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Diamond Offshore Orders New Drillship in South Korea

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Diamond Offshore Drilling, Inc. yesterday announced that a subsidiary, Diamond Offshore Drilling Limited, has entered into a turnkey contract with Hyundai Heavy Industries Co., Ltd. for construction of a new ultra-deepwater drillship with delivery scheduled in the fourth quarter of 2014.

Total cost, including commissioning, spares and project management, but excluding capitalized interest, is expected to be approximately $655 million.

The new drillship, to be named Ocean BlackLion, will be of the same design as Diamond Offshore’s three units currently on order with Hyundai. Design specifications include dynamic-positioning, dual activity capability, a maximum hook-load capacity of 1,250 tons, and operating capability at water depths up to 12,000 feet, though initially outfitted for operation at 10,000 feet. The unit will also feature two seven-ram blowout preventer (“BOP”) stacks, with the second available for use as a spare.

Diamond Offshore has elected to equip its previously announced drillships now under construction with an additional seven-ram BOP to improve rig reliability. The cost to add a second BOP is approximately $34 million, bringing the average total price for each of the previously announced drillships to approximately $640 million.

Diamond Offshore also announced today that it has completed the sale of four jack-up drilling rigs in two separate transactions. The Ocean Heritage was sold for $45 million in cash, and the cold stacked mat-supported rigs Ocean Champion, Ocean Crusader, and Ocean Drake were together sold for $10 million in cash; all four units were held for sale in the Company’s first-quarter financial results.

“We are principally a floater company, and during 2012 we have sold five jack-up rigs for a total of $95 million, which is being reinvested in our fleet,” said Larry Dickerson, President and Chief Executive Officer of Diamond Offshore. “We believe this new drillship along with our four additional units under construction—the Ocean BlackHawk, Ocean BlackHornet, Ocean BlackRhino and Ocean Onyx—will be profitably employed in the deep and ultra-deepwater markets.”

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Strong Demand for UDW Drillships Spurs Seadrill to Order One More from SHI (South Korea)

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Seadrill continues to see strong demand for modern ultra-deepwater (UDW) drilling rigs driven by high oil prices and large deep-water discoveries and increased development drilling. Specific interest, mainly from operators in West Africa and the Americas, demonstrate a trend towards higher day rates and longer term contracts.

With yard costs at very attractive levels and Seadrill’s proven track record with respect to successful new build construction the Company today announced the order of a sixth drillship from Samsung Heavy Industries (SHI) with delivery in the second quarter of 2014. The expected total project cost is less than USD600 million, in line with the 5 units under construction and with delivery in 2013 and 2014. The yard contract was originally between a party related to Seadrill’s major shareholder Hemen Holding and Samsung, as part of a larger shipyard deal, but Seadrill has been given the right to take over the contract at original terms.

Seadrill’s current new build program now includes 17 units: 6 ultra deep-water drillships, 1 harsh environment semi submersible, 5 tender rigs and 5 jack ups, all to be delivered in the period from Q4 2012 to Q1 2015. In addition, Seadrill has received a fixed price option for a further ultra deep-water drillship. The six drillships under construction are of the same design and will have a hook load capability of 1,250 tons and a water depth capacity of up to 12,000 feet targeting operations in areas such as the Gulf of Mexico, Brazil and West and East Africa. Also, these units will be outfitted with seven ram configuration of the Blow out Preventer (BOP) stack and with storing and handling capacity for a second BOP.

CEO of Seadrill Alf Thorkildsen says:

“With the available capacity in 2013 and 2014 Seadrill is uniquely positioned among its peers to take advantage of strong demand for drilling services with high dayrates and longer charter contracts. We will continue to aggressively build Seadrill’s earnings and further expansion of the building program is expected in the months to come. Together, these developments provide for continued value creation and an increased dividend capacity.”

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South Korea: Seadrill Confirms Samsung Drillships Contracts

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South Korea’s Samsung Heavy Industries on Friday announced that it had received contracts for the construction of two drillships without revealing who the costumer was. Today, Seadrill, a Norwegian/Bermudan offshore drilling contractor confirmed the deal.

The construction of the drillships is scheduled for completion in the second and third quarter 2014. Total project price per drillship is estimated to be under US$600 million, which includes a turnkey contract with the yard, project management, drilling and handling tools, spares, capitalized interest and operations preparations. Seadrill has also a fixed price option to order an additional drillship for delivery in 2014.

The drillships are of the same design as the three previous dual derrick drillships that Seadrill ordered at Samsung late 2010 and early 2011, with increased water depth, technical capabilities and accommodation capacities. These dynamic positioning drillships will have a hook load capability of 1,250 tons and a water depth capacity of up to 12,000 feet targeting operations in areas such as the Gulf of Mexico, Brazil as well as West and East Africa. In addition, these units will be outfitted with seven ram configuration of the Blow out Preventer (BOP) stack and with storing and handling capacity for a second BOP.

Chairman of Seadrill John Fredriksen says:

Our long relationship with Samsung has given us access to a proven rig design and favourable delivery slots. In combination with attractive global yard prices, this has created an opportunity to continue to organically build Seadrill with very compelling economics. Seadrill will have five new ultra-deepwater rigs scheduled for delivery in the period 2013 – 2014 and four existing units coming off current contracts in the same period. There has already been specific discussions regarding chartering of part of this capacity. We believe the open ultra-deepwater exposure position will serve Seadrill well and create a unique exposure to one of the fastest growing and most profitable energy businesses in the world. We also believe that this open exposure can be used to further strengthen our relationship with fast growing and dynamic oil companies. The recent increase in daily rates for drilling rigs will generate excess cash that can be used for a balanced combination of organic growth and a strong long-term dividend distribution. It is likely that Seadrill’s commitment to tender and ultra-deepwater new buildings will be further increased in the weeks to come.

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