Songa Wins $2.5 Billion Rig Pact

Norwegian oil-rig operator Songa Offshore SE said Tuesday it has been awarded a $2.5 billion contract to charter two new semisubmersible drilling rigs to Statoil for an initial eight years each.

The new rigs will go straight into service on the Norwegian continental shelf when they are delivered from Daewoo Shipbuilding & Marine Engineering Co., Ltd. in 2014.

Statoil has the option to extend the charter period to a total of 20 years for each rig. The oil giant said that during the second half of 2011 it will consider its options for the construction of another two similar rigs, including the opportunity to take an ownership position in them.

The fixed cost to Songa is $565 million per unit, with the payments staggered by delivery schedule, the company said, adding that the construction cost will be funded from a combination of ongoing cash flow in addition to bank debt.

“The rig capacity on the Norwegian continental shelf is limited, and increased capacity is essential to ensure enhanced recovery,” said Hans Jakob Hegge, Statoil’s senior vice president for eastern North Sea operations in Norwegian development and production.

“The new rigs are expected to operate 20% more efficiently than conventional rigs,” Mr. Hegge said. “It will be a workhorse on mature fields, primarily drilling production wells and completing wells, enabling Statoil and its partners to produce more oil from the fields.”

Capable of operating in 100 meters to 500 meters of water, these rigs can drill wells down to 8,500 meters.

Songa’s shares were up 8.7% in early European trade at 29.90 Norwegian kroner.

– By Dominic Chopping, Dow Jones & Co

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