New Vessels Rigs and Upgrades

Third largest service company created

Transocean Sedco Forex's acquisition of R&B Falcon will result in the oil industry's third largest service company with a valuation of approximately $17.7 billion. The transaction also results in the world's largest offshore drilling contractor, with nearly four times the number of rigs as the next largest driller. The transaction is expected to close by the end of the first quarter 2001. There are other aspects to the deal:

• Boat sales: R&B Falcon's marine trans-portation business will be sold because that business does not fit with Transocean's core activities, and second because Transocean Sedco Forex is a Cayman Islands company and operating the vessels in US waters would violate Jones Act regulations. With this being a "forced" sale, it may create a buyer's market. R&B Falcon Marine owns 102 inland and offshore tugs and four crew boats. The company also owns 58 inland and offshore flat deck cargo barges and inland shale barges.
• Little rig redundancy: Common share-holders of R&B Falcon will receive 0.5 share of newly issued Transocean Sedco Forex stock for each R&B Falcon share. The all-stock transaction is valued at $5.8 billion plus the assumption of $3 billion of R&B Falcon debt. The combined company will employ approximately 15,000 people worldwide, with about 85% of them aboard rigs, so there will be little if any redundancy in that segment.
• Some offices to close: Transocean Sedco Forex says it expects to save $50 million annually, realizing 25-50% of those saving during the first year. Several offices will likely be closed. It remains to be seen how many R&B Falcon headquarters employees will make the move. Additionally, the company expects savings resulting from reduced purchasing and insurance costs.
• Valuable shallow fleet: Transocean Sedco Forex said R&B Falcon's shallow water Gulf of Mexico fleet is a good fit since Transocean does not have a Gulf Shelf fleet. The company said it probably would not have wanted that fleet several years ago, but presently high natural gas prices make that market more attractive. R&B Falcon owns 29 jackups in the Gulf of Mexico, plus 58 inland water drill barges.

Both of the companies' newbuilding programs will be complete during 2001, according to the companies, and the first priority of the resulting free cash will be to pay down debt. The table below compares those offshore drilling cont-ractors with mobile marine and inland drilling units in the double digits. Rigs currently under construction are included in the figures.

Noble Drilling settles lawsuit with Samedan

Noble Drilling and Samedan Oil settled a breach of contract lawsuit regarding the use of Noble's semisubmersible Noble Homer Ferr-ington. As part of the settlement, Samedan will use the rig at various day rates for 660 days over a contract period of 1,625 days, including a stacking rate following the first 30 days of non-usage for each year of the contract. Noble also will receive working interests in seven of Samedan's deepwater exploration prospects and be carried during the drilling of the initial test well on each of the prospects. Additionally, the contract provides for a lump sum settlement and includes the provision for Noble to contract the rig to third parties for extended periods during the 1,625-day contract term.

Ensco 101 jackup damage more extensive

The Ensco 101 sustained damage while moving onto location in the UK sector of the North Sea. The accident occurred while jacking up the rig when a foundation failure and soil flow occurred in the seabed below one of the legs causing abnormal stresses and damage to the rig's hull and legs. Repairs have begun but the rig could be out of service until late fourth quarter. The rig was contracted to Phillips Petroleum for the Joanne 30/7a-M7 workover when the incident occurred. Ensco initially thought repairs would take 3-6 weeks. Meantime, Philips is seeking a replacement rig for the workover.

Marine Drilling, Esso arbitrate semi rate

Marine Drilling and Esso Exploration agreed in accordance with provisions of the drilling contract to submit to arbitration the deter-minations of the Marine 700 day rate for the 12 months from August 5. The contract calls for an annual review of the dayrate with potential increases from the base rate of $130,000 plus adjustments. The day rate cap for the coming 12 months is $165,000 plus adjustments.

SCORE continues to improve Global Marine's worldwide SCORE (Summary of Current Offshore Rig Econ

Among the areas included in the rating, Southeast Asia posted the largest monthly increase with a 16% growth to 32.42% followed by the North Sea with a 14.1% growth to 23.33%. The Gulf of Mexico recorded only a 1.6% increase to 35.8% but the area also showed the greatest year-on-year increase, rising 72.6%. West Africa posted a decrease of its SCORE, a 1.3% drop to 35.52% from 35.97% in June 2000.

By rig type, jackups showed the healthiest gain, 10.6% to 38.99% in July compared with June. Semisubmersibles actually decreased 7.8% to 22.24%. "Our optimism that the current recovery of offshore drilling markets will continue strengthening is bolstered by indications that major oil companies are now getting back into the game as we have not seen for some time," said Global Marine Chairman and CEO Bob Rose.

Aker modifying FPSO for North Sea development

Talisman Energy will utilize Bluewater's Bleo Holm FPSO for development of the Blake field in the UK North Sea and awarded Aker Maritime's UK yard Aker McNulty to modify the vessel for the field. The contract includes engineering, hookup, installation and commissioning. Aker McNulty will fabricate and install a new water injection module, processed water/cooling medium module, a new compression package and upgrade the process separators in addition to other modifications. The Bleo Holm FPSO will be mobilized from the Ross field in 2001 and it is expected that modifications will be completed and production will commence within 120 days from that time. Meantime, Aker Maritime and Cammell Laird Holdings signed an agreement for joint marketing for offshore floating production conversion work. The companies say their combined skills, experience and facilities will enable turnkey capability to owners and operators of floating production units.