Hercules Offshore, Inc. Announces Investment in Discovery Offshore S.A.

abarrelfullabarrelfull wrote on 25 Jan 2011 06:55
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Hercules Offshore, Inc. (Nasdaq: HERO) announces an investment of $10 million in Discovery Offshore S.A. ("Discovery Offshore"), a newly formed Luxembourg-based company, focused on ownership of ultra high-specification jackup rigs.

Discovery Offshore will construct two ultra high-specification jackup rigs, with options for two additional jackup rigs, at Keppel FELS in Singapore. Hercules Offshore will also enter into a Construction Management Agreement and Service Agreements with Discovery Offshore for which the Company will receive compensation to oversee the construction, marketing and operations of rigs owned by Discovery Offshore, as well as perform other corporate administrative functions required by Discovery Offshore.

"We are pleased to announce our investment in Discovery Offshore and the Construction Management and Service Agreements for their ultra high-specification jackup rigs," said John T. Rynd, President and Chief Executive Officer of Hercules Offshore, Inc. "This marks a new and exciting chapter in our Company's history, and is an example of how we continue to seek creative and unique opportunities to add value for our stakeholders. These rigs will be among the most capable jackups in the world, and have been designed to meet the exacting requirements of our most demanding customers. Well beyond our equity investment, the value that we bring to Discovery Offshore includes our in-house expertise in engineering, rig management and operations, global marketing presence, and strong customer relationships with key national and international oil companies. With the improving outlook for the offshore drilling industry, we believe that the rig design chosen by Discovery Offshore will be well positioned to take advantage of these positive long-term fundamentals over an extended period of time."

The two rigs to be constructed are based on Keppel FELS "Super A" Class proprietary design, and are scheduled for delivery in the second and third quarter of 2013, respectively. These ultra high-specification jackup rigs will be capable of operating in harsh environments at water depths of up to 400 feet and drill to depths of 35,000 feet. The rigs will have two million pounds of static hook load, 75 foot cantilever reach, off-line pipe handling capability, high capacity mud circulating systems, 15,000 psi blowout preventer systems, and accommodations capacity for up to 150 personnel. Keppel FELS will build the initial two rigs at a turnkey cost of approximately $208 million per rig. Including project management, spares, commissioning and other fees, total delivery cost is currently estimated at $231 million per rig. Payment terms to Keppel FELS are 20 percent of the turnkey construction price at contract signing, and the remainder due at rig delivery. The two options have the same payment terms, with a turnkey cost of $213 million and $215 million, respectively, subject to standard market adjustments.

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