Field problems cause reduction in Rowan’s Gorilla VII contract

Ray Tyson

Petroleum News Houston correspondent

Contract driller Rowan Cos. said March 26 that its wholly owned subsidiary, British American Offshore Ltd. and Tuscan Energy (Scotland) Ltd. have amended the Rowan Gorilla VII drilling and production contract for the Ardmore Field development in the North Sea.

The two companies have agreed to a temporary reduction in the day rate for a five-month period as a result of reduced production revenues due to well bore and geological difficulties encountered in the project’s first three wells, Rowan said.

Rowan said that during the period of Feb. 1 to June 30 of 2004, British American has agreed to reduce the floating day rate based on a specified number of barrels of oil at the daily Brent crude price, to a fixed day rate. During the five-month period, Rowan added, drilling revenues are expected to be reduced by about $4.5 million to $7.5 million.

After June 30, the day rate will revert to the floating day rate as specified in the original contract, Rowan said. British American also has agreed to a delay in the payment of day rate charges for the period Jan. 1 to March 31 of 2004, until proceeds from first production from the Ardmore Field are received after the recompletion of an existing well. Ardmore is the oldest field in the North Sea.

“At the time this contract was signed, its term was to be determined by the economic life of the Ardmore field,” said Danny McNease, Rowan’s chief executive officer. “To date, as a result of high oil prices, we have realized a significantly higher day rate from the contract than was anticipated. We have agreed to modify our contract to assist in attempting to extend the field’s life.”