Houston, Texas; Oslo, Norway; September 5, 2000: Petroleum Geo-Services ASA (NYSE:PGO; OSE:PGS) announced today that after several weeks of discussions with the U.K. Health and Safety Executive (“HSE”) and the Banff oil field partners, the Company has now received approval from both parties to proceed with a vessel improvement plan which will significantly reduce the roll motions of the Ramform Banff Floating Production Storage and Offloading Vessel and allow it to continue operations in the North Sea for the foreseeable future.
The planned modifications will reduce the vessel roll motion, both in storm and in more moderate sea states, by around 50%, improving the vessel’s production and availability record. This upgrade, which is expected to cost less than $20 million, will require a short shipyard stay in the fourth quarter of 2000. The Ramform Banff is expected to be back in operation before year-end.
“This vessel modification will bring the motion characteristics of the Ramform Banff to the original design specifications and exceed all the necessary safety standards, which is our first priority,” said Reidar Michaelsen, PGS’ Chairman and Chief Executive Officer. “While the brief shipyard stay will have a slight negative impact on near term earnings, this is largely offset by a marginally improved earnings potential elsewhere in our production services business for the remainder of 2000. More importantly, this upgrade will protect the long-term value and earnings potential of this asset.”
In addition, preparation of the Banff oil field is now complete for the installation of the Floating Storage and Offloading (“FSO”) vessel, Nordic Apollo. This FSO will provide a more reliable offloading system for future cargoes from the Banff field, replacing the current offloading system which has proven unreliable in heavy sea states. The Nordic Apollo contract will be deferred until the return of the Ramform Banff to regular production duty.
While the Ramform Banff is in the shipyard, the two Banff field shuttle tankers will be utilized in the shuttle spot market. Over the past few months, part-time spot market utilization of these tankers has been successful, with a healthy market for such vessels. As a result of this and other actions, PGS expects the operational cost of the vessel to be minimized while it is out of production.
Conoco and its Banff oil field partners have worked closely with PGS to review the scope of this work. For the period during which the Ramform Banff is away from the field, revenues will be suspended. However, no compensation will be required from PGS.
The HSE has reviewed PGS’ plan and supports the program of modification, which has been tested and thoroughly examined in a recent tank test. The planned modifications are expected to result in a complete discharge of the recent HSE Improvement Notice relating to the unexpected vessel motion characteristics.
Petroleum Geo-Services is a technologically-focused oilfield service company principally involved in two businesses: geophysical seismic services and production services. PGS acquires, processes, manages and markets 3D, time-lapse and multi-component seismic data and provides associated data management solutions. This data is used by oil and gas companies in the exploration for new reserves, the development of existing reservoirs, and the management of producing oil and gas fields. PGS’ PetroTracTM suite of advanced geophysical technologies allows oil and gas companies to better characterize and monitor their reservoirs in order to enhance production and ultimate recovery of hydrocarbons. In its production services business, PGS owns four floating production, storage and offloading systems (FPSOs) and operates numerous offshore production facilities for oil and gas companies. FPSOs permit oil and gas companies to produce from offshore fields more cost effectively. PGS operates on a worldwide basis with headquarters in Oslo, Norway and Houston, Texas.