Niko Resources will start drilling next year in Indonesian waters after signing the largest offshore exploration contract in the history of Indonesia.Photo Illustration/Niko Resources
Niko Resources Ltd., a Calgary-based global energy company which operates mainly in Asia, says it has signed a $700-million contract for drilling services in Indonesia.
The contract with a subsidiary of Diamond Offshore, a major deepwater drilling contractor, will begin late next spring or early summer, the company said Tuesday.
Niko said the deal is the largest deepwater exploration contract in the history of Indonesia and will boost the Canadian company's chances to discover oil and gas off the Indonesian coast.
Niko is Indonesia's largest deepwater acreage holder with a stake in 16 production-sharing contracts and will use the Ocean Monarch rig to drill its extensive exploration portfolio.
The Ocean Monarch is being contracted for four years. With the option year exercised, this contract is valued at more than $700-million.
Niko said it has assembled a very experienced drilling team which has drilled more than 150 deepwater wells worldwide.
"This contract removes the risk of rig availability for the company's planned massive drilling campaign," Niko said in a release Tuesday,
"The rig will complete its current contract and a hull inspection (required every five years) will be completed before Niko's contract begins. The contract is to commence between June 1 and Aug. 15, 2012.
Niko shares rose $1 to $55.45 or nearly 2 per cent in Tuesday trading on the Toronto Stock Exchange.
Niko produces and explores for oil and natural gas in India, Bangladesh, Indonesia, the Kurdistan region of Iraq, Trinidad, Pakistan and Madagascar.
Earlier this summer, the company reported a net loss of $54.9-million (U.S.) for the second quarter ended June 30 due to mechanical problems that cut production.
As well, the company booked a charge for paying higher legal costs as it pleaded guilty to bribing a Bangladeshi minister.
Revenue fell 15 per cent to $88.2-million (U.S.) from $104.7-million in the second quarter of 2010, when Niko recorded a profit of $14.1-million.
The company said mechanical problems at its Block 9 in Bangladesh led to lower natural gas production.
It also said it had higher maintenance expenses at its D6 block off India's coast, and natural gas production there is expected to continue to be down until additional wells are tied in.
The company also spent $6.1-million on general and administrative costs, up from $5.7-million, due to increased use of outside legal services, and it paid $2-million in legal fees, compared to $296,000 last year.
In June, Niko Resources agreed to pay nearly $9.5-million as punishment for bribing a Bangladeshi government official in 2005.
According to an agreed statement of facts, Niko provided goods and services "to induce officials to use their position to influence any acts or decisions" of the Bangladeshi government.
The bribes date back to the spring of 2005, when the company was criticized for a January explosion at a northeastern Bangladesh natural gas field.
In May of that year, Niko's Bangladeshi subsidiary provided a Bangladeshi minister with use of a car worth $190,984 and paid for trips to Calgary and New York.