Ship Finance to Acquire Drillship

Wednesday, May 21, 2008

Ship Finance International Limited announced that it has entered into an agreement to acquire the newbuilding ultra-deepwater drillship West Polaris, from a subsidiary of Seadrill Limited.
With a total acquisition cost of approximately $850 million, the vessel is expected to be delivered end of June 2008 from Samsung Heavy Industries in South Korea. It will be chartered back to the seller for 15 years on a bareboat basis, fully guaranteed by Seadrill.
The Company has received commitments for a $700 million loan facility from a syndicate of leading international banks, and the remaining $150 million will be funded from the Company's available liquidity.
West Polaris will be employed initially by Seadrill on a 4 year contract to Esso Exploration Inc., a subsidiary of Exxon Mobil Corporation. This contract has a value of approximately $815 million, and start-up of operations under the contract is expected to be three months after delivery from the shipyard.
The aggregate charter payments from Seadrill over the first 51 months will be approximately $491 million (including $10 million in the first three-month mobilization period). For the remaining lease period, the aggregate lease payments will be approximately $631 million.
Seadrill has been granted several fixed price purchase options, first time after 51 months at $548 million and last time after 15 years at $177.5 million.
The $700 million loan facility will have a 5 year term and the average annual repayment of debt will be approximately $65 million per year in this period. The average annual net cash contribution, after estimated interest expense and debt repayment, will be approximately $23 million, or $0.32 per share.
Based on this highly accretive transaction, the Company intends to increase the quarterly dividend by two cents per share in the third quarter, when the new drillship is delivered and has commenced its operation.