Bahri, Saudi Aramco Execute Transaction Agreements for Merger of Vela’s Fleet

The National Shipping Company of Saudi Arabia (“Bahri”) announces today that Bahri, the Saudi Arabian Oil Company (“Saudi Aramco”) and Vela International Marine Limited (“Vela”), a wholly owned subsidiary of Saudi Aramco, have executed definitive and legally binding agreements (the “Transaction Agreements”) to merge the fleet and operations of Vela and Bahri (the “Transaction”).

Execution of the Transaction Agreements took place in Riyadh on 4 November 2012 after the closing of trading on the Saudi Stock Exchange (Tadawul) and follows the announcement by Bahri on 20 October 2012 of the parties’ agreement on the terms and conditions of the Transaction and approval of such terms and conditions by the parties respective boards of directors.

The Transaction is subject to a number of conditions, including the approval of the Transaction and the related capital increase by Bahri’s shareholders at an Extraordinary General Assembly and receipt of required approvals from relevant regulatory authorities including, without limitation, the approval of the Capital Market Authority and Supreme Council for Petroleum and Mineral Affairs.

Subject to the parties ability to obtain the required regulatory approvals for the Transaction, Bahri expects to convene the Extraordinary General Meeting towards the end of Q1 2013. If all the relevant resolutions are approved, the initial transfer of vessels is expected to occur in Q2 2013 and the final transfer of vessels is expected to occur early in Q3 of 2013.

Under the terms of the Transaction Agreements, Vela will transfer to Bahri the full ownership of its entire fleet of vessels, which consists of 14 very large crude carriers (“VLCCs”), a floating storage VLCC, one Aframax tanker and four product tankers. In addition, Vela’s vessel-based personnel and a number of shore-based personnel will transfer to Bahri. Post-Transaction, the shipping businesses of Vela will be integrated within Bahri’s corporate structure.

Pursuant to the terms of a long-term shipping contract, which has an initial term of 10 years, Bahri will become the exclusive provider of VLCC crude oil shipping services to Saudi Aramco for crude oil sold by Saudi Aramco on a delivered basis. Bahri intends to satisfy Saudi Aramco’s annual VLCC transportation requirements relating to crude oil sold on a delivered basis which Bahri currently estimates to be around 50 VLCCs. This will require employing, following completion of the Transaction, 31 VLCCs owned by Bahri and 19 VLCCs chartered-in. Saudi Aramco will continue to manage all crude oil marketing and sales directly with its customers, and Bahri will provide reliable transportation services to Saudi Aramco on competitive terms. Furthermore, the two companies plan to explore ways to expand their cooperation in the maritime sector.

This long-term shipping contract is based on negotiated terms that include a floor to protect Bahri against declining shipping rates and provision for Saudi Aramco to be reimbursed for floor protection payments if shipping rates exceed a Continue(certain threshold)

Bahri and Vela have also agreed to discuss the terms of an interim arrangement to employ Bahri’s existing fleet of VLCCs within Saudi Aramco’s existing crude oil VLCC transportation program. The interim arrangement is expected to take effect from January 1, 2013 until the long-term shipping contract becomes effective pursuant to the terms of the Transaction Agreements.

Bahri will pay a total consideration of SAR 4,875,000,000 (equivalent to US$ 1,300,000,000). This will be satisfied by Bahri (i) making a cash payment of SAR 3,122,812,500 (equivalent to US$832,750,000) (the “Cash Consideration”) and (ii) issuing 78,750,000 new Bahri shares at an agreed price of SAR22.25 per share. Based on a post-transaction equity capitalization of 393,750,000 shares, the new Bahri shares held by a wholly owned Saudi Aramco subsidiary will represent a 20% shareholding interest in Bahri and will be appropriately represented in Bahris board. Bahri will raise the Cash Consideration through Sharia compliant debt financing from a number of sources and subsequent announcement will follow after signing the agreements with the financing entities.

The Transaction represents a transformational step for Bahri that provides it with a stronger financial and commercial position, and significantly expands Bahri’s business and enhances its position as a global marine transport leader.

The Transaction enables Bahri to become a national shipping champion that can achieve Bahri and Saudi Aramco’s aspirations to localize and develop a large and diversified national maritime industry, and will put Bahri in a position to support the Kingdoms growing petroleum, chemical and manufacturing industries and provide greater security in marine transportation.