ANNUAL REPORT 2013
ODFJELL DRILLING ANNUAL REPORT 2013 1 Content
Odfjell Drilling in brief 4 Key Figures 7 CEO Letter 10 The Fleet 12 Management Team 15
FEATURE ARTICLES How to avoid dropping objects 18 Deepsea Bergen yardstay 20 CHOSEN FOR EXPERIENCE AND EXPERTISE Wearing the platform shoes 22 Eastbound for growth 24
BUSINESS SEGMENTS Mobile Offshore Drilling Units 26 Drilling & Technology 30 Well Services 34
QHSE 38 Corporate Governance 40 Corporate Social Responsibility Report 44 Board of Directors 46 Board of Directors Report 48
ACCOUNTS & NOTES Consolidated Financial Statements 54 Parent Company Financial Statements 94
Auditors Report 104
2 ODFJELL DRILLING ANNUAL REPORT 2013 3 Odfjell Drilling in brief:
An integrated partner for high quality drilling and well services
Norway
UK
The Netherlands
Romania
THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY: Bermuda
Gulf of Mexico Dubai Mobile Offshore Drilling & Well Philippines Drilling Units Technology Services
Tanzania Angola Brazil
Drilling operations in Norway, Angola, Integrated drilling and engineering services on twenty Casing and tubular running, rental of well and Tanzania and Brazil. New sixth generation production installations offshore Norway and the drilling equipment in more than 20 countries. semisubmersible Deepsea Aberdeen will in early UK. Engineering and project management services, 2015 start drilling operations in deep water expertise in upgrades and modifications, subsea and • Casing and tubular running services west of Shetland. well management and well control from offices in • Drill tool and tubular rental Co-owner and manager of three ultra deep– Bergen, Stavanger, Stjørdal, Aberdeen and Manila. • Services in more than twenty countries water drillships under construction for Brazilian from 11 bases in Europe, the Middle East drilling operations starting from 2016. • Providing integrated platform drilling and Asia services on 20 installations in the North Sea • Modern fleet of UDW and harsh • Conceptual engineering and engineering design environment drilling units • Construction and commissioning support, • Extensive drilling experience modifications and upgrades • Provision of integrated management • Compliance assurance and maintenance services for drilling units management 3200 employees Operates six highly advanced 40 years of experience from • Marine and operational support operating in more than offshore drilling rigs and worldwide operations Revenue EBITDA Revenue EBITDA Revenue EBITDA 20 countries drillships Multiple revenue sources Highly specialised Modern fleet with four state- Solid financial profile engineers supporting of-the-art sixth generation 57 % 72 % 26 % 6 % 1717 % % 2422 % % all business segments drilling units One newbuild to be delivered in 2014 In depth, see pages 26–29 In depth, see pages 30–33 In depth, see pages 34–37
4 ODFJELL DRILLING ANNUAL REPORT 2013 5 Key Figures
2013 2012 2011
PROFIT AND LOSS ACCOUNT ( USD MILLION)
Operating revenue 1 174 1 094 1 057 Operating profit before depreciation (EBITDA) 393 331 382 Operating profit (EBIT) 248 184 237 Net profit before tax 171 148 153 Net profit 69 117 121
BALANCE SHEET (USD MILLION)
Non-current assets 2 239 2 323 2 158 Current assets 497 481 582 Total assets 2 736 2 804 2 741
Equity 1 130 1 154 1 033 Non-current liabilities 1 194 1 234 1 411 Current liabilities 411 416 297 Total equity and liabilities 2 736 2 804 2 741
KEY RATIOS
Equity to asset ratio (as a percentage of total capital) 41.3 % 41.2 % 37.7 % EBITDA margin 33.5 % 30.3 % 36.2 % EBIT margin 21.1 % 16.8 % 22.5 % Profit margin (pre-tax) 14.6 % 13.5 % 14.5 % Profit margin (after-tax) 5.8 % 10.7 % 11.5 % Earnings per share (USD) 0.34 0.81 0.54 Number of shares 200 000 000 200 000 000 200 000 000
Earnings per share is based on the issued number of shares in Odfjell Drilling Ltd., which were 200 000 000 shares as per 31 December 2013. Comparative figures (EPS) are presented retrospectively based on number of issued shares as at 31 December 2013. Earnings per share is based on profit after tax attributable to the owners of the parent.
6 ODFJELL DRILLING ANNUAL REPORT 2013 7 2013 Key Events
7 MAR 9 MAY 24 OCT 1 Stepped up technology development in Extended drilling contract for Deepsea 3 Deepsea Bergen completed yard stay well services Metro I ahead of schedule
Odfjell Well Services acquired Dubai-based Zenon Well BG Group and Ophir Energy extended the drilling The rig Deepsea Bergen underwent a client funded Technology LLC. The company has developed a range of contract for Deepsea Metro I in Tanzania. The extension yard stay at Coast Center Base, Bergen, in order to 6 FEB solutions for wellbore clean-up tools. The acquisition is is for a 540-day period from June 2013. The agreement 7 AUG meet requirements from the client, Statoil. The rig important to Odfjell Well Services’ in-house technology also included an additional 18-month option. modifications were completed in 26 days, two days Grane voted Rig of the Year development, and the product solutions are now in use. Statoil extended contract with Deepsea ahead of schedule. Deepsea Bergen is on a long-term Grane was voted Rig of the Year in platform drilling in Atlantic contract with Statoil. 2012. Odfjell Drilling has drilling services contracts on a total of 20 platforms, and the best-run platform is 8 MAR Statoil exercised a one-year option for its use of Deepsea honoured every year. Atlantic. Deepsea Atlantic has been drilling for Statoil in Engineering services for Lundin Norway the North Sea since 2009. In addition to the one-year option being exercised, the contract includes a further Lundin Norway AS awarded Odfjell Drilling a frame 27 SEP 7 FEB two-year option. agreement for engineering services. The frame Listed on Oslo stock exchange Drilling at record water depths agreement has a duration of two years, with possibilities for extensions. Lundin Norway has become a major 27 AUG player in the North Sea, with an important role in the CEO Simen Lieungh rang the bell to mark the stock Odfjell Drilling set a company record for drilling in ultra exchange listing of Odfjell Drilling Ltd. “The interest deep waters when Deepsea Metro II drilled its second Johan Sverdrup field, one of the largest oil discoveries Island Innovator received AoC ever made on the Norwegian shelf. and feedback we have received from the investors and well at a water depth of 2,845 metres off the Sergipe the listing of the shares in Odfjell Drilling Ltd open new coast in Brazil. The drillship Deepsea Metro II is on a As manager for Island Innovator, Odfjell Drilling received perspectives and opportunities for the company,” said Mr three-year contract with Petrobras, with an option for the Acknowledgement of Compliance (AoC) from the Lieungh. three more years. 14 MAY Norwegian Petroleum Authority. In September, Island Innovator started to perform drilling services on the 2 First steel cut for Brazilian drillships Johan Sverdrup field under contract to Lundin Norway. The NS Guarapari is the first of three drillships to be owned and operated by Odfjell Galvão. The ship is 10 DEC expected to be delivered from the shipyard in Aracruz in 13 SEPT 4 10 APR Brazil in 2016. Delivery of the next drillships is scheduled Calling all wellheads in Scotland for 2017 and 2018. Upgraded the Veslefrikk drilling system Platform drilling on Statoil’s Mariner with new control technology An advertising campaign at Aberdeen airport was used platform 1 OCT to attract senior personnel to the new onshore and 18 MAY After two and a half years of intensive work, Drilling offshore organisation for Deepsea Aberdeen. The aim Technology delivered its first EPC(I) project to Statoil. Statoil awarded Odfjell Drilling the contract for drilling Wintershall new client through Brage was to get experienced people to apply for the senior Deepsea Aberdeen launch successfully The main objectives of the project were to upgrade services on the Mariner platform on the UK continental operatorship positions as driller, toolpusher and subsea engineers. The the drilling system on Statoil’s Veslefrikk platform with shelf. The platform is under construction and drilling completed campaign was met with a positive response and resulted new control technology and to improve the working is scheduled to start up in 2016. Together with the In 2012, Odfjell Drilling was awarded a contract in an increase in applications. environment on the drill floor. establishment of the new onshore and offshore Deepsea Aberdeen was successfully launched from for integrated drilling services on eight of Statoil’s organisation for Deepsea Aberdeen, this strengthens the load-out barge at Daewoo Shipbuilding and Marine production installations on the Norwegian continental Odfjell Drilling’s position in the UK. In total, Odfjell Drilling Engineering (DSME) in Korea. The semisubmersible sixth- shelf, including Brage. The German company Wintershall 28 DEC 25 SEP will recruit 600 employees in the UK over the next four generation rig will operate on a contract with BP off the officially took over operating responsibility for Brage on 1 8 FEB coast of Shetland. Incident with Deepsea Aberdeen at yard years. Major contracts with Shell October, thereby becoming a new client of Odfjell Drilling. Celebrated 40 years The semisubmersible rig Deepsea Aberdeen, currently Odfjell Well Services was awarded a contract for Tool under construction in Korea, experienced water ingress 18 APR 3 JUNE 3 OCT Odfjell Drilling celebrated the company’s 40th Rental Services for Shell operated activities in Northern in pontoon while moored at the yard’s quay. Immediate anniversary in the medieval Håkon’s Hall in Bergen. In an Deep Sea Mooring sold to HitecVision Deepsea Stavanger contract extension Europe. The contract will run for four years and includes Two years without lost-time incidents evacuation was commenced and the rig was stabilised anniversary interview, the founder of Odfjell Drilling, Mr two options for two-year extensions. Earlier in 2013, on the seabed. No personnel were injured in the incident. Odfjell Well Services was awarded two contracts for Abraham Odfjell, said: “As owners, we depend on having Odfjell Drilling agreed to sell Deep Sea Mooring to BP exercised a one-year option for Deepsea Stavanger. The drillship Deepsea Metro I, which is on contract to The rig was later recovered and the work resumed. Tubular Running Services for different parts of Shell’s a management team and an organisation with capable HitecVision. Deep Sea Mooring was established by Odfjell The extension will keep the rig with BP in Angola until BG in Tanzania, celebrated two years without lost-time activities in Northern Europe. people who know the business, the technology, market Drilling in 2008. It has been developed from an in-house at least November 2014. The contract has two further incidents. “Our crew have made HSE a focus in all our and customers. The company would not be where it is mooring service provider into one of three providers of one-year options. day-to-day operations,” said Rig Manager Bjarte Fadnes. today had it not been for its capable employees.” mooring services for E&P companies and rig owners in
Norway.
8 ODFJELL DRILLING ANNUAL REPORT 2013 9 Simen Lieungh President & CEO, Odfjell Drilling
High ambitions
Odfjell Drilling entered the During 2013 I had the pleasure of meeting several mobilise and start up new drilling units for international Odfjell Drilling is currently drilling in ultra deepwater Our integrated service portfolio forms the foundation in order to support and develop the well service activities hundred professional investors in Europe and the U.S, deepwater operations without compromising the robust regions in both Africa and Brazil. We are now qualifying for our strategic development. Our ambition is to bring in all our selected markets. In addition, we have increased North Sea with a pioneering telling them the story of our company and of our HSE culture and performance Odfjell Drilling has always one of our drillships to allow it to conduct drilling our joint competence and experience to the selected our efforts to further develop our portfolio of proprietary capabilities. Each individual listened and reacted in a been renowned for. Our primary operational targets are operations down to water depths of 3200 meters. international regions we operate in. The presence of tools and equipment. The introduction of the new rig concept more than 40 years similar way, with respect: Respect for our experience, to reduce the number of dropped objects on both fixed Ensuring outstanding safety standards and high our mobile drilling units steers the direction for our well clean-up product line is a milestone in developing expertise and ability to manage risks; respect for our and mobile units, and to ensure a high level of reliability operational availability in our deepwater operations strategic development. Odfjell Drilling’s Well Services proprietary well technology. ago. In the decades that have delivery of high quality services and value creation over in all our drilling operations. is top of our agenda. We have been at the forefront of and our engineering services are already serving passed, this company has demon four decades; and respect for the competence of our the development of new technology and competence our own international activities and external clients Odfjell Drilling is proud of its past, pleased with its people and our strategy as an integrated service provider. Committed to a leading role for safe drilling operations in harsh environments and in international markets. We are also focused on present performance and confident of fulfilling strated its ability to successfully There was a clear and solid belief in Odfjell Drilling and its Due to the systematic training of personnel, and our deepwater since the 1970s. We are now channelling establishing platform drilling in a new region outside the its exciting future potential. In 2013 the company success as an organisation. on-going focus on improvement, we have achieved a our industry expertise to ensure that we, alongside North Sea. maintained its position at the forefront of the negotiate the toughest significant reduction in the number of dropped objects on our clients and suppliers, can close any existing international offshore drilling and well service industry, challenges, in the harshest In our first year as a listed company, all our mobile our mobile drilling units over recent years. Nevertheless, technological, organisational and competence gaps Maintaining high quality producing a satisfying set of results. In the future we drilling units have been in on-going operation. We have we still acknowledge that we face a challenge to curb to achieve the optimum in performance for our ultra The strong development of Well Services continues. We know we can do even better. Every day we strive to natural environments, building a developed an international organisation and operational an increasing number of dropped objects in our platform deepwater drilling units. In keeping with our values and are experiencing increasing demand in both existing strengthen our industry reputation, consolidating our base, while maintaining a strong focus on safe and drilling activities. However, we have a firm belief that our history, Odfjell Drilling is committed to playing a and new markets, and are dedicated to maintaining high position as a service provider chosen for our experience strong reputation for delivering reliable operations. During 2013 we have also managed implementing the same methodology will provide similar leading role in establishing the industry benchmark for quality in all our well service operations and deliveries. and expertise. to continue the positive development of important HSE harsh environment and ultra deepwater operations. on ambitious targets. results as those we have achieved throughout our fleet of We will continue to enhance our organisational capacity parameters. We have demonstrated that it is possible to semis and drillships.
10 ODFJELL DRILLING ANNUAL REPORT 2013 11 Contract A modern fleet of Option Construction advanced offshore drilling rigs and drillships
The semisubmersible drilling rig Deepsea Bergen is a self DEEPSEA Deepsea Metro II is an ultra deepwater drillship of Gusto DEEPSEA propelled semisubmersible unit of enhanced Aker H-3.2, Operational area: Midwater, harsh environment Design and was delivered by Hyundai Heavy Industries Operational area: Ultra deepwater commissioned in February 1983 and has since launch (HHI) in South Korea in November 2011. BERGEN METRO II Owner: Chloe Marine Corporation Ltd. operated mainly in the Norwegian sector of the North Owner: Odfjell Drilling Ownership: 100 % Sea. Ownership: 40 % Deepsea Metro II is operating for Petrobras in Brazil. Design: Aker H-3.2 modified Design: Gusto P10000 Deepsea Bergen is currently on long-term contract with Location and contract: Brazil for Petrobras Statoil on the Norwegian continental shelf. Location and contract: Norway for Statoil
2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022
Deepsea Atlantic is a sixth generation ultra deepwater Island Innovator is a midwater, harsh environment DEEPSEA Ultra deepwater, ISLAND Owner: Maracc ASA and harsh environment semisubmersible. This unit, along Operational area: semisubmersible of GM4000-WI design. The rig is harsh environment with its sister rig Deepsea Stavanger, is a state of the art managed by Odfjell Drilling under a management ATLANTIC INNOVATOR Design: Global Maritime GM4000-WI dual derrick, dynamic-positioned unit of enhanced GVA Owner: Odfjell Drilling agreement with Maracc ASA. The rig is drilling for Ownership: 100 % 7500 design. Ownership: 0 % Lundin Petroleum on the Norwegian continental shelf. Location and contract: Norway for Lundin Petroleum Design: Enhanced GVA 7500 Deepsea Atlantic is on a contract for Statoil. Location and contract: Norway for Statoil Operational area: Midwater, harsh environment
2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022
Deepsea Stavanger is a sixth generation ultra deepwater Guarapari is an ultra deepwater drillship of Jurong DEEPSEA Ultra deepwater, GUARAPARI Operational area: Ultra Deepwater and harsh environment semisubmersible. This unit, along Operational area: Espadon design built by Sete Brasil and Odfjell Galvao. harsh environment Odfjell Galvao (Odfjell Drilling 50% ownership) is the STAVANGER with its sister rig Deepsea Atlantic, is a state of the art Owner: Guarapari drilling BV Ownership: 10 % manager for construction and operations of the drillships. dual derrick, dynamic-positioned unit of enhanced GVA Owner: Odfjell Drilling The drillship will perform drilling services in Brazil under a Ownership: 100 % 7500 design. Design: Jurong Espadon Design: Enhanced GVA 7500 15+5 years contract with Petrobras. Deepsea Stavanger is operating for BP in Angola. Location and contract: Brazil for Petrobras Location and contract: Angola for BP
2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022
Deepsea Aberdeen is of the enhanced GVA7500 harsh Siri is an ultra deepwater drillship of Jurong Espadon DEEPSEA Ultra deepwater, SIRI Operational area: Ultra Deepwater environment design and will be a sister rig to the Operational area: design built by Sete Brasil and Odfjell Galvao. Odfjell harsh environment Galvao (Odfjell Drilling 50% ownership) is the manager ABERDEEN Deepsea Atlantic and Deepsea Stavanger previously Ownership: 10 % Owner: Siri drilling BV delivered from DSME. Owner: Odfjell Drilling for construction and operations of the drillships. The drillship will perform drilling services in Brazil under a Ownership: 100 % The semisubmersible is expected to be delivered from the Design: Jurong Espadon Design: Enhanced GVA 7500 15+5 years contract with Petrobras. yard in October/ November 2014 and will subsequently start Location and contract: Brazil for Petrobras drilling operations under a 7-year contract with BP in UK. Location and contract: UK for BP
2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022
Deepsea Metro I is an ultra deepwater drillship of Gusto Itaoca is an ultra deepwater drillship of Jurong Espadon DEEPSEA Operational area: Ultra deepwater ITAOCA Operational area: Ultra Deepwater Design. The vessel was delivered by Hyundai Heavy design built by Sete Brasil and Odfjell Galvao. Odfjell Galvao (Odfjell Drilling 50% ownership) is the manager METRO I Industries in South Korea in June 2011. Owner: Golden Close Maritime Corp. Ltd. Ownership: 10 % Owner: Itaoca drilling BV for construction and operations of the drillships. The drillship will perform drilling services in Brazil under a Ownership: 40 % Deepsea Metro I is operating for the BG Group Design: Gusto P10000 Design: Jurong Espadon in Tanzania. 15+5 years contract with Petrobras. Location and contract: Tanzania/Kenya for BG Group/Ophir Location and contract: Brazil for Petrobras
2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 2022
12 ODFJELL DRILLING ANNUAL REPORT 2013 13 Our Management Team
SIMEN LIEUNGH, PER LUND, JONE TORSTENSEN, PRESIDENT AND CHIEF EXECUTIVE OFFICER EVP WELL SERVICES EVP CHIEF OF STAFF Mr. Lieungh was appointed CEO of Odfjell Drilling in Per Lund holds a Master of Marine Technology from Mr. Torstensen is educated in business economics/ 2010. He holds a Msc in Mechanical Engineering from the Norwegian University of Science and Technology. administration at Stavanger University College and the the University of Trondheim. He has held various man- Mr. Lund has 16 years of experience in the oil and gas University of Bergen. During 18 years in Aker Kværner agement positions in the oil and gas industry and was industry and has held various managerial positions in and Aker Solutions Mr. Torstensen has held various previously CEO of Aker Solutions. several oilfield companies before joining Odfjell Drilling management positions in finance, project management in April 2013, including the CEO of Oceaneering NCA AS and business development. Mr. Torstensen joined Odfjell from 2011 to 2013. Drilling in 2012.
ATLE SÆBØ, OLE FREDRIK MAIER, BENGT A. OLSEN, CFO EVP PLATFORM DRILLING SVP HR & ORGANISATION Mr. Sæbø holds a Master of Science in Business Mr. Maier holds a Bachelor degree in engineering and Mr. Olsen holds a degree in personnel administration and Administration from the Norwegian School of Economics finance/administration from Vestfold University College marketing management from the Norwegian School of (NHH). He has previous held leading positions with Fred. (Horten ingeniørskole). He held various offshore postions Management and Business Administration (NHH). He has Olsen Offshore, Geco and Nevi Corporate. Mr. Sæbø has in the drilling industry before he joined Odfjell Drilling in more than 35 years experience from the shipping and been working with Odfjell Drilling since 1993. 2002. He has been regional manager for the UK since offshore markets. Mr. Olsen has been with Odfjell Drilling 2012. since 1979.
TOMMY JOHNSEN, JANIKE A. MYRE, GISLE JOHANSON, EVP MOBILE OFFSHORE DRILLING UNITS SVP QHSE SVP COMMUNICATIONS Mr. Johnsen has 16 years experience in drilling and oilfield Mrs. Myre is a business graduate from the Norwegian Mr. Johanson holds a Master`s degree in business eco- services. He was regional manager for Odfjell Drilling in Business School (BI), and has completed master programs nomics from the Norwegian School of Economics (NHH). the Middle East for the period 2006 to 2011. Mr Johnsen as well as executive management courses at BI. Mrs. Myre Mr. Johanson has been working in the Ministry was General Manager for Malm Orstad between 2004 has more than 28 years experience from leading positions of Petroleum and Energy, financial media. He has held and 2006. in Gulf, Chevron, Sonat Offshore and Transocean. Mrs. Myre various communication positions in Saga Petroleum, has been with Odfjell Drilling since 2002. Hydro and Statoil before he joined Odfjell Drilling in 2012.
KURT MEINERT FJELL, ERIK ASKVIK, EVP ODFJELL DRILLING TECHNOLOGY PRESIDENT ODFJELL OFFSHORE MANAGEMENT Mr. Fjell holds a Bachelor degree in Mechanical Mr. Askvik holds a bachelor degree in Drilling and Engineering from Bergen University College and has Petroleum engineering from the University of Stavanger. further studied project management and leadership. He He has held several management positions since he was has 15 years of experience from the offshore industry employed by Odfjell Drilling in 1986. He has previuously and has been working in Odfjell Drilling since 2002. beean head of the Corporate Business development the MODU business area.
14 ODFJELL DRILLING ANNUAL REPORT 2013 15 Integrating operational experience and technological competence
16 ODFJELL DRILLING ANNUAL REPORT 2013 17
INSIGHT: HOW TO AVOID DROPPING OBJECTS
Background:
The mobile drilling rig Deepsea Atlantic was put into operation in 2009. It is on contract to Statoil for drilling on the Norwegian continental shelf in the North Sea. From When we improve our focus on one area, we also improve the outset, the rig had a high number of incidents involving dropped objects. It our focus on other areas. We note that 2013 was the best saw a marked improvement in 2013. After February, no more incidents were registered year ever for Deepsea Atlantic. that year.
Per Arne Skare, Per Arne Skare and Lars Morten Tveit Quality Manager Mobile Offshore Drilling Units emphasise the following keywords as important in the work of improving the statistics: Creativity – look at the problem from a new angle Precision –in analyses and measures Involvement – create ownership to How the problem Accountability – awareness of leadership
to avoid Per Arne Skare is Quality Leader in MODU (Mobile Offshore Drilling Units).
Lars Morten Tveit started as Rig Manager dropping objects on Deepsea Atlantic in January 2013. Before that, he was Rig Manager on Deepsea Bergen. From 14 January 2014, he is head of MODU North Sea.
Analysing incidents: Per Arne Skare (left) and Lars Morten Tveit.
“There is no magic formula for the results we have achieved,” in control. That did something to my motivation; I wanted used as an explanation for why the number of incidents screws that had not been tightened, or faults that had not Results: In 2013, Deepsea Atlantic says Lars Morten Tveit, Rig Manager on Deepsea Atlantic to put an end to the problem.” was so high on Deepsea Atlantic,” says Tveit. been identified during an inspection. for the whole of 2013, and Per Arne Skare, Quality Leader Then the explanation turned out not to be correct. went from worst to best in MODU. They have played a key role in creating this He teamed up with Per Arne Skare. They had collaborated “It has to do with focus: that every time you are up in a derrick DROPPED OBJECTS ON DEEPSEA ATLANTIC positive trend, but they are quick to point out that they do successfully a few years before on stopping discharges to “If it had been correct, the investigation would have shown or a crane, you are aware of the risk. If you have your head performer in terms of not want to take the credit alone: “It is the people on board sea from Deepsea Bergen. a preponderance of incidents in winter, when the wind was stuck in a checklist all the time, you only see that checklist,” (Total: 15) who have done the work,” they underline. at its worst. But that was not the case. The incidents were says Skare. incidents involving dropped “The issue was different, but it involved some of the same evenly distributed, in summer and winter alike,” says Skare. objects. Systematic analyses The semisubmersible rig Deepsea Atlantic was put into problems and methods,” says Skare. The results of the work were quick to materialise. operation in 2009. From the outset, the number of It was often the case that one object was dropped, then (Total: 11) and increased awareness of incidents involving dropped objects was high. A fresh pair of eyes Together, they analysed each of another. This was followed by a period without incidents. And “Things stopped falling down. It is that simple, and the incidents to find similarities between them. This had then it happened again. Incidents followed a regular pattern. that difficult. We carried out the analyses in March and 7 management responsibility “Reports are submitted for incidents with an impact force also been done before, without result. They looked at the presented the results at the end of April. Very few physical of more than 40 joules, in other words with the potential figures with fresh eyes. “It is a bit like fires. When there is no fire, you do not pay changes were made. Almost everything we did was a 6 are behind this good result. to kill someone. And there were far too many such enough attention to the risk of fire,” he adds. matter of training, motivation and organisation. In addition, incidents, fortunately without personal injuries. Although “We looked at every single incident, including the ones be- the focus was high throughout the period, so after the number of dropped objects was high, there was a low 40 joules. We analysed both direct and indirect causes. Management responsibility The findings were a February, we had no incidents,” says Tveit. Total: 3 culture for respecting cordons and barriers,” says Tveit. We also included new parameters that had not been major breakthrough. They were followed up by determined 5 8 looked at before: the type of operation, the area on the rig, efforts to change attitudes and behaviour, and by manage- Per Arne Skare adds: 2 Dropped objects can be any number of things. the time of day and the time of year,” says Per Arne Skare. ment meetings at which the results were presented. “And when we increase focus on one area, we also focus 1 “They can be pieces of fixed equipment that are blown out more on other areas. We note that 2013 was the best 2011 2012 2013 of place, but they are often loose objects, such as tools They also involved the personnel on board. They asked all “We responded to arguments about weather conditions and it year ever for Deepsea Atlantic. We saw the same thing and materials,” he says, and adds: “And it is not exactly senior managers and safety delegates to provide feedback being a new rig with facts, and pointed out where the problem on Deepsea Bergen: We managed to gain control of the common or garden hand drills we use. One nut can easily on three areas that needed working on, and to propose lay. After all, nine out of ten incidents were caused by human discharges, and this focus led to better results in general.” Below 40 joules Above 40 joules weigh a kilo.” measures. Based on the analyses, they concluded that errors. It was important to create an understanding of the role nine out of ten incidents involving dropped objects were of leader – that the management is responsible for what goes So, can this experience be applied to other parts of Tveit became Rig Manager for Deepsea Atlantic in caused by human error. But why did they occur? on on board at all times. You cannot go to bed at night unless Odfjell Drilling? January 2013. The incidents on the rig were discussed as “I think there was a perception that, since this was such you know that the people assigned a task have understood “There are definitely elements of the work that was done a separate item at a board meeting in early February, and a new and big rig, with a lot of equipment and a double how to do it. And, even though you are indoors at a meeting, that could produce good results elsewhere. At the same Tveit was asked whether he was in control. derrick, this was no more than could be expected. In you are nonetheless responsible for everything that goes on time, it is difficult to come up with a simple magic formula. addition, the rig was in the North Sea, working in rough on the drill floor,” says Tveit. What it boils down to is systematic work on making “I answered like a politician: ‘I’m in control as long as nothing conditions and a lot of bad weather. In a sense, this was managers aware of their responsibility and focusing on falls down.’ And that is the same as saying that you are not seen as a fair reason for things falling down and it was Fixed objects that blew away or came loose account for the HSE management and quality. And, not least: that every last ten per cent of the incidents. This could be because of member of the organisation is part of the effort.”
18 ODFJELL DRILLING ANNUAL REPORT 2013 19
INSIGHT: DEEPSEA BERGEN YARDSTAY
Background:
The mobile drilling rig Deepsea Bergen is on a contract with Statoil for drilling on the Norwegian continental shelf in the North Sea. During the client funded yard stay Some companies primarily focus in 2013, the following modifications and alterations were carried out. on the operation of the rigs offshore. • Four new blisters installed to increase the variable deck capacity We intend to be just as good at yard stays. • New office module • Change of cementing unit, completion Stein Harald Nielsen, unit and other third party equipment Rig manager, Deepsea Bergen • New BOP (Blow Out Preventer) crane • Local electrical room for new facilities
Stein Harald Nielsen is rig manager on Deepsea Bergen and was responsible for the project on the part of MODU during the modification work on the rig.
Stig Waage manages MODU projects in Drilling & Technology. Ahead Drilling & Technology is Odfjell Drilling’s department for engineering services and project management. Drilling & Technology comprises 420 people employed worldwide. Yard stays for Odfjell’s of plan drilling rigs in the North Sea are planned and engineered here.
Yard stays completed Ahead of schedule: Stig Waage (left) and Stein Harald Nielsen. in recent years
2013 “This is the result of thorough planning and excellent co how short a planning phase we were given,” adds Stein engineering services and planning resources in house. members from Odfjell Drilling moved their offices to the • Deepsea Bergen Modifications Project When Deepsea Bergen was operation between all the involved parties,” Stein Harald Harald Nielsen. “In terms of communication, it is much easier. We work yard for the month during which the work took place. for Statoil at CCB, Norway to undergo a yard stay for Nielsen and Stig Waage sum up. Nielsen is Rig Manager on close together and have a shared understanding of the • Island Innovator Rig Intake for Maracc Deepsea Bergen and was responsible for the project on the Usually, the planning of Special Periodic Surveys, the tasks involved. We would never have been able to do “To give one example: Tor Olav Jørgensen of Drilling & at Hanøytangen, Norway part of MODU (Mobile offshore Drilling Units). Stig Waage main inspections of the rigs that are carried out every this if we had used external engineering companies,” he Technology, who was responsible for engineering and modifications, the client works in Drilling & Technology, where he manages MODU five years, begins two years before. In this case, the emphasises. designing the four blisters, was at CCB the whole time 2012 projects. team only had a few months in which to plan the project. to complete the job together with the yard. When the • Deepsea Bergen Modifications Project Statoil hoped to get the job Drilling & Technology started planning at the end of June, On 28 September, Deepsea Bergen arrived at the CCB people who are to perform the work are in direct contact done in less than 50 days. It was no small modification that Deepsea Bergen under- and the rig was expected to start the yard stay already in yard at Ågotnes. A month of intensive work followed for with the people who have planned it, things go a lot more for Statoil at Ølen, Norway went. The rig was to be prepared for new drilling operations late September. all the crew involved. With a workforce numbering almost smoothly,” says Waage. • Songa Trym SPS and new client mobilization The Odfjell Drilling team set on the Åsgård field. This meant that the variable deck 300 from the yard and hired contractors, good planning project for Songa and Statoil at CCB, Norway capacity had to be increased by 1,000 tonnes. The solution “The advantage for us as an engineering organisation is was important. All the contractors were taught Odfjell After intensive work that involved more than five kilo- • Deepsea Metro II new client mobilization a target of 28 days. And did it was to install four huge flotation elements, called blisters, that we are so closely involved in rig operations. We have Drilling’s procedures, and the regular rig crew were part metres of welding electrodes and demanding lifts, the project for Odfjell Drilling and Petrobras at with a combined weight of approximately 250 tonnes. The many experienced employees who feel ownership to the of the process. This was one of the success factors be- blisters were installed in the course of the first few days. Cape Town, South Africa in 26. modifications also included a new BOP crane, an office rigs and know each and every one of them. Together with hind the successful yard stays in 2011 and 2012, and that And on 24 October, the whole modification job on Deep module, a new electrical control room and a change to the MODU, we put together a team of capable and motivated experience was incorporated into this operation. More sea Bergen was completed – two days ahead of schedule. 2011 cementing and completion units on board. people who put in an outstanding effort,” says Stig Waage. than 60 rig workers were on board at all times, each with • Songa Delta SPS and modification project “We really had to make use of all our core values to be their own area responsibility. “Yard stays are a necessary part of any rig’s life. In recent Closely involved in rig operations The order was able to do it – and then some.” years, we have raised our level of expertise in relation to for Songa at CCB, Norway drafted by MODU following negotiations with Statoil, and “The regular crew members were a very important re- both engineering and execution. We see that we manage • Deepsea Stavanger new client mobilization Drilling & Technology was responsible for planning and en- A lot to build on Many of those involved also had a source and vital for us to be able to complete the project to do the job better and quicker every time. This exper- project for Odfjell Drilling and BP at Port gineering the modifications. Experience from correspond- great deal of experience from earlier yard stays. Deepsea by the deadline,” says Nielsen. They know all the details tise enables us to deliver ‘spot on’, at the agreed time and Elisabeth, South Africa ing projects indicated a yard stay of at least 40 days, and Atlantic was in dock in 2011 and Deepsea Bergen had a on board, were available to provide assistance and helped cost,” says Stein Harald Nielsen. • Deepsea Atlantic Modifications project for the client Statoil had initially set a time frame of 50 days. successful yard stay in 2012. to ensure that the work operations were carried out Odfjell Drilling at Hanøytangen, Norway Drilling & Technology’s response was a target of 28 days “Especially with Deepsea Bergen in 2012, we gained more safely and more efficiently. The feedback we have “Many analysts worry about yard stays because they for completion of the whole project. useful experience during both the planning and engi- received afterwards from the yard and the contractors on often take longer than expected. And extra time in dock 2010 neering phases and during the actual yard stay. The how this worked is very good. means lost revenues. Some companies do not have • Deepsea Atlantic BOP modifications project “We set ourselves a goal that was definitely ambitious,” result was a well-coordinated team with a lot of good sufficient control in this phase; they primarily focus on says Stig Waage. practice to build on,” Waage points out. Good dialogue Another key success factor was operating the rigs offshore. We intend to be just as good for Odfjell Drilling at Hanøytangen, Norway ensuring a close dialogue between the project team and at yard stays,” Stig Waage concludes. • Deepsea Bergen SPS and modifications “And it was really an extreme project already, in terms of Stein Harald Nielsen emphasises the advantage of having the people carrying out the work. Many of the 30 team project for Odfjell Drilling at CCB, Norway
20 ODFJELL DRILLING ANNUAL REPORT 2013 21
INSIGHT: WEARING THE PLATFORM SHOES
Background:
Odfjell Drilling provides engineering and project management services for a number of modification pojects on the production installations where the company is Our strength lies in acting as responsible for platform drilling services. In several of the projects, Odfjell Drilling’s and being seen as an integrated company engineering departments in Bergen, Stjørdal and Manila cooperate with each by the client. other.
Heidi Klaveness, The value of the contracts varies from Project & Modification Manager around NOK 1 million to NOK 150 million. The modification of the cement room on Snorre A is currently the biggest project.
The cement room The cement is mixed and pumped down into the borehole. The cement is used to Wearing cement the casing that is run down into the completed well. Once the casing is in place and cemented, the well is completed and ready for production.
the platform Heidi Klaveness is Project & Modification Manager for the three Statoil-operated platforms where drilling and maintenance is managed from Odfjell Drilling in Stavanger: shoes Snorre A, Snorre B and Sleipner.
Geir Håbesland is Operations Manager for the platform drilling on Snorre A.
We can work it out: Geir Håbesland and Heidi Klaveness.
“The people on the platform know what the problems are. forms have been there for a long time now. Modifications of managing the interfaces with the different parties in- A close-knit team For Klaveness and the rest of the Platform drilling clients The new cement room on It is vital that they are involved right from the start when and upgrades are important, both to ensure efficient drilling volved: Statoil, Halliburton, the engineers and platform peo- engineering team in Drilling & Technology, close collabora- we develop new solutions,” says Heidi Klaveness, Project & operations and for health, safety and environment reasons. ple. Rune Næss, who was assigned that role, is an engineer tion with the platform operations team is important both Norway UK the Snorre A platform is Modification Manager in Drilling & Technology. who has long experience as a drilling supervisor offshore. in terms of implementing the projects and in relation to “The operations and maintenance personnel on board are He speaks both languages. He became a key resource since generating new ones. Statoil Talisman Sinopec Energy the biggest of around 40 Klaveness is responsible for the engineering services that often the ones who take the initiative. It can be about HSE he was able to draw on his operational experience in his • Grane • Claymore are an integrated part of the contract for platform drilling on issues relating to ergonomics and noise, old equipment or work with the engineering team.” “We have a framework agreement for engineering projects, • Heidrun • Clyde engineering projects for Snorre A, Snorre B and Sleipner A. The drilling operations on a lack of parts which makes maintenance difficult,” says but Statoil can choose to put projects out to tender on an Odfjell Drilling. Maintaining these three Statoil-operated platforms are managed from Klaveness. “Different users were also involved from the outset. They individual basis. When they choose us and select Odfjell Well • Njord • Saltire Odfjell Drilling in Stavanger, where both Drilling & Technolo- know the work situation and know what they want from Services for equipment hire and casing services, it is prob- • Sleipner A • Piper a close dialogue between gy and Odfjell Well Services are gathered under one roof. That was also the case as regards the cement room on the new solutions. They are concerned with the details, ably precisely because we are an integrated and close-knit • Visund • Tartan Snorre A. The platform started production in 1992, and the such as individual tasks and the working positions involved team. That makes it easier.” • Snorre A • Fulmar platform operations and Geir Håbesland is Operations Manager for Snorre A. He working environment requirements have changed since in carrying them out. They attended all the meetings and • Snorre B manages the drilling from the operations room in Stavanger. then. The budget for the cement room assignment is NOK were able to share their experience directly. This resulted “It is difficult to think outside the box when working with BP the engineers is a key He is also strongly involved in the work of upgrading the 150 million, and many modifications are needed. in very good collaboration and a feeling of ownership of the different disciplines and when people are busy working on Wintershall Norge • Clair cement room and cooperates closely with Heidi Klaveness project,” says Klaveness and gives an example: their own projects without talking to each other,” says Geir • Brage • Andrew factor, both in terms of on the project. “The control cabin will be replaced. The old one was only “When the engineering team came out to Snorre A for an Håbesland and gives the following illustration: “In some • Bruce one metre broad, so there was hardly enough room for inspection, the people from the cement room were there to places, the glass walls are like concrete barriers, and moving • Magnus generating new projects and “There are many examples of people spending months anyone in it,” says Håbesland. welcome them on the helideck. That’s how eager they were one floor down is like going from here to Houston. We • Clair Ridge designing a project for use on a platform where the result to show them around and talk about the problems that have managed to tear down those walls and create a more implementing them. proves to be completely wrong, precisely because the users’ “In addition, the gearbox and machines will be overhauled needed solving.” vibrant and pulsating working environment.” TAQA experience hasn’t been taken into consideration. In Odfjell and the whole cement unit will be replaced. In the past, peo- • Harding Drilling, we have managed to create an environment where- ple had to stand on the unit itself when mixing the cement, After the engineering phase, the new cement room will be “We are a mixed team where people from operating back- by operations people and engineers involve each other, which led to noise problems and poor working conditions. installed in 2014. grounds and consulting engineers work side by side. People Statoil share information and ask each other for advice,” he says. Now, everything will be operated from the control cabin.” feel that they can pop in if they have any questions. This • Mariner Klaveness adds: “It’s probably often a case of differences in “The installation itself is perhaps the most demanding part way, problems and misunderstandings are cleared up very • Bressay (option) culture. You have to understand each other’s way of thinking Operating experience Heidi Klaveness mentions some of the project, but we feel confident that we will succeed. quickly,” says Heidi Klaveness and sums up: and speak the same language.” important measures that were implemented to ensure that We have established a shared understanding of what the project got off to a good start. we want and need, and everyone wants to succeed with “It’s about looking at the big picture and making sure that all Necessary upgrades There are still big resources in the the job. And, last, but not least: We act as a single unit in the units are working together. Our strength lies in acting as reservoirs on the Snorre and Sleipner fields, but the plat- “First of all, we appointed a coordinator who was in charge dialogue with the client,” she says. and being seen as an integrated company by the client.”
22 ODFJELL DRILLING ANNUAL REPORT 2013 23
INSIGHT: EASTBOUND FOR GROWTH
Background:
Eastbound John Thomson is VP Odfjell Well Services Middle East, Asia & Africa.
for growth Quality and the ability to deliver Odfjell Well Services is part of Odfjell Drilling and provides a range of well has been our trump card services, casing running services and rental of well equipment. over our competitors. Odfjell Well Services provides its services in more than 20 countries worldwide. The John Thomson, company has offices and workshops in VP Odfjell Well Services , Middle East, Asia & Africa Norway, the UK, the Netherlands, Romania, the United Arab Emirates, Saudi Arabia, Turkmenistan, Kurdistan, Thailand and Tanzania.
Range of Services
From left: Ronaldo Claridad, Ian Balansag (engineers) and Simon Leiper (Region Manager Wellbore Clean-Up) Expanding to new areas: John Thomson, TUBULAR RUNNING SERVICES VP Odfjell Well Services Middle East, Asia & Africa • Remote radio controlled and conventional equipment “I guess you could say we’re the pioneers of the company,” Raising the bar One important reason for Odfjell Well The market has also changed over time. Valuable cleanup tools In recent years, Odfjell Well • Top Drive Casing running Odfjell Well Services has says John Thomson, VP of Odfjell Well Service Middle East, Services’ success is a conscious strategy of standing out “Over the years, we have witnessed a shift from a ‘lowest Services has started to build up an internal technology de- • Remote operated and conventional Asia & Africa. from the competition. bidder wins’ mentality with little regard for service quality, velopment unit. Early in 2013, Odfjell Well Services acquired power tongs succeeded in entering new to a quality-driven one that requires good service support,” Dubai-based Zenon Well Technology LLC. The company has • Casing and tubing running and recovery In the eleven years that have elapsed since Odfjell Well “What we tried to do was to think outside the box and not Thomson says. developed a range of solutions for wellbore cleanup tools. In • Casing drilling markets in the Middle East, Services set up business in the Middle East, the business follow the crowd. If you look back more than ten years, there December 2013, Odfjell Well Services’ Abu Dhabi operations has reached far beyond the confines of its head office in was not much innovation or standards in the casing and Success in Kurdistan The business in Iraqi Kurdistan is successfully completed their second BOP jetting run for a RENTAL SERVICES Asia and Africa in recent Dubai. Saudi Arabia, Kuwait, Oman, Kurdistan, Thailand and rental companies working in this area. The market was a bit an example of the success Odfjell Well Services has enjoyed local offshore operator using these tools. years. Pursuing a strategy Turkmenistan are some of the markets in which Odfjell Well low end and the clients in the region were not demanding in new markets. Kurdistan has big oil and gas resources and • Drill pipe Services now operates. And 2013 was one of the best years enough of their suppliers to come up with new ideas,” says many oilfield majors now have a presence in the region. Od- “These tools effectively remove debris from the well • Tubing based on innovation, quality since it started up, Thomson tells us. John Thomson. fjell Well Services established an office in Erbil in Kurdistan and reduce loss of rig time and costs. They represent a • Jars / shock tools in 2012, and its turnover is growing rapidly. complementary and valuable range of services in our total • HW/ drill collars and thinking outside the box “By the year’s end, our organisation had almost doubled in “I would like to think that Odfjell Well Services has raised the portfolio,” says Thomson. • Non magnetic equipment Flexweight, size to cope with the work we have. We were able to expand bar and improved the quality of equipment and services. “We have contracts in place with the majority of operators Drill Collars, Stabilizers, X-Overs our business activity on all fronts, through new clients and We have always endeavoured to be a solution provider for our top drive casing running and fishing services, and has paid off. He believes that Odfjell Well Services will continue to • Steel Stabilizers / roller reamers contracts awards,” he says. rather than a company that just meets the minimum service Kurdistan now accounts for a quarter of our regional reve- develop positively: • Steel Valves / x-overs Fishing requirements.” nue. Quality and the ability to deliver have been our trump “Already this year, we were awarded significant contracts in Odfjell Well Services started up in Dubai through the acqui- card over our competitors, and we are currently sitting Turkmenistan for casing, fishing and rental for a three off- and abandonment tools sition of a small United Arabic Emirates-based rental and This meant applying new and better technology standards, with the majority market share for our product lines,” says shore rig operation in the Caspian Sea. Closer to home, we • Well bore clean out tools casing company, for which John Thompson worked and was in both rental and casing services. Thomson. were awarded one of the region’s largest wellbore cleanup • Hole Openers – Both Single one of the owners. Thompson came on board and has been contracts for an oilfield major in the Emirates,” he says. and Two Stage Types part of the development of the business since. “For instance, drill pipe and downhole tools with trace Thompson sees being part of Odfjell Drilling as a big advan- ability and manufactured to NS-1 spec, DS1-CAT 5 or NS-2 tage when Odfjell Well Services enters new markets. “We certainly achieved our goals for growth last year and WELL INTERVENTION SERVICES “We started from nothing, really. At that time, we were less inspection criteria were criteria that we were working “Being part of Odfjell Drilling is an important door opener managed to build a good platform for future growth and than 20 employees working for a handful of clients. From to long before our competitors. In recent years, we have for us. It creates new opportunities. Both the drilling and opportunities at the same time. Client expectations are • Fishing Services there, steady investment and head office confidence in the successfully introduced the CRTi top drive casing running the well service segments in Odfjell Drilling have a massive increasing all the time and we feel that we are well- • Casing Exit Services region have allowed us to build an extremely successful tool as the preferred solution for casing running operations. client list, and both can benefit from each other. We positioned to exceed them,” concludes an optimistic John • Well Abandonment Services business unit.” We now have CRTi tools in operation throughout the Middle strengthen our business together.” Thomson. • Wellbore Clean Out Services East, Asia and Africa.
24 ODFJELL DRILLING ANNUAL REPORT 2013 25 THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY
Business Segment:
Mobile Offshore Drilling Units
26 ODFJELL DRILLING ANNUAL REPORT 2013 27 Key Figures THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY MOBILE OFFSHORE DRILLING UNITS
Through the joint venture company Odfjell Galvão (50/50 • On contract to BG in Tanzania since December 2011. Operating REVENUE with Galvão Enghenaria) Odfjell Drilling participates as The contract with BG will expire in November 2014 (USD MILLION) owner and manager for three ultra deepwater drillships. and the drillship is presently being marketed for other In 2012 Odfjell Galvão and Brazilian SETE entered into a contracts worldwide. contract for construction and management for three ul- • Deepsea Metro I achieved an efficiency rate of 98.7% 762 tra deepwater drillships under a long term drilling service financial uptime in 2013. 693 contract with Petrobras. Construction work for the first drillship Guarapari begun in Singapore in 2013. DEEPSEA METRO II • An ultra deepwater drillship of the same design DEEPSEA BERGEN as Deepsea Metro I, delivered in November 2011. • A harsh environment semisubmersible, Aker H3.2 The drillship is owned by Chloe Marine Corporation design delivered in 1983. Ltd, a subsidiary of Deep Sea Metro Ltd, a joint • On contract with Statoil on the Norwegian venture by Metro Exploration (60%) and Odfjell continental shelf until 2017 plus a 1 year option. Drilling (40%). Odfjell Drilling operates the drillship. 2013 2012 • Upgraded both in 2012 and 2013 to increase variable • Commenced operations for Petrobras in May 2012. deck load and operational capacities The contract expires in May 2015. • In 2013 Deepsea Bergen achieved an efficiency rate • The drillship achieved an efficiency rate of 78.7% of 97.9% financial uptime. financial uptime in 2013. EBITDA (USD MILLION) DEEPSEA ATLANTIC MANAGED DRILLING UNITS 338 • A sixth generation ultra deepwater and harsh During its 40-year-long history, Odfjell Drilling has 285 environment semisubmersible of enhanced provided management services for owners of semisub- GVA 7500 design delivered early 2009. mersibles, drillships and jack-up drilling units worldwide. • The rig is equipped with a dual derrick and is The services include project management and fol- optimised for production drilling and completion low-up during the construction phase, management of activities. regulatory requirements, marketing and client relations, 2013 2012 • On contract to Statoil, it is presently drilling in the preparations for operation and operations. Gullfaks area on the Norwegian continental shelf. Statoil exercised in 2013 an option to use the rig for Odfjell Drilling is currently manager for the semi additionally one year until august 2015. The contract submersible rig Island Innovator owned by Maracc ASA. has an additional two-year priced option. The rig which was originally designed for well interven- EBIT • Deepsea Atlantic achieved an efficiency rate of tions has been modified for drilling operations on the (USD MILLION) 98.7% financial uptime in 2013 and is consistently Norwegian Continental Shelf. The owner has a 12 well ranked high on Statoil’s drilling efficiency benchmark. drilling contract with Lundin Petroleum Norway. 205 In 2013 Odfjell Drilling had responsibility for achieving 162 AoC (Acknowledgement of Compliance) from the Norwe- DEEPSEA STAVANGER gian Petroleum Safety Authority. Drilling operations with the semisubmersible started in September 2013. • A sixth generation ultra deepwater and harsh 2013 2012 environment semisubmersible unit of the same design as the Deepsea Atlantic and was delivered Mobile Offshore summer 2010. • Currently operating for BP in Angola under a contract Drilling Units that expires in November 2014. The contract has in addition two unpriced one-year options. • Deepsea Stavanger achieved in 2013 an efficiency rate of 87.1% financial uptime. MOBILE DRILLING UNITS semisubmersibles, one mid water harsh environment semi- Odfjell Drilling is well positioned in attractive offshore drill- submersible and two modern ultra deepwater drillships. ing markets. The Group’s strategy is to increase its presence Since its foundation in 1973 Odfjell Drilling has been in- The Group is manager for one mobile drilling unit Island with several mobile drilling units in selected international DEEPSEA METRO I volved in design and construction of more than 30 offshore Innovator. regions to realise financial and operational synergies. • An ultra deepwater drillship of Gusto P-10000 design drilling units and operation of more than 50 fixed and mo- delivered by Hyundai Heavy Industries in South Korea bile installations. Since 2006, Odfjell Drilling has developed Since 2011 Odfjell Drilling has mobilised three mobile drilling The Deepsea Aberdeen newbuild presently under construc- in June 2011. a modern fleet of ultra deepwater and harsh environment units in Africa and Brazil. All the Group’s mobile drilling units tion at Daewoo Shipbuilding & Marine Engineering (DSME) • The drillship is owned by Golden Close Maritime drilling units. are operating under contracts with major international in South Korea, is scheduled for delivery during the autumn Corp. Ltd, a subsidiary of Deep Sea Metro Ltd, a joint E&P companies. The semisubmersible Island Innovator 2014. The newbuild represents the next step in the Group’s venture between Metro Exploration (60%) and The Group presently operates five mobile drilling units on started drilling services for Lundin Petroleum in Norway in fleet development. Deepsea Aberdeen is of the same design Odfjell Drilling (40%). Odfjell Drilling operates the contract in Norway, Angola, Tanzania and Brazil. The fleet September 2013. as the Deepsea Atlantic and Deepsea Stavanger. drillship. consists of two ultra deepwater and harsh environment
28 ODFJELL DRILLING ANNUAL REPORT 2013 29 THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY
Business Segment:
Drilling & Technology
30 ODFJELL DRILLING ANNUAL REPORT 2013 31 Key Figures THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY DRILLING & TECHNOLOGY
Operating REVENUE (USD MILLION)
352 316 In October the operatorship for the Brage platform was During 2013 the two most important projects in Drilling transferred from Statoil to Wintershall. Odfjell Drilling’s Technology’s portfolio has been project management contract for drilling services has been transferred to the services for the mobilisation of the semisubmersible rig new operator. Island Innovator and planning and execution of the yard stay project for Deepsea Bergen. Drilling Technology In April 2013 Statoil awarded Odfjell Drilling a new four is also responsible for project management for Odfjell year contract for platform drilling services on the Mariner Drilling’s newbuild project Deepsea Aberdeen and the platform under development on the UK continental periodic survey for Deepsea Atlantic during the spring shelf. Odfjell Drilling will also provide engineering and 2014. 2013 2012 commissioning services to Statoil under the construction and start-up phase of the field development. The Odfjell Drilling also provides engineering and project contract includes options for 3x2 years and an option for management services for E&P companies under similar scope of work for the future Bressay platform. integrated platform drilling contracts. During 2013 EBITDA Drilling Technology has been involved in several projects The outlook for the activity level on the UK continental related to maintenance and modfications of drilling (USD MILLION) shelf is good and Odfjell Drilling currently has contracts facilities on production facilities in the North Sea. Project with both BP, Talisman Sinopec Energy and Taqa Bratani services for the Heidrun well intervention tower was 25 25 which took over as operator of the Harding platform in finalised in 2013. June 2013. Drilling Technology has during 2013 developed and 2013 2012 Demand for platform drilling services is steady in the implemented a new Project execution model to improve North Sea market and elsewhere. Odfjell Drilling’s risk management and reduce quality costs in project strategy is to develop platform drilling in a new region execution. A revised Technology strategy is adopted outside the Norwegian and UK market. supporting the Group’s ambition to be in the technology EBIT forefront in the international offshore drilling industry. (USD MILLION) The main risk elements in relation to further developing the platform drilling activities are related to delivery In 2007 Odfjell Drilling established an engineering of the targeted rig uptime. Odfjell Drilling’s team of department in Manila in the Philippines to support its 20 19 professionals has extensive experience and expertise in global engineering activities. The goal is to develop maintenance planning which is a key factor in delivering the Manila office further in order to increase overall 2013 2012 high rig uptime on mature offshore drilling facilities. engineering capacity and to realise operational and financial synergies. In all, Odfjell Drilling is well positioned as an employer. The Group benefits from a 35 year long experience of platform drilling, a sound contract portfolio with reputable clients and a good reputation for people development.
Drilling & ENGINEERING AND Technology PROJECT MANAGEMENT SERVICES The Drilling Technology business area provides a wide range of engineering, technology support and project management services to the company’s other business areas and external clients. Odfjell Drilling aims to be the Odfjell Drilling’s business segment Drilling & Technology including onshore support, production drilling and drilling services on eight installations on the Norwegian preferred supplier of drilling and well-related competence consists of two business areas: completion, well maintenance, facility maintenance continental shelf. During the autumn 2013 Statoil has through projects, products and services. During its • Platform Drilling planning and project management for maintenance and informed Odfjell Drilling that drilling activities on the 40-year-long history the company has been a pioneer • Drilling Technology modifications. The business area is currently responsible Njord and Snorre A platforms will be temporarily halted in the development and implementation of innovative for drilling services on 20 installations operated from due to modification projects. technology solutions for offshore drilling facilities and PLATFORM DRILLING SERVICES Bergen, Stavanger and Stjørdal in Norway and Aberdeen • The contract comprises integrated drilling services services. Odfjell Drilling is a leading provider of drilling services in the UK. on Grane, Visund, Heidrun, Njord, Snorre A, Snorre B on oil and gas production facilities for international and Sleipner A Drilling Technology provides engineering and project E&P companies in the North Sea. The Platform Drilling During 2013 Odfjell Drilling started up drilling services • The contract expires by the end of 2016 plus options management services both to MODU (mobile offshore business area provides integrated drilling services under the new Statoil contract for integrated platform for 3x2 years. drilling units) and fixed installations.
32 ODFJELL DRILLING ANNUAL REPORT 2013 33 THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY
Business Segment: Well Services
34 ODFJELL DRILLING ANNUAL REPORT 2013 35 Key Figures THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY WELL SERVICES
NORWAY: Operating REVENUE • Rental services with Repsol and Baker Hughes (USD MILLION) • Casing services with the Borgland Dolphin consortium, Repsol and Centrica 227 EUROPE: 208 • Tool Rental with Shell (Netherland, UK and Norway) • Tubular Running Services with Shell (Netherlands, UK and Norway), Dong/ Hess, Lane Energy/ ConocoPhillips (Poland), ADTI (Netherlands)
MIDDLE EAST: • Casing services and fishing with Repsol, (Kurdistan) • Casing services and Tool rental with Wintershall • Wintershall Casing and rental, UAE 2013 2012 • Talisman Casing Running (Kurdistan) • Tullow Casing running (Ethiopia) • PVD Casing running (Vietnam) EBITDA During 2013 Well Services has established its market (USD MILLION) presence in Tanzania, Angola, Vietnam and Thailand. The business segment is well positioned to serve 105 95 existing and new clients from its operational bases in Europe and Middle East.
2013 2012
EBIT (USD MILLION)
67 53
2013 2012 Well Services
The business segment Well Services was established in Casing Services provides casing and tubular running and item of stock to taking full responsibility for a complete 1982 on the basis of rental activities dating back to the handling services. The business unit offers a range of re- drill string, including all equipment necessary for running mid-1970’s. Today the business segment is a leading well mote operated tongs and handling equipment that it has and handling the string. service company in Europe and selected international developed itself or has developed in close cooperation regions. The business segment’s services are marketed with collaborating vendors. The services are provided to The activity level has been high in all product and services under the brand Odfjell Well Services and its product and E&P companies and to rig owners. areas and regions. The business segment entered into service portfolio is divided in two areas: Casing Services Rental Services offers a wide range of drilling tubular and several new contracts in Norway, rest of Europe, Middle and Rental Services. related equipment to the rental market. The business East and South East Asia. unit is capable of everything from delivering an individual
36 ODFJELL DRILLING ANNUAL REPORT 2013 37 A safe choice THREE BUSINESS SEGMENTS – ONE INTEGRATED COMPANY
Lost Time Incident Frequency (H1) As per 1 mill working hours
3.4 3.3 2.7 2.1 Quality, Health, 1.4 0.8 Safety & 2008 2009 2010 2011 2012 2013
Total Recordable Incident Environment Frequency (H2) As per 1 mill working hours
9.0 8.9 7.7 5.9
3.8 2.5
2008 2009 2010 2011 2012 2013
Sickness Absence Percentage
3.9 3.6 3.2 3.0 3.2 3.0
2008 2009 2010 2011 2012 2013
The Group works continually to improve its health, safety, ing of safety barrier management are important measures incidents involving dropped objects. In spite of a positive of offshore crews including the Deepsea Aberdeen onshore Goal < 3 % As an integrated drilling security and environment efforts and the main objective is in order to ensure a high safety level and prevent major development on several mobile drilling units, the overall in- and offshore organization. Focus on training and compe- to achieve zero faults through continuous improvement. accidents. Odfjell Drilling endeavours to foster a culture cident rate for dropped objects has increased. The efforts to tence assurance will continue in 2014 in all business areas. contractor Odfjell Drilling’s in which focus is on the individual’s responsibility and the implement the DROPS programme on all fixed installations ability to provide safe and Odfjell Drilling works continuously to develop a company ability to assess and manage risks. and throughout other parts of our operational activities, is The Group’s ambitions is to provide high quality drilling, Dropped Objects culture, governing documents, organisational competence, already intensified. engineering and well services that meet the clients’ expec- Frequency reliable services is crucial capacity and a leadership culture that promote the objec- The level of risk has improved in Odfjell Drilling in recent tations. All Odfjell Drilling’s business areas are individually tive of maintaining the highest safety standards. Through years. All HSE parameters related to personnel injuries In recent years, Odfjell Drilling has developed and imple- certified in accordance with the ISO 9001 Quality Man- As per 1 mill working hours to the Group’s future this approach the Group aims to safeguard the health of showed a positive development in 2013 and there were mented a Safety Leadership & Compliance programme to agement standard, and in the end of 2013 all the business all people involved in its operations, reduce environmental no serious injuries to any personnel involved in the Group’s support the management and teams in all business areas. areas underwent the ISO 14001 certification process for 10.0 9.0 development. risks through effective risk management and develop a activities. During 2013 the incident rates for both lost time This has been undertaken in order to ensure a high level of Environmental Management. 8.4 quality culture in which tasks are performed right the first incidents (H1) and medical treatment injuries (H2), were QHSE performance during a period of increased activity and 6.5 time and in which the goal is to constantly strive to add reduced. The number of lost time injuries was reduced from mobilization of several new drilling units and startup in new The Company’s management system (CMS) is a vital tool 5.6 value for clients. 7 to 4 from 2012 to 2013. The Group focus particularly to regions. The objective has been to achieve a shared QHSE to ensure a common practice based on experience gained 4.3 avoid high potential incidents (HIPO). The HIPO frequency and leadership culture in all of Odfjell Drilling’s operations through the Group’s 40-year-long history. The web based The highest priorities in all QHSE efforts are to manage was reduced from 2.2 in 2012 to 1.2 in 2013. based on openness, dialogue, the reporting of incidents and CMS is continuously evaluated and improved based on new risks and prevent high potential incidents and injuries to sharing of best practices. In 2013 there has been a specific experiences and feedback from employees and partners. personnel. Improved risk management and the strengthen- The Group is increasing its efforts to reduce the number of focus on optimization of training and competence assurance 2008 2009 2010 2011 2012 2013 Frequency > 40 joule
38 ODFJELL DRILLING ANNUAL REPORT 2013 39 CORPORATE GOVERNANCE
Corporate
Governance ODFJELL DRILLING LTD. (“Odfjell Drilling” or the By utilising its substantial 40-year track record of Members of the Board of Directors and employees must “Company”) is incorporated in Bermuda and is subject experience from operations in harsh environment notify the Board of Directors if they have a significant, to Bermuda law. The Company seeks to comply with and deepwater areas and its ability to implement best direct or indirect, interest in a transaction carried out by the applicable legal framework for companies listed practices based on experience and lessons learned, the the Company. on Oslo Børs, and endorses the Code of Practice for Odfjell Drilling Group shall become a preferred partner for Corporate Governance (Norwegian: “Norsk anbefaling drilling operations, engineering projects and well services Any transactions the Company carries out in its own for eierstyring og selskapsledelse”) issued by the in its selected business regions.” shares shall be carried out either through Oslo Børs or at Norwegian Corporate Governance Board, most recently prevailing stock exchange prices if carried out in another revised 23 October 2012 (the “Code”). This review is way. If there is limited liquidity in the Company’s shares, prepared in accordance with section 1 of the Code, and EQUITY AND DIVIDENDS the Company shall consider other ways to ensure equal any deviations from the recommendations set out in the treatment of all shareholders. Code are described in the following. The Company had book equity of USD 1,130 million and a book equity ratio of 41% as of 31 December 2013. The The Company does not deviate from section 4 of the Code. On 3 September 2013, the Board of Directors of the Company regards the Group’s present capital structure Company (the “Board of Directors” or the “Board”) as appropriate and tailored to its objectives, strategy and adopted this corporate governance policy (the “Corporate risk profile. FREELY NEGOTIABLE SHARES Governance Policy”) for and on behalf of the Company to reflect the Company’s commitment to good corporate The Company’s long-term objective is to make The Company’s constituting documents do not impose governance. distributions of net income in the form of dividends, any transfer restrictions on the Company’s common and targets a long-term annual pay-out representing shares and the Company’s common shares are freely Through good governance of the business, the Company 30-40% of its net profit on a consolidated basis. The transferable in Norway, provided, however that the Bye- intends to create profitability and increased shareholder payment of any dividends will depend on a number of laws include a right for the Board to decline to register value. This Corporate Governance Policy contains the factors, including the market outlook, contract backlog, a transfer of any share in the register of members, or measures that are, and will be, implemented to ensure cash flow generation, capital expenditure plans and if required, refuse to direct any registrar appointed by effective management and control over the Company’s funding requirements whilst maintaining adequate the Company to transfer any interest in a share where activities. The primary objective is to have systems financial flexibility, as well as restrictions on the payment such transfer would result in 50% or more of the shares for communication, monitoring and allocation of of dividends under Bermuda law and financial covenants, or votes being held, controlled or owned directly or responsibility, as well as appropriate incentives, which along with other factors the Board may consider relevant. indirectly by individuals or legal persons resident for tax contribute to increasing and maximising the Company’s purposes in Norway or, alternatively, such shares or votes financial results, long-term success and returns to Pursuant to Bermuda law and common practice for being effectively connected to a Norwegian business shareholders on their investments in the Company. The Bermuda incorporated companies, the Board has wide activity. The purpose of this provision is to avoid the Company aims to have good control and governance powers to issue any authorised unissued shares in Company being deemed a Controlled Foreign Company procedures to ensure equal treatment of all shareholders, the Company on such terms and conditions as it may pursuant to Norwegian tax rules. This represents a thereby providing a foundation for trust and positive decide, and any shares or class of shares may be issued deviation from section 5 of the Code, but the Company development of values. with preferred, deferred or other special rights or such does not foresee that this provision will impact on the restrictions, whether with regard to dividend, voting, free transferability of its shares. A description of the most important corporate return on capital, or otherwise as the Company may, by governance principles of the Company, as well as its core resolution of the shareholders, prescribe. Accordingly, values, is also made available on www.odfjelldrilling.com. this represents a deviation from section 3 of the Code. GENERAL MEETINGS However, such issuance of shares by the Company from the authorised, but unissued, share capital is subject to The Board of Directors will ensure that the greatest THE COMPANY’S BUSINESS ACTIVITIES prior approval given by resolution of the general meeting possible number of shareholders can exercise their of shareholders. Pursuant to Bermuda law and common voting rights in the Company’s general meetings and In accordance with common practice for Bermuda practice for Bermuda incorporated companies, the Board that the general meetings are an effective forum for the incorporated companies, the Company’s objects as set is also authorised to purchase the Company’s own shares. views of shareholders and the Board. out in its memorandum of association are wider and more These authorisations are neither limited to specific extensive than recommended by the Code. Accordingly, purposes nor to a specified period as recommended in Among other things, the Board of Directors will ensure this represents a deviation from section 2 of the Code. the Code. that: However, the Company’s and its subsidiaries’ (collectively, - the notice and the supporting documents and the “Odfjell Drilling Group” or the “Group”) objectives and information on the resolutions to be considered at strategy are further described in the following: EQUAL TREATMENT OF SHAREHOLDERS AND the general meeting are available on the Company’s TRANSACTIONS WITH CLOSELY-RELATED PARTIES website no later than 21 days before the general “The Odfjell Drilling Group is a Bermuda based drilling meeting is held; Through good governance of contractor with 40 years of operational experience on The Company has only one class of shares. Each share - the resolutions and supporting documentation, if any, the harsh environment Norwegian Continental Shelf in the Company carries one vote, and all shares carry are detailed enough to allow shareholders to (NCS), which has gradually expanded internationally equal rights, including the right to participate in general understand and form a view on matters that are to be the business, Odfjell Drilling intends by offering a state-of-the-art fleet of mobile offshore meetings. All shareholders shall be treated on an equal considered at the general meeting; drilling units to the harsh environment and ultra- basis, unless there is just cause for treating them - the registration deadline, if any, for shareholders to to create profitability and increased deepwater markets along with prudent engineering differently. participate at the general meeting is set as closely as services, well services and platform operations. practically possible to the date of the general In the event of not insignificant transactions between meeting and pursuant to the provisions in the Bye- shareholder value. Odfjell Drilling Group’s vision is to become a leading the Company and its shareholders, a shareholder’s laws; supplier of drilling units and drilling services designed parent company, members of the Board of Directors, - the Board of Directors and the person who chairs to the highest environmental and safety standards in executive personnel or closely-related parties of any the meeting shall ensure that the shareholders have the offshore oil and gas industry, mainly for the ultra- such parties, the Board of Directors shall arrange for a the opportunity to vote separately on each candidate deepwater and for the harsh environment markets. The valuation to be obtained from an independent third party. nominated for election to the Company’s Board of Odfjell Drilling Group has a zero fault philosophy and An independent valuation shall also be carried out in the Directors and committees, if applicable; shall be the trusted and leading partner for its blue chip event of transactions between companies within the - the members of the Board of Directors, the customers. same group where any of the companies involved have nomination committee and the auditor must attend minority shareholders. the general meeting; and
40 ODFJELL DRILLING ANNUAL REPORT 2013 41 CORPORATE GOVERNANCE
- there are routines to ensure the independent the Board of Directors must be independent of the internal control and external auditors and overseeing REMUNERATION OF THE BOARD OF DIRECTORS Unless exceptions apply and are invoked, the Company it should explain the reasons for this. In the statement, chairing of the general meeting. The Chairman of the Company’s executive personnel and material business legal and regulatory compliance; will disclose all inside information. In all circumstances, the Board of Directors should make it clear whether the Board of Directors will, in principle, chair the connections of the Company. In addition, at least two - taking decisions, endorsing decisions or authorising The remuneration of the Board is to be decided by the the Company will provide information about certain views expressed are unanimous, and if this is not the Company’s general meetings. This is mainly due to of the members of the Board of Directors must be decisions to be taken, as appropriate, in matters shareholders at the annual general meeting of the events, e.g. by the Board of Directors and general case, explain the reasons why specific members of the the fact that the Bye-laws of the Company provides, independent of the Company’s major shareholder(s). that are of an unusual nature or of importance to the Company. The level of compensation to the members of meeting(s) concerning dividends, amalgamations, Board of Directors have excluded themselves from the as is common under Bermuda law, that the Chairman For the purposes of this Corporate Governance Policy, Company; the Board shall reflect the responsibility of the Board, mergers/demergers or changes to the share capital, the statement. of the Board shall, as a general rule, chair the general a major shareholder shall mean a shareholder that - assessing the effectiveness of the Company’s policies its expertise and the level of activity in both the Board issuing of subscription rights, convertible loans and all meetings. Accordingly, in this respect the Company owns 10% or more of the Company’s common shares on ethics, conflicts of interest and compliance with and any Board committees. The remuneration shall not agreements of major importance that are entered into by The Board of Directors shall consider whether to arrange deviates from section 6 of the Code. or votes, and independence shall entail that there are competition law; approving various decision be linked to the Company’s performance. The Company the Company and related parties. a valuation from an independent expert. If any member no circumstances or relations that may be expected to guidelines for the Board and any other such manuals shall not grant share options to members of the Board of the Board of Directors, or close associates of such Shareholders who cannot be present at the general be able to influence independent assessments of the as the Board from time to time may adopt. of Directors.None of the members of the Board of The Company shall have procedures for establishing member, or anyone who has recently held a position but meeting will be given the opportunity to vote using person in question. Directors and/or companies with whom the members discussions with important shareholders to enable the has ceased to hold such a position as a member of the proxies. The Company will in this respect: The Board has established an Audit Committee whose are associated have taken on specific assignments Board of Directors to develop a balanced understanding Board of Directors, is either the bidder or has a particular - provide information about the procedure for The chairman of the Board of Directors shall be elected duties include supervising and reviewing the Company’s for the Group in addition to their appointments as of the circumstances and focus of such shareholders. personal interest in the bid, the Board of Directors shall attending via proxy; by the general meeting so long as the applicable laws do annual and interim financial reporting. This committee members of the Board of Directors with the exemption However, such discussions must be done in compliance arrange an independent valuation. This shall also apply if - nominate a person who will be available to vote on not require that the chairman must be appointed by the consists of two Board members. The Company has not of management and accounting services agreements with the provisions of applicable laws and regulations. the bidder is a major shareholder (as defined herein). Any behalf of a shareholder as their proxy; and Board of Directors. established a Remu¬neration Committee, but it should between Pin High Limited (controlled by Kirk Davis) and such valuation should either be enclosed with the Board - prepare a proxy form which shall, insofar as this in this respect be noted that no member of the executive Odfjell Drilling Services Ltd. and Odfjell Offshore Ltd., Information to the Company’s shareholders is posted on of Directors’ statement, or reproduced or referred to in is possible, be formulated in such a manner that The term of office for members of the Board of Directors management is represented at the Board of Directors respectively, under which Pin High Limited performs the Company’s website at the same time that it is sent to the statement. the shareholder can vote on each item that is to be shall not be longer than two years at a time. and all of the members of the Board of Directors are certain management and account services for Odfjell the shareholders. addressed and vote for each of the candidates that independent of the management of the Company. Drilling Services Ltd and Odfjell Offshore Ltd. The annual The Company does not deviate from section 14 of the are nominated for election. As of 31 December 2013, the Board of Directors consisted Accordingly, the Board of Directors has not considered fee for the services provided under each agreement is The Company does not deviate from section 13 of the Code. of five members, possessing the required expertise, such committee to be necessary. USD 20,000. Code. capacity and diversity. The Board can act independently NOMINATION COMMITTEE of the executive management of the Company and The Board of Directors annually evaluates its The remuneration to the members of the Board of AUDITOR exercise proper supervision of the management of performance and expertise. Directors will be specifically identified in the annual report. TAKE-OVERS The Company’s bye-laws sets out that the Company shall the Company and its operations. All of the members of The Company’s auditor is elected by the shareholders at have a nomination committee comprising such number the Board of Directors have participated in each of the The Company does not deviate from section 9 of the Code. Except for the above mentioned agreements with Pin The Company has established key principles for how the general meeting and the shareholders shall authorise of persons as determined by the general meeting of the board meetings held since the date of the listing at Oslo High Limited, the Group does not deviate from section 11 to act in the event of a take-over offer. In the event of the Board of Directors or the audit committee to fix the Company from time to time, and which members shall Børs. All of the members of the Board of Directors are of the Code. a take-over process, the Board of Directors will ensure auditor’s remuneration. be appointed by a resolution of the general meeting, independent of the management and material business RISK MANAGEMENT AND INTERNAL CONTROLS that the Company’s shareholders are treated equally including the chairman of the committee. The general connections of the Company. Further, all of the members and that the Company’s activities are not unnecessarily The auditor will annually submit the main features of meeting shall determine the remuneration of the of the Board of Directors (except for Helene Odfjell) are The Board recognises its responsibility to secure REMUNERATION OF THE EXECUTIVE MANAGEMENT interrupted. The Board of Directors will also ensure that the plan for the audit of the Company to the Board of nomination committee and shall stipulate guidelines for independent of the main shareholders of the Company. appropriate risk management systems and internal the shareholders have sufficient information and time to Directors, or, if relevant, the audit committee. the duties of the nomination committee. controls. The Board of Directors shall prepare guidelines for assess the offer. The Company does not deviate from section 8 of the Code. the remuneration of the executive personnel of the The auditor will participate in meeting(s) of the Board of The members of the nomination committee shall The Company has comprehensive relevant corporate Company. These guidelines shall be communicated In the event of a take-over process, the Board of Directors that deal with the annual accounts, accounting be elected to take into account the interests of the manuals and procedures, which provide detailed to the annual general meeting. Performance-related Directors will abide by the principles of the Code, and also principles, assess any important accounting estimates shareholders in general. At least one member of the THE WORK OF THE BOARD OF DIRECTORS descriptions of procedures for all aspects of managing remuneration of the executive personnel in the form ensure that the following take place: and matters of importance on which there has been nomination committee shall be independent of the main the operational business. The procedures and manuals of share options, bonus programmes or the like shall - the Board of Directors shall ensure that the offer is disagreement between the auditor and the executive shareholder of the Company. The nomination committee The Board seeks to schedule in advance physical are continuously revised to incorporate best practice be linked to value creation for the shareholders or the made to all shareholders, and on the same terms; personnel of the Company and/or the audit committee. shall not include the Chief Executive Officer or any other meetings seven to nine times per calendar year, derived from experience or adopted through regulations. Company’s earnings performance over time. - the Board of Directors shall not undertake any actions executive personnel. depending on the level of activity of the Company. Interim intended to give shareholders or others an The auditor will at least once a year present to the meetings may be convened if a Director so requires. Routines have been established to secure frequent and The remuneration of the Company’s Chief Executive unreasonable advantage at the expense of other Board of Directors, or the audit committee, a review of The nomination committee’s duties are to propose relevant management reporting on operational matters, Officer and Chief Financial Officer will be specifically shareholders or the Company; the Company’s internal control procedures, including candidates for election to the Board of Directors and The Board meetings are chaired by the Chairman in order to ensure adequate information for decision- identified in the annual report. - the Board of Directors shall strive to be completely identified weaknesses and proposed improvements. to propose fees to be paid to such members. The unless otherwise agreed by a majority of the Directors making and to respond quickly to changing conditions open about the take-over situation; nomination committee shall justify its recommendations. attending. If the Chairman is not present, the Directors and requirements. The Company does not deviate from section 12 of the - the Board of Directors shall not institute measures The Board of Directors will hold a meeting with the The Company shall provide information of the nomination shall elect among themselves a Chair for the Board Code. which have the intention of protecting the personal auditor at least once a year at which no representative of committee and any deadlines for submitting proposals to meeting. Similarly, the Board receives frequent and relevant interests of its members at the expense of the the executive personnel of the Company is present. the committee. reports on financial matters, and management reports interests of the shareholders; and The Board of Directors issues instructions for its own covering both operational and financial matters are INFORMATION AND COMMUNICATION - the Board of Directors must be aware of the The Board of Directors will specify the right of the As of 31 December 2013, the Company had not work, as well as for the executive personnel, with pro¬vided to the Board on a monthly basis. This ensures particular duty the Board of Directors carries executive personnel to use the auditor for purposes established a nomination committee as the current particular emphasis on clear internal allocation of that the Board is continuously updated on both the The Company has established guidelines for reporting for ensuring that the values and interests of the other than auditing. Directors of the Board all are elected for a two years responsibilities and duties. The Board of Directors capital and liquidity situation and the scope of the to the market, and is committed to provide timely and shareholders are safeguarded. period up until the annual general meeting of the works under an annual plan with particular emphasis activities, and able to immediately take any action precise information to its shareholders, Oslo Børs and The Board of Directors will inform the shareholders at the Company in 2015. Currently, this represents a deviation on objectives, strategy and implementation, with tasks deemed necessary. the financial markets in general (through Oslo Børs’ The Board of Directors shall not attempt to prevent or annual general meeting of the remuneration paid to the from section 7 of the Code. However, the Company including, amongst others: information system). Such information will be given in the impede the take-over bid unless this has been decided auditor, including details of the fee paid for auditing work intends to arrange for a nomination committee to be - identifying and establishing the Company’s overriding The Board’s also recognises the responsibilities with form of annual reports, quarterly reports, press releases, by the general meeting in accordance with applicable and any fees paid for other specific assignments. elected and the code of conduct for the nomination goals, objectives and strategies, including approval regards to the Company’s values and guidelines for ethics notices to the stock exchange and investor presentations laws. The main underlying principles shall be that committee to be approved at its annual general meeting and endorsement of plans and budgets; and corporate responsibilities. The core values reflect the in accordance with what is deemed most suitable. The the Company’s common shares shall be kept freely The Company does not deviate from section 15 of the in 2014. - determining policies, monitoring and supervising Company’s focus on commitment, safety conscious¬ness, Company will attempt to clarify its long-term potential, transferable and that the Company shall not establish Code. the day-to-day management of the Company and the creativity, competency and result orientation, and including strategies, value drivers and risk factors. The any mechanisms which can prevent or deter take-over business carried out by the Company; guidelines for the behaviour of Company representatives Company will maintain an open and proactive policy for offers unless this has been decided by the general THE BOARD OF DIRECTORS – - ensuring that the business of the Company, the are described in detail in the Company’s Code of Business investor relations. meeting in accordance with applicable law. COMPOSITION AND INDEPENDENCE accounts and the management of the assets of the Conduct. The core values and Code of Business Conduct Company are subject to adequate supervision and are are available on www.odfjelldrilling.com. The Company is publishing an annual, electronic finance If an offer is made for the Company’s common shares, the The composition of the Board of Directors shall ensure conducted in accordance with applicable legislation; calendar with an overview of the dates of important Board of Directors shall issue a statement evaluating the that it can act independently of any special interests. - monitoring and reviewing the annual and interim The Company does not deviate from section 10 of the events such as the annual general meeting, publishing offer and making a recommendation as to whether or not A majority of the shareholder-elected members of financial reporting, assessing the performance of Code. of interim reports, open presentations and payment of the shareholders should accept the offer. If the Board of dividends. Directors finds itself unable to give a recommendation to the shareholders on whether or not to accept the offer,
42 ODFJELL DRILLING ANNUAL REPORT 2013 43 CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility Report
Our key principles of our Corporate Social Responsibility Policy are as follows:
HEALTH AND SAFETY on Fundamental Principles and Rights at Work, where b) Assess the social and environmental impact of our Odfjell Drilling shall maintain the highest safety standard applicable to our business; and other applicable operations and be attentive to any internal or and protect the health of our employees and others international principles. external reports indicating that our principles have not been requested. associated with our operations. Odfjell Drilling aims to play a part in the progress and development of local communities through focusing on All Business Areas within Odfjell Drilling underwent the ENVIRONMENT AND SUSTAINABLE DEVELOPMENT local content by developing skills and opportunities in the DnV ISO-14001 certification audit in December 2013. communities which we operate. Environmental principles supporting the HSE Policy are Respect for the environment is fundamental to assuring defined and communicated. a sustainable future. Odfjell Drilling aims to minimise Our Corporate Social Responsibility principles are sought harmful effects whenever we can and will work through a to be promoted by: c) Designate persons within our organisation with a continuous improvement process. special responsibility for promoting and monitoring a) Communicating and monitoring our principles within our principles. our organisation and in our operations. INTEGRITY AND ANTI-CORRUPTION In order to ensure that our principles are being promoted The Corporate Social Responsibility Policy was adopted Odfjell Drilling shall maintain high standards of integrity, and adhered to, Odfjell Drilling has designated persons on December 1st 2013, and is currently in the process of throughout our organisation with responsibility to and conduct our operations with honesty, fairness and being implemented in our Corporate Management System. transparency. Corruption or bribery is not tolerated in our promote and monitor the principles. This has been done business or with our business partners. An internal and external communication plan is being both with regards to HR, QHSE, legal and finance issues. developed to ensure that Odfjell Drilling’s commitments Odfjell Drilling also has a Compliance Officer and a Case in the area are communicated internally and externally. handling portal to handle questions or reports related DIVERSITY AND LABOUR STANDARDS to board positions, closely related parties, facilitation Odfjell Drilling will not discriminate on the basis of Our Code of Business Conduct is currently implemented payment or notification of infringement. gender, religion, race, national or ethnic origin, cultural in our Company Management System and is the main reference document in the ethics domain. All new d) Look to contribute to organisations that are making background, social group, disability, sexual orientation, remarkable efforts to promote the principles in the marital status, age or political opinion. employees receive a copy of the Code of Business Conduct, and an e-learning course has been established. communities we operate. Odfjell Drilling will not use any form of forced labour or Furthermore, ethics and business conducts has been an Odfjell Drilling contributes financially to Red Cross child labour. The Group will maintain the freedom of Norway. Additionally Odfjell Drilling’s local branches association and the right to collective bargaining. The important issue on the agenda of all Leadership Training and Business Management courses for the last decade, supports activities for children and youth in their local Odfjell Drilling is committed to ethical, safe and sustainable value creation for Group shall comply with internationally recognised labour communities. standards covering the following areas: wages, working covering several hundred people over the last years. An hours, disciplinary practices, employment contracts and expanded Business Management “toolbox” is currently As an overall assessment of Odfjell Drilling’s CSR related our shareholders, employees and other stakeholders, as well as the communities working conditions. being launced work in 2013, we are confident that a good platform Our intranet, Pulse, is also serving as an important for further development has been established. We The same applies for any suppliers, business partners, believe that the introduction of our CSR policy will have in which we operate. The constituting documents for our core values are our agents working with Odfjell Drilling. channel of communication regarding our values towards our employees. Overall, Odfjell Drilling is working a further positive effect on our contribution in the area continuously on raising awareness of our values. of Corporate Social Responsibility. In 2014 we will focus Code of Business Conduct and our Corporate Social Responsibility Policy. RESPECTING HUMAN RIGHTS AND CONTRIBUTION on communicating our new policy and implementing TO LOCAL COMMUNITIES All Business Areas in Odfjell Drilling underwent ISO- initiatives to ensure that our goals in this area are put 14001 certification audit in December 2013.In order into practice. The Corporate Social Responsibility Policy was adopted by the Group Odfjell Drilling’s commitment to respecting human rights to monitor that the principles are followed, KPI’s (Key wherever we operate is embodied in our Corporate Performance Indicators) regarding QHSE has been on December 1st 2013. Through our Company Management System, Management System and our Code of Business Conduct. established for each Business Area. The KPI’s are reported on a monthly basis. We believe that Odfjell Drilling has a responsibility to Code of Business Conduct and our Corporate Social Responsibility Policy, respect human rights and that we are able to play a Corporate Risk Committee meetings are held to ensure positive role in the communities we operate. Our global satisfactory risk analysis on new material projects and operations are consistent with the spirit and intent of the / or countries, including integrity checks on agents and we also adhere to the UN Global Compact Principles. United Nations Universal Declaration of Human Rights; contractual partners. the International Labor Organization (ILO) Declaration
44 ODFJELL DRILLING ANNUAL REPORT 2013 45 The Board of Directors Carl-Erik Haavaldsen Chairman, Odfjell Drilling
CARL-ERIK HAAVALDSEN BENGT LIE HANSEN CHAIRMAN DIRECTOR
Carl-Erik Haavaldsen has a Master of Business Bengt Lie Hansen has a Master of Business Administration from the Norwegian School of Economics Administration from the Norwegian School of Economics (NHH) and a Master of Business Administration from (NHH) and a Master of Law from the University in Oslo UCLA (University of California, Los Angeles). (UiO). Mr. Lie Hansen has 38 years of experience in Mr. Haavaldsen has held executive positions in the oil, gas and offshore industry. He has been head of companies within the commercial banking, investment division in the Ministry of Petroleum and Energy, Vice banking and shipping industries. He has served as CEO President of Deminex Norway, Senior Vice President of for an Oslo securities firm as well as for a tanker shipping Norsk Hydro, in charge of Finance, Commercial, Natural company previously listed on the Oslo Stock Exchange. Gas and the Ormen Lange project. He has also served as Mr. Haavaldsen has further extensive experience President of Statoil Russia. He is currently a non-equity from previous and current board positions and is an partner in the Norwegian law firm Selmer. He is a experienced business advisor. Directors of TGS and Chairman of the Board of RN Nordic Oil AS.
HELENE ODFJELL HENRY H. HAMILTON III DIRECTOR DIRECTOR
Helene Odfjell has a Master of Business Administration Henry H. Hamilton III is currently Chairman of TGS-NOPEC from the Norwegian School of Economics (NHH), Geophysical Company ASA (TGS). He served as CEO of a Master of Business Administration from London TGS from 1995 to June 2009. Mr. Hamilton began his Business School and is a Chartered Financial Analyst. career as a geophysicist with Shell Offshore (1981 – Mrs. Odfjell has many years of experience in business and 1987) before he moved to Schlumberger (1987 – 1995), management and holds many board positions in the where he ultimately held the position of Vice President affiliates of the Company. and General Manager for all seismic product lines in North 2013 and South America. He joined TGS as its CEO in 1995 and remained in the position following the 1998 merger with NOPEC International that led to the initial public listing for In 2013 Odfjell Drilling celebrated its 40th anniversary. consider additional areas of business both with regard of the Company. High quality operations by dedicated KIRK L. DAVIS TGS. He was first elected as a Director of TGS in 1998 and Since placing the very first order for the Aker H3 rig in to products/technology and geography. And into this, and satisfied employees, strong cost consiousness and DIRECTOR its Chairman in 2009. He served as a director of Odfjell 1973, the Company has over the span of four decades always; at all levels operational focus on safety for a continuous improvement of customer relationship and Offshore Ltd., a subsidiary of the Company, from April grown into a significant, diversified oil service group everyone involved and on a clean environment. sales’ efforts, are all important factors in our strategy for Kirk L. Davis has a degree in accounting from Mt. Allison 2011 to September 2011. with operations in a large number of different locations achieving this. Financial strength and size is increasingly University, and is a Chartered Accountant of Bermuda around the world. The autumn of 2013 marked the start of a new era in important in our highly capital intensive and cyclical and a Chartered Professional Accountant of Ontario. He is the history of Odfjell Drilling. The Company launched in industry. We shall continue to improve our overall Applied persistently, and always with a long term September its first public offering and was listed on the position as we keep going forward. currently the President and a Director of Pin High Limited, perspective, key factors in the Company’s successful Oslo Stock Exchange. a company providing private client financial services. development have been a firm commitment to Mr. Davis has extensive experience from previous and investments in skilled personnel and new, efficient The most important issue for the Board of Directors is of current board positions. equipment as well as a willingness and ability to course to grow financially and otherwise the strength
46 ODFJELL DRILLING ANNUAL REPORT 2013 47 BOARD OF DIRECTORS REPORT
The Board of Directors Report
Odfjell Drilling Ltd. (“Odfjell Drilling” or the “Company”) is an integrated offshore drilling and oil service company with more than 40 years’ experience, which in addition to owning and operating a fleet of high quality harsh and ultra-deepwater mobile offshore drilling units, has substantial presence in platform drilling, engineering and well services. The Company was listed on the Oslo Stock Exchange on 27 September 2013 and has close to 3,200 employees. Odfjell Drilling is present in several regions worldwide supporting a client base primarily consisting of major oil and gas companies. The Odfjell Drilling Group generated revenues of USD 1.2 billion in 2013 and a net profit of USD 69 million.
48 ODFJELL DRILLING ANNUAL REPORT 2013 49 BOARD OF DIRECTORS REPORT
GROUP STRUCTURE The Well Services business segment is experiencing against the Norwegian Tax Authorities, as a result of and partly owned subsidiaries and joint ventures. trading of the company’s shares or voting rights as per Petrobras in Brazil, which expires in May 2015. high demand in all regional markets for their range of the outcome of the trial in 2013. Additional tax expense 31.12.2013. Odfjell Drilling Ltd. is the parent company of the Odfjell products and services. In 2013 Well Services entered into caused by change in estimates related to the tax court The parent company reported a loss of USD 2.5 million, Deepsea Metro I and Deepsea Metro II are both owned Drilling Group. several new contracts in Norway, UK, mainland Europe, case in 2013 is USD 68.6 million. (2012: a profit of USD 5.4 million). This result primarily by the Deep Sea Metro Group, a joint venture between reflected that the net interest income from subsidiaries Odfjell Drilling (40 percent) and Metro Exploration The Company was incorporated in Hamilton, Bermuda in the Middle East and South East Asia with both new and SEGMENT REPORTING existing clients. USD 67.3 million of the net profit was attributable to the was offset by other financial expenses related to the Holding Corp. (60 percent). Odfjell Drilling operates the November 2005 and the Group has 40 years’ experience owners of the parent company (2012: USD 102.5 million) listing of the company on the Oslo Stock Exchange. There vessels under individual management agreements. in the offshore drilling industry. The operating entities in Odfjell Drilling has organised its activities into three main In 2013 Odfjell Drilling divested its mooring rental while USD 1.3 million was attributable to non-controlling were no dividends from subsidiaries in 2013. business segments: the Group are based in Norway, the UK, the Netherlands, business unit. interests (2012: USD 14.3 million). The latter is profit Deepsea Aberdeen is a semisubmersible under Brazil, UAE, Romania, Singapore, Thailand, Saudi Arabia, for non-controlling interests in the Deepsea Bergen Total assets in the parent company amounted to USD • Mobile Offshore Drilling Units (MODU) construction at the DSME yard in South Korea, with Angola, Tanzania and the Philippines as wholly or partly Due to the negative outcome of the court trial between structure. 1,356.0 million, as of 31 December 2013 (2012: USD expected delivery in Q4 2014. This sixth generation owned subsidiaries or joint ventures. Odfjell Rig Ltd. and the Norwegian Tax Authorities, the 1,376.1 million). The reduction mainly reflected a • Drilling & Technology rig will be a sister rig to Deepsea Atlantic and Deepsea Group changed its estimate regarding the expected amount Total comprehensive income in 2013 was USD 48.9 decrease of USD 15.9 million in loans to related parties, Stavanger, built to the enhanced GVA 7500 ultra Odfjell Drilling has organised its activities into three to be paid as a consequence of this tax court case. Odfjell million (2012: USD 138.1 million). as well as a decrease in current assets of USD 7.1 million. • Well Services deepwater and harsh environment design. A seven-year business segments: Rig Ltd. still disputes the Norwegian Tax Authority’s view contract was signed with BP in the first quarter of 2012. that Odfjell Rig Ltd., is taxable for its participation in Deep Equity in the parent company stood at USD 957.9 million • Mobile Offshore Drilling Units (MODU) (2012: USD 969.0 million), corresponding to an equity Sea Drilling Company II KS. The case has been appealed BALANCE SHEET MOBILE OFFSHORE DRILLING UNITS (MODU) • Drilling & Technology through the court system. For further information, please ratio of 70.6 percent (2012: 70.4 percent). Odfjell Drilling has more than 40 years of experience MANAGED DRILLING UNITS refer to note 15 of the financial 2013 statement for more Consolidated total assets amounted to USD 2,736.2 million • Well Services Cash outflow from operating activities was USD 1.5 in design, ownership and operational management of information related to the tax court case. on 31 December 2013 (2012: USD 2,804.4 million). In addition to the wholly and partly owned units, the million (2012: cash inflow of USD 4.9 million). The change semisubmersible rigs, drillships, jack-ups and modular was mainly a reflection of the decrease in result from Group manages the rig Island Innovator on behalf Total non-current assets amounted to USD 2,239.4 drilling units. In recent years, the Group has invested of Maracc. The management agreement comprises million (2012: USD 2,323.4 million), and the decrease is 2012 to 2013 and change in working capital. Cash flow in a renewal of the fleet with state-of-the-art sixth IMPORTANT DEVELOPMENTS IN 2013 GOING CONCERN ASSUMPTION from investing activities was USD 15.9 million in 2013 project management, marketing and operation of the mainly caused by depreciations of fixed assets during the generation deepwater drilling units, three of which also rig, including crewing, quality systems and technical In recent years the MODU business segment has grown year, but is partly offset by an increase in sub-ordinated (2012: a cash outflow of USD 0.4 million). The change feature harsh environment capabilities. The financial statements have been prepared on the operation. considerably, with three mobile drilling units mobilised for loan to Deep Sea Metro Ltd. in 2013. mainly reflected payment of a long term receivable from basis of the going concern assumption and in accordance The total revenue for the MODU segment was USD 762 international operations in Angola, Tanzania and Brazil. related parties. Rig owner Maracc has a contract for 12 wells with Lundin with Norwegian Accounting Act Section 3-3 the Directors million (2012: USD 693 million), an increase of USD 69 In 2013 the activities in the MODU business segment Current assets amounted to USD 496.8 million (2012: Norway AS to be drilled over a period of approximately have confirmed that this was realistic at the time the Cash outflow from financing activities was USD 16.1 million, or 10 %. The increase was primarily attributable were further strengthened by the commencement of USD 480.9 million), USD 200.9 million of which was cash two years. Odfjell Drilling received the acknowledgement accounts were approved. The basis for the assumption is million (2012: a cash outflow of USD 41.0 million). This to the management agreement with Island Innovator and drilling operations of the semisubmersible rig Island and cash equivalents (2012: USD 200.6 million). of compliance (AOC) for the rig from the Norwegian the positive status of the Company’s equity, debt funding change mainly reflected a net increase in long-term loans an increase in financial utilisation for Deepsea Atlantic Innovator, which is managed by Odfjell Drilling on behalf Petroleum Safety Authority in August and commenced and secured contract portfolio. The parent company and Total equity amounted to USD 1,130.3 million (2012: from subsidiaries and payment of a dividend in 2013. and Deepsea Stavanger. In addition Deepsea Metro I of Marine Accurate Well ASA (Maracc), on the Norwegian operations for Lundin Petroleum Norway on the the Group are in good financial position for future growth USD 1,154.3 million), of which equity attributable to the entered into a new contract with a higher day rate in continental shelf. Norwegian continental shelf in September. in each of their respective business areas. owners of the parent company amounted to USD 1,130.3 June 2013, and Deepsea Metro II was in operation for the Following the water ingress incident at the DSME million (2012: USD 1,125.5 million). The equity ratio was ALLOCATION OF PROFITS full year 2013 compared with 7 months in 2012. EBITDA The Odfjell Galvão drillship projects comprise three yard in South Korea ultimo December 2013, the 41.3 percent at the end of 2013 (2012: 41.2 percent). increased by USD 53 million in 2013 to USD 338 million. drillships to be built by Jurong in Singapore and Estaleiro The Board of Directors proposes the following allocation semisubmersible rig under construction, Deepsea CONSOLIDATED ACCOUNTS Jurong Aracruz in Brazil, scheduled for delivery from 2016 Total liabilities amounted to USD 1,605.8 million at MODU was responsible for the operation of five owned Aberdeen, has been recovered and Odfjell Drilling will of the loss of the year of USD 2.5 million in 2013: onwards. Odfjell Drilling’s indirect ownership percentage (Comparable figures in brackets) the end of 2013 (2012: USD 1,650.1 million), reflecting and partly owned mobile drilling units in addition to one take delivery of the rig in October / November 2014 with is 10% in the vessels. a decrease in net interest-bearing debt of USD 48.3 Transferred from other equity: USD 2,536,023. Total unit under a management agreement with Maracc ASA. the objective to commence drilling operations during The below discussion covers the major items in the million, a decrease in derivative financial instruments of allocated: USD 2,536,023. Q1 2015. Project activities and operational preparations Odfjell Drilling Group financial statements for 2013. USD 9.6 million, which were partly offset by an increase Deepsea Atlantic is a sixth generation ultra deepwater for the newbuild semisubmersible Deepsea Aberdeen in deferred tax liability of USD 17.9 million. Total current and harsh environment semisubmersible on a long- DRILLING & TECHNOLOGY continued in 2013 and have been revised in accordance liabilities decreased from USD 416.4 million to USD term contract for Statoil on the Gullfaks-field on the Equity and shares The Drilling & Technology business segment is with rescheduled delivery and commencement of the rig. INCOME STATEMENT 411.5 million, mainly reflecting a decrease in short term Norwegian continental shelf. In August 2013 Statoil The Company had book equity of USD 1,130 million and a exercised a one-year option for use of the rig until responsible for platform drilling, project management In addition to the Deepsea Aberdeen project, MODU interest-bearing debt, an increase in current income tax Odfjell Drilling generated operating income of USD book equity ratio of 41% as of 31 December 2013. August 2015. The contract has an additional priced two- and engineering services. This business unit is a leading activities are destined to grow further as a result of and an increase in other current liabilities. 1,173.6 million in 2013, an increase of 7.3 percent over year option. company in platform drilling in the North Sea region new activities under the auspices of Odfjell Galvão, a 2012. Net interest bearing debt amounted to USD 1,071.4 The Company has only one class of shares. Each share in and is responsible for integrated drilling services on 50/50 joint venture between Odfjell Drilling and Galvão million (2012: USD 1,151.2 million). the Company carries one vote, and all shares carry equal Deepsea Stavanger is a sixth generation ultra deepwater 20 fixed and floating production drilling platforms off Enghenaria in Brazil. In 2013, construction work for the The operating profit (EBIT) amounted to USD 247.8 rights, including the right to participate in general meetings. and harsh environment semisubmersible delivered by the coast of Norway and the UK. The business area newbuild drillship Guarapari started in Singapore. million in 2013, (2012: USD 183.7 million). EBIT in 2013 All shareholders shall be treated on an equal basis, unless the DSME yard in July 2010. The rig is on contract to BP provides production drilling, completion, work-overs, slot included a USD 19.6 million gain relating to the sale of the there is just cause for treating them differently. for drilling operations off the coast of Angola. In June In 2013, the ownership jurisdiction of Deepsea Stavanger CASH FLOW recovery, plugging and abandonment, maintenance and Mooring business unit. 2013 BP exercised a one-year option for use of the rig modification. and Deepsea Atlantic was transferred to Singapore, with The Company’s constituting documents do not impose Cash flow from operating activities amounted to USD until November 2014. The contract has in addition two the objective to secure the Group’s competitiveness EBIT was affected by profit from joint ventures which any transfer restrictions on the Company’s common 245.1 million (2012: USD 267.2 million). The decrease unpriced one-year options. The business segment is providing engineering services long-term. were USD 0.4 million in 2013 (2012: a loss of USD 13.4 was mainly due to increase in paid income tax. shares and the Company’s common shares are freely towards mobile drilling units, fixed platforms, core million). The improved result from joint ventures was transferable in Norway, provided, however that the Bye- Deepsea Bergen drilled for Statoil on the Norwegian In the Drilling & Technology business segment, the Group business support services and project management. primarily caused by reduced losses in the joint venture The cash outflow from investing activities amounted laws include a right for the Board to decline to register continental shelf in 2013. The drilling contract with was awarded a contract with Statoil in 2013 for platform Drilling & Technology operates from offices in Bergen, Deep Sea Metro Ltd, Group. to USD 81.4 million (2012: USD 305.9 million). The main a transfer of any share in the register of members, or Statoil expires in July 2017. The contract includes a drilling and project services on the Mariner field on the Stavanger, Aberdeen and Stjørdal. investments in 2013 being in well services equipment, if required, refuse to direct any registrar appointed by one year priced option. In January 2013 Odfjell Drilling UK continental shelf. Odfjell Drilling will perform drilling Net financial costs amounted to USD 76.8 million in 2013 increase in subordinated loan to the joint venture the Company to transfer any interest in a share where increased its ownership from 71.5 percent to 100 percent Operating revenue in Drilling & Technology segment services, maintenance of the drilling facility and drill pipe (2012: USD 35.7 million). Net financial costs included company; Deep Sea Metro Ltd. and investments in joint such transfer would result in 50% or more of the shares of Deepsea Bergen. In the autumn 2013 Deepsea Bergen increased by USD 36 million to USD 352.0 million in 2013. logistics on the Mariner platform. The Mariner platform interest income of USD 9.8 million (2012: USD 7.4 venture companies. The proceeds from sale of fixed or votes being held, controlled or owned directly or underwent a client covered yard stay to increase variable The increase in revenue was mainly caused by increased is currently under construction and commencement of million), borrowing costs of USD 65.5 million (2012: USD assets is mainly explained by the sale of the Mooring indirectly by individuals or legal persons resident for tax deck load and improve operational capacities. The yard activity related to Statoil/Wintershall platform drilling drilling is expected during the fourth quarter of 2016. 64.0 million) and net other financial expenses totalling business line and related equipment. purposes in Norway or, alternatively, such shares or votes stay lasted 26 days and the rig was on zero rate for five contract in Norway (two new platforms in 2013; Brage The contract duration is four years plus three 2 year USD 21.1 million (2012: a profit of USD 20.9 million). The being effectively connected to a Norwegian business days, which was two days less than originally planned. and Njord), and increased activity on the UK Continental options. In addition, Statoil has an option to award the change in other financial items is primarily the result of The cash outflow from financing activities amounted activity. The purpose of this provision is to avoid the Shelf in the period. The activity has also increased within same services to Odfjell Drilling on the Bressay field increased currency exchange loss and other financial to USD 164.7 million (2012: USD 61.0 million). This Company being deemed a Controlled Foreign Company Deepsea Metro I is an ultra deepwater drillship of Gusto engineering services related to yard stays and new in the UK. Drilling & Technology has in 2013 delivered expenses related to the listing of Odfjell Drilling Ltd, on mainly reflected the net repayment of debt to financial pursuant to Norwegian tax rules. This represents a P-10000 design delivered by Hyundai Heavy Industries builds. EBITDA of USD 25 million was unchanged from project management and engineering services for the the Oslo Stock Exchange. institutions of USD 85.6 million (2012: net increase USD deviation from section 5 of the Code, but the Company in South Korea in June 2011. Deepsea Metro I currently 2012 to 2013. mobilization of Island Innovator and the client funded 44.3 million) and acquisition of non-controlling interests Pre-tax profit amounted to USD 171.0 million in 2013 does not foresee that this provision will impact on the operates off the coast of Tanzania for the BG Group. yard stay of Deepsea Bergen. It also performed project of USD 64.3 million. The Drilling & Technology business segment offers a (2012: USD 148.0 million). free transferability of its shares. In May 2013, the contact period was extended by 18 management services for the Group’s Deepsea Aberdeen months from June 2013. broad range of project management and engineering newbuild project in addition to delivering project The tax expenses amounted to USD 102.3 million in The company has not established any share purchase services for both owners of mobile drilling units and Deepsea Metro II is an ultra deepwater drillship of drilling facilities on production facilities. The broad range management and engineering services in connection 2013, (2012: USD 31.2 million) and the net profit for the PARENT COMPANY ACCOUNTS program for employees as per 31.12.2013. with major modification projects on offshore production Group declined to USD 68.6 million (2012: USD 116.9 Gusto P-10000 design, delivered by Hyundai Heavy of services provided for mobile drilling units include The company is not aware of any shareholder facilities. million). The increased tax expense is mainly caused by The business of the parent company; Odfjell Drilling Ltd, Industries in South Korea in November 2011. Deepsea design, engineering, building supervision, classification, agreements or any other agreements which limits change in estimates for the outcome of the court case is as a holding company for investments in both wholly Metro II currently operates on a three year contract, with authorities compliance, yard stays, technical support,
50 ODFJELL DRILLING ANNUAL REPORT 2013 51 BOARD OF DIRECTORS REPORT
marine operations, lifting operations, subsea services, potential in Eastern Europe, Africa, Brazil and South East Its Personnel policy states that the Odfjell Drilling Group The level of risk has decreased in Odfjell Drilling over the The Group’s technology strategy for 2012-2015 focuses interest rate risk relating to its debt financing and its project support, supply chain management, maintenance Asia. shall recruit and develop staff based on merit and equal last years, and most HSE trends show a positive trend. on four core technological areas: holding of interest bearing assets and cash and cash systems, and drilling technology. The business segment opportunities, regardless of ethnicity, religion, national Both the lost time incident frequency (H1), the total equivalents. None of the Group’s borrowings are at fixed offers its services to both internal and external clients. origin, gender, age, sexual orientation, marital status or recordable incident frequency (H2) and the high potential • Conceptual development interest rates and interest rate risks are mitigated by disability. incident frequency (HIPO) has improved steadily the using financial instruments such as interest rate swap The business segment provides engineering services ORGANISATION, HEALTH, SAFETY • Effective operations AND ENVIRONMENT last couple of years, including 2013. There were 4 lost agreements. for drilling facilities on production installations. The Equality is an integral part of the Group’s Personnel time incidents in 2013, none of which caused serious • Availability of machinery services include drilling modules, specific drilling support The Group’s operational activities are carried out in a Policy that ensures that all employees are given the incidents. The injuries were one hand/finger injury, one The Group’s commercial counterparts are primarily large • Asset traceability modules and associated drilling equipment, concept number of wholly or partially owned subsidiaries and same opportunities for employment, pay, as well as foot injury, one incident with broken ribs and one caught international E&P companies, and the credit risk is limited. studies, FEED, detailed engineering, purchasing, professional development in terms of training and Provisions for bad debt amounted to 2.0 percent of joint ventures in Norway, the UK, the Netherlands, Brazil, between incidents. The technology strategy also supports the zero fault construction, supervision, installation, commissioning promotion. The Group works actively and systematically accounts receivable in the balance sheet at year end 2013. UAE, Romania, Singapore, Thailand, Saudi Arabia, Angola, objectives and aims to improve the HSE level of the (EPCI), operation/P&A, project support and maintenance through internal Governing documents, employee Unfortunately the dropped object frequency >40 Tanzania and the Philippines. Group’s operations, as well as reducing the impact on the systems. training and various other measures to prevent any form joule has increased in 2013. Preventive and corrective Odfjell Drilling held cash and cash equivalents amounting environment. Odfjell Drilling’s vision is to become a recognised leader of discrimination. Such measures include recruitment programs have been initiated and implemented and to USD 200.9 million at the end of 2013 and unused In 2013 the Engineering Norway unit has delivered within the global offshore drilling market, aiming for policies and practice, salary- and working conditions, we have registered improvements within some of our credit lines of USD 530 million related to delivery of project management and engineering services to several leadership in QHSE, operational efficiency, technological personal development opportunities, promotions and business areas. Strong focus and specific programs on Deepsea Aberdeen in 2014. This is deemed to be mobile drilling units. Project services related to the achievements, and profitable growth. Odfjell Drilling had shelter against harassment. reduction of dropped objects will continue in 2014. RISK FACTORS sufficient funding for the Group’s current activity levels mobilization of Island Innovator for drilling services in a total of 3,167 employees at the end of 2013. and committed capital expenditures. Norway represented the most important project in 2013. Although it is emphasized that equality and non- Leadership and compliance are fundamental elements in discrimination are ultimately the management’s building and maintaining a strong QHSE culture. OPERATIONAL AND INDUSTRIAL RISK FACTORS The Drilling & Technology business segment has responsibility, all parties in the enterprise have a contracts for platform drilling operations for Statoil, BP, In 2014 Odfjell Drilling will have a special focus on: OUTLOOK WORKING ENVIRONMENT AND PERSONNEL responsibility for ensuring and safeguarding equality. Odfjell Drilling provides drilling and maintenance services Talisman Sinopec Energy, Taqa and Wintershall on a total All employees have access to the Group’s governing for the oil and gas industry, which historically has been Demand for the Group’s services is satisfactory in all of 20 platforms in Norway and the UK. The working environment in Odfjell Drilling is • Compliance & leadership considered to be good and sustaining a healthy working documents through Odfjell Drilling’s intranet, which cyclical in its development. The level of activity in the our markets but market conditions are expected to be • Training & competence In addition Odfjell Drilling was in 2013 awarded a four environment is seen as crucial to achieving continuous includes information about the ethics and business offshore oil and gas industry will depend, among other somewhat softer in the near term. In the medium- to culture in Odfjell Drilling, the Group’s management long-term, the Board is of the opinion that the oil year contract with Statoil for platform drilling services improvements in all aspects of the Group’s operations. • Dropped objects things, on the general climate in the global economy, to the Mariner platform on the UK continental shelf. system, managers’ guide, employee handbook etc. oil and gas prices, investment level for oil and gas industry’s demand for drilling services will continue to The contract includes 3x2 years options and an option The Group has conducted annual working environment The governing documents also confirm the Group`s • Barrier management exploration, production and drilling and regulatory be supported by the need for reserves replacement for similar service scope on the Bressay platform. The and organisational surveys since 2005. These surveys commitment to freedom of association and the right to issues relating to operational safety and environmental and by continued spending on exploration and field- • HSE culture internationally Mariner platform is currently under construction and provide the Group with valuable information about the collective bargaining, which is continuously followed up hazards. Financial performance will also depend on the development in the main offshore regions. workings of the organisation and they are important in all activities. The Group complies with internationally balance of supply and demand for mobile drilling units. drilling start up is scheduled to 2016. Odfjell Drilling • Environmental awareness and stewardship For the MODU segment the Board sees a somewhat tools for promoting and developing the working recognized labour standards covering areas such The Group seeks to mitigate these risks by securing long- will provide engineering and commissioning services to softer near term deep- and ultra deepwater market environment. In 2013, the working environmental and as wages, working hours, disciplinary practices, term contracts, for its main assets and services, with Statoil under the construction and start-up phase of the evidenced by shorter lead-times and lack of new organization survey shows a response rate of 86 %. The employment contracts and working conditions. The reputable customers. However, all offshore contracts are field development. long-term tenders. This is caused by a slowdown of oil job satisfaction is considered to be very good and the above requirements are also enforced in contracts with ENVIRONMENTAL REPORTING associated with considerable risk and responsibilities, In October 2013 the operatorship for the Brage platform companies’ growth in E&P spending and the increase average score shows a factor of approximately 5 on a suppliers, business partners, agents etc. Odfjell Drilling has a «zero fault philosophy» related to including technical, operational, commercial and political on the Norwegian continental shelf was transferred from in UDW rig supply, putting pressure on near term day scale from 0 to 6. QHSE. This concept includes prevention of pollution of risks. The Group will take out the insurance coverage Statoil to Wintershall. Odfjell Drilling’s contract for drilling The Group employs people from a diverse range of rates. This will mainly have an effect on the lower spec the environment. deemed adequate to limit these risks. services on the field has been transferred to Wintershall. Odfjell Drilling had a personnel turnover of 8.6 % in 2013 ethnic backgrounds and 60 different nationalities. Odfjell deepwater units and midwater units. Odfjell Drilling has which was a slight reduction compared to the previous year. Drilling’s employees also have a wide age distribution, All business areas in Odfjell Drilling underwent the The Group’s activities also entail risks related to its an UDW fleet of high spec 6th generation units, and as In 2013 Statoil informed Odfjell Drilling that drilling ranging from 18 to 67 years with an average age of ISO-14001 certification process in December 2013 and new-builds, including construction risks, the risk of cost such should be less impacted by the market fluctuations. activities on the Njord and Snorre A platforms on the The high turnover can be explained partly by a generally approximately 41 years. will continue to focus on environmental awareness overruns, risk of delays, etc. These risks will be minimized Norwegian continental shelf will be temporarily stopped tight Labour market, in particular in the international The harsh environment market, especially in the and stewardship in 2014. The HSE Policy and Company through construction contracts, active participation plus due to modification projects. Odfjell Drilling has managed oil and gas industry. While the turnover in the North Of a total of 3,167 employees at the end of 2013, there North Sea, will remain in better balance than the ultra Management System for the environment, based on ISO monitoring and insurance. to employ personnel internally in other operations and Sea is relatively stable, it has been more challenging were 2,834 male (89 %) and 333 female (10.5 %) deepwater market near term. 14001, defines requirements and expectations in order projects. to establish a stable workforce in the new areas of employees. This represents a 1.5 % increase for female operation. compared to previous year. to prevent negative influences on the environment. The Board expects that the Well Services segment will Odfjell Drilling has established environmental principles FINANCIAL RISK FACTORS continue its long-term growth in its selected regions. At Group level, sickness absence was reported at 3 The onshore organization employs 29.9 % females supporting the HSE policy. WELL SERVICES percent (156.544 hours) in 2013. Measures are being compared with 1.2 % in the offshore organization. The Group is exposed to currency risks, particularly The slowdown in oil companies’ E&P growth result in a implemented to maintain a low sick absence rate. since charter contracts are typically denominated in USD more volatile market for the Group’s engineering services Well Services provides a wide range of services to the oil The Corporate Management Group consists of ten whereas operating expenses are primarily incurred in near- to medium term due to potential postponement of industry, including drill tool and tubular rental, tubular Odfjell Drilling is a competence intensive company that is persons, of whom one is female. One of the five board R&D ACTIVITIES local currencies. The Group seeks to minimise these risks projects. running services, and fishing and wellbore cleanout dependent on a high level of expertise and technological members is female. The Group’s activities are based on high competence through currency hedging via financial instruments or by services. During 2013 the mooring rental business Deep know-how amongst its employees. The Group offers The Board of directors will emphasize that there will and experience in offshore drilling activities. Odfjell off-setting local currency elements in charter contracts. Sea Mooring AS was sold. extensive training to ensure that this expertise is There are elected employees representatives on the boards always be uncertainty related to future development and Drilling shall develop and implement technological continuously updated and to promote career development of five of the major management companies in the Group. The Group may also be exposed to currency risk relating future market conditions. Well Services currently operates out of 13 bases in 12 know-how and solutions to achieve its strategic objective for individual employees. In 2013 total training days at The employees of these companies represent nearly 70 per to debt financing in foreign currencies and it may also countries, and performs operations in more than 25 of becoming a leading and preferred drilling services Group level amounted to nearly 11,500 days. cent of the total number of employees in the Group. seek to mitigate these risks through currency swaps, countries worldwide. contractor and engineering and well service provider. hedges or other derivatives. The Group is exposed to During 2013, Odfjell Drilling has continued focusing Operating revenue for the Well Services segment for on training within the QHSE Safety Leadership 2013 was USD 227 million, an increase of USD 19 million HEALTH, SAFETY AND ENVIRONMENT Development programme, the Business Management or 9% from 2012. The increase was mainly due to program and local courses in different regions. At Group Odfjell Drilling works continually to improve quality, increased demand in general. This growth in operating The Board of Odfjell Drilling Ltd level, approximately 200 employees have participated health, safety and security towards a zero fault target revenue has been achieved despite the divestment of in different management development program in and to minimise the impact of its activities on the 1 April 2014, Hamilton, Bermuda the Mooring business unit in 2013. EBITDA for the Well 2013. The Group will in 2014 continue its management environment. Services segment for 2013 was USD 105 million, an development programs and established specific training increase of USD 10 million, or 10% compared with 2012. programs for securing critical competence related to In 2013 Odfjell Drilling has focused on the following main QHSE topics: In 2013 Well Services entered into several new contracts subsea equipment in ultra deepwater drilling operations. in Norway, rest of Europe, Middle East and South East • Quality improvements Asia. The activity level and demand in all of Well Services • Dropped objects markets have been on a high level throughout 2013. The MEASURES TO PROMOTE EQUALITY business segment aims at maintaining a sustainable AND PREVENT DISCRIMINATION • Major accident risk Carl-Erik Haavaldsen Helene Odfjell Kirk Davis Henry Hamilton III Bengt Lie Hansen growth through continuous improvement of existing Chairman Director Director Director Director service areas, expansion into new service areas and Odfjell Drilling emphasizes that all activities, irrespective • Safety Leadership & Compliance continued penetration into new geographical markets. of country of operation, shall comply with the applicable In the future Well Services sees interesting market legislation and the Group’s Code of Business Conduct. • ISO 14001 certification
52 ODFJELL DRILLING ANNUAL REPORT 2013 53 Consolidated Income Statement Consolidated Statement of Comprehensive Income
USD thousands Note 2013 2012 USD thousands Note 2013 2012
Operating revenue 4 1 173 605 1 093 754 PROFIT FOR THE YEAR 68 649 116 858 Total operating income 1 173 605 1 093 754
Other comprehensive income: Other gains/losses 16, 25 22 288 3 438 Items that will not be reclassified to profit or loss: Share of profit / (loss) from joint ventures 7 436 (13 399) Actuarial gain / loss on post employment benefit obligations 13 (9 444) 15 726 Total other items 22 725 (9 961) (9 444) 15 726
Personnel expenses 17 (547 039) (486 182) Items that are or may be reclassified to profit or loss: Depreciation and impairments 5, 6 (145 180) (147 318) Cash flow hedges 2 4 137 (1 707) Other operating expenses 16 (256 338) (266 609) Currency translation differences 11 (14 475) 7 234 Total operating expenses (948 557) (900 109) (10 338) 5 528
Operating profit (EBIT) 247 773 183 683 Other comprehensive income, net of tax (19 782) 21 254
Total comprehensive income 48 867 138 112 Interest income 16 9 823 7 369 Borrowing cost 16 (65 513) (63 955) Attributable to: Other financial items 16 (21 112) 20 936 Owners of the parent 47 883 123 362 Financial income / (expenses) (76 801) (35 650) Non- controlling interests 984 14 750 Total comprehensive income for the period 48 867 138 112 Profit / (loss) before tax 170 972 148 033 Income tax (expense) 15 (102 323) (31 176) Profit / (loss) for the period 68 649 116 858
Of which attributable to the owners of the parent 67 289 102 549 Of which attributable to non-controlling interests 1 360 14 309
Basic earnings per share (USD) 19 0,34 0,51 Diluted earnings per share (USD) 19 0,34 0,51
Items in the statement above are disclosed net of tax. The income tax relating to each item of other comprehensive income is disclosed in note 15.
The accompanying notes are an integral part of these financial statements The accompanying notes are an integral part of these financial statements
54 GROUP FINANCIAL STATEMENTS 2013 55 Consolidated Statement of Financial Position
USD thousands Note 2012 2011 USD thousands Note 2012 2011
ASSETS EQUITY AND LIABILITIES Goodwill 5 26 618 29 091 Share capital 10 2 000 15 Deferred income tax asset 15 - 835 Other contributed capital 329 809 331 794 Property, plant and equipment 6 1 779 724 1 871 897 Other reserves 11 (75 354) (30 896) Investments in joint ventures 7 338 480 331 144 Retained earnings 873 894 824 610 Available-for-sale financial assets 2 3 22 Total equity attributable to owners of the parent 1 130 350 1 125 524 Subordinated loan to related parties 24, 26 79 273 52 069 Derivative financial instruments 2 3 221 - Non-controlling interests - 28 779 Other non current assets 8 12 065 38 387 Total equity 1 130 350 1 154 303 Total non current assets 2 239 384 2 323 445 Borrowings 12 1 092 170 1 140 544 Spare parts 3 666 2 960 Derivative financial instruments 2 16 383 26 390 Trade receivables 8 247 793 242 055 Post employment benefits 13 67 447 62 148 Other receivables 8 44 420 35 289 Deferred income tax liability 15 17 911 - Cash and cash equivalents 9 200 902 200 636 Other non current liabilities 14 450 4 606 Total current assets 496 781 480 940 Total non current liabilites 1 194 361 1 233 688 Total assets 2 736 165 2 804 385 Borrowings 12 180 178 211 270 Trade payables 33 492 36 033 Current income tax 15 42 036 26 021 Social security and other taxes 31 851 32 746 Other current liabilities 14 123 896 110 324 Total current liabilities 411 454 416 394 Total liabilities 1 605 815 1 650 082 Total equity and liabilities 2 736 165 2 804 385
The accompanying notes are an integral part of these financial statements
The Board of Odfjell Drilling Ltd Hamilton, Bermuda, 1 April 2014
Carl-Erik Haavaldsen Helene Odfjell Kirk Davis Henry Hamilton III Bengt Lie Hansen Chairman Director Director Director Director
56 GROUP FINANCIAL STATEMENTS 2013 57 Consolidated Statement of Cash Flows
USD thousands 2013 2012 USD thousands 2013 2012
CASH FLOWS FROM OPERATING ACTIVITIES: CASH FLOWS FROM INVESTING ACTIVITIES: Profit before income tax 170 972 148 033 Purchase of property, plant and equipment (119 853) (210 867) Proceeds from sale of property, plant and equipment 66 702 6 081 Adjustments for: Loans granted to employees 39 118 Depreciation and impairment 145 180 147 318 Sub-ordinated loan to related parties (26 667) (80 000) Unrealised (gain) / loss on interest rate swaps (9 063) (1 616) Other long term receivables 1 699 (21 244) Interest expense - net 46 699 50 271 Purchase of shares incl. joint ventures (8 228) - Borrowing cost 8 991 4 588 Proceeds from sale of shares and bonds 4 924 - Share of (profit) / loss from joint ventures (436) 13 399 Net cash used in investing activities (81 383) (305 911) Net (gain) / loss on sale of shares (2 457) - Net (gain) / loss on sale of tangible fixed assets (19 831) (2 629) CASH FLOWS FROM FINANCING ACTIVITIES: Post-employment benefit expenses less post-employment 4 076 (6 518) Proceeds from debt to financial institutions 347 764 49 408 benefit payments Repayments of debt to financial institutions (433 333) (99 928) Unrealised foreign exchange losses / (gains) on operating 1 741 (21 907) Acquisition shares non-controlling interests (64 259) - activities Dividends paid to owners of the parent (14 847) (1 765) Profit owner period for disposed subsidary 79 - Dividends paid to non-controlling interests - (8 698) Impairment of investments in shares 18 893 Net cash from financing activities (164 675) (60 983)
Changes in working capital: Net change in cash and cash equivalents (920) (99 688) Spare parts (706) 710 Trade receivables (5 738) 8 373 Cash and cash equivalents 01.01 200 636 303 137 Trade payables (2 540) 1 672 Exchange gains/ losses on cash and cash equivalents 1 186 (2 813) Other accruals 1 750 (5 230) Cash and cash equivalents at 31.12 200 902 200 635 Cash generated from operations 338 734 337 355 Interest paid (56 140) (55 672) Income tax paid (37 457) (14 476) The accompanying notes are an integral part of these financial statements Net cash generated from operating activities 245 138 267 207
58 GROUP FINANCIAL STATEMENTS 2013 59 Consolidated Statement of Changes in Equity Notes (all figures in USD thousands)
USD thousands Attributable to owners of the parent 1 | Accounting Principles Share Other Other Retained Total Non- Total capital contributed reserves earnings controlling equity capital interest Balance at 1 January 2012 14 339 095 (35 982) 706 978 1 010 104 22 727 1 032 831 GENERAL INFORMATION measurement and disclosure requirements for use Subsidiaries are fully consolidated from the date on Odfjell Drilling Ltd., and its subsidiaries (together ‘the across IFRSs. The requirements, which are largely aligned which control is transferred to the Group. They are de- Profit / (loss) for the period 102 549 102 549 14 309 116 858 Group’) operates mobile offshore drilling units in addition between IFRSs and US GAAP, do not extend the use of fair consolidated from the date that control ceases. value accounting but provide guidance on how it should be Other comprehensive income for the year 1 (7 301) 5 087 23 026 20 813 441 21 254 to well services and drilling & technology in Norway and around the world. applied where its use is already required or permitted by The Group applies the acquisition method to account for Total comprehensive income for the year 1 (7 301) 5 087 125 574 123 362 14 750 138 112 other standards within IFRSs. business combinations. The consideration transferred Odfjell Drilling Ltd., is incorporated and domiciled in for the aquisition of a subsidiary are the fair values of the Bermuda. The address of its registered office is Clarendon Amendments to IAS 36, “Impairment of assets”, on the assets transferred, the liabilities incurred to the former Dividends paid (7 943) (7 943) (8 698) (16 640) House, 2 Church Street, Hamilton HM11, Bermuda. recoverable amount disclosures for non-financial assets. owners of the acquiree and the equity interests issued by Transactions with owners (7 943) (7 943) (8 698) (16 640) This amendment removed certain disclosures of the the Group. The consideration transferred includes the fair BASIS OF PREPARATION recoverable amount of CGU’s which had been included value of any asset or liability resulting from a contingent in IAS 36 by the issue of IFRS 13. The amendment is not consideration arrangement. Identifiable assets acquired The consolidated financial statements of the Group for the Balance at 31 December 2012 15 331 794 (30 896) 824 610 1 125 524 28 779 1 154 303 mandatory for the Group until 1 January 2014, however the and liabilities and contingent liabilities assumed in a year ended 31 December 2013 comply with IFRS. Group has decided to early adopt the amendment as of 1 business combination are measured initially at their fair January 2013. values at the acquisition date. The Group recognises any The consolidated financial statements ended 31 December non-controlling interest in the acquiree on an acquisition- 2013, comprise the income statement, statement of Profit / (loss) for the period 67 289 67 289 1 360 68 649 NEW STANDARDS, AMENDMENTS AND by-acquisition basis, either at fair value or at the non- comprehensive income, statement of financial position, INTERPRETATIONS ISSUED BUT NOT EFFECTIVE FOR controlling interest’s proportionate share of the recognised Other comprehensive income for the period (9 962) (9 444) (19 407) (376) (19 782) statement of cash flow, statement of changes in equity THE FINANCIAL YEAR BEGINNING JANUARY 1, 2013 amounts of the acquiree’s identifiable net assets. and disclosures. Total comprehensive income for the period (9 962) 57 845 47 883 984 48 867 AND NOT EARLY ADOPTED Acquisition related costs are expensed as incurred. GOING CONCERN IFRS 9 Financial Instruments addresses the classifi cation, measurement, and recognition of financial Acquisition non-controlling interests*) (34 496) (34 496) (29 764) (64 259) The Group has adopted the going concern basis in assets, financial liabilities and hedge accounting. If the business combination is achieved in stages, the preparing its consolidated financial statements. When Dividends paid (8 561) (8 561) (8 561) IFRS 9 was issued in November 2009, October 2010 acquistion date carrying value of the acquirer’s previously assessing this assumption, management has assessed held equity interest in the acquiree is adjusted to fair value Restructuring of par value/number of shares 1 985 (1 985) and November 2013. It replaces the parts of IAS 39 all available information about the future. This comprises that relate to the classification and measurement of at the acquisition date; any gains or losses arising from Transactions with owners 1 985 (1 985) (34 496) (8 561) (43 057) (29 764) (72 820) information about net cash flows from existing time financial instruments. IFRS 9 requires financial assets such re-measurement are recognised in profit or loss. charter contracts, drilling management contracts, other to be classified into two measurement categories: service contracts, debt service and obligations under those measured as at fair value and those measured Goodwill is initially measured as the excess of the Balance at 31 December 2013 2 000 329 809 (75 354) 873 894 1 130 350 0 1 130 350 existing newbuilding contracts. Forecasts take into at amortised cost. The determination is made at initial aggregate consideration transferred and the fair value of consideration expected future net income from assets recognition. The classification depends on the entity’s non-controlling interest over the net identifiable assets under construction. After making such assessments, business model for managing its financial instruments acquired and liabilities assumed. If this consideration is management has a reasonable expectation that the The accompanying notes are an integral part of these financial statements and the contractual cash flow characteristics of the lower than the fair value of the net assets of the subsidiary Group has adequate resources to continue its operational instrument. For financial liabilities, the standard retains acquired, the difference is recognised in profit or loss. existence for the foreseeable future. *) On 29 January 2013, the subsidiary Odfjell Rig AS acquired the following shares from non-controlling interests: most of the IAS 39 requirements. The main change is that, - 25.187 % of the shares in the subsidiary Deep Sea Drilling Company KS; charter party for drilling contract with Statoil in cases where the fair value option is taken for a financial Inter-company transactions, balances, income / - 25.187 % of the shares in the subsidiary Deep Sea Drilling Company II KS, former rig owner of Deepsea Bergen BASIS OF MEASUREMENT liability, the part of a fair value change due to an entity’s expenses on transactions between group companies - 27.625 % of the shares in the subsidiary KS AS Bergen Drillpart; holding company and co-owner shares in Deep Sea Drilling Company KS and Deep Sea Drilling Company II KS. The consolidated financial statements have been prepared are eliminated. Profits and losses resulting from inter- The shares were acquired for a total of USD 64.3 million resulting in a decrease in equity of the same amount. own credit risk is recorded in other comprehensive income under the historical cost convention, except for available- company transactions that are recognised in assets are rather than the income statement, unless this creates an also eliminated. Accounting policies of subsidiaries have for-sale financial assets and derivative instruments, which accounting mismatch. IFRS 9 includes a number of changes are measured at fair value. and simplifications that increase the possibilities for been changed where necessary to ensure consistency employing hedge accounting. The Group is yet to assess with the policies adopted by the Group. Transactions with The preparation of financial statements in conformity IFRS 9’s full impact. The Group will also consider the impact non-controlling interests (owners) that do not result in loss with IFRS requires the use of certain critical accounting of the remaining phases of IFRS 9 when completed by of control are accounted for as equity transactions. estimates. It also requires management to exercise the Board. The implementation date for IFRS 9 is not yet its judgement in the process of applying the Group’s decided, but will be earliest 1 January 2017. The difference between fair value of any consideration accounting policies. The areas involving higher degree of paid and the relevant share acquired of the carrying judgement or complexity, or areas where the assumptions CONSOLIDATION amount of net assets of the subsidiary is recorded in and estimates are significant to the consolidated financial equity. Gains or losses on disposals to non-controlling Subsidiaries are all entities over which the group has statements are disclosed in note 3. interests are also recorded in equity. the power to govern the financial and operating policies - generally accompanying a shareholding of more than STANDARDS EFFECTIVE AFTER 1 JANUARY 2013 Joint ventures are accounted for using the equity method. one half of the voting rights. The existence and effect of THAT HAVE BEEN ADOPTED BY THE GROUP Under the equity method, the investment is initially potential voting rights that are currently exercisable or recognised at cost, and the carrying amount is increased or IFR 13, “Fair value measurement”, aims to improve convertible are considered when assessing whether the decreased to recognise the investor’s share of the profit or consistency and reduce complexity by providing a precise Group controls another entity. loss of the investee after the date of acquistion. definition of fair value and a single source of fair value
60 GROUP FINANCIAL STATEMENTS 2013 61 When the Group ceases to have control any retained assessing performance of the operating segments, has purposes. Goodwill is monitored at the operating segment NEWBUILDINGS Management determines the classification of financial (such as an improvement in the debtor’s credit rating), the interest in the entity is adjusted to its fair value at the been identified as the board. level. Newbuildings under construction are capitalised as fixed assets at their initial recognition. reversal of the previously recognised impairment loss is date when control is lost, with the change in carrying assets during the construction as installments are paid to recognised in the consolidated income statement. amount recognised in profit or loss. The fair value is the Goodwill impairment reviews are undertaken annually or the yard. Financial assets are recognised at fair value. Transaction initial carrying amount for the purpose of subsequently FOREIGN CURRENCY TRANSLATION more frequently if events or changes in circumstances cost are expensed in the income statement. Derivatives For assets classified as available for sale, the Group accounting for the retained interest as an associate, indicate a potential impairment. The carrying value of Capitalised costs include contractual costs and costs are placed in this category unless designated as hedges. assesses at the end of each reporting period whether joint venture or financial asset. In addition, any amounts (a) Functional and presentation currency goodwill is compared to the recoverable amount, which related to the monitoring of the project during the Assets in this category are classified as current. there is objective evidence that a financial asset or a previously recognised in other comprehensive income in Items included in the separate financial statements of each is the higher of value in use and the fair value less costs construction period. Contractual costs include costs group of financial assets is impaired. A significant or respect of that entity are accounted for as if the Group had of the Group’s entities are measured using the currency to sell. Any impairment is recognised immediately as an related to the project for the duration of the contract, i.e. Available-for-sale financial assets are non-derivatives that prolonged decline in the fair value of an equity security directly disposed of the related assets or liabilities. This of the primary economic environment in which the entity expense and is not subsequently reversed. from signing of the contract to final completion of the are either designated in this category or not classified below its cost is evidence that the assets are impaired. If may indicate that amounts previously recognised in other operates (‘the functional currency’). The Consolidated contractual work. Any costs incurred prior to the signing of in any of the other categories. They are included in any such evidence exists for available-for-sale financial comprehensive income are reclassified to profit or loss. Financial Statements are presented in USD (in thousands), PROPERTY, PLANT AND EQUIPMENT the contract that relate to the procurement of the contract non-current assets unless the investment matures or assets, the cumulative loss - measured as the difference which is the Group’s presentation currency. Property, plant and equipment comprise mainly mobile are regarded as a purchase of contractual assistance and management intends to dispose of it within 12 months of between the acquisition cost and the current fair value, The Consolidated Financial Statements are presented on offshore drilling units, well services equipment and are included in contractual costs. the end of the reporting period. less any impairment loss on that financial asset previously the basis of the following group structure: b) Transactions and balances machinery and equipment. recognised in profit or loss - is removed from equity and Foreign currency transactions are translated into the IMPAIRMENT OF NON-FINANCIAL ASSETS Loans and receivables are non-derivative financial assets recognised in profit or loss. Impairment losses recognised ODFJELL DRILLING LTD (PARENT COMPANY) with fixed or determinable payments which are not quoted in the consolidated income statement on equity functional currency using the exchange rates prevailing at Property, plant and equipment is stated at historical cost All non-financial assets are reviewed for impairment in an active market. They are included in current assets, instruments are not reversed through the consolidated - Odfjell Offshore Ltd (100%) the dates of the transactions or valuation where items are less depreciation. Historical cost includes its purchase whenever events or changes in circumstances indicate except for maturities greater than 12 months after the income statement. - Odfjell Invest Ltd (100%) remeasured. price, any directly attributable costs of bringing the asset that the carrying amount of an asset may not be balance sheet date, which are classified as non-current - Odfjell Invest I Ltd (100%) to working condition and borrowing costs. recoverable. Whenever the carrying amount of an asset assets. DERIVATIVE FINANCIAL INSTRUMENTS AND - Odfjell Invest II Ltd (100%) Foreign exchange gains and losses resulting from the exceeds its recoverable amount, an impairment loss is Loans and receivables are recognised initially at their fair HEDGING - Deep Sea Atlantic Pte. Ltd. (100%) settlement of such transactions and from the translation Subsequent costs for day-to-day repairs and maintenance recognised in the income statement. - Deep Sea Stavanger Pte. Ltd. (100%) at year end exchange rates of monetary assets and are expensed as incurred. The cost of modernisation value plus transaction costs. Financial assets are written Derivatives are recognised at fair value on the date a off when the contractual rights to the cash flows from the - Odfjell Rig Ltd (100%) liabilities denominated in foreign currencies are recognised and rebuilding projects is included in the asset’s carrying The recoverable amount is the higher of an asset’s fair derivative contract is entered into and are subsequently financial assets expire or are transferred, and the Group - Deep Sea Drilling Company II KS (100%) in the income statement. Foreign exchange gains and amount when it is probable that the Group will derive value less costs to sell and value in use. The fair value less re-measured on a continuous basis at their fair value. The has transferred by and large all risks and rewards from the - Odfjell Offshore Management Pte. Ltd (100%) losses are presented in the income statement within ‘other future financial benefits and the cost of the item can be cost to sell is the amount obtainable from the sale of an method of recognising the resulting gain or loss depends financial asset. - Odfjell Rig II Ltd (100%) financial items’. measured reliably. asset in an arm’s length transaction less costs associated on whether the derivative is designated as a hedging - Odfjell Rig III Ltd (100%) with the disposal. Value in use represents the present instrument, and if so, the nature of the item being hedged. Realised gains and losses are recognised in the income - Odfjell Drilling Shetland Ltd (100%) (c) Group companies The carrying amount of the replaced part is written off. value of estimated future cash flows expected to arise statement as finance income in the period they arise. - Deep Sea Bergen Pte. Ltd. (100%) The results and financial position of all the Group’s Modernisation and rebuilding projects are depreciated over from the continuing use of an asset and from its disposal The Group designates certain derivatives as hedges - Odfjell Drilling Services Ltd. (100%) entities that have a functional currency different from the remaining useful life of the related assets. at the end of its useful life. of highly probable forecast transactions (cash-flow - Odfjell Drilling AS (100%) the presentation currency (USD) are translated into the IMPAIRMENT OF FINANCIAL ASSETS hedges). At the date of the hedging transaction, the - Deep Sea Management AS (100%) presentation currency as follows: Depreciation is calculated on a straight-line basis over Recoverable amounts are estimated for individual assets For assets carried at amortised cost, the Group assesses Group documents the relationship between hedging - Odfjell Drilling Management AS (100%) - Assets and liabilities for each balance sheet presented the useful life of the asset or component. Depreciable or, if this is not possible, for the CGU. For mobile offshore at the end of each reporting period whether there is instruments and hedged items, as well as the object of its - Odfjell Drilling (UK) Ltd (100%) are translated at the closing rate at the date of that amount equals historical cost less residual value. Items of drilling units, each unit is deemed to be a CGU. objective evidence that a financial asset or group of risk management and the strategy underlying the various - Odfjell Drilling US AS (100%) balance sheet; property, plant and equipment with components that have financial assets is impaired. A financial asset or a group hedge transactions. The Group also documents the extent - Odfjell Invest AS (100%) - Income and expenses for each income statement are substantially different useful lives are treated separately The value in use is determined on the basis of the total of financial assets is impaired and impairment losses are to which the derivatives used are effective in smoothing - Deep Sea Drilling Company I AS (100%) translated at average exchange rates (unless this for depreciation purposes. estimated discounted cash flow, excluding financing incurred only if there is objective evidence of impairment the changes in fair value or cash flow associated with the - Odfjell Operations Ltd. (100%) average is not a reasonable approximation of the expenses and taxes. In determining impairment of as a result of one or more events that occurred after the hedge items. Such assessments are documented both - Odfjell Drilling Deep Sea Management DMCC (100%) cumulative effect of the rates prevailing on the The useful lives of assets and the depreciation methods mobile offshore drilling units and other fixed assets, the initial recognition of the asset (a ‘loss event’) and that loss initially and on an ongoing basis. - Deep Sea Management FZE Ltd. (100%) transaction dates, in which case income and expenses are reviewed periodically in order to ensure that the management must make judgements and estimates to event (or events) has an impact on the estimated future - Odfjell Services (Thailand) FLC (100%) are translated at the rate on the dates of the method and period of depreciation are consistent with the determine whether the discounted cash flows generated cash flows of the financial asset or group of financial The effective portion of changes in the fair value of - Odfjell Arabia Drilling Services LLC (100%) transactions); and expected pattern of financial benefits from the asset. by those assets are less than their carrying amount, assets that can be reliably estimated. derivatives designated as cash-flow hedges are recognised - Odfjell Partners Invest Ltd. (100%) - All resulting exchange differences are recognised in including determining the appropriate discount rate to in other comprehensive income (net of tax). Gain and loss - Odfjell Well Services Europe AS (100%) other comprehensive income. When assets are sold or retired, their cost and accumulated be used. The data necessary for the execution of the Evidence of impairment may include indications that the on the ineffective portion is recognised immediately in the - Odfjell Casing Services AS (100%) depreciation and accumulated impairment loss are impairment test are based on management’s estimates of debtors or a group of debtors is experiencing significant income statement. - Odfjell Rental Services AS (100%) Fair value adjustments arising on the acquisition of a eliminated from the accounts and any gain or loss resulting future cash flows, which require estimates to be made for financial difficulty, default or delinquency in interest or - Odfjell Well Services Ltd. (100%) foreign entity are treated as assets and liabilities of the from their disposal is included in the income statement as future day rates, utilisation and profit margins. principal payments, the probability that they will enter Amounts recognised directly in other comprehensive - Odfjell Well Services II Ltd. (100%) foreign entity and translated at the closing rate. gain on sale of assets. bankruptcy or other financial reorganisation, and where income are reclassified as income or expense in the income - Odfjelll Technology Ltd. (100%) The assumptions used in estimating these cash flows are observable data indicate that there is a measurable statement in the period when the hedged liability or - Odfjell Technology AS (100%) INTANGIBLE ASSETS Residual value for mobile offshore drilling units are consistent with internal forecasts. Market outlook and decrease in the estimated future cash flows, such as planned transaction will affect the income statement. - Odfjell Technology Manila Corporation (100%) Goodwill arises on the acquistion of subsidiaries and determined based on the market prices for steel and day rate considerations provided by an independent third changes in arrears or economic conditions that correlate - Odfjelll Drilling Cooperatief UA (100%) represents the excess of the consideration transferred second hand prices for drilling equipment. Any changes are party are used to support management’s estimates. These with defaults. When a hedging instrument expires or is sold, or when a - Odfjell Invest Holland BV (100%) over the Group’s interest in net fair value of the net accounted for prospectively as a change in the accounting considerations are mainly based on the oil price. hedge no longer meets the criteria for hedge accounting, - Odfjell Well Services SRL (100%) identifiable assets, liabilities and contingent liabilities of estimate. The estimated useful life of the rig could change, For loans and receivables category, the amount of the any cumulative gain or loss existing in equity at that time - Odfjell Perfuracoes e Servicos Ltda (100%) the acquiree and the fair value of non-controlling interst in resulting in different depreciation amounts in the future. Non-financial assets other than goodwill that have loss is measured as the difference between the asset’s remains in equity and is reclassified when the forecast - Odfjell Well Services Ltda (100%) the acquiree. Residual value for other property, plant and equipment are suffered an impairment are reviewed for possible reversal carrying amount and the present value of estimated transaction is ultimately recognised in the income - Odfjell Drilling Netherlands BV (100%) estimated to be 0. of the impairment at each reporting date. future cash flows (excluding future credit losses that have statement. When a forecast transaction is no longer - Odfjell Galvao II BV (100%) For the purpose of impairment testing, goodwill acquired not incurred) discounted at the financial asset’s original expected to occur, the cumulative gain or loss that was in a business combination is allocated to each of the Rig and equipment are depreciated over a period of 5 - FINANCIAL ASSETS effective interest rate. The carrying amount of the asset reported in equity is immediately transferred to the income SEGMENT REPORTING 30 years. Periodic maintenance is depreciated over the is reduced and the amount of the loss is recognised in the statement within financial income/expenses. cash generating units (CGUs), or groups of CGUs, that are The Group classify financial assets in the following expected period to next docking, estimated to 5 years. consolidated income statement. Operating segments are reported in a manner consistent expected to benefit from the synergies of the combination. categories: trading financial assets at fair value through CURRENT AND DEFERRED INCOME TAX, with the internal financial reporting provided to the chief Each unit or group of units to which the goodwill is profit or loss, loans and receivables and available-for-sale Estimated useful life for machinery and equipment is If, in a subsequent period, the amount of the impairment WITHHOLDING TAX operating decision maker. The chief operating decision allocated represents the lowest level within the entity at financial assets. maker, who is responsible for allocating resources and which the goodwill is monitored for internal management 3 - 5 years. loss decreases and the decrease can be related objectively The tax expense for the period comprises current and to an event occuring after the impairment was recognised
62 GROUP FINANCIAL STATEMENTS 2013 63 2 | Financial risk management
deferred tax. Tax is recognised in the income statement, If collection is expected in one year or less (or in the liabilities if payment is due within one year or less (or in FINANCIAL RISK FACTORS evaluates the share of interest rate hedging based on Prudent liquidity risk management implies maintaining except to the extent that it relates to items recognised in normal operating cycle of the business if longer), they are the normal operating cycle of the business if longer). If not, The Group is exposed to a range of financial risks: market assessment of the Group’s total interest rate risk and sufficient cash, the availability of funding through credit other comprehensive income or directly in equity. In this classified as current assets. If not, they are presented as they are presented as non-current liabilities. risk (including currency risk, interest rate risk, and price currently has a combination of fixed and floating interest facilities and the ability to close out market positions. Due case, the tax is also recognised in other comprehensive non-current assets. risk), credit risk and liquidity risk. rates in order to limit exposure. to the dynamic nature of the underlying businesses, the income or directly in equity, respectively. Trade payables are recognised initially at fair value and The Group had 13 interest rate swap agreements at Group aims to maintain flexibility in funding by keeping Receivables are initially recognised at fair value and subsequently measured at face value, due to short time to The financial risk management focuses on the 31 December 2013. Market values have been used to committed credit lines available. The current income tax charge is calculated on the basis subsequently at amortised cost using the effective maturity. unpredictability of financial markets and seeks to determine the fair value of the swap agreements at of the tax laws enacted or substantively enacted at the interest method, less provision for impairment. Provision minimise potential adverse effects on the Group’s financial the end of the year. The fair value of the interest swap The Group’s cash flow forecasting is performed by Group balance sheet date in the countries where the company for impairment is made to specified receivable items REVENUE RECOGNITION performance. To some extent, the Group uses derivative agreements is confirmed by the financial institution with Finance. Group Finance monitors rolling forecasts of the and its subsidiaries operate and generate taxable income. when there is objective evidence that, as a result of one Revenue is measured at the fair value of the consideration financial instruments to reduce certain risk exposures. which the company has entered into the agreements. Group’s liquidity requirements to ensure it has sufficient Management periodically evaluates positions taken in or more events that occurred after the initial recognition received or receivable. Revenue is stated net of value- Risk management is carried out on a Group level. The During 2013 a gain from change in market values of cash to meet operational needs while maintaining tax returns with respect to situations in which applicable of the receivable, the estimated future cash flows of the added tax, returns, rebates and discounts and after Group identifies, evaluates and hedges financial risks in interest rate swaps were recognised at USD 9.1 million in sufficient head-room on it’s undrawn committed borrowing tax regulation is subject to interpretation. It establishes investments have been affected. eliminating sales within the Group. close co-operation with the Group’s operational units. the income statement as compared to a gain of USD 1.6 facilities at all times, so that the Group does not breach provisions where appropriate on the basis of amounts The board of Odfjell Drilling Ltd., has established written million in 2012. In addition, a gain of USD 1.7 million was borrowing limits or covenants on any of it’s borrowing expected to be paid to the tax authorities. SPARE PARTS The Group recognises revenue when the amount of principles for the Group regarding risk management classified as a component of the equity as of 31 December facilities. Such forecasting takes into consideration the Spare parts are stated at the lower of cost and net revenue can be reliably measured, it is probable that future of foreign exchange risk, interest rate risk and use of 2012 relating to interest rate swaps qualified for hedge Group’s debt financing plans and covenant compliance. Deferred income tax is recognised, using the liability realisable value. Cost is attributed using the first-in, first- economic benefits will flow to the entity and when specific derivative financial instruments. accounting. In 2013 the gain of USD 3.6 was classified as a method, on temporary differences arising between the tax out (FIFO) method. The costs of spare parts comprise the criteria have been met for each of the Group’s activities as component of the equity as of 31 December 2013, relating Surplus cash held by the operating entities over and above bases of assets and liabilities and their carrying amounts in purchase price, import duties and other taxes, transport described below. a) Market risk to interest rate swaps qualified for hedge accounting. the balance required for working capital management the consolidated financial statements. However, deferred and handling and other costs directly attributable to the The Group bases its estimates on historical results, taking Market risk is the risk of a change in market prices and The Group monitors its interest rate exposure on a is transferred to the Group Treasury. Group treasury tax liabilities are not recognised if they arise from the acquisition of the goods. Trade discounts, rebates and into consideration the type of customer, the type of demand, as well as changes in currency exchange rates dynamic basis. The Group calculates the impact on profit invests surplus cash in interest bearing current accounts, initial recognition of goodwill; deferred income tax is not other similar items are deducted in determing cost. transaction and the specifics of each arrangement. and interest levels. and loss of a defined interest rate shift. time deposits, money market deposits and marketable accounted for if it arises from initial recognition of an The result of the calculation on sensitivities returns the securities, choosing instruments with appropriate asset or liability in a transaction other than a business CASH AND CASH EQUIVALENTS The Group’s revenues are derived from day-rate based I) FOREIGN EXCHANGE RISK following expected values: maturities or sufficient liquidity to provide sufficient head- combination that at the time of the transaction affects - If interest is increased by 1.0 %, the effect will be an room as determined by the above-mentioned forecasts. Cash and cash equivalents include cash in hand, deposits drilling contracts and day-rates from management drilling The consolidated subsidaries’ reporting and functional neither accounting nor taxable profit or loss. Deferred increase in financing costs of USD 6.0 million for 2013, held at call with banks, other current highly-liquid contracts and other service contracts. currencies are USD, NOK, GBP, EUR, BRL, RON, THB, SGD income tax is determined using tax rates (and laws) that compared to USD 8.5 million in 2012. At the reporting date of 31 December 2013, the Group investments with original maturities of three months and PHP. have been enacted or substantially enacted by the balance held time deposits of USD 19 million that are expected or less, and bank overdrafts. Bank overdrafts are shown Revenue from management drilling contracts and other sheet date and are expected to apply when the related b) Credit risk to generate cash inflows for managing liquidity risk, under borrowings in current liabilities in the balance sheet. service contracts is recognised when the services are The Group operates internationally and is exposed to deferred income tax asset is realised or the deferred performed and at the rates specified in the contracts. foreign exchange risk arising from various currency The Group operates in three core business areas: Mobile compared to USD 4 million in 2012. income tax liability is settled. offshore drilling units (MODU), Drilling & Technology and BORROWINGS exposures, primarily with respect to USD and NOK. Foreign Day-rate based drilling contracts may include lump sum exchange risk arises when future commercial transactions Well Services (OWS). The market for the Group’s services The Group had an undrawn credit facility of USD 530 Borrowings are recognised initially at fair value, net of Deferred income tax assets are recognised only to the fees for mobilisation and demobilisation. Both day- or recognised assets or liabilities are denominated in a is the offshore oil and gas industry, and the customers million as of 31 December 2013. The facility is related to transaction costs incurred. Borrowings are subsequently extent that it is probable that future taxable profit will be rate based and lump sum fee revenues are recognised currency that is not the entity’s functional currency. The consist primarily of major integrated oil companies, the delivery of Deepsea Aberdeen in 2014. carried at amortised cost; any difference between the available against which the temporary differences can be ratably over the contract period when services are group is exposed to risks due to fluctuations in exchange independent oil and gas producers and government proceeds (net of transaction costs) and the redemption utilised. rendered. Under some contracts, the Group is entitled to rates, especially as charter contracts are normally in USD owned oil companies. The Group performs ongoing d) Other risks value is recognised in the income statement over the additional payments for exceeding performance targets. while most of the operating expenses are in local currency. credit evaluations of the customers and generally do not period of the borrowings using the effective interest Deferred income tax assets and liabilities are offset when Such additional payments are recognised when any If USD is weakend by 10 % against NOK, on the balance- request material collateral. Reserves for potential credit RIG RATES method. there is a legally enforceable right to offset current tax uncertainties are resolved or upon completion of the sheet date, we can expect the following effect on profit losses are maintained when necessary. With respect to The Group has signed long-term contracts for Deepsea assets against current tax liabilities and when the deferred drilling program. before tax in USD thousands: credit risk arising from other financial assets of the Group, Atlantic and Deepsea Bergen at fixed rates. The rate income taxes assets and liabilities relate to income taxes Fees paid on the establishment of loan facilities are which comprise cash and cash equivalents, marketable consists of a USD element and a NOK element; the latter is recognised as transaction costs of the loan to the extent levied by the same taxation authority on either the same Mobilisation costs incurred as part of a contract are securities, other receivables and certain derivatives annually escalated to reflect the increased costs of staffing that it is probable that some or all of the facility will be 2013 2012 taxable entity or different taxable entities where there is capitalised as receivable and recognised as expense over instruments receivable amount, the Group’s exposure to and maintenance. Both rigs have contracts with Statoil. drawn down. In this case, the fee is deferred until the an intention to settle the balances on a net basis. the contract term, excluding option periods not exercised. Current receivables 14 782 14 306 credit risk arises from default of the counterparty, with draw-down occurs. To the extent there is no evidence that a maximum exposure equal to the carrying amount of Deepsea Atlantic has a contract with fixed duration to it is probable that some or all of the facility will be drawn Cash 9 575 8 692 Withholding tax is the tax withheld on border-crossing EARNINGS PER SHARE these instruments. However, the Group believes this risk August 2015 plus a 2-year option. The drilling contract gross income, generated in Angola. Withholding tax is down, the fee is capitalised as a pre-payment for liquidity Current liabilities (24 703) (19 030) is limited as the counterparties mainly have a high credit with Statoil for Deepsea Bergen expires in June 2017, and services and amortised over the period of the facility to Basic earnings per share is calculated by dividing the presented as tax expense in the income statement. Net effect on profit before tax (346) 3 967 quality. has a 1-year option. which it relates. profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue TRADE RECEIVABLES The maximum exposure regarding trade receivables is the The Group has also signed a drilling contract for Deepsea during the year. Diluted earnings per share is calculated by The Group had 20 foreign exchange contracts at 31 TRADE PAYABLES carrying amount of USD 248 million. Stavanger at a fixed rate. The rate consists of a USD Trade receivables and other receivables, that have fixed or adjusting the weighted average number of ordinary shares December 2013. Market values have been used to Trade payables are obligations to pay for goods or services element and an AOA (Angola Kwanza) element. The drilling determinable payments that are not quoted in an active outstanding to assume conversion of all dilutive potential determine the fair value of the foreign exchange contracts that have been acquired in the ordinary course of business c) Liquidity risk contract expires in November 2014, and has two one-year market are classified as receivables. ordinary shares. at the end of the year. The fair value of the foreign from suppliers. Accounts payable are classified as current exchange contracts is confirmed by the financial institution The Group’s objective is to maintain a balance between options. with which the company has entered into the agreements. continuity of funding and flexibility through the use of credit facilities and to have sufficient cash or cash Deepsea Aberdeen is a semisubmersible under During 2013 a gain of USD 0.5 million was classified equivalents at any time to be able to finance its operations construction at the DSME yard in South Korea, with as a component of the equity as of 31 December 2013 and investments in accordance with the Group’s strategic expected delivery in October/ November 2014. This sixth relating to foreign exchange contracts qualified for hedge plan. generation rig will be a sister rig to Deepsea Atlantic and accounting. With regular forecasts and liquidity analysis updates, the Deepsea Stavanger, built to the enhanced GVA 7500 ultra Group will ensure sufficient available liquidity to fulfill its deepwater and harsh environment design. A seven year II) INTEREST RATE RISK duties at loan maturity, without unacceptable loss or risk contract was signed with BP in the first quarter of 2012. The Group’s exposure to the risk of changes in market of damaging the Group’s reputation. Expected commencement on contract is Q1 2015. interest rates relates primarily to the Group’s long-term debt obligations at floating interest rates. The Group
64 GROUP FINANCIAL STATEMENTS 2013 65 FINANCIAL INSTRUMENTS BY CATEGORY AND LEVEL
The tables below analyse financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: The Group had 13 interest rate swap agreements at 31 December 2013. Market values have been used to determine the fair value of the swap agreements at the end of the year. The - Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) Group has applied hedge accounting for six of the swap agreements entered into in 2012 and 2013. The instruments were documented as cash flow hedges, and changes in fair value - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2) were recognised directly in equity. - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). For short term assets and liabilities at level 3, the value is approximately equal to the carrying amount. As the time horizon is due in short term, future cash flows are not discounted. 2013 2012
The Group had the following financial instruments at each reporting period: Assets Liabilities Assets Liabilities
Note Level 2013 2012 Interest rate swaps - cash flow hedges - (15 482) - (24 573) Interest rate swaps - cash flow hegdes under hedge accounting 2 739 (901) - (1 817) ASSETS AT 31.12. Foreign exchange contracts - cash flow under hedge accounting 482 - - - Available-for-sale financial assets Total 3 221 (16 383) - (26 390) - Other noncurrent assets 3 22 Derivatives held as hedge instrument Less non current portion 3 221 (16 383) (26 390) - Other non current assets 2 2 3 221 - Loans and receivables Current portion - - - - - Subordinated loan to related parties 24, 26 79 273 52 069 - Other non current assets 8 12 065 38 387 As of 31.12. Odfjell Drilling Ltd. held the following derivatives: - Trade receivables 8 247 793 242 055 - Other current receivables 8 44 420 35 289 Instrument Fixed Floating Notional Effective Duration Net market - Cash and cash equivalents 9 200 902 200 636 rate rate amount from value Total assets 587 677 568 458 31-12-13 Interest rate swaps 0,671%-2,890% USD-LIBOR-BBA 450 000 2012-2016 3-4 years (15 483) LIABILITIES AT 31.12. Derivatives held at fair value through profit or loss Interest rate swaps under hedge accounting 0,735%-1,565% USD-LIBOR-BBA 120 000 2012-2021 3-7 years 1 838 - Other non current liabilities 2 2 16 383 24 574 Foreign exchange contracts under hedge accounting - - - 2013-2015 2-3 years 482 Derivatives held as hedge instrument - Other non current liabilities 2 2 - 1 817 31-12-12 Financial liabilities at amortised cost Interest rate swaps 0,671%-2,890% USD-LIBOR-BBA 553 617 2010-2012 3-4 years (24 574) - Interest bearing debt 12 1 272 348 1 351 814 Interest rate swaps under hedge accounting 0,920%-1,565% USD-LIBOR-BBA 215 000 2012-2014 3-7 years (1 817) - Other non current liabilities 14 450 4 606 - Trade payables 33 492 36 033 - Other current liabilities 14 123 896 110 324 Total liabilities 1 446 570 1 529 168
66 GROUP FINANCIAL STATEMENTS 2013 67 3 | Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and countries taken together in the consolidated financial impairment whenever events or changes in circumstances are based on historical experience and other factors, statements. The final tax liability for some transactions indicate that the carrying amount may not be recoverable. Mobile Offshore Drilling Units Drilling & Technology Well Services including expectations of future events that are believed and calculations will be uncertain. An impairment loss is recognised for the amount by which FY 2013 FY 2012 FY 2013 FY 2012 FY 2013 FY 2012 to be reasonable under the circumstances. the asset’s carrying amount exceeds its recoverable The Group recognises tax liabilities associated with future amount. External segment revenue 610 162 588 918 309 810 234 790 191 696 178 319 The Group makes estimates and assumptions concerning decisions in tax cases/disputes, based on estimates of the Inter segment revenue 8 029 5 921 41 768 81 259 35 298 29 840 the future. These estimates are based on the actual likelihood that additional income tax will fall due. The recoverable amount is the higher of an asset’s fair underlying business, its present and forecasted value less costs to sell and value in use. For the purposes Deep Sea Metro Ltd Group revenue 143 483 98 551 - - - - profitability over time, and expectations about external Should the final outcome of these cases vary from the of assessing impairment, assets are grouped at the lowest Total revenue 761 675 693 390 351 579 316 049 226 995 208 159 factors such as interest rates, foreign exchange rates and amount of the original provision, this variance will affect levels for which there are separately identifiable cash EBITDA 338 361 284 987 25 435 24 885 105 133 95 320 other which are outside the Group’s control. The resulting the stated tax expense and provision for deferred tax in flows (CGUs). Non-financial assets other than goodwill that estimates will, by definition, seldom equal the related the period when the final outcome is determined. suffered impairment are reviewed for possible reversal of Depreciation and impairment (133 512) (122 741) (5 373) (5 874) (38 314) (42 610) actual results. The estimates and assumptions that have the impairment at each reporting date. EBIT 204 849 162 246 20 062 19 010 66 820 52 709 a significant risk of causing a material adjustment to the The parent company recognises tax liabilities when these carrying amounts of assets and liabilities within the next are incurred. In other words, the tax expense is related If available, estimated fair value of an asset is obtained financial year are addressed below. to the accounting profit/loss before tax. The tax expense externally. In addition, the Group has financial models Total segments Corporate / Eliminations Consolidated comprises tax payable and the change in net deferred which calculate and determine the value in use through a REVENUE tax. Reference is made to note 21 relating to disclosed combination of actual and expected cash-flow generation FY 2013 FY 2012 FY 2013 FY 2012 FY 2013 FY 2012 The Group’s revenues are derived from day rate based information related to dispute with Norwegian Tax discounted to present value. The expected future cash- External segment revenue 1 111 669 1 002 026 61 937 91 728 1 173 605 1 093 754 drilling contracts, management drilling contracts and other Authorities, and hence the classification of paid tax as long flow generation and models are based on assumptions and service contracts. Day-rate based drilling contracts may term receivable. estimates. Inter segment revenue 85 096 117 020 (85 096) (117 020) - - include lump sum fees for mobilisation and demobilisation. Deep Sea Metro Ltd Group revenue 143 483 98 551 (143 483) (98 551) - - Withholding tax is the tax withheld on border-crossing The discount factor applied in the cash flow budgets is Total revenue 1 340 248 1 217 597 (166 643) (123 843) 1 173 605 1 093 754 Both day rate based and lump sum fee revenues are gross income, generated in Angola. Withholding tax is a pre-tax weighted average cost of capital. Beyond the recognized ratably over the contract period when services presented as tax expense in the income statement. period covered by the business plan, a growth factor EBITDA 468 930 405 191 (75 976) (74 190) 392 953 331 001 are rendered. which varies between 0 % and 5 % is applied, with Depreciation and impairment (177 198) (171 225) 32 019 23 907 (145 180) (147 318) IMPAIRMENT OF NON-FINANCIAL ASSETS an expectation that gross margins will not weaken INCOME TAX Assets that have an indefinite useful life, i.e. goodwill, substantially over time. EBIT 291 731 233 966 (43 958) (50 283) 247 773 183 683 The Group is subject to income tax in many jurisdictions. are not subject to amortisation and are tested annually Various tax systems have required some use of judgement for impairment. Assets that are subject to amortisation for certain countries in determining income tax for all or depreciation, i.e. mobile drilling units, are reviewed for Reconciliations: FY 13 FY 12 Total EBIT for reportable segments 291 731 233 966
Corporate / overhead (19 254) (23 258) Gain from sale of Mooring business unit 19 553 - 40% share of EBIT DSM Ltd (46 197) (23 528) 4 | Segment reporting Share of profit from JV 436 (13 399) Accounting differences 1 503 9 902 EBIT Total Group 247 773 183 683 The Group provides drilling and related services to the been presented in the MODU segment using the line-by- requirements, marketing, contract negotiations and client offshore oil and gas industry, and has three main business line proportionate method. See more information regarding relations, preparations for operation and mobilisation. Net financial items (76 801) (35 650) areas; the operation of mobile drilling units, drilling & this joint venture arrangement in note 7. technology and well services. - Drilling & Technology (OD&T): Within the Drilling & Profit before tax Group 170 972 148 032 The Group’s internal reporting is prepared according to Technology segment, the Platform Drilling business area The Board is the Group’s chief operating decision maker. Norwegian GAAP. This gives nature to differences between provides integrated drilling and maintenance services for Management has determined the operating segments the measurements of segment disclosures and comparable fixed platform drilling rigs in the North Sea. based on the information reviewed by the Board for items disclosed in this financial report. Such differences are The Technology business area offers engineering services, the purposes of allocating resources and assessing identified and reconciled in the tables below. including design, project management and operation and performance. Mobile Offshore Drilling Units business support. segment (MODU), Drilling & Technology business segment - Mobile Offshore Drilling Units (MODU): In the MODU (OD&T) and Odfjell Well Services business segment (OWS) segment, the Group operates drilling units owned by - Well Services (OWS): The Well Services segment provides have been determined as the operating segments. the Group and by third parties. The MODU segment casing and tubular running services as well as drilling tool also offers management services to other owners and tubular rental services both for exploration wells and In accordance with the internal financial reporting, the of semisubmersibles, drillships and jack-ups; mainly for production purposes. Group’s 40% interest in Deep Sea Metro Ltd Group has operational management, management of regulatory
68 GROUP FINANCIAL STATEMENTS 2013 69 5 | Goodwill
The key assumptions used for value-in-use calculations in 2013 are as follows: Goodwill
Drilling & Technology Well Services COST EBIT margin 5,7 % 29,4 % At 1 January 2013 29 091 Growth rate 2,0 % 2,0 % Additions - Discount rate 7,4 % 8,9 % Currency translation differences (2 474) As at 31 December 2013 26 618 The key assumptions used for value-in-use calculations in 2012 are as follows:
ACCUMULATED AMORTISATION AND IMPAIRMENT Drilling & Technology Well Services At 1 January 2013 - EBIT margin 6,0 % 25.3% Impairment charge - Growth rate 2.0% 2.0% As at 31 December 2013 - Discount rate 6.3% 6.3%
Net book value at 31 December 2013 26 618 These assumptions have been used for the analysis of each CGU within the operating segment.
COST Management determined budgeted EBIT margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with At 1 January 2012 27 022 the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments. Additions - Currency translation differences 2 069 As at 31 December 2012 29 091
ACCUMULATED AMORTISATION AND IMPAIRMENT At 1 January 2012 - Impairment charge - As at 31 December 2012 -
Net book value at 31 December 2012 29 091
IMPAIRMENT TESTS FOR GOODWILL
Goodwill is monitored by the management at the operating segment level. The following is a summary of goodwill allocation for each operating segment:
2013 Opening Addition Disposal Impairment Other adjustments Closing Drilling & Technology 22 560 - - - (1 324) 21 236 Well Services 6 531 - - - (1 149) 5 382 Total 29 091 - - - (2 474) 26 618
2012 Drilling & Technology 20 955 - - - 1 605 22 560 Well Services 6 067 - - - 465 6 531 Total 27 022 - - - 2 069 29 091
The recoverable amount of all CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five year period are extrapolated using the estimated growth rates stated below.
70 GROUP FINANCIAL STATEMENTS 2013 71 6 | Tangible fixed assets
Deepsea Bergen is a semisubmersible drilling rig with Aker that have different expected useful lifetimes. Periodic on September 16, 2010. When calculating depreciation, Tangible fixed assets Mobile Periodic Construction in Well Services Machinery & Total fixed H-3.2 design, built in 1983. Deepsea Bergen has completed maintenance is one of the allocated components. The estimated residual value is taken into consideration. drilling units maintenance progress equipment equipment assets a 5 year classification in 2010 and obtained a renewal of different groups of components are depreciated over their Deepsea Bergen was built in 1983. The rig is on a contract the certificate “Samsvarsuttalelse” (SUT) from Norwegian expected useful lifetimes.The main group of components with Statoil. The contract commenced June 2012 and 2013 Petroleum Directorate. is expected to have an economic useful lifetime of 30 has duration on five years and a 1 year option. The main years. The rig is depreciated using the straight line method group of component s is expected to have an economic Cost price 01.01 1 767 097 122 911 109 119 412 013 76 299 2 487 439 NEWBUILDINGS as from the date of completion on August 4, 2009. When useful lifetime of 35 years. The rig is depreciated using Additions 44 733 15 981 24 151 59 139 7 779 151 784 calculating depreciation, estimated residual value is taken the straight line method. When calculating depreciation, The Group has signed a construction contract with into consideration. estimated residual value is taken into consideration. Disposals - - - (13 283) (35 488) (48 771) Daewoo Shipbuilding & Marine Engineering Co. Ltd., on No- Deepsea Stavanger was delivered from the shipyard DSME vember 12, 2011 for the building of an ultra semisubmurs- on July 8, 2010 and commenced the contract with Ophir TRANSFER OF “SHAFFER BOP” Disposal - sale of Mooring division - - - (65 784) - (65 784) ible deepwater rig; Deepsea Aberdeen with an expected Services Energy Ltd. on September 16, 2010. The total delivery date in Q4 2014. On 30 November 2013, there was an agreement signed for Currency translation differences 207 - - (33 350) (3 086) (36 229) expenditures on the rig are allocated into groups of the allocated components that have different expected useful sale of “Shaffer BOP” from Odfjell Partners Invest Ltd. to Cost price 31.12 1 812 036 138 892 133 270 358 736 45 505 2 488 438 BASIS FOR DEPRECIATION/ lifetimes. Periodic maintenance is one of the decomposed Odfjell invest II Ltd., for the price of NOK 184,850,000. The ALLOCATION OF EXPENDITURE components. The different groups of components are transfer of “Shaffer BOP” affects the disposal in “Machinery & Equipment” and acquisitions in “Mobile drilling units.” Deepsea Atlantic was delivered from the shipyard DSME on depreciated over their expected useful lifetimes. The main Accumulated depreciation and impairment losses 01.01 282 102 65 228 - 235 990 32 220 615 539 The asset was transferred at book value. February 6, 2009 and commenced the contract with Sta- group of components is expected to have an economic Depreciation 77 421 24 779 - 37 766 5 215 145 180 toil Petroleum AS on August 4, 2009. The total expendi- useful lifetime of 30 years. The rig is depreciated using tures on the rig are allocated into groups of components the straight line method as from the date of completion Disposals (2) - - (6 823) (3 442) (10 268) Disposal - sale of Mooring division - - - (24 261) - (24 261) Currency translation differences 2 428 - - (19 479) (424) (17 476) Accumulated deprec. and impairm. losses 31.12 361 948 90 007 - 223 192 33 568 708 715 Carrying amounts 31.12.2013 1 450 088 48 885 133 270 135 544 11 936 1 779 724
2012 7 | Investments in joint ventures Cost price 01.01 1 748 030 116 830 - 322 836 100 062 2 287 758 Additions 18 922 6 081 109 119 69 267 41 673 245 062 Disposals - - - (6 818) (71 601) (78 419) 2013 2012 Currency translation differences 145 - - 26 728 6 164 33 037 Deep Sea Odfjell PSW Ross Total Deep Sea Odfjell PSW Ross Total Metro Galvão Group Holding Metro Galvão Group Holding Cost price 31.12 1 767 097 122 911 109 119 412 013 76 299 2 487 438 Ltd. BV AS Group AS Ltd. BV AS Group AS
Book value of equity at 01.01 309 496 2 026 - 19 621 331 144 298 679 - - 14 573 313 253 Accumulated depreciation and impairment losses 01.01 210 531 43 095 - 182 642 56 695 492 963 Investments/ Aquisitions during the year 2 809 5 413 - - 8 223 28 397 2 024 - - 30 421 Depreciation 75 000 22 163 - 42 225 7 930 147 318 Share of profits (2 685) (508) 2 045 1 669 520 (17 581) (30) - 4 283 (13 329) Disposals (1 375) (30) - (3 929) (35 474) (40 808) Share of OCI result (78) 495 - - 416 (114) - - - (114) Currency translation differences (2 055) - - 15 052 3 069 16 066 Depreciation of excess value (84) - - - (84) (70) - - - (70) Accumulated deprec. and impairm. losses 31.12 282 102 65 228 - 235 990 32 220 615 539 Impairment of excess value ------Carrying amounts 31.12.2012 1 484 995 57 682 109 119 176 023 44 079 1 871 897 Other changes ------(547) (547) Currency deviations (216) 272 (70) (1 726) (1 740) 185 33 - 1 312 1 530 Book value of equity at 31.12 309 242 7 698 1 975 19 564 338 480 309 496 2 026 - 19 621 331 144 Useful lifetime 5 - 35 years 5 years 3 - 10 years 3 - 5 years Depreciation schedule Straight line Straight line Straight line Straight line
The group’s share of the results, aggregated assets and liabilities in its joint ventures, are as follows:
2013 2012 MOBILE DRILLING UNITS Deep Sea Odfjell PSW Ross Total Deep Sea Odfjell PSW Ross Total The Group owns three mobile drilling units. Metro Galvão Group Holding Metro Galvão Group Holding The Group entered into a construction contract on February On February 24, 2007 the Group entered into a construction The Group has invested in additional 2,500m riser for Deep- Ltd. BV AS Group AS Ltd. BV AS Group AS 24, 2006 with the shipyard DSME to design and build Deep- contract with the shipyard DSME to design and build Deep- sea Stavanger. This additional riser will increase Deepsea Assets 700 639 10 659 11 350 29 287 751 935 728 257 3 795 12 539 38 627 783 218 sea Atlantic, a semi-submersible drilling rig of GVA 7500 sea Stavanger, a semisubmersible drilling rig of GVA 7500 Stavanger’s flexibility in connection with possible opera- design, and the delivery of the rig took place on February design, and the delivery of the rig took place on July 8, 2010. tions in ultra-deep water. Liabilities 393 674 2 960 9 103 20 937 426 675 421 338 1 389 11 178 25 538 459 442 6, 2009. The Group also entered into a building contract on The Group also entered into a building contract on February Revenues 143 483 3 320 15 345 51 188 213 335 98 551 389 16 697 47 490 163 127 February 27, 2006 with NOV for a complete drilling package. 27, 2007 with NOV for a complete drilling package. The The paid installments, including initial project costs, project The installation of the drilling package on Deepsea Atlantic installation of the drilling package on Deepsea Stavanger management cost under the Project Management Agree- Profit (2 685) (508) 2 045 (3 806) (4 955) (17 581) (30) - 4 283 (13 329) was carried out at DSME before the said delivery took place was carried out at DSME before the said delivery took place ments, costs of variation orders, costs for preparations for from the shipyard. from the shipyard. operation and interest cost have been capitalised on the rigs.
72 GROUP FINANCIAL STATEMENTS 2013 73 8 | Trade receivables and other receivables
DEEP SEA METRO LTD sidiaries are PSW Consultants AS (former name Deep Fjord Management Consultants AS) as per 31 December 2013. Trade receivables 2013 2012 Consultants AS), PSW Property AS, PSW Solutions AS and Ross Holding AS Group is incorporated in Norway. Deep Sea Metro Ltd is owned by Odfjell Offshore Ltd PSW Engineering AS. At 31 December 2011 the invest- Trade receivables 216 525 222 114 (40%) and Metro Exploration (60%) and managed by the ment in the joint venture was written down to USD 0. The ODFJELL GALVÃO BV Earned, not yet invoiced operating revenues 36 133 28 119 joint venture agreement signed in 2008. Deep Sea Metro impairment in 2011 relates to losses and negative equity Ltd is incorporated in Bermuda. Of book value investment Odfjell Galvão BV is owned by Odfjell Drilling Netherlands in the joint venture. At 31 December 2013 the impairment Provision for impairment of accounts receivable (4 865) (8 177) in joint venture Deep Sea Metro Ltd as per 31.12.2013, was reversed with USD 2 million due to positive equity and BV (50%) and Galvão Oil & Gas Holding BV (50%). Odfjell excess value of USD 2,276,613 is included. Excess value profit in the joint venture. Galvão BV owns shares in Odfjell Galvão Perfuracoes Ltda Trade receivables - net 247 793 242 055 is depreciated over the lifetime of the drillships owned by (100%), Siri Drilling (20%), Itaoca Drilling BV (20%) and Deep Sea Metro Ltd . Depreciation of excess value in 2013 ROSS HOLDING AS Guarapari Drilling BV (20%) as per 31.12.2013. amount to USD 84,000 OTHER CURRENT RECEIVABLES Ross Holding AS is owned by Odfjell Drilling Ltd Group (50 %) and Ross Offshore Invest AS (50 %). Ross Holding Reimbursable expenses 16 160 11 995 PSW GROUP AS AS owns 79.82 % of the shares in Ross Offshore AS. Prepayments 10 260 10 695 PSW Group AS was incorporated in Norway in March 2010, Ross Offshore AS owns 100 % of the shares in Ross Well and is owned by Odfjell Drilling Technology Ltd. (50 %) and Management AS (former Odfjell Well Management AS) and VAT- receivables 15 318 9 626 Ross Well Management Consultants AS (former Odfjell Well Dalseide & Fløysand Invest AS (50 %). PSW Group’s sub- Other short term receivables 2 683 2 973 Total other current receivables 44 420 35 289 Summarised financial information - according to the Group’s ownership in DSM Ltd: OTHER NON-CURRENT RECEIVABLES 2013 2012 Loans to employees 378 417 Share of total income 143 483 98 551 Loans to related-parties - 15 902 Share of operating expenses (97 286) (75 022) Capitalised loan expenses (undrawn USD 530 million facility) 9 906 - Share of net financial items (37 157) (33 407) Taxes paid to Norwegian tax authorities (disputed) - 19 824 Share of profit/(loss) before tax 9 041 (9 879) Other non current receivables 1 781 2 244 Total other non current receivables 12 065 38 387 Share of taxes (11 726) (7 702)
Share of profit/(loss) for the year (2 685) (17 581) THE FAIR VALUE OF TRADE RECEIVABLES AND OTHER RECEIVABLES ARE AS FOLLOWS: Trade receivables 247 793 242 055 Other Receivables 44 420 73 676 2013 2012 Total 292 213 315 732 Share of non-current assets 644 535 658 405 Share of cash 33 165 46 275 As the receivables are due in the short term, the fair value is approximately equal to the carrying amount, and the future cash flows are not discounted. Share of current assets 22 939 23 578 Total assets 700 639 728 257 THE CARRYING AMOUNTS OF THE TRADE RECEIVABLES ARE DENOMINATED IN THE FOLLOWING CURRENCIES: USD 81 037 78 584 Share of equity 01.01 306 920 296 226 NOK 132 460 138 596 Share of profit/(loss) for the period (2 685) (17 581) Other 34 296 24 875 Capital contribution 2 809 28 397 Total 247 793 242 055 Currency deviation (78) (123) Share of equity 31.12 306 965 306 920
THE AGEING OF THE TRADE RECEIVABLES, PAST DUE BUT NOT IMPAIRED: 2013 2012 Share of non-current liabilities 186 899 389 950 0 to 3 months 26 592 26 965 Share of current liabilities 206 775 31 387 3 to 6 months 330 1 253 Total liabilities 393 674 421 338 Over 6 months 14 924 2 933 Total equity and liabilities 700 639 728 257 Total 41 846 31 151
Following operational issues on Deepsea Metro II, mainly related to subsea equipment during 2013, and consequently reduced EBITDA, a waiver of the EBITDA-related covenants under the USD 400 million senior credit facility was granted in 2013 for the period until and including the measurement date 31 December 2013. Due to the waiver period not ending at least 12 months after the reporting date, all loan liabilities are presented as short term liabilities per 31 December 2013. In March 2014 the lenders granted an extended waiver of the EBIT- BA-related covenants to and including measurement date 31.12.2014. Deepsea Metro II is owned by Chloe Marine Corporation Ltd., a subsidiary of Deep Sea Metro Ltd.
74 GROUP FINANCIAL STATEMENTS 2013 75 Largest shareholders at 31 December 2013
(Note 8 continued) 2013 2012 Name Holding % of total ODFJELL PARTNERS LTD. 142 000 000 71.00% THE AGEING OF THE TRADE RECEIVABLES, PAST DUE AND IMPAIRED: DEUTSCHE BANK AG 7 148 441 3.57% 0 to 3 months - - FIDELITY SELECT PORTFOLIOS: ENERGY 3 275 481 1.64% 3 to 6 months - - STATE STREET BANK & TRUST COMPANY 2 403 037 1.20% Over 6 months 4 865 8 177 VARMA MUTUAL PENSION INSURANCE 1 900 000 0.95% Total 4 865 8 177 GOLDMAN SACHS & CO EQUITY SEGREGAT 1 697 481 0.85% BNP PARIBAS SEC. SERVICES S.C.A 1 618 186 0.81%
MOVEMENTS ON THE PROVISION FOR IMPAIRMENT OF TRADE RECEIVABLES ARE AS FOLLOW: LAZARD FRERES BANQUE 1 558 665 0.78% SKANDINAVISKA ENSKILDA BANKEN AB 1 497 169 0.75%
Pr 01.01 8 177 7 604 JP MORGAN CLEARING CORP. 1 412 196 0.71% This years change in provisions (3 312) 573 VERDIPAPIRFONDET DNB NORGE SELEKTI 1 387 028 0.69% Pr 31.12 4 865 8 177 RBC INVESTOR SERVICES TRUST 1 319 540 0.66% RBC INVESTOR SERVICES BANK S. A 1 192 794 0.60% J.P. MORGAN CHASE BANK N.A. LONDON 1 041 638 0.52% MORGAN STANLEY & CO LLC 1 023 391 0.51% LIEUNGH SIMEN 952 381 0.48% 9 | Cash and cash equivalents STATE STREET BANK AND TRUST CO. 860 371 0.43% VERDIPAPIRFONDET DNB NORGE (IV) 860 235 0.43% SKANDINAVISKA ENSKILDA BANKEN AB 825 392 0.41% 2013 2012 MORGAN STANLEY & CO INTERNAT. PLC 819 317 0.41% Cash in bank 166 394 180 957 TOTAL 20 LARGEST SHAREHOLDERS 174 792 743 87.40% Time deposits 19 212 4 056 OTHER SHAREHOLDERS 25 207 257 12.60% Restricted bank deposits regarding payroll tax 15 295 15 623 TOTAL 200 000 000 100.00 % Total 200 902 200 636 Helene Odfjell controls through Odfjell Partners Ltd. 71% of the shares and the CEO controls 0.48% of the shares in Odfjell Drilling Ltd. Chairman of the board of directors, Carl-Erik Haavaldsen, has a significant ownership in Cenor Ltd. which owns 19,047 shares in Odfjell Drilling Ltd.
10 | Share capital and shareholder information 11 | Other reserves
On 5 July 2013, it was resolved at the general meeting that share capital of Odfjell Drilling Ltd. to be increased from USD 18,000 to USD 2,000,000. At the general meeting it was further Note Financial Translation Acquisition non- Total resolved that 1,376,687,078 shares of USD 0.00001 par value issued as fully paid shares, be converted to 200,000,000 shares of par value USD 0.01. As per 31 December 2013 Odfjell instruments difference controlling interests Drilling Ltd. has a share capital of USD 2,000,000. The number of shares issued in Odfjell Drilling Ltd. as per 31 December 2013 is 200,000,000 with par value of USD 0.01. At 1 January 2012 (110) (35 872) - (35 982) SHARE CAPITAL AND SHAREHOLDERS
The share capital and information about shareholders: Interest rate swap, under hedge accounting (1 707) - - (1 707)
Currency translation difference Group - 5 924 - 5 924 Number Nominal value Book value Currency translation difference joint ventures - 869 - 869 At 31 December 2012 (1 817) (29 079) - (30 896) Shares 200 000 000 USD 0,01 2 000 000 200 000 000 USD 0,01 2 000 000 Financial instruments, under hedge accounting 4 137 - - 4 137 All shares carry equal voting rights. Currency translation difference Group - (12 359) - (12 359)
Currency translation difference joint ventures - (1 740) - (1 740) Acquisition non-controlling interests - - (34 496) (34 496) At 31 December 2013 4 137 (14 099) (34 496) (75 353)
76 GROUP FINANCIAL STATEMENTS 2013 77 12 | Interest-bearing debt
The interest-bearing debt is a combination of secured debt, unsecured debt and bond loans. Interest rates are generally based on LIBOR rates. Liabilities secured by mortgage 2013 2012
2013 2012 Current liabilities 180 178 211 270 NON CURRENT INTEREST-BEARING DEBT Non current liabilities 1 092 170 1 140 544 Bank borrowings 1 108 333 1 160 949 Transaction cost, unamortised (16 163) (20 405) Total 1 272 348 1 351 814 Non current interest-bearing debt 1 092 170 1 140 544 CARRYING AMOUNT OF MORTGAGED ASSETS:
CURRENT INTEREST-BEARING DEBT Property, plant and equipment 1 779 724 1 871 897 Current portion of non-current interest bearing debt 173 333 204 167 Accrued interest cost 6 845 7 104 Receivables 292 213 277 345 Total current interest-bearing debt 180 178 211 270 Bank deposits 200 902 200 636 Total 2 272 839 2 349 877
Total interest-bearing debt 1 272 349 1 351 814 The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the end of the reporting period are as follows:
Average interest rate for 2012 was 4.03 % (compared with 4.04 % for 2011), after the effect of interest rate hedging. 2013 2012 6 months or less 1 272 349 1 351 814
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity 6-12 months - - date. The amounts disclosed in the table are the contractual undiscounted cash flows which includes expected interest payments. 1-5 years - - Later than 5 years - - Repayment schedule for interest-bearing debt 2014 2015 2016 2017 2018 Subsequent Total 1 272 349 1 351 814 Bank borrowings 173 333 373 333 627 000 56 000 52 000 -
Total per 31.12.13 173 333 373 333 627 000 56 000 52 000 - The carrying amounts of the Group’s borrowings are denominated in the following currencies:
Repayment schedule for interest-bearing debt 2013 2014 2015 2016 2017 Subsequent 2013 2012
Bank borrowings 204 167 204 167 304 167 652 500 - - USD 1 272 349 1 351 814 Total per 31.12.12 204 167 204 167 304 167 652 500 - - Total 1 272 349 1 351 814
Estimated payment schedule for interests 2014 2015 2016 2017 2018 Subsequent as per 31 December 2013 The carrying amount and fair value of the non-current liabilities are as follows: Interest expenses bank borrowings (53 103) (46 122) (25 309) (3 577) (1 172) - Total (53 103) (46 122) (25 309) (3 577) (1 172) - Carrying amount Fair value 2013 2012 2013 2012
Estimated payment schedule for interests 2013 2014 2015 2016 2017 Subsequent Bank borrowings 1 092 170 1 140 544 1 092 170 1 140 544 as per 31 December 2012 Total 1 092 170 1 140 544 1 092 170 1 140 544 Interest expenses bank borrowings 52 929 45 599 38 520 18 810 -
Total 52 929 45 599 38 520 18 810 - - The fair value of non-current borrowings equals their carrying amount, as the loans has floating rate and credit margin has been stable from the loan raising.
The Group has the following undrawn borrowing facilties:
2013 2012 Floating rate: - Expiring within one year 530 000 - - Expiring beyond one year - - Total 530 000 -
The undrawn borrowing facility has been arranged to help finance the delivery of Deepsea Aberdeen in 2014.
78 GROUP FINANCIAL STATEMENTS 2013 79 The borrowing facility in the Odfjell Drilling Group includes the following financial covenants: Amounts recognised in the balance sheet:
ODFJELL INVEST LTD – USD 950 MILLION FACILITY times, a minimum free liquidity (cash and cash equivalents) 5% of interest bearing debt in the Odfjell Drilling Group 2013 2012 requirement of USD 50,000,000 and a total liquidity of or below USD 15,000,000 or 5% of the interest bearing The Odfjell Drilling Group has agreed to maintain, at all minimum 5 per cent of interest bearing debt (on consoli- debt in the Odfjell Drilling Services Group. In addition equi- Present value of funded obligations 149 214 150 667 times, a minimum free liquidity (cash and cash equivalents) dated basis) (if the Odfjell Drilling Group 12 months prior to ty ratio shall at all times not fall below 35 % for the Odfjell Fair value of plan assets 110 012 119 189 requirement of USD 50,000,000 and a total liquidity of delivery of any investments in excess of USD 100,000,000 Drilling Group and 30 % for the Odfjell Drilling Services minimum 5 per cent of interest bearing debt (on consoli- has any unfinanced capital expenditure related to such in- Group, for the Odfjell Drilling Services Group, adjusted Deficit of funded plans 39 202 31 477 dated basis) (if the Odfjell Drilling Group 12 months prior to vestment, the minimum liquidity requirement will increase leverage ratio I (ratio of interest bearing debt plus undrawn delivery of any investments in excess of USD 100,000,000 to USD 100,000,000 in addition to 5 per cent of interest and available amounts under the revolving facility, divided Present value of unfunded obligations 28 245 30 670 has any unfinanced capital expenditure related to such in- bearing debt). Further, the Odfjell Drilling Group has agreed by EBITDA on a twelve-month rolling basis) shall not Total deficit of defined benefit pension plans 67 447 62 148 vestment, the minimum liquidity requirement will increase to maintain an equity ratio (equity to total assets) of min- increase above 2.40 if free liquidity is less than USD 100 to USD 100,000,000 in addition to 5 per cent of interest imum 35 per cent, at all times to maintain a leverage ratio million, or above 3.00 if free liquidity is more than USD 100 bearing debt). Further, the Odfjell Drilling Group has agreed (interest bearing debt to EBITDA) not exceeding 5.00:1.00 million. Adjusted leverage ratio II (the same definition as Movement in the net defined benefit obligation over the years: to maintain an equity ratio (equity to total assets) of min- and likewise to ensure that the ratio of current assets to adjusted leverage ratio I but divided by EBITDA less USD imum 35 per cent, at all times to maintain a leverage ratio current liabilities at all times being minimum 1.00:1.00. 40 million), shall not increase above 3.75 if free liquidity is (interest bearing debt to EBITDA) not exceeding 5.00:1.00 Distribution of dividends by Odfjell Drilling Ltd. are limited less than USD 100 million, or above 4.50 if free liquidity is Present value of obligation Fair value of plan assets Total and likewise to ensure that the ratio of current assets to to a maximum of 50% of net income (adjusted for any less than USD 100 million, ratio of current assets to current At 1 January 2013 181 337 (119 189) 62 148 current liabilities at all times being minimum 1.00:1.00. write downs of drilling units and after taxes paid) for each liabilities in the Odfjell Drilling Services Group shall at all The facility agreement allows Odfjell Drilling Ltd. to distri– calendar year. The facility agreement also provides for times be minimum 1.00, and equity for the Odfjell Drilling Current service cost 3 680 14 729 18 409 bute dividends in an amount up to 50% of its net income mandatory prepayment if Helene Odfjell (and her descend- Group shall not fall below USD 750 million.” Interest expense/ (income) 5 001 (3 834) 1 168 (adjusted for any write downs of rigs and after taxes paid) ants) cease to own at least 50.1% of the shares in Odfjell in its previous financial year. The facility agreement also Drilling Ltd. The facility agreement allows Odfjell Drilling Ltd. to distri– Pension expense 8 682 10 895 19 577 provides for mandatory prepayment if Helene Odfjell (and The facility agreement otherwise contains undertakings bute dividends in an amount up to 50% of its net income her descendants) cease to own at least 50.1% of the and covenants, and terms and conditions which are consid- (adjusted for any write downs of rigs and after taxes REMEASUREMENTS: shares in the Company. ered to be customary for similar types of bank financings, paid) in its previous financial year. The facility agreement Return on plan assets, excluding amounts included in interest expense/(income) - - - The facility agreement contains undertakings and cove- including, but not limited to, undertakings related to also provides for mandatory prepayment if Helene Odfjell nants, and terms and conditions which are considered to reporting and information, certain restrictions on corporate (and her descendants) cease to own at least 50.1% of Total actuarial (gain)/loss 8 367 5 216 13 583 be customary for similar types of bank financings, includ- actions and change of business and covenants relating the shares in Odfjell Drilling Ltd. The facility agreement 8 367 5 216 13 583 ing, but not limited to, undertakings related to reporting to the operation and maintenance of Deepsea Bergen. otherwise contains undertakings and covenants which and information, certain restrictions on corporate actions Further, the facility agreement also contains default and Odfjell Drilling Services Ltd. considers to be customary for Exchange differances (15 056) 9 395 (5 660) and change of business and covenants relating to the cross-default provisions, all applicable to the Odfjell Drilling similar types of bank financings, including, but not limited CONTRIBUTIONS: - operation and maintenance of Deepsea Stavanger and Ltd. group. However, the cross-default provision is only ap- to, undertakings related to reporting and information and Deepsea Atlantic. The facility agreement contains default plicable to the default of any member of the Odfjell Drilling certain restrictions on corporate actions and change of Employers - - - and cross-default provisions, all applicable to Odfjell Invest Ltd. group (excluding Deep Sea Metro, unless any member business. Further, the facility agreement also contains Ltd and its subsidiaries, and in some cases the Odfjell of the Odfjell Drilling Ltd. group contributes at least USD default and cross-default provisions, all applicable to the Plan participants (2 558) (18 140) (20 697) Drilling Ltd. group. The cross-default provision is, however, 5 million in response to such default) on indebtedness of Odfjell Drilling Ltd. group. However, the cross-default provi- PAYMENTS FROM PLANS: - only applicable to the Odfjell Drilling Ltd. group in relation more than USD 5 million. sion is only applicable to the default of any member of the to a default on indebtedness of more than USD 5 million. Odfjell Drilling Ltd. group (excluding Deep Sea Metro Ltd.) Benefit payments (3 314) 1 811 (1 503) ODFJELL DRILLING SERVICES - USD 300 MILLION on indebtedness of more than USD 5 million. ODFJELL RIG II LTD. - USD 270 MILLION FACILITY At 31 December 2013 177 459 (110 012) 67 447 The main restrictive covenants are that free cash shall not The Odfjell Drilling Group has agreed to maintain, at all For the financial years 2012 and 2013 the Group has not fall below USD 50,000,000 and total liquidity not below been in violation of the covenants. At 1 January 2012 197 568 (110 577) 86 990 Current service cost (1 892) 15 292 13 399 Interest expense/ (income) 4 732 (3 066) 1 666 Pension expense 2 840 12 225 15 065 REMEASUREMENTS: 13 | Post employment benefits Return on plan assets, excluding amounts included in interest expense/(income) Total actuarial (gain)/loss (30 930) 9 088 (21 842)
The Group operates various post-employment schemes, obligation is calculated annually by independent actuaries DEFINED BENEFIT PENSION PLANS (30 930) 9 088 (21 842) including both defined benefit and defined contribution using the projected unit credit method. The present value of Exchange differances 15 112 (8 872) 6 239 pension plans. The pension plans are measured and pre- the defined benefit obligation is determined by discounting The Group has a pension scheme covering a total of 1 688 sented according to IAS 19 (revised 2011). the estimated future cash outflows using interest rates of persons, of which 118 pensioners. The scheme entitles staff CONTRIBUTIONS: - government bonds that are denominated in the currency to defined future benefits. These are mainly dependent on Employers - - - PENSION OBLIGATIONS in which the benefits will be paid, and that have terms to the number of years of service, the salary level at pen- sionable age and the size of benefits paid by the national maturity approximating to the terms of the related pension Plan participants - (22 569) (22 569) A defined contribution plan is a pension plan under which obligation. insurance. The liabilities are covered through an insurance the Group pays fixed contributions into a separate entity. company (funded). PAYMENTS FROM PLANS: - The Group has no legal or constructive obligations to pay The Group also has a contractual pension agreement Actuarial gains and losses arising from experience adjust- Benefit payments (3 252) 1 515 (1 737) further contributions if the fund does not hold sufficient as- ments and changes in actuarial assumptions are charged (CPA) covering 1 618 persons, of which 38 pensioners. The sets to pay all employees the benefits relating to employee or credited to equity in other comprehensive income in the agreement entitles staff to benefits from the age of 62 At 31 December 2012 181 337 (119 189) 62 148 service in the current and prior periods. A defined benefit period in which they arise. until they are eligible for a national insurance pension when plan is a pension plan that is not a defined contribution plan. reaching the age of 67. The employer’s contribution to Past-service costs are recognised immediately in income. these amounts to 20 % of the pension paid. These liabilities The significant actuarial assumptions were as follows: Typically defined benefit plans define an amount of pension are not covered through an insurance company (unfunded). benefit that an employee will receive upon retirement, usu- For defined contribution plans, the Group pays contributions 2013 2012 ally dependent on one or more factors such as age, years of to publicly or privately administered pension insurance plans A number of the Norwegian subsidiaries in the Group are service and compensation. on a mandatory, contractual or voluntary basis. The Group required to have a civil service pension scheme according Discount rate 4,10% 3.8% has no further payment obligations once the contributions to the Norwegian Act relating to mandatory occupational Salary growth rate 0% - 3,75% 0% - 3.5% The liability recognised in the balance sheet in respect have been paid. The contributions are recognised as em- pensions. These subsidiaries have pension schemes in of defined benefit pension plans is the present value of accordance with the requirements in this Act. ployee benefit expense when they are due. Prepaid contri- Expected growth in G (base social security amount) 3,50% 3.25% the defined benefit obligation at the end of the reporting butions are recognised as an asset to the extent that a cash period less the fair value of plan assets. The defined benefit refund or a reduction in the future payments is available. Pension growth rate 0,6% - 3,5% 0.2% - 3.25%
80 GROUP FINANCIAL STATEMENTS 2013 81 15 | Tax
The sensitivity of the defined benefit obligation to changes in the weigthed principal assumptions is:
Impact on defined benefit obligation USD thousands 2013 2012 Change in assumption Increase in assumption Decrease in assumption Withholding tax, ordinary taxation (8 024) (7 453) Discount rate 1% Decrease by 17% Increase by 22% Payable tax, ordinary taxation (31 662) (26 075) Salary growth rate 1% Increase by 10% Decrease by 9% Change in deferred tax, ordinary taxation 5 928 2 033 Pension growth rate 1% Increase by 13% Decrease by 7% Total tax expense current year items (33 758) (31 496)
Estimated average annual tax rate 19,7 % 21,0 %
Payable tax prior years, disputed (25 902) 320
Total pension expenses (including defined benefit and defined contribution scheme) are splitted to the following: Payable tax current year, disputed (13 908) - Change in deferred tax, disputed (28 755) - 2013 2012 Total tax expense prior years and disputed (68 564) 320 Pension expenses from defined benefit scheme 19 577 15 065 Total tax expense (102 323) (31 176) Pension expenses from defined contribution scheme 7 491 4 645 Effective tax rate 59,8 % 21,3 % Total pension expenses 27 068 19 710 TAX RECONCILIATION 2013 2012 See also note 17 for further information regarding personnel expenses. Profit before tax 170 972 148 033 Tax calculated at domestic tax rates applicable to profits in respective countries* (97 625) (33 398) Non-taxable income (4 698) 2 223 Taxes (102 323) (31 176)
* Domestic tax rates applicable to the Group varies between 0 % and 28 %
14 | Other liabilities The tax (charge)/credit relating to components of the comprehensive income is as follows:
2013 Other non-current liabilities 2013 2012 Before tax Tax (charge)/ credit After tax Actuarial loss on post employment benefit obligations (13 117) 3 673 (9 444) Interest rate swap - related party - 2 563 Other comprehensive income (13 117) 3 673 (9 444) Other non-current liabilities 450 2 043 Deferred tax - 3 673 - Total other non-current liabilities 450 4 606
2012 Other current liabilities 2013 2012 Before tax Tax (charge)/ credit After tax
Prepayments from customers 8 579 3 407 Actuarial gain on post employment benefit obligations 21 842 (6 116) 15 726 Deferred revenue 3 477 3 724 Other comprehensive income 21 842 (6 116) 15 726 Accrued salaries 17 589 14 357 Deferred tax - (6 116) -
Holiday pay 25 197 22 875 Employee bonus provisions 26 116 21 428 The gross movement on the deferred tax account is as follows: Other accrued expenses 42 939 44 532
Total other current liabilities 123 896 110 324 2013 2012 Net deferred tax assets/(deferred tax liabilities) at 01.01 835 5 303 Income statement charge (22 827) 2 033 Charged directly to equity 3 673 (6 116) Current assets - (846) Currency translation differences 408 460 Net deferred tax assets/(deferred tax liabilities) at 31.12 (17 911) 835
82 GROUP FINANCIAL STATEMENTS 2013 83 Deferred tax assets
Current assets Net pension liabilities Loss carried forward Fixed assets Total TAX COURT CASE Tax payable prior years, disputed, is tax paid by Odfjell Rig years 2009 – 2011 Odfjell Rig Ltd. was the owner (limited The district court concluded that the bareboat charter 2013 Ltd. for it’s participation in Deep Sea Drilling Company II KS partner) of 52.913 % of Deep Sea Drilling Company II KS business of DSDCII was carried out from Norway, and for the years 2009 and onwards. Due to a negative out- (DSDCII), which in turn was the owner of the rig Deepsea thus the owner Odfjell Rig Ltd. was deemed taxable on Opening balance 01.01. 344 17 401 - (4 134) 13 612 come of the trial between Odfjell Rig Ltd. and the Norwe- Bergen. The general partner of DSDCII was Deep Sea Drill- the basis of the Norwegian Tax Act section 2-3 para. 1, Income statement charge 112 (634) - 7 002 6 479 gian Tax Authorities, the Group has changed their estimate ing Company II AS, and additionally there were two other letter b for its interest in DSDCII. The district court came to regarding the expected amount to be paid in this case. It limited partners. The rig Deepsea Bergen has operated this conclusion inter alia on the basis that the day-to-day Charged directly to equity - 3 673 - - 3 673 is now assessed that the most likely outcome will be to on the Norwegian Continental Shelf since spring 2006 management of the bareboat charter by Odfjell Drilling pay the full amount that is disputed, and as a result the under a bareboat charter with Deep Sea Drilling Company AS in Bergen involves considerable activity in Norway on Currency translation differences (33) (1 783) - 111 (1 705) tax receivable booked at 31.12.2012 is expensed. Odfjell KS. All main decisions pertaining to the rig (purchase, sale, behalf of DSDCII, and also that the rig Deepsea Bergen had 31.12. 423 18 657 - 2 979 22 059 Rig Ltd. still disputes the Norwegian Tax Authorities view financing etc) are made by partnership meeting of DSDCII. been deployed within Norwegian jurisdiction (i.e. on the that Odfjell Rig Ltd. is taxable for its participation in Deep The company Odfjell Drilling AS – resident in Norway – has Norwegian Continental Shelf). Furthermore, the district Sea Drilling Company II KS. The case has been appealed been contracted to carry out the day-to-day operations/ court concluded that a tax exemption in the Norwegian 2012 through the court system. management of the bareboat charter. Tax Act section 2-34 was not applicable as this only relates to “international business” which in the court’s opinion is Opening balance 01.01. 741 24 357 - - 25 098 Change in deferred tax, disputed, is recognised as tax ex- The dispute between Odfjell Rig Ltd. and the Norwegian not the case as long as the rig is operated on the Norwe- Income statement charge (433) (2 587) 846 - (2 174) pense due to the outcome of the trial between Odfjell Rig tax authorities is whether Odfjell Rig Ltd. is taxable to gian Continental Shelf. Ltd, and the Norwegian Tax Authorities mentioned above. Norway as a result of its ownership in DSDCII. The tax Charged directly to equity - (6 116) - - (6 116) The change in deferred tax expense relates to Odfjell Rig authorities made their decision for the years 2009 – 2010 Please see table below for overview of paid tax and total Ltd.’s ownership in Deep Sea Drilling Company II KS, and on 29 June 2012, and later also for 2011. The case for 2009 tax expense related to court case. Income tax for the Use of losses carried forward - - (846) - (846) the remaining gain and loss account generated from the – 2011 was brought before the Norwegian courts by Odfjell period 2009 - 2012 is fully provided and paid, and will be Currency translation differences 37 1 747 - - 1 784 sale of the drilling unit Deepsea Bergen by Deep Sea Drill- Rig Ltd. pursuant to a writ of summons on 20 December repaid if the outcome of the case is that Odfjell Rig Ltd. is ing Company II KS to Odfjell Rig II Ltd. in January 2013. 2012, and the district court made its decision on 12 July not deemed taxable to Norway for its interest in DSDCII. 31.12. 344 17 401 - - 17 746 2013. For the income years 2009-2012, the disputed Odfjell Rig Ltd. is a company incorporated in Bermuda, amount (before-tax income) is approximately NOK 526 and the sole shareholder is Odfjell Drilling Ltd. During the million. Deferred tax liabilities
Share in limited partnership Fixed assets Deferred capital gains Total Tax expense in USD thousands Tax expense in NOK thousands Gross income in NOK thousands
2013 Tax expense and tax paid related to tax court case Opening balance 01.01. 169 - (12 946) (12 777) Total tax expense paid, for income years 2009 - 2012 (25 902) (147 391) 526 395 Income statement charge (32 110) - 2 804 (29 306) Total tax expense not paid, for income year 2013 (13 908) (84 611) 302 182 Currency translation differences 1 108 - 1 005 2 113 Total change in deferred tax 2013 (28 755) (168 933) 625 677 31.12. (30 832) - (9 138) (39 970) Total tax expense and tax paid related to tax court case (68 564) (400 934) 1 454 254
2012 TAX AUDIT CASE Opening balance 01.01. (46) (4 708) (15 040) (19 794) Odfjell Invest I Ltd. (Odfjell Invest I), a wholly-owned instance. As part of a settlement with Statoil, Odfjell Invest 2010 with NOK 6,552,467. Furthermore, the tax authori- Income statement charge 210 894 3 104 4 207 subsidiary of the Group incorporated in Bermuda, was AS decided not to appeal the decision. Odfjell Invest AS has ties have notified that they do not consider the bareboat Currency translation differences 6 (320) (1 010) (1 324) the owner of the rig Deepsea Atlantic (until 12 December taken the position that it had no legal basis for stopping charter between Odfjell Invest AS and Odfjell Invest I to be 2013), which has been leased to Odfjell Invest AS under a payment of bareboat hire to Odfjell Invest I under the in accordance with the arm’s length principle. This results 31.12. 169 (4 134) (12 946) (16 911) bareboat charter at a fixed day rate. Odfjell Invest AS has bareboat charter during the period of non-payment of the in a reduction of bareboat hire for the years 2009 – 2012 in turn entered into a drilling contract with Statoil for the operating rate by Statoil under the drilling contract with in total NOK 209,434,800. Note that the above provision of drilling services to Statoil on the Norwegian notifications from the tax authorities have not yet resulted Continental Shelf. Soon after commencement of drilling The tax authorities have notified that they do not consider in any decision of reassessment. services under the drilling contract, Statoil stopped paying Odfjell Invest AS as entitled to a tax deduction under the the operating rate based on the contention that Odfjell Norwegian Tax Act section 6-1, resulting in an increase The potential tax exposure amounts to USD 41.0 million Invest AS was not able to provide the drilling services of the taxable income for 2009 of NOK 103,305,720 and excluding incurred interest. Odfjell Invest AS will dispute as contemplated by the drilling contract. Odfjell Invest for 2010 with NOK 520,607,220. Following the tax audit any assessment based on the notification, and hence no AS challenged Statoil’s decision to stop payment of the (report dated 5 July 2013) the notice of reassessment also tax expense is recognised in the financial statements pr operating rate and instigated legal proceedings to recover relates to the omission of taking a payment of hire from 31.12.2013, as the Company’s best estimate of the amount lost income. Odfjell Invest AS lost the court case in the first Statoil as income, resulting in an increase of the income for it will ultimately pay is zero.
84 GROUP FINANCIAL STATEMENTS 2013 85 16 | Combined items, income statement 17 | Personnel expenses
Other gains and losses 2013 2012 Personnel expenses 2013 2012 Salaries and wages 441 780 385 631 Gain on disposals of casing, mooring and rental equipment 19 792 3 371 Employer`s national insurance contributions 49 825 46 189 Disposal of subsidiary 2 457 - Pension expenses 27 068 19 710 Gain on sale of other assets 39 67 Other benefits 18 597 17 623 Gain on sale of assets 22 288 3 438 Hired personnel 9 769 17 029 Total personnel expenses 547 039 486 182
Other operating expenses 2013 2012 No. of employees (annual average) 3 027 2 763
Consumption of purchased goods for resale (1 910) (1 436) Hired services, subcontractors and stand-in employees (47 882) (58 137) Audit 2013 2012 Hired casing, mooring and rental services (15 037) (16 518) Audit (incl. technical assistance with financial statements) 668 848 Tools, fixtures and fittings, and working plant (53 069) (49 036) Other assurance services (mainly related to listing process at Oslo Stock Exchange) 434 31 Repair and maintenance (22 470) (18 976) Tax advisory fee (incl. technical assistance with tax returns) - - Insurance, guarantee and service costs (6 614) (7 192) Total audit fees 1 102 880
Loss on disposal of machinery and bad debt (1 692) (619) The fees are net of VAT. Course expenses (fees. rent of premises etc.) (9 031) (7 524) Freight. transport and insurance (8 446) (11 834) Office rent and warehouses (12 897) (13 514) Fees for financial and legal assistance (4 972) (6 298) Inspection (7 975) (4 184) Travel expenses (34 926) (38 418) Other operating and administrative expenses (29 416) (32 366) Total other operating expenses (256 338) (266 051) 18 | Remuneration to the Board of Directors and key executive management
Financial income/expenses 2013 2012 2013
EXECUTIVE MANAGEMENT: INTEREST INCOME (USD thousands) Salary Bonus Pension premium Other remuneration Total Interest income 2 490 2 171 Simen Lieungh (CEO) 788 512 10 38 1 347 Interest income from related parties 7 334 5 198 Atle Sæbø (CFO) 398 278 24 28 727 Total interest income 9 823 7 369 Total remuneration executive management 1 186 790 34 65 2 074
BORROWING COST BOARD OF NON EXECUTIVE DIRECTORS: Interest incurred (56 522) (57 639) (USD thousands) BoD fee Other borrowing expenses (8 991) (6 315) Carl-Erik Haavaldsen 55 Total borrowing cost (65 513) (63 955) Helene Odfjell 54 Kirk L. Davis 43 OTHER FINANCIAL ITEMS Henry Hamilton III 12 Currency gain 35 649 43 201 Bengt Lie Hansen 43 Other financial income 666 6 643 Total remuneration Board of non executive directors 207 Currency loss (50 046) (20 449) Gain/loss on interest rate swaps 9 063 1 616 Other financial expenses (16 444) (10 075) Total other financial items (21 112) 20 936
86 GROUP FINANCIAL STATEMENTS 2013 87 2012 and DNB Bank ASA as Agent on behalf of the lenders. The amounts actually repaid (and prepaid, if any) under the Odfjell Drilling Ltd hereunder shall be limited to USD 636 liability of Odfjell Drilling Ltd hereunder shall be limited to loan agreement. The Company, and certain of Odfjell million plus any unpaid amount of interest, fees and ex- EXECUTIVE MANAGEMENT: USD 324 million plus any unpaid amount of interest, fees Drilling Services Ltd.’s subsidiaries, are guarantors under penses, and shall be reduced with amounts actually repaid (USD thousands) Salary Bonus Pension premium Other remuneration Total and expenses, and shall be reduced with amounts actually the facility agreement. Further, all of the shares in Odfjell (and prepaid, if any) under the loan agreement. repaid (and prepaid, if any) under the loan agreement. All Offshore Ltd., Odfjell Drilling Services Ltd., Odfjell Opera- As security for the facilities, and as a condition precedent of the shares in and substantially all of the assets of Odfjell tions Ltd., Odfjell Partners Invest Ltd., Odfjell Drilling AS, to utilisation of the facilities upon delivery of Deepsea Rig II Ltd. have been pledged in favour of the lenders, Odfjell Drilling Technology Ltd., Odfjell Rental Services AS, Aberdeen, substantially all of the shares in and assets of Simen Lieungh (CEO) 754 321 11 34 1 119 including a mortgage over Deepsea Bergen. Also, Odfjell Odfjell Casing Services AS, Odfjell Well Services Europe AS, Odfjell Rig III Ltd. and Odfjell Drilling Shetland Limited will Atle Sæbø (CFO) 387 132 18 21 559 Drilling Ltd. and Odfjell Offshore Ltd. have guaranteed the Odfjell Well Services Ltd. and Odfjell Drilling Technology be pledged in favour of the lenders and hedging banks, obligors’ obligations under the finance documents. AS have been pledged in favour of the lenders. The loan is including a mortgage of Deepsea Aberdeen. Also, Odfjell Total remuneration executive management 1 141 453 28 55 1 678 also secured by first priority assignment of all intra-group Drilling Ltd. and Odfjell Offshore Ltd. have guaranteed receivables owed to Odfjell Drilling Services Ltd. and its the obligors’ obligations under the finance documents, ODFJELL DRILLING SERVICES LTD. – USD 300 MILLION subsidiaries. and one of the USD 200 million export credit facilities has BOARD OF NON EXECUTIVE DIRECTORS: FACILITY been guaranteed by the Norwegian Garanti-Instituttet for (USD thousands) BoD fee ODFJELL RIG III LTD. – USD 530,000,000 FACILITY Eksportkreditt (for a guarantee fee). USD 300 million term loan facility agreement entered AGREEMENT Helene Odfjell 57 into on 4 November 2011 with Odfjell Drilling Services Ltd (undrawn facility as per 31 December 2013) as borrower and DNB Bank ASA and Danske Bank A/S as Marianne Odfjell 28 lenders. The liability of Odfjell Drilling Ltd hereunder shall USD 530 million term loan facility agreement entered into Kirk L. Davis 43 be limited to USD 330 million plus any unpaid amount of on 7 May 2013 with Odfjell Rig III Ltd as borrower and DNB interest, fees and expenses, and shall be reduced with Bank ASA as Agent on behalf of the lenders. The liability of Carl-Erik Haavaldsen 28 Bengt Lie Hansen 28 Total remuneration Board of non executive directors 185
21 | Contingencies
Contingencies related to income tax are disclosed in note been called to court in Stavanger District Court in March There are no other contingencies to be disclosed as per 31 15 Tax. 2014 for the ruling of pension rights related to night shift December 2013. | Odfjell Drilling and all other offshore contractors being compensation for offshore workers. It is currently not 19 Earnings per share members of the Norwegian Shipowners’ Association have possible to estimate the impact of the claim.
The basic and diluted earnings per share are the same, as the Company has no convertible bond loan or stock option plan. Earnings per share is calculated as net result allocated to shareholders for the year divided by the weighted average number of outstanding shares. During 2013 number of shares was changed, and hence EPS for 2012 is recalculated accordingly. Please see note 10 Equity for disclosed information related to changes in number of issued shares during 2013.
2013 2012 22 | Commitments Profit/ (Loss) attributable to equity holders of the company 67 289 102 549 CAPITAL COMMITMENTS
Weighted average number of ordinary shares in issue 200 000 000 200 000 000 The Group has signed a contract with Daewoo Shipbuilding & Marine Engineering (DSME) to build a new semi-submersible drilling rig DeepSea Aberdeen for the use in the UK’s West of Shetland region under a future contract with BP. The commitments related to the newbuilding programme are summarised in the table below:
Earnings per share 0,34 0,51 2013 2012 Due in year 1 604 400 53 047 Due in year 2 - 598 000 Due in year 3 - - 20 | Securities and mortgages Value of new building commitments 604 400 651 047
ODFJELL INVEST LTD. – USD 950 MILLION Odfjell Invest Ltd. and its subsidiaries have been pledged and performance of the obligors’ obligations under the Capital expenditure other than newbuildings contracted for at the end of the reporting period but not yet incurred is as follows: FACILITY AGREEMENT in favour of the lenders. This includes the shares in Deep finance documents, however such that Odfjell Drilling Ltd. Sea Atlantic Pte. Ltd., Deepsea Stavanger Pte. Ltd. and the may be released as guarantor under the facility agreement 2013 2012 USD 950 million term loan facility agreement entered into charter company Odfjell Invest AS, mortgages over the upon the occurrence of either an initial public offering or a on 4 November 2011 with Odfjell Invest Ltd as borrower semi-submersible drilling rigs “Deepsea Stavanger” and private placement of Odfjell Offshore Ltd. Global Standard - New ERP solution 5 359 - and DNB Bank ASA as Agent of behalf of the Lenders. The “Deepsea Atlantic” and assignment of rights to revenue, 1) liability of Odfjell Drilling Ltd hereunder shall be limited to interest proceeds and bank accounts. In addition, the Rig investments 35 043 - USD 1 140 million plus any unpaid amount of interest, fees shares in Odfjell Invest Ltd. have been pledged by Odfjell ODFJELL RIG II LTD. - USD 270 MILLION Rental and casing equipment, due in 1 year 20 023 15 989 and expenses, and shall be reduced with amounts actually Offshore Ltd. in favour of the lenders. Also, Deep Sea FACILITY AGREEMENT repaid (and prepaid, if any) under the loan agreement. Atlantic Pte. Ltd., Deep Sea Stavanger Pte. Ltd., Odfjell Total 60 425 15 989 Drilling Ltd. and Odfjell Offshore Ltd. have guaranteed as USD 270 million term loan facility agreement entered into As security for the loan, substantially all of the assets of and for its own debt the due and punctual observance on 15 February 2013 with Odfjell Rig II Ltd as borrower 1) Rig investments is mainly five year classification of Deepsea Atlantic Q1 2014
88 GROUP FINANCIAL STATEMENTS 2013 89 24 | Transactions with related parties
OPERATING LEASE COMMITMENTS - GROUP COMPANY AS LESSEE
The Group leases various offices under non-cancellable operating lease arrangements. The lease terms are between 1 and 10 years, and the majority of the lease arrangements The Group is 71% controlled by Odfjell Partners Ltd. Odfjell Partners Ltd. is controlled by board memeber Helene Odfjell. CEO Simen Lieungh controls 0.48% of the shares in Odfjell are renewable at the end of the lease period at market rates. Drilling Ltd. as per 31 December 2013.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows: The following material transactions were carried out with related parties:
2013 2012 2013 2012 No later than 1 year 4 390 4 457 SALES OF SERVICES: Later than 1 year and no later than 5 years 9 938 12 635 - Entities controlled by Odfjell Partners Ltd. (management services) 34 26 Later than 5 years 929 4 715 - Associates 81 192 93 191 Total 15 257 21 806 Total 81 226 93 217
OPERATING EXPENSES Associates 5 384 14 068 23 | Capital Disclosures Total 5 384 14 068
LEASES: - Entities controlled by Odfjell Partners Ltd. (office rent) 1 922 1 909 CAPITAL MANAGEMENT DEPOSITS / PLACEMENTS The following instruments are allowed for short term placements; Total 1 922 1 909 The primary objective of the Group`s capital manage- The liquidity management has four main objectives: - Deposits in banks ment is to ensure that it maintains healthy capital ratios - Matching of surplus funds against borrowing - Loans to companies/institutions/funds (like fixed or and liquidity available to take advantage of investment requirements. floating rate bonds, senior or subordinated debt) INTEREST INCOME: opportunities and generally support the business. Capital - Secure a high level of liquidity (a targeted minimum of - Certificates management should be such that the capital structure two months cash flow) in order to meet future plans of - Money-market funds - Associates 7 334 5 198 is sufficiently robust to withstand prolonged adverse the Odfjell Drilling. Total 7 334 5 198 conditions in significant risk factors, such as long-term - Limitation of credit risks. down-cycles in our markets and unfavourable conditions - Maximise return on liquid assets. WORKING CAPITAL in financial markets. Capital management also comprise securing the company to be in compliance with covenants Accordingly, investments may only be made in securities The company’s policy is to have working capital corre- KEY MANAGEMENT COMPENSATION on interest bearing debt. Reference is made to note 12 with a rating of Investment grade, Baa (Moodys) , BBB- sponding to 2 months’ operating expenses. Key management includes directors (executive and non-executive). The compensation paid or payable to key management for employee services is shown in Note 18 - Remuneration. which disclose information about covenants on long term (Standard and Poors and Fitch IBCA) or better. interest bearing liabilities. For companies not rated by international rating bureaus, INTEREST RATE RISK Year-end balances arising from purchase of services 2013 2012 The Group will manage the capital structure and make investments may be made in accordance with DNB’s rating adjustments to it, to maintain an optimal structure adapt- BBB or better. The administration is authorised to hedge up to 50% of ed to current economic conditions. In order to maintain or A list of counter party exposure limits shall be established the interest payments of the external financing based on adjust the capital structure, the Group may adjust dividend by the CFO, and be reported to the Board of Odfjell Drilling an approval from the CFO. Status is to be reported to the CURRENT RECEIVABLES FROM RELATED PARTIES: Board on a quarterly basis. payments, buy treasury shares, return capital to share- on a yearly basis. Current receivables from related parties: 13 220 14 285 holders or issue new shares Total 13 220 14 285
2013 2012 CURRENT LIABILITIES TO RELATED PARTIES: 2013 2012 Current liabilities to related parties 3 349 Equity 1 130 350 1 154 303 Current liabilities to parent company - 6 286 Total assets 2 736 165 2 804 385 Total 3 6 635 Equity ratio 41% 41%
NON-CURRENT LOANS FROM RELATED PARTIES 2013 2012 Cash and cash equivalents 185 606 185 013 Non-current liability under related party agreement - - Available drawing facilities - - Total - - Total available liquidity 185 606 185 013
NON-CURRENT RECEIVABLES FROM RELATED PARTIES 2013 2012 Non-current receivable under related-party agreement 79 273 52 069 Non-current receivable Odfjell Capital Ltd - 15 902 Total 79 273 67 970
90 GROUP FINANCIAL STATEMENTS 2013 91 Parent Company Financial Statements
COMMITMENTS
The Group leases various offices under non-cancellable operating lease agreements. The lease terms are between 1 and 10 years, and the majority of lease agreements are renewable at the end of the lease period at market rate.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
2013 2012 No later than 1 year 1 882 1 911 Later than 1 year and no later than 5 years 7 430 7 543 Later than 5 years 840 4 715 Total 10 153 14 169
25 | Disposal of Deep Sea Mooring
On 16 April 2013, the group agreed to sell it’s Mooring business unit, including shares in Deep Sea Mooring AS in addition to property, plant and equipment related to the operations of the Mooring business unit. The business of the unit is well services and rental of mooring equipment. The transaction was completed on 16 May with a total net gain of USD 19,6 million.
The business is not presented in this interim financial information as a discontinued operation, as it does not represent a major line of business.
Financial information relating to the mooring business area is set out below:
USD thousands 01.01.13 - 30.04.2013 2012 Operating revenue 11 400 24 110 Other gains/(losses) 62 464 Personell expenses (1 162) (3 655) Other operating expenses (800) (2 620) EBITDA 9 501 18 299 Depreciation and impairment (2 770) (7 745) Operating profit 6 731 10 554 Net financial items 4 13 Profit/(loss) before tax 6 735 10 567
USD thousands 31.12.13 31.12.12 Property, plant and equipment - 41 593
26 | Events after the reporting period
Deep Sea Metro Ltd’s debt to Odfjell Offshore Ltd., amount- Offshore Ltd converting the remaining portion of the facility There have not been any other events identified after ing to USD 80 million in addition to accrued interest, was to common shares, thereby maintaining the 40/60 owner- the reporting period, which would materially affect these settled on 20 February 2014. Settlement was made partly ship. Cash settlement from Deep Sea Metro Ltd. to Odfjell financial statements. by way of contribution of cash equity by the 60% share- Offshore Ltd. on 20 February 2014 was USD 49,525,070, holder Metro Exploration Holding Corp to Deep Sea Metro including accrued interest. Ltd in exchange for common shares and partly by Odfjell
92 PARENT COMPANY FINANCIAL STATEMENTS 2013 93 Income Statement Statement of Financial Positions
USD thousands Note 2013 2012 USD thousands Note 2013 2012
Other operating expenses 2 (2 391 768) (1 956 928) ASSETS Total operating expenses (2 391 768) (1 956 928) Investments in subsidiaries 5 986 808 660 986 808 660 Long term loan to group companies 6 368 426 669 365 578 375 Operating profit / (loss) (2 391 768) (1 956 928) Long term loan - 15 901 827 Total financial fixed assets 1 355 235 329 1 368 288 861 Interest income 5 674 61 789 Interest income from group companies 6, 9 26 676 963 18 581 374 Other short time receivables 35 926 11 619 Other financial income group companies 7 175 - Intercompany short-term receivables 6 - 5 523 599 Other financial income 9, 10 5 703 075 3 677 927 Cash and cash equivalents 7 683 143 2 303 968 Interest expenses - (1 386) Total current assets 719 070 7 839 186 Interest expenses from group companies 6, 9 (17 035 288) (14 831 691) Total assets 1 355 954 398 1 376 128 047 Other financial expenses group companies - (110 641) Other financial expenses 10 (15 501 855) 891 EQUITY AND LIABILITIES
Net financial items (144 255) 7 378 263 Share capital 3, 4 2 000 000 15 224 Ordinary profit / (loss) before tax (2 536 023) 5 421 335 Other contributed capital 3 329 809 525 331 794 301 Tax on ordinary result 12 - - Other equity 3 626 045 398 637 142 332 Net profit / (loss) for the year (2 536 023) 5 421 335 Total equity 957 854 923 968 951 858
Allocation: Long term debt 13 - 2 562 819 Transferred from/to other equity 3 (2 536 023) 5 421 335 Intercompany long term liabilities 6, 13 395 377 946 397 474 200 Total long-term liabilities 395 377 946 400 037 019
Short term debt Other short-term liabilities 8 2 211 593 307 489 Intercompany short-term liabilities 6 509 936 6 831 681 Total short-term liabilities 2 721 528 7 139 171 Total liabilities 398 099 475 407 176 189 Total equity and liabilities 1 355 954 398 1 376 128 047
The Board of Odfjell Drilling Ltd Hamilton, Bermuda, 1 April 2014
Carl-Erik Haavaldsen Helene Odfjell Kirk Davis Henry Hamilton III Bengt Lie Hansen Chairman Director Director Director Director
94 PARENT COMPANY FINANCIAL STATEMENTS 2013 95 Statement of Cash Flow Notes (all figures in USD thousands)
USD thousands 2013 2012 1 | Accounting Principles
CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) before tax (2 536 023) 5 421 335 The accounting information includes profit and loss Liabilities due less than one year after being incurred are IMPAIRMENT OF ASSET Adjustments for: statement, balance sheet statement, notes and cashflow classified as short-term liabilities. The asset is reviewed for impairment whenever events Decrease/(increase) in trade accounts receivable and other receivables (24 308) 20 235 statement. The accounts are prepared in accordance with or changes in circumstances indicate that the carrying Decrease/(increase) in trade accounts payable and other current liabilities 1 904 104 121 603 Norwegian GAAP. Figures are reported in USD. ACCOUNTS RECEIVABLE amount of the asset may not be recoverable. Whenever The company is located at Bermuda. Trade debtors and other receivables are accounted for at the carrying amount of an asset exceeds its recoverable Change in net intercompany short-term liabilities and receivables (798 147) (681 638) net value after deductions for expected losses. amount, an impairment loss is recognised in the income Net cash flows from operating activities (1 454 374) 4 881 536 RECOGNITION OF INCOME statement. The company is a single purpose company with the only FOREIGN CURRENCY The assets are tested annually for impairment at each interest of owning its shares in subsidiaries. Any dividend Balance sheet items in foreign currencies are translated reporting date. CASH FLOWS FROM INVESTING ACTIVITIES received or other financial income are recognised as to USD at the currency rate at the balance date. Profit and Long-term loan 15 901 827 (438 297) financial income. loss transactions in other currencies, are translated to USD CASH FLOW STATEMENT Net cash flow used in investing activities 15 901 827 (438 297) at the currency rate at the transaction day. “The cash flow statement is prepared using the indirect CLASSIFICATION OF BALANCE SHEET ITEMS method. Assets identified as being permanently owned or used, are CASH AND BANK DEPOSITS CASH FLOWS FROM FINANCING ACTIVITIES classified as fixed assets. Other assets are classified as Cash and bank deposits also include other liquid CHANGE OF FUNTIONAL AND PRESENTATION CURRENCY Long term debt (2 562 819) (4 692 524) current assets. Liabilities due more than one year after investments with a period to maturity of 90 days or less they are incurred are classified as long-term liabilities. from the date of issue. As per 1 January 2012 the company changed its functional Long term loan to group companies 27 247 082 (112 578 375) First year instalment on long-term loans are classified as and presentation currency from NOK to USD. Intercompany long term liabilities (32 191 630) 78 077 877 long-term liabilities. Paid out dividende (8 560 911) (1 765 000) Net cash flow from financing activities (16 068 278) (40 958 022)
NET EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS Net increase/(decrease) in cash and cash equivalents (1 620 825) (36 514 783) Cash and cash equivalents at beginning of period 2 303 969 38 818 752 2 | Operating expenses, remuneration of the board of directors Cash and cash equivalents at end of period 683 143 2 303 969 and CEO and number of employees etc.
2013 2012 FEE TO THE AUDITOR (EX. VAT): Auditors fee 93 751 42 654 Other confirmations 31 460 - Technical assistance related to conversion of financial statement from NGAAP to IFRS 70 037 190 283 Total 195 248 232 937
OTHER OPERATING EXPENSES: Board of directors fee 206 979 275 956 Financial and legal assistance ex VAT 506 417 800 701 Management fee 574 665 583 051 Other expenses 908 458 64 284 Total 2 391 768 1 956 928
The administration of the company is performed by Odfjell Drilling AS for a management fee of USD 574 665. The company has no employees, and no remuneration were paid to the General Manager during the year. General Manager receives salary from Odfjell Drilling AS.
No loans or guarantees have been given to the General Manager or to the members of the board of directors.
The company is not required to have an occupational pension scheme in accordance with the Norwegian law of required occupational pension.
96 PARENT COMPANY FINANCIAL STATEMENTS 2013 97 3 | Shareholders’ equity
The share capital consists of 200 000 000 shares with a nominal value of USD 0,01. Total book value USD 2 000 000.
J.P. Morgan Chase Bank N.A. London 1 041 638 0.52% Share capital Other contributed Other equity Total capital Morgan Stanley & Co. LLC 1 023 391 0.51% Shareholders’ equity as per 01.01.2012 15 224 331 794 301 639 663 497 971 473 022 Lieungh Simen 952 381 0.48% Dividend - - (7 942 500) (7 942 500) State Street Bank and Trust Co. 860 371 0.43% Profit 2012 - - 5 421 335 5 421 335 Verdipapirfondet DnB Norge V 860 235 0.43% Shareholders’ equity as per 01.01.2013 15 224 331 794 301 637 142 332 968 951 858 Skandinaviska Enskilda Banken AB 825 392 0.41% Shares 1 984 776 (1 984 776) - - Morgan Stanley & Co.Internat. PLC 819 317 0.41% Dividend - - (8 560 911) (8 560 911) Other shareholders 25 207 257 12.60% Profit for the year - - (2 536 023) (2 536 023) Total 200 000 000 100,00% Shareholders’ equity as per 31.12. 2013 2 000 000 329 809 525 626 045 398 957 854 923 Helene Odfjell controls 71.0 % of the shares in Odfjell Drilling Ltd. through Odfjell Partners Ltd. CEO controls 0.48 % of the shares in Odfjell Drilling Ltd. Chairman of the board of directors, Carl-Erik Haavaldsen, has a significant ownership in Cenor Ltd. which owns 19,047 shares in Odfjell Drilling Ltd.
4 | Share capital and shareholders 5 | Subsidiaries
The share capital and information about shareholders: Company Acquisition/ Registered Shares and Percent of Share capital Profit/loss Equity as per Book value
formation date office percent of votes USD 2013 31.12.2013 Number Nominal value Book value votes in USD in USD
Odfjell Offshore Ltd. 2011 Hamilton, 100% 100% 10 000 (25 758 353) 706 744 455 714 766 309 Shares 200 000 000 USD 0,01 2 000 000 Bermuda Odfjell Drilling Services Ltd. 2011 Hamilton, 100% 100% 10 000 (6 250 753) 351 240 026 272 042 350 Total 200 000 000 USD 0,01 2 000 000 Bermuda
Total 986 808 660
Overview of largest shareholders as per 31.12.13: The shares are recognised in the accounts according to the cost method.
Number of shares Participating interests/ share of votes
Odfjell Partners Ltd 142 000 000 71.00% Deutche Bank AG 7 148 441 3.57% 6 | Intercompany balances Fidelity Select Portfolios: Energy 3 275 481 1.64% State Street Bank & Trust Company 2 403 037 1.20% Long term: Receivables 2013 Liabilities 2013 Receivables 2012 Liabilities 2012 Interests 2013 Varma Mutual Pension Insurance 1 900 000 0.95% Odfjell Offshore Ltd 368 426 669 - 365 578 375 - 26 676 963 Fixed ann. interest rate Goldman Sachs & Co Equity Segregat 1 697 481 0.85% of 6,95% BNP Paribas Sec. Services S.C.A. 1 618 186 0.81% Odfjell Drilling Services Ltd - 395 377 946 - 397 474 200 (17 035 288) 3 mnths Libor + 3,63% Lazard Freres Banque 1 558 665 0.78% margin Skandinaviska Enskilda Banken AB 1 497 169 0.75% Total long term 368 426 669 395 377 946 365 578 375 397 474 200 9 641 676
JP Morgan Celaring Corp. 1 412 196 0.71% Verdipapirfondet DnB Norge Selekti 1 387 028 0.69% Repayment and interest conditions:
RBC Investor Services Trust 1 319 540 0.66% Loan from Odfjell Drilling Services Ltd : Final maturity date 9 November 2018, applicable interest is 3 months Libor + 3,63% margin Loan given to Odfjell Offshore Ltd: Final maturity date 9 May 2015, applicable interest is fixed annual 6,95%. RBC Investor Services Bank S.A. 1 192 794 0.60%
98 PARENT COMPANY FINANCIAL STATEMENTS 2013 99 9 | Related parties transactions
Short term: Receivables 2013 Liabilities 2013 Receivables 2012 Liabilities 2012 Revenue from related parties Odfjell Drilling AS - (17 001) - 10 939 Type of transaction Related party Relation Amount 2013 Amount 2012 Odfjell Drilling Holding Ltd - - 16 599 6 286 000 Interest Odfjell Offshore Ltd Subsidiary 26 676 963 18 581 374 Odfjell Drilling Services Ltd - (6 063) - 1 550 Guarantee provision Odfjell Invest Ltd Subsidiary 1 785 000 1 907 000 Odfjell Rig Ltd - - 3 600 000 - Guarantee provision Odfjell Rig II Ltd Subsidiary 697 000 - Odfjell Drilling Technology Ltd - 533 000 - 533 000 Guarantee provision Odfjell Rig Ltd Subsidiary 34 000 366 000 Odfjell Invest Ltd - - 1 907 000 - Guarantee provision Odfjell Drilling Services Ltd Subsidiary 1 279 000 1 380 000 Total short term - 509 936 5 523 599 6 831 489 Sum 30 471 963 22 234 374
The short term receivables have less than one year maturity. Cost from related parties Type of transaction Related party Relation Amount 2013 Amount 2012 Management services Odfjell Drilling AS Subsidiary 574 665 583 051 Interest Odfjell Drilling Services Ltd Subsidiary 17 035 288 14 831 691 Sum 17 609 953 15 414 742 7 | Cash and bank deposits
2013 2012 Current account NOK 85 173 170 667 Current account USD 597 970 2 133 300 Total 683 143 2 303 968 10 | Financial income and expenses
Guarantee provision As security for the pledged loan in Odfjell Drilling AS, some companies within the group have furnished a joint liability guarantee towards the lending authority. Odfjell Drilling AS there- fore pays a guarantee provision to these companies. Bank deposits are not restricted. Other financial income: 2013 2012 Foreign exchange profit 54 455 13 508 Regulation bank balance 1 853 620 11 419 Guarantee commission 3 795 000 3 653 000 8 | Short-term liabilities Total other financial income 5 703 075 3 677 927
2013 2012 Other financial expenses: 2013 2012 Provision for directors' fees 1 028 500 201 651 Interest expenses Trade creditors 683 093 105 838 Foreign exchange loss 174 272 11 332 Other short term debt 500 000 - Regulation bank balance 1 858 360 2 561 Total 2 211 593 307 489 Other financial expenses - (14 785) Initial public offering 13 469 223 - Total other financial expenses 15 501 855 (891)
100 PARENT COMPANY FINANCIAL STATEMENTS 2013 101 11 | Guarantees and security 12 | Tax
GUARANTEES FROM ODFJELL DRILLING LTD IN - USD 530 million term loan facility agreement entered ODFJELL INVEST LTD. – USD 950,000,000 Odfjell Drilling Ltd is registered in Bermuda. The company has received from the Minister of Finance the company except insofar as such tax applies to persons RELATION TO SUBSIDIARIES’ LOAN AGREEMENTS into on 7 May 2013 with Odfjell Rig III Ltd as borrower FACILITY AGREEMENT of Bermuda under the Exempted Undertakings Tax ordinarily resident in Bermuda and holding such shares, and DNB Bank ASA as Agent on behalf of the lenders. There is no Bermuda income, corporation, or profit tax, Protection Act 1996 an assurance that, in the event of debentures or other obligations of the company or any All of the shares and substantially all of the assets of The liability of Odfjell Drilling Ltd hereunder shall be withholding tax, capital gains, capital transfer tax, estate there being enacted in Bermuda any legislation imposing land leased or let to the company. Odfjell Invest Ltd. and its subsidiaries have been pledged in Odfjell Drilling Ltd has furnished an On-Demand Guarantee limited to USD 636 million plus any unpaid amount of duty or inheritance tax payable by the company or its tax computed on profits or income, or computed on any favour of the lenders, including mortgages over Deepsea under the following facility agreements: interest, fees and expenses, and shall be reduced with shareholders not ordinarily resident in Bermuda. The com- capital assets, gain or appreciation or any tax in the nature As an exempted company, the company is liable to pay a Stavanger and Deepsea Atlantic. Also, Odfjell Drilling Ltd. amounts actually repaid (and prepaid, if any) under the pany is not subject to Bermudan stamp duty on the issue, of estate duty or inheritance tax, such tax shall not until registration fee in Bermuda at a rate presently amounting and certain of its subsidiaries have guaranteed the oblig- - USD 300 million term loan facility agreement entered loan agreement. transfer or redemption of its shares. 2035 be applicable to the company or to any of its opera- to USD 8 360 per annum. ors’ obligations under the finance documents. into on 4 November 2011 with Odfjell Drilling Services tions, or to the shares, debentures or other obligations of Ltd as borrower and DNB Bank ASA and Danske Bank A/S as lenders. The liability of Odfjell Drilling Ltd hereunder SHARE PLEDGES shall be limited to USD 330 million plus any unpaid ODFJELL RIG II LTD. – USD 270,000,000 amount of interest, fees and expenses, and shall be Odfjell Drilling Ltd has pledged its shares in Odfjell Offshore SENIOR SECURED TERM LOAN FACILITY reduced with amounts actually repaid (and prepaid, Ltd and Odfjell Drilling Services Ltd as security for any All of the shares in and substantially all of the assets of if any) under the loan agreement. amounts outstanding under the USD 300 million loan Odfjell Rig II Ltd. have been pledged in favour of the lenders, agreement entered into by Odfjell Drilling Services Ltd on including a mortgage over Deepsea Bergen. Also, Odfjell - USD 950 million term loan facility agreement entered 4 November 2011. Drilling Ltd. and Odfjell Offshore Ltd. have guaranteed the into on 4 November 2011 with Odfjell Invest Ltd as obligors’ obligations under the finance documents. borrower and DNB Bank ASA as Agent of behalf of the 13 | Financial liabilities Lenders. The liability of Odfjell Drilling Ltd hereunder OTHER SECURITY shall be limited to USD 1 140 million plus any unpaid ODFJELL RIG III LTD. – USD 530,000,000 amount of interest, fees and expenses, and shall be ODFJELL DRILLING SERVICES LTD. – USD 300,000,000 FACILITY AGREEMENT reduced with amounts actually repaid (and prepaid, FACILITY AGREEMENT The table below summarises the maturity profile of the company’s financial liabilities at 31 December 2013: As security for the facilities, and as a condition precedent if any) under the loan agreement. The Company, and certain of Odfjell Drilling Services Ltd.’s to utilisation of the facilities upon delivery of Deepsea subsidiaries, are guarantors under the facility agreement. Aberdeen, substantially all of the shares in and assets of Less than 3 months 3 to 12 months 1 to 5 years > 5 years - USD 270 million term loan facility agreement entered Further, all of the shares in Odfjell Offshore Ltd., Odfjell Odfjell Rig III Ltd. and Odfjell Drilling Shetland Limited will into on 15 February 2013 with Odfjell Rig II Ltd as Drilling Services Ltd., Odfjell Operations Ltd., Odfjell Part- Long term loan from subsidiary - - - 395 377 946 be pledged in favour of the lenders and hedging banks, borrower and DNB Bank ASA as Agent on behalf of the ners Invest Ltd., Odfjell Drilling AS, Odfjell Drilling Technol- including a mortgage of Deepsea Aberdeen. Also, Odfjell Accounts payable (666 092) - - - lenders. The liability of Odfjell Drilling Ltd hereunder ogy Ltd., Odfjell Rental Services AS, Odfjell Casing Services Drilling Ltd. and Odfjell Offshore Ltd. have guaranteed shall be limited to USD 324 million plus any unpaid AS, Odfjell Well Services Europe AS, Odfjell Well Services Other short-term liabilities - (1 528 500) - - the obligors’ obligations under the finance documents, amount of interest, fees and expenses, and shall be Ltd. and Odfjell Drilling Technology AS have been pledged and one of the USD 200 million export credit facilities has Intercompany short-term liabilities - (526 937) - - reduced with amounts actually repaid (and prepaid, in favour of the lenders. The loan is also secured by first been guaranteed by the Norwegian Garanti-Instituttet for if any) under the loan agreement. priority assignment of all intra-group receivables owed to Total (666 092) (2 055 437) - 395 377 946 Eksportkreditt (for a guarantee fee). Odfjell Drilling Services Ltd. and its subsidiaries.
Guarantee liabilities 2013 2012 Parent company guarantee in relation to the subsidiaries’ loan agreements; Loan agreement in Odfjell Drilling Services Ltd 300 000 000 300 000 000 Loan agreement in Odfjell Invest Ltd 950 000 000 950 000 000 Loan agreement in Odfjell Rig Ltd 0 170 000 000 Loan agreement in Odfjell Rig II Ltd. 270 000 000 0 Loan agreement in Odfjell Rig III Ltd. 530 000 000 0 Total guarantee liabilities 2 050 000 000 1 420 000 000
Book value of assets pledged as security 2013 2012 The following assets are pledged as security by the parent company Odfjell Drilling Ltd regarding the loan agreement entered into by its subsidiary Odfjell Drilling Services Ltd: Shares in Odfjell Offshore Ltd 714 766 309 714 766 309 Shares in Odfjell Drilling Services Ltd 272 042 350 272 042 350 Total book value of assets pledged as security 986 808 660 986 808 660
Intra-group receivables (Odfjell Drilling group) 2013 2012 Total book value of receivables pledged as security 368 462 595 387 015 420
102 PARENT COMPANY FINANCIAL STATEMENTS 2013 103 Responsibility statement Auditors Report
We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2013 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and the group taken as a whole. We also confirm that the Board of Directors’ Report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group.
Bermuda, 1 April 2014 Board of Directors of Odfjell Drilling Ltd.
Carl-Erik Haavaldsen Helene Odfjell Kirk Davis Henry Hamilton III Bengt Lie Hansen Chairman Director Director Director Director
104 ODFJELL DRILLING ANNUAL REPORT 2013 105 Auditors Report
Design and production by Alf Gundersen
Photo by: Helge Hansen (p. 1, 6, 10, 14, 15, 16, 19, 26, 28, 29, 32, 33,34, 36, 37, 40, 44, 48, 108) David Zadig, (p. 18, 20, 22, 30, 38, 39) Stein Atle Fedøy (p. 21) Rune Johanson, Statoil (p. 23) Øystein Klakegg (p. 46)
106 ODFJELL DRILLING LTD. CLARENDON HOUSE 2 CHURCH STREET HAMILTON HM11 BERMUDA www.odfjelldrilling.com
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