Agenda Presentation Pareto September 2001
Company Overview
Rig/Market Profiles
Business Strategy
Future Plans
Financials
Questions
Page 1 of 32 Company Overview • Petrolia Drilling ASA, a Norwegian, publicly listed limited Company established March 17 1997, owns and charters drilling vessels for offshore, deepwater oil and gas Company Overview exploration and development drilling.
Rig/Market Profiles • Predecessor company formed by principals of DNO ASA in 1995. Business Strategy
Future Plans • DNO ASA holds approx. 37% of outstanding shares (total of 45 mill.).
Financials • The Company has a market capitalization of Questions approximately NOK 300 million, as per September 2001.
Page 3 of 32 Operation and Business Management
Head Office Company Overview Bergen
Rig/Market Profiles Base Office Base Office Business Strategy Macae, Brazil Aberdeen, UK
Future Plans Hands-on controlling
Odebrecht Maersk Odfjell Drilling Financials Oil & Gas Contractors (Deepsea Bergen)
Questions
Page 4 of 32 Rig / Market Profiles Petrolia Drilling Fleet
SS Petrolia
DS Valentin Shashin SS Deep Sea Bergen (20,19%) SS Petrolia
Description 2. generation Pentagone-class Semisubmersible Upgraded 1991 / 2001 CFEM, France Market Segment Medium water depth 1.200 ft Class / Flag DNV +1A1 / Liberia
Charter Party DNO
Charter Type 1 well + 2 well option
Dayrate USD 65.000 (option USD 65’-100’) Cost per day USD 40.000 (operation)
Manager Maersk
Estimated value USD 40 - 45 mill. SS Deep Sea Bergen
Description 3. generation Aker H-3.2 Semisubmersible Built 1983 (upgraded 2000) Aker Verdal / BMV Market segment Medium water depth 1.500 ft Class / Flag DNV +1A1 / Norway
Charter Party Esso
Charter Type 4 wells + 3 well option
Dayrate USD 110.000 (T/C)
Cost per day USD 65.000
Manager Odfjell Drilling
Estimated value USD 127,5 mill. Tight market for Semisubmersibles in the North Sea
Tot. # of rigs 44 Max. utilisation of 88% Summer 2000 42 Jan. 12 estimate 40 38 36 34 32 Utilisation of 95% 30 Summer 2001 28 26 24 Oct Oct Apr Apr Jan Mar Jan Mar Jun Feb Feb Sep Dec Sep Dec May May Nov Nov Aug July Aug June
Total rig fleet of 46, whereof 44 are on the market. Brazil
! Most mature deepwater market in the world
! Petrobras has announced its aim for 1,9 mill. Barrels / day to cover Company Overview national consumption. Today’s level is approx. 1,3 mill. barrels / day.
! Petrobras is the largest customer of deepwater drilling equipment Rig/Market Profiles
! Petrobras monopoly has been broken Business Strategy ! Petrobras has an estimated 16 joint venture deepwater exploration blocks with international operators Future Plans
Financials
Questions
Page 10 of 32 Petrobras Press Release 08/01/2001 7:11 PM Increase in domestic petroleum production
PETROLEUM PRODUCTION INCREASED BY 8% IN JUNE
The petroleum domestic production in June achieved 1,338,491 barrels per day, 8% higher than the 1,242,324 bpd from the previous month. The reasons for this growth were both the improvement of Campos Basin operational efficiency and the operational startup of another well in Marlim Field (MRL-126), with a flow of 12 thousand barrels/day.
To increase its domestic production, Petrobras needs to produce its fields in deep and ultra- deepwaters. In 2005, the Company plans to reach a 1.9-million bopd production in Brazil and to have nearly 75% of it from deep and ultra-deepwaters.
Source: http://www2.petrobras.com.br/portal/ingles/tecnologia.htm DS Valentin Shashin
Description Drillship IHC Gusto design Pelican Class DP Built 1982 (upgraded 1998-99) Rauma Repola, Finland Market Segment Deep Water 4.500 ft (can be upgraded to 6000 ft) Class / Flag DNV ICE 1A* / Barbados
Charter Party Petrobras
Charter Type Bareboat
Charter Expiration March 2003
Dayrate USD 100.000
Cost per day USD 40.000
Manager Odebrecht
Estimated Value USD 100 mill. Estimated Demand and Supply of Deep Water Units 2000-2008
120 117,3
100 83,0 Supply 80 Demand
60 40,8 40 34,0 31,7 26,0 28,8 14,0 16,0 20 9,0
0 Total US Gulf Brazil W. Africa Other Business Strategy
Future Plans Key Events last year
November 2000
• 1 year contract for SS Deepsea Bergen / Esso • USD 110’ per day / OPEX USD 65’ Company Overview December 2000 Rig/Market Profiles • 2 year contract extension for DS Valentin Shashin / Petrobras • USD 100’ per day incl. Bonus / OPEX USD 40’ Business Strategy July 2001 Future Plans • 1 (+2) well contract for SS Petrolia / DNO • USD 65’ per day (cost USD 40’/day) Financials
Questions • Net Cash Flow from operation approx. USD 80’ per day.
Page 15 of 32 Petrolia Drilling’s Conclusions
PastPast
• Poor market due to lack of investment from oil companies
• Invested in re-activation and mobilisation of vessels for contracts
FutureFuture
• All vessels upgraded , reactivated, classed and drilling.
• Valentin Shashin on long term contract until 2003 (market outlooks give higher dayrates)
• SS Petrolia / SS Deepsea Bergen short term contracts (market outlooks give higher dayrates) Petrolia Drilling’s Strategy
MediumMedium TermTerm
• Focus on key growth markets [West Africa, Brazil, others]
• Secure long term contracts, at the right time, with the world’s major oil and gas companies
• Develop joint marketing and operating arrangements with established local partners
LongLong Term Term
• Specialize in deep water
• Pursue expansion of fleet / Merger and acquisitions
• Optimize share value over time
ChallengesChallenges // ThreatsThreats
• Oil price
• The industry is very capital intensive. Financials Q2 2001 - Group Result
2. Quarter 1. Half Year Year PROFIT AND LOSS STATEMENT 2001 2000 2001 2000 2000
Operating income 38 711 448 46 881 421 83 136 624 98 127 349 252 075 671 Company Overview Other operating income 0 51 425 011 Sum operating income 38 711 448 46 881 421 83 136 624 149 552 360 252 075 671
Ordinary depreciation -29 252 214 -34 900 602 -58 504 428 -69 193 752 -133 727 657 Rig/Market Profiles Other operating costs -19 055 964 -23 080 841 -29 186 326 -40 255 554 -75 203 125 Sum operating costs -48 308 178 -57 981 443 -87 690 754 -109 449 306 -208 930 782 Operating profit -9 596 730 -11 100 022 -4 554 112 40 103 054 43 144 889
Business Strategy Income from investment in associated company 3 002 054 -7 036 099 4 183 542 -14 374 412 -27 715 283 Other interest income 168 145 243 826 261 939 737 904 Other finance income 9 864 784 201 6 621 624 Other interest costs -20 441 582 -12 039 948 -35 959 242 -24 987 318 -64 547 515 Future Plans Other finance costs and currency losses -8 228 785 -3 558 294 -21 089 890 -7 527 394 -52 243 201
Ordinary result before tax cost -35 255 179 -33 566 218 -56 391 675 -6 524 131 -94 001 582 Tax cost on ordinary result 0 0 0 0 2 913 257 Financials The period's result -35 255 179 -33 566 218 -56 391 675 -6 524 131 -91 088 325
Result per share -1,24 -2,05 Book equity per share 10,35 11,49 Questions
Page 19 of 32 Booked Equity as per 30.06.01 USD 52 mill (NOK 471 mill)
Vessels Booked Value Market Value
Company Overview SS PetroliaUSD 26 300 000 USD 45 000 000 SS Deepsea Bergen (20,19%)USD 12 500 000 USD 25 700 000 DS Valentin ShahsinUSD 94 800 000 USD 100 000 000 Other equipment (riser / top drive / BOP)USD 10 300 000 USD 20 000 000 Rig/Market Profiles SUMUSD 143 900 000 USD 190 700 000
Business Strategy Debt SS PetroliaUSD 17 000 000 SS Deepsea Bergen (20,19%)USD 18 000 000 Future Plans DS Valentin Shashin / equipmentUSD 36 000 000 Convertible LoanUSD 20 000 000 SUMUSD 91 000 000 Financials
Questions
Page 20 of 32 Net Asset Values (NOK per share)
35 Company Overview 29,4 30 25 Rig/Market Profiles 19,6 20 15 Business Strategy 10,3 10 6,25
Future Plans 5 0
Financials Share price Book value of Net asset value Net asset value (Aug 29-01) equity (2001) (a) (1997) (b)
Questions (a) Based on the following rig values: SS Petrolia = $45 million; SS Deep Sea Bergen = $117 million (PDR’s share = $25,7 million; DS Valentin Shashin = $100 million; spare drilling equipment = $20 million. (b) Based on the following rig values: SS Petrolia = $60 million; SS Deep Sea Bergen = $137 million (PDR’s share = $30 million; DS Valentin Shashin = $130 million; spare drilling equipment = $20 million.
Page 21 of 32 20 Largest Shareholders (as per 4/9/01)
Balance Share Name Country 16 945 614 37,17 DNO ASA NOR 1 132 000 2,48 Independent Oilfield GBR 1 027 000 2,25 Sundal Collier & Co Meglerkonto Innland NOR 900 000 1,97 Verdipapirfondet K_S V/K-Fondene AS NOR Company Overview 800 000 1,75 Larsen Oil & Gas AS NOR 638 000 1,39 Verdipapirfondet SKA NOR 550 000 1,2 Orkla Enskilda Secur Egenhandelskonto DER NOR Rig/Market Profiles 481 900 1,05 DnB Aksje Pensjon NOR 470 000 1,03 Firstnordic Norge VE V/Firstnordic Fonden NOR 437 000 0,95 IOR Trading AS NOR Business Strategy 424 000 0,93 Teigum Hans I NOR 400 000 0,87 Increased Oil Recovery GBR 400 000 0,87 Sanne Per Olav NOR Future Plans 360 130 0,79 Energy Drilling LBR 300 000 0,65 Halvorsen Grave- Transportservice AS NOR 260 000 0,57 Huntington Invest A/S NOR Financials 258 175 0,56 Larsen Holding A/S Bernh. NOR 238 849 0,52 B/L Trading & Services NOR 225 000 0,49 Odin Offshore Odin Forvaltning AS NOR Questions 220 200 0,48 Nordea S/A Nordea (DK) CCA DNK
Page 22 of 32 Appendix Strong Underlaying Fundamentals
Energy demand and offshore market fundamentals are favorable and improving Company Overview
! Oil demand growing 2 – 3% per year; crude oil prices Rig/Market Profiles have improved by 250% since beginning of 1999
Business Strategy ! Offshore production expected to increase 6% per year
Future Plans ! Deep water drilling is fastest growing area of rig demand within offshore sector Financials ! Deep water activity maintained even at low oil prices Questions
Page 24 of 32 Deepwater defined
– Begins in water depths of about 3,000 feet extending to maximum water depths of approximately 10,000 feet; current drilling record is in excess of 9,000 feet in offshore Brazil Company Overview – Relatively new market with few fields at water depths >3,000 feet Rig/Market Profiles developed before 1994
Business Strategy – Deepwater market is the strategic target for the oil majors: • Deep water fields are only remaining sources of “elephant” finds. Future Plans • Technological innovation has made it economically feasible to produce hydrocarbons in deep waters e.g. Elf’s Girassol discovery has estimated all-in costs of $6.00 per barrel Financials • Fields are outside of OPEC
Questions – Major deep water drilling markets include West Africa, Brazil, U.S., Gulf of Mexico, East Coast of Canada and the North Sea
Page 25 of 32 Worldwide Petroleum Consumption
Petroleum consumption continues to grow at a consistent rate regardless of economic cycles
Company Overview Worldwide Petroleum Supply and Demand Balance (Million Barrels per day)
Rig/Market Profiles
80
Business Strategy 75
70 Future Plans
65
Financials 60
Questions 55 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000E 2001E
Total World Demand Total World Supply
Page 26 of 32 Analysts Predict Stable Oil Prices
Company Overview
$29,0 $35,0 $27,2 Rig/Market Profiles $26,0 $24,0 $23,5 $30,0 $22,2 $22,5 $22,5 $20,3 $20,5 $25,0 $19,4 Business Strategy $17,9
$20,0
Future Plans $ Barrel $12,2 $15,0
$10,0 Financials $5,0
Questions $0,0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Bassoe Offshore Consultants
Page 27 of 32 Increasing oil prices precipitates declining inventory levels...
$35 400 Spot Price of Crude Oil (WTI) Stock of Crude Oil (U.S.) ($ / Barrel) (In Million Barrels) Company Overview 30 375
25 Rig/Market Profiles 350
20
325 Business Strategy 15
300 Future Plans 10
275 5 Financials
0 250 (1) (1) Jan-99 Feb- Mar- Apr-99 May- Jun-99 Jul-99 Aug- Sep- Oct- Nov- Dec- Jan-00 Feb- Mar- Apr-00 May- Jun-00 Questions 99 99 99 99 99 99 99 99 00 00 00 Stock Price
(1) Based on weekly average. Source: Weekly Petroleum Status Report, Energy Information Administration
Page 28 of 32 …and spurs growth in oil exploration
20.0% 30.0%
15.0% 20.0% Company Overview 10.0% 10.0%
Rig/Market Profiles 5.0% 0.0%
0.0% -10.0% Business Strategy -5.0% -20.0%
Future Plans -10.0% -30.0%
-15.0% -40.0%
5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 Financials 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Change in Spending Change in Oil Price Questions
Source: Oil Services and Drilling Monthly July 7, 2000, SSB
Page 29 of 32 Valentin Shashin
New Top Drive & Compensator New Sponsons / Steel (Maritime Hydraulics & Company Overview Construction Hydralift) (J.Bladt) New BOP control System Rig/Market Profiles New Dynamic (ABB Seatec) Positioning System Business Strategy (Kongsberg Simrad)
Future Plans
Financials
Questions
Page 30 of 32 Q2 2001 - Group Balance (1/2)
PETROLIA DRILLING ASA GROUP BALANCE SHEET 30.06.01 30.06.00 31.12.00
FIXED ASSETS Immaterial assets Deferred tax asset 3 612 305 622 890 3 612 305 Sum immaterial assets 3 612 305 622 890 3 612 305 Company Overview Fixed operating assets The rig SS Petrolia 234 725 316 216 755 019 202 142 319 Drilling ship DS Valentin Shashin 843 260 620 695 829 064 879 395 396 Rig/Market Profiles Other equipment 91 305 144 41 103 262 97 336 119 Sum fixed operating assets 1 169 291 080 953 687 345 1 178 873 834
Financial fixed assets Business Strategy Investment in equities 5 000 000 109 056 487 Investment in associated company 111 672 982 101 771 717 Sum financial fixed assets 116 672 982 109 056 487 101 771 717 Future Plans SUM FIXED ASSETS 1 289 576 367 1 063 366 722 1 280 645 551
CURRENT ASSETS Financials Receivables Customers 58 594 979 33 836 674 8 980 941 Other claims 97 268 614 104 722 291 70 231 605 Sum receivables 155 863 593 138 558 938 79 212 546 Questions Bank deposits, cash and equiv. 12 922 320 10 307 930 9 850 535
SUM CURRENT ASSETS 168 78 5 913 148 866 868 89 063 081
SUM ASSETS 1 458 362 280 1 212 233 590 1 373 320 937 Page 31 of 32 Q2 2001 - Group Balance (2/2)
Customers 58 594 979 33 836 674 8 980 941 Other claims 97 268 614 104 722 291 70 231 605 Sum receivables 155 863 593 138 558 938 79 212 546
Bank deposits, cash and equiv. 12 922 320 10 307 930 9 850 535 Company Overview SUM CURRENT ASSETS 168 78 5 913 148 866 868 89 063 081
SUM ASSETS 1 458 362 280 1 212 233 590 1 373 320 937 Rig/Market Profiles SHAREHOLDERS' FUNDS Share capital 227 923 430 223 923 430 223 923 430 Business Strategy Other shareholders' funds 243834846 361 741 983 292 108 799
SUM SHAREHOLDERS' FUNDS 471 758 276 585 665 413 516 032 229
Future Plans LIABILITIES Other long term liabilities Convertible bond loan 182 770 000 90 000 000 90 000 000 Financials Debt to credit institutions 339 714 403 372 579 612 366 546 132 Other long term liabilities 319 862 554 141 299 162 308 554 733 Sum other long term liabilities 842 346 957 603 878 774 765 100 865
Questions
Page 32 of 32