Fearnley Offshore AS, an independent Norwegian consultancy group specialising in the marketing and procurement of drilling equipment, stated in its report prepared for the Company, “The Deepwater and Ultra-Deepwater Rig Market” (March 2007) that deepwater drilling rigs worldwide are currently 100% utilised. Fearnley Offshore also suggest that the rates of utilisation are expected to remain at or near 100% for several years and that as a consequence, the average daily rate for deepwater rigs has increased significantly as oil companies compete for access to drilling equipment.
Since the Company’s core strategy requires the creation of value for shareholders through the discovery and ultimately the production of oil and gas reserves, the Company requires access to drilling equipment. In view of the global shortage of such equipment, Management believes that it would not be possible to plan effectively or efficiently if the Company employed an opportunistic contracting strategy, taking occasional rig slots as they became available at relatively short notice or through third parties via divestment transactions.
To ensure reliable long-term access to suitable drilling equipment, the Company has entered into rig sharing agreements to secure access to deepwater drilling rigs. The Company has concluded an agreement with ExxonMobil Corporation’s (“ExxonMobil”) drilling subsidiary, Esso Exploration Incorporated (“Esso”), and Seadrill Offshore A/S (“Seadrill”) to provide access to the ultra-deepwater dynamically positioned drillship (“DPDS”) “West Polaris”. A further series of agreements with Esso and Larsen Oil & Gas Limited, on behalf of Venture Drilling A/S, provide access to the DPDS, “Deep Venture”. Ophir had originally secured the use of the “West Polaris” for 295 days. Ophir and ExxonMobil subsequently amended these arrangements in February 2008 to revise Ophir’s access to the “West Polaris” for 200 days (which can be extended by 30 days or reduced by up to 200 days with appropriate notice) in 2009. The amended agreement also provides for access to the dynamically positioned semi-submersible (“DPSS”) drilling rig “West Aquarius” for 100 days (which can be extended by 30 days or reduced by up to 100 days with appropriate notice) in 2010. The “Deep Venture” will be available to Ophir for a continuous drilling programme of 135 days (which can be extended or reduced by 20 days) expected to which commenced in September 2008. The Company’s first drilling campaign with the Deep Venture will focus upon the Company’s assets in Equatorial Guinea and Gabon. In the event of discoveries, the Company has plans in place for swift follow-up and appraisal drilling.
The “Deep Venture” is a third generation DPDS owned by Petrolia Drilling and operated by Larsen Oil & Gas Limited (“Larsen”). It was built in Finland in 1983. The vessel has a single derrick capacity and can drill to a maximum total depth of 7,620m in up to 1,280m of water. The water depth range may be increased to in excess of 2,000m through the application of the Company’s advanced drilling technology and through the use of the surface blow-out preventer which the Company has contracted to lease from Stena Subsea Leasing Limited for installation on the “Deep Venture” during the Company’s 2008 drilling campaign.
The “West Polaris” is a state-of-the-art sixth generation DPDS owned and operated by Seadrill. The vessel, constructed by Samsung Heavy Industries in Korea, was completed in 3Q 2008 and is currently operating in Brazil. The vessel has dual derrick capability and can drill to a maximum total depth (water + subsurface) of 11,430m in up to 3,000m of water.