Ability Drilling and Geoenergie Bayern cancel agreement

Alexander Richter 25 Jan 2009

Ability Drilling (OSL:ADRL) and Geoenergie Bayern have agreed to terminate its agreement. The agreement included a drilling contract for land Rig no. 2, originally scheduled to start operations in Germany in Q4 2008.

According to CEO Hans Petter Eikeland there are several reasons for the termination of the agreement: “Delivery delays triggered the customer’s decision regarding land rig no. 2, but the overall picture with lower energy prices worldwide, which is related to the current situation in the world economy, is also an important factor. We could not agree on the terms for a future partnership and decided to terminate the agreement.”

Mr. Eikeland still believes geothermal drilling is an interesting market for Ability Drilling, but expects that it will take some time before the availability of projects improves. “Our rigs are very well suited for this type of projects, and we are in contact with several possible future customers. However, we believe that both credit issues and energy prices will slow down the market for a while.”

The CEO confirms that Ability Drilling is negotiating new contracts for the rigs available for the market. “Negotiations are progressing well for all rigs, but the termination of contracts with Porosity and Geoenergie negatively impacts our business in the current quarter as we cannot employ the rigs over the night. Consequently, we have reduced manning and cost to adapt to the current situation while we are finalising new contracts. We expect this to be solved in Q1.”

Source: Company statement