UH BAUER COLLEGE OF BUSINESS: MARCH 30, 2006 PRESENTATION
Rowan Companies, Inc.
John Buvens, General Counsel
Ted Gobillot, Associate General Counsel
Emma
Lindsay
Joe
I.
Overview of Rowan Companies, Inc.
II.
Emerging Trends in the Offshore Drilling Industry
III. How is an offshore well drilled?
IV. Oilco/Drillco Relationship: Who provides what?
V.
Risks: What can happen?
VI. What is an indemnity agreement?
VII. How do the parties allocate risk?
I.
Overview of Rowan Companies, Inc.
•
Founded in 1923 by Arch and Charlie Rowan
•
Two units: Drilling and Manufacturing
•
Total workforce: 4,500+ employees
•
HQ at Williams Tower (ex-Transco Tower)
•
On NYSE and publicly-owned since 1967
•
2005: Revenue of over $1B; $4.5B market cap
DRILLING DIVISION
•
HQ in Houston; operations onshore in Texas,
Louisiana, Mississippi and Oklahoma; offshore in the
U.S. GOM, east coast of Canada, North Sea, Persian
Gulf and Trinidad
•
20 offshore rigs; 17 land rigs
•
Accounts for 75% of RCI's revenue
Land Rig Locator Map
Land Rig Locator Map
LR-53
MISS
LR-9, 29, 35
LR-18
TEXAS
LR-33
LOUISIANA
LR-34
LR-15
LR-12
LR-26, 30, 31, 51
LR-14
17 Land Rigs Operating
Currently 100% Utilized
PA
N
CO
M
C.
ROWAN
N I E S,
I
LR-41
9- Texas 7- Louisiana 1- Oklahoma
LR-52
LR-54
Current Average Well Depth: 15,980 ft.
MANUFACTURING DIVISION
• Acquisitions: LeTourneau (1994), Ellis
Williams (1999), OEM (2001)
• HQ in Longview, TX; manufacturing
facilities in Vicksburg, MS and Houston, TX
• Manufactures jack-up rigs, land rigs and rig
component parts, equipment for the timber
and mining industries
• Accounts for 25% of RCI’s revenues
LeTourneau Products
World’s Largest Front-End Loader
Manufacturing Division
3000 HP Mud Pump
Drawworks
Rotary Table
ROWAN’S RIG CONSTRUCTION PROGRAM
1. Large Fixed Capital Investment
•
Purchase LeTourneau
•
Restore Vicksburg, MS Facility
•
Hire and Train Workers
•
Rig Construction Cost: $180-$500 Million
•
Ongoing Maintenance and Labor Cost
2. Volatile Revenue Stream
•
Dayrates Track Commodity Prices
•
Boom-and-Bust Business
3. Gorilla V Experience
Worldwide Jack-up Newbuilds and Attrition 1950-2005
90
80
70
Average Age of Retired Rigs:
30
years
Number of Retired Rigs per
year (20-year average): 6 rigs
55 Rigs Under
Construction
2006 - 10
60
2007 – 20
50
2008 - 20
40
2009 - 5
30
20
10
19
5
19 0
5
19 2
1954
5
19 6
5
19 8
1960
6
19 2
6
19 4
1966
6
19 8
7
19 0
1972
7
19 4
7
19 6
1978
8
19 0
8
19 2
1984
8
19 6
8
19 8
1990
9
19 2
9
19 4
1996
9
20 8
0
20 0
2002
0
20 4
0
20 6
08
0
Additions to the fleet
Source: ODS-Petrodata
Attrition
Scheduled Construction / On Order
ROWAN
1998
1999
2000
2001
2002
2003
2004
2005
PA
N
CO
M
C.
Land Dayrate History 1998-2005
N I E S,
2006
$30,000
$28,000
Current Average
Dayrate $22,559
$26,000
$24,000
$22,000
$20,000
$17,242
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
Dayrates through March 27, 2006
July
6
Jan-0
July
5
Jan-0
July
4
Jan-0
July
3
Jan-0
July
2
Jan-0
July
1
Jan-0
July
0
Jan-0
July
9
Jan-9
July
Jan-9
8
$6,000
I
ASTRODOME
ROWAN GORILLA VI VS.
THE ASTRODOME & WILLIAMS TOWER
WILLIAMS
TOWER
CONSTRUCTION OF THE HANK BOSWELL: DECEMBER 2004
March 2005
June 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
Following Construction, Rig Walks
into Mississippi River
Rig Travels Down Mississippi River
Rig Crosses Under
Four Bridges En Route
to U.S. GOM
Bob Palmer (2003) vs. Rowan-Texas (1973)
Under Tow To Location
Jacked Up on Open Location
Jacked up on Location and Cantilevered out
over Platform
Heavy-Lift Rig Hauler
Rig Floats Onto Submerged Deck
Transport of Rigs Overseas
Single-Rig Dry Tow
Double-Rig Dry Tow
Triple-Rig Dry Tow
Rowan Fleet Migrates to Saudi Arabia
• 35,000 Tons
• 12,300 miles
• 60 days
Sharjah
Roads
Jacked up in Halifax Harbor, Nova Scotia, Canada
II.
Emerging Trends in the Offshore Drilling Industry
A.
B.
Current Status
1.
Global Supply and Demand
2.
Saudi Arabia as swing producer
3.
Declining Production in GOM
4.
The Moratorium
5.
The Stakeholders in GOM
Extending Life of GOM
1.
Evolving Technology
2.
Deep Shelf and Deep Water
3.
Royalty Relief by MMS
C.
Emergence of Liquified Natural Gas
D.
Law of the Sea Treaty
E.
Fallout from Hurricanes Katrina and Rita
Worldwide Jack-up Supply / Demand
Worldwide Utilization: 92%
9
2 0
9
85
E. Canada: 100%
19 US GOM: 82%
32
0
North Sea: 100%
27 0 Mexico: 100%
80 2
Middle East: 98%
14
25
0
Indian Ocean: 100%
3
C&S
America: 82%
21
0
West Africa: 100%
31
1
SE Asia: 97%
Contracted
Total Number of Jack-up Rigs Worldwide: 390
Source: ODS – Petrodata
Not Contracted
Houston Chronicle: March 23, 2006
DEEP-WATER EXPLORATION, DRILLING FLOURISH IN THE GULF
NEW ORLEANS - Petroleum operators announced 10 new deep-water discoveries in the
Gulf of Mexico in 2005 and the number of drilling rigs exploring in deep water has
increased sevenfold in a year, a federal agency is reporting. Deep water is considered to
be 1,000 feet or deeper. The deepest discovery reported last year was by BP in 9,576 feet
of water.
"Last year continued to be a strong year for deep-water activity in the Gulf of Mexico," said
Chris Oynes, the agency's Gulf of Mexico regional director. "There is intense interest in oil
and gas potential in the deep water." In March, there were 42 rigs drilling or working on
development wells in deep-water areas, including 10 rigs in 5,000 feet or more, the agency
said. A year ago, there were six rigs in ultradeep water.
On March 15, petroleum exploration companies put $588.3 million in high bids for 405
offshore tracts off Louisiana, Mississippi and Alabama. The figure far exceeded last year's
auction by the agency, when $342 million in high bids were accepted for 403 tracts that
exploration firms are betting on to produce in the central Gulf of Mexico.
Houston Chronicle: March 2, 2006
GLOBALSANTAFE WINS CONTRACT: DEEP-WATER RIG WILL COST $590 MILLION
GlobalSantaFe Corp., the world’s second-largest offshore driller by market
value, said Thursday it reached an agreement with an unidentified customer to
provide a new deep-water rig that would generate about $1 billion in revenue
over seven years.
Keppel Fels, a unit of Keppel Corp., has been contracted to build the rig at its
Singapore shipyard at a cost of about $590 million, Houston-based
GlobalSantaFe said. Delivery of the rig, to be named GSF Development Driller
III, is expected in early 2009, the company said.
The new rig may generate an average of about $390,000 a day for
GlobalSantaFe, based on the total revenue and duration of the agreement.
Houston Chronicle: March 11, 2006
LOST LANGUAGE DRAINS BILLIONS: MYSTERIOUS ERROR TO COST GOVERNMENT ENERGY ROYALTIES
WASHINGTON – How it happened or who’s responsible is a mystery eight years after the fact. But what may have
been a simple error – or perhaps something more ominous – has given a multimillion-dollar windfall to a group of oil
and natural gas companies and could cost the government billions of dollars more in the years to come.
The Interior Department disclosed this week that a provision was mysteriously deleted from hundreds of federal
drilling leases in the late 1990s that would have required producers to pay royalties, once prices reached a certain
level, on oil or gas taken from deep waters of the Gulf of Mexico. In 1995, Congress exempted deep-water oil from
royalty payments to spur development. But a price threshold was included in leases issued in 1996 and 1997 and
again in leases sold in each year since 2000 that reinstates the royalties if market prices reach a certain level.
For some reason the language “was inadvertently dropped” from an addendum attached to more than 1,100 leases
the Interior Department’s Minerals Management Service issued for 1998 and 1999, Walter Cruickshank, the agency’s
deputy director, told a House Government Reform subcommittee Wednesday. He said officials have not been able to
determine who made the change. “It is clear that there is no record telling people to take the language out,” he said,
and it was widely known that the department wanted the price threshold restriction in any oil and gas leases as a
matter of policy.
In the late 1990s, when oil prices were well below the threshold, the issue may not have attracted attention. Rep.
Darrell Issa, R-Calif., the subcommittee chairman, called the whole matter “suspicious.” “This is a $7 billion word
processing error,” Issa told reporters. He said some of the leases issued during those two years could remain in
effect for as long as 85 years, so the government will be unable to collect royalty payments from oil and gas taken
from those leases because they lacked the threshold language. If prices remain high, lost royalties “will be in the
billions of dollars,” he acknowledged.
Houston Chronicle: March 5, 2006
TRANSOCEAN HAS NEW DRILL SHIP IN THE WORKS
TRANSOCEAN, the world's largest offshore oil and natural gas driller, has been awarded contracts
from Chevron Corp. that will lead to construction of a new deep-water rig and generate as much as
$1.7 billion in revenue.
The contracts include a new drillship that will cost an estimated $650 million to build and will be used
by Chevron for five years, Houston-based Transocean said Wednesday in a prepared statement. The
drillship will be Transocean's first new deep-water rig since 2001 and will be among the most
expensive ever built. Chevron also extended agreements to use two other deep-water rigs.
Transocean and other drillers have been reluctant to build new rigs without first having multiyear
contracts in place for their use. With the most prized deep-water rigs in short supply and producers
racing to capitalize on soaring energy prices, rents have climbed to unprecedented highs.
The new drillship, to be named Discoverer Clear Leader, will be built at the Daewoo Shipbuilding and
Marine Engineering Co. shipyard in South Korea, Transocean said. Construction is expected to take
30 months, and the contract with Chevron is scheduled to start in the second quarter of 2009.
The rig may generate revenue of $493 million for Transocean during the first three years, or an
average rate of about $450,000 a day, company spokesman Guy Cantwell said. Rates during the final
two years are linked to oil prices and are expected to range from $400,000 to $500,000 a day, he
said. The Discoverer Clear Leader will be capable of operating in waters as deep as 12,000 feet and
will be able to drill wells as deep as 40,000 feet, the company said.
Less than 200m
Greater than 1,000 m
DEEPWATER
FLEX TREND (Shelf Edge)
SHELF
Cretaceous Shelf Edge
S
N
Tahiti
Thunder
Horse
Llano
Jason
Conger
Typical Treasure ST
Shelf Prospect 172
Hickory
JB Mtn.
Pleistocene
10,000’
Pliocene
Miocene
Mid. Miocene
20,000’
Low. Miocene
Paleogene
30,000’
Salt
Salt
Basement Rock
Source: Newfield Exploration
Mesozoic
III. How is an offshore well drilled?
The Basic Rig Systems are:
•
Power System
•
Hoisting System
•
Rotating System
•
Circulating System
•
Well Control System
Making a Drillstring Connection
Land Rig Substructure
Derrick
TYPES OF OFFSHORE RIGS
•
Drilling from beach (1890’s)
•
Drilling from wharves (1910’s)
•
Platform rig and barge (1920’s)
•
Submersible barge rig (1940’s)
•
Jackup rig (1950’s)
•
Semi-submersible rig (1970’s)
•
Drillship (1980’s)
Drilling from Wharf: Oil Rock City in Caspian Sea, Baku, Russia
Submersible Barge Rig
Jackup Drilling Rig
Semi-Submersible Drilling Rig
Drillship
IV. Oilco/Drillco Relationship: Who Provides What?
Drillco Provides:
•
Rig and drillpipe
•
Rig maintenance, repairs and certifications
•
Rig crew aboard rig 24/7
•
Catering and housekeeping staffs
•
Medic
Drillco Personnel
TOTAL NO.
ON RIG
CLASSIFICATION
As required
Rig Manager
1
Day Toolpusher (on-site manager)
1
Night Toolpusher (on-site manager)
1
Mechanic
1
Electrician
1
Barge Engineer (a/k/a Rig Administrator)
1
Assistant Barge Engineer
1
Welder
2
Drillers
2
Assistant Drillers
2
Derrickmen
2
Enginemen
2
Crane Operators
2
Assistant Crane Operators/Deck Supervisors
10
Roughnecks
8
Roustabouts
1
Medic
38
Roughnecks
Men Working on Well
Driller
Derrickman
OILCO PROVIDES:
•
•
•
•
•
•
•
•
•
•
•
Lease rights and drilling permits
Well program
Transportation of rig to Oilco’s wellsite
“Company man” aboard rig 24/7
Mud Engineer aboard rig 24/7
Specialized services
Air and/or sea transportation for all personnel
and equipment
Fuel
Drilling mud
Well evaluation services
Production equipment (platforms, pipelines,
compressors)
THE EXCHANGE
•
Oilco pays Drillco a dayrate charge
•
Drillco’s dayrate charges account for 4060% of Oilco’s total well costs
•
Oilco expects delivery of well in
compliance with Oilco’s well program
and in a safe and timely manner
•
Oilco gets 83.3% of production
V.
Risks
WHAT BAD STUFF CAN HAPPEN?
•
Boat accidents
•
Crane accidents
•
Equipment defects and malfunction
•
Lightning strikes
•
Hurricanes
•
Pipeline strikes
•
Platform strikes
•
Punchthroughs
•
Blowouts
•
Helicopter accidents
•
Sabotage
•
Nationalization/confiscation
•
War Risk/Terrorism
Lightning Strike
Hurricane Lili
(October 2002)
Rowan-Houston following Hurricane Lili
Salvage Operation Re Rowan-Houston
Salvage Operation Re Rowan-Houston
Seminal Spindletop Blowout (1900)
Derrick Collapse
Land Rig Blowout
Offshore Egypt
August 2004
Rig sinks and
Platform is destroyed
New Risk: Icebergs and Ice Flows
Ivan, Katrina and Rita
Three of the worst
hurricanes to ever hit the
U.S. Gulf of Mexico. Struck
within a 13-month period,
devastating the offshore oil
and gas industry
IVAN SCORECARD (September 2004)
•
Approximately 33,000 miles of pipeline, 4,000 platforms,
135 drilling rigs and 30,000 offshore workers in GOM.
•
Approximately 10,000 miles of pipeline, 1,500 platforms
and 40 drilling rigs in Ivan’s direct path.
•
Total Damage
1. Platforms: 31 destroyed or damaged
2. Pipelines: hundreds of miles of pipelines buried,
snapped and/or damaged due to mudslides;
production shut-in for months
3. Drilling Rigs: 6 damaged
4. No one injured or killed due to evacuations
Hurricane Ivan: September 2004
Hurricane Katrina 2005
Path of Rita
Path of Katrina
Hurricane Damage
Refinery Damage in
Pascagoula, MS
Aviation Base in Venice, LA
Marine facility in
Fourchon, LA
Shell Mars Platform
Before
After
Chevron
Typhoon Platform
Before
After
GSF Adriatic VII
Diamond Ocean Warwick
GlobalSantaFe
High Island III
NOBLE THERALD MARTIN OFF COAST LOUISIANA
RIG DRIFTED 125 MILES
DRAGGING 6 ANCHORS
BEFORE BEACHING
ITSELF IN VERMILLION
ROWAN’S LOSSES
•Rowan-New Orleans (capsized and found)
•Rowan-Halifax (capsized and found)
•Rowan-Odessa (capsized and found)
•Rowan-Fort Worth (capsized and not found)
•Rowan-Louisiana (beached and destroyed)
Before
After
This 10-ton anchor was racked on the exterior of the
hull 50 feet above the sea before the storm
Ex-President Clinton hard at work on a rescue mission
Hurricanes Katrina/Rita Scorecard
•
Platforms: 167 destroyed or damaged
•
Drilling Rigs: 8 destroyed; 22 extensively
damaged; 19 knocked off station and adrift
•
Pipelines and Refineries: extensive damage
•
No one injured or killed in offshore industry
•
Fallout: (1) tight rig supply and price increases
(2) increase in oil and gas prices
(3) government intervention
(4) increase in insurance costs
Katrina/Rita Fallout: Dayrate Increases
Rig Type
August 2004
August 2005
November 2005
250’ Jack-up
$30,000
$60,000
$100,000
$130,000
300’ Jack-up
$40,000
$70,000
$130,000
$150,000
350’ Jack-up
$45,000
$75,000
$140,000
$160,000
7500’ Semi
$80,000
$200,000
$300,000
$400,000
Source: ODS - Petrodata
Today
Katrina/Rita Fallout: Insurance
• Big Losses: Hurricane Katrina results in the largest
insured loss in history. Hurricane Rita is the most
devastating storm to hit the offshore drilling industry and
particularly Rowan.
• Higher Premiums: The losses due to Hurricanes Katrina
and Rita has caused an increase of between 300% and
500% in insurance premiums.
• Less Coverage: Insurers are requiring drillers to accept
more risk in the form of higher deductibles and maximum
aggregate windstorm coverages.
POTENTIAL DAMAGES
•
Injury and death to Oilco’s and Drillco’s personnel
•
Damage to Oilco’s property
•
Damage to Drillco’s rig
•
Third-party damage (beaches, fishermen, reefs,
oysterbeds, adjacent pipelines and reservoirs)
•
Loss or damage to the hole
•
Well control costs
•
Pollution control costs
•
Reservoir loss or damage
•
Debris removal
VI.
Indemnity Agreements
Following an accident, management has
three questions:
•
What happened?
•
What does the contract say?
•
Do we have insurance?
What is an indemnity agreement?
• American system of liability is fault-based
• Contract-based allocation vs. fault-based allocation
• Indemnity agreement is only as good as the financial
resources of party who gives it and that party’s
insurer
• Prepare management for the possibility of a harsh
result
• If used, the indemnifying party, its insurers and
eventually the courts will closely scrutinize the
indemnity agreement
• Carefully read, review and re-review indemnity
language
• Know the law
CASE #1

Oilco's company man is killed and his family files a lawsuit against Drillco.

Oilco's Indemnity: Oilco shall be responsible for and hold harmless and
indemnify Drillco from and against all claims, demands, and causes of action
of every kind and character arising in connection with this Drilling Contract
asserted by Oilco's employees on account of illness, bodily injury or death,
but only to the extent Oilco is negligent in causing such illness, bodily injury,
or death.

Will Oilco indemnify Drillco?

ANSWER: No because no claim of negligence has been filed against Oilco
and Oilco's indemnity is limited to covering claims alleging Oilco acted
negligently.
CASE #2


Oilco's company man is killed and his family files a lawsuit against Drillco.

Oilco's Indemnity: Oilco shall be responsible for and hold harmless and
indemnify Drillco from and against all claims, demands, and causes of action
of every kind and character arising in connection herewith in favor of
Operator's employees on account of illness, bodily injury or death, but only to
the extent Oilco is negligent or causes such illness, bodily injury, or death.

Will Oilco indemnify Drillco?
ANSWER: No because the company man is a subcontractor hired by Oilco
and not an employee and Oilco's indemnity is limited to covering claims
asserted by Oilco's employees.
CASE #3

Oilco's company man is killed and his family files a lawsuit against Drillco.

Oilco's Indemnity: Oilco shall be responsible for and hold harmless and
indemnify Drillco from and against all claims, demands, and causes of action
of every kind and character arising in connection with this Drilling Contract
asserted by Oilco's employees, subcontractors and invitees on account of
illness, bodily injury or death, but only to the extent Oilco is negligent in
causing such illness, bodily injury, or death.

Will Oilco indemnify Drillco?

ANSWER: No because the lawsuit is a claim asserted by the family of Oilco's
company man, and Oilco's indemnity is limited to covering claims asserted by
Oilco's employees, subcontractors and invitees.
CASE #4

Oilco's company man is killed and his family files a lawsuit against Drillco.

Oilco's Indemnity: Oilco shall be responsible for and hold harmless and
indemnify Drillco from and against all claims, demands, and causes of action
of every kind and character arising in connection with this Drilling Contract
asserted by Oilco's employees, subcontractors and invitees, as well as each
of their respective beneficiaries, heirs, survivors and estates, on account of
illness, bodily injury or death., but only to the extent Oilco is negligent in
causing such illness, bodily injury, or death.

Will Oilco indemnify Drillco?

ANSWER: Yes, but the family also files suit against Rigco, which is the
manufacturer of the rig and the wholly-owned subsidiary of Drillco. Oilco
must indemnify Drillco, but Oilco will not indemnify Rigco.
CASE #5

Oilco's company man is killed and his family files a lawsuit against Drillco
and Rigco.

Oilco's Indemnity: Oilco shall be responsible for and hold harmless and
indemnify Drillco, its parent, subsidiary and affiliated companies, and their
respective officers, directors, subcontractors and employees ("Contractor
Group") from and against all claims, demands, and causes of action of every
kind and character arising in connection herewith asserted by Oilco's
employees, subcontractors and invitees, as well as each of their respective
beneficiaries, heirs, survivors and estates, on account of illness bodily
injury or death., but only to the extent Oilco is negligent in causing such
illness, bodily injury, or death.

ANSWER: Yes.
WHY ALLOCATE RISK?
•
Tailor risk to insurance coverage, but you should
protect your coverage, loss-history and insurer
•
Avoid insuring the same risk twice
•
Possibility of acquiring insurance for an assumed but
uninsured risk
•
Preserve customer relationships
•
Avoid company-breaking risks
•
Avoid biased courts and unpredictable jury verdicts
•
Avoid litigation expenses
•
Market conditions may dictate risk allocation
•
Take advantage of unsuspecting party
•
Assume risks that you can control through operations
and avoid risks that you cannot control
•
Allocation of risk should reflect value of contracted
services
VII.
Risk Allocation in Offshore Drilling Contracts
A.
Injury and Death
•
Industry Norm: knock-for-knock
•
Oilco’s Indemnity: Oilco shall be responsible for and hold
harmless and indemnify the Drillco Group from and
against all claims, demands and causes of action of every
kind and character on account of injury, illness or death of
Oilco’s employees, subcontractors or invitees.
•
Drillco’s Indemnity: Drillco shall be responsible for and
hold harmless and indemnify the Oilco Group from and
aginst all claims, demands and causes of aciton of every
kind and character on account of injury, illness or death of
Drillco’s employees, subcontractors or invitees.
•
Drillco assumes vast majority of personal injury risk
because Drillco has more personnel on rig.
A.
B.
Injury and Death: Knock-for-knock
Property Damage
•
Industry Norm: Qualified knock-for-knock
•
Oilco’s Indemnity: Oilco shall be responsible for and hold
harmless and indemnify the Drillco Group from and
against damage to or loss of the property and equipment
of Oilco, its parent, subsidiary and affiliated companies,
its partners and co-venturers, and their respective
subcontractors.
Drillco’s Indemnity: Drillco shall be responsible for and
hold harmless and indemnify the Oilco Group from and
against damage to or loss of the property and equipment
of Drillco, its parent, subsidiary and affiliated companies,
and their respective subcontractors; provided, however,
that Oilco shall reimburse Drillco 75% of the repair or
replacement cost for damage to or loss of any drillpipe,
drill collars or other in-hole equipment when such
equipment is being used in the hole below the rotary
table.
A. Injury and Death: Knock-for-knock
B. Property Damage: Qualified knock-for-knock
C. Third-party damage
•
Industry Norm: Not addressed in contract so liability is
allocated on a fault basis
A.
B.
C.
Injury and Death: Knock-for-knock
Property Damage: Qualified knock-for-knock
Third-party damage: Fault-based
D.
Loss of Hole
•
Industry Norm:
Oilco assumes risk with a fault-based
redrilling discount
•
Indemnity: In the event of loss or damage to the hole Oilco
shall be responsible for and hold harmless and indemnify the
Drillco Group from such damage to or loss of the hole;
provided that in the event such loss or damage is caused by
Drillco’s gross negligence or willful misconduct, Drillco shall
upon Oilco’s request and as Oilco’s exclusive remedy for such
loss or damage, repair the damaged portion or redrill to the
depth at which the loss or damage occurred at 85% of the
dayrate.
A.
B.
C.
D.
Injury and Death: Knock-for-knock
Property Damage: Qualified knock-for-knock
Third-party damage: Fault-based
Loss of Hole: Oilco assumes
E. Well Control Costs
•
Industry Norm: Oilco assumes risk
•
Indemnity: Oilco shall be responsible for and hold
harmless and indemnify the Drillco Group for the cost
of regaining control of any wild well.
A.
B.
C.
D.
E.
Injury and Death: Knock-for-knock
Property Damage: Qualified knock-for-knock
Third-party damage: Fault-based
Loss of Hole: Oilco assumes
Well Control Costs: Oilco assumes
F.
Reservoir Loss or Damage
•
Industry Norm: Oilco assumes risk without qualification
•
Indemnity: Oilco shall be responsible for and hold harmless
and indemnify the Drillco Group from and against all claims
on account of injury to, destruction of, or loss or impairment
of any property right in or to oil, gas or other mineral
substance and for any loss or damage to any formation, strata
or reservoir beneath the seabed.
A.
B.
C.
D.
E.
F.
Injury and Death: Knock-for-knock
Property Damage: Qualified knock-for-knock
Third-party damage: Fault-based
Loss of Hole: Oilco assumes
Well Control Costs: Oilco assumes
Reservoir Loss or Damage: Oilco assumes
G. Pollution
•
Industry Norm: Drillco assumes pollution emanating from rig, and Oilco assumes
wellbore pollution with qualification.
Drillco's Indemnity: Drillco shall be responsible for and hold harmless and indemnify
the Oilco Group for control and removal of pollution or contamination which
originates above the surface of the water from spills of fuels, lubricants, motor oils,
paints, solvents and garbage wholly in Contractor's possession and control and
directly associated with Contractor's equipment and facilities.
Oilco's Indemnity: Oilco shall be responsible for and hold harmless and indemnify
the Drillco Group for control and removal of all pollution or contamination other than
that assumed by Drillco above, including all pollution or contamination resulting from
fire, blowout, cratering, seepage or any other uncontrolled flow of oil, gas, water or
other substance; provided, however, that in the event any such pollution or
contamination is caused by the gross negligence or willful misconduct of Contractor,
Contractor shall assume the first $1,000,000 of such pollution or contamination.
A.
B.
C.
D.
E.
F.
G.
Injury and Death: Knock-for-knock
Property Damage: Qualified knock-for-knock
Third-party damage: Fault-based
Loss of Hole: Oilco assumes
Well Control Costs: Oilco assumes
Reservoir Loss or Damage: Oilco assumes
Pollution: Split risk
H.
Debris Removal
•
Industry Norm: Each party will pay the costs to raise and remove its own
equipment.
•
Oilco’s Indemnity: Oilco shall at all times be responsible for and hold
harmless and indemnify the Drillco Group for the cost of removal of debris
that is the property or equipment of the Oilco Group.
Drillco’s Indemnity: Drillco shall at all times be responsible for and hold
harmless and indemnify the Oilco Group for the cost of removal of debris
that is the property or equipment of the Drillco Group, but only to the extent
removal of such debris is required by governmental authority or impedes
Oilco’s ongoing operations.