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CARBON TAX ON BUNKER FUEL
IMO is looking at a global levy (tax) on marine fuels. Do you think this is

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a really bad idea

Marine Log

June 23, 2008

Transocean to acquire newbuild drillship

Transocean Inc. (NYSE:RIG) says that subsidiaries have agreed with subsidiaries of Petrobras and Mitsui to acquire a newbuild ultra-deepwater drillship under a capital lease contract. In conjunction with the capital lease contract, subsidiaries of Petrobras and Transocean have entered into a 10-year drilling contract covering worldwide operations with an option by Petrobras to extend the term of the drilling contract by up to an additional 10 years.

The capital lease contract has a 20-year term, after which Transocean will have the right and obligation to acquire the drillship for $1. Total capital costs to be incurred by Petrobras and Mitsui for the construction of the drillship are estimated to be $750 million, including $65 million of capitalized interest.

The currently unnamed ultra-deepwater newbuild drillship is under construction at Samsung Heavy Industries Geoje yard in South Korea. It will feature Transocean's patented dual-activity drilling technology. The rig will also feature expanded completions capabilities. It will have a variable deck-load of over 20,000 metric tons and the capability of development and exploration drilling in greater than 10,000 feet of water depth, upgradeable to 12,500 feet of water depth and 37,500 feet of total drilling depth with additional equipment.

The 10-year drilling contract is set to commence in the third quarter of 2009 following shipyard construction, sea trials, mobilization and customer acceptance. The drilling contract commencement is contingent on vendor performance and other factors. At least 12 months prior to the expiration of the initial 10-year term, Petrobras may elect to extend the term of the drilling contract by up to an additional 10 years at a mutually agreed operating dayrate which would then apply to the extension period.

Contract revenues over the initial 10-year contract term are estimated to be $1.68 billion, including monthly bonuses which could be as high as 12 percent of dayrate revenue each month. Estimated contract revenues are before taxes, which will be paid by Transocean and fully reimbursed by Petrobras. Additionally if the rig is operating in a jurisdiction where the company has a valid dual activity patent, an additional 5 percent royalty would be paid to Transocean. Estimated contract revenues represent the maximum amount of revenue that may be earned in the firm 10-year contract period, excluding revenues for reimbursed taxes, royalties, mobilization, demobilization and cost escalation.

Robert L. Long, Transocean's Chief Executive Officer, said, "This contract is an excellent opportunity to expand our relationship with Petrobras and its partner Mitsui. This unique structure allows us to acquire a newbuild drillship with construction cost protection, while also providing us with rates of return consistent with our other enhanced Enterprise-class newbuilds."


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