It is reported that, as a result of the turmoil in the global credit markets, Scorpion Offshore Limited's wholly owned special purpose company Scorpion Deepwater Limited has been unable to secure the necessary financing in order to complete the construction of a deepwater rig or meet its future payment obligations to Keppel FELS, which is building the rig.
In July 2008, Scorpion Deepwater entered into a contract with Keppel FELS for the construction of a DSS-38 class semi submersible scheduled for delivery in December 2011. Additional contracts were signed with third parties for the provision of the rig's drilling and sub sea equipment. Scorpion Offshore issued a parent company guarantee to Keppel for the performance of Scorpion Deepwater's contract with Keppel.
To date, Scorpion Deepwater has paid Keppel and third party equipment providers approximately USD 74 million in connection with the construction of the rig, which is scheduled to commence in March or April of 2009.
Scorpion Offshore and Scorpion Deepwater, along with Keppel FELS and the third party equipment providers, continue to explore all options while recognizing the value associated with the long-term drilling contract for the rig with Petrobras in Brazil. If a solution that is acceptable to Scorpion Deepwater and Keppel cannot be determined in the near term, the construction contract may have to be terminated.
