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Simonsen vogtwng Nordhordland District Court, estate in liquidation P. O. Box 7418 NO-5020 BERGEN Resp. advocate: Our ref.: Your ref: Bergen F.gil Horstad 51081 033 09-084819K.ON-NOHO 20. September 2013 ANNUAL REPORT III - ABILITY DRILLING ASA, ITS ESTATE IN LIQUIDATION 1. Addressees for the report 1.1. Nordhordland District Court, P.O. Box 7418, NO-5020 Bergen 1.2. Creditors 1.3. Company in liquidation repr. by Chair of the Board Geir Nordahl-Pedersen, Brattholmen 112, NO-5350 Brattholmen 1.4. Tax Norway West, P.O. Box 8103, NO-4068 Stavanger 1.5. Hordaland Police District,[email protected] 1.6. NAV Lonnsgaranti (Wage Guarantee), P.O. Box 8103 Dep, NO-0032 Oslo 1.7. The report will be published on the home page for the estate in liquidationwww.altinn.no at 2. Who the case concerns 2.1. Name of the company in liquidation: Ability Drilling ASA 2.2. Registered address: Trollhaugmyra 15, NO-5353 Straume 2.3. The company’s organisation number: 989 761 846 2.4. The estate in liquidation’s organisation number: 994 148 427 2.5. Industry: The company’s object stipulated in its articles of association‘Own, is operateto and manage drilling rigs and offshore equipment, and other activities related thereto within the offshore and onshore petroleum industry, including investment in other’. companies 2.6. Group: The debtor is the parent company in the group. Christies gate 3A P.O. Box 1213 Sentrum NO-5811 Bergen T +47 55 56 82 00 F +47 55 56 82 01 Org. no 898 783 812 WWW.SVW.IIO Årsredegjørelse III (20130920) - engelsk: 1487888 1 Advokatfirmaet Simonsen Vogt Wiig AS Page 2 o f8 3. Main developments in the winding-up proceedings since the previous report Reference is made to the preliminary report dated 16 September 2009 and to Annual Report 1 dated 6 October 2010 and Annual Report II dated 28 June 2011. The reports must be read in conjunction with each other. The information in the reports will not be repeated unless this is expedient for presentation purposes. The creditors have also received updates on the status of the winding-up proceedings through correspondence prepared in connection with the examination of further claims and new preliminary distributions. The estate’s work since the last annual report has mostly consisted of the collection of claims, final consideration of unexamined claims, and carrying out further distributions. The estate has also continued its work on completing and auditing the accounts of the Maltese companies, and it has endeavoured to clarity and collect the claims for the reimbursement of value added tax in the Netherlands. As in previous reports, this report will only deal with important matters, and matters that are, relatively speaking, less important will not be dealt with. 4. The relationship with TTS Sense AS and TTS Group ASA The settlement agreement with and work in relation to TTS Sense AS and TTS Group ASA have been thoroughly described in previous reports, and reference is made to Annual Report II section 5 for information about the status as of June 2011. Following payments pursuant to the settlement agreement, in May 2012 TTS wished to repay the vendor's credit of NOK 55,000,000, and such payment was made on 1 June 2012. In that connection, the estate in liquidation has deleted the registered stock lien it held in TTS as security for the loan, and, pursuant to the loan agreement, all the parties' claims against each other under the loan agreement have now been settled. 5. The estate’s realisation work since the annual report - MAIN developments 5.1. Maintenance rigs in Canada IO & R Ltd filed a claim relating to complaints in connection with the sale of two 150 T maintenance rigs that were sold by the deadline that had been set. In connection with the sale, an amount of NOK 2,550,000 was set aside as a maximum amount for liability for claims. Some of the complaints cited in the claim were justified, and the parties arrived at an amicable agreement about the claims whereby NOK 1,400,000 of the purchase price was repaid to IO & R Ltd. The remaining amount, NOK 1,203,045.11 including interest, was transferred to the estate's account on 17 February 2012. 5.2. Return of premium Reference is made to Annual Report II section 6.3, in which the auditor for the estate raises the question of whether the estate in liquidation might be entitled to a larger return of premium. Årsredegjørelse III (20130920) - engelsk: 14878881 Advokatfirmaet Simonsen Vogt Wiig AS Page 3 of 8 However, correspondence with the debtor's insurance company has clarified that the estate had no such claim. 5.3. Loans to employees Reference is made to Annual Report II section 6.4 concerning the estate's agreement for the repayment of a loan to a former employee. This agreement has been complied with, and the loan has now been repaid, including the agreed interest. 6. Particular matters 6.1. Claim against Porosity The estate has not found it justifiable to spend more funds to attempt to collect the claim against Porosity. 6.2. Reimbursement of value added tax - the Netherlands Ability Drilling Malta II Germany Ltd has filed a claim for reimbursement of value added tax that the company had paid to the Dutch authorities before the commencement of liquidation proceedings for Ability Drilling ASA. Reimbursement has been obtained for one payment period, but reimbursement claims totalling EUR 654,469 remain outstanding. This amount concerns value added tax on goods that have now been sold. The Dutch VAT authorities have requested a detailed overview of which goods the paid VAT relates to, as well as a detailed overview of which goods have been sold and which, if any, are still in storage in the Netherlands. This is very time-consuming and complicated work for the estate, both as regards proving what the payments relate to and establishing in detail which goods had been sold before the commencement of liquidation proceedings. The estate is cooperating with PwC in the Netherlands and hopes to clarify this matter within a few months. 6.3. Claims against a former employee The estate refers to Annual Report II section 7.3 for information about the basis for the claim against a former employee. As mentioned, the matter was considered by Askoy Conciliation Board on 30 May 2011. No settlement was reached in the case and the former employee did not consent to a judgment being pronounced, and the Conciliation Board therefore discontinued the case. After assessing the procedural risk, the estate has decided not to pursue the matter further. 7. The financial relationship between the subsidiaries and the debtor Annual Report II section 8 described the relationship between Ability Drilling ASA and its subsidiaries in Malta, particularly loan transactions between the companies. Substantial repayments have been made of the Maltese subsidiaries' loan obligations to the parent company. It is nevertheless clear that the subsidiaries are not, and nor will they be, in a Årsredegjørelse III (20130920) - engelsk: 1487888 1 Advokatfirmaet Simonsen Vogt Wiig AS Page 4 of 8 position to settle the debtor's claims against them in full. The subsidiaries have repaid loans to the company in liquidation in the total amount of just over NOK 170 million. There are still some funds in the respective subsidiaries accounts in DNB. As of 30 July 2013, these funds break down as follows: 1) Ability Drilling Malta Holding Limited: NOK 9,563.92 2) Ability Drilling Malta Limited: NOK 257,824.74 3) Ability Drilling Malta (II) Germany Limited: NOK 738,601.29 4) Ability Drilling Malta (III) Jordan Limited: NOK 118,361.77 and EUR 1,244 5) Ability Drilling Malta (IV) UK Limited: NOK 23,657.12 It must be expected that a large part of the above-mentioned amounts will be spent on winding up the companies. On this basis and seen in conjunction with the size of the subsidiaries' remaining loan obligations to the parent company, the subsidiaries' ability to meet their loan obligations in relation to the company in liquidation will be limited. The subsidiaries have realised all their assets, with the exception of the above-mentioned claim against the Dutch authorities. Further expenses must also be expected in connection with the winding-up of these companies, see section 8.4 below. 8. The position and status of the estate in liquidation 8.1. Annual accounts Please find enclosed the estate in liquidation's accounts as of today-. This is a cash flow account based on payments to and from the estate’s operating account. In addition, the estate has a placement account, containing approx. NOK 4,100,000. 8.2. Account balances In addition to the account balance in the debtor (see above), the subsidiaries have total cash and cash equivalents of approx. NOK 1,000,000. 8.3. Receivables Once it has been clarified whether the company is entitled to reimbursement of value added tax from the Netherlands and once the companies in Malta have been would up, any remaining amount will be repaid to the estate in liquidation. 8.4. Dissolution of subsidiaries in Malta Since the assets in the subsidiaries have now been sold, there is a basis for closing the accounts of the subsidiaries in the manner required to wind them up, so that the remaining funds can be transferred to the parent company. A liquidator must then be appointed in Malta. In the period since the last annual report, the estate has continued its work of finalising the accounts of the Maltese subsidiaries for the period before and after the initiation of the liquidation proceedings, and auditing these accounts.