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FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer Pursuant to Rule 13a-16 or 15f-16 of the
Securities Exchange Act of 1934
For the month of March, 2000
SANTA FE INTERNATIONAL CORPORATION
(Translation of Registrant's name into English)
Two Lincoln Centre, Suite 1100, 5420 LBJ Freeway, Dallas, Texas 75240-2648
(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.]
Form 20-F [X] Form 40-F [ ]
[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934]
Yes [ ] No [X]
[If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with rule 12g3-2(b): 82 - ________.]
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Note: The following disclosure has been prepared to conform to the disclosure
called for in Quarterly Reports on Form 10-Q filed with the U. S. Securities
and Exchange Commission.
SANTA FE INTERNATIONAL CORPORATION AND SUBSIDIARY COMPANIES
TABLE OF CONTENTS TO FORM 6-K
QUARTER ENDED MARCH 31, 2000
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Page No.
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COVER PAGE 1
DOCUMENT TABLE OF CONTENTS 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations and Retained Earnings for the Three
Months ended March 31, 2000 and 1999 3
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 4
Consolidated Statements of Cash Flows for the Three Months ended
March 31, 2000 and 1999 5
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II - OTHER INFORMATION 14
SIGNATURES 15
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SANTA FE INTERNATIONAL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
(U.S. dollars, in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months ended March 31,
----------------------------------
2000 1999
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<S> <C> <C>
Operating revenues $ 132,548 $ 185,516
Operating costs 88,643 93,513
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Operating margin 43,905 92,003
Other operating costs and expenses:
Depreciation and amortization 20,359 17,658
General and administrative 4,121 5,189
Gain on sale of assets (284) (200)
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Operating income 19,709 69,356
Other income (expense):
Investment income 3,590 1,431
Other, net (1,128) (1,114)
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Income before provision for taxes on income 22,171 69,673
Provision for taxes on income (Note 4) 3,902 11,217
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Net income 18,269 58,456
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Retained earnings as of the beginning of the period 693,168 558,260
Dividends declared ($0.0325 per share per quarter) (3,735) (3,729)
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Retained earnings as of the end of the period $ 707,702 $ 612,987
============= =============
Income per Ordinary Share:
Basic and Diluted $ 0.16 $ 0.51
============= =============
Weighted average ordinary and ordinary equivalent
shares used in Ordinary Share computations:
Basic 114,910,836 114,728,491
============= =============
Effect of dilutive securities - employee stock options 1,460,620 361,875
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Diluted 116,371,456 115,090,366
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</TABLE>
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SANTA FE INTERNATIONAL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(U.S. dollars, in thousands, except share data)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
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ASSETS
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Current assets:
Cash and cash equivalents $ 248,268 $ 99,692
Marketable securities 13,008 147,749
Accounts receivable 115,740 107,741
Inventories 36,426 42,083
Prepaid expenses and other current assets 9,019 11,427
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Total current assets 422,461 408,692
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Property and equipment, at cost 2,159,935 2,152,094
Less accumulated depreciation and amortization (1,068,871) (1,049,530)
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Property and equipment, net 1,091,064 1,102,564
Other noncurrent assets 52,672 52,286
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Total assets $ 1,566,197 $ 1,563,542
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,109 $ 49,212
Accrued liabilities 92,779 100,214
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Total current liabilities 136,888 149,426
Other noncurrent liabilities 46,147 48,091
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Total liabilities 183,035 197,517
Commitments and contingencies (Note 3)
Shareholders' equity:
Ordinary shares par value $.01; 600,000,000 shares authorized,
115,144,552 and 114,971,177 shares issued and outstanding at
March 31, 2000 and December 31, 1999, respectively 1,151 1,150
Additional paid-in capital 674,309 671,707
Retained earnings 707,702 693,168
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Total shareholders' equity 1,383,162 1,366,025
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Total liabilities and shareholders' equity $ 1,566,197 $ 1,563,542
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</TABLE>
4
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SANTA FE INTERNATIONAL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(U.S. dollars, in thousands)
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<CAPTION>
Three Month ended March 31,
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2000 1999
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Operating activities:
Net income $ 18,269 $ 58,456
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 20,359 17,658
Gain on sale of assets (284) (200)
Accretion of interest income and gains on sales
of marketable securities 1,325 (365)
Deferred income tax provision (benefit) -- (43)
Changes in operating assets and liabilities:
Accounts receivable (7,999) 6,708
Inventories 5,657 311
Prepaid expenses and other current assets 2,407 268
Accounts payable (5,103) (23,401)
Accrued liabilities (6,684) 456
Other, net (2,647) 1,574
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Net cash provided by operating activities 25,300 61,422
Investing activities:
Capital expenditures (8,740) (38,264)
Proceeds from sales of property and equipment 365 296
Maturities of marketable securities 148,254 --
Purchases of marketable securities (14,838) (51,488)
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Net cash used for investing activities 125,041 (89,456)
Financing activities:
Dividends paid (3,729) (3,721)
Issuance of shares under the Employee Share Purchase Plan 1,964 2,099
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Net cash used for financing activities (1,765) (1,622)
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Net change in cash and cash equivalents 148,576 (29,656)
Cash and cash equivalents at beginning of period 99,692 124,314
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Cash and cash equivalents at end of period $ 248,268 $ 94,658
========= =========
Supplemental disclosures of cash flows information:
Income taxes paid $ 4,663 $ 3,985
========= =========
</TABLE>
5
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SANTA FE INTERNATIONAL CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
Santa Fe International Corporation (the "Company"), a Cayman Islands
corporation, is a majority-owned subsidiary of SFIC Holdings (Cayman), Inc.
("Holdings"), which in turn is a wholly-owned subsidiary of Kuwait Petroleum
Corporation ("KPC"). KPC is wholly-owned by the State of Kuwait. The Company
owns and operates a high quality, technologically advanced fleet of 27 marine
and 33 land drilling rigs and provides drilling related services to the
petroleum industry worldwide.
Holders of Ordinary Shares are entitled to participate in the payment
of dividends in proportion to their holdings. Under Cayman Islands law, the
Company may pay dividends or make other distributions to its shareholders, in
such amounts as the Board of Directors deems appropriate from the profits of
the Company or out of the Company's share premium account (equivalent to
additional paid-in capital) if the Company thereafter has the ability to pay
its debts as they come due. Cash dividends, if any, will be declared and paid
in U.S. dollars. At March 31, 2000, the Company had declared dividends that had
not been paid amounting to $3,735,000.
The accompanying consolidated financial statements are presented in
U.S. dollars and in accordance with accounting principles generally accepted in
the U.S. The preparation of interim financial statements requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. While management has based its
assumptions and estimates on facts and circumstances currently known, actual
amounts may differ from such estimates.
The condensed consolidated financial statements included herein have
been prepared without audit, pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission. Certain information and notes normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations.
The financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods. Such adjustments are considered to be of a normal recurring
nature unless otherwise identified. Results of operations for the three month
period ended March 31, 2000 are not necessarily indicative of the results of
operations that will be realized for the year ending December 31, 2000. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the Company's Annual Report on
Form 20-F for the year ended December 31, 1999.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents and Marketable Securities
Cash equivalents consist of highly liquid short-term investments that
are readily convertible into cash and which at the date of purchase were so
near their maturity that they expose the Company to an insignificant risk from
changes in interest rates. Cash equivalents are carried at cost plus accrued
interest, which approximates fair value. The interest method is used to account
for any premium or discount on cash equivalents. The Company's policy is to
place its temporary cash investments with high credit quality financial
institutions and by policy limit the amount of credit exposure to any one
financial institution.
The Company's marketable securities are classified as
available-for-sale securities. Unrealized holding gains and losses on
available-for-sale securities are included as a component of other comprehensive
income in shareholders' equity, net of the tax effect. The fair values for
marketable securities are based on quoted market prices. The amortized cost of
debt securities in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included in investment
income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in investment
income. The Company does not believe that it is exposed to any significant risks
on its investments.
6
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At March 31, 2000, marketable securities consisted primarily of
Eurodollar debt securities and commercial paper. Cost approximates market
value.
Income Per Ordinary Share
The basic and diluted income per Ordinary Share data for the three
months ended March 31, 2000 and 1999, respectively, is calculated based on the
weighted average shares outstanding for the periods.
Comprehensive Income
The Company accounts for comprehensive income in accordance with
Statement of Financial Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" which establishes standards for reporting and display of comprehensive
income and its components. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. For the three month periods
ended March 31, 2000 and 1999, respectively, the Company realized no such
transactions other than those reported in net income.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is involved in various
lawsuits, claims and related matters. In the opinion of management, the
ultimate resolution of such matters will not have a material adverse effect on
the consolidated financial position or results of operations of the Company.
NOTE 4 - INCOME TAXES
The Company is not subject to income taxes in the Cayman Islands. All
of the Company's income before provision for taxes on income and the related
provision for taxes on income relates to operations in jurisdictions other than
the Cayman Islands. The relationship between income before provision for taxes
on income and the provision for taxes on income varies from period to period
because each jurisdiction in which the Company operates has its own system of
taxation (not only with respect to the nominal rate, but also with respect to
the allowability of deductions, credits and other benefits) and because the
amounts earned in, and subject to tax by, each jurisdiction varies from period
to period. The provisions for taxes on income for the three month periods ended
March 31, 2000 and 1999, respectively, were recognized based upon the expected
annualized relationship.
NOTE 5 - SEGMENT INFORMATION
The Company currently has six reportable segments, defined as
different equipment classifications, or by contract terms in the case of
drilling related services, as follows: heavy duty harsh environment jackup
rigs, semisubmersible rigs, 300 to 350 foot cantilever jackup rigs, 200 to 250
foot jackup rigs, land rigs and drilling related services. In past periods, the
Company's platform rig and inland lake barge were combined and reported as an
additional reportable segment, "other marine rigs".
7
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The Company evaluates performance and allocates resources based upon
the operating margin (operating revenues less operating expenses) generated by
the segment. For further details of operating margin by segment, see "Item 2. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations." There are no intersegment sales and transfers due to the nature of
the business of the segments. The following table sets forth operating revenue
and segment income for each of the reportable segments and reconciles total
segment income to consolidated income before provision for taxes on income.
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THREE MONTHS ENDED MARCH 31,
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2000 1999
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(in thousands)
<S> <C> <C>
OPERATING REVENUES
Heavy duty harsh environment jackup rigs $ 55,395 $ 45,262
Semisubmersible rigs 5,364 28,917
300-350 foot cantilever jackup rigs 13,699 34,067
200-250 foot jackup rigs 14,419 20,794
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Total marine rigs 88,877 129,040
Land rigs 34,592 34,801
Drilling related services 8,787 21,373
Other 292 302
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Total operating revenues $ 132,548 $ 185,516
========= =========
SEGMENT INCOME
Heavy duty harsh environment jackup rigs $ 31,717 $ 26,281
Semisubmersible rigs (9,639) 16,684
300-350 foot cantilever jackup rigs (1,819) 18,150
200-250 foot jackup rigs (1,360) 6,257
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Total marine rigs 18,899 67,372
Land rigs 4,792 5,480
Drilling related services 2,481 5,498
Other (2,342) (3,805)
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Total segment income 23,830 74,545
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Unallocated amount:
General and administrative 4,121 5,189
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Operating income 19,709 69,356
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Other income (expense) 2,462 317
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INCOME BEFORE PROVISION FOR TAXES ON INCOME $ 22,171 $ 69,673
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</TABLE>
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements regarding future performance and results and the other
statements that are not historical facts contained in this report are
forward-looking statements. Statements made in this document that state the
Company's or management's intentions, hopes, plans, estimates, beliefs,
expectations, anticipations or predictions of the future and words of similar
import are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to have been
correct. Such statements involve risks and uncertainties including, but not
limited to, the risks involved in dealing with other parties, including the
risk that other parties' commitments to the Company and its subsidiaries could
be breached, changes in the markets for oil and natural gas and for drilling
rigs and the risks of doing business in changing markets and changing costs and
other factors discussed herein and in the Company's other Securities and
Exchange Commission filings. Should one or more risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those indicated.
The contract drilling industry is and historically has been highly
volatile, competitive and cyclical, with periods of high demand and rig
utilization resulting in high rig dayrates followed by periods of low demand,
excess rig supply and low rig dayrates. The contract drilling business is
influenced by many factors beyond the control of the Company, including the
current and anticipated prices of oil and natural gas and client oil company
capital programs. During the depressed oil price cycle of late 1998 and early
1999, the oil and gas industry continued its trend toward consolidation, with
the announcement or completion of several merger and acquisition transactions.
Although oil prices have rebounded from the lows of the first quarter of 1999,
oil and gas industry capital spending levels for exploration and production
projects have been and may continue to be less robust than might have otherwise
been experienced without industry consolidation. As oil and gas companies
continue to address the impact of consolidation, their requirements for
drilling rigs and services may be adversely affected.
In addition to consolidation within the oil and gas industry, the
contract drilling industry continued to experience merger and acquisition
activity. Further drilling industry consolidation could adversely impact the
Company's results of operations through lowered operating margins, increased
competition from larger industry members or a variety of other factors that
cannot as yet be identified or quantified.
Oil prices recovered beginning in the second quarter of 1999 and
recently were at near record levels. The contract drilling industry is now
beginning to recover from the 1999 down cycle that resulted in reduced
worldwide rig utilization and depressed rig rates. To date, this recovery has
yielded increased offshore rig utilization and dayrates primarily in the Gulf
of Mexico. International offshore and land rig drilling markets (including
those in which the Company operates) have yet to enter into a meaningful
recovery and the Company presently has a number of rigs idle. The Company
believes the decreased utilization and lower dayrate trends recently
experienced by the industry will be reversed as the industry continues to
rebound. Although the price of crude oil increased through the last half of
1999 and remained strong during the first quarter of 2000, the potential impact
of this oil price increase on the Company's future results of operations, both
as to amount and timing, cannot be accurately predicted. The Company believes,
however, that higher oil and natural gas prices for an extended period of time
may result in increased oil and gas company exploration and production budgets,
which in turn may result in increased future demand for drilling rigs.
9
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The following table presents data relating to the Company's operating
revenues, operating costs, operating margin, operating income, utilization and
average dayrates by segment.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
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(in thousands except as indicated)
<S> <C> <C>
OPERATING REVENUES
Heavy duty harsh environment jackup rigs $ 55,395 $ 45,262
Semisubmersible rigs 5,364 28,917
300-350 foot cantilever jackup rigs 13,699 34,067
200-250 foot jackup rigs 14,419 20,794
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Total marine rigs 88,877 129,040
Land rigs 34,592 34,801
Drilling related services 8,787 21,373
Other 292 302
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Total operating revenues 132,548 185,516
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OPERATING COSTS (1)
Heavy duty harsh environment jackup rigs 17,385 14,437
Semisubmersible rigs 13,181 10,715
300-350 foot cantilever jackup rigs 12,664 13,238
200-250 foot jackup rigs 13,686 12,243
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Total marine rigs 56,916 50,633
Land rigs 23,632 23,606
Drilling related services 6,081 15,633
Other 2,014 3,641
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Total operating costs 88,643 93,513
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OPERATING MARGIN 43,905 92,003
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Depreciation and amortization 20,359 17,658
General and administrative 4,121 5,189
Loss (gain) on sale of assets (284) (200)
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OPERATING INCOME $ 19,709 $ 69,356
========= =========
OPERATING INCOME AS A PERCENTAGE OF REVENUES 14.9% 37.4%
========= =========
RIG FLEET UTILIZATION (IN PERCENTAGES)
Heavy duty harsh environment jackup rigs 91.9% 100.0%
Semisubmersible rigs 33.3% 100.0%
300-350 foot cantilever jackup rigs 67.3% 89.7%
200-250 foot jackup rigs 72.3% 54.2%
Total marine rigs 70.6% 80.2%
Land rigs 68.1% 73.0%
AVERAGE DAYRATES (IN WHOLE DOLLARS)
Heavy duty harsh environment jackup rigs $ 110,349 $ 100,582
Semisubmersible rigs 58,945 107,100
300-350 foot cantilever jackup rigs 24,862 52,735
200-250 foot jackup rigs 27,413 47,367
Total marine rigs 53,220 71,490
Land rigs 16,924 16,596
</TABLE>
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(1) EXCLUSIVE OF DEPRECIATION WHICH IS PRESENTED SEPARATELY BELOW.
10
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QUARTERS ENDED MARCH 31, 2000 AND 1999
OPERATING REVENUES. Total operating revenues decreased $53.0 million
(28.6%). Revenues from the Company's heavy duty harsh environment jackup rig
fleet increased $10.1 million (22.4%) primarily due to the impact of Galaxy III
operations, which began on December 5, 1999 ($14.2 million). Partially
offsetting this increase were lower utilization ($3.0 million), primarily for
the Monitor, and lower average dayrates ($1.1 million). Operating revenues for
the Company's semisubmersible rigs decreased $23.6 million (81.5%) mainly due
to idle time incurred for Rig 135 and the Aleutian Key ($19.8 million) and a
45.0% decrease in average dayrates ($3.8 million). Revenues from 300-350 foot
cantilever jackups decreased $20.4 million (59.8%) primarily because of a 52.9%
decrease in average dayrates ($16.3 million) and decreased utilization of rigs
in Egypt and Saudi Arabia ($5.2 million), partially offset by increased
utilization of the Galveston Key in Indonesia ($1.1 million). Revenues from
200-250 foot jackup rigs decreased $6.4 million (30.7%), mainly due to a 42.1%
decrease in average dayrates ($8.2 million), lower utilization of Rig 103 in
Qatar ($2.0 million) and the idling of Rig 134 as it was upgraded during the
first quarter of 2000 ($1.9 million). Increased utilization ($5.7 million) of
rigs in Egypt and for Rig 127 in Qatar partially offset these decreases.
Revenues from drilling related services decreased $12.6 million (58.9%),
primarily because of a $6.7 million decrease in revenues from incentive
contracts and a $6.1 million decrease in third party rig operations, partially
offset by $0.3 million in revenues from the Company's platform rig. Revenues
from both incentive drilling and third party rig operations decreased mainly
due to lower activity in the North Sea.
OPERATING COSTS. Total operating costs decreased $4.9 million (5.2%).
Operating expenses from heavy duty harsh environment jackup rigs increased $2.9
million (20.4%) primarily due to the impact of Galaxy III operations.
Semisubmersible rig operating costs increased $2.5 million (23.0%) primarily
due to maintenance costs incurred on Rig 135 and on the Aleutian Key while
idle. Operating costs for the 200-250 foot jackups rigs increased $1.4 million
(11.8%), primarily due to increased utilization. Operating expenses from
drilling related services decreased $9.6 million (61.1%) primarily due to a
$6.3 million decrease in expenses associated with incentive drilling contracts
and a $3.2 million decrease in expenses from third party operations. Other
operating expenses decreased $1.6 million (44.7%), primarily due to decreased
provision for inventory obsolescence.
GENERAL AND ADMINISTRATIVE. General and administrative expense
decreased $1.1 million (20.6%) primarily due to lower employee benefit costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased $2.7 million (15.3%) for the quarter ended March 31, 2000 as compared
with the same period in the prior year. Addition of the Galaxy III marine rig
and Rig 180 land rig increased depreciation expense by $1.7 million and $0.4
million, respectively. The remainder of the increase was due to depreciation of
general capital additions to all other rigs and equipment.
OTHER INCOME (EXPENSE), NET. Other income increased $2.1 million for
the quarter ended March 31, 2000, mainly due to increased investment income,
primarily due to higher invested balances.
PROVISION FOR TAXES ON INCOME. The provision for taxes on income
decreased $7.3 million (65.2%) for the first quarter of 2000 as compared with
the same quarter of 1999. The Company's expected annualized effective tax rate
will increase to 17.6% in 2000 from 16.1% in 1999 due to changes in the mix of
reportable earnings generated within the various taxing jurisdictions in which
the Company operates.
NET INCOME. Net income for the quarter ended March 31, 2000 decreased
$40.2 million (68.7%) to $18.3 million as compared to $58.5 million for the
same period in the prior year. This decrease resulted primarily from $53.0
million decreased operating revenues and $2.7 million increased depreciation
and amortization expense, partially offset by decreased operating expense of
$4.9 million, $2.1 million higher other income (expense), net, decreased
general and administrative expense of $1.1 million and $7.3 million decreased
provision for income taxes.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $25.3 million and $61.4
million for the three months ended March 31, 2000 and 1999, respectively. The
decrease in cash flows from operations was primarily attributable to changes in
income before non-cash charges. Investing activities provided cash of $125.0
million for the three months ended March 31, 2000 and used cash of $89.5
million for the corresponding period in 1999. The $214.5 million increase in
cash provided by investing activities was primarily due to $184.9 million
increased net maturities and purchases of marketable securities and lower
capital spending of $29.5 million. Capital expenditures totaled $8.7 million
and $38.3 million for the three months ended March 31, 2000 and 1999,
respectively, principally related to rig upgrades and modernization in both
periods and rig expansion in 1999. For the three months ended March 31, 2000,
capital expenditures on the heavy duty harsh environment jackup rig Galaxy III
decreased $21.9 million and spending for new land rigs decreased $5.0 million
compared to the corresponding period in 1999. Maturities and purchases of
marketable securities for the three month periods were primarily for Eurodollar
debt instruments and commercial paper with original maturities of more than 90
but less than 365 days. For the three months ended March 31, 2000 and 1999,
cash used in financing activities was $1.8 million and $1.6 million,
respectively. Dividends paid to shareholders amounted to $3.7 million in each
period, partially offset by issuance of shares under the Company's Employee
Share Purchase Plan in January 2000 and 1999 of $1.9 million and $2.1 million,
respectively.
The Company budgeted approximately $150 million for capital
expenditures during the year ending December 31, 2000. Capital spending to meet
contractual obligations for customers and for rig upgrade, modernization and
enhancement projects is budgeted to require approximately $60 million,
representing numerous individual transactions spread over the course of the
year. Further, the Company budgeted $50 million intended for use in either
constructing or acquiring one or more new rigs, based upon market conditions.
Finally, in anticipation of favorable contract negotiations with oil companies
operating in Azerbaijan, $40 million was budgeted for anticipated equipment
upgrades to the semisubmersible Dada Gorgud. Such negotiations have now been
successfully concluded, and the Company will be operating the rig under an
approximate six-year drilling contract. In order to meet the contract
specifications required, the Company now estimates spending approximately $30
million for capital improvements to the Dada Gorgud in 2000, the cost of which
will be recovered through operating dayrates following completion of the
upgrade. It is expected that the entire 2000 capital program will be funded
from internally generated funds. Future capital spending, particularly rig
fleet additions, is subject to the Company's prospects for securing appropriate
drilling contract opportunities and the availability of suitable rigs, rig
components, construction facilities and supplies.
From time to time, the Company reviews opportunities for rig
acquisition, construction or upgrade. Once the Company undertakes a capital
project, factors outside the Company's control, such as changes in market
demand, may alter the project economics and the Company may be unable to fully
recoup the cost of such expenditures through future drilling contracts. At any
time, should plans for rig acquisition, construction or upgrade not be
completed, the Company would not have those rigs available to compete in its
markets.
On March 7, 2000, the Company's Board of Directors declared a regular
quarterly dividend of $0.0325 per Ordinary Share payable on April 17, 2000 to
holders of record at the close of business March 31, 2000. The Company's
current dividend policy contemplates payment of future quarterly dividends of
$0.0325 per Ordinary Share.
The Company's principal source of funds has been cash flow from
operations. The Company believes available cash resources and cash flows from
operations will be sufficient to meet its capital requirements during 2000.
The Company currently has a $35 million uncommitted credit facility
for advances and letter of credit with a major bank, none of which was drawn or
subject to standby letters of credit at March 31, 2000.
CURRENCY RISK AND INFLATION
The Company conducts material business operations in foreign currency
environments. The Company generally attempts to minimize its currency exchange
risk by seeking international contracts payable in local currency in amounts
equal to the Company's estimated operating costs payable in local currency and
in dollars for the balance of the contract. Because of this strategy, the
Company has minimized its net asset or liability positions denominated in local
currencies and has not experienced significant gains or
12
<PAGE> 13
losses associated with changes in currency exchange rates. Accordingly, the
Company has not historically entered into financial hedging arrangements to
manage risks relating to fluctuations in currency exchange rates. However, the
Company may enter into such contracts in the future in the event that the
Company assumes significant foreign currency risks.
Although inflation has not had a significant impact on the Company's
results of operations during the past several years, labor availability and
cost and vendor prices and delivery fluctuate in response to overall drilling
industry conditions.
CREDIT RISKS
The Company's customers consist primarily of major international,
state owned and large independent oil companies and their affiliates. The
Company has not incurred any charges for credit losses during the last five
years. There is no assurance that in the future such charges will not occur.
Such charges may adversely affect the Company's profitability.
OTHER
Operational risks and hazards may result in extensive damage to or
total loss of drilling rigs, with associated personal injuries and loss of
life, pollution, well loss, well control expenses and/or wreck removal or other
requirements. Such losses, liabilities or obligations may be uninsured or
underinsured. In the event of a major incident or incidents resulting from
operational risks and hazards, the Company will sustain a loss of revenue by
reason of the rig loss or damage and may be subject to extraordinary expenses
in respect of uninsured or underinsured losses, liabilities or obligations.
The Company's worldwide operations are subject to numerous foreign,
U.S., state and local environmental laws and regulations that relate directly
or indirectly to its operations, including certain regulations controlling the
discharge of materials into the environment, requiring removal and clean-up
under certain circumstances, or otherwise relating to the protection of the
environment. Laws and regulations protecting the environment have become
increasingly stringent in recent years and may in certain circumstances impose
a strict liability and render a company liable for environmental damage without
regard to negligence or fault on the part of such company. Such laws and
regulations may expose the Company to liability for the conduct of or
conditions caused by others, or for acts of the Company that were in compliance
with all applicable laws at the time such acts were performed.
The Company operates each of its rigs under a contract either to drill
a specified well or number of wells or for a stated period of time, which
generally is automatically extended to include the period required to complete
the well in progress on the scheduled contract expiration date. Contracts often
are cancelable upon specified notice at the option of the customer, and some,
but not all, contracts provide for the customer to pay a specified early
termination payment in the event of such cancellation. The contracts
customarily provide for either automatic termination or termination at the
option of the customer in the event of total loss of the drilling rig or if
drilling operations are suspended for extended periods by reason of force
majeure or excessive rig downtime for repairs. The contracts also contain
provisions addressing automatic termination or termination at the option of the
customer in certain circumstances and may be dishonored or subject to
renegotiation in depressed market conditions.
The Company's liquidity also may be adversely impacted by reason of
war, political turmoil, revolution, insurrection or similar events which could,
inter alia, result in damage to or loss of the Company's rigs, either
physically or by reason of nationalization, expropriation or deprivation of
use, or could impair the concessionary rights of the Company's customers, thus
jeopardizing the Company's drilling contracts. The Company does not normally
insure against these risks, and such events could result in an actual or
constructive loss of substantial assets and the associated loss of revenues
and/or receivables.
IMPACT OF YEAR 2000
The Company's successfully implemented Y2K initiative spanned a period
of three years and cost approximately $3 million. Our worldwide operations were
prepared to overcome any failures experienced during the millennium rollover
and leap year periods. To date, the Company has experienced no disruption.
However, contingency plans will remain in effect throughout 2000 as
circumstances dictate.
13
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There is no change to the data provided in the Company's Annual Report
on Form 20-F for the year ended December 31, 1999.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
10.38 Drilling Contract between Azerbaijan International Operating
Company and Santa Fe International Corporation, executed on
March 14, 2000, dated effective July 7, 1999.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: May 5, 2000 SANTA FE INTERNATIONAL CORPORATION
By: /s/ S. M. McCarty
------------------------------------------
S. M. McCarty, Senior Vice President
and Chief Financial Officer
15
<PAGE> 16
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.38 Drilling Contract between Azerbaijan International
Operating Company and Santa Fe International
Corporation, executed on March 14, 2000, dated
effective July 7, 1999.
</TABLE>
16
<PAGE> 1
EXHIBIT 10.38
[LOGO]
DRILLING CONTRACT
BETWEEN
AZERBAIJAN INTERNATIONAL OPERATING COMPANY
AND
SANTA FE INTERNATIONAL CORPORATION
<PAGE> 2
DRILLING CONTRACT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
CLAUSE 1 DEFINITIONS AND INTERPRETATION.................................................................1
CLAUSE 2 CARRY OUT DRILLING SERVICES....................................................................5
CLAUSE 3 RATES AND CHARGES..............................................................................5
CLAUSE 4 TERM OF CONTRACT...............................................................................5
CLAUSE 5 TERMINATION....................................................................................5
CLAUSE 6 ACCESS TO LOCATIONS............................................................................6
CLAUSE 7 DEFAULT........................................................................................7
CLAUSE 8 LIABILITIES AND INDEMNITIES...................................................................11
CLAUSE 9 CONTRACTOR'S INSURANCES.......................................................................18
CLAUSE 10 TAX INFORMATION AND INDEMNITY.................................................................21
CLAUSE 11 BANKRUPTCY OR LIQUIDATION.....................................................................22
CLAUSE 12 FORCE MAJEURE.................................................................................22
CLAUSE 13 FREEDOM FROM LIENS............................................................................23
CLAUSE 14 CONTRACTOR TO MAINTAIN REPRESENTATION.........................................................23
CLAUSE 15 GIVING OF NOTICES AND PAYMENT OF FEES.........................................................23
CLAUSE 16 CONFIDENTIAL INFORMATION......................................................................24
CLAUSE 17 PUBLICITY.....................................................................................25
CLAUSE 18 ASSIGNMENT AND SUBCONTRACTING.................................................................25
CLAUSE 19 APPLICATION OF LAWS AND REGULATIONS...........................................................27
CLAUSE 20 SERVING OF NOTICES............................................................................27
CLAUSE 21 VARIATION AND WAIVER..........................................................................28
CLAUSE 22 INDEPENDENT CONTRACTOR RELATIONSHIP...........................................................28
CLAUSE 23 INFRINGEMENT OF PATENTS.......................................................................29
CLAUSE 24 APPLICABLE LAW................................................................................29
CLAUSE 25 ARBITRATION...................................................................................30
CLAUSE 26 EXCLUSION OF PREVIOUS CORRESPONDENCE..........................................................31
CLAUSE 27 AUDIT.........................................................................................31
CLAUSE 28 GENERAL PROVISIONS............................................................................31
</TABLE>
EXHIBITS
EXHIBIT "1" FORM OF ASSIGNMENT AGREEMENT
EXHIBIT "2" FORM OF PARENT COMPANY GUARANTEE
EXHIBIT "3" CONTRACTOR's INSURANCE
EXHIBIT "4" STATEMENT OF REQUIREMENTS
EXHIBIT "5" RATES AND CHARGES
EXHIBIT "6" CONTRACTOR's PERSONNEL
EXHIBIT "7" CONTRACTOR's EQUIPMENT
- --------------------------------------------------------------------------------
C-2000-AIOC-21467
<PAGE> 3
DRILLING CONTRACT
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THIS CONTRACT shall be effective on 7th July 1999 ("EFFECTIVE DATE") and is made
BY AND BETWEEN:
AZERBAIJAN INTERNATIONAL OPERATING COMPANY ("AIOC"), a Company incorporated and
subsisting under the laws of the Cayman Islands; and
SANTA FE INTERNATIONAL CORPORATION ("SANTA FE"), a company established under the
laws of the Cayman Islands.
AIOC may sometimes be referred to individually as "OPERATOR". SANTA FE may
sometimes be referred to as "CONTRACTOR". The OPERATOR and CONTRACTOR may
sometimes be referred to individually as a "Party" or collectively as the
"Parties".
WHEREAS, the Parties agree that a floating drilling unit of modern international
standard is needed to meet the OPERATOR'S drilling commitments under its PSA;
WHEREAS, OPERATOR and CONTRACTOR wish to enter into this CONTRACT for the
provision of DRILLING SERVICES with respect to the DRILLING UNIT made the
subject of this CONTRACT.
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
In the CONTRACT the following words and expressions shall have the
meanings assigned to them, except where the context otherwise requires.
1.1.1 "AFFILIATE" of a company means a person or entity directly
or indirectly controlling, controlled by, or under common
control with such company. "Control" for this purpose shall,
in the case of a corporation with outstanding voting stock,
require the direct or indirect ownership of, or power to
vote with respect to, outstanding shares of a corporation's
capital stock constituting fifty percent (50%) or more of
the votes of any class of such corporation's outstanding
voting stock.
1.1.2 "CERTIFICATION" shall mean the class of certification as
referenced in Exhibit "7".
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<PAGE> 4
DRILLING CONTRACT
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1.1.3 "COMMENCEMENT DATE" shall mean, as to each WELL, the date
after the EFFECTIVE DATE when the DRILLING UNIT is under
tight tow to the OPERATOR's first or next LOCATION
(whichever is applicable).
1.1.4 "COMPLETION DATE" means the date and time the DRILLING UNIT
is under tight tow from the last LOCATION, should the
DRILLING UNIT be proceeding directly to fill another
operator's contract, or alternatively, when the DRILLING
UNIT is safely moored following removal of all of OPERATOR's
MATERIALS and equipment, material and supplies of the
OPERATOR's contractors and their subcontractors at Baku or
other mutually agreed equidistant port.
1.1.5 "CONTRACT" shall mean this instrument and all its Exhibits,
together with any written extension, renewals, replacement
or modification hereto which may be mutually agreed and
executed by the Parties.
1.1.6 "CONTRACT AREA" shall mean the Azerbaijan Sector of the
Caspian Sea and any onshore area used in association
therewith, or other areas agreed between the Parties.
1.1.7 "CONTRACT DEPTH" shall mean the DEPTH as specified in
Exhibit "4" to which the CONTRACTOR may be required to carry
out the DRILLING SERVICES.
1.1.8 "CONTRACTOR" shall mean Santa Fe International Corporation.
1.1.9 "CONTRACTOR's EQUIPMENT" shall mean the DRILLING UNIT (as
hereinafter defined) together with all the drilling and
associated equipment listed in Exhibit "7" (hereinafter
referred to as the "DRILLING EQUIPMENT") together with the
CONTRACTOR's stock of spare parts.
1.1.10 "CONTRACTOR GROUP" shall mean:
(a) CONTRACTOR;
(b) any parent company or shareholders of CONTRACTOR;
(c) subsidiaries and AFFILIATES of (a) and (b);
(d) all contractors and subcontractors of (a), (b) and (c)
including but not limited to SUBCONTRACTOR's; and
(e) the agents, directors, officers and employees of (a),
(b), (c) and (d).
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<PAGE> 5
DRILLING CONTRACT
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1.1.11 "CONTRACTOR's PERSONNEL" or "its PERSONNEL" shall mean the
CONTRACTOR's labour and supervisory personnel listed in
Exhibit "6".
1.1.12 "CO-VENTURERS" as applied to OPERATOR shall mean any parties
to a joint venture agreement whereby the OPERATOR undertakes
to act as operator for such participants of any Offshore
Block in which the CONTRACTOR may be required to perform the
DRILLING SERVICES in the CONTRACT AREA.
1.1.13 "DEPTH" shall mean the depth of the hole as obtained by
measuring the drilling string with a steel tape, using as
datum the top of the Rotary Table.
1.1.14 "DRILLING SERVICES" shall mean the operations as defined in
Clause 2.
1.1.15 "DRILLING UNIT" shall mean the semisubmersible vessel "Dada
Gorgud" as specified in Exhibit "7".
1.1.16 "EFFECTIVE DATE" shall mean 7 July 1999.
1.1.17 "FORCE MAJEURE" shall have the meaning ascribed to it in
Clause 12.
1.1.18 "LOCATION" shall mean the location of any WELL.
1.1.19 "MONTH" shall mean a Gregorian calendar month.
1.1.20 "OPERATOR" shall mean AIOC or any of OPERATOR's assignees.
1.1.21 "OPERATOR GROUP" shall mean:
(a) the OPERATOR;
(b) any parent company or shareholders of
OPERATOR;
(c) subsidiaries and AFFILIATES of (a) and (b);
(d) the working interest owners, co-lessees,
co-owners (including CO-VENTURERS) of (a),
(b) and (c); and (e) the agents, directors,
officers and employees of (a), (b), (c) and
(d).
1.1.22 "OPERATOR's MATERIALS" shall mean the equipment, materials,
and supplies owned and provided directly by the OPERATOR.
1.1.23 "OPERATOR's REPRESENTATIVE" and "CONTRACTOR's
REPRESENTATIVE" shall mean those persons who are appointed
as such from time to time by the OPERATOR and the CONTRACTOR
respectively and whose names have been notified in writing
by the appointing Party to the other Party.
- --------------------------------------------------------------------------------
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<PAGE> 6
DRILLING CONTRACT
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1.1.24 "OPERATOR's PSA" shall mean, as to OPERATOR, the
Exploration, Development and/or Production Sharing Agreement
signed with the State Oil Company of Azerbaijan for an
offshore block in the Azerbaijan sector of the Caspian Sea.
1.1.25 "RIG STAFF" shall mean the Rig Superintendent, Assistant Rig
Superintendent (if any), Toolpushers, Tour Pushers (if any),
Drillers and Assistant Drillers of the CONTRACTOR's
PERSONNEL.
1.1.26 "SUBCONTRACTORs" shall mean the contractors hired by the
CONTRACTOR for any services in conjunction with the DRILLING
SERVICES.
1.1.27 "WELL" shall mean any OPERATOR's well or drilling location
(as hereinafter defined) whether already drilled, or yet to
be drilled by OPERATOR in the CONTRACT AREA under the terms
and conditions of the CONTRACT.
1.1.28 "THIRD PARTY" shall for the avoidance of doubt, mean those
parties excluding CONTRACTOR, CONTRACTOR GROUP, OPERATOR,
OPERATOR GROUP or SUBCONTRACTORs.
1.2 Interpretation
In this CONTRACT:
1.2.1 Unless the context otherwise requires, reference to the
singular shall include a reference to the plural and
vice-versa; and reference to any gender shall include a
reference to all other genders.
1.2.2 Unless the context otherwise requires, reference to any Clause
shall be to a Clause of this CONTRACT.
1.2.3 Reference to any law or regulation having the force of law
includes a reference to that law or regulation as from time to
time amended, extended or re-enacted.
1.2.4 The headings of the Clauses in this CONTRACT are inserted for
convenience of reference only and shall not affect the meaning
or construction of this CONTRACT.
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<PAGE> 7
DRILLING CONTRACT
- --------------------------------------------------------------------------------
1.2.5 Where reference is made to work or acts being performed to
OPERATOR's satisfaction or dissatisfaction or reference is
made to OPERATOR's judgment or opinion, it shall be deemed in
such cases that it will be to OPERATOR's reasonable
satisfaction or dissatisfaction, reasonable judgment or
reasonable opinion.
CLAUSE 2 CARRY OUT DRILLING SERVICES
The scope of the services shall be the provision of a DRILLING UNIT and DRILLING
EQUIPMENT as more fully described in Exhibit "7" hereto, the provision of
PERSONNEL as more fully described in Exhibit "6" hereto and the provision of
services as more fully described in Exhibit "4". The CONTRACTOR shall carry out
the DRILLING SERVICES according to the specifications and instructions issued
from time to time by the OPERATOR. CONTRACTOR hereby warrants and represents
that it shall provide the DRILLING UNIT to OPERATOR on the first WELL
COMMENCEMENT DATE and that all necessary rights, authorizations and clearances
to make the DRILLING UNIT available to OPERATOR have been secured and shall be
maintained throughout the term hereof.
CLAUSE 3 RATES AND CHARGES
In full consideration of the satisfactory performance of the services set out in
Clause 2 herein the CONTRACTOR shall be paid as set forth in Exhibit "5" herein.
CLAUSE 4 TERM OF CONTRACT
This CONTRACT shall be deemed to have had effect as of the EFFECTIVE DATE,
subject to the provisions for termination set forth in Clause 5 herein, and
shall continue in effect for 2,100 (two thousand and one hundred) operating days
from the first WELL COMMENCEMENT DATE plus any DRILLING UNIT upgrade time.
Further, the term of this CONTRACT shall continue in effect for such period of
time as is necessary to complete the WELL then in progress.
CLAUSE 5 TERMINATION
5.1 Termination Without Cause
Without prejudice to the OPERATOR's other rights under the CONTRACT,
the OPERATOR shall have the right to terminate the CONTRACT by giving
90 days advance written notice to the CONTRACTOR at any time, provided
that such notice shall not terminate the CONTRACT prior to the
OPERATOR's paying the OPERATING RATE for a minimum of 365 days and
shall be subject to payment to
- --------------------------------------------------------------------------------
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<PAGE> 8
DRILLING CONTRACT
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CONTRACTOR of the appropriate Early Termination Fee. In the event of
such termination, CONTRACTOR shall be paid for all work performed up to
the effective date of termination together with the appropriate Early
Termination Fee. Further, in the event of such termination, the
DRILLING UNIT shall be demobilised in accordance with the provisions of
this CONTRACT.
5.2 Early Termination Upon Total Loss of DRILLING UNIT or Damage to
DRILLING UNIT
Unless otherwise agreed between the Parties, the CONTRACT will
automatically be terminated upon the actual, constructive, compromised
or arranged total loss (as hereinafter defined) of the DRILLING UNIT or
if the DRILLING UNIT is damaged so as to prevent it from carrying out
the DRILLING SERVICES. Such termination shall be at the date and time
of such actual, constructive, compromised or arranged total loss or at
such time as the DRILLING UNIT is no longer able to perform the
DRILLING SERVICES as aforesaid.
In the context of this sub-clause 5.2 the constructive, compromised or
arranged total loss of the DRILLING UNIT shall mean the constructive,
compromised or arranged total loss of the DRILLING UNIT under
applicable insurance policies or arrangements as otherwise agreed to by
the Parties.
CLAUSE 6 ACCESS TO LOCATIONS
The OPERATOR shall secure for the CONTRACTOR and its SUB-CONTRACTORS rights of
access to and from LOCATIONS. All LOCATIONS shall be surveyed by OPERATOR at its
own cost, such survey being subject to any approval by surveyors which may be
required under applicable marine insurance. The OPERATOR shall use its best
endeavors to advise the CONTRACTOR in writing of the presence of any obstacles
and obstructions and any limitations, restrictions or conditions associated
therewith which may affect such access and the CONTRACTOR shall abide by such
written limitations, restrictions and conditions. OPERATOR and CONTRACTOR shall
meet and agree whether such limitations, restrictions or conditions prevent the
DRILLING UNIT from safely moving or operating on the LOCATION. In the event it
is agreed by the Parties that the DRILLING UNIT cannot be safely moved to or
operated on the LOCATION, CONTRACTOR shall be paid the OPERATING RATE until such
time as the DRILLING UNIT can be safely moved to or operated on the LOCATION.
While CONTRACTOR is unable to safely move to or operate on the LOCATION the
OPERATOR may instruct the CONTRACTOR to remain on standby near the LOCATION or
move to a new location and the appropriate rate as set out in Exhibit "5" shall
be payable.
Notwithstanding any other provision of the CONTRACT, or the results of any
survey or the approval of such survey by marine insurance surveyors, OPERATOR
shall indemnify, defend and hold the CONTRACTOR GROUP harmless from and against
any and all liability, claims,
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 6 OF 33
<PAGE> 9
DRILLING CONTRACT
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demands, suits, expenses and causes of action arising in any manner for damage
to or destruction of any such obstacles or obstructions, provided that the
defense, indemnity and hold harmless obligation contained in this clause 6 shall
not apply if the damage to or destruction of any such obstacle or obstruction is
caused by CONTRACTOR's failure to abide by such written limitations,
restrictions and conditions associated with such obstacles and obstructions.
As used herein, obstacles and obstructions shall mean and include, by way of
illustration, flowlines, pipelines wellheads, platforms, subsea installations,
wreckage and debris at, or in proximity to, drilling locations or routes of
access thereto or therefrom.
CLAUSE 7 DEFAULT
7.1 Unsatisfactory Performance by the CONTRACTOR
In the event that the OPERATOR is dissatisfied with the performance of
the CONTRACTOR based upon any one of the following reasons:
(i) unreasonably slow progress of CONTRACTOR;
(ii) incompetence of CONTRACTOR;
(iii) default by CONTRACTOR in the performance of its obligations
under the CONTRACT; or
(iv) any other reason as a result of causes reasonably within the
CONTRACTOR's control, the OPERATOR shall notify the CONTRACTOR
in writing as to the cause of its dissatisfaction.
Should the CONTRACTOR fail to remedy the matters so specified within a
period of not more than seven (7) days (or if it is not possible to
remedy such matters within seven (7) days and CONTRACTOR has failed to
initiate and diligently pursue corrective action within such seven (7)
day period to the reasonable satisfaction of OPERATOR), the OPERATOR
may exercise one of the following rights:
(a) immediately terminate the CONTRACT in which case no further
payments shall be due to the CONTRACTOR other than those
outstanding for work done prior to termination together with
the appropriate Early Termination Fee. In such event,
CONTRACTOR shall not be entitled to have the DRILLING UNIT
demobilised at OPERATOR's expense;
(b) continue the current operation and such other operations as
set forth in Clause 7.2 herein; or
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<PAGE> 10
DRILLING CONTRACT
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(c) terminate the CONTRACT upon completion of the current
operation then being performed at the time of receipt of the
notification of dissatisfaction as aforesaid in which case no
further payments shall be due to the CONTRACTOR other than
those outstanding for work done prior to termination together
with the appropriate Early Termination Fee. In such event,
CONTRACTOR shall not be entitled to have the DRILLING UNIT
demobilised at OPERATOR's expense.
The OPERATOR's remedies under subclauses 7.1(a) (b) and (c) shall be
OPERATOR's exclusive remedies against CONTRACTOR with respect to the
matters set forth in this clause 7.1 herein; provided, however, that if
CONTRACTOR willfully and materially or otherwise materially defaults in
the performance of its obligations under the CONTRACT the OPERATOR's
remedies under subclauses 7.1(a) (b) and (c) shall not be OPERATOR's
exclusive remedies against CONTRACTOR with respect to the matters set
forth in this clause 7.1.
7.2 Continuation of Operations by OPERATOR
If OPERATOR so elects to continue operations in accordance with Clause
7.1 herein, the OPERATOR may continue operations hereunder either by
taking possession of and using the CONTRACTOR's EQUIPMENT and that of
the SUBCONTRACTORs and all things connected therewith and using the
CONTRACTOR's PERSONNEL and SUBCONTRACTOR's personnel and repossessing
any OPERATOR's MATERIALS then unconsumed and if it so elects by either
of the following:
(i) completing the current operation and such other operation or
operations contemplated by the OPERATOR hereunder by the
aforesaid means; or
(ii) completing the current operation and such other operations as
aforesaid by the use of another contractor to operate the
CONTRACTOR's EQUIPMENT. During the conduct of all such
operations by or on behalf of the OPERATOR incurring the use
of the CONTRACTOR's PERSONNEL and SUBCONTRACTOR's personnel
aforesaid the CONTRACTOR shall be responsible for the payment
of all its PERSONNEL, for any replacement therefor and for
procuring their obedience to the OPERATOR's instructions. The
CONTRACTOR shall continue to make payments due to its
SUBCONTRACTORs and suppliers as well as for insurance
premiums. Except for CONTRACTOR's payment obligations set
forth in this sub-clause 7.2(ii) all such operations shall be
at the sole risk of the OPERATOR and the CONTRACTOR GROUP
shall be under no liability during such operations for
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DRILLING CONTRACT
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the OPERATOR's defaults or those of its agents or those of the
SUBCONTRACTOR's personnel.
For all such operations carried out by the OPERATOR under this
sub-clause 7.2 the CONTRACTOR shall be entitled to be paid for work in
accordance with the terms of the CONTRACT less expenditure necessarily
incurred by the OPERATOR in carrying out the aforesaid operations in
respect of the CONTRACTOR's EQUIPMENT, the CONTRACTOR's PERSONNEL or
the use of staff and labour provided by another contractor and less
sums due from the CONTRACTOR to any THIRD PARTY, the non-payment or
non-expenditure of which jeopardises the continuance of the said
operations (but excluding any payment due to the CONTRACTOR for the use
of tools, machinery and appliances hired by it at the request of the
OPERATOR), provided, however, the expenditures necessarily incurred by
OPERATOR, for which CONTRACTOR shall hereunder be liable, shall not in
any event be greater than the then current REDRILLING Rate under the
CONTRACT. Upon completion of the aforesaid operations the OPERATOR
shall return to the CONTRACTOR the CONTRACTOR's EQUIPMENT and the
equipment of the SUBCONTRACTORs and any tools, machinery and appliances
hired by it as aforesaid in as good condition as when taken over by the
OPERATOR, fair wear and tear excepted.
7.3 CONTRACTOR's Failure to Provide the CONTRACTOR's EQUIPMENT
In the event of the CONTRACTOR's failure to provide any of the
CONTRACTOR's EQUIPMENT or in the event that the CONTRACTOR's EQUIPMENT
fails to meet the applicable manufacturer's rating for such equipment
(or such other rating that may otherwise be specified in Exhibit "7")
so as to make operations unsafe or to reduce the efficiency thereof the
OPERATOR shall notify the CONTRACTOR in writing specifying such
CONTRACTOR's EQUIPMENT which the CONTRACTOR has so failed to provide or
which fails to meet the said rating, and immediately thereafter the
OPERATOR shall have the right to exercise one of the following options:
(a) shutdown such operations until such time as the CONTRACTOR
shall have made good the deficiencies in the said equipment
whether as to provision or to performance.
For any such period of shutdown the OPERATOR shall pay the
CONTRACTOR:
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DRILLING CONTRACT
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(i) at the REPAIR RATE in accordance with Exhibit "5"
hereof provided the shutdown is due to an equipment
failure.
(ii) REDUCED REPAIR RATE if the shutdown is due to unsafe
operations.
In all such instances referred to in (i) and (ii) above the
OPERATOR shall have the exclusive right to terminate the
CONTRACT any time after a shutdown period has exceeded seven
(7) days (or if it is not possible to remedy the deficiencies
in the equipment in such seven (7) day period and CONTRACTOR
has failed to initiate and diligently pursue corrective action
within such seven (7) day period to the reasonable
satisfaction of OPERATOR).
In the event of such termination, no further payments shall be
due to CONTRACTOR other than those outstanding for the work
done prior to termination together with the appropriate Early
Termination Fee. In such event, CONTRACTOR shall not be
entitled to have the DRILLING UNIT demobilised at OPERATOR's
expense. The remedies set forth herein shall be the exclusive
remedies of OPERATOR against CONTRACTOR only with respect to
the matters set forth in this clause 7.3 (a).
(b) to continue with operations at reduced efficiency as aforesaid
and in such event the OPERATOR shall have the right to reduce
the Rates and Charges in Exhibit "5" by an amount in direct
relation to the percentage that operations have in OPERATOR's
opinion been so reduced in efficiency or slowed down, provided
that if operations are so continued then the OPERATOR shall
assume liability for any loss of or damage to the hole arising
directly out of the continuing of operations with such reduced
efficiency and provided further that during such operations so
continued the CONTRACTOR shall continue to make good the
aforesaid failure.
(c) to hire from the nearest available source satisfactory to the
OPERATOR all such equipment as may be required:
(i) arising out of the CONTRACTOR's failure so to provide
the DRILLING EQUIPMENT or any part thereof, until the
CONTRACTOR shall have provided as aforesaid, or
(ii) arising out of failure of the DRILLING EQUIPMENT or
any part thereof to meet manufacturer's
specifications, or such other
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specification as may otherwise be specified in
Exhibit "7", until the CONTRACTOR can demonstrate to
the OPERATOR that the said equipment or part thereof
does meet such specifications.
All costs incurred by the OPERATOR in hiring and transporting
such equipment shall be a debt due to the OPERATOR from the
CONTRACTOR and shall be deducted from any monies due to the
CONTRACTOR from the OPERATOR.
(d) to elect not to hire pursuant to (c) above but deduct from
monies due to the CONTRACTOR the cost of hire (from the
nearest available source) of equipment listed in the
CONTRACTOR's EQUIPMENT but not provided by it.
CLAUSE 8 LIABILITIES AND INDEMNITIES
8.1 CONTRACTOR's EQUIPMENT and Property
(a) Except as may be provided for in Clauses 7.2, 8.1(b) and
8.1(c) herein, the CONTRACTOR shall release, defend, indemnify
and hold harmless the OPERATOR GROUP from and against any and
all liability, claims, demands, suits, expenses and causes of
action for any loss, damage, injury or destruction of the
CONTRACTOR GROUP's equipment and property, including
CONTRACTOR's EQUIPMENT whether arising in contract or in tort,
or any other theory of law, including but not limited to
strict liability, regardless of how such loss, damage or
destruction occurs, notwithstanding that such loss or damage
as aforesaid may have been due to the sole, concurrent, active
or passive negligence, or fault of OPERATOR GROUP or a defect
in the property or equipment of either Party, including but
not limited to those defects pre-existing the EFFECTIVE DATE
of this CONTRACT.
(b) Except as to fair wear and tear, the OPERATOR shall assume
liability at all times during the DRILLING SERVICES for loss
of or damage to the CONTRACTOR GROUP's in-hole equipment when
in the hole and Sub-sea Equipment while it is being operated
sub-sea (whether owned or rented) including loss or damage
resulting from exposure to H2S. The OPERATOR shall reimburse
the CONTRACTOR for the replacement cost less depreciation of
any such equipment so lost, and in respect of equipment so
damaged whichever shall be the lesser of the replacement
on-site cost less depreciation or the repair cost, provided,
however, that OPERATOR shall not reimburse the
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CONTRACTOR for the loss of such equipment if such loss or
damage is due to the sole negligence and/or sole default of
the CONTRACTOR GROUP.
For purposes of this clause, sub-sea equipment shall include
CONTRACTOR's sub-sea equipment and mooring equipment including
but not limited to riser, slip joints, control hoses, blowout
preventers, anchors, anchor wires and chains, tripping lines
and buoys, (herein collectively called Sub-sea Equipment).
As to new equipment, depreciation shall be calculated monthly
from the COMMENCEMENT DATE or the date such equipment was
first placed in service (whichever is later) at two percent
(2%) per month for in-hole tools and one percent (1%) per
month for Sub-sea equipment. As to used equipment,
depreciation shall be calculated monthly from 1 June 1997 or
the date such equipment was first placed in service (whichever
is later) at two percent (2%) per month for in-hole tools and
one percent (1%) per month for Sub-sea equipment.
(c) Notwithstanding any other provision of the CONTRACT or any of
the Exhibits hereto: (i) nothing contained herein shall be
construed as in any way restricting CONTRACTOR's or its
underwriters' rights to recover against any vessel owner or
operator for damage to or loss of the DRILLING UNIT; and (ii)
OPERATOR GROUP shall not be entitled to any release, defence,
indemnity or hold harmless undertaking from CONTRACTOR under
clause 8.1 (a) for any claims which may be made against
OPERATOR by any vessel owner or operator (or their
underwriters) for damage or loss caused by such vessel owner
or operator to the DRILLING UNIT.
8.2 OPERATOR's MATERIALS and Property
(a) The CONTRACTOR shall take all reasonable precautions
(including but not limited to the making out of loading notes)
to protect and save from loss or damage items of the
OPERATOR's MATERIALS and materials of OPERATOR's contractors
and subcontractors while in the custody of the CONTRACTOR.
Subject to the provisions of clause 8.2(b) below, when no
longer required for operations hereunder the CONTRACTOR shall
return to the OPERATOR after use such of the said OPERATOR's
MATERIALS as have not been consumed, in the same condition as
when handed to the CONTRACTOR fair wear and tear excepted.
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(b) The OPERATOR shall release, defend, indemnify and hold
harmless CONTRACTOR GROUP from and against any and all
liability, claims, demands, suits, expenses and causes of
action for any loss, damage, injury or destruction of the
OPERATOR's MATERIALS whether arising in contract or in tort,
or any other theory of law, including but not limited to
strict liability, regardless of how such loss, damage or
destruction occurs, notwithstanding that such loss or damage
as aforesaid may have been due to the sole, concurrent, active
or passive negligence, or fault of CONTRACTOR GROUP or a
defect in the property or equipment of either party, including
but not limited to those defects pre-existing the COMMENCEMENT
DATE of this CONTRACT, provided, however, that the CONTRACTOR
shall be liable for any loss of or damage to OPERATOR's
MATERIALS to the extent such loss or damage is caused by the
negligence of the CONTRACTOR GROUP, such liability to be
limited to Two Hundred Thousand United States Dollars (U.S.
$200,000) each and every such occurrence.
(c) The OPERATOR shall release, defend, indemnify and hold
harmless CONTRACTOR GROUP from and against any and all
liability, claims, demands, suits, expenses and causes of
action for any loss, damage, injury or destruction of the
in-hole equipment of OPERATOR's contractors (when such
equipment is in-hole) whether arising in contract or in tort,
or any other theory of law, including but not limited to
strict liability, regardless of how such loss, damage or
destruction occurs, notwithstanding that such loss or damage
as aforesaid may have been due to the sole, concurrent, active
or passive negligence, or fault of CONTRACTOR GROUP or a
defect in the property or equipment of either party, including
but not limited to those defects pre-existing the COMMENCEMENT
DATE of this CONTRACT.
As used in this clause 8.2 (c) herein, the term "OPERATOR's
contractors" shall not include CONTRACTOR or the
subcontractors of CONTRACTOR.
8.3 Employees
(a) The CONTRACTOR shall release, defend, indemnify and hold
harmless the OPERATOR GROUP from and against any and all
claims, liabilities, demands, damages, actions, costs and
expenses (including reasonable attorneys fees) for loss of or
damage to personal property of or in the possession of the
employees of CONTRACTOR GROUP and from and against any and all
claims, liabilities, demands, damages, actions, costs and
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expenses (including attorneys fees) for sickness, injury or
death to any of the employees of CONTRACTOR GROUP arising in
contract or in tort or pursuant to any other theory of law,
including but not limited to strict liability, regardless of
how such loss, damage to such property or sickness, injury or
death as aforesaid may have occurred and notwithstanding that
such sickness, injury, death, loss or damage as aforesaid may
have been due to the sole, concurrent, active or passive
negligence, or fault of OPERATOR GROUP or a defect in the
property or equipment of either Party, including but not
limited to those defects pre-existing the EFFECTIVE DATE of
this CONTRACT.
(b) The OPERATOR shall release, defend, indemnify and hold
harmless the CONTRACTOR GROUP from and against any and all
claims, liabilities, demands, damages, actions, costs and
expenses (including reasonable attorneys fees) for loss of or
damage to personal property of or in the possession of the
employees of the OPERATOR and from and against any and all
claims, liabilities, demands, damages, actions, costs and
expenses (including attorneys fees) for sickness, injury, or
death to any of the employees of OPERATOR arising in contract
or in tort or pursuant to any other theory of law, including
but not limited to strict liability, regardless of how such
loss, damage to such property or sickness, injury or death as
aforesaid may have occurred and notwithstanding that such
sickness, injury, death, loss or damage as aforesaid may have
been due to the sole, concurrent, active or passive
negligence, or fault of CONTRACTOR GROUP or a defect in the
property or equipment of either Party, including but not
limited to those defects pre-existing the EFFECTIVE DATE of
this CONTRACT.
8.4 Loss of or Damage to the Hole
In the event that the hole should be lost or damaged arising out of
operations hereunder due to the sole, concurrent, active or passive
negligence of the CONTRACTOR GROUP, then the OPERATOR may instruct the
CONTRACTOR either to drill a new hole to the DEPTH at which the said
loss or damage occurred or to re-drill such section of the damaged hole
in both instances at the REDRILLING RATE and otherwise in accordance
with the terms of the CONTRACT. Except for CONTRACTOR's obligation to
redrill at the REDRILLING RATE as provided in the preceding sentence,
OPERATOR shall release, defend and indemnify the CONTRACTOR GROUP from
and against any and all claims, demands, proceedings, causes of action,
losses or damages arising out of or in connection with loss or damage
to the hole.
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8.5 Underground Damage and Control of Blowout and Pollution
(a) Reservoir Damage
Notwithstanding any other provision in the CONTRACT, the
OPERATOR shall release, defend, indemnify and hold harmless
the CONTRACTOR GROUP from and against any damage to or
destruction of or loss or impairment of any property right in
or to oil, gas or other mineral substance or water if at the
time of the act or omission causing such damage, destruction,
loss or impairment the said substance had not been reduced to
physical possession above the surface of the seabed, and for
any loss or damage to any formation strata or reservoir
beneath the seabed resulting from operations under the
CONTRACT.
(b) Pollution and Blowout
(i) The CONTRACTOR shall release, defend, indemnify and
hold harmless the OPERATOR GROUP from and against any
and all claims, demands, proceedings, causes of
action, loss or damages (including but not limited to
THIRD PARTY claims or liability) arising out of or in
connection with pollution, contamination, spills or
discharges originating from the DRILLING UNIT
including the hull (excluding the riser and the
subsea equipment) including but not limited to spills
or discharges of fuels, lubricants, motor oils, pipe
dope, paints, solvents, ballast, bilge and garbage in
the possession or control of CONTRACTOR GROUP and
regardless of the sole, concurrent, active or passive
negligence of OPERATOR GROUP.
(ii) Except as provided in sub-clause 8.5(b)(i), the
OPERATOR shall release, defend, indemnify and hold
harmless the CONTRACTOR GROUP from and against any
and all claims, demands, proceedings, causes of
action, losses or damages (including but not limited
to costs of control and THIRD PARTY claims or
liability) arising out of or resulting from any
pollution or contamination from fire, blowout,
cratering, seepage, or any other uncontrolled flow of
oil, gas, wastes or other substance from any WELL,
provided, however, that the CONTRACTOR shall be
liable for any loss or damages arising out of
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or resulting from any such pollution or contamination
to the extent such pollution or contamination is
caused by the negligence of the CONTRACTOR GROUP,
such liability to be limited to One Hundred Thousand
United States Dollars (U.S. $ 100,000) each and every
occurrence and otherwise OPERATOR shall release,
indemnify, defend and hold harmless CONTRACTOR GROUP
from and against any and all such claims, demands,
proceedings, causes of action, losses or damages in
excess of said sum, regardless of the sole,
concurrent, active or passive negligence of
CONTRACTOR GROUP.
(iii) The OPERATOR shall release, defend, indemnify and
hold harmless CONTRACTOR GROUP from and against any
loss or damage arising out of or resulting from any
pollution or contamination arising from the use or
disposal of oil emulsion, oil based or chemically
treated drilling fluids, contaminated cuttings and
cavings, radioactive substances, lost circulation
materials and fluids as well as the furnishing,
transportation and disposal or containerisation of
any materials when such are required, provided,
however, that the CONTRACTOR shall be liable for any
loss or damages arising out of or resulting from any
such pollution or contamination to the extent such
pollution or contamination is caused by the
negligence of the CONTRACTOR GROUP, such liability to
be limited to One Hundred Thousand United States
Dollars (U.S. $ 100,000) each and every occurrence
and otherwise OPERATOR shall release, indemnify,
defend and hold harmless CONTRACTOR GROUP from and
against any and all such claims, demands,
proceedings, causes of action, losses or damages in
excess of said sum, regardless of the sole,
concurrent, active or passive negligence of
CONTRACTOR GROUP.
(iv) The CONTRACTOR shall immediately notify the OPERATOR
of all instances of pollution arising out of
operations hereunder and confirm such notification in
writing or by telex or facsimile to the OPERATOR
within twenty-four (24) hours of the event.
8.6 Sunken Property
When required by law or governmental authority or when OPERATOR is of
the opinion that CONTRACTOR's sunken property interferes with present
or future
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operations of the OPERATOR or is required by the law or governmental
authority the CONTRACTOR shall at its own expense raise and remove the
DRILLING UNIT and any property of the CONTRACTOR or its SUBCONTRACTORs
which may sink in the course of operations hereunder or otherwise deal
with it in accordance with the OPERATOR's direction. In the event that
the CONTRACTOR does not carry out these obligations the OPERATOR may
buoy and light the sunken DRILLING UNIT or property and may remove it
(without prejudice to the OPERATOR's rights) and in such event
CONTRACTOR shall refund to the OPERATOR all costs so incurred. The fact
that the sunken DRILLING UNIT or property is insured or has been
declared a total loss shall not absolve the CONTRACTOR from its
obligations to raise and/or remove same. This clause shall remain
binding on the CONTRACTOR notwithstanding the termination of the
CONTRACT for any reason.
8.7 Consequential Damages
Notwithstanding any other provision in the CONTRACT, OPERATOR hereby
releases its claims against CONTRACTOR GROUP for indirect, incidental
or consequential damages resulting from or arising out of this
CONTRACT, including, without limitation, loss of profits, loss of
production or business interruption howsoever same may be caused,
including that caused by the sole, joint and/or concurrent negligence,
fault or strict liability of CONTRACTOR GROUP. Notwithstanding any
other provision in the CONTRACT, CONTRACTOR hereby releases its claims
against OPERATOR GROUP (which for purposes of this Clause 8.7 shall
include OPERATOR's contractors and sub-contractors) for indirect,
incidental or consequential damages resulting from or arising out of
this CONTRACT, including, without limitation, loss of profits, loss of
production or business interruption howsoever same may be caused,
including that caused by the sole, joint and/or concurrent negligence,
fault or strict liability of OPERATOR GROUP. CONTRACTOR shall be
responsible for ensuring that its subcontractors agree to release,
defend, indemnify and hold harmless OPERATOR GROUP for such claims and
damages.
8.8 Except as otherwise expressly provided for in the CONTRACT, whenever
under any provision in Clauses 7.2, 7.3, 8, 9.5 or 23 of the CONTRACT
it is provided that one of the Parties hereto shall be liable or
responsible in respect of any loss or damage to property or injury to
or death of personnel, or where it is provided that either Party shall
indemnify the other Party against any liability, claim, demand, or
cause of action, the Party assuming such liability or responsibility or
furnishing such indemnity (hereinafter called the "Indemnitor") shall
hold harmless, indemnify and defend the
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other Party, its shareholders, its and their parent, holding and
affiliated companies, directors, officers, employees and agents and
CO-VENTURERS, from and against any and all claims and rights of action
asserted directly or indirectly against any or all of the Parties to be
so indemnified.
Any indemnities expressed to be in favour of CONTRACTOR shall be deemed
to extend also to the DRILLING UNIT and its legal owner (with respect
to actions IN REM).
It is the intent that where in this CONTRACT responsibility or
liability is assumed by either of the Parties hereto or where either of
the Parties agrees to indemnify the other Party in respect of any
claim, demand or cause of action, unless it is otherwise expressly
stated herein, such assumption of liability and/or indemnification
shall apply notwithstanding the sole, passive, active or concurrent
negligence of, or unseaworthiness of any vessel owned or under CONTRACT
or chartered by, any Party hereto or of or by any person, firm or
corporation for which such Party is responsible (whether or not such
negligence or unseaworthiness related to a pre-existing condition or
defect), breach of representation, warranty, duty (contractual,
statutory or otherwise) or other theory of liability, including strict
liability, which may be applicable.
If any contractor of OPERATOR, (other than any vessel owner and/or
operator), as part of its indemnity obligation to OPERATOR, agrees to
release, defend, indemnify and hold harmless CONTRACTOR, then
CONTRACTOR shall, to the same extent, agree to release, defend,
indemnify and hold harmless said contractor (other than any vessel
owner and/or operator) whereby the indemnity obligations of CONTRACTOR
set forth in this clause 8 shall extend to said contractor.
The CONTRACTOR releases and indemnifies the OPERATOR against any and
all costs, claims, demands, proceedings, causes of action, losses or
damage (including but not limited to THIRD PARTY claims or liability)
arising out of the CONTRACT howsoever caused during the period from the
EFFECTIVE DATE until the actual FIRST WELL COMMENCEMENT DATE.
CLAUSE 9 CONTRACTOR'S INSURANCES
9.1 The Parties recognize that in connection with the operations and the
provision of goods, equipment and facilities contemplated by this
CONTRACT, there is some risk that accidents and events may occur in
which property is lost, damaged, or destroyed,
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and/or in which persons may be killed or injured. The Parties desire to
allocate these risks between them and to require that these risks be
adequately insured so as to minimize the possibility of disputes and to
engage in effective risk management. For these reasons, the Parties
agree to the insurance requirements, mutual indemnities and defense
obligations set forth in this CONTRACT.
9.2 The Parties agree that the indemnity and insurance obligations
contained in this CONTRACT are separate and apart from each other, such
that failure to fulfill the indemnity obligation does not alter or
eliminate the insurance obligation or vice versa. The Parties further
agree that the insurance obligations shall support but will not in any
way limit the defense and indemnity obligations set forth herein.
9.3 CONTRACTOR shall maintain at its own expense such insurance necessary
to protect against all claims for damages, risks of losses, and
contractual indemnities expressly assumed by CONTRACTOR under this
CONTRACT, specifically including without limitation any and all risks
and/or claims assumed by CONTRACTOR set forth in Clause 8, and shall
secure and maintain policies with the minimum limits and other
requirements stated in Exhibit "3" attached to and incorporated into
this CONTRACT. All such policies shall be issued by insurance companies
satisfactory to OPERATOR, with an AM Best rating of B or higher or
alternatively shall be issued by Underwriters at Lloyds of London or
the Member Companies of the Institute of London Underwriters or other
such underwriters of equally sound financial condition. All such
policies (except workers' compensation coverage) shall with respect to
the indemnity obligations expressly assumed by CONTRACTOR under this
CONTRACT:
(1) name OPERATOR GROUP as additional insured, and
(2) be primary in relation to any policies in which any member of
OPERATOR GROUP is a named or additional insured.
CONTRACTOR waives all rights of subrogation (whether by loan receipt,
equitable assignment, or otherwise) against OPERATOR GROUP and any of
their insurers. CONTRACTOR warrants that its insurers similarly waive
any such rights of subrogation which CONTRACTOR's insurers may have
against OPERATOR GROUP or its insurers.
The Parties agree that CONTRACTOR is not required to obtain coverage
protecting OPERATOR GROUP for those risks specifically allocated to
OPERATOR in Clauses 7.2, 7.3, 8, 9.5 or 23 of this CONTRACT.
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Prior to performing the DRILLING SERVICES for OPERATOR, CONTRACTOR
shall furnish OPERATOR certificates of insurance reflecting insurance
coverage in accordance with the requirements of Exhibit "3". Failure of
OPERATOR to object to CONTRACTOR's failure to furnish such certificates
or to object to any defect in such certificates shall not be deemed a
waiver of CONTRACTOR's obligation to furnish such a certificate and to
provide insurance coverages as prescribed in Exhibit "3".
In the event that CONTRACTOR fails to perform any of its obligations
hereunder with respect to insurance, with or without the knowledge or
consent of OPERATOR, then CONTRACTOR shall itself be an insurer to the
extent it has failed to perform such obligations.
9.4 If the CONTRACTOR shall fail to effect and keep in force any of the
insurances referred to herein, then the OPERATOR may effect and keep
the same in force and pay such premium as may be necessary for that
purpose and from time to time deduct the amount so paid by the OPERATOR
as aforesaid from any monies due or which may become due to the
CONTRACTOR or recover the same as a debt due from the CONTRACTOR.
9.5 In the event the OPERATOR takes over the CONTRACTOR's EQUIPMENT as
provided in Clause 7.2 hereof, then the OPERATOR shall have the right
at its cost and expense to take over the CONTRACTOR's insurance,
provided that CONTRACTOR's underwriters approve continuation of such
insurance and provided further that OPERATOR reimburses CONTRACTOR for
any premium increases or surcharges imposed by CONTRACTOR's insurance
underwriters in the event of a takeover.
If CONTRACTOR'S underwriters do not approve the continuation of such
insurance, OPERATOR shall assume all risks of loss, damage, injury or
death which would have been covered by CONTRACTOR'S insurance had such
insurances been in effect. In such event all of CONTRACTOR's
indemnities, except for patent infringement, shall be inapplicable.
9.6 Nothing contained in this Article 9 shall be construed as restricting
or prohibiting CONTRACTOR from arranging with its subcontractor,
Caspian Drilling Company (CDC), for CDC to provide any or all of the
insurance coverages contemplated to be provided by the CONTRACTOR under
this CONTRACT, provided that such insurance coverages are at least
equivalent to the insurance described in this Article 9.
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CLAUSE 10 TAX INFORMATION AND INDEMNITY
10.1 It is understood and agreed that CONTRACTOR's rates and charges are
inclusive of all Taxes imposed, directly or indirectly, on CONTRACTOR
or its subcontractors, employees, agents or servants as a result of
this CONTRACT. Upon prior notice to CONTRACTOR, OPERATOR shall deduct
or withhold from any payment made by it under this CONTRACT any Taxes
required to be so deducted or withheld under any applicable laws or
regulations. OPERATOR shall use its best efforts to provide the notice
required in the preceding sentence not less than ten (10) business days
prior to such withholding. The Petroleum Operations carried out by
CONTRACTOR and its subcontractors under this CONTRACT shall be subject
to the tax provisions of the OPERATOR's PSA and its related protocols
with respect to Taxes to the extent such provisions are applicable.
OPERATOR shall not reimburse CONTRACTOR for any Taxes imposed, directly
or indirectly, on CONTRACTOR or its subcontractors, employees, agents
or servants as a result of this CONTRACT.
10.2 The CONTRACTOR shall pay any and all Taxes, and shall ensure the due
payment by any of its subcontractors, employees, agents or servants of
all Taxes, imposed, directly or indirectly, on the CONTRACTOR, or any
of its subcontractors, employees, agents or servants as a result of
this CONTRACT. CONTRACTOR shall be responsible for the reporting,
filing and payment of any Taxes and any related fines, penalties or
interest imposed directly or indirectly on CONTRACTOR GROUP as a result
of CONTRACTOR's performance under this CONTRACT.
10.3 The CONTRACTOR shall release, defend, indemnify and hold harmless
OPERATOR GROUP from and against any and all payments required to be
made or liabilities, losses, costs or expenses of whatsoever nature
incurred by the OPERATOR GROUP as a result of or in connection with any
failure by the CONTRACTOR or any of its subcontractors, employees,
agents or servants to comply with the provisions of Clause 10 hereof.
10.4 "Taxes" shall be defined as all levies, duties, payments, fees, taxes
or contributions payable to or imposed by any governmental authority.
10.5 Except as provided in Exhibit 5, Clause 5.7, the Rates and Charges set
forth in Exhibit "5" shall not be revised to reflect any changes in the
Taxes imposed, directly or indirectly, on CONTRACTOR or its
subcontractors, employees, agents or servants as a result of this
CONTRACT.
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CLAUSE 11 BANKRUPTCY OR LIQUIDATION
If the CONTRACTOR shall become bankrupt or insolvent, or have a receiving order
made against it, or present a petition in bankruptcy or make an arrangement with
or an assignment in favour of its creditors, or shall agree to carry out the
CONTRACT under a Committee of Inspection of its creditors, or commence to be
wound up (not being a member's voluntary winding up for the sake of
reconstruction), or shall carry on its business under a receiver for the benefit
of its creditors or any of them then the OPERATOR shall be at liberty either:
(a) to suspend immediately all or any of the operations then in progress
and apply the provisions of sub-clause 7.1 hereof, or
(b) to give such receiver, liquidator or any other person in whom the
CONTRACT may become vested the option of carrying out the CONTRACT
subject to his providing a guarantee in an amount to be agreed for the
due and faithful performance of the CONTRACT without prejudice in
either event to any right of action or remedy which shall have accrued
or shall accrue thereafter to the OPERATOR.
CLAUSE 12 FORCE MAJEURE
No failure or omission by either Party to carry out or observe any of the
stipulations, conditions or obligations to be performed hereunder shall, except
as herein expressly agreed to the contrary, give rise to any claim against such
Party or be deemed to be a breach of the CONTRACT if such failure or omission
arises from an event of FORCE MAJEURE.
In this CONTRACT, FORCE MAJEURE shall mean occurrences such as expropriation,
confiscation, orders of governmental authority, acts of war (declared or
undeclared), insurrection, rebellion, sabotage, civil disturbances, strikes
(except of the CONTRACTOR's or SUBCONTRACTOR's own workforce), actions of the
elements (except waiting on weather in the field) or other events beyond the
reasonable control of the Parties affected thereby but specifically excluding
financial distress and obligations to make payment by one Party to the other
under this CONTRACT.
If by any reason of FORCE MAJEURE either Party shall be prevented from executing
or continuing to execute the CONTRACT, the Party so prevented shall forthwith
give notice in writing to the other Party of such prevention and the reasons
therefor. The obligations of the Parties as have been thus affected shall be
suspended for the duration of such prevention.
In the event that the CONTRACTOR is unable to carry out the DRILLING SERVICES by
reason of FORCE MAJEURE the OPERATOR shall have the right to instruct the
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CONTRACTOR to remain on LOCATION or to move to a new location and the
appropriate rate as set out in Exhibit "5" shall be payable.
In the event the OPERATOR does not exercise the above right and the execution of
the CONTRACT has been prevented for not less than ninety (90) days then either
Party shall have the right to terminate the CONTRACT by giving written notice to
the other. Upon such notice being given, the CONTRACT shall forthwith be
terminated in respect of that operation or the whole of the CONTRACT according
to the subject matter of the notice, but without prejudice to the claim under
the CONTRACT of any Party in respect of any antecedent breach thereof. In the
event of such termination, CONTRACTOR shall be paid for all work performed up to
the effective date of termination together with the appropriate Early
Termination Fee and, if it is practical to demobilise the DRILLING UNIT, it
shall be demobilised in accordance with the provisions of this CONTRACT.
CLAUSE 13 FREEDOM FROM LIENS
Without prejudice to any other provision of the CONTRACT the CONTRACTOR shall
release, defend, indemnify and hold harmless OPERATOR from and against all
liens, attachments or claims by or on behalf of any of the CONTRACTOR's
suppliers, subcontractors, CONTRACTOR's PERSONNEL or SUBCONTRACTORs in
connection with or arising out of the CONTRACT. In such an instance, OPERATOR
shall have the right to withhold payment until CONTRACTOR has provided proof to
OPERATOR that all such liens have been released, provided that CONTRACTOR has
not posted a bond or other security satisfactory to OPERATOR within five (5)
days of OPERATOR's notice of such liens.
CLAUSE 14 CONTRACTOR TO MAINTAIN REPRESENTATION
For a period of not less than two (2) years after the termination or completion
of the CONTRACT howsoever arising the CONTRACTOR shall maintain representation
in Azerbaijan through the services of a person, firm or corporation resident in
the CONTRACT AREA. Such person, firm or corporation shall be empowered to act
and shall have the right to receive summonses on behalf of the CONTRACTOR in any
matter having reference to the business or affairs of the CONTRACTOR and arising
out of or connected with the CONTRACT. Before appointing any such person, firm
or corporation the CONTRACTOR shall obtain the prior approval of the OPERATOR
thereto.
CLAUSE 15 GIVING OF NOTICES AND PAYMENT OF FEES
The CONTRACTOR shall in connection with the CONTRACT give all notices and pay
all fees and any other monies required to be given or paid under any National or
State Statute,
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Ordinance, Decree, Proclamation or any other Order or any other enactment or any
Regulations or By-Law of any Local or other duly constituted authority having
the force of Law in the CONTRACT AREA and under the rules and regulations of all
public bodies and public companies whose property or rights are affected or may
be affected, provided always that the OPERATOR will, subject always to Clause 10
herein, repay or allow to the CONTRACTOR all such sums as OPERATOR's
REPRESENTATIVE shall certify to have been properly and necessarily payable and
paid by the CONTRACTOR in respect of any such fees or monies the obligation for
which does not exist at the date hereof, provided further that in respect of any
such fees or monies the obligation for payment of which does exist at the date
hereof but which ceases after the date hereof the CONTRACTOR shall repay or
allow to the OPERATOR all such sums as OPERATOR's REPRESENTATIVE shall certify
are not properly payable by it or which if paid are refundable to it.
CLAUSE 16 CONFIDENTIAL INFORMATION
All information obtained by the CONTRACTOR in the course or conduct of its
services hereunder shall be considered confidential and shall not be divulged by
the CONTRACTOR, its personnel or agents to any person, firm or corporation other
than the OPERATOR's designated representatives. The foregoing restrictions
regarding confidentiality shall not apply to any of the following:
(i) information in the public domain or generally available to the public
other than as a result of disclosure by CONTRACTOR;
(ii) disclosure of information in the CONTRACTOR's possession prior to being
furnished by or on behalf of OPERATOR;
(iii) information received by CONTRACTOR from another source when such source
is not restricted in its use or disclosure of such information;
(iv) information required to be disclosed by operation of applicable law;
(v) information describing the specification of the DRILLING UNIT given to a
bona fide prospective customer of CONTRACTOR provided such disclosure
does not violate sub-clause 28.7 herein;
(vi) information describing the availability of the DRILLING UNIT given to a
bona fide prospective customer of CONTRACTOR provided such disclosure
does not violate sub-clause 28.7 herein; or
(vii) information requested by SOCAR.
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Permission should first be obtained from SOCAR prior to disclosing any
information under (v) above to third parties. The confidentiality obligations
under this clause shall survive for a period of five (5) years following
termination of the OPERATOR's PSA.
CLAUSE 17 PUBLICITY
The CONTRACTOR shall not publish or permit to be published either alone or in
conjunction with any other person any articles, photographs or other
illustrations relating to the work hereunder, or OPERATOR's business generally,
without prior reference to and approval in writing from OPERATOR. Such consent
shall only apply to each specific application and relate only to that
application. The accuracy of any information which was not supplied directly by
OPERATOR shall be the absolute responsibility of the CONTRACTOR. The obligations
of this clause shall continue notwithstanding the completion or termination of
the work under this CONTRACT.
CLAUSE 18 ASSIGNMENT AND SUBCONTRACTING
18.1 Assignment
The CONTRACTOR shall not without the prior written consent of the
OPERATOR assign the CONTRACT or any part thereof or any benefit or
interest therein or thereunder to any party other than a wholly-owned
subsidiary of the Santa Fe International Corporation. Such consent
shall not be unreasonably withheld. If CONTRACTOR assigns the CONTRACT
or any part thereof or any benefit or interest therein or thereunder to
a wholly-owned subsidiary of Santa Fe International Corporation, then
prior to such assignment CONTRACTOR shall provide to COMPANY a Parent
Company Guarantee in the form of Exhibit 2 hereto.
OPERATOR may assign or sub-let the whole or part of this CONTRACT, its
rights, liabilities and obligations to an AFFILIATE of the BP Amoco plc
and to Agip Azerbaijan BV or its AFFILIATE operating the Kurdashi PSA
upon the same terms and conditions as those agreed between the parties
hereto without consent of the CONTRACTOR, and to any other party with
the prior written consent of the CONTRACTOR. Such consent shall not be
unreasonably withheld.
When this CONTRACT is assigned it shall be assigned on the terms and
conditions of the Assignment Agreement in the form which is attached
hereto as Exhibit "1".
When the CONTRACT is assigned, the Rates and Charges set forth in
Exhibit "5" of the CONTRACT shall be revised to reflect variations in
CONTRACTOR's operating costs in carrying out the DRILLING SERVICES only
if caused solely as a result of such assignment and only as
specifically provided for herein. Except as otherwise provided for
herein or elsewhere in this CONTRACT, cost variations in
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CONTRACTOR's operating costs in carrying out the DRILLING SERVICES will
be subject to adjustment, if solely the result of the assignment of the
CONTRACT, and shall be the following cost variations: (i) compliance
with the assignee's safety, hygiene and import/export procedures, and
(ii) compliance with the assignee's fire and safety regulations.
Provided, further, that matters set forth elsewhere in the CONTRACT or
its Exhibits which expressly call for CONTRACTOR to assume the
obligation for compliance and/or expressly address adjustments of costs
by and between the Parties (by way of example this includes but is not
limited to Clause 10 herein and Section 5.7 of Exhibit "5" herein )
shall not be subject to adjustment under this Clause 18. In all other
cases, when the CONTRACT is assigned, the Rates and Charges set forth
in Exhibit "5" of the CONTRACT shall be revised to reflect variations
in CONTRACTOR's operating costs in carrying out the DRILLING SERVICES
only if, solely as a result of such assignment, there is an increase or
decrease in the operating requirements imposed on CONTRACTOR by the
assignee that results in an increase or decrease of the CONTRACTOR's
operating costs in a manner not originally contemplated by the Parties
with respect to the work to be performed by CONTRACTOR under the
CONTRACT. Such variations in cost shall be supported by auditable
evidence of the actual cost changes properly documented and supported
by CONTRACTOR to OPERATOR's reasonable satisfaction: provided further
that with respect to cost increases no such cost variations shall be
allowed unless the assignee is advised in advance of such changes and
has been given the opportunity to modify its operating requirements to
avoid the cost increase.
18.2 Subcontracting
The CONTRACTOR shall not enter into any subcontract for the whole or
any part of its obligations under the CONTRACT other than with Caspian
Drilling Company Limited without the prior written consent of the
OPERATOR and such consent if given shall not relieve the CONTRACTOR
from any liability or obligation under the CONTRACT and the CONTRACTOR
shall be responsible for the acts, breaches of contract, defaults and
negligence of any SUBCONTRACTOR, its personnel or agents as fully as if
they were the acts, defaults, breaches of contract or negligence of the
CONTRACTOR, its personnel or agents.
The CONTRACTOR shall ensure that all its subcontracts shall include
provisions to the like effect as the provisions hereof. In addition the
CONTRACTOR shall ensure that the SUBCONTRACTOR's personnel (where
applicable) are made aware of, and follow the provisions for Fire and
Safety Precautions and Emergency Procedures as set out in Exhibit 4.
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18.3 Under no circumstances shall any subcontractor of CONTRACTOR or its
agents, servants or employees be considered employees of OPERATOR.
18.4 If CONTRACTOR shall cause any part of the DRILLING SERVICES hereunder
to be performed by a subcontractor, CONTRACTOR shall provide on behalf
of such subcontractor or require such subcontractor to procure and
maintain in effect for the duration of the subcontract such insurance
coverages as are set forth elsewhere in this CONTRACT as applicable to
such subcontractor which coverages shall, with respect to the risks
expressly assumed by such subcontractor under its subcontract, name
OPERATOR GROUP as additional insured, be primary, and contain the
waiver of subrogation specified herein.
CLAUSE 19 APPLICATION OF LAWS AND REGULATIONS
The CONTRACTOR shall comply with all Laws, Rules and Regulations of Government
or local or other authority which are effective at the date hereof or may in the
future become applicable to the CONTRACTOR's business, CONTRACTOR's EQUIPMENT
and CONTRACTOR's PERSONNEL engaged in the operations hereunder. The CONTRACTOR
shall promptly advise the OPERATOR of any such laws, rules or regulations with
which it believes it is unable to comply.
The CONTRACTOR shall ensure that its PERSONNEL, SUBCONTRACTORs and agents
observe all such laws, rules and regulations and shall at the CONTRACTOR's
expense replace any CONTRACTOR's PERSONNEL or SUBCONTRACTOR's personnel or
agents whose conduct or behavior may reasonably be considered by the OPERATOR to
be in breach or conflict with such laws, rules or regulations. CONTRACTOR,
subject always to the provisions of Clause 8 herein, shall defend indemnify and
hold harmless OPERATOR from and against any and all claims, liabilities,
demands, damages, actions, costs and expenses (including attorneys fees) arising
out of or in connection with the failure of CONTRACTOR, its personnel and/or its
subcontractors to observe all such laws, rules and regulations.
CLAUSE 20 SERVING OF NOTICES
Except as otherwise expressly and specifically set forth in this CONTRACT or in
any Exhibits or attachment hereto, all notices and other communications required
to be in writing hereunder shall be deemed sufficient for all purposes if sent
by registered or certified letter, courier service, facsimile or telex to the
recipients' addresses stated below (provided that each Party may change its
address by notice in writing) or if delivered by hand to the recipient Party's
designated representative. Each notice in any of the foregoing manners shall be
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effective upon receipt, or seventy-two (72) hours following confirmed date of
dispatch, whichever is earlier.
OPERATOR:
AZERBAIJAN INTERNATIONAL OPERATING COMPANY
VILLA PETROLEA
2 NEFTCHILAR PROSPEKTI, BAIL
BAKU, AZERBAIJAN
ATTENTION: JAMES REESE, DRILLING MANAGER
FACSIMILE: (+994-12) 97-96-02
CONTRACTOR:
SANTA FE INTERNATIONAL CORPORATION
52 KHANLAR STREET (APARTMENT 15)
BAELOVA, BAKU, AZERBAIJAN
ATTENTION: JOHN BOONE, GENERAL MANAGER
FACSIMILE: (011) (994-12) 97-45-01
COPY TO:
SANTA FE INTERNATIONAL CORPORATION
TWO LINCOLN CENTRE, SUITE 1100
5420 LBJ FREEWAY, DALLAS, TX 75240, USA
ATTENTION: GENERAL COUNSEL
FACSIMILE: (+1) 972-701-7737
CLAUSE 21 VARIATION AND WAIVER
No variation or waiver of any obligation hereunder shall be valid or effective
unless confirmed in writing in the case of a variation by all Parties and in the
case of a waiver then by the Party towards whom the obligation shall have been
undertaken.
CLAUSE 22 INDEPENDENT CONTRACTOR RELATIONSHIP
22.1 In the performance of the DRILLING SERVICES the CONTRACTOR shall be an
independent contractor with the authority to control and direct the
performance thereof. OPERATOR is interested only in the results
obtained and shall not have the right to control or direct the details
of the services performed by CONTRACTOR, but the DRILLING SERVICES
shall be subject to the approval of the OPERATOR and be subject to a
general right of inspection and any necessary supervision thereof
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which the OPERATOR may choose to exercise if necessary to secure the
satisfactory completion thereof.
22.2 The actual performance and superintendence of the DRILLING SERVICES
hereunder shall be by the CONTRACTOR but the OPERATOR shall at all
times have access to all parts of the DRILLING UNIT for the purpose of
inspecting the CONTRACTOR's EQUIPMENT or observing tests or inspecting
the DRILLING SERVICES. In addition, operations shall be carried out at
the request and in accordance with the instructions of the OPERATOR's
REPRESENTATIVE who shall inform the CONTRACTOR's REPRESENTATIVE of the
end result desired from any operation, but the CONTRACTOR shall have
the entire responsibility for the proper and timely execution thereof.
22.3 The CONTRACTOR shall give all reasonable assistance to the OPERATOR's
REPRESENTATIVE in the performance of his duties. However, the presence
of and/or inspection and/or supervision by the OPERATOR's
REPRESENTATIVE hereunder shall not relieve the CONTRACTOR of any of its
obligations or responsibilities hereunder.
CLAUSE 23 INFRINGEMENT OF PATENTS
The CONTRACTOR shall release, defend, indemnify and hold harmless the OPERATOR
from and against all claims proceedings and liabilities for or on account of
infringement or alleged infringement of any patent rights design trade mark or
name or other protected right of any THIRD PARTY arising in connection with the
use by the CONTRACTOR of any such equipment, machinery, materials or process and
shall defend at its sole expense any and all such proceedings to which both
Parties are defendants, provided, however, that such indemnity shall not apply
and OPERATOR shall release, defend, indemnify and hold harmless CONTRACTOR
therefor if the equipment, machinery, materials or process which infringes on
the patent, design, trademark or name or other protected right was specified or
provided by OPERATOR. Both the CONTRACTOR and the OPERATOR shall at all times
have the right to be represented respectively by their own counsel and to
participate in the defense of any such proceedings if both shall be made Parties
defendant thereto. Each Party shall give notice in writing forthwith to the
other party of any such claims and proceedings as aforesaid and shall supply the
other party with all information and documents in connection therewith as the
other Party may reasonably require.
CLAUSE 24 APPLICABLE LAW
This CONTRACT shall be governed by, construed, interpreted and applied in
accordance
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with English Law, excluding any choice of law rules which would refer the matter
to the laws of another jurisdiction.
CLAUSE 25 ARBITRATION
25.1 Any dispute, controversy or claim arising out of or in relation to or
in connection with this CONTRACT or the operations carried out under
this CONTRACT, including without limitation any dispute as to the
validity, interpretation, enforceability or breach of this CONTRACT,
shall be exclusively and finally settled by arbitration, and any Party
may submit such a dispute, controversy or claim to arbitration.
25.2 Unless otherwise expressly agreed by the Parties of the arbitration,
the arbitration proceedings shall be conducted by three (3) arbitrators
in accordance with the Arbitration Rules of the United Nations
Commission on International Trade Law (UNCITRAL), as in existence on
the EFFECTIVE DATE.
25.3 Unless otherwise expressly agreed by the Parties to the arbitration,
the arbitrators shall be appointed in accordance with the procedure set
forth in the arbitration rules specified in Clause 25.2; provided,
however, that if the appointing authority specified in such rules
refuses or fails to act as the appointing authority within ninety (90)
days after being requested to do so, then the appointing authority
shall be the President for the time being of the Law Society of England
and Wales.
25.4 Unless otherwise expressly agreed in writing by the Parties to the
arbitration proceedings:
25.4.1 the arbitration proceedings shall be held in London;
25.4.2 the arbitration proceedings shall be conducted in the English
language and the arbitrator(s) shall be fluent in the English
language;
25.4.3 the arbitrator(s) shall be and remain at all times wholly
independent and impartial;
25.4.4 the costs of the arbitration proceedings (including attorney's
fees and costs) shall be borne in the manner determined by the
arbitrator(s).
25.4.5 the decision of a majority of the arbitrators shall be final
and binding, and the Parties to the arbitration proceedings
hereby agree to exclude, to the extent that they may validly
do so, any right of application or appeal to any court in
connection with any question of law arising in the course of
the arbitration proceedings or out of the award.
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25.4.6 judgment upon award may be entered in any court having
jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement,
as the case may be; and
25.4.7 each Party hereto, for the purposes of allowing such
arbitration and the enforcement and execution of any
arbitration decision, award, issuance of any attachment,
provisional remedy or other pre-award remedy, hereby waives
any and all claims to immunity, including, but not limited to,
claims of sovereign immunity.
CLAUSE 26 EXCLUSION OF PREVIOUS CORRESPONDENCE
All previous correspondence, negotiations, representations, explanations,
statements, promises or guarantees whether oral or written are hereby excluded
from the CONTRACT.
CLAUSE 27 AUDIT
CONTRACTOR shall maintain a complete and correct set of records pertaining to
all aspects of this CONTRACT. OPERATOR shall have the right to inspect and audit
any and all relevant records relating to the performance of the DRILLING
SERVICES and to audit all relevant records relating to payment for reimbursable
services (including provision of equipment) within a period of twenty-four (24)
months after the settlement of the final invoice for DRILLING SERVICES hereunder
provided that CONTRACTOR shall have the right to exclude any proprietary
matters, trade secrets, formulas or processes from such inspection and audit.
Should the results reveal that payments have been made incorrectly, appropriate
adjustments shall be made. Neither the completion of such audit by OPERATOR nor
the decision not to conduct an audit shall waive, forfeit or prejudice any right
or remedy that OPERATOR may have under this CONTRACT or at law.
CLAUSE 28 GENERAL PROVISIONS
28.1 Successors and Assigns
This CONTRACT shall inure to the benefit of and be binding upon the
successors and permitted assigns of the Parties.
28.2 Reservation
No Party shall be required to act or refrain from acting if to do so
would make such Party, its shareholders or their parents, subsidiaries
or AFFILIATES (including, in the case of the CONTRACTOR, its
sub-contractor Caspian Drilling Company Limited) liable to penalisation
under the laws of any jurisdiction applicable to such Party, its
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shareholders or their parents, subsidiaries or AFFILIATES (including,
in the case of the CONTRACTOR its sub-contractor Caspian Drilling
Company Limited) notwithstanding anything to the contrary in this
CONTRACT.
28.3 Severance of Invalid Provisions
If and for so long as any provision of this CONTRACT shall be deemed to
be judged invalid for any reason whatsoever, such invalidity shall not
affect the validity or operation of any other provision of this
CONTRACT and any such invalid provision shall be deemed severed from
this CONTRACT without affecting the validity of the balance of this
CONTRACT.
28.4 No waiver by any Party of any provision of this CONTRACT shall be
binding unless made expressly and expressly confirmed in writing.
Further, any such waiver shall relate only to such matter,
non-compliance or breach as it expressly relates to and shall not apply
to any subsequent or other matter, non-compliance or breach.
28.5 If this CONTRACT is executed in multiple languages, the English version
will prevail as to any conflicts between the executed documents.
28.6 Conflicts
Except as specifically provided in Clause 11.2 of Exhibit "1" attached
hereto, in the event of any conflicts between the provisions in the
Exhibits of this CONTRACT and the body of this CONTRACT, the latter
shall prevail.
28.7 Conflicts of Interest
CONTRACTOR undertakes that it shall not use any information received as
a result of its status as a Party under the CONTRACT to gain an
advantage for other operations which it may be or it anticipates it may
be conducting or participating in, to the material disadvantage of the
operations contemplated under this CONTRACT.
28.8 Survival
Clauses 6, 7, 8, 9, 10, 13, 14, 15, 16, 17, 19, 20, 23, 24, 25, 27, 28
of this CONTRACT, and Section 4.13 of Exhibit 4, shall survive the
termination of this CONTRACT. In addition, the rights of the Parties
under the insurance policies procured pursuant to Clause 9 herein shall
survive termination of this CONTRACT.
28.9 As of the EFFECTIVE DATE, the OPERATOR and CONTRACTOR shall be subject
to clause 11.2 of Exhibit "1" attached hereto, applying such provisions
mutatis mutandis to this CONTRACT.
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IN WITNESS WHEREOF, the duly authorised representatives of the Parties execute
this CONTRACT.
For and on behalf of
AZERBAIJAN INTERNATIONAL OPERATING COMPANY
By: /s/ Graham Howard
Name: Graham Howard
Title: Manager, Contracts and Procurement
Date: 14th March 2000
For and on behalf of
SANTA FE INTERNATIONAL CORPORATION
By: /s/ John Bergeland
Name: John Bergeland
Title: Vice President, Santa Fe International Corporation
Date: 14th March 2000
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<PAGE> 36
EXHIBIT "5"
RATES AND CHARGES
<PAGE> 37
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
PREAMBLES
5.1 GENERAL
The Rates and Charges shall be fully inclusive of all costs, expenses,
overheads and profit arising out of the provision of the DRILLING
SERVICES, PERSONNEL and EQUIPMENT by the CONTRACTOR under the CONTRACT
and its Exhibits hereof.
5.2 MOBILISATION AND DEMOBILISATION
(a) MOBILISATION CHARGE shall be the amount payable, as
set out in Exhibit "5.1", for the mobilisation of the
CONTRACTOR's EQUIPMENT and CONTRACTOR's PERSONNEL to
the CONTRACT AREA to cover all costs incurred by
CONTRACTOR as a result of such mobilisation including
but not by way of limitation all costs incurred by
the CONTRACTOR in:
- setting up a base in the CONTRACT AREA,
- air passages,
- sea freight,
- lighterage,
- port dues,
- pilotage,
- wharfage,
- cranage,
- cargo handling,
- all and any other costs
until the agreed time and date that the DRILLING UNIT is under
tight tow to the first LOCATION under this CONTRACT.
(b) DEMOBILISATION CHARGE shall be the amount payable, as
set out in Exhibit "5.1", for the demobilisation of
the CONTRACTOR's EQUIPMENT and CONTRACTOR's PERSONNEL
from the CONTRACT AREA to cover all costs incurred by
CONTRACTOR as a result of such demobilisation
including but not by way of limitation all costs
incurred by the CONTRACTOR in:
- closing down a base in the CONTRACT AREA,
- air passages,
- sea freight,
- lighterage,
- port dues,
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- pilotage,
- wharfage,
- cranage,
- cargo handling,
- all and any other costs
after the COMPLETION DATE.
(c) Standing Down/Remobilisation Charge
The CONTRACTOR will be paid a reimbursement for all actual
costs reasonably and properly incurred by the CONTRACTOR in
standing down at a port on the mainland of the CONTRACT AREA
nominated by the OPERATOR, or, at the OPERATOR's option, at
the individual home bases of the CONTRACTOR's PERSONNEL, and
(as the case may be) in remobilising from said port or home
bases the CONTRACTOR's PERSONNEL as a direct consequence of
the DRILLING UNIT being shutdown under the direction of the
OPERATOR. Full supporting documents must accompany any invoice
for this charge.
5.3 DAILY RATES
All rates per day described hereunder refer to a day of twenty-four
(24) hours. For parts of a day all such daily rates shall be prorated
to the nearest one quarter hour.
(a) The OPERATING RATE shall be the amount per day
payable for all operations from the COMMENCEMENT DATE
(including DRILLING UNIT movements to and from port
for upgrading the DRILLING UNIT) to the COMPLETION
DATE except when the REPAIR, REDRILL, SHUTDOWN
WITHOUT CREW, RATE DURING REPAIRS REQUIRED BY NEW
RULES AND REGULATIONS AFTER INITIAL COMMENCEMENT
DATE, REDUCED REPAIR RATE (as provided for in Section
D.1 of Attachment "1" of Exhibit "4") applies, or
other special rates (as may be agreed by the Parties)
are in effect. During the upgrade of the DRILLING
UNIT between the first WELL and second WELL as
envisaged under the CONTRACT, a nil RATE shall apply.
(b) The REPAIR RATE shall be equal to the OPERATING RATE
for forty eight (48) cumulative repair hours per
month or pro rata for part of a month. Thereafter the
REDUCED REPAIR RATE shall apply. In no event shall
any single occurrence of REPAIR RATE exceed forty
eight (48) hours. The REPAIR RATE shall be applicable
during such times as there is a shutdown in
operations for repairs to the DRILLING EQUIPMENT or
due to CONTRACTOR's failure to keep its
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EXHIBIT "5" - RATES AND CHARGES
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EQUIPMENT in certification in accordance with
requirements in effect at the first WELL COMMENCEMENT
DATE.
In respect of repairs to subsea equipment the REPAIR
RATE shall commence from the time that normal
operations cease on account of defective subsea
equipment until the time when normal operations are
resumed. Normal operations shall be deemed to have
been resumed when the same depth is reached as was
reached prior to the instigation of such repairs as
aforesaid. Waiting on weather to raise or run damaged
or defective or repaired subsea equipment shall be at
OPERATING RATE and not at REPAIR RATE.
Cessation of operations in order to slip, cut or
change the drilling line, or routine lubrication for
routine maintenance and routine top drive maintenance
purposes which cannot be safely and properly carried
out without suspending the DRILLING SERVICES shall
not be deemed to be shutdown for the purposes of this
sub-clause.
(c) The REDRILLING RATE shall apply during all time spent
in redrilling the hole or during remedial work on the
hole due to circumstances set out in Clause 8.4 of
the CONTRACT.
(d) The SHUTDOWN WITHOUT CREW RATE shall be at a rate as
set forth in Exhibit "5.1". The OPERATOR shall give
the CONTRACTOR thirty (30) days written notice of the
application of this Rate, which shall be applicable
for a period of not less than thirty (30) days.
In addition, the OPERATOR shall reimburse the
CONTRACTOR the Standing Down/Remobilisation Charge.
(e) The RATE DURING REPAIRS REQUIRED BY NEW RULES AND REGULATIONS
AFTER INITIAL COMMENCEMENT DATE shall apply as provided in
Sections 4.3 and 4.4 of Exhibit "4".
(f) In the event that the first WELL COMMENCEMENT DATE is delayed
beyond 15 March 2000 for reasons beyond the control of the
CONTRACTOR then the STANDBY RATE FOR DELAYED COMMENCEMENT
shall apply from 0000 hours on 15 March 2000 until the actual
first WELL COMMENCEMENT DATE.
5.4 CHARGE FOR MEALS AND ACCOMMODATION PROVIDED BY CONTRACTOR
This charge shall be the amount per man-day applicable for meals and
accommodation provided by CONTRACTOR to OPERATOR's and service
companies' personnel
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staying over night on the DRILLING UNIT in excess of eight (8) such
personnel per day.
The said Charge shall apply irrespective of whether the said Personnel
are in fact each provided with no meals per day or one or two or three
meals per day, and the substantiation for the application of this
Charge shall be the daily "people on board" report.
5.5 PERSONNEL
(a) Additional Personnel
The CONTRACTOR shall be paid at the rates set out in Exhibit
"5.2" hereto for personnel additional to those listed in
Exhibit "6" requested by the OPERATOR.
(b) Courses
The OPERATOR shall reimburse the CONTRACTOR for all costs and
expenses in respect of travel, accommodation and subsistence
reasonably and properly incurred by CONTRACTOR's PERSONNEL
when in attendance at courses, other than those for the
account of CONTRACTOR as set forth in Exhibit "6", at the
request of OPERATOR. Invoices for such reimbursement shall be
supported by the requisite bills, tickets and other such
substantiation as the OPERATOR may reasonably require.
(c) Replacement
Pending replacement of personnel the OPERATOR shall deduct
from any monies due to the CONTRACTOR at the appropriate rate
per day quoted in Exhibit "5.2" for all days in excess of
seven (7) that such person shall not have been so replaced.
5.6 ADDITIONAL EQUIPMENT
The OPERATOR shall reimburse the CONTRACTOR as follows for additional
equipment provided:
(a) The capital costs of modifications to the DRILLING
UNIT or additional equipment purchased on the
instructions of the OPERATOR shall be reimbursed to
the CONTRACTOR in accordance with the provisions of
sub-clause (b) hereunder.
(b) The agreed rental costs of listed equipment under
Exhibit "5.3" hereto or if not listed the costs of
materials or charges for hire of additional equipment
or services required by the OPERATOR's REPRESENTATIVE
at net invoice cost, after deduction of all
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discounts plus an addition of ten percent (10%) for
all items not exceeding three thousand dollars
(US$3,000) and six percent (6%) on all items
exceeding three thousand dollars (US$3,000) to cover
the CONTRACTOR's additional costs, overhead charges
and profit. provided, however, except and to the
extent otherwise agreed, the foregoing shall not
apply to the modification, enhancement, upgrade and
replacement of certain equipment items on the
DRILLING UNIT to be undertaken between the first and
second WELL under the CONTRACT, as summarised in
Exhibit "7" hereto.
(c) The costs of transport and shipping the further
equipment and materials to the CONTRACT AREA.
(d) An agreed rental rate to be incorporated in Exhibit
"5.3" hereto covering CONTRACTOR's operating and
maintenance costs for each item on such additional
equipment included in Exhibit "7" hereof; provided,
however, the foregoing shall not apply to the
modification, enhancement, upgrade and replacement of
certain equipment items on the DRILLING UNIT to be
undertaken between the first and second WELL under
the CONTRACT, except as stated in Exhibit "7" hereto.
The OPERATOR shall not reimburse the CONTRACTOR for any
further equipment or materials supplied and delivered by it
which the OPERATOR's REPRESENTATIVE has not first requested in
writing as aforesaid.
5.7 ESCALATION
5.7.1 At one-year intervals, with the first revision being
due 1 January 2001, the Rates and Charges herein set
forth shall be revised to reflect variations in
CONTRACTOR's costs after 1 January 2000 (the "Base
date") for or due to:
(a) Increases or decreases in the salaries, wages
benefits and burden for CONTRACTOR's PERSONNEL. Base
Cost for Non Azeri Personnel is U.S. $13,043 per day.
Base Cost for Azeri Personnel is U.S.$4,033 per day.
CONTRACTOR shall properly document and support to the
OPERATOR's reasonable satisfaction any such
variations in cost.
(b) Increases or decreases in CONTRACTOR's cost arising
from a change in the number, or the location of any
operating base, or work schedule of CONTRACTOR's
PERSONNEL only if made at the request of OPERATOR.
Otherwise, no adjustments shall be made for any
change in the number, operating base
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 5 OF 14
<PAGE> 42
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
location or work schedule of PERSONNEL made by
CONTRACTOR.
5.7.2 At one year intervals, with the first revision being due 1
January 2001, the Rates and Charges set forth herein shall be
revised to reflect variations in CONTRACTOR's costs after 1
January 2000 (the "Base Date") for or due to:
(a) Decreases or unavoidable increases in CONTRACTOR's
insurance and catering costs. Base Cost for insurance
is U.S. $957 per day and Base Cost for catering is
U.S. $1,934 per day. Decreases or unavoidable
increases in CONTRACTOR's insurance costs or catering
costs shall be supported by auditable evidence of the
actual cost changes properly documented and supported
by CONTRACTOR to OPERATOR's reasonable satisfaction.
(b) Increases or decreases in CONTRACTOR's maintenance
and capital equipment replacement costs. Base Cost is
U.S. $8,584 per day. Such cost increases or decreases
shall be calculated in accordance with increases or
decreases reported in the Bureau of Labour Statistics
Oilfield Drilling Machinery and Equipment Price Index
(Code No. 1191.02) as published by the U.S.
Department of Labour after the Base Date. Each
revision shall be determined by multiplying the
percentage change between the then current Index and
that which was in effect on the Base Date times the
Base Cost.
5.7.3 Rates and Charges herein set forth shall be adjusted when the
combined amount of the revision is greater than United States
Dollars Two Hundred and Fifty per day (U.S. $250/day) on 1
January 2001 and once every twelve (12) months thereafter.
5.7.4 CONTRACTOR shall maintain a complete and correct set of
records pertaining to all aspects of the matters set forth in
this Section 5.7. OPERATOR shall have the right to audit any
and all relevant records relating to the increases or
decreases in the Rates and Charges as provided for in this
Section 5.7 within a period of twenty-four (24) months after
the settlement of the final invoice for DRILLING SERVICES
hereunder provided that CONTRACTOR shall have the right to
exclude any proprietary matters, trade secrets, formulas or
processes from such inspection and audit. Should the results
reveal that payments have been made incorrectly, appropriate
adjustments shall be made. Neither the completion of such
audit by OPERATOR nor the decision not to conduct an audit
shall waive, forfeit or prejudice any
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 6 OF 14
<PAGE> 43
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
right or remedy that OPERATOR may have under this CONTRACT or
at law.
"5.7.5 The Rates and Charges herein set forth shall be revised to
reflect variations of CONTRACTOR's costs after January 1, 2000
("Base Date") for or due to an increase or decrease in
CONTRACTOR's costs due to a change in the laws, rules or
regulations of the Azerbaijan Republic, or the interpretation
or enforcement thereof, which becomes effective after the Base
Date. Each time that CONTRACTOR's out-of-pocket costs of such
items (one or more) increase or decrease by more than U.S.
$250 per 24-hour day, the Rates and Charges will be revised by
the corresponding amount with retroactive effect to the date
such increase or decrease was incurred. CONTRACTOR shall
properly document and support such variation in costs."
5.8 PAYMENT PROVISIONS
5.8.1 Monthly Account and Invoicing
(a) Within the first ten (l0) days of each MONTH the
CONTRACTOR shall submit to the OPERATOR in triplicate
a monthly account in respect of DRILLING SERVICES
performed by CONTRACTOR during the previous MONTH for
which payment is due, and also in respect of services
given and/or materials supplied (if any) for which
payment is due.
(b) Such account shall be accompanied by one copy of the
Time Breakdown Report and such other invoice
documents or information as the OPERATOR may
reasonably require from time to time.
(c) Such account shall comprise one invoice for each WELL
on which the DRILLING UNIT has operated during the
previous MONTH.
(d) Invoices shall be numbered serially and submitted to
the OPERATOR bearing the CONTRACT reference number.
5.8.2 Payments by the OPERATOR
(a) Insofar as it is approved by the OPERATOR, the
OPERATOR shall pay all invoices within thirty (30)
days after receipt thereof to bank accounts nominated
by the CONTRACTOR. In the event any undisputed
invoices are not so paid by the OPERATOR within the
said thirty (30) days, then the OPERATOR shall pay
interest on such unpaid amounts at LIBOR plus one
percent (1%). The bank account to which
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 7 OF 14
<PAGE> 44
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
OPERATOR shall make payments under the CONTRACT shall
be as follows:
SANTA FE INTERNATIONAL CORPORATION
Bank of America, NT and SA
333 S. Beaudry Avenue
19th Floor, Account Admin. 5583
Los Angeles, CA 90017, USA
Wire Instructions:
Bank of America NT and SA, SF
Account No. 12357-01847
ABA: 121000358
Any change to the above details shall be the subject
of a formal amendment to CONTRACT.
(b) In the event that the OPERATOR disputes an invoice or
part thereof, the OPERATOR shall within twenty (20)
days of receipt thereof notify the CONTRACTOR in
writing of the invoice or part thereof so disputed
and specifying the reason therefore. Payment of such
disputed invoice or part thereof shall be withheld
until settlement of the said dispute. Such payments
so withheld shall not be subject to interest charges
unless the original invoices as submitted by the
CONTRACTOR are subsequently agreed by OPERATOR to be
correct.
(c) Payment by the OPERATOR of the CONTRACTOR's invoices
shall be without prejudice to the OPERATOR's rights
subsequently to challenge the correctness thereof.
(d) Any expenditure of whatsoever nature incurred by the
CONTRACTOR in connection with the CONTRACT for which
responsibility has not been assumed in the CONTRACT
by the OPERATOR shall be a cost to be borne by the
CONTRACTOR.
(e) Payment by the OPERATOR of any account submitted by
the CONTRACTOR shall not discharge or release the
CONTRACTOR from any of its obligations under the
CONTRACT or be deemed approval or acceptance of work
covered by such account.
(f) All invoices shall be submitted in and payment made
in the currency or currencies set forth in Exhibit
5.1. Such currencies or amounts thereof may be
adjusted by mutual agreement of the Parties, from
time to time.
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 8 OF 14
<PAGE> 45
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
5.8.3 Payment During Upgrade.
CONTRACTOR shall upgrade the DRILLING UNIT in accordance with
Attachment 2 to Exhibit 7. Such DRILLING UNIT upgrade is to be
performed upon completion of the GCA 6 WELL which is to be the
first WELL under this CONTRACT. OPERATOR shall provide tow
vessels and other necessary services for moving the DRILLING
UNIT from the GCA 6 well location and pay the OPERATING RATE
until the DRILLING UNIT is safely moored following removal of
all of OPERATOR's MATERIALS and equipment, materials and
supplies of the OPERATOR's contractors and their
subcontractors at Baku or other mutually agreed equidistant
port. During the upgrade, a Nil Rate shall be payable and
OPERATOR shall not provide and/or bear the cost of services
and materials which are for its account under Attachment 1 to
Exhibit 4. Upon completion of the upgrade, which for purposes
hereof shall mean when the DRILLING UNIT has met the
acceptance criteria as stated in Attachment 3 to Exhibit "7"
and the DRILLING UNIT is ready to move to OPERATOR's next
location, or such other time and date as agreed between the
Parties, OPERATOR shall provide tow vessels and other
necessary services for moving the DRILLING UNIT to OPERATOR's
next location and pay the OPERATING RATE and provide and/or
bear the cost of services and materials which are for the
OPERATOR's account under Attachment 1 to Exhibit 4
5.9 EARLY TERMINATION FEE
5.9.1 Notwithstanding any other provision of the CONTRACT, in the
event the CONTRACT is terminated prior to the second WELL
COMMENCEMENT DATE for any reason whatsoever, (excepting only
the constructive, compromised or arranged total loss of the
DRILLING UNIT under applicable insurance policies or
arrangements), then OPERATOR shall pay the CONTRACTOR an Early
Termination Fee equivalent to 365 Days at the GCA-6 OPERATING
RATE plus CONTRACTOR's audited costs of complying with
OPERATOR's instruction to terminate the CONTRACT (including
all costs of terminating or cancelling any current or planned
work or orders for materials and equipment associated with the
Upgrade envisaged under this CONTRACT).
5.9.2 Notwithstanding any other provision of the CONTRACT, in the
event the CONTRACT is terminated after the second WELL
COMMENCEMENT DATE for any reason whatsoever, (excepting only
the constructive, compromised or arranged total loss of the
DRILLING UNIT under applicable insurance policies or
arrangements), then OPERATOR shall pay CONTRACTOR the
following Early Termination Fee based upon the actual date of
termination. FOR PURPOSES OF IMPLEMENTING SUB-CLAUSE 5.9.2 THE
FIRST
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 9 OF 14
<PAGE> 46
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
YEAR OF THE CONTRACT SHALL BE CONSIDERED TO COMMENCE ON THE
SECOND WELL COMMENCEMENT DATE.
The applicable Early Termination Fee shall be calculated by
considering the actual date of termination against the
following fixed reference points.
a) If the Contract is terminated at any time during the
first year of the CONTRACT:
- U.S. $23,100,000 plus the non-GCA-6 WELL
OPERATING RATE for each Day the actual
duration of the CONTRACT is less than 365
Days.
b) If the CONTRACT is terminated at any time during the
second year of CONTRACT:
- U.S. $19,400,000 plus U.S. $10,137 for each
Day the actual duration of the CONTRACT is
less than 730 Days.
c) If the CONTRACT is terminated at any time during the
third year of the CONTRACT:
- U.S. $14,900,000 plus U.S. $12,329 for each
Day the actual duration of the CONTRACT is
less than 1,095 Days.
d) If the CONTRACT is terminated at any time during the
fourth year of the CONTRACT:
- U.S. $9,500,000 plus U.S. $14,795 for each
Day the actual duration of the CONTRACT is
less than 1,460 Days.
e) If the Contract is terminated at any time after the
1,460th Day of the CONTRACT:
- U.S. $17,336 for each Day the actual
duration of the CONTRACT is less than 2,008
Days.
The above-applicable Early Termination Fee excludes any
element of withholding Tax payment. If CONTRACTOR is subject
to Azerbaijan withholding Tax on such Early Termination Fee,
then the applicable Fee shall be adjusted as necessary to
include the applicable withholding tax in order that the net
Early Termination Fee to be received by CONTRACTOR after such
tax has been withheld remains as stated above.
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 10 OF 14
<PAGE> 47
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
For the purpose of sub-clause 5.9.2 "Day" or "Days" mean a day
for which a non-GCA-6 Well OPERATING RATE has been paid to
CONTRACTOR.
5.9.3 In addition to the Early Termination Fee, if the period of the
DRILLING SERVICES from the second WELL COMMENCEMENT DATE to
the actual date of Termination shall be less than 2,008 Days
then OPERATOR shall pay CONTRACTOR the unrecovered portion of
the cost to CONTRACTOR of providing supply boats and fuel
during the period when the DRILLING UNIT is undergoing Upgrade
following completion of the first WELL. For the avoidance of
doubt, the Non-GCA-6 WELL OPERATING RATE includes an element
of $525 per Day (inclusive of withholding tax at 5%) to cover
these costs and such rate is payable under the CONTRACT for
the equivalent of 2,008 Days.
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 PAGE 11 OF 14
<PAGE> 48
EXHIBIT "5" - RATES AND CHARGES
- --------------------------------------------------------------------------------
EXHIBIT "5.1" RATES AND CHARGES
(NOTE ALL VALUES IN U.S. DOLLARS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1. MOBILISATION 0
- -------------------------------------------------------------------------------------------------------------------------------
2. DEMOBILISATION 0
- -------------------------------------------------------------------------------------------------------------------------------
3. STANDING DOWN/ REMOBILISATION CHARGE At cost
- -------------------------------------------------------------------------------------------------------------------------------
Base Rate Without Azeri W/H Tax (For With 5% Azeri W/H Tax
information purposes only)
- -------------------------------------------------------------------------------------------------------------------------------
GCA-6 Other GCA-6 Well Other Wells
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
4. OPERATING RATE 57,242 77,026 60,255 81,080
- -------------------------------------------------------------------------------------------------------------------------------
5. REDUCED REPAIR RATE 13,043 13,043 13,730 13,730
- -------------------------------------------------------------------------------------------------------------------------------
6. REDRILLING RATE 42,931 57,769 45,191 60,810
- -------------------------------------------------------------------------------------------------------------------------------
7. SHUTDOWN W/O CREW RATE N/A OPERATING RATE Less Agreed
Cost Savings
- -------------------------------------------------------------------------------------------------------------------------------
8. RATE DURING REPAIRS REQUIRED BY NEW RULES AND 57,242 77,026 60,255 81,080
REGULATIONS AFTER INITIAL COMMENCEMENT DATE
- -------------------------------------------------------------------------------------------------------------------------------
9. STANDBY RATE FOR DELAYED COMMENCEMENT 38,422 N/A 40,444
- -------------------------------------------------------------------------------------------------------------------------------
10. MEALS AND ACCOMMODATION IN EXCESS OF EIGHT (8) 38/man/day 40/man/day 40/man/day
MEN PER DAY OF OPERATOR'S PERSONNEL
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS SUBJECT TO WITHHOLDING TAX 1,837 1,934 1,934
(BEFORE TAX)
- -------------------------------------------------------------------------------------------------------------------------------
11. MISCELLANEOUS CHARGES The rate per day for CONTRACTOR's personnel who have been removed and
who have not been replaced by the CONTRACTOR shall be a deduction of
the amount of the rate in Exhibit "5.2" hereto for the person so
removed until such time as the said person so removed has been
replaced
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
1. MOBILISATION
- -------------------------------------------------------------------------------------------------------------------------------
2. DEMOBILISATION
- -------------------------------------------------------------------------------------------------------------------------------
3. STANDING DOWN/ REMOBILISATION CHARGE
- -------------------------------------------------------------------------------------------------------------------------------
With 6.25% Azeri With 8.0% Azeri
W/H Tax W/H Tax
- -------------------------------------------------------------------------------------------------------------------------------
(All Wells) (All Wells)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
4. OPERATING RATE 82,186(1) 83,787
- -------------------------------------------------------------------------------------------------------------------------------
5. REDUCED REPAIR RATE 13,913 14,177
- -------------------------------------------------------------------------------------------------------------------------------
6. REDRILLING RATE 61,639 62,840
- -------------------------------------------------------------------------------------------------------------------------------
7. SHUTDOWN W/O CREW RATE OPERATING RATE Less Agreed Cost Savings
- -------------------------------------------------------------------------------------------------------------------------------
8. RATE DURING REPAIRS REQUIRED BY NEW RULES AND 82,186 83,787
REGULATIONS AFTER INITIAL COMMENCEMENT DATE
- -------------------------------------------------------------------------------------------------------------------------------
9. STANDBY RATE FOR DELAYED COMMENCEMENT N/A
- -------------------------------------------------------------------------------------------------------------------------------
10. MEALS AND ACCOMMODATION IN EXCESS OF EIGHT (8) 41/man/day 41/man/day
MEN PER DAY OF OPERATOR'S PERSONNEL
- -------------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS SUBJECT TO WITHHOLDING TAX 1,959 1,997
(BEFORE TAX)
- -------------------------------------------------------------------------------------------------------------------------------
11. MISCELLANEOUS CHARGES The rate per day for CONTRACTOR's personnel who have been removed and
who have not been replaced by the CONTRACTOR shall be a deduction of
the amount of the rate in Exhibit "5.2" hereto for the person so
removed until such time as the said person so removed has been
replaced
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) (77,026 / 0.9375) + (1,959 - 1,934) = 82,186
(2) Without prejudice to the provisions of Exhibit 5, Clause 5.7, should
CONTRACTOR and its subcontractors be subject to Azerbaijan withholding
tax at a rate other than 5%, 6.25% or 8%, then CONTRACTOR's rates of
payment shall be adjusted so that CONTRACTOR's rates before Azerbaijan
withholding tax remain unchanged.
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 Page 12 of 14
<PAGE> 49
EXHIBIT "5.2"
RATES FOR CONTRACTORS PERSONNEL
<TABLE>
<CAPTION>
ONSHORE
- ------------------------------------------------------------------------------------------------------------
RATE/MAN/DAY*
-------------------------------------------
POSITION NATIONALITY ROTATION/ NUMBER
RESIDENT PROVIDED US DOLLARS/DAY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Drilling Superintendent NA Resident 1 1021
- ------------------------------------------------------------------------------------------------------------
Maintenance Superintendent NA Resident 1 838
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OFFSHORE
- ------------------------------------------------------------------------------------------------------------
RATE/MAN/DAY*
-------------------------------------------
POSITION NATIONALITY ROTATION/ NUMBER
RESIDENT PROVIDED US DOLLARS/DAY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sr. Drilling Foreman NA 28/28 1 585
- ------------------------------------------------------------------------------------------------------------
Drilling Foreman NA 28/28 1 571
- ------------------------------------------------------------------------------------------------------------
Tourpusher NA 28/28 2 480
- ------------------------------------------------------------------------------------------------------------
Barge Engineer NA 28/28 1 489
- ------------------------------------------------------------------------------------------------------------
Asst. Barge Engineer NA 28/28 1 419
- ------------------------------------------------------------------------------------------------------------
Electrician NA 28/28 1 467
- ------------------------------------------------------------------------------------------------------------
Mechanic NA 28/28 1 462
- ------------------------------------------------------------------------------------------------------------
Subsea Engineer NA 28/28 1 517
- ------------------------------------------------------------------------------------------------------------
Safety Training Co-ordinator NA 28/28 1 448
- ------------------------------------------------------------------------------------------------------------
Clerk/Medic/HLO NA 28/28 1 380
- ------------------------------------------------------------------------------------------------------------
Tourpusher A 14/14 1 75
- ------------------------------------------------------------------------------------------------------------
Driller A 14/14 1 46
- ------------------------------------------------------------------------------------------------------------
Asst. Driller A 14/14 1 34
- ------------------------------------------------------------------------------------------------------------
Derrickman A 14/14 1 32
- ------------------------------------------------------------------------------------------------------------
Pumpman A 14/14 1 29
- ------------------------------------------------------------------------------------------------------------
Roughneck A 14/14 1 27
- ------------------------------------------------------------------------------------------------------------
Materialsman A 14/14 1 30
- ------------------------------------------------------------------------------------------------------------
Storeman A 14/14 1 30
- ------------------------------------------------------------------------------------------------------------
Motorman A 14/14 1 26
- ------------------------------------------------------------------------------------------------------------
Welder A 14/14 1 29
- ------------------------------------------------------------------------------------------------------------
Electrician A 14/14 1 55
- ------------------------------------------------------------------------------------------------------------
Mechanic A 14/14 1 55
- ------------------------------------------------------------------------------------------------------------
Subsea Engineer A 14/14 1 46
- ------------------------------------------------------------------------------------------------------------
Crane Operator A 14/14 1 34
- ------------------------------------------------------------------------------------------------------------
Asst. Crane Operator A 14/14 1 27
- ------------------------------------------------------------------------------------------------------------
Roustabout A 14/14 1 23
- ------------------------------------------------------------------------------------------------------------
Asst. Barge Engineer A 14/14 1 51
- ------------------------------------------------------------------------------------------------------------
Ballast Control Opt. A 14/14 1 34
- ------------------------------------------------------------------------------------------------------------
Asst. Ballast Control Opt. A 14/14 1 32
- ------------------------------------------------------------------------------------------------------------
Paint Foreman A 14/14 1 28
- ------------------------------------------------------------------------------------------------------------
Painter A 14/14 1 23
- ------------------------------------------------------------------------------------------------------------
Radio Operator A 14/14 1 28
- ------------------------------------------------------------------------------------------------------------
Safety Training Officer A 14/14 1 57
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
A - Azeri
NA - Non Azeri
*Payable for days worked and earned days off
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 Page 13 of 14
<PAGE> 50
EXHIBIT "5.3"
RATES FOR
ADDITIONAL EQUIPMENT/MISCELLANEOUS CHARGES
<TABLE>
<CAPTION>
ITEM DESCRIPTION RATE CHARGE
- ---- ----------- -----------
<S> <C> <C>
US$/day
NONE
</TABLE>
- --------------------------------------------------------------------------------
C-2000-AIOC-21467 Page 14 of 14
<PAGE> 51
Santa Fe International Corporation undertakes, upon the request of the
Securities and Exchange Commission, to file the appendices to the foregoing
agreement that are not included in the filing.
- --------------------------------------------------------------------------------
