Offshore staff
Tuscan Energy (Scotland) Ltd., the North Sea Ardmore field operator, notified Rowan Companies, Inc. that it is insolvent. As a result, Tuscan has shut in field production. Rowan expects to complete field abandonment and decommissioning activities in 30-45 days. Rowan is marketing theGorilla VII jackup for work starting immediately thereafter.
The rig started Ardmore field operations in mid-2003 for a day rate based on the average price of oil. In March 2004, Rowan agreed to reduce the dayrate to help extend the life of the project. In December 2004, Rowan extended the contract after collecting outstanding receivables. During 4Q 2004, Rowan deferred recognition of further revenues under the contract until collection. The company maintains no recorded balance of receivables from Tuscan.
Since the contract began, Tuscan collections total $74 million, including $9 million in 2005. Rowan will pursue collection of the remaining $19.7 million of billed but unrecorded amounts owed by Tuscan under the contract as well as amounts for rig time and incremental abandonment costs.
"The term of this contract has always been dependent upon the economic life of the Ardmore field. When we extended the contract last December following new investment by the project's owners, we noted that our collection of additional amounts was dependent upon cash flows from the project, but remained optimistic that the contract would continue to generate significant revenues for Rowan. The project has been both a technological success and profitable for the company, but it now appears to be at an end," says D. F. McNease, chairman, president, and CEO, Rowan.
06/06/05
