PGS Wins the Varg Floating Production Contract

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July 9, 1999

Petroleum Geo-Services ASA (NYSE:PGO)(OSE:PGS) announced today that it has successfully negotiated an agreement with Saga Petroleum, acting on behalf of the Varg license owners (Saga-35% and Statoil-65%), to purchase the newly constructed FPSO Varg for USD 350 million. Simultaneously, PGS has entered into a minimum three-year contract to operate the vessel on behalf of Saga Petroleum and the license owners. This contract provides an option for Saga and Statoil to lease the vessel for an unlimited period of time. In addition to their operating expenses, PGS shall receive a day rate of USD 177,000 for the first three-year period, thereafter USD 162,000. The FPSO will be operated by PGS through its subsidiary Golar Nor Offshore in Trondheim, Norway.

Reidar Michaelsen, PGS' Chairman and Chief Executive Officer stated, "The Varg acquisition represents a confirmation of our long-term strategy to become one of the largest, most experienced and profitable operators of high technology, harsh environment FPSO's in the world. With this transaction, PGS becomes the largest FPSO operator in the North Sea area with seven FPSO operations; four of which are owned by PGS. The Varg vessel, which will be renamed Petrojarl Varg, is a new and modern FPSO and will be the only contractor-owned and operated FPSO working in Norway. The agreed price for this vessel is competitive when compared to the cost of a newbuild. PGS and its shareholders will get an immediate earnings and cash flow acceleration because this vessel is already hooked up and producing the Varg field."

Chris Boswell, PGS' Senior Vice President and Chief Financial Officer stated, "The purchase of this asset will be financed with a fully underwritten unsecured bank facility. The bank facility bears interest at rates ranging from 35 to 55 basis points above LIBOR. This facility will remain in place for up to one year and will be refinanced in the international capital markets when conditions are deemed favorable."

The Varg license (PL 038) is 35% owned by Saga and 65% by Statoil (including 30% owned by the Norwegian government), with Saga as the operator. Saga's estimated recoverable reserves at December 31, 1998 are on the order of 50 million barrels. Keppel FELS built the Varg vessel for this field and delivered it to Saga last summer, substantially on budget. Production from the Varg field started in December of 1998.

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