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September 16, 2008

Offshore operators assess Ike damage

Rowan Companies, Inc. (NYSE:RDC) and Pride International (NYSE) each announced today that it had lost a rig as a result of Hurricane Ike.

Noble Corporation (NYSE: NE) said two rigs had lost their moorings and drifted from their original positions.

Hercules Offshore, Inc. (Nasdaq: HERO) said one rig had moved some 600 ft from its original position.

The Minerals Management Service reports that two other rigs that had been reported adrift had been secured by tugs.

MMS also reported that 28 of the 3,800 offshore oil and gas production platforms in the Gulf of Mexico have been destroyed by Hurricane Ike. Several others have been reported as significantly damaged.

Rowan said all of its rigs were on location, with the exception of the Rowan-Anchorage. Rowan is undertaking efforts to locate the rig but believes it may have capsized and sunk at its pre-storm location offshore Louisiana. All appropriate regulatory agencies have been notified.

In addition, Rowan's Sabine Pass, Texas facility encountered a significant storm surge and is expected to be out of commission for some time. The company's newbuild jack-up, Rowan-Mississippi, which is stationed there for final outfitting, was apparently struck by another vessel during the storm. The initial assessment is that damage is limited and should not delay the rig's scheduled delivery.

Rowan's other rigs in the Gulf Coast area appear to have sustained minimal damage but a complete evaluation of their condition will require a closer inspection on the return of drilling personnel. Crew members have begun returning to their assigned rigs and normal operations should resume as soon as possible.

The Rowan-Anchorage was a LeTourneau 52-class slot jack-up rig. The rig had been secured at its pre-storm location in Vermillion Block 201 and all personnel were evacuated prior to the arrival of Hurricane Ike. It was insured for $60 million, less a $17.5 million windstorm deductible, and had a carrying value of approximately $4.5 million. The rig had been operating under a well-to-well contract at a day rate of approximately $60,000.

Pride International, Inc. (NYSE:PDE) reported that the Pride Wyoming, a 250-foot mat slot jackup rig is missing and expected to be a total loss. The rig's last location was at Ship Shoal 283, approximately 90 miles south of Houma, Louisiana. All rig personnel had been safely evacuated prior to the arrival of the storm.

The company noted that the insured value of the rig is $45 million, with a $20 million loss retention. In addition, the company is fully insured for costs associated with the removal of wreckage, if necessary.

Air reconnaissance of the remaining rigs in Pride's U.S. Gulf of Mexico fleet indicated no visible damage. The company has begun the process of boarding these units to conduct a more thorough inspection and to commence reactivation.

Noble Corporation said it has concluded an aerial survey and preliminary on board evaluations of most of its active U.S. Gulf of Mexico units. The Noble Paul Romano and Noble Amos Runner experienced mooring failures and drifted from their original respective locations, but have been boarded and power has been restored. In addition, the Noble Lorris Bouzigard has experienced damage to its mooring system but has remained in the area of its primary location. The rig has been boarded and power has been restored. Tugs are on station to assist with the start-up of each of these three rigs and other than to the mooring equipment, there is no other apparent significant damage.

Noble has start-up crews on all other active rigs in the U.S. Gulf of Mexico except the Noble Clyde Boudreaux which is scheduled to be remanned tomorrow.

Hercules Offshore, Inc. reported today that all of its drilling rigs, liftboats and other marine vessels in the U.S. Gulf of Mexico have been accounted for. The company conducted an aerial survey of its rigs and has start-up crews on the majority of its active rigs and is presently coordinating the re-manning of the remaining rigs.

The Hercules 78, an 85-foot Donhaiser Marine submersible, has moved approximately 600 feet from its pre-storm position. An assessment crew is onboard and a diving vessel will be conducting an underwater survey of the rig. The rig is insured for $45 million, with a $10 million deductible and a 10% quota share. The company has a $200 million aggregate annual limit on losses related to U.S. Gulf of Mexico named windstorms.

Minerals Management Service (MMS) says that initial estimates are that the 28 destroyed production platforms produced a total of 11,000 barrels of oil per day and 82 million cubic feet of gas per d

"To date, most of the destroyed platforms include older facilities with small levels of production," said Lars Herbst, regional director, MMS Gulf of Mexico Region. "We expect additional reports of damage as the weather allows more flights and operators are able to board the platforms and begin inspections."

Early reports indicate that there is some pipeline damage. The full extent of damage will not be available until operators are able to test the systems.

MMS has been conducting helicopter fly-overs to investigate reports of oil spills/sheens. While it is too early for definitive reports, there was one reported sheen as of September 15, 2008 estimated to be nine barrels; subsequent investigations showed that the sheen had dissipated.

Production from the Gulf of Mexico accounts for 25 percent of the oil produced domestically and 15 percent of the natural gas produced domestically. As of June 2008, daily production estimates for the Gulf of Mexico were 1.3 million barrels of oil and 7.0 billion cubic feet of gas. Since that time, gas production from the Independence Hub facility increased and in August 2008 gas production from the Gulf was estimated at 7.4 billion cubic feet of gas per day.

As of August 2008, there were more than 3,800 production platforms in the Gulf of Mexico; these structures range in size from single well caissons in water depths of ten feet to a large complex facility in water depth greater than 7,000 feet.

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