Desire Petroleum formally signed a rig contract with Diamond Offshore Drilling (UK) Ltd for the use of the the Ocean Guardian semisubmersible drilling rig.

The terms of the contract are for a four well, minimum eighty day campaign, under which the Guardian could earn maximum total revenue of US $19.6 million. Mobilisation and demobilization fees are estimated to be US $16 million dollars. Desire has secured options to drill a further six wells for itself or its partners. Following a program of scheduled shipyard work, the rig will mobilize from North Sea waters in late November 2009 and the first well is expected to spud in the North Falkland basin in early February 2010.

Desire has retained the services of AGR Petroleum Services for the provision of well construction technical work and operations management. All associated service contracting is underway as is the necessary addendum to the Company's EIAs to include the relevant details of the Ocean Guardian. In conjunction, detailed drilling budgets which will include the additional costs of associated services necessary for drilling are being prepared for the formal approval of the Company's partners.

Desire has waited a number of years to secure a rig at competitive rates to drill in the North Falkland Basin. The Company believes that it should take this opportunity to have the flexibility to drill more wells and/or potentially test successful wells. It is the Company's intention to raise additional funds to enable it to do so.

Stephen Phipps, Chairman of Desire, said, "We are delighted to be able to announce the formal rig contract with Diamond Offshore Drilling. We intend to maximize our chances of success with our firm four well program, with additional wells being likely, subject to further agreements with partners and additional funding."

Tags: Desire Petroleum plc