Transocean, Chevron Upgrade Another Rig Contract

Transocean Inc. announced that it has entered into an agreement with Chevron Corp for the upgrade of one of Transocean's Sedco 700-series semisubmersible rigs. Under the terms of the drilling contract, Chevron will contract the rig over a primary term of three years, but has the right to convert the contract term to five years. Revenues could total approximately $385 million over the three-year primary term or approximately $550 million should the contract be converted to a five-year term. Estimated revenues exclude revenues for mobilization, demobilization and client reimburseables. The Sedco 700-series unit upgrade is expected to commence in the second quarter of 2007 at a shipyard yet to be determined. The cost of the upgrade is estimated to be $300 million and includes dynamic positioning station keeping and water-depth drilling capability up to a maximum of 6,500 feet. The rig is expected to complete necessary shipyard work by the first quarter of 2008 and then mobilize to its initial drilling location where it will commence operations on Chevron's Frade project offshore Brazil after rig commissioning and customer acceptance. Chevron reserves the right to terminate the contract should the shipyard work not be completed by December 31, 2008. The contract is the second Sedco 700-series upgrade announced by Transocean in the last month. Once completed, the two upgraded Sedco 700-series units will increase the company's High-Specification Floaters fleet to 34 units, with 30 of the units capable of operating in water depths of 4,500 feet and greater.