Bahri and Saudi Aramco reach agreement on Merger of Vela's Fleet and Operations with Bahri

This announcement follows the Memorandum of Understanding signed in June 2012.

Subject to approvals that must be obtained from relevant regulatory authorities, the boards of Bahri, Saudi Aramco and Vela have approved the Transaction on October, 17th 2012.

Execution of the agreements governing the Transaction 'the Transaction Agreements' is agreed to tentatively take place in November 2012. Bahri will make a subsequent announcement to the market promptly after the Transaction Agreements are executed.

Under the terms of the Transaction Agreements, Vela will transfer to Bahri the ownership of its entire fleet, 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 to be determined later will transfer to Bahri. Post-Transaction, the combined shipping businesses of Vela and Bahri 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. 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. Furthermore, the two companies plan to explore ways to expand their cooperation in the maritime sector.

Bahri and Vela have also agreed to discuss terms of an interim arrangement to employ Bahri's current VLCCs within Saudi Aramco's existing crude oil VLCC transportation programme. 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 SR4,875,000,000 (equivalent to $1,300,000,000) to Vela. This will be satisfied by Bahri (i) making a cash payment of SR3,122,812,500 (equivalent to $832,750,000) and (ii) issuing 78,750,000 new Bahri shares, which the parties agreed represent a value of SR22.25 per share.

Based on a post-Transaction equity capitalization of 393,750,000 shares, the new Bahri shares will represent a 20% shareholding interest in Bahri. Bahri is currently considering raising the cash consideration through debt financing from a number of sources.

The Transaction represents a transformational step for Bahri that significantly expands Bahri's business, provides it with a stronger financial and commercial position 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 strong national maritime industry and will put Bahri in a position to support the Kingdom's growing petroleum, chemical and manufacturing industries, and provide greater security in marine transportation.

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 obtaining the aforementioned regulatory approvals including, without limitation, the approval of the Capital Market Authority.

Bahri has appointed J.P. Morgan Saudi Arabia Limited as its financial adviser for the Transaction. Saudi Aramco has appointed HSBC Saudi Arabia Limited as its financial adviser for the Transaction.