Odfjell Drilling Annual Report 2019 ANNUAL REPORT 19 ANNUAL REPORT 19 Content Section 01 Section 09 Introduction 03 Board of Directors Report 51 – CEO Letter 04 – Business & Market Overview 52 – Focus Areas 56 Section 02 – Segment Overview 58 Our Business 06 – Outlook 59 Section 03 – Financial Review 60 Milestones 13 – Risk Review 63 – Going Concern Statement 64 Section 04 – Subsequent Events 64 Executive Management Team 15 Section 10 Section 05 Group Financial Statements 65 QHSE 18 Section 11 Section 06 Parent Financial Statements 143 Corporate Governance Report 25 Section 12 Section 07 Responsibility Statement 160 Sustainability Report 33 Section 13 – Environment 35 Auditors Report 162 – Social Responsibility 41 – Governance 45 Appendix 1 Definitions of Alternative Section 08 Performance Measures 169 Board of Directors 49 01 Introduction Section 01 Introduction Section 01 Introduction The outbreak of the Coronavirus and the collapse of the the Mariner drilling facilities from the project where OPEC+/Russia cooperation has, however, dramatically drilling is due to commence early in 2020. Platform changed the global economy and the world’s prospects Drilling has in 2019 continued production drilling and CEO Letter for 2020. drilling maintenance for Wintershall on Brage, on the Heidrun and Johan Sverdrup installations for Equinor The spread of the coronavirus is having a profound and for Taqa and Serica Energy in the UK. With our and serious impact on the global economy, how much contracts on Johan Sverdrup, Mariner and Clair Ridge, and for how long is still to be seen. We are obviously we are positioned on the three most digitally advanced not immune to this correction in the world economic field installations in the North Sea. situation, but we do what we can to keep our people healthy and to mitigate the impact of COVID-19 and its Although the well service market is still suffering from effects on our businesses. oversupply and pressure on margins, our well service division has seen a turning point in 2019. Well Services In 2019, we have increased our capacity and added has successfully implemented strategic changes and valuable contracts to our portfolio. expanded the business with new profitable services and products. I am pleased to say that Odfjell Well Services In May, we successfully started operations for Aker BP is commercially “back on track” - and well prepared for with our newbuild Deepsea Nordkapp and in October, the future. we commenced another successful drilling operation with the newbuild Deepsea Yantai for Neptune Energy. Odfjell Drilling & Technology had a very busy 2019 and Towards the end of last year, we could also announce delivered strong results. In our annual report for 2018, we envisaged continued efficiently. In 2019, we rolled out new innovative digital more work for Deepsea Nordkapp and Deepsea Atlantic tough competition and challenging markets in 2019 but solutions, which will contribute to this. We are gathering for Aker BP and Equinor respectively. The decision to retain the core engineering competence still with significant ambitions for Odfjell Drilling to build and analysing new data every day, and in cooperation within the Group during some difficult years in which a solid foundation for sustainable growth. with operations we are learning how this can become All our six semisubmersibles have performed very well most others laid off their technical support functions a tool to improve predictability and therefore aide in 2019 including our two newbuilds that performed has proven right. The Brulpadda project, a successful One year after, I am pleased to see that most of our decision making. extremely well from day one. Another highlight of 2019 completion of Deepsea Atlantic’s Special Periodic ambitious goals have been met and that we have was Deepsea Stavanger’s successful drilling campaign Survey (SPS) and two extensive yard stays with two managed to deliver in all business areas and built our With the Paris Accord in 2016, it became evident that for Total on the Brulpadda project in South Africa. The new builds would not have been possible without this portfolio further. We have continued to increase our regulatory requirements surrounding environment and significant discovery made at the beginning of 2019, in-house capacity and expertise. Going forward, we competiveness through operational performance and emissions would increase. Since then, Odfjell Drilling lead to a multi-well drilling contract with Total for see a number of opportunities for Odfjell Drilling & efficiency. In 2019, we have implemented important has put major resources into assessing how we can further exploration, commencing in Q2-Q3/2020. Technology, both independent projects and integrated measures to develop the organisation and our people. decrease the carbon emissions from our mobile drilling services with platform drilling. People management and leadership training to units in particular. 2019 was the year where many of When released by Total in April, Deepsea Stavanger safeguard and further develop our strong business these efforts materialised into what we now refer to continued work for Aker BP under the exclusive rig Despite the challenging market, Odfjell Drilling has culture is an important part of our strategy. as our ambition of “zero emission drilling”. In a switch alliance entered into in 2017. Deepsea Atlantic and delivered satisfactory results in 2019 within all our towards a more sustainable future, Odfjell Drilling Deepsea Aberdeen have been working for Equinor and business areas and the best results since the downturn HSE performance is essential to stay competitive and recognises that our industry needs to take action BP UK in 2019 while Deepsea Bergen has performed started in 2014. With the increased contract portfolio and will always be our “license to drill”. We believe strongly and contribute to reduce the carbon emissions in the drilling operations for Equinor, Ithaca Energy UK, OMV our fleet renewal with two more semisubmersibles, we that all accidents and incidents are preventable and we oil and gas production cycle. We are ready to do our Norge and MOL Norge. Given that options are declared, are in a position for further growth. The switch towards a will continue to focus on maintaining the highest safety part together with our clients, partners, suppliers and all units, with the exception of Deepsea Bergen, have so more sustainable future for our services is a continuous standards to safeguard the health of our employees and employees. far secured work until at least mid-2022. innovative development, which has been characteristic associates. Although we have improved in important for the organisation for more than 45 years. Odfjell areas, we still have a way to go to meet our zero fault By the end of 2019, the market situation was still Platform Drilling achieved some important milestones Drilling has been a frontrunner for innovative and philosophy. Hence, we will take the learnings from 2019 challenging in most areas although somewhat healthier in 2019. One came at the end of the year, with a 5 + smarter business solutions for decades, and I look for further improvements going forward. than previous years; the supply/demand balance in the 6 year contract award with ConocoPhillips for three forward to the next decade with strong optimism. harsh environment market had improved and some installations at the Greater Ekofisk Area. Further, BP UK Entering into the third decade of the 2000’s, technology other areas had slowly started to pick-up. Analysis confirmed Odfjell Drilling as their preferred partner for poses many possibilities within our industry. Odfjell shows an increased demand for oil and gas during the their Clair field in the UK. In November, we took over Drilling spend a lot of time and resources assessing next decades, largely driven by population growth. how technology can help us operate more safely and 4 ODFJELL DRILLING – Annual Report 2019 ODFJELL DRILLING – Annual Report 2019 5 Section 02 Our Business Three Business areas – Odfjell Drilling in brief one integrated company COMPANY MOBILE OFFSHORE DRILLING UNITS • More than 45 years of experience from worldwide The business segment “Mobile Offshore Drilling Units” drilling and well service operations (MODU) is responsible for the operations of mobile drilling units wholly owned by the Group and one unit • Continued investments in the latest and best owned by another company. technological solutions • Ambitious development program for zero emission Our six semisubmersible drilling units have performed drilling services drilling operations in Norway, UK, and South Africa in 2019. Deepsea Stavanger started drilling operations • Multiple revenue sources from complementary for Total offshore South Africa in December 2018 business areas and returned to NCS under the alliance agreement with Aker BP on 7 April 2019. The newbuild Deepsea PEOPLE Nordkapp commenced drilling operations under the Aker BP alliance agreement on 10 May 2019 while the • Nearly 2600 employees in more than 20 countries latest delivery Deepsea Yantai commenced drilling with • Highly specialized engineers supporting all business Neptune Energy Norway on 31 October 2019. Deepsea segments Atlantic and Deepsea Aberdeen have been drilling for Equinor and BP UK respectively in 2019 while • Highly committed and experienced work force Deepsea Bergen has performed drilling operations within all business areas for several clients in UK and Norway during the year.