PETROLIA DRILLING
PresentationPareto 1999
Page 1
PetroliaDrilling ASA
1999
Executive Summary
Page 3
• Company Overview: Petrolia Drilling ASA, a Norwegian, publicly listedlimited Company, owns and charters drilling vessels for offshore,deepwater oil and gas exploration and development drilling.
• Existing Rig Fleet: The Company owns the semi-submersible drilling rigPetrolia, holds a 20.19% interest in the semi-submersible rig Deep SeaBergen and has a 9-year remaining bareboat charter for the deepwaterDrillship Valentin Shashin.
• Business Strategy: The Company intends to continue to expand itscurrent rig fleet through a strategy of acquiring, refurbishing andselectively deploying offshore drilling rigs and drillships, on fixed rate,long-term contracts.
Executive Summary
Page 4
Company Overview
• Predecessor company formed by principals of DNO ASA in 1995.
• The Company was established in March 17, 1997.
• The Company has a market capitalization of approximately NOK 450million, as of August 31, 1999. Booked equity based on rig values yearmid ‘99 is NOK 547 million.
• DNO ASA holds 32,75% of outstanding shares.
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The key elements of the Company’s strategy are as follows:
– Acquire under-utilized or idle offshore drilling rigs
• Focus on acquiring contract for Petrolia
• Purchase Valentin Shashin
– Strategically deploy rigs in deepwater markets
• Offshore deepwater rig market represents the most attractive sector in the drilling
industry
– Capitalize on strong strategic relationships
• Russian authorities
• North Sea oil companies
• Petrobras
Business Strategy
Company Overview
Page 7
Company Overview
Operation and Business Management
Company operates through extensive network of business relationshipsand agreements --optimal for current tax structure and maintaining low,stable operating overhead.
B o a rd o f d ire c to rs
F inance and daily operations
S trategy and industria l re la tions
Technical O perations C ontract nego tia tions
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Existing Rig Fleet
Petrolia Deep Sea Bergen Valentin Shashin
Description:Class Semi Sub
3rd Generation AkerH-3.2 Semi Sub
Pelican Class DP-equipped
Drill Ship
Year Built: 1976/1995 1983/1991 1982/1998
Market Segment: Medium Depth Medium Depth Deepwater
Ownership Structure:
100 % 20,19 %Subleased under 9-year bareboat
charter with purchase right
Charter Party: n/a Saga Petroleum Petrobras
Charter Type: n/a Time Charter Bareboat
Charter Expiration: Stacked 9/01/99 March 2001
Current Day Rate: $ 0,000 $ 90,000 $69,000
2nd Generation Pentagone
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New BOP control System
(ABB Seatec)
New Top Drive & Compensator
(Maritime Hydraulics &Hydralift)
New Sponsons / Steel Construction
(J.Bladt)
New Dynamic Positioning System
(Kongsberg Simrad)
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DS Valentin Shashin
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Campos Basin
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Global deep water market
• Oil and gas companies are considering over 250 deep water field developments.
– Currently 1,300 deepwater wells planned compared to only 400 shallowwater wells.
• Brazil has been the pioneering region for deep water drilling.
– 35% of the regions offshore reserves are in water depths greater than3,000 feet.
– Brazil is opened to foreign oil and gas companies.
• Gulf of Mexico is alsoone of the most active deepwater region in the world.
Market Segment
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Need to replace reserves
• Oil companies need to increase their reserves even while oil prices are low.
• Most of the world’s major untapped oil and gas reserves are located in deepwater areas, asmost accessible land-based and shallow water reserves already been explored.
West Africa 18.0North America 10.0South America 8.0West of Shetland 3.5Norway 2.4Other 23.1Total 65.0
Source: Shell International
Industry Overview
Major Deepwater (>3,000 feet) oil reserves by region254 potential fields developments (Billions of barrels)
Page 14
• The world drillship fleet totals 24 units, of which R&B Falcon controls 12.
• Management is currently aware of five 5th generation semi subs under construction.
• The following chart lists Valentin Shashin’s sisterships.
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Market Segment
Global deep water market (cont’d)
Rig & Market Profile
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Rig Profile
Existing Rig Fleet
a) The Company owns 20.19% of KS Deep Sea Bergen.
b) The Company paid $45 million for a 10-year bareboat-charter, is upgrading the drillship for $70 million, plus $6 million in equipment
c) Average of 3 independent brokers
Rig/drill shi p Type Design Built Riser BOP Purchase Price Est. Mkt. Value (c)
(feet) (PSI)
Petrolia Semi-Sub Pentagone 1976 1,100 10,000 $41 $41
Deep Sea Bergen (a) Semi-Sub Aker H-3 1983 1,500 15,000 $105 $105
Valentin Shashin (b) Drill ship Pelican class 1982 4,500 15,000 $100 $130
($ million)
Notes:
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Supply and demand for oil and gas
• World demand for oil and gas is expected to increase through the year 2000.
• Offshore production will represent a larger contribution to global oil supplies as onshore fieldproduction declines.
• About 50% of offshore oil & gas production is conducted outside of OPEC areas such as theNorth Sea, GOM and South America (Brazil).
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Industry Overview
Source: IEA
Page 18
Technology
• Advances in new technologies have driven down the cost of oil and gas exploration
• Cost of exploring for and developing new offshore reserves
• Most new offshore fields have a breakeven oil price of $8-10 per barrel due to:– more accurate and cheaper seismic survey technology
– increased usage of cost effective floating production units
– better and cheaper subsea installation opportunities
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Industry Overview
Source: Saga Petroleum
Page 19
Fleet Capacity• Demand for all types of mobile drilling rigs increased substantially after 1995, reaching full
utilization in the second half of 1997.
• The fall in oil price in 1998 was necessary to stabilize the supply/demand.
• End 1999 GOM lease auction and the ramp-up in Brazil and in West Africa will cause oilcompanies to scramble for deepwater rigs.
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Industry Overview
Source: Bassoe Offshore Monthly
Historical Second Hand Rig Value
Source: Offshore Data Services, Inc.
World Capacity Utilization
80.0%
85.0%
90.0%
95.0%
100.0%
105.0%
1993 1994 1995 1996 1997 1998
Semi-submersible Drilling Rigs, 3rd Generation Semi-submersible Drilling Rigs, 2nd Generation
Drillships, Dynamically positioned Jackups, 75-90 meters
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Newbuildings
• Demand for deep- and medium-water rigs is expected to remain firm over the next two years.
• Factors limiting additional newbuildings:– Many newbuildings have experienced significant cost overruns recently - a new deepwater unit
costs approximately $300 - 400 million
– Few rig owners will order newbuildings without advance contract - most of the rigs on order havecontracts
• Limited yard capacity and long delivery lead times also serves to limit flow of newbuildings
D e liv e ry A v g. co ntr.C o ntra c t Ye s N o Ye s N o Ye s N o Ye s N o le ng thT o ta l se mi ne w b uild ings 1 0 7 2 5 0 1 3 2 4 ,9T o ta l se mi c o nve rs io ns 1 1 0 1 0 1 0 0 2 1 1 4 ,0T o ta l d r illship ne w b uild s 4 0 5 0 3 2 1 2 2 4 ,6T o ta l d r illship c o nve rs io ns 3 2 1 0 0 0 4 2 3 ,8T o ta l a ll c a te go r ie s 1 9 2 2 3 3 8 2 5 0 7 4 ,3
R igs o n orde r a bo ve 1 ,50 0 fe e t1 9 98 1 9 99 2 0 00 T o ta l
Industry Overview
Source: FT Rig Forecast
Appendix
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Key Events of the Company
Company Overview
• Company founded• $24 million share
issue• Acquisition of
Petrolia for $41million - contractwith DNO
• Listing on OsloStock Exchange
• Acquisition of 20%interest in KS DeepSea DrillingCompany (ownerof Deep SeaBergen) for $20million - contractwith SagaPetroleum
• 2-Year contractwith Petrobras forValentin Shashincommenced.
• Private placementUS$ 4 mill.
Prior toSeptember
1997February
1999
• Enter into 10-yearbareboat agreement forDrillship ValentinShashin - cost $45million
• Commenced $50million upgrade ofValentin Shashin
September1997
• $8 million privateplacement tofinance part ofValentin Shashinupgrade
December1997
• $35 million rightsoffering to continueValentin Shashinupgrade
March1998
• 2-Year contractwith Petrobrasfor ValentinShashin
June1998
October1998
• Convertiblebond issueNOK 90 MillStrike NOK 19
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Share Price Performance
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Shareholders as of August, 1999(conform chart)
N ame Share s Owne rs hipD N O A S A 1 1 0 02 96 1 3 2,9 5 %D elphi F ond s 8 07 00 0 2 ,4 2 %A tlantis V est A S 5 71 60 0 1 ,7 1 %S ira P S V III A S 5 70 60 0 1 ,7 1 %F o kus S M B 4 70 00 0 1 ,4 1 %S k ib s A S A b aco 4 68 42 6 1 ,4 0 %S and nes Investering 4 00 00 0 1 ,2 0 %K F o nd ene 3 50 00 0 1 ,0 5 %Teigum, H ans I 2 48 60 0 0 ,7 4 %Energy D rilling 2 31 13 0 0 ,6 9 %To tal 10 largest shareho ld ers 1 5 1 20 31 7 4 5,2 8 %
O the r shareho ld ers 1 8 2 69 47 4 5 4,7 2 %To tal shareho ld ers 3 3 3 89 79 1 1 00 ,00 %
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