Maracc Annual Report 2008 by Fasett AS

maracc Annual Report 2008

How to get the most out of your subsea wells

Island Innovator is the first purposebuilt heavy well intervention vessel on the market. The rig is designed to perfom the full range of intervention services at highest efficiency using the latest in technology, best solutions in work environment and an optimized operation philosophy.

Contents annual report 2008 maracc 3

04 Highlights 05 Key Figures 06 About the Company 08 Island Innovator in profile 13 Board of Directorsâ&#x20AC;&#x2122; Report 16 Board of Directors 18 Annual Accounts 19 Profit and Loss Account 20 Balance Sheet 22 Cash Flow Statement 24 Notes 38 Auditorâ&#x20AC;&#x2122;s Report 40 Corporate Governance Report 42 Shareholder Information

4 maracc annual report 2008 Highlights

2008 Highlights February Maracc and Cosco agreed to split the work between Zhoushan Yard for fabrication of substructure and Nantong Yard for the fabrication of the deck box. This decision was made on the basis of Coscoâ&#x20AC;&#x2122;s strategy to centralize all their offshore projects under their Nantong yard including the new site at Quidong, and better utilization of yard capacity. March Maracc entered into an exclusive Co-operation Agreement with Halliburton for the supply of integrated well services work including the full range of Halliburton scope of work. The Agreement is limited to Statoil and Norway, but can be expanded geographically if mutually agreed. May Steel cutting ceremony held at Cosco for the deck box construction at Nantong. August Maracc tendered the Island Innovator as a drilling rig to StatoilHydro. Tender was submitted in August, but the process was terminated by Statoil in November due to the negative market development. August Maracc ordered Drilling Riser and BOP system from Vetco Gray and Cameron respectively. September A MUSD 30 Convertible Bond issue was raised in September. The transaction was underwritten by the major owners. October Agreed with Cosco to move delivery date from 10th January 2010 to 30th April 2010 due to certain engineering changes. December Island Innovator put on the market globally as both a Well Intervention Unit and a combined Drilling and Well Intervention Unit. Increasingly difficult to obtain financing throughout 3rd and 4th quarter. Oil price dropped from USD 146 to USD 38 per barrel in 2nd half basically stalling the entire rig market.

Key Figures annual report 2008 maracc 5

Key figures

2008

2007

2006

0,0 6,2 -6,2 0,0 -6,2

0,0 0,6 -0,6 0,0 -0,6

0,0 0,4 -0,4 0,0 -0,4

205,0 97,0 302,0 82,5 206,7 12,8

139,4 129,9 269,3 77,9 186,0 5,4

0,0 0,1 0,1 0,1 0,0 0,0

96,0 84,2

128,5 124,5

0,1 0,1

Figures in USD million

Profit and loss account Operating income Operating expenses Operating profit Net financial items Pre-tax profit Balance sheet Fixed assets Current assets Total assets Equity capital Non current liabilities Current liabilities Liquidity Liquid assets Working capital1 Capital Total assets Equity capital Equity ratio2 Definitions 1 Current assets â&#x20AC;&#x201C; current liabilities 2 Equity capital as % of total assets

302,0 82,5 27,3%

269,3 0,1 77,9 0,1 28,9% 100,0%

6 maracc annual report 2008 About the company

Island Innovator provides the full toolbox Full size 18-3/4" BOP system and 21-1/4" drilling riser for 1300 meters waterdepth drilling applications if applicable Well Intervention size BOP and 5" to 8" riser for 3000 meter to fit all types of x-mas trees Full range of Coil Tubing services up to 3-1/2" including spooling on deck Wireline services, all types Through Tubing Rotary Drilling (TTRD) capabilities 165 tonnes AHC crane with subsea lift capabilities to 2000 meters Stimulation and fraccing services Well test services Central Control Room for all services Multiskilled operators

About the Project 窶的sland Innovator Maracc was established in 2006 in Stavanger by industry veterans and Island Offshore. The aim was to bring forward a semi-submersible rig solution for heavy well intervention activities on subsea wells. The rig will have particular focus on the Norwegian market complementing the advances made on riserless light well intervention by monohull vessels. The Company was financed through a USD 60 million equity issue at nok 25 per share and a USD 120 million bond issue in February 2007.

Cosco entered into a consortium contract with Siemens for the marine equipment including Wartsila for engines and Kongsberg Martime for dynamic positioning systems.

In March 2007 Maracc placed a contract for one rig, with options for three more, at the Cosco Zhoushan shipyard in China. The rig, a Global Maritime design GM 4000, is a conventional drilling rig hull. The rig was scheduled for delivery on 1st December 2010 at Cosco shipyard ready for transportation to Norway and installation of the topside module.

In July 2007 further Usd 80 million was raised in convertible bond issue, to finance the topside.

Maracc further entered into a contract with Island Offshore Management in March 2007 for the construction superﾂｭvision and operation of the rig. The Company was OTC listed in April 2007 under the ticker MARA.

In August 2007 Maracc entered into contracts with National Oilwell Varco for the development and delivery of the specialised intervention topside system, and further with Nymo shipyard in Grimstad, Norway for the assembly of the topside module.

About the company annual report 2008 maracc 7

The Board of Directors decided in October 2007 the name of the unit to be Island Innovator. The name reflects both that the unit shall be an integral part of the Island Offshore Well Intervention fleet, and that the unit represents a new innovative approach to well intervention. Island Innovator is due to be completed and ready for operation at the end of 2011. The unit will be built to Norwegian NORSOK and DNV standards and specifications, and its port of registry will be Aalesund in the NOR register. The Unit Island Innovator will represent a new approach to well intervention and Maracc/Island Offshore intend to offer complete and integrated services in this field.

The intention is to offer a unit capable to perform all types of well intervention activities such as wireline, coil tubing and through tubing rotary drilling for drilling of short side tracks. The unit will also be prepared for a number of other and related services. The goal is to achieve a 30% reduction of time per operation compared to conv-entional drilling rigs by significantly reduce time spent on mobilisation, demobilisation, transit and other. The response from the market has so far been very positive. It is expected a long term contract for the unit will be signed some-time in 2009. There is currently dialogue with several operators, but as always, when a new service is introduced, the first contract takes time to establish.

Company structure:

Morten Ulstein

Berit Rynning

Ă&#x2DC;ivind Lund Chairman

Dionne Chouest

Ă&#x2DC;yvind Jordanger

Asle Solheim CEO

Project Management

Technical Operations

Marine Crew

Marketing

Finance

Innovative topside solutions: 590 tonnes hydraulic derrick system Derrick mast providing access from 3 sides Can change operations between Wireline, Coil Tubing and Drill Pipe in one hour Full automatic pipe handling system

Highly efficient and safe Coil Tubing Operations: Integrated Coil Tubing Frame No planned lifting operations in the derrick area Operator friendly

Efficient BOP handling: Can provide for BOP weights up to 300 tonnes Efficient BOP handling capabilities Can be configured for Drilling services only, Well Intervention services only or with certain limitations a combination of Drilling and Well Intervention services

The operating modus between services can be altered in one hour On Island Innovator intervention equipment is permanently installed on the rig floor and are skidded in and out as required.

Board of Directors’ report annual report 2008 maracc 13

The Board of Directors’ Annual Report 2008

1. The nature of business The purpose of Maracc – Marine Accurate Well ASA (hereinafter “Maracc” or “the Company”) is to build and operate rigs and appliances for support of operations in the offshore oil industry. The Company was founded in 2006. In February 2007 the Company ordered its first semi submersible rig based on the GM 4000 design, developed by Global Maritime. The Company’s registered office is in Stavanger. 2. Continued operation In accordance with the Norwegian Accounting Act § 3–3a it is confirmed that the presumptions for continued operation are present. The Board of Directors will however emphasize that behind this presumption there are 3 significant elements of uncertainty; securing a financing solution for the remaining 50 % of the total project cost, final delivery date for the rig from the yard in China and point in time for signing an operational contract for the rig post delivery. Even though these three elements of uncertainty are considered significant, and make the presumption for continued operation somewhat uncertain, the Board of Directors, based on the efforts made and the resources laid down, consider the presumption for continued operation still to be present. For further information see section 6. 3. Working environment and personnel The Company had no employees as of 31st December 2008. The Company’s needs for competence and accompanying resources have been secured through a fullservice long-term management agreement with Island Offshore Management AS (IOM). According to the agreement IOM shall assist the Company within administration, construction supervision and later operation services. No Lost-Time Incidents, resulting in greater material damages or personal injuries, has been reported during the year. The working environment is considered good, and continuous efforts for improvement are carried out. 4. Equal opportunities The Company has an aim to be a working place where equal opportunities prevail between men and women. The Board consists of 5 members, three men and two women. The Company satisfies the requirement of representation of both sexes according to the the Norwegian Public Limited Companies Act § 6-11a.

5. Environmental reporting The Company’s business as of 31st December 2008 is not regulated by licenses or public orders. The business does not pollute the external environment over and above what is customary for this kind of operation. 6. Future development Maracc was established in 2006 with an aim to bring forward a semisubmersible rig solution for heavy intervention activities on subsea wells. The rig is tailor made for Norwegian operations but able to work globally. To accomplish this, Maracc has one semi-submersible intervention rig under construction at the Cosco Shipyard Group Ltd. in China. The rig, to be named Island Innovator, is based on the GM 4000 design. The plan was and still is to address the issue of low oil recovery from subsea wells and the need for more service related work for a steady increasing number of subsea wells around the world. The basis is to build on the experiences gained from Light Well intervention services performed by Island Offshore in the North Sea. Island Offshore will manage and operate the rig when in operation. The rig is the first purpose built well intervention rig and is prepared for the full range of services such as Coil Tubing and Through Tubing Rotary Drilling (TTRD) down to 3000 meters water depth. GM4000 – Project status The project is generally progressing according to schedule. The one exception is the deck box construction at Cosco Nantong which has fallen behind and is expected to impact delivery from the yard. How this delay eventually will impact the overall project schedule and date for ready for operation is not yet quantified, however, the deck box is on critical line and some impact is expected. It is expected that a worst case scenario could be a delay of start up of up to 12 months from current plan, moving ready for operations date towards the end of 2011. The reason for the delay is both that the yard has underestimated the time to be consumed based on the original specification, coincident with there having been some adjustments on the way. A delay from the yard of 7 – 10 months are inevitable. A project team consisting of about 30 persons doing construction supervision has been established in China under IOM’s direction. The team has daily contact with the yard in relation to engineering, progress and quality. The follow-up towards the yard has been emphasized to avoid further delays.

14 maracc annual report 2008 Board of Directors’ report

All engineering work is now finished and the project progress is above 50 %, which in turn forms a solid basis for considering further progress and delivery based on the presumption that no major surprises arise going forward. The project is partly financed with 290 MUSD of a total cost of 560 MUSD. Of the remaining financing requirement of 270 MUSD about 180 MUSD is due for payment during 2009. Eksportfinans ASA has indicated that they are willing to provide a loan in the amount of up to USD 235 million, based on GIEK or other acceptable financial institutions guaranteeing the entire loan. GIEK is positive to issue a guarantee covering the major part of the loan amount. The base case scenario is to secure a long term contract by the end of 2009 and thereby fully secure bank financing for the remaining part of the project. Failing this, the Board of Director’s has drawn up an alternative proposal were a certain amount will be paid to suppliers during 2009, and the rest to be postponed for payment until early 2010. There is currently a constructive dialog with these suppliers. The proposal is based on the supplier’s approval and Maracc having secured some additional financing by the end of November 2009. The participation required from commercial banks has proven difficult to obtain in today’s market without having a long term operational contract in place, and the main challenge is therefore to secure a long term contract for the rig either in Norway or internationally. Several banks have signaled that they are prepared to contribute as soon as a long term, acceptable contract is in place. Market Update The oil service market has deteriorated as a result of the weakening oil price and rig rates have also weakened although from a strong level. Several prospects are being pursued with oil majors, of which 3 prospects are considered very firm. It is expected that oil companies will award contracts in 2009 for intervention units potentially combined with drilling. It is expected the oil price will slowly strengthen through 2009. As this will have a positive effect on the oil service market in general and on the rig market in particular, it is expected that the number of contracts to be awarded in the drilling and intervention segment will increase in 2009 and 2010. 7. Achievement, cash flow, investments, financing and liquidity The Board of Directors is of the opinion that the annual accounts give a true and fair view of Maracc’s assets and liabilities, financial position and result. There have not been any significant incidents after the 31.12.2008 that have not been considered in the annual accounts, or that are of importance to assess the Company’s result or financial position. The Company had no turnover in 2008. The result before taxes showed a loss of USD 6 160 612. The loss is mainly caused by two circumstances. First it is the impairment of the ‘Right of redemption own bonds’ totaling USD 2 777 048, and secondly it is the impairment of ‘Forward Exchange Currency Contracts’ totaling USD 3 037 295. Furthermore, a part of the loss is due to the Company being in the establishment phase. The Company aims at limiting

expenditure, but has no ambitions of obtaining a positive annual result before 2012. Despite the negative annual result for 2008, the Board finds the financial statements satisfactory. Both the result for 2008 and the cost of building the vessel are within the plan. The Company has no expenditure in connection with Research and Development. Total cash flow from operational activities in the Company was minus USD 346 269. The operating result for the Company shows a deficit of USD 6 160 612. Total investments relating to plant and equipment in 2008 were USD 68 742 089. The Company’s cash position was USD 95 995 319 as of 31.12.08. The Company borrowed USD 30 000 000 in the Bond market in 2008. The Company’s long-term debt is recorded at USD 206 663 550 at the end of 2008. The long-term debt is adjusted downwards by USD 23 336 450 as a consequence of the value of built-in options related to the Bonds at the disbursement date having been deducted, and the value of repurchased bonds having been deducted. The Company’s short-term debt was USD 12 790 489 as of 31.12.08. The total capital at year end was USD 301 983 228. The equity capital was USD 82 529 189 as of 31.12.08, which gives a solidity of 27.3%. 8. Financial risk 8.1 Market risk The Company is exposed to market risk as no long-term operating contract for the vessel under construction has been entered into. However, the Company is in discussions with several oil companies regarding potential time charters. The Company’s aim was to enter into a long-term contract within 2008, however the revised ambition is to enter into a long-term contract before year end 2009. 8.2 Currency risk The Company is to some extent exposed to changes in the foreign exchange markets. All long term debt is in USD (USD denominated bonds) and the major part of the Company’s expenses is in USD. Some expenses are in NOK; however the Company has reduced most of the risk by entering into forward foreign exchange contracts. 8.3 Interest risk Similarly the Company is exposed to changes in the interest rate level, since 52 % of the Company’s debt has floating interest. 8.4 Credit risk The risk related to opposite parties not having the means to fulfill their obligations is seen as low, as the Company does not have unsettled claims. To reduce risks in relation to large suppliers’ delivery obligations the company has obtained performance guarantees from the relevant suppliers’ banks. The company has received a repayment guarantee from Bank of China in connection with the Construction Contract with Cosco shipyard. Set off agreements or similar financial instruments in order to minimize the credit risk have not been entered into by the Company.

Board of Directors’ report annual report 2008 maracc 15

8.5 Liquidity risk As at year end 2008, the Company has obtained financing of approximately 50 % of the total project costs (construction-, supervision- and financing costs during the construction phase as well as mobilization / start up costs). The Company has sufficient cash reserves until the end of November, 2009 at which point in time additional financing needs to be secured. Given the general economic recession and the crisis in the financial markets, the availability of financing

is more limited now than what was the case a year ago. From November 2009 and up until June 2010 the financing need is estimated to USD 190 million. The plan is to secure this through commercial banks and Eksportfinans ASA. 9. Annual results and disposals The Board suggests the following disposal of the annual result in the Company: Uncovered loss: USD 6 570 106. The Company had no distributable reserve at the end of 2008.

Oslo, 27th May 2009

Øivind Lund Chairman of the Board

Øyvind Jordanger Board Member

Berit Rynning Board Member

Dionne Chouest Board Member

Morten Ulstein Board Member

Asle Solheim Chief Executive Officer

Island Innovator is offering efficieny gains of 30–35% compared to convential units.

35%

Up-/downrigging when changing operation-mode is generally eliminiated Integration of Service-Equipment reduces number of manhours significantly 10 knots transit speed

16 maracc annual report 2008 The Board of Directors

The Board of Directors

Øivind Lund

Morten Ulstein

Dionne Chouest

Chairman of the Board

Board Member

Has held various senior positions with ABB over the last 10 years including CEO of ABB in Norway and president & country manager in Turkey. Member of the board of directors of Yara (chairman). Holds an MSc and a PhD in electrical engineering and a degree in industrial economy.

Over 25 years experience in the offshore and marine sectors – both as investor and in various CEO positions (Rolls Royce Marine, Vickers Ulstein Marine Systems, Ulstein Industrier). Founder and chairman of Island Offshore – the most successful and fastest growing well intervention company to date. Responsible for managing the Ulstein family’s investment companies.

Owner and officer of several of the Edison Chouest Offshore group companies. Has held the position of general counsel of the Edison Chouest Offshore group since 1993. Holds a BSc in accounting from Nicholls State University and a law degree from Tulane Law School.

The Board of Directors annual report 2008 maracc 17

Ă&#x2DC;yvind Jordanger

Berit Rynning

Asle Solheim

Board Member

Chief Executive Officer

Some 30 years experience in the oil and gas industry, mainly within drilling and operations. Managing director of Dolphin for six years, and thereafter president of Navion Inc (Navion ASA was acquired by Teekay in January 2003). Is currently director of business development and offshore projects at Teekay.

Recently started as executive director for center of viable energy in relation to IRIS (International Research Institute in Stavanger). Has held several senior positions within StatoilHydro, including regional director for Kazakhstan, Mexico and Venezuela and country manager in Mexico, government relations manager in Venezuela and project manager in Algeria.

Has 20 years of relevant experience including Managing Director of ABB Offshore Systems in the UK. Has since 2005 been involved in developing subsea riserless well intervention solutions with with FMC and Island Offshore. Educated mechanical engineer from the University of Wisconsin at Madison, USA.

Annual accounts

Annual accounts annual report 2008 maracc 19

Profit and Loss account

Note

2008

2007

3 3,15 7,13

175 473 170 796 5 814 343 6 160 612

– 600 148 600 148

-6 160 612

-600 148

-6 160 612

-600 148

409 494

-56 598

-6 570 106

-543 550

In USD

Salaries Other operating expenses Other gains and losses (net) Total operating expenses Operating result Financial income and expenses Other financial income Net financial items Result before tax Tax on ordinary result

Result for the year Earnings per share Diluted earnings per share

16 16

-0.44 -0.44

-0.04 -0.03

Transfers Uncovered loss Total transfers

-6 570 106 -6 570 106

-543 550 -543 550

20 maracc annual report 2008 Annual accounts

Balance sheet Assets 31.12

Note

2008

2007

440 140 440 140

849 634 849 634

In USD

Fixed assets Intangible assets Deferred tax asset Total intangible assets Property, plant and equipment Rig under construction Total tangible assets Financial fixed assets Long term financial instruments Total financial fixed assets

6,8,15 204 561 394 135 819 305 204 561 394 135 819 305

7, 17

Total fixed assets Current assets Receivables Other short term receivables Total receivables Short term financial instruments Cash and cash equivalents Total current assets Total assets

2 777 048 2 777 048

205 001 534 139 445 987

4, 17

13, 17 9,17

986 374 986 374

865 746 865 746

505 665 95 995 319 128 508 324 96 981 693 129 879 735 301 983 228 269 325 723

Annual accounts annual report 2008 maracc 21

Balance sheet Equity and Liabilities

Note

2008

2007

10,11,15 11 11

2 891 027 58 951 535 27 868 128 89 710 690

2 891 027 58 951 535 16 706 322 78 548 884

-7 181 502 -7 181 502

-611 395 -611 395

82 529 189

77 937 489

In USD

Equity Paid in equity Share capital Share premium Equity from convertion right Total paid in equity Retained earnings Uncovered loss Total retained earnings Total equity Liabilities Other long term liabilities Bond loans Total long term liabilities

7,8,10 206 663 550 186 038 411 206 663 550 186 038 411

Current liabilities Accounts payable Other short term debts Total current liabilities

4 726 231 8 064 258 12 790 489

809 493 4 540 330 5 349 823

Total liabilities

219 454 039 191 388 234

Total equity and liabilities

301 983 228 269 325 723 Oslo, 27th May 2009

Ă&#x2DC;ivind Lund Chairman of the Board

Ă&#x2DC;yvind Jordanger Board Member

Berit Rynning Board Member

Dionne Chouest Board Member

Morten Ulstein Board Member

Asle Solheim Chief Executive Officer

22 maracc annual report 2008 Annual accounts

Cash flow statement

Note

2008

2007

-6 160 612

-600 148

7,13

5 814 343

-346 269

3 168 919 2 568 771

In USD

Cash flow from operating activities Result before tax Decline in fair vaule call right and forwards Changes in accounts payable Changes in other accruals Net cash flow from operating activities Cash flows from investing activities Purchases of property, plant and equipment Other investments Changes in accounts payable and other accruals related to investments Net cash flows from investing activities

6 -68 742 089 -135 819 305 7

-2 777 048

4 788 408

809 493

-63 953 681 -137 786 860

Annual accounts annual report 2008 maracc 23

Note

Cash flows from financing activities Proceeds from issuance of bonds (convertible and non-convertible) Proceeds from issuance of equity Proceeds from issuance of convertible bonds (equity) Net cash flow from financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

8, 11

2008

2007

20 625 139 186 038 411 -

60 870 472

11 161 806

16 706 322

31 786 945 263 615 205 -32 513 005 128 397 116 128 508 324 9

111 208

95 995 319 128 508 324

Definitions * Accounts payables and other accruals were presented as operating activities in 2007. In 2008 these accounts are presented as investing activities. The corresponding numbers for 2007 has been revised. The operating part of the accounts is considered to be immaterial.

Notes

Notes annual report 2008 maracc 25

Accounting principles

Maracc – Marine Accurate Well ASA is a public limited company incorporated and domiciled in Norway and OTC listed in Oslo. The address of its registered office is Lagerveien 23, 4033 Stavanger, Norway. The financial statements have been prepared in accordance with simplified IFRS (International Financial Reporting Standards) pursuant to section 3-9 of the Norwegian Accounting Act and with the Directives of simplified IFRS specified by the Norwegian Ministry of Finance on 21th January 2008. This implies that estimates and measurements follows IFRS, and that presentation and notes to the financial statement are in accordance with the Norwegians Accounting Act and generally accepted accounting principles in Norway.

and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Changes in accounting estimates are accounted for in the same period as the change occurs. The changes concerns future periods, the effects of the changes will be spread throughout current and future periods. The majority of the company’s estimates are related to the construction of the rig, its progression and any need for impairment.

1.5 Revenue recognition The Company recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity.

1.1 Simplified IFRS The Company has applied all relevant simplifications in regard to IFRS, including: Dividend is treated in accordance with the Norwegian Accounting Act and deviates form IAS 10 no. 12 and 13. The cost method is applied for investments in associate companies and jointly owned assets, and deviates from IAS 28 and IAS 31.

1.2 Basis of preparation The financial statements have been prepared under the pricipals of historical cost, with the following exceptions: Available-for-sale financial assets and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

1.3 Currency

As this is a start-up period for the Company, the Company does not have operating revenues in 2008 and 2007. Interest income is recognised on a time-proportion basis using the effective interest method.

1.6 Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed.

1.7 Income tax The tax expense consists of the tax payable and changes to deferred tax. Deferred tax/tax assets are calculated on all differences between the book value and tax value of assets and liabilities.

The financial statements are presented in “US dollars” (USD) which is the Company’s functional and presentation currency. Foreign currency transactions are translated into Deferred tax is calculated as expected future tax rate the functional currency using the exchange rates prevailing of temporary differences and the tax effect of tax losses at the dates of the transactions. carried forward. The assets and liabilities of non-USD currency are translated into USD at the rate of exchange as of the balance sheet date. Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the available-for-sale reserve in equity.

1.4 Accounting estimates and judgments The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. Estimates

Deferred tax assets are recorded in the balance sheet when it is more likely than not that the tax assets will be utilized. Taxes payable and deferred taxes are recognised directly in equity to the extent that they relate to equity transactions.

1.8 Fixed assets Fixed assets are valued at cost, less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Costs for maintenance are expensed as incurred, whereas costs for improving and upgrading property, plant and equipment are added to the acquisition cost and depreciated with the related asset. When carrying value of a non current asset exceeds the estimated recoverable amount, the asset is written down to its recoverable amount. The recoverable amount is the greater of the net realisable value and value

26 maracc annual report 2008 Notes

in use. In assessing value in use, the discounted estimated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as either: future cash flows from the asset are discounted. (a) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); Property, plant and equipment under processing are classified as fixed assets. (b) hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); or As the Company is in a start-up period and all of the fixed assets are under processing, there are no deprecitations (c) hedges of a net investment in a foreign operation (net for 2008 and 2007. investment hedge).

1.9 Financial instruments In accordance to IAS 39, the Company classifies its financial instruments in the following four categories: at fair value through profit or loss, loans and receivables, available for sale and other obligations, with the exceptions described in note 1.1. Financial instruments at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. Liabilities in this category are classifies as current liabilities. Financial assets with specific or determinable cash flows that are not listed in an active market is classified as loans and receivables, with exceptions of instruments that the Company has classified as at fair value carried through profit or loss, or available for sale. Loans and receivables are carried at amortised cost using the effective interest method. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.

The entity has not applied hedge accounting.

1.11 Derivates financial instruments not used in hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. An embedded derivative is separated and accounted for as a separate financial instrument provided that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, and a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the host contract is not accounted for at fair value. Embedded derivatives are classified both in profit and loss and on the balance sheet based on the derivatives’ underlying nature.

1.12 Impairment of financial assets

Intangible assets that have an indefinite useful life and goodwill are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher All other financial assets are classified as available for sale. of an asset’s fair value less costs to sell and value in use. For Assets classifies as available for sale is measured at fair the purposes of assessing impairment, assets are grouped value with changes in fair value recognised in equity and at the lowest levels for which there are separately identifiable reversed to profit or loss at time of derecognition or impair- cash flows (cash-generating units). Non-financial assets other ment. They are included in non-current assets unless than goodwill that suffered an impairment are reviewed for management intends to dispose of the investment within possible reversal of the impairment at each reporting date. 12 months of the balance sheet date. Impairment of financial assets Financial obligations that are not held for trading and The Company assesses at each balance sheet date whether classified as at fair value through profit or loss are classithere is objective evidence that a financial asset classified fied as other liabilities. Other liabilities are carried at amortised as loans and receivables or available for sale or a group of cost using the effective interest method. financial assets classified as loan and receivable is impaired. In the case of equity securities classified as available for sale, Holdings of own bonds are presented as net obligations. a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale 1.10 Derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current a derivative contract is entered into and are subsequently fair value, less any impairment loss on that financial asset remeasured at their fair value. The method of recognising gain or loss depends on whether the derivative is designated previously recognised in profit or loss – is removed from

Notes annual report 2008 maracc 27

equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

1.13 Cash and cash equivalents Cash and cash equivalents includes cash, bank deposits and all other monetary instruments with a maturity of less than three months from the date of acquisition.

1.16 Contingent liabilities and assets Contigent liabilities are not accounted in the financial statement. Substantial contigent liabilities, except contigent liabilities where the probability of the liabality is low, are reported. Contigent assets are not accounted in the financial statement, but reported if there exists a certain probability that the Company will accrue an advantage.

Cash and cash equivalents, as defined for reporting purposes in the statement of cash flows, consist of cash 1.17 Events after the balance sheet date and cash equivalents as defined above, net of outstanding New information after the balance sheet date concerning bank overdrafts connected to cash management activities. the Companyâ&#x20AC;&#x2122;s financial standing is taken into account in the financial statement. Events after the balance sheet date that not affect the Companyâ&#x20AC;&#x2122;s financial standing on the balance 1.14 Equity sheet date, but will affect the Company in the future are Financial instruments are classified as debt or equity reported if it is considered substantial. in accordance to the underlying economic reality. Interest, dividend, gains or loss related to a financial instrument classified as debt are presenteted as cost or revenue. Distributions to bearers of financial instruments that are classified as equity are accounted directly towards equity. Convertible obligations and similurar instruments, that includes both debt and equity elements, are divided into two components by emission, and accounted seperately as respectively debt and equity. Cost of equity transactions: Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Other equity: (a) Fund of valuation variance The fund includes the unified net-change in fair value of financial instruments that is classified as available for sale, until investment is disposed or where it has been determined that the investement has no value.

1.15 Year-end provisions A provision is accounted when the Company has obligation (legal og self-imposed) as a consequence of a former incident, it is probable (more likely than not) that an economic settlement will occur as a consequense of the obligation and the amount can be reliably measured. If the effect is substantial, the provision would be estimated by disconting expected future cashflows with a discount rate before tax that reflects the market price of cash and, if relevant, risks spesifically attached to the obligation.

28 maracc annual report 2008 Notes

Segment information

Employee benefits expense, number of employees, loans to employees and auditor’s fee

The Company’s business activities in 2008 has been in conjunction to the building of one rig, see note 6. The Company did not have operating income in 2008 or 2007, segment information is hence not relevant.

The Company had no employees during 2008. The Board of Directors have received remuneration for their work amounted to USD 157 437 in 2008. Social expenses amounts to USD 18 036. There was no such remuneration in 2007. Salaries to leading personnel In connection with hiring a CEO from another company, the Company has paid fees and travelling expenses amounted to USD 368 570 in 2008 and USD 188 360 in 2007. The expense has been capitalized as the expense is considered obtained as a part of acquiring fixed assets. Management remuneration No loans/securities have been granted to the CEO, chairman of the board or other related parties. There are no obligations regarding post employment benefits.

Auditor -Statutory Audit -Other assurance services -Tax advisory fee -Other advisory services Total fee of the auditor

2008 27 490 27 290 27 290

2007 5 822

82 070

11 642 17 464

2008 82 070 25 205 13 862 49 658 170 796

2007 17 464 321 829 231 807 29 049 600 148

2008 2 777 048 3 037 295 5 814 343

2007 0 0 0

2008 780 000 206 374 986 374

2007 705 882 159 864 865 746

VAT is not included in the fee specified above.

Specification of other operating costs Fee of the auditor Consultant's fee Legal costs Other Total

Specification of other gains and losses (net) Decline in fair value call right Forwards to fair value Total

Other short-term receivables Prepaid costs Outstanding VAT Total

Notes annual report 2008 maracc 29

Tax Components of the Income Tax Expense Tax payable Changes in deferred tax Changes in deferred tax to equity Total income tax expense

2008 -1 571 930 -1 571 930

2007 -849 634 793 036 -56 598

-6 160 612 7 623 091 -21 381 242 -19 918 763

-600 148 941 521 -2 832 585 -9 629 646 -12 120 858

31.12.2008 31 010 888 -32 582 818 -1 571 930 -440 140

31.12.2007 9 629 646 -12 664 055 -3 034 409 -849 634

-440 140

-849 634

2008 -1 724 971 2 134 465

2007 -168 041 263 625

409 494

-27 971 -16 692 -107 520 -56 598

-6.6 %

9.4 %

Tax base calculation Profit/loss before income tax Permanent differences *) Permanent differences charged to equity Changes in temporary differences Basis for the tax expense of the year Tax payable (28%) of the tax base of the year

Temporary diefferences Fixed assets Tax losses carried forward Total 28 % deferred tax Deferred tax (asset) not in the balance sheet Deferred tax (asset) in the balance sheet

Explanation why profit before tax differs from the amount that would arise using the 28% tax rate 28 % of profit before income tax Insufficient/excess provision last year Expenses not deductible for tax purposes Differences arisen as a consequence of tax determined in accordance to NOK-accounts Exchange differences activated deferred tax asset 1.1 Reversal of impairment of deferred tax asset Total income tax expense Effective tax rate in % **) * ) Permanent differences consist of non deductible costs **) Tax expense related to profit before tax.

Deferred tax asset The deferred tax asset is fully recongnised. The asset is considered to be used when the rig becomes operative.

30 maracc annual report 2008 Notes

Tangible assets 2008 Acquisition cost at 01.01.08 Additions Disposals Additions capitalized financial costs Acquisition cost 31.12.08 Accumulated depreciation 31.12.08 Accumulated impairment loss 31.12.08 Reversed impairment loss 31.12.08 Net carrying value at 31.12.08 Depreciation of the year Impairment loss of the year

2007 Acquisition cost at 01.01.07 Additions Disposals Additions capitalized financial costs Acquisition cost 31.12.07 Accumulated depreciation 31.12.07 Accumulated impairment loss 31.12.07 Reversed impairment loss 31.12.07 Net carrying value at 31.12.07 Depreciation of the year Impairment loss of the year

Heavy Well Intervention Unit

Total tangible assets

135 819 305 47 360 847 21 381 242 204 561 394

204 561 394

Heavy Well Intervention Unit

Total tangible assets

120 846 728 14 972 577 135 819 305

135 819 305

Maracc has one Semi submersible Intervention Rig ‘Island Innovator’ under construction at the Cosco Shipyard Group Ltd. in China. The contractual obligation towards the yard is at USD 203 000 000 plus expected 10 % contract growth. In addition the Company has signed contracts with several subcontractors. Total contract obligations are estimated at approximately USD 450 000 000. The rig is based on the GM 4000 design and is due to be completed and ready for operation by end of 2011. The rig is the first purpose built Well Intervention Rig and is prepared for the full range of services such as Coil Tubing and Through Tubing Rotary Drilling down to 3000 meters water depth. The overall project progress has been satisfactory across the board with one exception. The deckbox fabrication at the Cosco Nantong Yard has fallen behind and impacting the delivery from the yard with approx. 7 months from the original schedule. Several causes have contributed to this delay and it is a mix between yard capacity, expanded workscope and knock on effects from other projects being late. The progress of the pontoon and column fabrication at the Cosco Zhoushan Yard has developed satisfactorily and is now off the critical path. Mating is now scheduled for March 2010 at the Quidong Yard and delivery from Cosco is 1st December 2010.

Notes annual report 2008 maracc 31

The topside delivery schedule from NOV and Nymo will be revised to suit new rig delivery from Cosco and installation of topside is scheduled to take place during the 1st half of 2011, with operations start at the end of 2011. Maracc has established a comprehensive Site Team following all aspects of engineering, material and fabrication quality in China. Several external companies have been contracted to follow the various stages of production. Some of these companies were already established at the Cosco yards to follow other offshore projects, and therefore already has significant knowledge of the yard and associated work processes. In 2008 capitalized financial costs includes capitalized interest on bond loans by a total of USD 28 792 303 (2007: USD 14 358 883). Rate of interest on the bond loans is shown in note 8 to the financial statements. Interest income on bank deposits has according to IAS 23.15 reduced capitalized financial costs by a total of USD 7 411 061 in 2008 (2007: USD 5 769 834) and thus net interest expenses are capitalized. All expenses which are related to construction of the rig are capitalized. This includes management fee from Island Offshore Management AS. The management fee is mainly consisting of construction supervision. According to IAS 16.19 administration expenses and general service expenses are not capitalized. As the rig is under construction there are no depreciations in either 2008 or 2007. Economical life for the rig is not yet estimated. The company will estimate economical lifetime of the rig at delivery.

Right of redemption own bonds and other financial assets Company Right of redemption of own bonds Total

Currency USD

Book value 0 0

Market value 0 0

** The fair value of right of redemption has declined significant in 2008 and the entity has as of 31.12.2008 not calculated a fair value of the redemption amount as the fair value is considered to be immaterial. The total amount of USD 2 777 048 is charged into the profit and loss statement, as to the decline in fair value in 2008.

32 maracc annual report 2008 Notes

Bond loans The company has three bond loans in USD with a nominal value of respectively 80 MUSD (maturity 9 July 2012), 120 MUSD (maturity 27 February 2012) and 30 MUSD (maturity 8 October 2013). There is a conversion right connected to the loans with a nominal value of 80 MUSD and of 30 MUSD. The fair value of this conversion right is recognized as equity in the balance sheet (see note 11). Nominal value

Book value

Market value

120 000 000

36 752 346

-1 000 000 119 000 000 80 000 000 30 000 000 229 000 000

-945 280 119 054 720 68 524 948 19 083 882 206 663 550

-945 280 35 807 066 20 410 123 7 500 145 63 717 334

Nominal value

Book value

Market value

120 000 000

120 800 833

116 528 321

-1 000 000 119 000 000 80 000 000 199 000 000

-927 958 119 872 875 66 165 536 186 038 411

-927 958 115 600 363 64 742 447 180 342 810

Bond loans 2008 Loan 1 Holdings of own bonds (loan 1) Net Loan 1 Loan 2 (convertible) Loan 3 (convertible) Total

Bond loans 2007 Loan 1 Holdings of own bonds (loan 1) Net Loan 1 Loan 2 (convertible) Total

Nominal interest rate

Effective interest rate

3m LIBOR +5.0% 3m LIBOR +5.0%

9.0% 12.0%

14.3% 25.4%

Nominal interest rate

Effective interest rate

3m LIBOR +5.0% 3m LIBOR +5.0%

9.0%

14.3%

There are information terms and general terms connected to the loans. The general terms connected to the bond loan at a nominal value of 120 MUSD is somewhat extended. The general terms of this loan includes prohibition of disbursement of dividends, repurchase of shares, or grant loans to the shareholders. The terms of this loan also includes prohibition of using pledged assets connected to the loan for other purposes. Regarding the convertible bond loans there are no pledges. For more details regarding the bond loans and loan terms, the loan contracts are available at www.stamdata.no. 2008 2007 Debts secured by pledges 120 000 000 120 800 833 Pledged assets: Property, plant, and equipment Total

204 561 394 204 561 394

135 819 305 135 819 305

2008 95 995 319 0 95 995 319 0 95 995 319

2007 128 508 324 0 128 508 324 0 128 508 324

Cash and cash equivalents Bank deposits Short term investments Cash and cash equivalents in the balance sheet Bank overdraft Cash and cash equivalents in the cash flow statement

The company does not have credit facilities. Of the total bank deposits at a nominal value of USD 95 995 319, the following is restricted to the benefit of Cosco USD to the benefit of Nymo AS USD to the benefit of Vetco Grey AS USD to the benefit of Cameron USD to DNB NOR (future trade) USD Total USD

39 000 000 4 250 500 1 628 300 7 737 773 4 500 000 57 116 573

Notes annual report 2008 maracc 33

Share capital and shareholder information The share capital of the company is registered in Norwegian Kroner. The share capital in the financial statement is calculated in USD. There is only one class of shares, and all shares have the same rights.

The share capital consists of Shares Total

Nominal value

Registered in NOK

Book value in USD

17 640 000 17 640 000

1 1

17 640 000 17 640 000

2 891 027 2 891 027

The company has only one class of shares. The company has issued two convertible bonds. The owners of the convertible bonds in loan 2 has a right to acquire 20 611 277 shares in the Company at a convertion rate of 5.80 USD per share. Convertion can occur until the maturity date of the bonds 9th July 2012.The owners of the convertible bonds in loan 3 has a right to acquire 6 818 181 shares in the company at a convertion rate of 4.40 USD per share. Convertion can occur until the maturity date of the bonds 8th October 2013.

The largest shareholdings as at 31.12.08. Island Offshore V AS JCE Group AB Trond Mohn Euroclear Bank S.A./N.V. ('BA') Morgan Stanley & CO INTL PLC Alpha Marine Services L.L.C Skagen Vekst Cheyne Global Catalyst Island Offshore Management AS Innovative Design Solutions AS Mancorp AS Barclays Bank PLC Naustneset AS Behrman Associates L.L.C Sneingen AS Island Offshore Invest DA Timetall Holding AS Hodne Shipping AS Alden AS Emar Invest AS Total Others (shareholders < 1%) Total shares

Ownership

Voting rights

5 590 000 2 066 000 1 260 000 1 200 000 1 168 000 932 000 901 000 715 343 560 000 506 664 506 664 504 000 233 000 224 000 200 000 144 957 80 000 70 000 65 000 65 000 16 991 628 648 372 17 640 000

31.7 % 11.7 % 7.1 % 6.8 % 6.6 % 5.3 % 5.1 % 4.1 % 3.2 % 2.9 % 2.9 % 2.9 % 1.3 % 1.3 % 1.1 % 0.8 % 0.5 % 0.4 % 0.4 % 0.4 % 96.3 % 3.7 % 100.0 %

Shares owned by Members of the board and CEO Morten Ulstein Dionne Chouest Øyvind Jordanger Asle Solheim Total

See below See below 30 536 80 000 110 536

Morten Ulstein owns shares indirectly through his indirect ownership in Island Offshore V AS, Island Offshore management AS, Island Offshore Invest AS, Naustneset AS and Sneingen AS. Dionne Chouest owns shares directly through her ownership in Alpha Marine Services LLC, and indirectly through her ownership in Island Offshore V AS and Island Offshore management AS.

34 maracc annual report 2008 Notes

Equity

Equity per 31.12.2006 Result for the year Issue of shares Equity from conversion right Equity per 31.12 2007 Result for the year Issue of shares Equity from conversion right Equity per 31.12 2008

Share capital

Share premium

Equity from conversion right

Uncovered loss

179 054

-67 845 -543 550

2 711 973

58 951 535

2 891 027

58 951 535

16 706 322 16 706 322

2 891 027

58 951 535

11 161 806 27 868 128

-611 395 -6 570 106

-7 181 501

Total

111 209 -543 550 61 663 508 16 706 322 77 937 489 -6 570 106 11 161 806 82 529 189

The company does not have fund for unrealised gains per 31.12.08.

Pensions The company has no employees. The company is not obliged to have occupational pension according to the Norwegian occupational pension act.

Other financial instruments The company has entered into currency futures to hedge purchases in NOK. As of year end 2008 the contracts amounts to NOK 104 632 500. The instruments have running maturity until March 2010. The currency futures do not qualify for hedge accounting. In the in company’s point of view however, the futures qualify for economic hedging. The futures are held to secure the price volatility caused by foreign currency fluctuations. Changes in fair value in 2008 is reflected in the profit and loss statement of a total amount of USD 3 037 295. The same amount is presented as short term liabilities. Unrealised contracts represented a loss in 2008. The value in 2007 was immaterial.

Notes annual report 2008 maracc 35

Financial risk Market risk The Company is exposed to market risk since no long-term operating contract for the vessel under construction has been entered into. However, the Company is in discussions with several oil companies regarding potential term charters. The company’s aim was to enter into a long-term contract within 2008, however the revised ambitions is to enter into a long-term contract before year end 2009. Currency risk The Company is to some extent exposed to changes in the foreign exchange markets. All long term debt is in USD (USD denominated bonds) and the major part of the Company’s expenses is in USD. Some expenses are in NOK; however the Company has reduced most of the risk by entering into forward foreign exchange contracts. Interest risk Similarly the Company is exposed to changes in the interest rate level, since 52 % of the Company’s debt has floating interest. Credit risk The risk related to opposite parties not having the means to fulfil their obligations is seen as low, as the Company does not have unsettled claims. To reduce risks in relation to large suppliers’ delivery obligations the company has obtained performance guarantees from the relevant suppliers’ banks. The company has received a repayment guarantee from Bank of China in connection with the Construction Contract with Cosco shipyard. Set off agreements or similar financial instruments in order to minimize the credit risk have not been entered into by the Company. Liquidity risk As at year end 2008, the Company has obtained financing of approximately 50 % of the total project costs (construction-, supervision- and financing costs during the construction phase as well as mobilization / start up costs). The Company has sufficient cash reserves until the end of November, 2009 at which point in time additional financing needs to be secured. Given the general economic recession and the crisis in the financial markets, the availability of financing is more limited now than what was the case a year ago. Please see the board of directors annual report for further information.

36 maracc annual report 2008 Notes

Related parties All transactions with related parties is based upon market terms. The company has been part of the following transactions with related parties: Island Offshore Management AS Island Offshore Management AS (IOM) owns 3.2 % of the shares in Maracc ASA. IOM has an agreement of delivering services connected to administration and management, supervision of construction and operation. Within the construction period the agreed upon contract rate is fixed at 15.6 MUSD, while there is agreed a fixed and a variable rate for the operating period. Island Offshore V AS Island Offshore V AS (IOV) owns 31.7 % of the shares in Maracc. IOV concluded an investment agreement with Maracc dated 26.01.2007 concerning purchase of shares in the company. The agreement gave IOV the right to purchase 560.000 shares by the first issue in February 2007 at a price of NOK 1 per share. The agreement also gave IOM a equivalent right to purchase shares in the company. In return IOV is obliged to subscribe for shares from 25 to 30 % in the subsequent issue to a price above NOK 20 per share. Jordanger Invest AS This company is owned 100 % by Øyvind Jordanger, a member of the board in Maracc. Healey Consulting Services AS This company is owned 100 % by Nigel John Rose, a shareholder in Maracc. Global Maritime AS This company is owned by Innovative Design Solutions AS where the former member of the board Jan Vatsvåg is CEO and owner. Jan Vatsvåg resigned as a member of the board in Maracc in 2007. Island Offshore Subsea AS The Company is owned 55 % by Island Offshore Management AS.

Purchase of services Management and supervision of construction via IOM Engineering services from Island Offshore Subsea AS Member of the board Øyvind Jordanger through Jordanger Invest AS Shareholder Nigel John Rose, through Healey Consulting Services Member of the board Heidi Baugstø through Mancorp AS Rent and engineering services from Global Maritime AS Total

2008 6 101 476 25 202 29 519 0 0 580 710 6 736 908

2007 4 132 827 0 85 714 53 894 146 754 350 601 4 769 790

Employees in the Island Offshore-sphere has options to purchase 560 000 shares in Maracc ASA from Island Offshore Management AS at a price of NOK 1. Island Offshore Management AS acquired these shares at a price of NOK 1 by the issue on 27th February 2007.

Notes annual report 2008 maracc 37

Earnings per share Earnings per share is calculated by dividing the result attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is calculated by taking into account the number of shares connected to convertible bonds as if conversion has occurred. There are no expenses solely connected to the convertible bonds in the financial statement. The expenditures connected to the convertible bonds are capitalized as part of fixed assets (see note 6). 2008 2007 Result for the year attributable to shareholders -6 570 106 -543 550 Weighted average number of ordinary shares 15 014 904 15 014 904 Weighted average number of ordinary shares (incl. conversion right) 32 964 852 20 796 668 Earnings per share -0.44 -0.04 Diluted earnings per share -0.44 -0.04

Financial assets and liabilities 2008

Financial assets Receivables Call rights Bank deposits Total

2007

Category

Book value

Fair value

Book value

Fair value

1) 1) 2)

-4 726 231 -5 019 562 -3 037 295

-809 493 4 050 000 -505 665

-206 663 550 -214 720 407

2008

Financial liabilities Accounts payables Accrued interest Currency futures Bond loans, se note 8 for spesifications Total

1): Available for sale 2): Fair value through profit and loss 3): Amortised cost

2007

-63 717 334 -186 038 411 -180 342 810 -71 774 191 -182 494 076 -176 798 475

38 maracc annual report 2008 Auditor’s report

PricewaterhouseCoopers AS Postboks 3984 - Dreggen NO-5835 Bergen Telephone +47 95 26 00 00 Telefax +47 23 16 10 00

To the Annual Shareholders' Meeting of Maracc - Marine Accurate Well ASA

Auditor’s report for 2008 We have audited the annual financial statements of Maracc - Marine Accurate Well ASA as of December 31, 2008, showing a loss of USD 6 570 106 for the company. We have also audited the information in the directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss. The annual financial statements comprise the financial statements of the company. The financial statements of the company comprise the balance sheet, the statements of income and cash flows and the accompanying notes. Simplified IFRS according to the Norwegian accounting act § 3-9 have been applied in the preparation of the financial statements of the company. These financial statements are the responsibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors. We conducted our audit in accordance with the laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by The Norwegian Institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and auditing standards an audit also comprises a review of the management of the Company's financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion. In our opinion, • the financial statements of the company have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the Company as of December 31, 2008, and the results of its operations and its cash flows for the year then ended, in accordance with simplified IFRS according to the Norwegian accounting act § 3-9 • the company's management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway • the information in the directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss are consistent with the financial statements and comply with the law and regulations Without qualifying our opinion above we would like to emphasize that completion of the construction contracts demands new equity and/or debt financing. We refer to further discussion in the notes to the financial statements and in the directors’ report. Bergen, May 27, 2009 PricewaterhouseCoopers AS Bjørn Gravdal State Authorised Public Accountant (Norway)

Roald Viken State Authorised Public Accountant (Norway)

Note: This translation from Norwegian has been prepared for information purposes only.

Alta Arendal Bergen Bodø Drammen Egersund Florø Fredrikstad Førde Gardermoen Gol Hamar Hammerfest Hardanger Harstad Haugesund Kongsberg Kongsvinger Kristiansand Lyngseidet Mandal Mo i Rana Molde Mosjøen Måløy Namsos Oslo Sandefjord Sogndal Stavanger Stryn Tromsø Trondheim Tønsberg Ulsteinvik Ålesund PricewaterhouseCoopers navnet refererer til individuelle medlemsfirmaer tilknyttet den verdensomspennende PricewaterhouseCoopers organisasjonen Medlemmer av Den norske Revisorforening • Foretaksregisteret: NO 987 009 713 • www.pwc.no

The number of subsea wells globally is increasing from 3000 to 5000 over the next five years

40 maracc annual report 2008 Corporate Governance Report

Corporate Governance Report Marine Accurate Well ASA (‹Maracc› or ‹the Company›) is a Norwegian company organised according to the Norwegian Public Limited Companies Act. The Company has no employees and has therefore entered into a Management Agreement with Island Offshore Management AS to be responsible for a major part of the business and administration services. The company’s corporate governance policy is approved by the Board of Directors.

The Board of Directors bases its corporate governance practices on the principles set forth in the Norwegian Code of Practice for Corporate Governance based on the latest revision dated December 2007. According to the Code of Practice, departures from the recommendations are commented on.

1. Reporting on Corporate Governance The Board has adopted instructions for the Board itself and the Chief Executive Officer (CEO). The Company’s objective is to create value for its owners by knowing customers needs, being professional in the construction phase and later carry out profitable operations and business development. Key elements of the Company’s strategy are to develop the Company’s position within the intervention sector, and to develop a leading intervention contractor business. Deviation from the Code of Practice: The Board has not drawn up a special policy for corporate governance.

3. Equity and dividends The Company’s equity is appropriate for its goals, strategy and risk profile. The equity as per 31.12.2008 was USD 83 million, which corresponds to 27.3%. As Maracc is within the establishment phase, dividends will not be considered in the short term. The Company’s dividend policy will be reevaluated once the Company is generating positive cash flow and is able to maintain compliance with its financial covenants. The Company has issued 2 million warrants to subscribe up to 2 million shares in the Company, for further information please see section 4. There are no authorisations issued to the Board for the issuing or purchasing of shares.

4. Equal treatment of shareholders and transactions with close associates

Maracc’s shares are all of one class with identical voting rights. All shares are equal. A Management Agreement and a Construction Supervision Agreement is entered into between Maracc (the Company) and Island Offshore 2. Operations Management AS (the Manager). Maracc is currently developing The Manager owns 3.2% of the Coma special purpose and first of pany’s shares – under which the its kind semi-submersible rig for Company has requested the Manager heavy well intervention operations to provide it with certain management and increased oil recovery. services, including construction su The Company’s business is pervision, technical operation of the defined in § 3 of the Articles of Association of the Company, which rig, commercial management services/marketing related to the rig, reads: ‘The Company’s objective is corporate governance services, into construct, market, sell and vestor relations, Budgets – Reports, operate vessels for supporting Accounting, auditing, company resubsea operations and accommodation connected to the oil industry, cords, stock exchange, government relations – taxes, finance and treasury including to participate in other functions. The management fee is companies, acquisition based on market terms. and sale of property and what An Investment Agreement is is connected with this.’

entered into between Maracc and Island Offshore V AS (the Investor) – which owns 31.7% of the Company’s shares – under which Maracc offered the Investor 560 000 shares in Maracc at a subscription price of NOK 1 per share and 560 000 shares in Maracc to the Manager at a subscription price of NOK 1 per share. Furthermore the Investment Agreement gave the Investor a right to subscribe for 25% of the aggregate numbers of warrants issued (2.0 mill warrants exercisable at NOK 1 per share subject to share price appreciation of 40% to issue within 36 months, 1.5 mill warrants exercisable at NOK 1 per share subject to share price appreciation of 60% to issue within 36 months, 1.5 mill warrants exercisable at NOK 1 per share if change of control occurs within 36 months and subject to share price appreciation to issue price being less than 40%). The CEO and CFO of the Company are employees of Island Offshore Management AS and their services are seconded to Marine Accurat Well ASA pursuant to the Management Agreement described above. Morten Ulstein is a board member of Maracc and the chairman and substantial owner of Island Offshore Management AS and Island Offshore V AS. Dionne Chouest is a member of the Board of Maracc and is related to indirect ownership interests in Island Offshore Management AS and Island Offshore V AS.

5. Freely negotiable shares The shares of Maracc ASA are freely negotiable.

6. General meetings The Annual General Meeting is the forum where the Company’s shareholders participate in the Company’s major decisions. According to the Norwegian law the general meeting

Corporate Governance Report annual report 2008 maracc 41

must also appoint the auditor and approve the auditor’s fee. All shareholders of Maracc ASA are guaranteed participation in the annual general meeting. The annual meeting will normally be held in May each year, but at the latest 30th June. Notification of the general meeting is sent out at least two weeks in advance.

The Board of Directors review the Company’s objectives, strategy and implementation on a regular basis, and at least annually. Once a year the Board of Directors evaluate its own working methods, meeting plans and similar. The Board has adopted instruction for their own work and for the work of the CEO.

12. Remuneration of the executive management The remuneration of the Chief Executive Officer forms part of the remuneration under the Management Agreement with Island Offshore Management AS. The remuneration to the CEO is described in the annual accounts of the Company.

13. Information and communications

Maracc ASA does openly provide shareholders and the market with relevant information about its business and cor7. Nomination committee The Board, in conjunction with the porate governance practices, to assist Deviation from the Code of Practice: management, evaluates the risks ininvestors in making informed decisions herent in the business operations of Maracc ASA has not established about their interest in the Company. Maracc. Currently these risks are a nomination committee. The Company’s objectives are to limited to the construction and finanensure equal treatment of all shareholdcing of one intervention rig. The risks 8. Corporate assembly and board of are managed through control systems ers and to provide balanced, complete directors: composition and independence Corporate assembly is not applicable which carefully handle the supervision and correct information regularly to all shareholders and bondholders, financial of the construction process and the nor binding to the Company since analysts, media and other interested safety reporting systems at yard. there are no employees. parties. Information about the Company The Board comprises 3-7 directors Construction supervision and busiis published to the Company’s website ness management services are taken in accordance with the Articles of Association, and currently it consists care of by Island Offshore Management www.maracc.no. AS through a Management Agreement of five members, three men and two (full service provider). Maracc may women. All directors are appointed 14. Take-overs terminate the agreement in the event by the shareholders at the annual The Company’s share is publicly traded of change of control occurring in Island on the OTC list. Island Offshore Mangeneral meeting, and are elected for two years terms. The chairmen of the Offshore Management or Island agement may terminate the manageOffshore, or in case Island Offshore Board was appointed by the sharement agreement in the event of change holders meeting. The Board does not reduces its ownership in Maracc to of control occurring in Maracc. below 10% of the share capital. include representatives of the Given the current shareholders The Board receives updated cash Company’s executive management. structure the likelihood of a takeover bid flow statements in every ordinary The Board’s task is regulated by being made for the Company is regardBoard meeting, and has close follow- ed as small. The Board has therefore Norwegian law and includes the up discussions with the management not drawn up any main principles for overall administration and managebetween the meetings as needed. ment of the Company. Members of how it would act in the event of a take the Company’s management are not The Board can raise questions with over bid being made. regard to financial reporting in the members of the Board, although the Articles of association providing for a annual meeting with the auditor. Company’s management does mandatory offer obligation triggered at The Board is also presented finanattend Board meetings. 40% in accordance with the Norwegian cial statement on quarterly bases Securities Trade Act. which are carefully reviewed with ma9. The work of the Board of Directors anagement and the external auditors. The Board meetings are held six to 15. Auditor eight times per year on a regular PriceWaterhouseCoopers AS is responbasis, and additional meetings are 11. Remuneration of the Board of Directors sible for the financial auditing of the called as required. The Board of Company. The auditor is present during None of the Board members have Directors does prepare a meeting other assignments in Maracc ASA ex- the board meeting that deals with the plan within January each year, of the cept for the position of being a Board annual accounts. The Board can meet ordinary Board meetings for such member. The general meeting approves auditors without the management being year. Board meeting agendas are set the remunerations paid to the members present if this so desired. by the Chairman of the Board in of the Board of Directors annually. consultation with the CEO.

10. Risk management and internal control

42 maracc annual report 2008 Shareholder Information

Shareholder Information Maracc ASA was founded in 2006 and listed on the OTC list on the Oslo Stock Exchange in February 2007. The shares of Maracc are all of one class with identical voting rights. All shares are equal. As Maracc is within the establishment phase, dividends will not be considered in the short term. The Company’s dividend policy will be re-evaluated once the company is generating positive cash flow and is able to maintain compliance with its financial covenants. The Company carried through an Equity issue in 2007 which brought in 60,9 USD million, and furthermore borrowed USD 200 mill in the Bond market in 2007 and USD 30 mill in 2008. The purpose of the company’s capital increase has been to finance the Company’s first Semi Submersible Rig, which is under construction at Cosco›s Zhouchan and Nantong shipyard in China. The Company needs to secure an additional USD 270 mill to fulfil the financing of the construction project. Export Finance and GIEK is expected to contribute, subject to one or more commercial banks committing a portion of the additional funding needed. The 20 largest shareholders of Maracc held 96,3 % of the outstanding shares by year end 2008, and approximately 27,1 % of the shares was owned by investors located outside Norway. The largest shareholder is Island Offshore V AS, which holds at date 5 590 000 shares ( 31,7 %). At December 31, 2008 the share price was NOK 3,5, which corresponds to a decrease of 87,2 % from 1st January 2008. Information about the Company is published to the Company’s website www.maracc.no and under the Company’s ticker-code MARA on www.newsweb.no. Traded volume per quarter 2008

17 640 Share capital (NOK 1 000)

3.5

Market price 31.12.2007 (NOK)

61 740

Market capitalisation (NOK 1 000)

28.0

Share price high (NOK)

3.5

Volume 2 000 000 1 800 000 1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0

Share price low (NOK)

17.64 mill Average number

share price development

of outstanding shares

Definition: Market capitalisation =

NOK 1

Total shares* share price

30.0

at 31.12.2008

25.0 20.0 15.0 10.0 5,0

16.12.08

27.10.08

07.09.08

19.07.08

30.05.08

10.04.08

20.02.08

01.01.08

The recovery rates for sub sea wells are generally 10-20% lower than for conventional dry platform wells Island Innovator provides a platform for effectively solving this challenge and brings huge potential for added revenues.

Marine Accurate Well ASA Lagerveien 23 4033 Forus, Norway Tel + 47 51 81 71 00 Fax + 47 51 81 71 01 www.maracc.no