AWO Prospectus PETROJACK offer - COSL Drilling Europe AS
AWO Prospectus PETROJACK offer - COSL Drilling Europe AS
AWO Prospectus PETROJACK offer - COSL Drilling Europe AS
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Offer Document and <strong>Prospectus</strong><br />
Voluntary <strong>offer</strong> for the acquisition of all shares outstanding in<br />
Petrojack <strong>AS</strong>A<br />
Made by<br />
Awilco Offshore <strong>AS</strong>A<br />
Terms of the <strong>offer</strong><br />
1 Awilco Offshore share for 2 Petrojack shares<br />
New shares to be issued<br />
A maximum of 17,156,485 Awilco Offshore shares<br />
Offer period<br />
From 16 September 2005 to and including 30 September 2005<br />
Lead Manager<br />
Co-manager<br />
15 September 2005
Important information<br />
This Offer Document has has been prepared in connection with the Offer by Awilco Offshore <strong>AS</strong>A<br />
to acquire all outstanding shares in Petrojack <strong>AS</strong>A and the issuance of the Consideration Shares (as<br />
defined and described herein). The Offer Document has been prepared to comply with the<br />
requirements of the Norwegian Securities Trading Act and Stock Exchange Regulations. The Offer<br />
Document has been reviewed by the Oslo Stock Exchange pursuant to sections 4-18 cfr 4-14 and 5-<br />
7 of the Securities Trading Act.<br />
The information contained herein is as of the date hereof and is subject to change, completion and<br />
amendment without notice. There may have been changes in matters affecting the Offeror<br />
subsequent to the date of this Offer Document. Any new material information that might have an<br />
effect on the assessment of the Consideration Shares arising after the publication of this Offer<br />
Document and before the completion of the Offer will be published as a supplement to this Offer<br />
Document in accordance with applicable regulations in Norway, cf. section 14-6 of the Stock<br />
Exchange Regulations. The delivery of this Offer Document shall under no circumstances create<br />
any implication that the information contained herein is complete or correct as of any time<br />
subsequent to the date hereof.<br />
This Offer Document does not constitute an <strong>offer</strong> to sell, or a solicitation of an <strong>offer</strong> to buy any of<br />
the securities <strong>offer</strong>ed hereby, by or on behalf of the Offeror, the Manager, any of their respective<br />
affiliates or any other person in any jurisdiction in which it is unlawful for any person to make such<br />
an <strong>offer</strong> or solicitation. The distribution of this Offer Document and the <strong>offer</strong>ing or sale of the<br />
Consideration Shares may be restricted by law in certain jurisdictions. Person into whose<br />
possession this Offer Document may come are required by the Offeror and the Manager to inform<br />
themselves about and to observe any such restrictions. This Offer Documents may not be used for,<br />
or in connection with any <strong>offer</strong> to, or solicitation by, anyone in any jurisdiction under any<br />
circumstances in which such <strong>offer</strong> or solicitation is not authorized or is unlawful.<br />
The Offer described in this Offer Document will not be made directly or indirectly in the United<br />
States, Canada, Australia or Japan, and this Offer Document may not be distributed in or sent to the<br />
United States, Canada, Australia or Japan.<br />
This Offer Document and the shares issued hereby have not been nor will be registered under the<br />
U.S. Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws. The<br />
shares will not be <strong>offer</strong>ed or sold to U.S. persons (as defined in Regulation S under the Securities<br />
Act), unless the Offeror determines in its sole discretion that it may do so under an applicable<br />
exemption from the registration requirements of the Securities Act and relevant state securities law.<br />
Certain statements made in this Offer Document may include forward-looking statements. These<br />
statements relate to the Offeror’s expectations, beliefs, intentions or strategies regarding the future.<br />
These statements may be identified by the use of words like “anticipate”, “believe”, “estimate”,<br />
“expect”, “intend”, “may”, “plan”, “project”, “will”, “should”, “seek”, and similar expressions.<br />
The forward-looking statements reflect the Offeror’s current views and assumptions with respect to<br />
future events and are subject to risks and uncertainties. Actual and future results and trends could<br />
differ materially from those set forth in such statements.<br />
All inquiries relating to this Offer Document or the matters addressed herein should be<br />
directed to the Offeror or the Manager. No persons other than those described in this Offer<br />
Document have been authorized to disclose or disseminate information about this Offer<br />
Document or about the matters addressed in this Offer Document. If given, such information<br />
may not be relied upon as having been authorized by the Offeror.<br />
1
Table of Contents<br />
1. Summary .............................................................................................................................. 6<br />
1.1 Background for the <strong>offer</strong>................................................................................................ 6<br />
1.2 Summary terms of the <strong>offer</strong> ........................................................................................... 6<br />
1.3 Awilco Offshore <strong>AS</strong>A ................................................................................................... 6<br />
1.4 Petrojack <strong>AS</strong>A ............................................................................................................... 7<br />
2. Summary in Norwegian (Sammendrag på norsk)............................................................ 8<br />
2.1 Bakgrunn til tilbudet ...................................................................................................... 8<br />
2.2 Tilbudspris .....................................................................................................................8<br />
2.3 Awilco Offshore <strong>AS</strong>A ................................................................................................... 8<br />
2.4 Petrojack <strong>AS</strong>A ............................................................................................................... 9<br />
3. Terms and Conditions of the Offer .................................................................................. 10<br />
3.1 The Offer ..................................................................................................................... 10<br />
3.2 The Offeror .................................................................................................................. 10<br />
3.3 The target company ..................................................................................................... 10<br />
3.4 The Offer consideration ............................................................................................... 10<br />
3.5 Conditions to the <strong>offer</strong> ................................................................................................. 11<br />
3.6 The Offer Period .......................................................................................................... 11<br />
3.7 Acceptances of the Offer ............................................................................................. 11<br />
3.8 Shareholder rights........................................................................................................ 12<br />
3.9 Settlement .................................................................................................................... 12<br />
3.10 Costs of Tendering Shareholder................................................................................... 13<br />
3.11 Relationship with Petrojack’s board of directors and management............................. 13<br />
3.12 Acquisition of Petrojack shares outside the Offer ....................................................... 13<br />
3.13 Mandatory <strong>offer</strong> ........................................................................................................... 13<br />
3.14 Compulsory acquisition of shares................................................................................ 13<br />
3.15 Continued listing of Petrojack ..................................................................................... 14<br />
3.16 Legal Consequences of the Offer................................................................................. 14<br />
3.17 Consequences for the Employees ................................................................................ 14<br />
3.18 Tax Consequences of the Offer.................................................................................... 14<br />
3.19 Statement from the board of directors of Petrojack ..................................................... 14<br />
3.20 Contact between the Offeror and the target company.................................................. 15<br />
3.21 Governing law / Jurisdiction........................................................................................ 15<br />
3.22 Announcements ........................................................................................................... 15<br />
3.23 Costs ............................................................................................................................ 15<br />
4. Background to and reasons for the Offer........................................................................ 16<br />
5. The Offer consideration .................................................................................................... 18<br />
6. Short description of Petrojack <strong>AS</strong>A................................................................................. 19<br />
6.1 Company description ................................................................................................... 19<br />
6.2 Key Financial Figures.................................................................................................. 20<br />
6.3 Shareholders................................................................................................................. 21<br />
7. Description of Awilco Offshore <strong>AS</strong>A ............................................................................... 22<br />
7.1 Company background.................................................................................................. 22<br />
7.2 Anders Wilhelmsen Group – background.................................................................... 23<br />
7.3 Relation to the Anders Wilhelmsen Group.................................................................. 24<br />
7.4 Company strategy ........................................................................................................ 25<br />
7.5 The accommodation units............................................................................................ 25<br />
7.6 The jack-up drilling rig newbuilding contracts............................................................ 28<br />
7.7 Legal structure ............................................................................................................. 29<br />
7.8 Board of Directors ....................................................................................................... 30<br />
7.9 Management and employees........................................................................................ 31<br />
8. Market overview................................................................................................................ 32<br />
8.1 Market positioning....................................................................................................... 32<br />
2
8.2 The market for accommodation rigs............................................................................ 33<br />
8.3 The market for jack-up drilling rigs............................................................................. 36<br />
9. Financial information........................................................................................................ 32<br />
9.1 Proforma accounts ....................................................................................................... 39<br />
9.2 Effect of International Financial Reporting Standards (IFRS) .................................... 40<br />
9.3 Accounting principles.................................................................................................. 41<br />
9.4 Accounts ...................................................................................................................... 43<br />
9.5 Other financial information ......................................................................................... 46<br />
9.6 Statutory auditors......................................................................................................... 47<br />
10. Share capital and shareholder matters............................................................................ 48<br />
10.1 Share capital................................................................................................................. 48<br />
10.2 Share capital after the Offer......................................................................................... 48<br />
10.3 Share price development.............................................................................................. 50<br />
10.4 Shareholder policy and corporate governance............................................................. 51<br />
11. Legal matters ..................................................................................................................... 52<br />
11.1 The transfer of assets ................................................................................................... 52<br />
11.2 Construction contracts ................................................................................................. 52<br />
11.3 Bank financing agreements.......................................................................................... 57<br />
11.4 Management agreements ............................................................................................. 59<br />
11.5 Certain other legal matters........................................................................................... 60<br />
12. Taxation.............................................................................................................................. 61<br />
12.1 Introduction.................................................................................................................. 61<br />
12.2 Taxation related to holding and disposal of the Shares ............................................... 61<br />
12.3 Duties on the Transfer of Shares.................................................................................. 63<br />
12.4 Inheritance tax.............................................................................................................. 63<br />
12.5 Norwegian Tonnage Tax ............................................................................................. 63<br />
13. Risk factors......................................................................................................................... 64<br />
Appendix 1 Rig specifications – Port Reval ........................................................................ 67<br />
Appendix 1 Rig specifications – Port Reval ........................................................................ 67<br />
Appendix 2 Rig specifications – Port Rigmar...................................................................... 71<br />
Appendix 3 Rig specifications – PPL contracts and options ............................................... 75<br />
Appendix 4 Rig specifications – Keppel contract and option.............................................. 79<br />
Appendix 5 Articles of Association ..................................................................................... 80<br />
Appendix 6 Second quarter report 2005 .............................................................................. 81<br />
Appendix 7 Application form .............................................................................................. 82<br />
3
Statements of responsibility<br />
The Board of Directors<br />
This Offer Document has been prepared in connection with the Offer by Awilco Offshore <strong>AS</strong>A to<br />
acquire all outstanding shares in Petrojack <strong>AS</strong>A as described herein. The Board of Directors<br />
confirms that, to the best of its knowledge, the information contained in this Offer Document is in<br />
accordance with the facts and contains no omissions likely to affect the import of the Offer<br />
Document. Statements in the Offer Document about current and future market conditions and<br />
prospects for the Offeror have been made on a best judgement basis. The Offeror is not involved in<br />
any legal proceedings or disputes material to an evaluation of the Company. All information<br />
regarding Petrojack <strong>AS</strong>A is based on publicly available information and has not been<br />
independently verified by Awilco Offshore <strong>AS</strong>A.<br />
Oslo, 15 September 2005<br />
The Board of Directors of Awilco Offshore <strong>AS</strong>A<br />
Sigurd E. Thorvildsen (Chairman) Arne Alexander Wilhelmsen<br />
Jarle Roth Marianne Blystad<br />
Tor Bergstrøm<br />
The Managers<br />
Enskilda Securities, as lead manager, and Fearnley Fonds, as co-manager, have been appointed by<br />
Awilco Offshore <strong>AS</strong>A to act as Managers in connection with the Offer. The Managers have<br />
assisted in the preparation of this Offer Document based on information received from Awilco<br />
Offshore and external sources. The Managers have endeavoured to provide a description of the<br />
Offeror that is as consistent and complete as possible. However, the Managers do not accept any<br />
legal or commercial responsibility for the accuracy or completeness of the contents of this Offer<br />
Document. This Offer Document includes forward-looking statements as to how Awilco Offshore<br />
may perform in the future. The management of Awilco Offshore has based these forward-looking<br />
statements on current expectations and projections about the way in which future events and<br />
financial trends affect the financial conditions of <strong>AWO</strong>’s business. These forward-looking<br />
statements are subject to risks and uncertainties, and the Managers cannot assume responsibility for<br />
these assumptions. As of the date of this Offer Document, Enskilda Securities owns 1,471,900<br />
shares (whereof 1,471,900 shares are held as hedge for sold future contracts) and Fearnley Fonds<br />
owns 400 shares in Awilco Offshore. Employees of Enskilda Securities hold 0 shares and<br />
employees of Fearnely Fonds hold 0 shares in Awilco Offshore.<br />
Oslo, 15 September 2005<br />
Enskilda Securities <strong>AS</strong>A Fearnley Fonds <strong>AS</strong>A<br />
Legal counsel<br />
We have acted as Norwegian legal counsel to Awilco Offshore in connection with the Offer.We<br />
confirm that the Board of Directors of Awilco Offshore has been granted a valid authorisation from<br />
the Offeror’s General Meeting to increase the share capital of the Offeror through the issuance of<br />
the Consideration Shares. As soon as the Board of Directors has passed the required resolution to<br />
carry out such share capital increase, we will issue a confirmation regarding this to the Oslo Stock<br />
Exchange. We confirm that the general description of tax matters referred to in section 12 of this<br />
Offer Document reflects the present tax regime in Norway for Norwegian investors. We have not<br />
reviewed any commercial, financial, technical or market matters described in this Offer Document.<br />
Oslo, 15 September 2005<br />
Wiersholm, Mellbye & Bech advokatfirma <strong>AS</strong><br />
4
Definitions<br />
Anders Wilhelmsen Group A Wilhelmsen <strong>AS</strong> and its subsidiaries<br />
Awilco Awilco <strong>AS</strong>, a company in the Anders Wilhelmsen Group<br />
<strong>AWO</strong>, Awilco Offshore, the Awilco Offshore <strong>AS</strong>A and, unless the context requires<br />
Offeror<br />
otherwise, its consolidated subsidiaries<br />
Board of Directors The board of directors of the Offeror<br />
Consideration Shares Up to 17,156,485 shares in Awilco Offshore <strong>offer</strong>ed as<br />
consideration in the Offer.<br />
DBS Bank Development Bank of Singapore Ltd<br />
Enskilda Securities Enskilda Securities <strong>AS</strong>A<br />
Fearnley Fonds Fearnley Fonds <strong>AS</strong>A<br />
Jurong Jurong Shipyard PTE Ltd<br />
Keppel FELS Keppel FELS Limited<br />
LOG Larsen Oil & Gas <strong>AS</strong><br />
Managers Enskilda Securities as lead manager and Fearnley Fonds as comanager,<br />
collectively referred to as the “Managers”<br />
NOK Norwegian Kroner<br />
Nordea Nordea Bank Norge <strong>AS</strong>A<br />
Offer Awilco Offshore’s <strong>offer</strong> to acquire all outstanding shares of<br />
Petrojack as described in this Offer Document<br />
Offer Document This <strong>offer</strong> document and prospectus, including all appendices<br />
hereto<br />
Offer Period The period from and including 16 to 30 September 2005,<br />
subject to any extensions.<br />
Petrojack Petrojack <strong>AS</strong>A<br />
PPL PPL Shipyard Pte Ltd<br />
SCB Standard Chartered Bank<br />
Sinvest Sinvest <strong>AS</strong>A<br />
USD United States Dollars<br />
VPS Verdipapirsentralen, the Norwegian Central Securities<br />
Depositary<br />
5
1. Summary<br />
The following summary is qualified in its entirety by reference to the more detailed information<br />
appearing elsewhere in this Offer Document, including section 13 “Risk factors”. This summary<br />
does not contain all information that is of importance to investors in deciding whether to apply for<br />
Offer Shares. Investors should read the entire Offer Document carefully.<br />
1.1 Background for the <strong>offer</strong><br />
On August 4 2005 Awilco Offshore announced that it had acquired approximately 20% of the<br />
shares outstanding in Petrojack and its intention to launch a voluntary Offer for all of the shares in<br />
Petrojack. A revised Offer and indicative timetable for the Offer was announced on August 23<br />
2005. Awilco Offshore has previously stated its intention to play an active role in the consolidation<br />
of the Norwegian drilling-rig industry. The Company believes that there are significant benefits to<br />
be derived from consolidation, including organisational synergies, economies of scale with respect<br />
to management and marketing of the drilling rigs as well as increased attention in the capital<br />
markets.<br />
1.2 Summary terms of the <strong>offer</strong><br />
The voluntary Offer made by Awilco Offshore <strong>offer</strong>s Petrojack shareholders the opportunity to<br />
exchange two Petrojack shares for one Awilco Offshore share, equivalent to an exchange ratio of<br />
2:1. Based on the closing share price of Awilco Offshore on 22 August 2005 (the day prior to<br />
announcement of the revised voluntary Offer) of NOK 34.50 this values each Petrojack share at<br />
NOK 17.25 and the entire share capital of Petrojack at approximately NOK 997 million.<br />
1.3 Awilco Offshore <strong>AS</strong>A<br />
Awilco Offshore was incorporated on 21 January 2005 as a wholly-owned direct subsidiary of<br />
Awilco, a company in the Anders Wilhelmsen Group. In February 2005, Awilco Offshore<br />
acquired from Awilco all of the offshore accommodation and drilling rig assets of the Anders<br />
Wilhelmsen Group and, as part of the transaction, raised NOK 1,000 million in new equity from<br />
external investors through a private placement. In May of 2005 Awilco Offshore completed an<br />
Initial Public Offering and was listed on the Oslo Stock Exchange.<br />
Background<br />
Awilco and the Anders Wilhelmsen Group, originally founded in 1939, have a long tradition within<br />
investments in maritime and offshore assets. Having sold its entire offshore exposure to Petroleum<br />
Geo-Services in 1998, Awilco commenced new offshore investments in 2002, at that time<br />
acquiring an accommodation unit. One additional accommodation unit was purchased and rebuilt<br />
in 2004. Also in 2004, Awilco acquired one contract for a jack-up drilling rig newbuilding at PPL.<br />
A further three jack-up newbuilding contracts were entered into at Keppel and PPL during 2005.<br />
Asset and market exposure<br />
Awilco Offshore is exposed to two distinct markets from the outset; the market for accommodation<br />
units (holding two units) and the market for jack-up drilling rigs (holding four newbuilding<br />
contracts and four newbuilding options). The accommodation units mainly operate in the North Sea<br />
and are both suited, as two of only four units in the world fleet, for employment on the Norwegian<br />
Continental Shelf. The jack-up newbuilding contracts and options have the main terms set out in<br />
the table below.<br />
6
Name Yard W. depth D. depth Decl. by Delivery Project price Financing<br />
Contracted rigs<br />
WilPower PPL 375ft 30,000ft 2Q06 131 MUSD SCB<br />
WilCraft Keppel 400ft 30,000ft 4Q06 131 MUSD Nordea<br />
WilSuperior PPL 375ft 30,000ft 2Q07 130 MUSD Nordea<br />
WilTBN Keppel 400ft 30,000ft 4Q07 134 MUSD Nordea*<br />
Optional rigs<br />
PPL option 1A PPL 375ft 30,000ft 03 / 2006 +24mo 144 MUSD<br />
Keppel option B Keppel 400ft 30,000ft 08/ 2006 +28mo 150 MUSD<br />
PPL option 2 PPL 375ft 30,000ft 10 / 2006 +24mo 131 MUSD<br />
PPL option 3 PPL 375ft 30,000ft 09 / 2007 +24mo 132 MUSD<br />
* in process<br />
The project prices set out above are the expected prices of the rigs delivered and fully equipped.<br />
The prices include yard contract prices (which are firm for the contracted rigs and the PPL option<br />
rigs), newbuilding supervision, owner furnished equipment, spares, financing, and other project<br />
expenses.<br />
Organisation and management<br />
The Offeror is incorporated as a Norwegian public limited liability company and has its registered<br />
office in Oslo.The Offeror has five full-time employees. The Offeror’s managing director is Henrik<br />
Fougner, who has more than 15 years of experience from banking and the shipping and offshore<br />
industry. A minor part of the Offeror’s support functions, such as accounting and treasury services,<br />
are provided pursuant to a management agreement with Anders Wilhelmsen & Co <strong>AS</strong>.<br />
All commercial and operational management of the jackup drilling fleet is provided by Premium<br />
<strong>Drilling</strong>, a company established jointly by Sinvest <strong>AS</strong>A and Awilco Offshore. Premium <strong>Drilling</strong><br />
will be responsible for advising the owners on business development and market strategy, and for<br />
the marketing, contracting and operation of the two companies’ fleet of jackup drilling rigs. The<br />
head office of Premium <strong>Drilling</strong> is located in Houston, USA. Bill Rose, former Vice President of<br />
Noble Corporation, has been appointed as its CEO. The process of creating a professional drilling<br />
contractor is well underway.<br />
Corporate, technical- (including supervision of the new buildings) and commercial management for<br />
the accommodation rigs are being ensured by the Offeror itself. The Offeror acquires operational<br />
management services for the accommodation units from third party service providers, Polycrest <strong>AS</strong><br />
and OSM Offshore <strong>AS</strong>. These are both independent managers of offshore units.<br />
Objective and strategy<br />
Key elements of the Offeror’s strategy is:<br />
• To create the basis for a leading international drilling contractor.<br />
• To participate in and take advantage of an expected upturn in the jack-up drilling market and<br />
to further expand into this market, partly by utilising cash flow from the accommodation rigs.<br />
• To be an active participant in sector consolidation.<br />
• To have an opportunistic approach to expansion in other offshore segments.<br />
1.4 Petrojack <strong>AS</strong>A<br />
Petrojack <strong>AS</strong>A is a Norwegian-based rig-owning company listed on the Oslo Stock Exchange.<br />
Petrojack has entered into contracts for the construction of three jackup rigs to be constructed at the<br />
Jurong shipyard in Singapore. The rigs are under construction and are scheduled for delivery in<br />
March 15 2007, January 15 2008 and June 30 2008 respectively. Petrojack was incorporated in<br />
October 2004 by LOG a company owned by Mr. Berge Gerdt Larsen. Petrojack was listed during<br />
February 2005. The main owners are Berge Gerdt Larsen, Awilco Offshore and Sinvest <strong>AS</strong>A.<br />
7
2. Summary in Norwegian (Sammendrag på norsk)<br />
Det følgende er en oversettelse av sammendraget av prospektet (prospektets kapittel 1). I tilfelle av<br />
avvik mellom den engelske teksten og den norske oversettelsen skal den engelske teksten ha<br />
forrang. Investorer oppfordres til å lese hele prospektet. Det er lagt til grunn tilsvarende<br />
definisjoner og forkortelser som i den engelske teksten. Det følgende sammendraget må leses i<br />
sammenheng med den mer detaljerte informasjon som fremgår i andre deler av dette prospektet,<br />
herunder i kapittel 13 “Risk factors”. Sammendraget er ingen erstatning for den mer detaljerte<br />
informasjonen i prospektet.<br />
2.1 Bakgrunn til tilbudet<br />
Den 4. august 2005 annonserte Awilco Offshore kjøpet av ca. 20% av aksjene i Petrojack og deres<br />
hensikt om å fremsette et frivillig Tilbud til alle aksjonærene i Petrojack. Et revidert Tilbud og<br />
indikativ timeplan ble annonsert 23. august 2005. Awilco Offshore har tidligere fremhevet sin<br />
intensjon om å spille en aktiv rolle i konsolideringen av den norske borerigg industrien. Selskapet<br />
mener at betydelige verdier kan skapes gjennom konsolidering, inkludert organisasjonsrelaterte<br />
synergier, stordriftsfordeler med hensyn til drift og markedsføring av riggene samt økt interesse fra<br />
kapitalmarkedet.<br />
2.2 Tilbudspris<br />
Det frivillige Tilbudet framsatt av Awilco Offshore gir Petrojacks aksjonærer muligheten til å bytte<br />
to Petrojack aksjer mot en Awilco Offshore aksje, tilsvarende et bytteforhold på 2:1. Basert på<br />
sluttkursen for Awilco Offshore den 22. august 2005 (dagen før annonseringen av det reviderte<br />
Tilbudet) på NOK 34,50 gir dette en verdi per Petrojack aksje på NOK 17,25 og for den samlede<br />
aksjekapitalen til Petrojack på NOK 997 millioner.<br />
2.3 Awilco Offshore <strong>AS</strong>A<br />
Awilco Offshore ble stiftet den 21. januar 2005 som et heleid datterselskap av Awilco, et selskap i<br />
Anders Wilhelmsen-gruppen. I februar 2005 overtok Awilco Offshore alle eiendeler innen<br />
offshore riggvirksomhet som før var eiet av Awilco, og som del i denne transaksjonen ble det<br />
gjennomført en rettet kontantemisjon hvor selskapet ble tilført NOK 1,000 millioner i ny<br />
egenkapital fra eksterne investorer. I mai 2005 ble Awilco Offshore notert på Oslo Børs.<br />
Bakgrunn<br />
Awilco og Anders Wilhelmsen-gruppen, som har røtter tilbake til 1939, har en lang tradisjon for<br />
investeringer i maritime og offshore-baserte eiendeler. Etter salget av hele offshore-virksomheten<br />
til Petroleum Geo-Services i 1998 gjorde gruppen igjen nye offshore-investeringer i 2002, da med<br />
kjøp av en boligrigg. Ytterligere en rigg ble kjøpt og konvertert til boligrigg i 2004. I 2004 kjøpte<br />
Awilco seg også inn i en nybyggingskontrakt for en oppjekkbar borerigg, en satsing som har blitt<br />
utvidet i 2005 gjennom kontraheringen av ytterligere tre oppjekkbare borerigger.<br />
Eksponering til eiendeler og markeder<br />
Awilco Offshore er eksponert mot to separate markeder; markedet for boligrigger (gjennom å eie to<br />
enheter) og markedet for oppjekkbare borerigger (gjennom fire nybyggingskontrakter og fire<br />
opsjoner til nye kontrakter). Boligriggene er i det vesentlige beskjeftiget i Nordsjøen og er egnet,<br />
som to av kun fire enheter i verden, for beskjeftigelse på norsk sokkel. Innen oppjekkbare<br />
borerigger har selskapet nybyggingskontrakter og opsjoner med betingelser som angitt i tabellen<br />
nedenfor.<br />
8
Navn Verft Vanndyp Boredyp Opsj. til Levering Prosjektpris Finansiering<br />
Faste kontrakter<br />
WilPower PPL 375ft 30,000ft 2Q06 131 MUSD SCB<br />
WilCraft Keppel 400ft 30,000ft 4Q06 131 MUSD Nordea<br />
WilSuperior PPL 375ft 30,000ft 2Q07 130 MUSD Nordea<br />
WilTBN Keppel 400ft 30,000ft 4Q07 134 MUSD Nordea*<br />
Opsjoner<br />
PPL opsjon 1A PPL 375ft 30,000ft 03 / 2006 +24md 144 MUSD<br />
Keppel opsjon B Keppel 400ft 30,000ft 08/ 2006 +28md 150 MUSD<br />
PPL opsjon 2 PPL 375ft 30,000ft 10 / 2006 +24md 131 MUSD<br />
PPL opsjon 3 PPL 375ft 30,000ft 09 / 2007 +24md 132 MUSD<br />
* under utarbeidelse<br />
Prosjektprisene angitt over er de forventede prisene for riggene levert og fullt utstyrt. Prisene<br />
inkluderer verkstedpriser (som er faste for de faste kontraktene og PPL-opsjonene), oppfølgning i<br />
byggeperioden, eierspesifisert utstyr, reservedeler, finansiering og andre prosjektkostnader.<br />
Organisasjon og ledelse<br />
Selskapet er registrert i Norge som allmennaksjeselskap og har sitt registrerte kontor i Oslo.<br />
Selskapet har fem faste ansatte. Selskapets administrerende direktør er Henrik Fougner, som har<br />
mer enn 15 års erfaring fra bank, shipping og offshore. En begrenset del av Selskapets<br />
støttefunksjoner slik som regnskap og likviditetsstyring ivaretas gjennom en management avtale<br />
med Anders Wilhelmsen & Co <strong>AS</strong>.<br />
All kommersiell og operasjonell drift av jackup boreriggene ivaretaes av Premium <strong>Drilling</strong>, et<br />
selskap opprettet i fellesskap av Awilco Offshore og Sinvest. Premium <strong>Drilling</strong> vil være ansvarlig<br />
for å gi råd til eierne på selskapets utvikling og markedsstrategi samt markedsføring, inngåelse av<br />
kontrakter og drift av de to selskapenes jack-up flåter. Hovedkontoret til Premium <strong>Drilling</strong> ligger i<br />
Houston, USA. Bill Rose, tidligere konserndirektør i Noble Corporation, har blitt utnevnt til<br />
administrerende direktør. Prosessen med å bygge et profesjonelt drillingselskap er derfor godt<br />
underveis.<br />
Administrasjon samt teknisk (inkludert byggeoppfølgningen av nybyggene) og kommersiell drift<br />
av boligenhetene ivaretas av Selskapet selv. Awilco Offshore kjøper operasjonelle driftstjenester<br />
for boligenhetene fra tredjepartsleverandørene, Polycrest <strong>AS</strong> og OSM Offshore <strong>AS</strong>. Begge disse<br />
selskapene er uavhengige operatører av boligenheter.<br />
Målsetning og strategi<br />
Sentrale elementer i selskapets strategi vil være:<br />
• Å legge grunnlag for et ledende internasjonalt boreselskap.<br />
• Å delta i, og dra nytte av, en forventet bedring i markedet for oppjekkbare borerigger, samt å<br />
ekspandere ytterligere i dette markedet dels gjennom den kontantstrøm som genereres fra<br />
selskapets boligrigger.<br />
• Å være en aktiv deltager i konsolidering innen sektoren.<br />
• Å ha et opportunistisk syn på ekspansjon innen andre segmenter av offshorenæringen.<br />
2.4 Petrojack <strong>AS</strong>A<br />
Petrojack <strong>AS</strong>A er et norskbasert riggselskap notert på Oslo Børs. Petrojack har kontrahert tre jackup<br />
rigger ved Jurong verftet i Singapore. Riggene er under konstruksjon og forventes levert<br />
henholdsvis 15. mars 2007, 15. januar 2008 og 30. juni 2008.<br />
Petrojack ble stiftet i oktober 2004 av LOG et selskap eiet og kontrollert av Berge Gerdt Larsen.<br />
Petrojack ble notert på Oslo Børs i februar 2005. I dag er Berge Gerdt Larsen, Awilco Offshore og<br />
Sinvest <strong>AS</strong>A blant de største eierne av Petrojack.<br />
9
3. Terms and Conditions of the Offer<br />
3.1 The Offer<br />
Awilco Offshore hereby <strong>offer</strong>s to acquire all outstanding shares in Petrojack not already owned by<br />
it or by Sinvest which is consolidated with Awilco Offshore pursuant to the Securities Trading Act<br />
§ 4-5 cfr § 1-4 no. 5 (see chapter 4 of this Offer Document for a description of the basis of the<br />
consolidation of Awilco Offshore and Sinvest).<br />
The Offer is not being made in any country where the making of the Offer or its acceptance would<br />
be a violation of the laws of such country. Shareholders of Petrojack resident outside of Norway<br />
should read the information on the inside cover page. This Offer Document will be sent to all<br />
persons registered as shareholders of Petrojack on 13 September 2005 to the addresses registered<br />
with the VPS, except for shareholders with registered addresses in jurisdictions where this Offer<br />
Document may not be lawfully distributed. A description of the background to the Offer is set out<br />
in chapter 4 of this Offer Document.<br />
3.2 The Offeror<br />
The Offer is made by:<br />
Awilco Offshore <strong>AS</strong>A<br />
Beddingen 8 Aker Brygge<br />
0250 OSLO<br />
Awilco Offshore is a Norwegian public limited liability company registered with the Norwegian<br />
Register of Business Enterprises with registration number 987 861 894. As of the date of the Offer<br />
Document Awilco Offshore owns 11,942,030 shares in Petrojack, equal to 20.7% of the total<br />
number of outstanding shares in Petrojack. Sinvest, with which Awilco Offshore has entered into a<br />
co-operation agreement with regard to Petrojack (see chapter 4 of this Offer Document for a<br />
description of this co-operation agreement), owns 11,572,000 shares in Petrojack, equal to 20.0%<br />
of the total number of outstanding shares in Petrojack.<br />
Other related parties of Awilco Offshore (as defined in section 1-4 of the Norwegian Securities<br />
Trading Act) do not own any shares in Petrojack. Neither Awilco Offshore nor any of its related<br />
parties hold any convertible bonds, warrants, stock options or other instruments entitling the holder<br />
to acquire shares in Petrojack.<br />
3.3 The target company<br />
The target company is:<br />
Petrojack <strong>AS</strong>A<br />
Stranden 1 Aker Brygge<br />
0113 Oslo<br />
Petrojack is a Norwegian public limited liability company registered with the Norwegian Register<br />
of Business Enterprises with registration number 987 358 920.<br />
3.4 The Offer consideration<br />
Awilco Offshore <strong>offer</strong>s to issue one new share in consideration of each two Petrojack shares<br />
tendered pursuant to the Offer. By signing and delivering a Form of Acceptance, the tendering<br />
shareholder will authorize the Manager to subscribe on its behalf for the Consideration Shares to be<br />
issued to it. A description of Awilco Offshore’s shares and share capital is included in chapter 10 of<br />
this Offer Document. No interest compensation will be paid for the period from the date of<br />
acceptance until the settlement date.<br />
10
Any acceptance received encompassing an odd number of Petrojack shares, will be rounded up to<br />
the nearest even number of Petrojack shares.<br />
3.5 Conditions to the <strong>offer</strong><br />
The Offer is subject to satisfaction or waiver by Awilco Offshore of each of the following<br />
conditions:<br />
(i) Satisfactory due diligence of Petrojack by Awilco Offshore, including as<br />
described in 3.16.<br />
(ii) Awilco Offshore shall have become the owner of shares constituting no less<br />
than 67 per cent of the total number of outstanding shares in Petrojack.<br />
(iii) All necessary approvals from public authorities.<br />
The above conditions to the Offer must be satisfied or waived within two weeks of the expiry of the<br />
Offer Period. If the conditions to the Offer has not been satisfied or waived within this time limit,<br />
the Offer will lapse, and any Petrojack shareholders who have accepted the Offer will no longer be<br />
bound by such acceptance and the Tendered shares will be released the following day.<br />
3.6 The Offer Period<br />
The Offer Period under the Offer is from and including 16 September 2005 to 4.00 p.m.<br />
(Norwegian time), 30 September 2005. Awilco Offshore expressly reserves the right to extend the<br />
Offer Period one time with up to one week, i.e. the Offer Period may be extended until 7 October<br />
2005. Any extension of the Offer Period will be announced in the manner described in section 3.22<br />
no less than 24 hours before the expiry of the Offer Period. If the Offeror decides to extend the<br />
Offer Period, there will be a corresponding postponement of other dates referred to herein in the<br />
period after the Offer Period, including the dates set out in section 3.9 of this Offer Document.<br />
3.7 Acceptances of the Offer<br />
In order to accept the Offer, shareholders of Petrojack must deliver a Form of Acceptance, properly<br />
completed and signed to one of the Managers before 4.00 p.m. (Norwegian time), on 30 September,<br />
2005. The Form of Acceptance, duly completed and signed, must be sent by letter, fax or be<br />
delivered to the Managers at the following addresses:<br />
Enskilda Securities <strong>AS</strong>A<br />
Filipstad Brygge 1<br />
P.O. Box 1363 Vika<br />
0113 Oslo<br />
Telefax: +47 21 00 89 62<br />
Fearnley Fonds <strong>AS</strong>A<br />
Grev Wedels plass 9<br />
PO Box 1158 Sentrum<br />
0107 Oslo<br />
Telefax: +47 22 93 60 00<br />
Any acceptance of the Offer is irrevocable. The valid acceptance of the Offer pursuant to the<br />
procedure described in this Offer Document will constitute a binding agreement between the<br />
tendering shareholder and Awilco Offshore upon the terms and subject to the conditions of the<br />
Offer and the relevant Form of Acceptance.<br />
Awilco Offshore reserves the right to reject any or all acceptances of the Offer determined by it, at<br />
its sole discretion, not to be in proper form, or to be unlawful. Awilco Offshore also reserves the<br />
right to treat an acceptance of the Offer as valid, in whole or in part, even though it is not entirely<br />
complete or not accompanied by required document(s) or if it is received at places other than set<br />
out above. Awilco Offshore reserves the right, but has no obligation to accept acceptances which<br />
are received after the expiry of the Offer Period. Shareholders holding Petrojack shares at more<br />
than one VPS account will receive a separate Form of Acceptance for each VPS account.<br />
11
All Petrojack shares to be tendered under the Offer must be transferred free of any encumbrances<br />
or other third-party rights whatsoever and with all shareholder rights attached to them. Any third<br />
party with registered encumbrances or other third-party rights over the relevant VPS account(s)<br />
must sign the Form of Acceptance and thereby waive the rights in the shares and approve the<br />
transfer of shares to Awilco Offshore free of any encumbrances or other third-party rights<br />
whatsoever. Any shareholder whose Petrojack shares are registered in the name of a broker, dealer,<br />
commercial bank, trust company or other nominee must contact such nominee if such shareholder<br />
wishes to accept the Offer.<br />
By executing and delivering the Form of Acceptance, the shareholder irrevocably authorises the<br />
Managers to block the Petrojack shares encompassed by the acceptance in favour of the Managers<br />
on behalf of Awilco Offshore. This means that no transactions relating to the Petrojack shares<br />
encompassed by the acceptance may be undertaken after the Offer has been accepted. The blocking<br />
will only be in effect in relation to the Petrojack shares encompassed by the Acceptance and will<br />
not have any affect on other securities which are registered at the same VPS account If the<br />
conditions to the Offer has not been satisfied or waived within two weeks of the expiry of the Offer<br />
Period, the blocking of the shares will promptly be lifted and the shareholders who have accepted<br />
the Offer will be free to dispose of their shares, see section 3.6 of this Offer Document.<br />
Any omission or failure to dispatch the Offer Document or the Form of Acceptance or any notice<br />
required to be dispatched under the terms of the Offer to, or any failure to receive the same by, any<br />
person to whom the Offer is or should be made, shall not invalidate the Offer in any way or create<br />
an implication that the Offer has not been made to any such person. No acknowledgement of<br />
receipt of any Form(s) of Acceptance is required or will be given. All communications, notices etc.<br />
to be delivered by or sent to or from shareholders of Petrojack (or their designated agent(s)) will be<br />
delivered by or sent to or from such shareholders (or their designated agent(s)) at their own risk.<br />
Such communications, notices etc will be sent to the shareholders address as it is registered in VPS.<br />
3.8 Shareholder rights<br />
Petrojack shareholders accepting the Offer will remain owners of the tendered Petrojack shares<br />
and, to the extent permitted by Norwegian law, retain their voting rights and other shareholder<br />
rights, until the settlement of the Offer.<br />
3.9 Settlement<br />
By accepting this Offer, shareholders of Petrojack authorize the Manager, upon the Offer being<br />
declared unconditional by Awilco Offshore, to transfer the tendered Petrojack shares to an escrow<br />
account in VPS-account in the name of Enskilda Securities for the benefit of Awilco Offshore.<br />
Such transfer is expected to take place within 5 days following the waiver of all conditions<br />
precedent to the Offer by Awilco Offshore, at the latest on 19 October 2005.<br />
As soon as reasonably possible after such transfer, Awilco Offshore will cause the increase of the<br />
share capital to be registered with the Norwegian Register of Business Enterprises. The registration<br />
is expected to take place no later than three business days after the day on which the Tendered<br />
Shares are transferred to the escrow VPS account for the benefit of the Offeror, i.e. at the latest on<br />
24 October 2005. The Consideration Shares cannot be sold or otherwise disposed of until the share<br />
capital increase has been registered with the Norwegian Register of Business Enterprises. The<br />
Consideration Shares will be registered at the VPS-account[s] at which the tendered Petrojack<br />
shares were registered no later than three business days following the registration of the share<br />
capital increase with the Norwegian Register of Business Enterprises which is expected to be at the<br />
latest on 27 October 2005. The tendered Petrojack shares will not be transferred to Awilco<br />
Offshore until the Consideration Shares have been properly issued and registered.<br />
12
3.10 Costs of Tendering Shareholder<br />
Awilco Offshore will pay costs directly related to VPS transactions in connection with the Offer.<br />
Petrojack shareholders who accept the Offer will not incur any brokerage fees or other costs<br />
directly related to VPS transactions in connection with the Offer. Awilco Offshore will not cover<br />
any costs for advisory or other services incurred by Petrojack shareholders at their own initiative.<br />
3.11 Relationship with Petrojack’s board of directors and management<br />
No special advantages or benefits will be accorded to the board of directors or the management of<br />
Petrojack in connection with the Offer.<br />
3.12 Acquisition of Petrojack shares outside the Offer<br />
To the extent permitted by the Securities Trading Act § 4-10, Awilco Offshore reserves the right to<br />
acquire Petrojack shares outside the Offer both during and after the Offer Period. If Awilco<br />
Offshore acquires Petrojack shares in the Offer Period, and Awilco Offshore and Sinvest at such<br />
time jointly own more than 40% of the shares in Petrojack, Awilco Offshore will be obligated<br />
under the Securities Trading Act to make a mandatory <strong>offer</strong> for all shares in Petrojack not already<br />
owned by it, see section 3.13 below.<br />
3.13 Co-operation with Sinvest - Mandatory <strong>offer</strong><br />
On 30 August 2005, Awilco Offshore entered into an agreement with Sinvest to co-operate with<br />
regard to an acquisition of Petrojack. Sinvest currently holds 20.0% of Petrojack’s shares. Under<br />
the agreement, all further acquisitions by either party will be made on a 50/50 basis. This means<br />
that 50% of any Petrojack shares acquired by Awilco Offshore through the Offer, will be re-sold to<br />
Sinvest at a price in cash equal to Awilco Offshore’s cost price no later than 14 days after the<br />
completion of Awilco Offshore’s acquisition of the shares. The co-operation agreement also<br />
includes an obligation on each of the parties to seek to co-ordinate their voting at general meetings<br />
of Petrojack.<br />
In Awilco Offshore’s opinion, this co-operation agreement will mean that Awilco Offshore and<br />
Sinvest will be consolidated under the Securities Trading Act § 4-5 cfr § 1-4 no. 5. This means that<br />
if Awilco Offshore, as a result of the Offer or otherwise, acquires any further shares in Petrojack,<br />
and Awilco Offshore and Sinvest at such time jointly own more than 40% of the shares in<br />
Petrojack, Awilco Offshore will be obligated under the Securities Trading Act to make a<br />
mandatory <strong>offer</strong> for all shares in Petrojack not already owned by it or Sinvest.<br />
The <strong>offer</strong> price for the mandatory <strong>offer</strong> must be equal to, or higher than, the highest price paid, or<br />
agreed to be paid, by Awilco Offshore or any related party (including Sinvest) for shares in<br />
Petrojack during the six-month period prior to the date at which the obligation to make a mandatory<br />
<strong>offer</strong> is triggered. If it is clear that the market price when the mandatory <strong>offer</strong> obligation is<br />
triggered is higher, the <strong>offer</strong> price is required to be at least as high as the market price.<br />
See chapter 4 for more information on the agreement between Awilco Offshore and Sinvest.<br />
3.14 Compulsory acquisition of shares<br />
If Awilco Offshore, as a result of the Offer or otherwise, were to become the holder of more than<br />
90 per cent of the shares and votes in Petrojack, Awilco Offshore would have the right to effect a<br />
compulsory acquisition pursuant to section 4-25 of the Norwegian Public Limited Companies Act<br />
of the shares in Petrojack not already owned by it.<br />
13
Under the co-operation agreement between Awilco Offshore and Sinvest described in chapter 4 of<br />
this Offer Document, Awilco Offshore and Sinvest will make any further acquisitions in Petrojack<br />
on a 50/50 basis. This means that 50% of any Petrojack shares acquired by Awilco Offshore<br />
through the Offer, will be re-sold to Sinvest at a price in cash equal to Awilco Offshore’s cost price<br />
within 14 days of Awilco Offshore’s acquisition. The cost price will be determined using the<br />
closing share price of Awilco Offshore on the day that the share capital increase is carried out. For<br />
as long as such an ownership structure is maintained, the conditions for carrying out a compulsory<br />
acquisition would not be satisfied unless the parties transferred their shareholdings to a joint<br />
holding company.<br />
3.15 Continued listing of Petrojack<br />
In the event that the Offer is completed, Awilco Offshore will consider proposing to the general<br />
meeting of Petrojack that an application be made to the Oslo Stock Exchange to de-list Petrojack’s<br />
shares from the Oslo Stock Exchange. Such an application would require the approval of the<br />
general meeting of Petrojack by a majority of 2/3 of the votes cast and the share capital represented<br />
at such general meeting.<br />
3.16 Legal Consequences of the Offer<br />
Awilco Offshore does not expect the Offer to have any material legal consequences for Petrojack.<br />
However, according to the prospectus published by Petrojack on 3 February 2005 in connection<br />
with its listing on The Oslo Stock Exchange:<br />
Petrojack’s loan agreement with DBS Bank implies that LOG shall remain manager of<br />
Petrojack for as long as the loan agreement remains in effect.<br />
A failure by “Berge Gerdt-Larsen/LOG” to maintain management control of Petrojack or any<br />
change in the day-to-day management arrangements of Petrojack will constitute an event of<br />
default under Petrojack’s loan agreement with DBS Bank unless DBS Bank consents to such<br />
changes.<br />
Berge Gerdt-Larsen has undertaken to maintain a shareholding interest in Petrojack of not less<br />
than 10 per cent until all amounts under the loan agreement with DBS Bank and other financing<br />
documents have been paid in full.<br />
Awilco Offshore has not had access to the loan agreement with DBS Bank, and is not in a position<br />
to consider the above restrictions in detail. The Offer is expressly conditional upon a satisfactory<br />
due diligence of Petrojack. If the due diligence process reveals that any of the above issues will<br />
have material adverse effect on Petrojack, this condition will not be satisfied.<br />
3.17 Consequences for the Employees<br />
According to publicly available information, Petrojack does not have any employees.<br />
3.18 Tax Consequences of the Offer<br />
A description of the Norwegian tax consequences of the Offer is included in chapter 12 of this<br />
Offer Document.<br />
3.19 Statement from the board of directors of Petrojack<br />
Under the Norwegian Securities Trading Act § 4 -16, the board of directors of Petrojack is required<br />
to issue a statement concerning the Offer, including information on the employee’s views and other<br />
factors of significance for assessing whether the shareholders should accept the Offer, no later than<br />
one week prior to the expiry of the Offer Period.<br />
14
3.20 Contact between the Offeror and the target company<br />
Awilco Offshore has not had any contact with the board of directors or management of Petrojack<br />
prior to launching the Offer. Awilco Offshore has, however, in combination with the Managers had<br />
discussions with certain shareholders of Petrojack as well as Petrojack’s financial advisor ABG<br />
Sundal Collier regarding the possible acquisition of major shareholders’ holdings in Petrojack. A<br />
more detailed description of the background the Offer is set out in chapter 4 of this Offer<br />
Document.<br />
3.21 Governing law / Jurisdiction<br />
The Offer and any acceptance thereof are subject to Norwegian law.<br />
Any disputes that arise in connection with the Offer or any acceptance thereof which cannot be<br />
amicably resolved shall be subject to the exclusive jurisdiction of the Norwegian courts, with Oslo<br />
as venue in the first instance.<br />
3.22 Announcements<br />
Any announcements from Awilco Offshore will be made through the information system of the<br />
Oslo Stock Exchange.<br />
3.23 Costs<br />
Awilco Offshore expects to incur the following fees and expenses in connection with the Offer<br />
Name Location Nature of engagement Amount (NOK mill.)<br />
Enskilda Securities Oslo Manager 3.0 – 12.0<br />
Fearnley Fonds Oslo Manager 0.0 – 12.0<br />
Wiersholm, Mellbye & Bech Oslo Legal services 0.2<br />
Ernst & Young Oslo Audit services 0.1<br />
Kjelstrup & Wiggen Expert statement 0.1<br />
Estimated fees to the Managers are based an agreed success fee arrangement. The fee payable to<br />
Fearnley Fonds <strong>AS</strong>A has not yet been determined and will depend on degree of involvement and<br />
level of work performed. Other fees are based on hourly rates and an estimated time consumed.<br />
Fees include value added tax, as applicable.<br />
In addition to the fees set out above, Awilco Offshore will also be responsible for other costs<br />
incurred, including cost of printing and distribution of the Offer Document and fees to the Oslo<br />
Stock Exchange and VPS.<br />
15
4. Background to and reasons for the Offer<br />
Awilco Offshore has previously stated its intention to play an active role in the consolidation of the<br />
Norwegian drilling-rig industry. Awilco Offshore believes that there are significant benefits to be<br />
derived from consolidation, including organisational synergies, economies of scale with respect to<br />
management and marketing of the drilling rigs as well as increased attention in the capital markets.<br />
In the period 1-3 August 2005, Awilco Offshore acquired 11,942,030 shares in Petrojack through a<br />
combination of cash purchases in the market and agreements with major shareholders to exchange<br />
Petrojack shares for shares in Awilco Offshore. The shareholders that accepted the <strong>offer</strong> to<br />
exchange their Petrojack shares for shares in Awilco Offshore have been <strong>offer</strong>ed compensation in<br />
the event that Awilco Offshore increases its <strong>offer</strong> within a period of one month.<br />
On 4 August, 2005, Awilco Offshore announced an <strong>offer</strong> to acquire all outstanding shares in<br />
Petrojack at a consideration of 1 Awilco Offshore share for every 2.31 Petrojack shares.<br />
On 23 August 2005, Awilco Offshore announced an improved <strong>offer</strong>. This Offer is described in<br />
detail in this Offer Document.<br />
On 30 August 2005, Awilco Offshore entered into an agreement with Sinvest to co-operate with<br />
regard to an acquisition of Petrojack. Sinvest currently holds 20.0% of Petrojack’s shares. The<br />
agreement states that it is the intention of the parties to acquire control of Petrojack if market<br />
conditions permit this. The parties also agree to work towards placing Petrojack’s rigs under the<br />
management of Premium <strong>Drilling</strong>. Under the agreement, all further acquisitions by either party will<br />
be made on a 50/50 basis. The agreement also provides that the parties agree that Awilco Offshore<br />
shall proceed with the Offer set out in this Offer Document, and that any shares acquired through<br />
the Offer shall be subject to the above mentioned principle of 50/50 acquisition. This means that<br />
50% of any Petrojack shares acquired by Awilco Offshore through the Offer, will be re-sold to<br />
Sinvest at a price in cash equal to Awilco Offshore’s cost price no later than 14 days after the<br />
completion of Awilco Offshore’s acquisition of the shares. The cost price will be determined using<br />
the closing share price of Awilco Offshore on the day that the share capital increase is carried out.<br />
Under the agreement, if either party desires to sell its Petrojack shares, the other party is entitled to<br />
acquire them at market price or, alternatively, to require that the sale be carried out in a coordinated<br />
manner on a 50/50 basis. The co-operation agreement also includes an obligation on each<br />
of the parties to seek to co-ordinate their voting at general meetings of Petrojack.<br />
In Awilco Offshore’s opinion, this co-operation agreement will mean that Awilco Offshore and<br />
Sinvest will be consolidated under the Securities Trading Act § 4-5 cfr § 1-4 no. 5. This means that<br />
if Awilco Offshore, as a result of the Offer or otherwise, becomes acquires any further shares in<br />
Petrojack, and Awilco Offshore and Sinvest at such time jointly own more than 40% of the shares<br />
in Petrojack, Awilco Offshore will be obligated under the Securities Trading Act to make a<br />
mandatory <strong>offer</strong> for all shares in Petrojack not already owned by it or Sinvest. The <strong>offer</strong> price for<br />
the mandatory <strong>offer</strong> must be equal to, or higher than, the highest price paid, or agreed to be paid, by<br />
Awilco Offshore or any related party (including Sinvest) for shares in Petrojack during the sixmonth<br />
period prior to the date at which the obligation to make a mandatory <strong>offer</strong> is triggered, see<br />
section 3.13 of this Offer Document. The highest price paid in cash by Awilco Offshore is NOK<br />
13.40. Awilco Offshore has also acquired shares in Petrojack against consideration in Awilco<br />
Offshore shares, based on an exchange rate of 1 Awilco Offshore share for every 2.31 Petrojack<br />
shares. To the best of Awilco Offshore’s knowledge, the highest price paid by Sinvest for Petrojack<br />
shares is NOK 17.50 per share.<br />
Through the voluntary Offer Awilco Offshore wishes to strengthen its position and increase its<br />
16
exposure towards the jack-up drilling market while executing on its stated strategy of playing an<br />
active role in the consolidation of the drilling industry. Awilco Offshore believes that it has built a<br />
highly competent organisation and excellent foundation for management of the drilling rigs through<br />
Premium <strong>Drilling</strong>, company jointly owned with Sinvest. Awilco Offshore believes that significant<br />
synergies can be extracted through the transfer of management of Petrojack’s rigs into the Premium<br />
<strong>Drilling</strong> organisation.<br />
If the Offer is successful, it is Awilco Offshore’s intention to propose a delisting of Petrojack and<br />
to bring the commercial and operational management of Petrojack’s assets (the jackup drilling rigs)<br />
under the management of Premium <strong>Drilling</strong>. It is anticipated that this would entail a termination of<br />
Petrojack’s current management agreement with LOG. The acquisition will not otherwise affect the<br />
Petrojack organisation as Petrojack does not have any full-time employees.<br />
17
5. The Offer consideration<br />
The voluntary Offer made by Awilco Offshore <strong>offer</strong>s Petrojack shareholders the opportunity to<br />
exchange two Petrojack shares for one Awilco Offshore share, equivalent to an exchange ratio of<br />
2:1. Based on the closing share price of Awilco Offshore on 22 August 2005 (the date of<br />
announcement of the revised voluntary Offer) of NOK 34.50 this values each Petrojack share at<br />
NOK 17.25 and the entire share capital at approximately NOK 997 million. Using the volumeweighted<br />
average price of Awilco Offshore over the month prior to announcement of the revised<br />
Offer, the Offer values each Petrojack share at NOK 17.10.<br />
This corresponds to a premium of 28% to the closing price of Petrojack on the Oslo Stock<br />
Exchange on August 3 2005 of NOK 13.4, the day prior to the initial announcement of Awilco<br />
Offshore’s intention to launch a voluntary Offer.The Offer corresponds to a 22% premium over the<br />
volume-weighted average price of Petrojack over the last two months prior to 22 August of NOK<br />
14.1.<br />
The exchange ratio is the result of a thorough consideration by Awilco Offshore taking into<br />
consideration, among others, the share price and trading volume development of Awilco Offshore<br />
and Petrojack respectively preceding the announcement of the <strong>offer</strong> as well as discounted cash flow<br />
and relative trading multiple-based valuation.<br />
The exhibit below shows the development of the Petrojack share price and trading volume from the<br />
day of the listing on the Oslo Stock Exchange to the day preceding this Offer document.<br />
Share price (NOK)<br />
20<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
feb-05 mar-05 apr-05 mai-05 jun-05 jul-05 aug-05<br />
Source: Oslo Børs<br />
Volume ('000s) Share price<br />
25 000<br />
20 000<br />
15 000<br />
10 000<br />
5 000<br />
0<br />
Volume ('000s)<br />
18
6. Short description of Petrojack <strong>AS</strong>A<br />
The information in this chapter is based on publicly available information regarding Petrojack,<br />
including information published by Petrojack in its introductory prospectus dated February 3,<br />
2005, subsequent stock exchange releases from Petrojack and other public sources of information.<br />
Awilco Offshore has not independently verified any information regarding Petrojack.<br />
6.1 Company description<br />
Petrojack <strong>AS</strong>A is a Norwegian-based rig-owning company which was established in October 2004<br />
and listed on the Oslo Stock Exchange during February 2005. The company has entered into<br />
contracts for the construction of three jack-up rigs at Jurong shipyard in Singapore. The first rig<br />
will be delivered March 15, 2007.<br />
Petrojack’s stated strategy is to create value for its shareholders by contracting new or acquiring<br />
existing jack-up drilling rigs with a view to operating them on medium to long term contracts. The<br />
company intends to take advantage of the expected strong development in the drilling rig market<br />
has stated that it intends to actively consider structural alternatives such as mergers, acquisitions or<br />
outright sale to competitors in order to create maximum shareholder value.<br />
Corporate history<br />
Petrojack was incorporated on October 4, 2004 by LOG, an offshore-industry project development,<br />
investment, rental and management company owned by Mr. Berge Gerdt Larsen.<br />
The contract for the first jack-up rig to be built by Jurong shipyard in Singapore, came into effect<br />
December 15, 2004.<br />
Petrojack was listed on the Oslo Stock Exchange in February 2005. The company declared options<br />
for two additional jack-up rigs to be constructed at Jurong on April 15 and June 18, 2005.<br />
The jack-up rigs<br />
Petrojack has entered into EPC contracts with Jurong/SembCorp Marine for the construction of<br />
three jack-up rigs at Jurong shipyard in Singapore. The rigs are Baker Marine class jack-up rigs<br />
with an operating water debt capacity of 375 feet and drilling depth capacity of approximately<br />
30,000 feet.<br />
The rig price for the first jack-up rig is USD 125.3m, while the total project cost is estimated to<br />
approximately USD 135.9m. Development Bank of Singapore (DBS Bank) has provided Petrojack<br />
with a loan facility of up to USD 106.0m (subject to a maximum of 80 percent of the rig price plus<br />
certain other defined costs) for the construction of the jack-up rig. The remaining amount,<br />
approximately USD 31m, is financed through equity. The delivery date is on or before March 15,<br />
2007.<br />
The rig price for the second jack-up rig is USD 126.5m with 80 % yard financing during the<br />
construction period. Delivery date is on or before January 15, 2008.<br />
The rig price for the third jack-up rig is USD 131.2m with 80 % yard financing during the<br />
construction period. Delivery date is on or before June 30, 2008.<br />
Management and Board of Directors<br />
Petrojack has entered into a management agreement with LOG where LOG shall be responsible for<br />
the appointment of Petrojack’s managing director and provide additional staff, supplies and<br />
equipment to undertake all necessary administrative functions. LOG shall report to Petrojack’s<br />
Board of Directors and shall also be responsible for the operation and financing of Petrojack,<br />
19
according to the strategy set forth by Petrojack’s Board of Directors.<br />
Petrojack’s current management consists of:<br />
Lars Moldestad CEO<br />
Gro Aadahl Kvalheim CFO<br />
Martin Nordaas Project Manager / Head of Yard Supervision<br />
Unni F. Tefre Office Manager<br />
Petrojack’s current Board of Directors consists of:<br />
Erik Solheim Chairman<br />
Petter H. Tomren Board Member<br />
Gunnar Hirsti Board Member<br />
Berge G. Larsen Board Member<br />
6.2 Key Financial Figures<br />
Income statement<br />
(NOK) Q2 2005 H1 2005 2004<br />
Operating revenues - - -<br />
Operating expenses (1,475,043) (3,002,393) (473,532)<br />
Operating profit (loss) (1,475,043) (3,002,393) (473,532)<br />
Financial income 3,461,188 7,636,588 217,233<br />
Financial expenses 47,916 (10,363) -<br />
Pre tax profit 2,034,061 4,623,832 (256,299)<br />
Tax - - 0<br />
Net result 2,034,061 4,623,832 (256,299)<br />
Balance sheet statement<br />
(NOK) 30/06/2005 31/03/2005 31/12/2004<br />
Fixed assets 257,192,327 125,640,910 134,199,323<br />
Current assets 116,569,446 159,022,164 89,867,436<br />
Total assets 373,761,773 284,663,074 224,066,759<br />
Equity 367,900,877 278,260,443 202,058,512<br />
Liabilities 5,860,896 6,402,631 22,008,247<br />
Total equity and liabilities 373,761,773 284,663,074 224,066,759<br />
Source: Petrojack <strong>AS</strong>A<br />
20
6.3 Shareholders<br />
As per August 24, 2005, the share capital of Petrojack consists of 57,825,000 shares each with a<br />
par value of NOK 5. Petrojack has no outstanding or authorized stock options, warrants or<br />
convertible debt. The table below shows the largest shareholders in Petrojack registered in VPS as<br />
of 9 September, 2005.<br />
Shareholder No. Of shares Ownership in %<br />
AWILCO OFFSHORE <strong>AS</strong>A 11 942 030 21 %<br />
SINVEST <strong>AS</strong>A ATT: SVEIN BJØRNHOLM 11 572 000 20 %<br />
INCRE<strong>AS</strong>ED OIL RECOVE 10 043 259 17 %<br />
INDEPENDENT OIL TOOL 5 426 923 9 %<br />
GOLDMAN SACHS INTERN EQUITY NONTREATY 4 090 867 7 %<br />
CREDIT SUISSE FIRST (EUROPE) PRIME BROKE 4 062 450 7 %<br />
GEVERAN TRADING CO L 1 047 000 2 %<br />
NORDEA VEKST AKSJEFONDET V/NORDEA 920 000 2 %<br />
BANK OF NEW YORK, BR BNY GCM CLIENT ACCT 881 000 2 %<br />
NET <strong>AS</strong> 796 000 1 %<br />
GOLDMAN SACHS INTERN EQUITY HOUSE 456 945 1 %<br />
FIRST SECURITIES <strong>AS</strong>A MEGLERKONTO INNLAND 355 298 1 %<br />
ABG SUNDAL COLLIER N MEGLERKONTO 318 000 1 %<br />
DEUTSCHE BANK AG LON PRIME BROKERAGE 313 440 1 %<br />
DANSKE BANK A/S 3887 SETTLEMENTS NOR 304 000 1 %<br />
VERDIPAPIRFONDET NOR V/NORDEA FONDENE <strong>AS</strong> 255 000 0 %<br />
HALVORSEN ØYVIND 205 000 0 %<br />
LARSEN MILLY KARIN 200 000 0 %<br />
ERIKSEN LEIF W. C/O AON GRIEG <strong>AS</strong> 186 818 0 %<br />
BARINGS (GUERNSEY) L NON TREATY CLIENTS A 185 000 0 %<br />
Total top 20 53 561 030 93 %<br />
Source: VPS<br />
21
7. Description of Awilco Offshore <strong>AS</strong>A<br />
7.1 Company background<br />
Awilco Offshore was incorporated on 21 January 2005 as a 100% owned subsidiary of Awilco, a<br />
company in the Anders Wilhelmsen Group. In February 2005, the Offeror acquired from Awilco<br />
all investments of the Anders Wilhelmsen Group within offshore accommodation and drilling. A<br />
description of the acquisition agreements is set out in section 11.1. As part of the transaction, the<br />
Offeror raised NOK 1,000 million in new equity from external investors. In May 2005 the Offeror<br />
carried out a small new issue and was listed on the Oslo Stock Exchange.<br />
The assets held by the Offeror fall within two segments; offshore accommodation units and jack-up<br />
drilling rigs.<br />
Accommodation units<br />
The Offeror owns two accommodation units suited for employment in the North Sea; one jack-up<br />
accommodation unit and one semi-submersible accommodation unit. Both units are suited for<br />
operation on the Norwegian Continental Shelf, which has some of the strictest requirements in the<br />
market. Only four units of the world-wide fleet of specialised accommodation units comply with<br />
the requirements for operation on the Norwegian Continental Shelf.<br />
The jack-up accommodation unit “Port Rigmar” is currently employed on a contract on the Ekofisk<br />
field on the Norwegian Continental Shelf. The fixed contract currently runs until October 2006.<br />
The client, ConocoPhillips, holds options to extend the contract for up to four additional years.<br />
Based on the firm contract, the unit would secure an EBITDA of approximately USD 10.5 – 11<br />
million in 2005. For a further description of the unit and the contract, see section 7.5.<br />
The semi-submersible accommodation unit “Port Reval”, which was converted from a service rig,<br />
has secured employment through November 2006 and additional three months in 2007. Currently,<br />
the rig is employed on a contract on the Eldfisk with client ConocoPhillips Norge. Commencement<br />
was early September and duration is 10 months. The rig also has secured contracts with Aker<br />
Kværner for four months in 2006 and three months in 2007. For 2005, the EBITDA contribution is<br />
expected to be approximately USD 6.5 million from the Aker Kværner contract (June 05 to August<br />
05) and approximately USD 5.5 million from the ConocoPhillips contract. For a further<br />
description of the unit and the contracts, see section 7.5.<br />
During the spring, Port Reval was undergoing a minor upgrade at a yard in Haugesund. The<br />
upgrading was made to satisfy requirements made for work on the Norwegian Continental Shelf.<br />
Jack-up drilling rigs and options<br />
The Offeror has four newbuilding contracts and four newbuilding options. A summary of the<br />
contracts and options is set out below.<br />
Name Yard W. depth D. depth Decl. by Delivery Project price Financing<br />
Contracted rigs<br />
WilPower PPL 375ft 30,000ft 2Q06 131 MUSD SCB<br />
WilCraft Keppel 400ft 30,000ft 4Q06 131 MUSD Nordea<br />
WilSuperior PPL 375ft 30,000ft 2Q07 130 MUSD Nordea<br />
WilTBN Keppel 400ft 30,000ft 4Q07 134 MUSD Nordea*<br />
Optional rigs<br />
PPL option 1A PPL 375ft 30,000ft 03 / 2006 +24mo 144 MUSD<br />
Keppel Option B Keppel 400ft 30,000ft 08/ 2006 +28mo 150 MUSD<br />
PPL option 2 PPL 375ft 30,000ft 10 / 2006 +24mo 131 MUSD<br />
PPL option 3 PPL 375ft 30,000ft 09 / 2007 +24mo 132 MUSD<br />
* in process<br />
The project prices set out above are the expected prices of the rigs delivered and fully equipped.<br />
22
The prices include yard contract prices (which are fixed for the contracted rigs and the PPL option<br />
rigs), newbuilding supervision, owner furnished equipment, spares, financing, and other project<br />
expenses.<br />
Each of the Offeror’s options can be declared independently of the others. A particular feature for<br />
the PPL options is that both the steel price and the currency exchange rate element of the contract<br />
price have been fixed. This is normally not the case, as yards will typically reserve the right to<br />
adjust the final price for movements in steel prices, currency exchange rates and certain other<br />
factors.<br />
Following the ordering of WilTBN, the Offeror was awarded an option for an additional rig from<br />
Keppel Fels. The Keppel option B has steel price and currency exchange rate adjustments based on<br />
the levels of steel prices and currency exchange rates that applied on second half of July 2005.<br />
The price is also subject to increase in major equipment price over that purchased for WilTBN.<br />
Price increase in major equipment includes but is not limited to the price of main engines and<br />
generators, emergency generators, cranes and drilling equipment set.<br />
Under the Keppel option B agreement, a total of USD 12 million of the yard price will be subject to<br />
adjustment in the event of variations in the steel price from second half of July 2005 to the time of<br />
entering into a firm contract. Correspondingly, a total of USD 84 million of the yard price will be<br />
subject to adjustment in the event of variations in the currency exchange rates between USD and<br />
Singapore Dollars, and between USD and Euros, from second half of July 2005 to the time of<br />
entering into a firm contract.<br />
Additional information on the rigs and designs is provided in section 7.6. A further description of<br />
the newbuilding contracts and option agreements is set out in section 11.2. A description of the<br />
financing arrangements is set out in section 11.3.<br />
7.2 Anders Wilhelmsen Group – background<br />
The Anders Wilhelmsen Group is a privately owned group of companies based in Norway and with<br />
headquarters located in Oslo. The first company in the group, A Wilhelmsen <strong>AS</strong>, was founded in<br />
1939 as a shipowning and investment company, and the group has over the years been involved in<br />
many sectors of the marine industry.<br />
The chart below gives an illustration of the main businesses in the Anders Wilhelmsen Group.<br />
23
Royal Caribbean Cruises<br />
Ltd.<br />
Cruise liner<br />
21%<br />
Linstow <strong>AS</strong><br />
Real estate<br />
Hotels<br />
Shopping<br />
The Anders Wilhelmsen Group<br />
100%<br />
Awilco <strong>AS</strong><br />
Shipping<br />
100%<br />
Awilco Offshore <strong>AS</strong>A<br />
Jackups<br />
Accommodation units<br />
100%<br />
A Wilhelmsen Capital <strong>AS</strong><br />
Venture<br />
Private equity<br />
Share trading<br />
Currently 45,4% ownership<br />
In addition, Wilhelmsen family members own approx. 4,5%<br />
The Anders Wilhelmsen Group participated in the foundation of Royal Caribbean Cruise Line<br />
(RCCL) in 1969 which has since developed into one of the world’s leading cruise liners. Current<br />
ownership, together with ownership of Wilhelmsen family members, is approximately 21% of this<br />
company. Through a shareholders’ agreement with Cruise Associates, the Anders Wilhelmsen<br />
Group is a leading and influential shareholder in RCCL.<br />
The group also has large engagements in real estate through its wholly-owned company Linstow,<br />
with primary focus on central Oslo and the Baltic region. Maritime investments are held through<br />
Awilco, a name with long traditions in the group. The group also has significant financial<br />
investments, held through A Wilhelmsen Capital <strong>AS</strong>.<br />
7.3 Relation to the Anders Wilhelmsen Group<br />
Ownership<br />
As of the date of this Offer Document, Awilco has an ownership of approximately 45.4% of the<br />
Offeror. In addition, members of the Wilhelmsen family have an ownership of approximately<br />
4.5%. However, the only part of the Wilhelmsen family group of companies that should be grouped<br />
is Aweco Holding <strong>AS</strong> which owns 2.8% of Awilco Offshore. Aweco Holding <strong>AS</strong> owns 60.1% of A<br />
Wilhelmsen <strong>AS</strong> which again owns 100% of Awilco <strong>AS</strong> and therefore will be consolidated with<br />
Awilco under the Securities Trading Act § 4-5. Assuming acceptance of the Offer by all<br />
shareholders of Petrojack (excluding Sinvest), Awilco’s ownership of the Offerer will be reduced<br />
to approximately 40%%, and the ownership of members of the Wilhelmsen family will be reduced<br />
to approximately 4%. The purpose of the Anders Wilhelmsen Group’s investment in the Offeror is<br />
to create value for all shareholders. The Anders Wilhelmsen Group expects to remain a significant<br />
shareholder in the Offeror going forward, but considers its investment to be of a financial nature<br />
and will take its decisions to buy or sell shares in this perspective.<br />
Board representation<br />
The Anders Wilhelmsen Group intends, for as long as it retains a significant ownership position in<br />
the Offeror, to seek representation on the Board of Directors of the Offeror.<br />
Management contract<br />
A minor part of the Offeror’s support functions, such as accounting and treasury services, are<br />
provided pursuant to a management agreement with Anders Wilhelmsen & Co <strong>AS</strong>.<br />
See section 11.4 for a description of this agreement.<br />
24
Non-competition<br />
The Anders Wilhelmsen Group has stated its intention, for as long as it remains a shareholder of<br />
the Offeror, to refrain from competing investments. It is the intention that any investment in<br />
drilling rigs, accommodation rigs, or similar types of equipment, will only be <strong>offer</strong>ed to the<br />
Offeror, and if declined, will not be made by other companies in the Anders Wilhelmsen Group.<br />
7.4 Company strategy<br />
Awilco Offshore intends to create the basis for a leading international drilling contractor and will,<br />
in doing so, employ strategies as set forth below.<br />
Investments<br />
Awilco Offshore intends to be a service provider to oil companies by <strong>offer</strong>ing first-class equipment<br />
for use in various stages of exploration for, and production of, oil and gas. The Offeror intends to<br />
grow, particularly in the drilling rig segment, by possibly taking on new newbuilding contracts.<br />
The Offeror will have an opportunistic approach to expansion into other offshore segments.<br />
Operation<br />
The Offeror believes that its exposure to the accommodation market will provide a stable<br />
underlying cash flow which will provide financial leverage to its construction of jack-up drilling<br />
rigs. As the time of delivery of jack-up drilling rigs approaches, the Offeror will consider entering<br />
into short- or long-term contracts to secure cash flows and to provide the financial stability for<br />
additional newbuilding orders.<br />
Consolidation<br />
The Offeror believes that further consolidation of the oil service industry will take place and will<br />
consider taking part in such consolidation. The Offeror believes that it has the strength to take<br />
active part in such consolidation and will consider opportunities to grow by mergers and<br />
acquisitions. The Offeror has been informed that Awilco, its largest shareholder, will consider any<br />
such consolidation on the basis of the transaction’s financial implications and that it will not resist<br />
any transaction from the point of view of having its ownership percentage reduced.<br />
7.5 The accommodation units<br />
The Offeror has two accommodation rigs suited for employment in the North Sea; one jack-up<br />
accommodation unit and one semi-submersible accommodation unit. Both units are suited for<br />
employment on the Norwegian Continental Shelf, which has some of the strictest requirements in<br />
the market. Only four units in the world fleet of specialised accommodation units comply with the<br />
requirements for employment in this region.<br />
25
Key specifications<br />
Additional specifications of the accommodation units are set forth in Appendix 1 and Appendix 2.<br />
Rig name: Port Rigmar Port Reval<br />
Design: Robin 300 self elevating jack-up<br />
accommodation rig<br />
Built / converted: Built 1979 as drilling rig, converted to<br />
accommodation mode in 1991<br />
Flag: Bahamas Bahamas<br />
Class: DnV; +1A1 Self-elevating Accommodation<br />
Unit<br />
Suited for: Norwegian, UK and Danish continental<br />
shelf<br />
Dimensions: Length 65m, breadth 65m, depth 8m, leg<br />
lengths 127m (417ft)<br />
Capacities: Variable load 2200mt, fuel/diesel oil 254m3,<br />
helifuel bundle for 2 tanks, potable water<br />
532m3<br />
Accommodation: 162 two bed cabins, 2 single bed cabins, all<br />
with daylight, toilet and shower; galley and<br />
dining room for 152 persons; various<br />
recreation rooms; hospital and first aid<br />
treatment rooms; gymnasium; 14 offices and<br />
1 conference room<br />
Machinery: 3 main diesel engines each of 2200HP; 4<br />
generators each of 930kW; 1 emergency<br />
diesel generator 400kW; 1 fresh water<br />
maker 75m3/d; 3 deep well pumps each<br />
295m3/h<br />
Mooring: 3 anchor winches with 3000’ x 1.25” wire; 3<br />
anchors Bruce 1.5t<br />
Aker H-3 (enhanced) semi-submersible<br />
accommodation rig<br />
Built 1976 as drilling rig; converted to<br />
tender support rig; converted to<br />
accommodation mode in 2004<br />
DnV; +1A1 Accommodation HELDK,<br />
P<strong>AS</strong>MOOR V<br />
Norwegian and UK continental shelf<br />
Length 108m, breadth 67m, main deck<br />
elevation 37m, operational draft 21m<br />
Deckload 1600t, fuel/diesel oil 2326m3,<br />
helifuel 7500ltr, potable water 602m3,<br />
displacement 22344t<br />
262 single bed cabins, 50 two bed cabins, all<br />
with daylight, shared (separate) toilet and<br />
shower; galley and dining room for 152<br />
persons; various recreation rooms; hospital<br />
and first aid treatment room; gymnasium;<br />
various offices and conference room; laydown<br />
and storage area and workshop<br />
4 main diesel engines each 2200HP; 4<br />
generators each 1500kW; 1 emergency<br />
diesel generator 800kW; 2 fixed four-blade<br />
propellers with steerable rudders driven by 2<br />
electric DC motors each 1250kW; 2 fresh<br />
water makers 35+60m3/d<br />
12 anchor winches; 12 anchor chains each<br />
1370m;12 anchors Stevpris 14.5t<br />
26
Technical mgr.: Polycrest <strong>AS</strong>, an independent manager of<br />
offshore units<br />
Employment: Contract to Oct 2006 with ConocoPhillips<br />
for employment on the Ekofisk field. T/C<br />
contract with a rate of USD 55,500 per day<br />
to Oct 2005 and USD 68,000 per day from<br />
Oct 2005 to Oct 2006.<br />
Charterer has 4x1 year options to extend the<br />
contract. Rates for the first option year are<br />
USD 68,000 per day. Rates for the next<br />
three option years are subject to negotiation<br />
and the options therefore have character of a<br />
right of first refusal. Options must be<br />
declared one year in advance.<br />
Opex: Norwegian sector employment – about USD<br />
25,000 – 28,000 per day<br />
OSM Offshore <strong>AS</strong>, an independent manager<br />
of offshore units<br />
The unit is currently employed at the Eldfisk<br />
field with client Conoco Phillips Norge.<br />
Commencement was early September and<br />
duration is 10 months. Gross contract value<br />
is approximately USD 24.5 million.<br />
The unit will thereafter be employed for<br />
Aker Kværner for UK/Norwegian sector on<br />
the Frigg field for the period July-October<br />
2006 at a rate of USD 130,000 per day (with<br />
cost compensation if employed on<br />
Norwegian sector). This contract further<br />
covers three months in the spring of 2007 on<br />
similar terms.<br />
Norwegian sector employment – about USD<br />
31,000 – 34,000 per day<br />
UK sector employment – about USD 25,000<br />
– 28,000 per day<br />
Idle periods – costs will depend on duration<br />
but normally there will be full opex one<br />
month before and after contract; when fully<br />
idle about USD 10 – 12,000 per day<br />
27
7.6 The jack-up drilling rig newbuilding contracts<br />
The Offeror has entered into four newbuilding contracts to build jack-up drilling rigs. The<br />
contracts are distributed with two contracts at the PPL yard and two at the Keppel Fels yard.<br />
In addition to these firm contracts, the Offeror holds additional options to construct four jack-up<br />
rigs, as further described in section 11.2.<br />
Key features of the designs are set out below. Additional design specifications are included in<br />
Appendix 3 and Appendix 4.<br />
Yard PPL Keppel<br />
Design: Baker Marine Pacific 375’ Class KFELS MOD V ‘B’ Class<br />
Class: ABS A1, CDS, Self-Elevating <strong>Drilling</strong> Unit ABS +A1 Self-Elevating <strong>Drilling</strong> Unit<br />
Water depth 375ft 400ft<br />
<strong>Drilling</strong> depth 30,000ft 30,000ft<br />
Cantilever 70ft outreach maximum 70ft outreach maximum<br />
BOP 15,000psi 15,000psi<br />
Generators 10,750bhp 10,750bhp<br />
Deckload 3400mt 2400mt<br />
Pipe handling Remotely operated Remotely operated<br />
Contracts<br />
WilPower is secured on a five year bare-boat contract with Arabian <strong>Drilling</strong> Company. The<br />
contract value is approximately USD 131 mill (including mobilization and demobilization fees),<br />
and Arabian <strong>Drilling</strong> Company has the option to extend the contract for a further year, for a<br />
contract value of approximately USD 33 mill. Arabian <strong>Drilling</strong> Company will be responsible for all<br />
28
operating and local expenses. The rig will be employed in Saudi Arabia, and will commence work<br />
under the contract in July 2006.<br />
No contracts have been secured for any of the other units.<br />
Expected capital expenditure<br />
The table below sets forth the expected capital expenditure for the firm contract rigs. The amounts<br />
referred to as paid are amounts that have been paid or will be paid prior to completion of the<br />
Offering.<br />
USD mill. Paid 3q05 4q05 1q06 2q06 3q06 4q06 1q07 2q07 3q07 4q07 Total<br />
Investments<br />
WilPower 43.0 21.0 33.5 33.0 130.5<br />
WilCraft 49.2 26.0 26.0 29.8 131.0<br />
WilSuperior 13.0 6.5 19.5 25.6 19.5 13.0 13.0 19.5 129.6<br />
WilTBN 26.8 26.8 26.8 26.8 26.8 134.0<br />
Total 105.2 54.3 59.5 19.5 111.4 19.5 69.6 39.8 19.5 26.8 525.1<br />
Financing source<br />
Equity 92.2 33.3 22.5 19.5 52.4 6.2 226.1<br />
WilPower debt 13.0 21.0 27.0 33.0 94.0<br />
Corp. bank debt * 10.0 26.0 19.5 63.4 39.8 19.5 26.8 205<br />
Total 105.2 54.3 59.5 19.5 111.4 19.5 69.6 39.8 19.5 26.8 525.1<br />
* Corp. bank debt includes the Offeror’s own estimate for financing of WilTBN (in process with Nordea).<br />
Final payment schedule has not yet been established for WilTBN. The above schedule is the<br />
Company’s own estimate.<br />
The Offeror expects to cover its payments of interest costs and instalments (as further described in<br />
section 11.3) from cash generated from operations.<br />
7.7 Legal structure<br />
Awilco Offshore <strong>AS</strong>A is a Norwegian public limited liability company incorporated on 21 January<br />
2005. Awilco Offshore was registered with the Norwegian Register of Business Enterprises on 11<br />
February 2005 under the registration number 987 861 894. In accordance with its articles of<br />
association, Awilco Offshore <strong>AS</strong>A shall have its registered office in the municipality of Oslo. The<br />
registered address of Awilco Offshore <strong>AS</strong>A is Beddingen 8 Aker Brygge, N-0250 Oslo, Norway.<br />
The chart below illustrates the group structure. All direct and indirect subsidiaries are wholly<br />
owned.<br />
29
Awilco Offshore is the owner of 50% of Premium <strong>Drilling</strong>. The other 50% of the shares are held by<br />
Sinvest. Premium <strong>Drilling</strong>, which was established in June, 2005, will be responsible for advising<br />
the owners on business development and market strategy, and for the marketing, contracting and<br />
operation of the two companies’ fleet of jackup drilling rigs. The head office of Premium <strong>Drilling</strong><br />
is located in Houston, USA. Bill Rose, former Vice President of Noble Corporation, has been<br />
appointed as its CEO.<br />
7.8 Board of Directors<br />
As of the date of this Offer Document, the following persons serve on the Board of Directors of<br />
Awilco Offshore.<br />
Sigurd E. Thorvildsen (40), Oslo, Chairman<br />
Mr Thorvildsen has 15 years of experience from the shipping and offshore industries. He holds the<br />
position as Managing Director of Awilco. Before joining Awilco, Mr Thorvildsen was for several<br />
years a partner in the shipbroking firm O-J. Libaek and Partners <strong>AS</strong>. He holds a degree<br />
(Siviløkonom) from Handelshøyskolen BI.<br />
Arne Alexander Wilhelmsen (40), Oslo<br />
Mr Wilhelmsen has 16 years of experience from finance and the shipping and offshore industries.<br />
He is CEO of Anders Wilhelmsen & Co <strong>AS</strong> and has held a variety of managerial positions within<br />
the Anders Wilhelmsen group since 1995. Mr. Wilhelmsen is a member of the board of directors of<br />
A Wilhelmsen <strong>AS</strong> and various other business units within the Anders Wilhelmsen group of<br />
companies, including as chairman of Awilco, and serves as a director of the board of Royal<br />
Caribbean Cruise Line. He also serves on the board of directors for Nordisk Skipsrederforening and<br />
as a deputy board member in Norges Rederiforbund. Mr. Wilhelmsen has a Masters of Business<br />
Administration from IMD, Lausanne, Switzerland.<br />
Jarle Roth (44), Oslo<br />
Mr Roth is President and CEO of Unitor <strong>AS</strong>A, a position he has held since 2001. He has been<br />
employed in various companies related to the Ulltveit-Moe Group since 1990. He is educated as a<br />
naval architect (1983) and holds a degree (siviløkonom) from NHH (1987) in addition to a<br />
doctorate programme within organisation and strategy from NHH (1989).<br />
Marianne Blystad (47), Oslo<br />
Mrs Blystad has experience from her position as an attorney with the law firm Bull & Co in Oslo<br />
with specialisation within company law and real estate. Mrs Blystad has held positions in Citibank,<br />
Eksportfinans and Rederiet Arne Blystad <strong>AS</strong>. She holds a degree (siviløkonom) from<br />
Handelshøyskolen BI (1984) and a law degree (cand.jur.) from the University of Oslo (2002).<br />
Tor Bergstrøm (56), Kolbotn<br />
Mr Bergstrøm has more than 30 years of experience from banking, industry and asset management,<br />
both in Norway and internationally. He holds the position as Executive Vice President of Anders<br />
Wilhelmsen & Co <strong>AS</strong>. He is chairman of A Wilhelmsen Capital <strong>AS</strong> and, among other<br />
responsibilities, a member of the board of directors of Mamut <strong>AS</strong>A and Advanced Production and<br />
Loading <strong>AS</strong>A. Bergstrøm was for many years Executive Vice President and CFO of the Aker<br />
Group and before that heading Asset Management in the Storebrand Group. He has also been<br />
working in banking, both in Norway and in the US. He has broad experience as board member of<br />
manufacturing companies, investment companies and finance companies, both in Norway and<br />
internationally. He holds a degree (siviløkonom) from the Norwegian School of Economics and<br />
Business Administration.<br />
Mr Wilhelmsen has 33.2% ownership in Aweco Holding <strong>AS</strong> which owns 3,300,000 shares in the<br />
Offeror. No other directors hold shares in the Offeror.<br />
30
No remuneration has been paid or granted to the Offeror’s board of directors. The level of<br />
remuneration will be determined at the annual general meeting (May 2006).<br />
7.9 Management and employees<br />
Management agreements<br />
Management services are provided to the Offeror by Premium <strong>Drilling</strong> <strong>AS</strong>, a company jointly<br />
owned with Sinvest <strong>AS</strong>A. In addition, Anders Wilhelmsen & Co <strong>AS</strong>, the holding company of the<br />
Anders Wilhelmsen Group, provides accounting and treasury services to the Offeror. See section<br />
11.4 for a description of the management agreements.<br />
Corporate management<br />
Henrik Fougner (42), managing director, Bærum<br />
Mr Fougner has more than 15 years of experience from banking and the shipping and offshore<br />
industries, both in Norway and internationally. He previously held the position as CFO of Awilco<br />
<strong>AS</strong>. Before joining Awilco in 2001 Henrik Fougner was CFO of Osprey Maritime Limited in<br />
Singapore. He has also been working in banking through Den norske Bank and Scandinavian Bank<br />
Group, both in London and Oslo, focusing on the shipping- and offshore industry. He holds an<br />
MBA from the Norwegian School of Economics and Business Administration.<br />
Mr Fougner’s remuneration in his capacity as managing director of the Offeror is under<br />
consideration by the board of the Awilco Offshore. Until such conclusion, he has and will continue<br />
to receive the same salary as he had as CFO of Awilco, NOK 1.200.000.<br />
Key personnel – commercial management<br />
Thor Alexander Krafft (61)<br />
Mr Krafft is Senior Vice President in Awilco Offshore <strong>AS</strong>A, and has more than 35 years of<br />
international experience from shipping and the oil and gas offshore industry. Mr Krafft has worked<br />
for Esso, Gotaas Larsen/Golar Nor Offshore and Arne Blystad Rederi. He holds an MBA from<br />
University of Wisconsin,USA.<br />
Knut Martin Wadet (54)<br />
Mr Wadet has 30 years experience from the offshore oil and gas and marine industries, both in<br />
Norway and internationally. He holds a position as Vice President with special responsibility for<br />
the two accommodation units Port Reval and Port Rigmar. Previously Mr. Wadet was General<br />
Manager of the marine contracting entity Farmand Survey, he has been employed by Stolt-Nielsen<br />
Seaway and the Kværner group, and has spent several years in the Middle East and South East<br />
Asia. He holds a degree in business administration (Siviløkonom) and a degree in civil engineering.<br />
Jan B. Usland (45)<br />
Mr Usland is Director – Offshore Business Development in Awilco Offshore <strong>AS</strong>A. He holds an<br />
MSc in Naval Architecture and Marine Engineering from NTNU (Norway) and enjoys more then<br />
20 years of experience within the offshore oil & gas industry primarily from management, business<br />
development and technical positions with floating production and drilling contractors. He was<br />
previously Senior Vice President, Floating Production with Northern Offshore <strong>AS</strong>A.<br />
Key personnel – technical management<br />
Claus Mørch (58)<br />
Mr Mørch has both a MSc in Mechanical engineering and a BSc in Marine engineering from the<br />
University of Newcastle upon Tyne. Mr Mørch is Senior Vice President of Awilco Offshore <strong>AS</strong>A.<br />
He has more than 30 years experience in the marine and offshore market with broad experience in<br />
relation to newbuilding projcts, conversions and management of shipping and offshore units and<br />
has worked within the Anders Wilhelmsen group for 20 years.<br />
As of the date of this document Awilco Offshore management hold no shares in Awilco Offshore.<br />
31
8. Market overview<br />
8.1 Market positioning<br />
The Offeror’s main assets give exposure to two market segments; accommodation units and jackup<br />
drilling rigs. Both of these markets are related to the international oil and gas industry and have<br />
drivers linked to exploration and production of oil and gas.<br />
Oil and gas projects have a life cycle from exploration, through production, to abandonment. The<br />
Offeror’s assets are typically employed in different phases of the life cycle, as illustrated below.<br />
Phase Seismic Exploration<br />
drilling<br />
Accommodation<br />
units<br />
Jack-up drilling<br />
rigs<br />
<strong>Drilling</strong> of<br />
exploration wells<br />
Engineering,<br />
construction,<br />
installation<br />
Accommodation<br />
and support<br />
Production Abandonment<br />
Accommodation,<br />
maintenance,<br />
upgrades,<br />
modifications,<br />
stand by, hospital<br />
<strong>Drilling</strong> of<br />
production wells<br />
Accommodation<br />
and support<br />
Typically, accommodation units are used in the production phase of a field and is less dependent on<br />
the general strength of the oil and gas markets. On the other hand, jack-up drilling rigs are<br />
typically used in the exploration phase where demand is more directly correlated with the overall<br />
activity in the oil and gas markets. These markets are currently enjoying strong demand, as clearly<br />
evidenced by the development in the oil price.<br />
Short- to medium-term oil price forecasts are well in excess of historical levels as seen from the<br />
graph below, showing the price of Brent Blend oil since 1986 including future prices.<br />
USD per bbl (Brent Blend)<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
20 year average (USD 22.0)<br />
Future price (WTI)<br />
0<br />
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06E 07E<br />
Source: Enskilda Securities<br />
12 Month average<br />
Weekly figures<br />
32
8.2 The market for accommodation rigs<br />
Market overview and status<br />
The market for accommodation rigs is a highly specialized part of the offshore market. First of all,<br />
it is a small market; secondly, it is dominated by a few operators globally; and thirdly, it is<br />
separated from the drilling markets by being more directly linked to oil companies’ production than<br />
to their exploration.<br />
Accommodation units provide a flexible means of providing accommodation and service capacity<br />
to an offshore field. They are used for short- or long-term purposes whenever manning and/or deck<br />
capacity is required beyond the capacity of the fixed installation.<br />
The market is geographically divided into a few segments. Historically, accommodation units have<br />
mainly been used in the North Sea and Mexico. With the long-term chartering of five Prosafe units<br />
by Pemex in 2003, Mexico took over as a leading market for such units.<br />
The supply of accommodation units<br />
The current world fleet of dedicated accommodation units is limited and the most relevant units are<br />
summarized in the table below.<br />
Market / unit Owner Type Design Capacity (beds)<br />
North Sea<br />
Borgholm Dolphin Fred. Olsen Semi Aker H-3 600<br />
MSV Regalia Prosafe Semi GVA 3000 243<br />
Port Rigmar Awilco Offshore Jack-up Robin 300 326<br />
Port Reval Awilco Offshore Semi Aker H-3 362<br />
Pride Rotterdam Pride Jack-up Gusto 200<br />
Gulf of Mexico<br />
MSV Chemul Pemex Semi GVA 2000 433<br />
Jasminia Prosafe Semi GVA 2000 600<br />
Jupiter I Cotemar Semi Small semi 720<br />
Safe Britannia Prosafe Semi Pacesetter 812<br />
Safe Hibernia Prosafe Semi Aker H-3 500<br />
Safe Lancia Prosafe Semi GVA 2000 600<br />
Safe Regency Prosafe Semi Pacesetter 780<br />
Other markets<br />
Safe Astoria Consafe Offshore Semi Sedco 600 256<br />
Safe Concordia Consafe Offshore Semi 376<br />
Safe Caledonia Prosafe Semi Pacesetter 550<br />
Safe Scandinavia Prosafe Semi Aker H-3 527<br />
Source: Fearnley Fonds<br />
In addition to the units set forth above, there are several units that are used for accommodation<br />
purposes in special markets, but these can not be deemed relevant for competitive purposes. This<br />
includes some small shallow-water units being employed in the Southern North Sea, barges being<br />
employed in West Africa, construction platforms, diving ships, and a limited number of emergency<br />
stand-by units. Also, conventional drilling rigs do, from time to time, operate as accommodation<br />
units, but this is mainly on short term contracts with limited bed capacity requirements (100-150<br />
beds, i.e. below the capacity of conventional accommodation units).<br />
The world fleet of accommodation units has declined significantly over the last 15 years, as several<br />
units have been converted into drilling rigs. With a fleet of about 20 units, there was a large<br />
overcapacity of accommodation units in the North Sea in the early to mid-1990s as many of the<br />
large construction projects came to an end.<br />
Over the last years, three units have been converted into accommodation mode. This includes the<br />
Offeror’s unit Port Reval, formerly a service rig, the Fred. Olsen unit Borgholm Dolphin which was<br />
33
formerly a cold-stacked drilling rig, and the Consafe Offshore unit “Safe Astoria” which was also<br />
formerly a cold-stacked drilling rig.<br />
There is currently two additional rigs undergoing conversion into accommodation units. Consafe<br />
Offshore are converting the “Safe Bristolia” which will be delivered in Q1 2006. This unit is being<br />
converted from a formerly cold-stacked drilling rig to a 550 bed accommodation unit at Yantai<br />
Raffles Shipyard in China. The unit is contracted to commence operation in the Far East region,<br />
and will not be suited for North Sea operation.<br />
The Houston based EER (Energy Equipment Resources) has also bought and old rig that will be<br />
converted into a accommodation unit with 400 beds – “Odin Millennium”. The unit is currently<br />
undergoing conversion and upgrades at a US yard, but will not be North sea ready. EER has<br />
already secured a 3 year contract with Petrobras for the unit.<br />
While additional conversion into accommodation mode may take place, the number of rig<br />
structures available for such conversion is little. In the present strengthening market for drilling<br />
rigs, the owners generally seek to have their marginal units employed in drilling mode rather than<br />
investing in conversions.<br />
Consafe Offshore has recently taken delivery of the accommodation and service unit “Safe<br />
Concordia”, the first new building in more than 15 years. The unit was built at Keppel FELS in<br />
Singapore. It will not be suited for North Sea operation.<br />
Demand for accommodation rigs<br />
There are several sources of demand for accommodation units, linked to the various phases of the<br />
oil fields. These include;<br />
Installation and commissioning<br />
Support services during installation and testing of new fixed installations. In the North Sea such<br />
activity was formerly a large market, but has now become a minor part of demand. The market in<br />
Mexico has been stable to growing over the last 5 years. Additional growth is expected in<br />
deepwater provinces as West Africa, Brazil and South East Asia.<br />
Support services during hook-ups of satellite fields to existing installations (growth niche in the<br />
North sea with a number of subsea tie back prospects).<br />
Production and maintenance<br />
Support services during upgrading and maintenance on fixed installations (the major part of the<br />
North Sea market).<br />
Stand-by and hospital services (small part of the market);<br />
Long-term addition of accommodation capacity on producing fields (small part of market).<br />
Abandonment<br />
Abandonment and de-commissioning of fixed installations (small but growing part of the market).<br />
The key demand drivers are oil companies’ spending on new offshore production facilities and<br />
upgrades to enhance production from fields in operation. As further discussed in section 8.3, the<br />
level of such spending is strongly correlated to expectations for future oil and natural gas prices,<br />
the requirement to grow production at a sustainable rate and the need to replace production lost<br />
through depletion.<br />
The North Sea and Mexico have, historically, been the prime markets for such units. In addition<br />
emerging markets as West Africa and Australia have absorbed 1-2 units over the last few years.<br />
34
Also, prospects for further growth are identified in other key offshore provinces as Brazil and<br />
South East Asia.<br />
The current large market in Mexico (currently 8 out of total 16 floating accommodation units in the<br />
world are employed in Mexico) is for a large part linked to new installations. All of the 8 units are<br />
fixed on firm contracts beyond 2006. While ongoing, this is a very stable market, and the long term<br />
outlook is stable to growing.<br />
In the North Sea, the market is to a much larger extent based on maintenance and upgrading service<br />
on existing fields, as the installation phase is mainly past. This includes both planned maintenance<br />
and short-term repair work. Since this is linked directly to the production of oil and gas and thereby<br />
to the oil company’s cash flows, the contracts are often time critical. Some contracts are entered<br />
into long in advance to ensure a well-timed process. In addition abandonment and<br />
decommissioning of old installations is expected to create demand for accommodation services in<br />
the future. As an example Port Reval is fixed on the Frigg removal project in 2006 and 2007.<br />
The North Sea market is characterized by a harsh environment and there is traditionally little<br />
maintenance activity in the winter season.<br />
Current supply – demand balance<br />
The chart below illustrates the employment status for the relevant units in the world fleet of<br />
accommodation units.<br />
2005 2006 2007<br />
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4<br />
North Sea semis<br />
Borgholm Dolphin (UK)<br />
MSV Regalia (NOR)<br />
Port Reval (NOR)<br />
Safe Caledonia (UK)<br />
Safe Scandinavia (NOR) #<br />
North Sea jack-ups (ex. Workfox)<br />
Port Rigmar (NOR)<br />
Pride Rotterdam (DK)<br />
Gulf of Mexico units<br />
MSV Chemul (damaged by Katrina)<br />
MSV Iolair<br />
Jasminia<br />
Jupiter 1<br />
Safe Britannia<br />
Safe Hibernia<br />
Safe Lancia<br />
Safe Regency<br />
Other markets<br />
Safe Astoria Yard<br />
Safe Bristolia Yard<br />
Safe Concordia (del. Mar-05) Yard<br />
Source: Enskilda Securities<br />
Fixed contracts<br />
Options<br />
Under construction<br />
35
8.3 The market for jack-up drilling rigs<br />
Background<br />
<strong>Drilling</strong> on offshore oil and gas fields is primarily done with units of the three categories below.<br />
The selection of a unit will depend on several factors, such as water depth, drilling depth, weather<br />
conditions, location, and availability of units.<br />
Jack-ups<br />
Jack-ups have legs that are lowered<br />
to the seabed, whereafter the hull is<br />
jacked up clear of the sea surface.<br />
Depth capability is limited to leg<br />
length, so jack-ups are generally<br />
shallow water units. Some of the<br />
largest units can operate in 450ft<br />
water depth but the majority of the<br />
fleet is equipped for 250-300ft water<br />
depth.<br />
Semi-submersibles Drillships<br />
Semis are floating units implying<br />
that their depth capacity is not<br />
limited to leg length. They have<br />
hulls or pontoons that are filled with<br />
ballast water to provide stability.<br />
When drilling, they are kept in<br />
position by anchors or dynamic<br />
positioning. Semis are often referred<br />
to in “generations”, with the last<br />
generations being the last built and<br />
largest units with water depth<br />
capacity up to 10,000ft.<br />
Drillships have ordinary ship hulls and a<br />
derrick on top for drilling through a hole<br />
in the hull. Being ships, they have an<br />
advantage in more efficient movement<br />
between drilling operations. Like semis,<br />
the drillships may be anchored or<br />
equipped with dynamic positioning.<br />
Drillships represent a smaller element of<br />
the market.<br />
All of the Offeror’s current exposure to the drilling market is through jack-up drilling rigs, through<br />
its newbuilding contracts and options.<br />
Offshore rig activity is closely correlated to oil companies’ investments related to the exploration<br />
and production of oil and gas (often referred to as E&P spending). E&P activity is driven by the<br />
dual requirement to grow production at a sustainable rate while replacing production lost through<br />
depletion.<br />
E&P spending and the offshore rig activity has historically been highly cyclical. Such levels of<br />
spending may be influenced significantly by oil and natural gas prices and expected changes or<br />
instability of such prices, as well as other factors, including demand for oil and gas and regional<br />
and global economic conditions.<br />
36
The figure below demonstrates the link between jack-up rig demand and oil prices with a 1 year<br />
time lag.<br />
Source: Enskilda Securities<br />
# active jack up rigs world wide<br />
360<br />
340<br />
320<br />
300<br />
280<br />
260<br />
240<br />
220<br />
200<br />
jan. 89<br />
jan. 90<br />
jan. 91<br />
jan. 92<br />
Demand Jack up rigs Oil price 1 year ago<br />
jan. 93<br />
jan. 94<br />
jan. 95<br />
jan. 96<br />
jan. 97<br />
As illustrated above the offshore rig market has experienced both booming periods (1995-97) and<br />
soft markets (1998-2000). However, since bottoming out late 2001, demand for jack-ups has<br />
increased steadily and current status is characterized by firm markets in all key regions and<br />
segments.<br />
Supply<br />
The current fleet of jack-ups comprises 404 units, including 70 non-competitive units (typically<br />
owned and operated by national oil companies and not actively marketed to others). For the<br />
purpose of this document, the total fleet is referenced if not otherwise noted.<br />
There are currently 39, 350ft and above jack-up rigs on order representing 10% of the total fleet.<br />
10 of the new buildings are for delivery in 2006, while 14 are scheduled for 2007. The current lead<br />
time for new buildings is above 30 months, and potential additions of new buildings will not enter<br />
the market before 2007. Awilco Offshore owns four of the new buildings currently in order.<br />
Aging world fleet<br />
The majority of the current operating rigs were constructed in the late 1970’s and early 1980’s, and<br />
the average age of the fleet is 23 years today. Roughly 75% of the current fleet is between 20 and<br />
27 years old, and only 4% of the current fleet is less than 6 years old. Although the useful lifetime<br />
of rigs is difficult to predict, it is expected that new requirements for drilling deeper and more<br />
complex wells will require replacement of older assets over time. In addition attrition of units due<br />
to accidents, conversions and retirement has been in the range of 2-6 units annually over the last 5<br />
years.<br />
jan. 98<br />
jan. 99<br />
jan. 00<br />
jan. 01<br />
jan. 02<br />
jan. 03<br />
jan. 04<br />
jan. 05<br />
45<br />
40<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
Oil price (brent)<br />
37
Jack ups, new buildings<br />
Source: Enskilda Securities<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
Another 11 options for jack ups to be<br />
delivered after 2008 in market<br />
0<br />
1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008E<br />
Current market balance<br />
Total utilization of the worldwide jack-up fleet is around 91% today, with most of the individual<br />
drilling markets stable or improving and varying little from that number. Excluding cold stacked<br />
rigs (not actively marketed), the effective utilization is 98%, a level that, in historical context, is<br />
very high. Thus, all worldwide markets are virtually in balance today, with little room for<br />
mobilization of units between regions as no region seems to have available capacity to spare.<br />
Region Demand Total supply Utilisation Cold stacked Eff. Utilisation<br />
US GoM 89 109 82% 19 99%<br />
Central America 37 38 97% 1 100%<br />
South America 5 6 83% 0 83%<br />
West Africa 19 19 100% 0 100%<br />
North Sea 33 36 92% 0 92%<br />
Middle East 67 74 91% 7 100%<br />
South East Asia 28 30 93% 2 100%<br />
Other 62 63 98% 0 98%<br />
Sum 340 375 91% 29 98%<br />
Source: Petrodata / Fearnley Fonds<br />
The fleet of jack-ups rigs made for 350ft and deeper water depths, comprises 62 units today. These<br />
are the jack-ups that can most efficiently drill deep and complex wells. Recent federal royalty<br />
waivers on “deep shelf” natural gas production in the US Gulf of Mexico, extensive use of<br />
horizontal wells in the North Sea region and technically challenging fields developments in Middle<br />
East and South East Asia are forecasted to increase demand for these rigs in the future.<br />
Ultra premium jackups by contractor Ultra premium jackups by region<br />
Contractor Rig today On order Total Region Contracted Supply Utilisation<br />
Atwood 1 0 1 Austr / NZ 2 3 67%<br />
Awilco 0 4 4 Canada (E) 2 2 100%<br />
Diamond 2 2 4 C America 2 2 100%<br />
ENSCO 12 2 14 NW <strong>Europe</strong> 12 12 100%<br />
GSF 16 0 16 S America 1 1 100%<br />
Maersk 4 4 8 SE Asia 3 3 100%<br />
Rowan 18 3 21 USA, GoM 25 25 100%<br />
Sinvest 0 6 6 M East 1 1 100%<br />
Smedvig 1 0 1 Mediterranean 4 4 100%<br />
<strong>COSL</strong> 0 2 2 West Africa 4 4 100%<br />
Petrojack 0 3 3 Indian Ocean 1 1 100%<br />
Seadrill 0 4 4 Mexico 3 3 100%<br />
Noble 3 2 5 Caspian Sea 1 1 100%<br />
Transocean 2 0 2<br />
Scorpion 0 2 2<br />
Gulf 0 2 2<br />
Others 3 3 6<br />
Sum: 62 39 101 Sum: 61 62 100%<br />
Source: Petrodata / Fearnley Fonds<br />
38
Rate developments<br />
Rates for all kind of jack-up equipment has seen substantial increases over the last year, with<br />
leading edge rate structures approaching previous peak levels in main “jack-up provinces” as US<br />
Gulf of Mexico, North Sea and South East Asia. One of the strongest rate rebounds has taken place<br />
for ultra premium units with technical characteristics similar to the Awilco Offshore units on order.<br />
The right-hand graph below provides average and leading edge rate structures on new fixtures from<br />
January 2000 till now. For purpose of this graph, harsh environment units have been excluded from<br />
the statistics.<br />
Dayrate (USD/d)<br />
100 000<br />
90 000<br />
80 000<br />
70 000<br />
60 000<br />
50 000<br />
40 000<br />
30 000<br />
20 000<br />
10 000<br />
0<br />
jan.91<br />
jul.91<br />
jan.92<br />
jul.92<br />
jan.93<br />
jul.93<br />
jan.94<br />
jul.94<br />
jan.95<br />
jul.95<br />
jan.96<br />
jul.96<br />
jan.97<br />
jul.97<br />
jan.98<br />
jul.98<br />
jan.99<br />
jul.99<br />
jan.00<br />
jul.00<br />
jan.01<br />
jul.01<br />
jan.02<br />
jul.02<br />
jan.03<br />
jul.03<br />
jan.04<br />
jul.04<br />
jan.05<br />
jul.05<br />
Source: Enskilda Securities<br />
Southeast Asia Jackups 250-300' IC - Average (USD)<br />
US GOM Jackups 250-300 - Average (USD)<br />
9. Financial information<br />
9.1 Proforma accounts<br />
Dayrate (USD/d)<br />
140 000<br />
120 000<br />
100 000<br />
80 000<br />
60 000<br />
40 000<br />
20 000<br />
0<br />
sep.02<br />
nov.02<br />
jan.03<br />
mar.03<br />
mai.03<br />
US GOM Jackups 301'+ IC- Average (US$)<br />
US GOM Jackups 301'+ IC- High (US$)<br />
General<br />
Awilco Offshore <strong>AS</strong>A was founded on 21 January 2005. The pro forma group accounts for 2004<br />
have been prepared on a historical cost basis on a consolidated level. The pro forma accounts are<br />
presented as if the offshore segment was reorganized per beginning of the period presented, and is<br />
derived from audited financial statements for Awilco group for 2004. The pro forma accounts have<br />
been provided based on the assumptions stated below. Pro forma financial statements are provided<br />
for informational purposes only and are not necessarily indicative of actual results that would have<br />
been achieved if the transactions and assumptions described below had occurred during the period<br />
presented.<br />
Since the formation of Awilco’s offshore segment into the wholly owned <strong>AWO</strong> group is seen as a<br />
reorganization of a segment in a wholly owned subgroup of Awilco, the reorganization has been<br />
recorded using the continuity method. Consequently, the net book value of the assets, rights and<br />
liabilities transferred to the <strong>AWO</strong> group, corresponds to the net book value under the previous<br />
organization and ownership structure.<br />
Pro forma adjustments<br />
Equity contribution<br />
The Offeror carried out a private placement in the period from 14 – 18. February 2005. Prior to<br />
completion of the private placement, the share capital of the Offeror was increased through the<br />
conversion into equity of part of the consideration for the offshore assets transferred from Awilco.<br />
This conversion of debt into equity is rolled-back and reflected in the pro forma balance sheet per<br />
beginning of 2004. Correspondingly, debt not converted to equity is also reflected in the pro forma<br />
balance sheet per beginning of 2004. Interest cost on this debt is reflected in the accounts using the<br />
same interest rate as agreed in 2005.<br />
jul.03<br />
sep.03<br />
nov.03<br />
jan.04<br />
mar.04<br />
mai.04<br />
jul.04<br />
sep.04<br />
nov.04<br />
jan.05<br />
mar.05<br />
mai.05<br />
jul.05<br />
39
The transfer of assets from Awilco to <strong>AWO</strong> is in the pro forma accounts assumed to have been<br />
executed using the same underlying values as actually used in the reorganization that took place in<br />
2005.<br />
The proceeds from the private placement were received by the Offeror at end of February 2005,<br />
and are reflected in the financial report for 1 st quarter 2005, and is not rolled back to be reflected in<br />
the pro-forma accounts for 2004.<br />
Inter-company debt<br />
Part of the proceeds from the private placement was used to repay inter-company debt to Awilco.<br />
In order to better reflect the actual funding of the segment in 2004, combined with that the proceeds<br />
from the private placement mentioned above is not rolled-back to 2004, no pro forma adjustments<br />
are made to the actual inter-company debt that existed in 2004.<br />
Management fee<br />
The Offeror has entered into management agreements with Anders Wilhelmsen & Co <strong>AS</strong>. The<br />
management fee will equal the costs incurred in delivering the agreed management services. The<br />
pro forma accounts for 2004 include a management fee of approximately NOK 15 million.<br />
Tax<br />
The accommodation rigs have been organised within the Norwegian tonnage tax regime since the<br />
acquisition date of the rigs. However, the law has recently been changed so that with effect from<br />
the fiscal year 2006, rigs will not longer qualify for the tonnage tax regime. This means that the<br />
Offeror will no longer be in a position to benefit from the deferred taxation allowed under the<br />
regime. Consequently, the deferred tax on historical operating profits from the accommodation<br />
units will become payable.<br />
In the pro forma accounts, the Offeror has provided for income tax on the basis of their profit for<br />
financial reporting purposes, adjusted for income and expense items which are not taxable or<br />
deductible for income tax purposes, using the current tax rate. This deferred tax provision is<br />
reflecting the possible change on tax rules mentioned above.<br />
Income tax expense has been adjusted for the effects of pro forma adjustments to the profit and loss<br />
statement.<br />
9.2 Effect of International Financial Reporting Standards (IFRS)<br />
General information<br />
As from 2005 Norwegian public companies are subject to new accounting standards introduced in<br />
the <strong>Europe</strong>an Union. The new accounting standards are called International Financial Reporting<br />
Standards (IFRS). The objective of IFRS is to develop, in the public interest, a single set of high<br />
quality, understandable and enforceable global accounting standards that provide accurate,<br />
transparent and comparable information to help users make economic decisions.<br />
<strong>AWO</strong> has prepared the pro forma accounts for 2004 according to the IFRS. <strong>AWO</strong> has prepared the<br />
pro forma accounts based on the current understanding of IFRS.<br />
Below is a description of the main effects between the accounting principles previously used by<br />
Awilco compared with the IFRS principles used in the pro-forma accounts of <strong>AWO</strong>;<br />
Assets<br />
The useful economic lives of the accommodation rigs are estimated for the material components of<br />
the rigs separately. The major components of the rigs are estimated to have useful economic lives<br />
in the range from 20-38 years. Based on experience, performance and future scheduled dockings,<br />
economic lives are evaluated on a regular basis – at least annually. If the estimated useful economic<br />
life changes future depreciations are adjusted accordingly.<br />
40
There is established residual value for the accommodation rigs. Awilco’s previous principle has<br />
been to depreciate assets to zero over the economic life. We have recalculated accumulated<br />
depreciations for each asset taking into account the residual value and dismantling expenses. The<br />
asset value has been appreciated by the difference in accumulated depreciation based on IFRS and<br />
Norwegian GAAP. Future depreciations are based on depreciation schedules including residual<br />
values and dismantling expenses. The residual value is based on the market value for scrapping at<br />
the reporting date.<br />
Reclassification of docking expenses<br />
Docking expenses are regarded as a separate part of the rig value with a different depreciation<br />
period than the rig. Depreciation of docking expenses is therefore reclassified from operating<br />
expenses to depreciation.<br />
Deferred tax and tax expense<br />
Income tax expense has been adjusted for the effects of IFRS adjustments to the profit and loss<br />
statement. Deferred tax is adjusted due to changes in asset values.<br />
Long term debt<br />
First year installment of long term debt has been classified as current liabilities.<br />
9.3 Accounting principles<br />
Classification of balance sheet items<br />
Assets and liabilities related to the operation of the company are classified as current assets and<br />
liabilities. Assets for long term use are classified as fixed assets.<br />
Revenue<br />
Revenues are recognized as earned, based on contractual daily rates or on a fixed price basis.<br />
Debt issuance costs<br />
Debt issuing costs are amortized and then capitalized if they are directly attributable to the<br />
acquisition, construction or production of a qualifying asset. Borrowing costs are capitalized until<br />
the assets are substantially ready for their intended use. If the resulting carrying amount of the asset<br />
exceeds its recoverable amount, an impairment loss is recorded.<br />
Taxes and deferred tax liabilities<br />
The Offeror provides for income tax on the basis of their profit for financial reporting purposes,<br />
adjusted for income and expense items which are not taxable or deductible for income tax<br />
purposes.<br />
Deferred taxation is provided in the balance sheet as the liability method in respect of temporary<br />
differences between the tax base of an asset or liability and its carrying amount in the balance<br />
sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax<br />
purposes. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred<br />
tax assets are recognized for all deductible temporary differences to the extent that it is probable<br />
that taxable profits will be available against which the deductible temporary difference can be<br />
utilized.<br />
Current assets<br />
Current assets are valued at the lower of historical cost and market value.<br />
Foreign currency<br />
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction.<br />
41
Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange<br />
rate at the balance sheet date.<br />
Fixed assets<br />
Rigs and equipment are stated at cost less accumulated depreciation and accumulated impairment<br />
loss. The cost of an asset comprises its purchase price and any directly attributable costs of<br />
bringing the asset to its working condition. In situation where it can be clearly demonstrated that<br />
expenditures have resulted in an increase in the future economic benefits expected to the obtained<br />
from the use of the asset beyond its originally assessed standard of performance, the expenditures<br />
are capitalized as an additional cost of the asset.<br />
Components of new fixed assets with different economic useful lifetime will have different<br />
depreciation time.<br />
Depreciation is calculated using the straight-line method to write off the cost, after taking into<br />
account the estimated residual value, of each asset over its expected useful life. The expected useful<br />
life for the accommodation rigs is 20 – 38 years.<br />
The useful lives of assets and the depreciation method are reviewed periodically to ensure that the<br />
method and period of depreciation are consistent with the expected pattern of economic benefits<br />
from items of property, plant and equipment.<br />
When assets are sold or retired, their costs and accumulated depreciation and accumulated<br />
impairment loss are eliminated from the accounts and any gain or loss resulting from their<br />
disposals is included in the income statement.<br />
Newbuilding contracts<br />
Newbuilding contracts include payments made under the contracts, capitalized interest and other<br />
costs directly associated with the new bilding program.<br />
Impairment of assets<br />
All assets are reviewed for impairment whenever events of changes in circumstances indicate that<br />
the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset<br />
exceeds its recoverable amount, an impairment loss is recognized in the income statement. The<br />
recoverable amount is the higher of an asset’s net selling price and value in use. The net selling<br />
price is the amount obtainable from the sale of an asset in an arm’s length transaction less the costs<br />
of disposal while value in use is the present value of estimated future cash flows expected to arise<br />
from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable<br />
amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit.<br />
Reversal of impairment losses recognized in prior years is recorded when there is an indication that<br />
the impairment losses recognized for the asset no longer exist or have decreased. The reversal is<br />
recorded in the income statement.<br />
Cash flow statement, cash and cash equivalents<br />
The cash flow statement is prepared using the indirect method. Cash represents cash on hand and<br />
deposits with bank that are repayable on demand. Cash equivalents represent short-term, highly<br />
liquid investments which are readily convertible into known amounts of cash with original<br />
maturities of three months or less and that are subject to an insignificant risk of change in value.<br />
Consolidation<br />
The consolidated statements consist of Awilco Offshore <strong>AS</strong>A and companies where the parent<br />
company controls directly or indirectly more than 50% of the votes. Companies are consolidated<br />
from the time when control is obtained. Companies in the group apply consistent accounting<br />
principles. Inter-company transactions and balances between group companies are eliminated.<br />
42
9.4 Accounts<br />
Profit and loss statement Actual Pro forma<br />
All figures in NOK 1000 01.01 - 30.06 01.01 - 31.12 01.01 - 30.06<br />
2005 2004 2004<br />
Net operating income 86 445 270 731 77 542<br />
Operating expenses (66 184) (136 349) (51 071)<br />
Adminstrative expenses (9 484) (21 093) (10 147)<br />
Depreciation (26 216) (40 805) (14 589)<br />
Total operating expenses (101 885) (198 247) (75 808)<br />
Operating result (15 439) 72 484 1 734<br />
Financial items<br />
Interest income 6 041 1 044 317<br />
Interest costs (12 369) (12 348) (3 744)<br />
Foreign exchange gain/(loss) (32 938) 28 950 (14 027)<br />
Other financial items (2 561) (962) (618)<br />
Net financial items (41 826) 16 684 (18 072)<br />
Profit before tax (57 266) 89 168 (16 338)<br />
Tax expense 17 499 (26 483) 4 563<br />
Profit/(loss) in period (39 767) 62 685 (11 774)<br />
Earnings per share -0,41 1,03 -0,19<br />
43
Balance sheet Actual Pro forma<br />
All figures in NOK 1000<br />
Assets<br />
30.06.05 31.12.04 30.06.04<br />
Accomodation units 581 179 566 244 597 470<br />
Jack-up rigs, under construction 656 096 150 854 97 162<br />
Other fixed assets 623<br />
Fixed assets 1 237 898 717 098 694 632<br />
Investments in associated companies 19 500<br />
Total fixed assets 1 257 398 717 098 694 632<br />
Receivables and accruals 46 148 45 057 40 317<br />
Group receivables 0 9 039 19 510<br />
Cash, bank 610 240 146 602 130 336<br />
Current assets 656 388 200 698 190 164<br />
Total assets 1 913 786 917 796 884 796<br />
Equity and debt<br />
Equity 1 269 834 269 458 189 871<br />
Deferred tax 35 226 48 617 19 495<br />
Mortgage debt 426 364 223 131 270 703<br />
Other debt 77 251 0 0<br />
Total long term debt 503 616 223 131 270 703<br />
Creditors 0 3 425 26<br />
Intercompany debt 0 337 828 350 878<br />
Other short term debt and accruals 105 111 35 337 53 823<br />
Total short term debt 105 111 376 590 404 727<br />
Total debt and equity 1 913 786 917 796 884 796<br />
44
Cash flow statement Actual Pro forma<br />
All figures in NOK 1000 01.01 - 30.06 01.01 - 31.12 01.01 - 30.06<br />
2005 2004 2004<br />
Cash flow generated by/used in operations<br />
Profit before tax (57 266) 89 168 (16 338)<br />
Tax payable 0 (10 424) (361)<br />
Depreciation 26 216 40 805 14 589<br />
Foreign exchange effects unrealized 28 814 (46 683) 15 350<br />
Cash flow from operations -2 236 72 866 13 240<br />
Change in debtor, creditors ,<br />
accruals and provisions 18 034 28 887 16 609<br />
Net cash flow from operations 15 799 101 754 29 849<br />
Cash flow generated by/used in investments<br />
Invested in fixed assets (547 016) (262 261) (213 578)<br />
Proceeds from sale of fixed assets 0 0 0<br />
Net sale/(purchase) of shares 0 0 0<br />
Other investments (19 500) 0 0<br />
Net cash flow from investments -566 516 -262 261 -213 578<br />
Cash flow generated by/used in financial activities<br />
Dividend and/or group contribution etc 0 5 049 0<br />
New debt 573 618 105 573 102 959<br />
Repayment debt (587 688) (29 772) (15 072)<br />
Equity contributions 1 028 426 164 728 164 647<br />
Net cash flow from financial activities 1 014 355 245 577 252 534<br />
Net cash flow for the year 463 638 85 070 68 804<br />
Cash and cash equivalents per opening balance 146 602 61 532 61 532<br />
Cash and cash equivalents per end of period 610 240 146 602 130 336<br />
Equity<br />
The Company's share capital is NOK 1.141.333.500 made up of 114.133.350 shares with a par value of<br />
NOK 10 per share. All shares of the Company are of the same class and are equal in all respects. The<br />
Company's articles of association do not provide for shares of other classes.<br />
Actual<br />
Group equity 30.06.05 31.03.05<br />
Proforma equity per opening balance 269 458 269 458<br />
Reversed pro forma effects * 11 716 11 716<br />
Capital transfers, group contribution etc 0 0<br />
Equity contributions 1 028 426 965 000<br />
Dividend 0 0<br />
Profit/(loss) in period -39 767 -23 097<br />
Equity per ending balance 1 269 834 1 223 078<br />
*) The proforma adjustments for 2004 are included in the proforma equity opening balance as<br />
specified above. As these adjustments only relate to the proforma financial statements for 2004, the<br />
net equity effect of the proforma adjustments are reversed in the opening balance of equity in 2005.<br />
45
9.5 Auditor’s statement<br />
The financial statements for the second quarter set out above have not been subject to review or<br />
audit.<br />
In connection with the public listing of the company, Ernst & Young conducted a review of the<br />
first quarter figures of 2005 and a review of the pro forma financial statements and adjustments for<br />
2004. Both reviews were made in accordance with Norwegian Auditing Standard on Review<br />
Engagements RS 910. Further information on this can be obtained from the prospectus issued in<br />
connection with Awilco Offshore’s initial public <strong>offer</strong>ing.<br />
9.6 Other financial information<br />
Currency and use of financial instruments<br />
The majority of the Offeror’s revenues and expenses, as well as assets and liabilities, are<br />
denominated in USD. The Offeror currently has no intention to engage in the use of hedging or<br />
speculation activity through the use of financial instruments.<br />
Per share data<br />
Figures in NOK 2Q2005 2Q2004 2004<br />
Actual Proforma Proforma<br />
Earnings per share -0.41 -0.19 1.03<br />
Dividend per share - - -<br />
Analytical information<br />
Awilco Offshore’s is exposed to two distinct markets; the market for accommodation units and the<br />
market for jack-up drilling rigs, holding three rigs under construction. See more information in<br />
chapter 7. The Company’s activity in 2004 was operation of the two accommodation units, of<br />
which one unit was in operation for the full year while the other unit commenced operation in June<br />
2004 shortly after completion of its reconstruction. The net operating income and operating<br />
expenses for 2004, as set out in the pro forma accounts for 2004 in section 9.4, reflect this activity.<br />
Set out below is an overview of contract rates received by the Company’s accommodation units in<br />
2004/2005.<br />
Unit / Contract Starting Ending Rate, USD/day<br />
Port Rigmar<br />
BP Valhall August 2003 February 2004 55,500<br />
ConocoPhillips February 2004 September 2005 55,500<br />
ConocoPhillips October 2005 September 2006* 68,000<br />
Port Reval<br />
BP Clair June 2004 January 2005 110,000<br />
Aker Kværner June 2005 August 2005 130,000<br />
* Plus options<br />
9.7 Events since the second quarter report<br />
On August 30 2005, the Offeror and Sinvest <strong>AS</strong>A announced to co-operate on the acquisition of<br />
Petrojack. The parties have agreed that all future acquisitions of Petrojack shares shall be made on<br />
a 50/50 basis. The parties agreed to continue Awilco Offshore’s Offer and that an improved <strong>offer</strong><br />
will not be made.<br />
On September 5 2005, the Offeror entered into a five year bare-boat contract with Arabian <strong>Drilling</strong><br />
Company for the employment of the drilling rig under construction, WilPower. The contract value<br />
is approximately USD 131 mill (including mobilization and demobilization fees), and Arabian<br />
<strong>Drilling</strong> Company has the option to extend the contract for a further year for a contract value of<br />
approximately USD 33 mill. Arabian <strong>Drilling</strong> Company will be responsible for all operating and<br />
local expenses. The rig will be employed in Saudi Arabia, and will commence work under the<br />
contract in July 2006.<br />
46
9.8 Statutory auditors<br />
Awilco Offshore’s statutory auditor is Sondre Kvaalen at Ernst & Young, Oslo, Norway. Ernst &<br />
Young has been Awilco Offshore’s auditor since the company’s inception.<br />
47
10. Share capital and shareholder matters<br />
10.1 Share capital<br />
Share capital prior to the Offer<br />
The Offeror’s share capital prior to the Offer is NOK 1,185,303,330, made up of 118,530,333<br />
shares with a par value of NOK 10 per share, all fully paid. All shares of the Offeror are of the<br />
same class and are equal in all respects. The Offeror’s articles of association do not provide for<br />
shares of other classes. Each share carries the right to one vote in shareholders’ meetings. The<br />
Offeror’s articles of association do not provide for limitations on the transferability or ownership of<br />
shares.<br />
The development of the Offeror’s share capital is set forth in the table below.<br />
Time Event Capital increase Share price Share capital Shares issued<br />
January 2005 Incorporation 1,000,000 100.0 1,000,000 10,000<br />
February 2005 Contribution of assets 610,333,500 611,333,500 6,113,335<br />
February 2005 Split 10:1 - - 611,333,500 61,133,350<br />
February 2005 New issue 500,000,000 20.0 1,111,333,500 111,133,350<br />
May 2005 New issue 30,000,000 22.0 1,141,333,500 114,133,350<br />
August 2005 New issue 43,969,830 33.9 1,185,303,330 118,530,333<br />
There are no outstanding warrants, stock options, convertible bonds or other securities convertible<br />
into shares of the Offeror.<br />
10.2 Share capital after the Offer<br />
The Consideration Shares will be issued through an increase of the share capital of the Offeror. The<br />
new shares will be issued to shareholders of Petrojack who accept the Offer based on the <strong>offer</strong>ed<br />
exchange ratio of 2:1 and the subscription price will be determined based on the closing share price<br />
of the Awilco Offshore share on the day that the resolution is passed. The reasons why Awilco<br />
Offshore has <strong>offer</strong>ed this exchange ratio are set out in section 4 of this Offer Document. The<br />
number of new shares to be issued by the Offeror will depend upon the level of acceptance of the<br />
Offer. Since the number and identity of the Petrojack shareholders who accept the Offer will only<br />
be known after the Offer Period, the formal resolution to increase the share capital can only be<br />
passed after the expiry of the Offer Period.<br />
Assuming completion of the Offer, the share capital of the Offeror will be increased by a minimum<br />
of NOK 10 and a maximum of NOK 171,564,850, through the issuance of a minimum of 1 and a<br />
maximum of 17,156,485 new shares, to a minimum of NOK 1,185,303,340 and a maximum of<br />
NOK 1,356,868,180, made up of a minimum of 118.530.334 and a maximum of 135,686,818<br />
shares, each with a nominal value of NOK 10.<br />
The board of directors of the Offeror anticipates passing the following resolution after the expiry of<br />
the Offer Period pursuant to the authorization granted at the extraordinary general meeting on 4<br />
April, 2005:<br />
1. The company’s share capital is increased by [●]* through the issuance of [●]*new<br />
shares, each with a par value of NOK 10 at a subscription price of NOK [●]* per share.<br />
The share premium will be transferred to the company’s share premium fund.<br />
2. The new shares are issued to shareholders of Petrojack <strong>AS</strong>A who have accepted<br />
Awilco Offshore <strong>AS</strong>A’s voluntary <strong>offer</strong> to acquire all outstanding shares in the<br />
company, as further listed in appendix 1 to this resolution. Subscription for the shares<br />
shall take place in the minutes of the board meeting.<br />
3. In consideration of the new shares, the subscribers shall contribute 2 shares in<br />
Petrojack <strong>AS</strong>A for each new share of Awilco Offshore <strong>AS</strong>A.<br />
4. The share contribution shall be made no later than [●]* by the transfer of the tendered<br />
48
shares in Petrojack <strong>AS</strong>A to a VPS-account in the name of Awilco Offshore <strong>AS</strong>A.<br />
5. The new shares shall carry rights to dividends from and including the financial year<br />
2005, and shall otherwise rank equal with the existing shares as from the registration of<br />
the share capital increase with the Register of Business Enterprises.<br />
6. Section 4 of the articles of association shall be amended so as to reflect the number of<br />
shares and the share capital after the share capital increase.<br />
*These items of information will not be known until after the end of the Offer Period. Appendix 1 will include a list of<br />
the Petrojack shareholders who have accepted the Offer and the number of Consideration Shares to be issued to each of<br />
them. The subscription price will be determined based on the closing share price of the Awilco Offshore share on the day<br />
that the resolution is passed. Since the new shares will be issued in consideration of the tendered Petrojack shares and in<br />
accordance with the <strong>offer</strong>ed exchange ratio of 2:1, the subscription price will not have any impact on the number of<br />
shares received by each tendering Petrojack shareholder.<br />
If Awilco Offshore, as a result of the Offer or otherwise, becomes acquires any further shares in<br />
Petrojack, and Awilco Offshore and Sinvest at such time jointly own more than 40% of the shares<br />
in Petrojack, Awilco Offshore will be obligated under the Securities Trading Act to make a<br />
mandatory <strong>offer</strong> for all shares in Petrojack not already owned by it or Sinvest, see section 3.13 of<br />
this Offer Document<br />
Registration<br />
The Offeror’s shares are registered in VPS with Nordea Bank Norge <strong>AS</strong>A, Securities Service<br />
Department, as registrar. The shares are registered with ISIN NO 001 0255722.<br />
Authorizations to issue new shares<br />
The extraordinary general meeting on 4 April 2005 also granted the board of directors an<br />
authorization to increase the share capital by up to NOK 525,666,750. The authorization is valid<br />
until the annual general meeting in 2006, but in no event later than June 30, 2006. The<br />
authorization includes share capital increases against contributions other than in cash, the right to<br />
incur special obligations for the company, cfr. the Norwegian Public Limited Liability Companies<br />
Act § 10-14, and resolutions on mergers in accordance with § 13-5 the Norwegian Public Limited<br />
Liability Companies Act. The pre-emptive rights of the shareholders under § 10-4 of the<br />
Norwegian Public Limited Liability Companies Act may be set aside. The general meeting has not<br />
issued any instructions to the board of directors as to the use of the authorization.<br />
As of the date of this Offer Document Awilco Offshore has used NOK 73,969,830 of the above<br />
mentioned authorization.<br />
Other authorizations<br />
The Offeror does not hold any authorizations to issue convertible loans or to acquire own shares.<br />
Shareholders and share trading<br />
As per 12 September 2005, the number of shareholders of the Offeror is 631, of which 87% are<br />
Norwegian and 13% are non-Norwegian.<br />
The following table sets forth the 20 largest shareholders of the Offeror, as registered in VPS as per<br />
9 September 2005.<br />
Ownership in<br />
Shareholder No. Of shares %<br />
AWILCO <strong>AS</strong> ATTN: MARIE K<strong>AS</strong>SEL 53 850 630 45,4 %<br />
BANK OF NEW YORK, BR S/A EQUITY TRI-PARTY 3 459 311 2,9 %<br />
AWECO HOLDING <strong>AS</strong> 3 300 000 2,8 %<br />
GOLDMAN SACHS & CO EQUITY NONTREATY CUS 3 262 700 2,8 %<br />
CREDIT SUISSE FIRST (EUROPE) PRIME BROKE 3 024 000 2,6 %<br />
ORKLA <strong>AS</strong>A 2 572 300 2,2 %<br />
ODIN OFFSHORE ODIN FORVALTNING <strong>AS</strong> 2 303 000 1,9 %<br />
49
CITIBANK, N.A. GENERAL IRISH RES.-T 2 288 200 1,9 %<br />
BANK OF NEW YORK, BR BNY GCM CLIENT ACCOU 2 059 527 1,7 %<br />
ODIN NORDEN 1 981 087 1,7 %<br />
DEUTSCHE BANK (SUISS 1 883 500 1,6 %<br />
MERRILL LYNCH INTERN A/C MLI GEF A/C NON 1 616 000 1,4 %<br />
STOREBRAND LIVSFORSI P980, AKSJEFONDET 1 589 598 1,3 %<br />
ENSKILDA SECURITIES EGENHANDELSKONTO 1 521 900 1,3 %<br />
DEUTSCHE BANK AG LON PRIME BROKERAGE FULL 1 480 946 1,3 %<br />
BARINGS (GUERNSEY) L NON TREATY CLIENTS A 1 353 528 1,1 %<br />
THE NORTHWESTERN MUT INSURANCE COMPANY FO 1 165 420 1,0 %<br />
WATRIUM <strong>AS</strong> 1 100 000 0,9 %<br />
ODIN NORGE 1 057 050 0,9 %<br />
TEIGEN FRODE NAKA RACHA TLD, 87/2 1 000 000 0,8 %<br />
Total top 20 91 868 697 77,5 %<br />
The shareholders referred to as being related to Wilhelmsen family members are Aweco Holding<br />
<strong>AS</strong>, Watrium <strong>AS</strong> and Miami <strong>AS</strong> which together hold approximately 4.5% of the shares in Awilco<br />
Offshore. Aweco Holding <strong>AS</strong> owns 60.1% of A Wilhelmsen <strong>AS</strong> which again owns 100% of<br />
Awilco <strong>AS</strong> and therefore Aweco Holding <strong>AS</strong> and Awilco <strong>AS</strong> will be consolidated with Awilco<br />
under the Securities Trading Act § 4-5 with respect to their ownership in Awilco Offshore <strong>AS</strong>A. In<br />
total the Wilhelmsen family therefore controls 49.9% of the shares and votes in Awilco Offshore<br />
<strong>AS</strong>A.<br />
Mr Arne Alexander Wilhelmsen has 33.2% ownership interest in Aweco Holding <strong>AS</strong>. For further<br />
detail of the Wilhelmsen family ownership in Awilco Offshore <strong>AS</strong>A see section 7.3.<br />
10.3 Share price development<br />
The below chart shows the share price performance of Awilco Offshore since its listing on the Oslo<br />
Stock Exchange on May 11 2005.<br />
Share price (NOK)<br />
38,00<br />
36,00<br />
34,00<br />
32,00<br />
30,00<br />
28,00<br />
26,00<br />
24,00<br />
22,00<br />
20,00<br />
11-mai 25-mai 08-jun 22-jun 06-jul 20-jul 03-aug 17-aug 31-aug<br />
8 000<br />
7 000<br />
6 000<br />
5 000<br />
4 000<br />
3 000<br />
2 000<br />
1 000<br />
0<br />
Volume ('000s)<br />
50
10.4 Shareholder policy and corporate governance<br />
Corporate governance<br />
Awilco Offshore is dedicated to observing high standards of corporate governance, based on the<br />
principles set forth in the Norwegian Code of Practice for Corporate Governance, as published on 7<br />
December 2004 (the “Code of Practice”). The Offeror’s Board and management are carrying out<br />
an assessment with regard to the implementation of the recommendations of the Code of Practice.<br />
The Offeror will annually produce a report as to corporate governance, which will be included in its<br />
annual report. It is the Offeror’s ambition to adopt the recommendations set forth in the Code of<br />
Practice. To the extent that the Offeror does not fully adhere to all the recommendations in the<br />
Code of Practice, the reasons for choosing an alternative approach will be explained in this report.<br />
Shareholder policy<br />
The Offeror intends to provide the market and its shareholders with reliable, timely and consistent<br />
information to ensure that investors at all times have a sound basis for their investment decisions.<br />
In addition to regular quarterly reporting, the Offeror will provide notifications in respect of<br />
significant events as they occur. The Offeror intends to meet regularly with investors and analysts.<br />
Any financial reports, notifications and presentations will be made available through the<br />
notification system of the Oslo Stock Exchange.<br />
Dividend policy<br />
The Offeror has large expected capital expenditures and currently has no plans to pay dividends<br />
until these expenditures have been made. In addition, the Offeror’s financing arrangements place<br />
limitations on the Offeror’s ability to pay dividends.<br />
It is however envisaged that the dividend policy will be reconsidered when the rigs currently under<br />
construction have been delivered and earnings from these rigs are being generated. Any such<br />
dividends will be considered in light of the Offeror’s financial position, its debt covenants, and<br />
capital requirements for additional investment.<br />
51
11. Legal matters<br />
This section 11 makes use of a number of definitions not used elsewhere in this Offer Document.<br />
Such definitions are made in the text below.<br />
11.1 The transfer of assets<br />
Awilco Offshore was incorporated on 21 January 2005 as a wholly owned subsidiary of Awilco.<br />
Wilpower <strong>AS</strong> and Wilcraft <strong>AS</strong> were incorporated on the same date as wholly owned subsidiaries of<br />
Awilco Offshore.<br />
On 13 February 2005, the Offeror entered into a share purchase agreement with Awilco pursuant to<br />
which the Offeror acquired all of the shares in Port Rigmar <strong>AS</strong>, Awilco Sea Beds <strong>AS</strong>, Awilco Sea<br />
Beds II <strong>AS</strong> and Wilhelmsen Oil & Gas <strong>AS</strong> for an aggregate purchase price of NOK 571,645,229<br />
plus interest at a rate of 2% p.a. from 1 January 2005 to closing. The acquisition was made with<br />
economic effect from 1 January 2005.<br />
On 13 February 2005, the Offeror’s wholly owned subsidiary Wilpower <strong>AS</strong> entered into a share<br />
purchase agreement with Awilco pursuant to which it acquired all of the shares in Awilco <strong>Drilling</strong><br />
Ltd for a purchase price of NOK 164,640,954 plus interest at a rate of 2% p.a. from 1 January 2005<br />
to closing. The acquisition was made with economic effect from 1 January 2005.<br />
On 13 February, 2005, the Offeror’s wholly owned subsidiary Wilcraft <strong>AS</strong> entered into a share<br />
purchase agreement with Awilco pursuant to which it acquired all of the shares in Wilcraft Ltd for<br />
a purchase price of NOK 80,640 plus interest at a rate of 2% p.a. from 1 January 2005 to closing.<br />
The acquisition was made with economic effect from 1 January 2005.<br />
11.2 Construction contracts<br />
PPL Contract 1<br />
The PPL Contract 1 was entered into on 20 March 2004 between Mosvold <strong>Drilling</strong> Ltd (now called<br />
Awilco <strong>Drilling</strong> Ltd) and PPL under which PPL agreed to design, construct, launch, equip, test and<br />
deliver to Awilco <strong>Drilling</strong> Ltd a Pacific Class 375 ft jack-up drilling rig (the “PPL Rig”).<br />
All rights and obligations of Awilco <strong>Drilling</strong> Ltd under the PPL Contract 1 have since been novated<br />
to Mosbarron Ltd (now called Wilpower Ltd).<br />
The PPL Rig, bearing builder’s hull number P.2007, shall be delivered with a “+A1 Self-Elevating<br />
<strong>Drilling</strong> Unit” classification with the American Bureau of Shipping.<br />
The price for the PPL Rig (the “Contract Price”) is USD 112,100,000, payable by eight<br />
instalments: The three first instalments, comprising 30% of the Contract Price, have already been<br />
paid. The last five instalments will be paid as follows:<br />
1. 20% is payable on completion of the main deck;<br />
2. 15% is payable on installation of the three first leg sections;<br />
3. 10% is payable on launching;<br />
4. 10% is payable on completion of leg erection; and<br />
5. 15% is payable on delivery.<br />
In addition to the Contract Price, Wilpower Ltd shall pay to PPL a provisional contract sum of<br />
USD 5,500,000 (the “PC Sum”), according to the same payment schedule as the Contract Price.<br />
The PC Sum shall be used by PPL to make payments on behalf of Wilpower Ltd:<br />
52
1. of up to USD 2,500,000 in respect of various project management costs; and<br />
2. of up to USD 3,000,000 in respect of equipment for the PPL Rig, variation orders and various<br />
finance costs.<br />
The difference between the project price set out in section 7.1 and the Contract Price and the PC<br />
Sum comprises inter alia variation orders, spare parts, pipe handling, cost of site teams and other<br />
construction supervision costs and financing costs.<br />
Any part of the PC Sum which has not been used by delivery shall be repaid to Wilpower Ltd or its<br />
financing banks to reduce Wilpower Ltd’s indebtedness.<br />
Property and risk in the PPL Rig shall remain with PPL until delivery, when it shall pass to<br />
Wilpower Ltd.<br />
Following delivery, PPL provides a 12 month warranty against defects in workmanship and<br />
materials, and failure of the PPL Rig to meet the performance criteria set out in the Specifications.<br />
Subject to permissible delays and force majeure, delivery of the PPL Rig shall take place in May<br />
2006, being 24 months after the payment of the first instalment of the Contract Price.<br />
If delivery is delayed by more than 14 days beyond the contractual delivery date, and the delay is<br />
not due either to force majeure or other permissible delays, then PPL will pay liquidated damages<br />
of USD 50,000 for each day of delay after the 14 day grace period, subject to a maximum of 5% of<br />
the Contract Price, when Wilpower Ltd shall be entitled to cancel the PPL Contract 1.<br />
PPL will also pay liquidated damages if the variable load criteria set out in the PPL Contract 1 are<br />
not achieved, subject to a maximum of USD 5,000,000. If the deficiency in any variable load<br />
exceeds 5%, Wilpower Ltd shall be entitled to cancel the PPL Contract 1.<br />
If the total delay, whether for permissible or non-permissible delays, reaches 240 days, Wilpower<br />
Ltd shall be entitled to cancel the PPL Contract 1.<br />
On cancellation on any of the above grounds, Wilpower Ltd’s only remedy is to recover all<br />
amounts then paid by it under the contract, together with interest at three month Libor plus 2%.<br />
In addition to the circumstances mentioned above, Wilpower Ltd shall be entitled to cancel the PPL<br />
Contract 1 for material continuing breach or delay on the part of PPL, or on the bankruptcy or<br />
receivership of PPL or SCM.<br />
On cancellation of the PPL Contract 1 by Wilpower Ltd in such circumstances, it shall be entitled<br />
to recover damages for its losses and/or to take possession and title to the rig under construction,<br />
and all material and equipment in the possession or owned by PPL and intended to be incorporated<br />
into the PPL Rig, and either remove them from PPL’s shipyard or complete the work at such<br />
shipyard. If Wilpower Ltd exercises its right to take possession and title to the rig under<br />
construction, PPL’s liability for loss or damage sustained by Wilpower Ltd shall be limited to 10%<br />
of the Contract Price.<br />
PPL may cancel the PPL Contract 1 for material breach or delay on the part of Wilpower Ltd, or on<br />
its bankruptcy or receivership, and recover damages for its losses.<br />
The PPL Contract 1 is governed by English law with non-exclusive submission to the Commercial<br />
Court in London.<br />
PPL’s obligations under the PPL Contract 1 are guaranteed by SCM, by a performance guarantee<br />
dated 7 May 2004.<br />
53
PPL Option Agreement<br />
The PPL Option Agreement was entered into on 30 March 2004 between PPL and Awilco <strong>Drilling</strong><br />
Ltd under which PPL granted to Awilco <strong>Drilling</strong> Ltd options to require PPL to design, construct,<br />
equip, complete and deliver up to three further jack-up drilling units similar to the PPL Rig.<br />
The first option is exercisable during the period 1 October 2004 to 1 July 2005 and has been<br />
exercised, see “PPL Contract 2” below. This contract rig is referred to elsewhere in this Offer<br />
Document as WilSuperior.<br />
The second option is exercisable during the period 1 April 2006 to 1 October 2006.<br />
The third option is exercisable during the period 1 March 2007 to 1 September 2007.<br />
Each option is independent and may be exercised whether or not any other option is exercised<br />
provided, however, that no option may be exercised if Awilco <strong>Drilling</strong> Ltd is then in breach of the<br />
PPL Contract 1.<br />
An option may be exercised by notice from Awilco <strong>Drilling</strong> Ltd and, within 30 days from the<br />
exercise of an option, the parties will enter into a construction contract in substantially the same<br />
form as the PPL Contract 1, subject to the following amendments:<br />
1. construction will commence three months after the date of the notice exercising the option, and<br />
the contractual delivery date shall be 24 months after commencement of construction;<br />
2. the contract price for the first option unit shall be USD 120,934,000, for the second option unit<br />
122,046,000 and for the third option unit 123,157,000, but each price is subject to adjustment if<br />
the cost of the relevant drilling package (which is supplied by third parties) exceeds USD<br />
25,000,000 (The difference between the project prices set out in section 7.1 and these contract<br />
prices comprises inter alia variation orders, spare parts, pipe handling, cost of site teams and<br />
other construction supervision costs and financing costs);<br />
3. subject to Awilco <strong>Drilling</strong> Ltd’s consent (not to be unreasonably withheld) the relevant unit may<br />
be built at another shipyard in Singapore wholly owned by SCM.<br />
Awilco <strong>Drilling</strong> Ltd may assign its rights under the PPL Option Agreement to a special purpose<br />
company with satisfactory equity and which is wholly owned, controlled or managed by Awilco<br />
<strong>Drilling</strong> Ltd.<br />
In the event that SCM’s guarantee of the financing of the PPL Rig is released, PPL will procure<br />
that SCM provides a similar guarantee for the financing of one of the option units, provided that the<br />
financial terms of the new guarantee, and the underlying obligations of the relevant borrower, are<br />
not more onerous than those in respect of the financing of the PPL Rig.<br />
The PPL Option Agreement is governed by English law with non-exclusive submission to the<br />
Commercial Court in London.<br />
PPL Contract 2<br />
On 22 February 2005, Awilco <strong>Drilling</strong> assigned its right under the PPL Option Agreement to the<br />
First Option to its wholly-owned subsidiary Wilsuperior Ltd. On the same day, Wilsuperior Ltd.<br />
exercised the First Option. A construction contract (the “PPL Contract 2”) was entered into on 5<br />
March 2005 between Wilsuperior Ltd and PPL for the design, construction, launching, equipment,<br />
testing and delivery of the PPL Rig 2 (to be named “WilSuperior”). The PPL Contract 2 is in all<br />
material respects similar to the PPL Contract 1, with the exceptions that:<br />
1. The Contract Price under the PPL Contract 2 is USD 120,934,000 inclusive of drilling<br />
54
package (with the difference between the Contract Price and the project price set out in<br />
section 7.1 comprising inter alia variation orders, spare parts, pipe handling, cost of site<br />
teams and other construction supervision costs ad financing costs); and<br />
2. The scheduled delivery of the PPL Rig 2 shall be in July 2007.<br />
PPL Option 1A<br />
Following the exercising of the first option under the PPL Option Agreement on 22 February 2005,<br />
PPL has granted a new option (Option 1A) to Awilco <strong>Drilling</strong> Ltd to require PPL to design,<br />
construct, equip, complete and deliver an additional jack-up drilling unit like the first option rig.<br />
The terms and conditions for Option 1A shall be the same as the definition in the PPL Option<br />
Agreement described above save for the following:<br />
1. Notice period is from 1 October 2005 to 1 March 2006;<br />
2. Construction Commencement Date is three months after the notice has been served;<br />
3. The option Contract Price is USD 135.5m (with the difference between the Contract Price<br />
and the project price set out in section 7.1 comprising inter alia variation orders, spare<br />
parts, pipe handling, cost of site teams and other construction supervision costs ad<br />
financing costs).<br />
Keppel Contract<br />
The Keppel Contract was entered into on 31 January 2005 between Keppel FELS and Wilcraft Ltd<br />
under which Keppel FELS agreed to design, construct, equip, complete, test and deliver a “Keppel<br />
FELS MOD V Enhanced B-Class” mobile offshore self-elevating drilling unit (the “Keppel FELS<br />
Rig”).<br />
The Keppel FELS Rig shall be delivered with a “+A1 Self-Elevating <strong>Drilling</strong> Unit” classification<br />
with the American Bureau of Shipping.<br />
The price for the Keppel FELS Rig (the “Contract Price”) is USD 117,200,000. The difference<br />
between the project price set out in section 7.1 and the Contract Price comprises additional work<br />
with Keppel FELS, estimated by Keppel FELS to approximately USD 8 million, as well as inter<br />
alia , cost of site teams and other construction supervision costs and financing costs. Subject only to<br />
adjustment for agreed variation orders, the Contract Price is a fixed lump sum price, and includes<br />
an allowance of USD 700,000 for spares beyond those required by class and other regulatory<br />
bodies.<br />
The Contract Price is payable in five instalments. Two instalments, comprising 40% of the Contract<br />
price, have already been paid. The last three instalments will be paid as follows:<br />
1. 20% is payable within three business days of notice that keel-laying of the first double-bottom<br />
block has taken place;<br />
2. 20% is payable within three business days of notice of launching/float-out; and<br />
3. 20% is payable on delivery of the rig to Wilcraft Ltd.<br />
The contractual delivery date is 31 December 2006. If delivery is delayed by more than 30 days,<br />
and the delay is not due either to force majeure or other permissible delays, then Keppel FELS will<br />
pay liquidated damages of USD 40,000 for each day of delay after the 30 day grace period, subject<br />
to a maximum of USD 6,000,000.<br />
If Wilcraft Ltd has secured a drilling contract and can financially benefit from early delivery,<br />
Wilcraft Ltd will pay a bonus of USD 15,000 for each day by which delivery precedes the<br />
contractual delivery date, subject to a maximum of USD 900,000.<br />
Keppel FELS will also pay liquidated damages if the variable load criteria set out in the Keppel<br />
55
Contract are not achieved, subject to a maximum of USD 2,400,000.<br />
Risk of loss or damage to the Keppel FELS Rig shall remain with Keppel FELS until delivery, but<br />
title to the rig, and all equipment, raw materials, goods and appurtenances intended for<br />
incorporation or installation in the rig, shall pass progressively to Wilcraft Ltd as it is constructed.<br />
Following delivery, Keppel FELS provides a 12 month warranty against defects in workmanship<br />
and materials.<br />
Wilcraft Ltd may terminate the Keppel FELS Contract for material continuing breach by Keppel<br />
FELS, on the insolvency of Keppel FELS, or if delivery is delayed by reason of force majeure or<br />
other non-permissible delays aggregating 180 days or more, in which event Wilcraft Ltd may, at its<br />
option, either:<br />
1. recover all amounts paid to Keppel FELS under the contract, together with interest at three<br />
month Libor plus 1.5%, and any purchaser’s supplies (and will then retransfer title to the rig<br />
under construction and all other equipment, raw materials, goods and appurtenances which had<br />
been transferred to it by Keppel FELS); or<br />
2. take possession of the rig under construction, together with all other equipment, raw materials,<br />
goods and appurtenances which it then owns, and any purchaser’s supplies.<br />
Keppel FELS may terminate the Keppel FELS Contract if delivery is delayed by reason of force<br />
majeure aggregating 180 days or more, in which event Wilcraft Ltd may exercise its options as<br />
described above.<br />
Keppel FELS may also terminate the Keppel FELS Contract:<br />
1. if Wilcraft Ltd fails to make any payment due under the contract within seven days of demand;<br />
2. if Wilcraft Ltd fails to take delivery of the rig on completion; or<br />
3. on the insolvency of Wilcraft Ltd;<br />
in which event Keppel FELS may recover from Wilcraft Ltd all costs incurred by it in the<br />
construction of the rig, and in terminating the construction work, to the extent that such costs<br />
exceed the amounts already paid by Wilcraft Ltd under the contract.<br />
Except for its liability:<br />
1. to refund instalments and interest;<br />
2. to pay liquidated damages;<br />
3. to deliver the Keppel FELS Rig to Wilcraft Ltd free from encumbrance; and<br />
4. certain indemnities;<br />
Keppel FELS’ liability under the Keppel FELS Contract is limited to 10% of the Contract Price.<br />
The Keppel FELS Contract is governed by English law with non-exclusive submission to the courts<br />
of Singapore.<br />
The obligations of Keppel FELS to refund amounts paid by Wilcraft Ltd under the Keppel FELS<br />
Contract plus interest on those amounts, in the event of termination have been guaranteed by<br />
Keppel Marine and Offshore Limited, Keppel FELS’ immediate parent company, by a guarantee<br />
dated 2 February 2005.<br />
Awilco, the intermediate parent company of Wilcraft Ltd, has issued a letter of comfort to Keppel<br />
FELS dated 27 January 2005 regarding its policy towards its subsidiaries.<br />
56
Keppel Option Agreement<br />
The Keppel Option Agreement was also entered into on 31 January 2005 between Keppel FELS<br />
and Wilcraft Ltd, under which Keppel FELS granted to Wilcraft Ltd an option to require Keppel<br />
FELS to construct and deliver a second rig, identical to the Keppel FELS Rig, on the same terms<br />
and conditions as those contained in the Keppel Contract, except that: The first option was<br />
exercisable during the period 1 August 2005 to 31 January 2006 and has been exercised, see<br />
“Keppel Contract 2” below. This rig is referred to elsewhere in this Offer document as “WilTBN”.<br />
Keppel Contract 2<br />
On August 1 2005 Wilcraft Ltd. exercised Keppel option A. A construction contract (the “Keppel<br />
Contract 2”) was entered into on August 18 2005 between Wilcraft Ltd and PPL for the design,<br />
construction, completion and delivery of the Keppel Rig 2 (To Be Named ). The Keppel Contract<br />
2 is in all material respects similar to the Keppel Contract 1 (“WilCraft”), with the exceptions that:<br />
1. The Contract Price under the Keppel Contract 2 is USD 119,800,000 inclusive of drilling<br />
package (with the difference between the Contract Price and the project price set out in<br />
section 7.1 comprising inter alia variation orders, spare parts, pipe handling, cost of site<br />
teams and other construction supervision costs ad financing costs); and<br />
2. The scheduled delivery of the Keppel Rig 2 shall be in the fourth quarter of 2007.<br />
Keppel Option B<br />
Following the exercising of the Keppel option A, Keppel Fels has granted a new option (Keppel<br />
option B) to Wilcraft Ltd to require Keppel Fels to design, construct, equip, complete and deliver<br />
an additional jack-up drilling unit like the first option rig.<br />
The terms and conditions for Keppel option B shall be the same as the definition in the Keppel<br />
Option Agreement described above save for the following:<br />
1. Notice period is from 1 March 2006 to 1 August 2006;<br />
2. The delivery date shall be no later than 31 May 2009;<br />
3. The option Contract Price is USD 136m (with the difference between the Contract Price<br />
and the project price set out in section 4.1 comprising inter alia variation orders, spare<br />
parts, pipe handling, cost of site teams and other construction supervision costs ad<br />
financing costs).<br />
4. The Contract Price is subject to adjustments for currency exchange rates, steel price<br />
increase and price increase for major equipment prices..<br />
Wilcraft Ltd may nominate another company to enter into the construction contract for the option<br />
rig, provided that:<br />
1. it is a subsidiary or affiliate of Wilcraft Ltd;<br />
2. it has the financial capacity to fulfil its obligations under the construction contract; and<br />
3. Wilcraft Ltd or a subsidiary of Wilcraft Ltd is appointed as the company’s representative<br />
and project manager for the construction contract.<br />
The Keppel Option Agreement is governed by English law with non-exclusive submission to the<br />
courts of Singapore.<br />
11.3 Bank financing agreements<br />
PPL Contract 1 financing<br />
A credit facility agreement (the ”Loan Agreement”) was entered into on 7 May 2004 between<br />
Wilpower Ltd as borrower, certain financial institutions as lenders and Standard Chartered Bank<br />
(“SCB”) as Arranger, Facility Agent and Security Agent. The loan Agreement was amended by a<br />
letter dated 14 May 2004 (the “Amendment Letter”).<br />
57
To finance its obligations under the PPL Contract 1, the Lenders have provided a loan facility to<br />
Wilpower Ltd of USD 94,080,000 or (if lower) 80% of the Contract Price and the PC Sum.<br />
As a condition of drawdown under the loan facility, Wilpower Ltd was required to deposit into an<br />
escrow account with SCB an amount of not less than USD 23,520,000, to fund the 20% balance of<br />
the Contract Price and the PC Sum. This condition has been fulfilled.<br />
The loan facility is available for drawing in multiple tranches for a period of 32 months from the<br />
date of the Loan Agreement (ie until 7 January 2007).<br />
The loan carries interest at a rate of Libor (for interest periods of one, three or six months, or other<br />
periods agreed by the lenders) plus a margin of 2.25%.<br />
The loan is repayable by eight instalments, each of the first seven being in the amount of USD<br />
3,136,000 and the final instalment being equal to the outstanding balance of the loan.<br />
The first instalment is to be repaid on 7 January 2007 and each subsequent instalment is repayable<br />
at six-monthly intervals thereafter.<br />
The loan (or relevant part) shall be prepaid in the following circumstances:<br />
1. if the PPL Rig is sold or becomes a total loss;<br />
2. to the extent that it becomes unlawful for a lender to maintain its participation in the loan;<br />
3. to the extent that Wilpower Ltd receives damages from PPL under the PPL Contract 1 relating<br />
to the performance of the PPL Rig;<br />
4. to the extent that the PC Sum is not fully utilised before delivery; or<br />
5. if Wilpower Ltd pays a dividend, an amount equal to one third of the dividend shall be prepaid.<br />
Wilpower Ltd’s obligations under the Loan Agreement are (or are to be) secured by:<br />
1. a guarantee from SCM (the “SCM Guarantee”);<br />
2. a charge over Wilpower Ltd’s escrow account with SCB,<br />
3. a charge granted by Awilco <strong>Drilling</strong> Ltd over the share capital of Wilpower Ltd,<br />
4. a security assignment and charge over (i) the PPL Contract 1 and SCM’s performance guarantee<br />
of that contract, (ii) insurances over the PPL Rig, (iii) any charter or other employment contract<br />
for the PPL Rig, (iv) any sale contract for the PPL Rig, and (v) all other assets of Wilpower Ltd,<br />
and<br />
5. a mortgage over the PPL Rig.<br />
The PPL Contract 1 provides that in the event that SCM’s guarantee of the financing of the PPL<br />
Rig is released, PPL will procure that SCM provides a similar guarantee for the financing of one of<br />
the option units, provided that the financial terms of the new guarantee, and the underlying<br />
obligations of the relevant borrower, are not more onerous than those in respect of the financing of<br />
the PPL Rig.<br />
In addition, Awilco <strong>Drilling</strong> Ltd has entered into a shareholder support agreement, under which<br />
Awilco <strong>Drilling</strong> Ltd has agreed (amongst other things) to subscribe for further shares in Wilpower<br />
Ltd in order to fund (i) any operating costs arising before delivery of the PPL Rig under the PPL<br />
Contract 1 and (ii) any modification costs, in respect of which Wilpower Ltd does not have<br />
available funds.<br />
The Loan Agreement includes provisions usually found in loan documentation of this nature,<br />
including (amongst others) covenants (i) that Wilpower Ltd will remain a wholly owned subsidiary<br />
of Awilco <strong>Drilling</strong> Ltd, (ii) that Awilco <strong>Drilling</strong> Ltd will remain a subsidiary of Awilco Offshore,<br />
58
(iii) that, upon listing, Awilco Offshore remains listed, (iv) that Awilco will have control of 40% of<br />
the board of directors of Awilco Offshore, provided that such requirement is permitted by the Oslo<br />
Stock Exchange, and (v) that Wilpower Ltd will continue to be managed by Wilhelmsen Marine<br />
Services <strong>AS</strong> under the terms of a management agreement.<br />
The Loan Agreement is governed by English law and the parties submit to the jurisdiction of the<br />
English courts.<br />
Nordea Credit Facility<br />
Certain subsidiaries of the Offeror have entered into an agreement with Nordea Bank Norge <strong>AS</strong>A<br />
for USD 210 million of senior credit facilities consisting of:<br />
1. A term-loan facility in an aggregate principal amount equal to USD 80 million for the debt<br />
financing of the accommodation units, all of which has been drawn.<br />
2. A pre- and post delivery term loan facility in an aggregate principal amount equal to the lesser<br />
of (x) USD 130 million and (y) 50% of the delivered cost of the jack-up units to be financed by<br />
the facility, being the WilCraft rig and the WilSuperior rig.<br />
Borrowers under the loan agreement are Port Rigmar <strong>AS</strong>, Wilhelmsen Oil & Gas <strong>AS</strong>, Wilcraft Ltd<br />
and Wilsuperior Ltd.<br />
The loans are secured by:<br />
1. Guarantees from the Offeror, Awilco Sea Beds <strong>AS</strong>, Awilco Sea Beds II <strong>AS</strong>, Wilcraft <strong>AS</strong> and<br />
any holding company of Wilsuperior Ltd.<br />
2. A first priority security interest in the rigs/accommodation units being financed by the loans,<br />
and all earnings from and insurances on such rigs/accommodation units.<br />
3. A first priority security interest in the shares of certain of the Offeror’s subsidiaries.<br />
4. During the construction period of the jack-up rigs, a first priority security interest in the<br />
borrowers’ rights under the shipbuilding contracts, insurance and related refund guarantees.<br />
The loans shall carry interest at a rate of LIBOR plus a margin of 1 5/8% per annum. A<br />
commitment fee at a rate of 40% of the margin will accrue on the unutilized commitment from time<br />
to time under the pre- and post delivery term loan facility.<br />
The loans will be repaid in quarterly instalments of USD 1.43 million in respect of each of the<br />
accommodation units, commencing three months from the initial borrowing date, and in quarterly<br />
instalments of USD 1.35 million in respect of each of the WilCraft and WilSuperior rigs. The final<br />
maturity of the credit facilities will be on the fifth anniversary of the initial borrowing date.<br />
The loan agreement includes customary financial covenants, including covenants as to minimum<br />
cash, positive working capital, minimum interest coverage ratio, capitalization ratio and collateral<br />
maintenance ratio. Other covenants includes the maintenance of Awilco Offshore’s listing on the<br />
Oslo Stock Exchange. Anders Wilhelmsen Group maintaining negative control (34%) over the<br />
Offeror, limitations on consolidation, mergers and de-mergers, limitations on dividends and<br />
limitations on new indebtedness.<br />
The Company is in the process of amending the Nordea Credit Facility to also include the financing<br />
of Keppel Contract 2 (“WilTBN”).<br />
11.4 Management agreements<br />
Premium <strong>Drilling</strong><br />
Sinvest <strong>AS</strong>A and Awilco Offshore <strong>AS</strong>A have entered into a shareholders’ agreement relating to<br />
Premium <strong>Drilling</strong> <strong>AS</strong>. The agreement defines and clarifies the areas of responsibility of Premium<br />
<strong>Drilling</strong>. Premium <strong>Drilling</strong> shall be responsible for the marketing, contracting and operation<br />
(including repair & maintenance) of the two companies’ fleet of jackup drilling rigs. Premium<br />
<strong>Drilling</strong> shall also advise the owners on business development and market strategy.<br />
59
Each rig owing company will enter into separate management agreements with Premium <strong>Drilling</strong>.<br />
The agreements shall be entered into not later than six months before scheduled delivery of the rig<br />
from the shipyard. No management agreements have yet been entered into (the Offeror’s first rig is<br />
scheduled for delivery in the second quarter of 2006).<br />
S,G&A expenses will from the outset be covered by an initial equity contribution, which was paid<br />
by the two parties at the establishment in May 2005. In the future these costs will be covered by a<br />
management fee paid equally by the owners, while direct operating expenses for the drilling units<br />
will be funded by the respective owner of the drilling rig. The level of the fixed part of the<br />
management fee has not yet been determined.<br />
Anders Wilhelmsen & Co <strong>AS</strong><br />
Awilco Offshore has entered into a management agreement with Anders Wilhelmsen & Co <strong>AS</strong>.<br />
The agreement covers a minor part of the Offeror’s support functions such as accounting-, treasury<br />
services and office rentals. The management fee will be on market terms and can be terminated by<br />
the Offeror by six months written notice and by Anders Wilhelmsen & Co <strong>AS</strong> by twelve months<br />
written notice.<br />
11.5 Certain other legal matters<br />
Rights to the Awilco name<br />
<strong>AWO</strong> has entered into an agreement with Awilco in respect of the Awilco name. Under this<br />
agreement, <strong>AWO</strong> is granted free of charge a non-exclusive, non-transferable right to use the name<br />
“Awilco” as part of its corporate name and, subject to certain restrictions, as a trade mark. Awilco<br />
may terminate the agreement by six months’ notice if Awilco’s ownership in <strong>AWO</strong> should for any<br />
reason be reduced below 20 per cent. Awilco may terminate the agreement with immediate effect if<br />
<strong>AWO</strong> is in material breach of the agreement or if <strong>AWO</strong> uses the “Awilco” name in a manner which<br />
is likely to cause material harm to the goodwill attached to the name. A termination of the<br />
agreement by Awilco would mean that <strong>AWO</strong> would need to change its corporate name and to cease<br />
using any trade marks which include the name “Awilco”.<br />
Litigation<br />
There are no material claims, actions, suits, litigation or proceedings pending, expected or<br />
threatened against or affecting <strong>AWO</strong> or any of its subsidiaries or any of its assets before any court,<br />
arbitrator or any administrative body or governmental authority, nor is there any qualified basis for<br />
any such claim, action, suit, litigation or proceeding that has not been disclosed herein.<br />
Documents<br />
Documents referred to in this Offer Document are available for inspection at the Offeror’s office in<br />
Oslo.<br />
60
12. Taxation<br />
12.1 Introduction<br />
The summary is of a general nature, and investors who wish to clarify their own tax situations<br />
should consult with and rely upon their own tax advisers. Investors resident in jurisdictions other<br />
than Norway should consult with and rely upon local tax advisors as regards the tax position in<br />
their country of residence.<br />
Set out below is a summary of Norwegian tax matters related to sale of the shares in Petrojack<br />
pursuant to the Offer, as well as acquisition, holding and future sale of shares in Awilco Offshore.<br />
The summary is based on Norwegian law, including tax treaties, applicable at the date of this Offer<br />
Document. It should be noted that Norway at the date of this Offer Document is in the process of<br />
introducing a tax reform which will influence on the fiscal treatment of the instruments dealt with<br />
in this summary. As a part of the first phase of the tax reform the Exemption Method (with main<br />
effect from 26 March 2004) and the Shareholder Model (with effect from 1 January 2006) have<br />
been introduced. It should be noted that the tax reform rules include a number of transitional<br />
provisions which may affect the taxation in the years 2005-2006.<br />
12.2 Taxation related to holding and disposal of the Shares<br />
Norwegian Shareholders<br />
Net wealth tax<br />
Shareholders resident in Norway for tax purposes (“Norwegian shareholders”) are, with the<br />
exception of limited companies and similar entities, subject to net wealth taxation by the State and<br />
the local municipality. Shares are included as part of the taxable base for this purpose. Shares listed<br />
on the Oslo Stock Exchange are currently valued at 65 % of market value on 1 January in the<br />
assessment year. The maximum combined rate of net wealth tax is 1.1%.<br />
Taxation of dividends and capital gain on realization of shares<br />
Corporate shareholders<br />
The Exemption Method exempts Norwegian corporate shareholders from taxation on received<br />
dividend distributions and capital gains from sale of shares in Norwegian companies. Likewise<br />
losses on realization of shares will not be deductible for tax purposes.<br />
Individual shareholders<br />
Dividends distributed to Norwegian individual shareholders are under current rules (until 31<br />
December 2005) taxable as general income at 28 %. Norwegian shareholders are, however, entitled<br />
to a tax credit under the Norwegian imputation tax system. The tax credit corresponds with the tax<br />
payable by the shareholder on the dividends. This implies that Norwegian individual shareholders<br />
under 2005 are effectively exempted from tax on dividend distributions from Norwegian<br />
companies.<br />
Norwegian shareholders are taxable in Norway for capital gains on the realization of shares, and<br />
have a corresponding right to deduct losses that arise on such realization. The tax liability applies<br />
irrespective of time of ownership, and the number of shares sold. Gains are taxable as general<br />
income in the year of realization, and losses can be deducted from general income in the year of<br />
realization. The tax rate for general income is currently 28 %.<br />
When calculating gain or loss, Norwegian shareholders must apply a “first-in, first-out” (FIFO)<br />
principle. Costs incurred in connection with the acquisition and/or sale of shares may be deducted<br />
from the Norwegian shareholders’ taxable income in the year of sale.<br />
61
As a part of the Norwegian tax reform the imputation tax system on dividends will be replaced by<br />
the Shareholder Model from 1 January 2006. Pursuant to the Shareholder Model, share income<br />
(dividend income or capital gain from sale of shares) of individual shareholders is liable to 28 %<br />
tax on total share income in excess of an estimated capital yield. The estimated capital yield shall<br />
be computed for each individual shareholders on the basis of the cost price of each of the shares<br />
multiplied by a risk-free interest. The protection interest rate shall be based on the effective rate of<br />
interest on government bonds of five year’s maturity.<br />
Foreign Shareholders<br />
In general<br />
This section summarizes Norwegian rules of taxation relevant to shareholders who are not regarded<br />
as residents of Norway for tax purposes (“foreign shareholders”). Foreign shareholders’ tax<br />
liabilities in their home country or other countries will depend on tax rules applicable in the<br />
relevant country.<br />
Corporate shareholders - taxation of dividends<br />
According to the Exemption Method, foreign corporate shareholders resident within the EEA area<br />
are not subject to Norwegian dividend withholding tax. Corporate shareholders tax resident outside<br />
of the EEA area are subject to dividend withholding tax pursuant to Norwegian domestic<br />
legislation and applicable tax treaties.<br />
Individual shareholders – taxation of dividends<br />
According to Norwegian domestic legislation dividends paid to foreign individual shareholders are<br />
subject to a maximum withholding tax of 25 %, or a lower rate pursuant to the provisions of an<br />
applicable income tax treaty. Norway has entered into income tax treaties with over 80 countries,<br />
with withholding taxes reduced to 15% in most tax treaties.<br />
From 1 January, 2006, new domestic legislation is introduced in Norway regarding dividend<br />
withholding tax to individual shareholders resident within the EEA-area. Dividends distributed in<br />
2006 and subsequent years will be subject to withholding tax at the applicable tax treaty rate.<br />
However, such shareholders may choose to have dividends subject to the general withholding tax<br />
of 25% and seek refund for an allowance under the internal Norwegian tax provisions. In general<br />
the allowance is calculated as the acquisition cost of the share (adjusted for RISK-amount for the<br />
income year 2005), multiplied by a determined (risk-free) interest rate.<br />
In accordance with the present administrative system in Norway, a distributing company will<br />
generally deduct withholding tax at the applicable reduced rate when dividends are paid directly to<br />
an eligible foreign shareholder, based on information registered with the VPS as to the tax<br />
residence of the foreign shareholder. Dividends paid to foreign shareholders in respect of nominee<br />
registered shares are not eligible for reduced treaty-rate withholding at the time of payment unless<br />
the nominee, by agreeing to provide certain information regarding beneficial owners, has obtained<br />
approval for reduced treaty-rate withholding from the Central Office - Foreign Tax Affairs<br />
(Sentralskattekontoret for utenlandssaker), or formerly the Directorate of Taxes.<br />
Foreign shareholders should consult their own advisers regarding the availability of treaty benefits<br />
in respect of dividend payments, including the ability to effectively claim refunds of over-withheld<br />
amounts.<br />
Taxation on realization of shares<br />
Gains from sale or other disposition of shares by a foreign corporate shareholder will according to<br />
Norwegian domestic legislation not be subject to taxation in Norway.<br />
A foreign individual shareholder who has been a resident of Norway for tax purposes within the<br />
five calendar years proceeding the year of the sale or disposition is subject to Norwegian capital<br />
62
gain taxation. However, such taxation may be limited pursuant to applicable tax treaty.<br />
12.3 Duties on the Transfer of Shares<br />
No stamp or similar duties are currently imposed in Norway on transfer of shares, whether on<br />
acquisition or disposal.<br />
12.4 Inheritance tax<br />
When shares are transferred either through inheritance or as a gift, such transfer may give rise to<br />
inheritance or gift tax in Norway if the decedent, at the time of death, or the donor, at the time of<br />
the gift, is a resident or citizen of Norway. However, in the case of inheritance tax, if the decedent<br />
was a citizen but not a resident of Norway, Norwegian inheritance tax will not be levied if<br />
inheritance tax or a similar tax is levied by the decedent’s country of residence. Irrespective of<br />
residence or citizenship, Norwegian inheritance tax may be levied if the shares are held in<br />
connection with the conduct of a trade or business in Norway. The basis for the inheritance or gift<br />
tax computation on listed shares is the market value of the shares at the time the transfer takes<br />
place.<br />
12.5 Norwegian Tonnage Tax<br />
The accommodation rigs Port Rigmar and Port Reval have been organised within the Norwegian<br />
tonnage tax regime since May 2002 and July 2004 respectively. However, a change in the law has<br />
recently been adopted which will exclude rigs from the tonnage tax regime with effect from the<br />
fiscal year 2006. This means that the accommodation rigs will have to exit the tonnage tax regime,<br />
and that it will not be possible to organise the jack-up rigs within the regime. This will have an<br />
adverse effect on the Offeror as it will no longer be in a position to benefit from the deferred<br />
taxation, but will be taxed based on the taxable income each year. Furthermore, accumulated profit<br />
not yet taxed will become taxable..<br />
63
13. Risk factors<br />
A number of risk factors may adversely affect the Offeror. These risk factors include financial risks,<br />
technical risks, risks related to the business operations of the Offeror, environmental and<br />
regulatory risks. If any of these risks or uncertainties actually occurs, the business, operating<br />
results and financial condition of the Offeror could be materially and adversely affected. The risks<br />
presented in this Offer Document are not exhaustive, and other risks not discussed herein may also<br />
adversely affect the Offeror. Prospective investors should consider carefully the information<br />
contained in this Offer Document and make an independent evaluation before making an<br />
investment decision.<br />
Included in this Offer Document are various “forward-looking statements”, including statements<br />
regarding the intent, opinion, belief or current expectations of the Offeror or its management with<br />
respect to, among other things, (i) the Offeror’s target market, (ii) evaluation of the Offeror’s<br />
markets, competition and competitive position, (iii) trends which may be expressed or implied by<br />
financial or other information or statements contained herein. Such forward-looking statements are<br />
not guarantees of future performance and involve known and unknown risks, uncertainties and<br />
other factors that may cause the actual results, performance and outcomes to be materially<br />
different from any future results, performance or outcomes expressed or implied by such forwardlooking<br />
statements. Such factors include, but are not limited to, the risk factors described below<br />
and elsewhere in this Offer Document.<br />
Construction risks: The Offeror has entered into the contracts for the fabrication, installation and<br />
commissioning of four deep drilling jack-ups; including hull, marine equipment and supply and<br />
installation of drilling equipment. The contracts stipulate dates of delivery and specified prices. In<br />
the case of late delivery, the Offeror may be in a position to impose penalties. However, delays<br />
may still represent serious negative consequences for the Offeror.<br />
The contractual rights of the relevant owner to take title to, and possession of, either rig under<br />
construction will not be enforceable in the event of a bankruptcy or receivership of the relevant<br />
yard.<br />
Charters: The Offeror cannot be assured that it will obtain charter contracts for one or more of its<br />
rigs when completed, or that such contracts, if and when obtained, will be obtained on profitable<br />
terms to the Offeror. Furthermore, there is often considerable uncertainty as to the duration of<br />
offshore charters because most charter contracts give the operator both extension and early<br />
cancellation options. There can also be off-hire periods between charters. The cancellation or<br />
postponement of one or more charters can have a major impact on the earnings of drilling and<br />
service companies.<br />
Oil prices: Historically, demand for offshore exploration, development and production has been<br />
volatile and closely linked to the price of hydrocarbons. Low oil prices typically lead to a reduction<br />
in exploration drilling as the oil companies’ scale down their investment budgets. The sharp<br />
reduction in production costs on new oil fields will probably somewhat reduce the strong historical<br />
correlation between rig rates and oil prices<br />
Market risks: Demand for drilling services in connection with exploration, development and<br />
production in the offshore oil and gas sector is particularly sensitive to price falls, reductions in<br />
production levels and disappointing exploration results. On the supply side, there is uncertainty<br />
when it comes to the construction of new rigs, the upgrading and maintenance of existing rigs, the<br />
conversion of other types of rigs into drilling units and alternative uses for equipment as market<br />
conditions change.<br />
The Offeror may assume substantial liabilities: Contracts in the offshore sector require high<br />
64
standards of safety, and it is important to note that all offshore contracts are associated with<br />
considerable risks and responsibilities. These include technical, operational, commercial and<br />
political risks, and it is impossible to insure against all the types of risk and liabilities mentioned.<br />
For instance, under some contracts the Offeror may have unlimited liability for losses caused by its<br />
own gross negligence.<br />
Political risks: Changes in the legislative and fiscal framework governing the activities of the oil<br />
companies could have an impact on exploration and development activity or affect the company’s<br />
operations directly. Changes in political regimes may constitute a risk factor for operations in<br />
foreign countries.<br />
Currency fluctuations: Because a portion of Awilco Offshore’s business is conducted in<br />
currencies other than USD, the Offeror will be exposed to volatility associated with foreign<br />
currency exchange rates in the course of business. There can be no assurance that the Offeror will<br />
not experience currency losses in the future.<br />
Interest rate risks: The Offeror’s bank financing agreements are subject to floating interest rates.<br />
Hence, the Offeror will be financially exposed to fluctuations in interest rates.<br />
Service life and technical risks: The service life of drilling rigs is generally assumed to be more<br />
than 30 years but will depend ultimately on their efficiency. There will always be some exposure to<br />
technical risks, with unforeseen operational problems leading to unexpectedly high operating costs<br />
and/or lost earnings.<br />
Environmental risk: The Offeror’s operations may involve the use and/or disposal of materials<br />
that may be classified as hazardous substances. The environmental laws and regulations of the<br />
countries in which the Offeror may operate expose the Offeror to liability for the conduct of, or for<br />
conditions caused by, others, or for acts of the Offeror that were in compliance with all applicable<br />
laws at the time such actions were taken. In the past several years, protection of the environment<br />
has become a higher and more visible priority of many governments throughout the world.<br />
Offshore drilling in certain areas has been opposed by environmental groups and, in some areas,<br />
has been legally restricted. The Offeror’s operations could be restricted and its rigs could become<br />
more expensive to operate if new laws or legislation are enacted or other governmental actions are<br />
taken that prohibit or restrict offshore drilling or impose additional environmental protection<br />
requirements. Moreover, the Offeror may have no right to compensation from its customers if its<br />
costs are increased through such governmental actions, and its operating margins may fall as a<br />
result.<br />
Fluctuations in share price: The market price of the Offeror’s share may fluctuate and may<br />
decline below the <strong>offer</strong> price in the Offering. The market price of the Offeror’s shares may<br />
fluctuate widely, depending on many factors beyond the Offeror’s control, including:<br />
• market expectations of the rig construction performance;<br />
• investor perceptions of the outlook for the Offeror to obtain future engagements for its rigs<br />
on profitable terms;<br />
• the outcome of the intended IPO process; and<br />
• the other factors listed above under “Risk factors”.<br />
The price of the Offeror’s shares will also be subject to fluctuations in line with general movements<br />
in the capital markets and the liquidity of the secondary market. Earnings of offshore companies<br />
and the value of the equipment used have historically seen large fluctuations.<br />
As a result of these and other factors, the Offeror cannot give assurance that any investor will be<br />
able to sell its shares at a price equal to or greater than the <strong>offer</strong> price in the Offering.<br />
Control by major shareholder: Awilco currently holds approximately 45.4% of the shares of the<br />
65
Offeror. This means that Awilco has the ability to significantly influence the outcome of matters<br />
submitted for the vote of shareholders, including the election of members of the board of directors.<br />
The commercial goals of Awilco as a shareholder, and those of the Offeror, may not always remain<br />
aligned. The substantial equity interest by Awilco may make it more difficult for the Offeror to<br />
maintain its business independence from other companies within the Anders Wilhelmsen Group.<br />
If Awilco were to sell a large number of shares in the Offeror, or there is a perception in the market<br />
that such sales could occur, the trading price of the shares in the Offeror could decline. Such sales<br />
could also make it more difficult for the Offeror to <strong>offer</strong> equity securities in the future at a time and<br />
at a price that are deemed appropriate.<br />
Since Awilco owned more than 40% of the shares in the Offeror at the time of its listing on the<br />
Oslo Stock Exchange, Awilco will be exempt from the mandatory bid requirements under the<br />
Norwegian Securities Trading Act unless at any time the ownership of Awilco falls below 40%.<br />
Risks related to the acquisition of Petrojack: An acquisition by Awilco Offshore may trigger<br />
rights for contract parties of Petrojack to terminate or modify agreements with Petrojack. This<br />
could adversely affect the value of Petrojack. Although the Offer is subject to a satisfactory due<br />
diligence of Petrojack, Awilco Offshore cannot be certain that it will obtain a complete overview of<br />
the effects of a change of control in Petrojack. Furthermore, Awilco Offshore cannot be certain that<br />
any actions taken to deal with such issues will be successful. If Awilco Offshore becomes the<br />
owners of Petrojack it will seek to incorporate Petrojack into its other operations. There can be no<br />
assurance that this incorporation will be successful. For instance, if persons currently involved in<br />
the management of Petrojack do not remain with the company, this could potentially cause<br />
disruptions to or have other negative consequences for Petrojack’s existing building projects.<br />
66
Appendix 1 Rig specifications – Port Reval<br />
67
Appendix 2 Rig specifications – Port Rigmar<br />
71
Appendix 3 Rig specifications – PPL contracts and options<br />
This specifications below will apply to both WilPower and WilSuperior.<br />
75
Appendix 4 Rig specifications – Keppel contract and option<br />
Keppel FELS rig Deck lay-out<br />
PPL vs. Keppel FELS designs:<br />
Common characteristics<br />
• Proven drilling equipment with excellent performance characteristics<br />
• Improved drilling efficiency<br />
• Zero discharge<br />
• Pipe-handling package<br />
• <strong>Drilling</strong> depth 30,000ft+<br />
• Well control equipment (15,000psi) high temperature<br />
PPL design Keppel FELS design<br />
• Leg spacing wider • Standardised foot print<br />
• Larger spudcans • Compact lay-out – efficient unit<br />
• Larger deck area and high variable load • Larger cantilever operating envelop<br />
• Flexible operation<br />
• Robust<br />
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Appendix 5 Articles of Association<br />
The Offeror’s Articles of Association are set out below in Norwegian official form, as last amended<br />
on 11 August 2005, and in an English office translation.<br />
§1 Firma §1 Company<br />
Selskapets firma er Awilco Offshore <strong>AS</strong>A. Selskapet er et<br />
allmennaksjeselskap.<br />
The name of the Company is Awilco Offshore <strong>AS</strong>A. The<br />
Company is a public limited-liability company.<br />
§2 Forretningskontor §2 Registered offices<br />
Selskapets forretningskontor er i Oslo kommune. The Company’s registered offices are in the municipality<br />
of Oslo.<br />
§3 Virksomhet §3 Activities<br />
Selskapets virksomhet er å drive offshorevirksomhet og<br />
dermed beslektet virksomhet inkludert skipsfart. Innenfor<br />
formålet er også å drive erverv, forvaltning, belåning og<br />
salg av kapitalgjenstander innenfor offshore og<br />
shippingvirksomhet, samt investering i aksjer, obligasjoner<br />
og interessentinnskudd av enhver art, og delta med<br />
eierinteresser i andre selskaper med naturlig tilhørende<br />
virksomhet.<br />
The activities of the Company are to run offshore<br />
operations and associated business, including shipping.<br />
The objectives also include undertaking acquisition,<br />
administration, and sale of capital assets within offshore<br />
and shipping, as well as investment in shares, bonds and<br />
partnership contributions of any nature, and participating<br />
with ownership interests in other companies as well as<br />
naturally associated operations.<br />
§4 Aksjekapital §4 Share capital<br />
Selskapets aksjekapital er NOK 1.185.303.330 fordelt på<br />
118.530.333 aksjer, hver med pålydende NOK 10.<br />
The Company’s share capital is NOK 1,185,303,330<br />
divided into 118,530,333 shares, each with a nominal value<br />
of NOK 10.<br />
§5 Ledelse §5 Management<br />
Selskapets styre består av 3 – 6 styremedlemmer etter<br />
generalforsamlingens nærmere beslutning.<br />
Selskapets firma tegnes av styrets leder. Styret kan<br />
meddele prokura. Selskapet skal ha en daglig leder.<br />
The Company’s Board of Directors comprises 3 – 6<br />
directors in accordance with the general meeting’s further<br />
resolution.<br />
The Chairman of the Board signs for the Company. The<br />
Board of Directors may grant powers of procuration. The<br />
Company shall have a chief executive director.<br />
§6 Generalforsamling §6 General meeting<br />
Den ordinære generalforsamling skal behandle:<br />
The annual general meeting shall consider:<br />
1. Godkjennelse av årsregnskapet og årsberetningen,<br />
herunder utdeling av utbytte.<br />
2. Andre saker som etter loven eller vedtektene hører<br />
under generalforsamlingen.<br />
1. Approval of the financial statements for the year and<br />
the annual report, including distribution of a<br />
dividend.<br />
2. Other matters that according to law or to the Articles<br />
of Association are appropriate to the general<br />
meeting.<br />
80
Appendix 6 Second quarter report 2005<br />
81
Appendix 7 Application form<br />
Acceptance form<br />
To be used to accept the <strong>offer</strong> by Awilco Offshore <strong>AS</strong>A (Norwegian Registration No. 987 861 894) to acquire all outstanding shares in<br />
Petrojack <strong>AS</strong>A (Norwegian Registration No. 987 358 920)<br />
Enskilda Securities <strong>AS</strong>A<br />
Filipstad Brygge 1, 8. floor<br />
P.O. Box 1363 Vika<br />
0113 Oslo<br />
Fax: + 47 21 00 89 62<br />
Return to:<br />
The acceptance is for shares in Petrojack <strong>AS</strong>A as stated below<br />
Name of shareholder<br />
VPS-account number<br />
Fearnley Fonds <strong>AS</strong>A<br />
Grev Wedels plass 9<br />
PO Box 1158 Sentrum<br />
0107 Oslo<br />
Telefax: +47 22 93 60 00<br />
Number of shares<br />
Right holder registered:<br />
(Yes or No)<br />
CLOSING DATE FOR ACCEPTANCE:<br />
Enskilda Securities <strong>AS</strong>A or Fearnley Fonds <strong>AS</strong>A (collectively the “Managers”) must receive this acceptance form by 16.00 CET on 30<br />
September 2005 which is the end of the acceptance period. Any extension of the acceptance period will be announced in the electronic<br />
information system on Oslo Børs. Shareholders with shares in Petrojack <strong>AS</strong>A split between several VPS accounts must complete and return a<br />
separate form for each VPS account.<br />
To Awilco Offshore <strong>AS</strong>A ("the Offeror") and the Managers:<br />
1. I/we have received the <strong>offer</strong> document dated 15 September 2005 (The “Offer Document”) and accept the <strong>offer</strong> set out therein (the “Offer”) to sell<br />
all my/our shares in Petrojack <strong>AS</strong>A as stated above (together with any shares sold pursuant to item 2 below, the “Tendered Shares”), in accordance<br />
with the terms and conditions stated in the Offer Document and in this acceptance form. I/We will receive one share in Awilco Offshore <strong>AS</strong>A (the<br />
“Consideration Shares”) for each two shares in Petrojack <strong>AS</strong>A sold hereby. I/We hereby irrevocably authorize the Managers to subscribe for the<br />
Consideration Shares on my/our behalf.<br />
2. This acceptance also covers any Petrojack <strong>AS</strong>A shares that, in addition to the number of shares specified above, have been or will be acquired and<br />
are registered at the above VPS-account when the acceptance is registered, not later than 16.00 CET on 30 September 2005.<br />
3. I/we understand that from today's date I/we will not be able to sell or in any other way dispose, put up as security or move to another VPS-account,<br />
the Tendered Shares. I/we understand that is the Managers are given irrevocable authority to, on the date that this acceptance is received and<br />
registered by the Managers, to block the Tendered Shares at the above VPS-account in favour of the Managers on behalf of the Offeror until the<br />
conditions to the Offer have been satisfied/waived or the Offer has lapsed. I/we understand that I/we will retain ownership of the Tendered Shares,<br />
including voting rights, until settlement under the Offer is made.<br />
4. The Managers are granted irrevocable authority to debit the Tendered Shares from my/our VPS-account(s) and to transfer the Tendered Shares to<br />
an escrow VPS account in the name of the Managers for the benefit of the Offeror, within 5 days after the conditions for the Offer are fulfilled<br />
and/or waived. As soon as reasonably possible after such transfer, Awilco Offshore will cause the increase of the share capital to be registered with<br />
the Norwegian Register of Business Enterprises. The registration is expected to take place no later than three business days after the day on which<br />
the Tendered Shares are transferred to the escrow VPS account for the benefit of the Offeror, i.e. at the latest on 24 October 2005. The<br />
Consideration Shares cannot be sold or otherwise disposed of until the share capital increase has been registered with the Norwegian Register of<br />
Business Enterprises. The Consideration Shares will be registered at the VPS-account[s] at which the tendered Petrojack shares were registered no<br />
later than three business days following the registration of the share capital increase with the Norwegian Register of Business Enterprises which is<br />
expected to be at the latest on 27 October 2005. The tendered Petrojack shares will not be transferred to Awilco Offshore until the Consideration<br />
Shares have been properly issued and registered.<br />
5. The Tendered Shares will be transferred free of any encumbrances or other third-party rights whatsoever and with all shareholder rights attached to<br />
them. I/we recognise that this acceptance will be valid only if any right holders (indicated by a “Yes” beneath "Right holder registered" above<br />
right) have given their written consent on this acceptance form for the Tendered Shares to be transferred to the Offeror free of any charges.<br />
6. The Offeror will pay all my/our VPS transaction costs incurred directly in connection with my/our acceptance.<br />
7. The Offer and all acceptances of the Offer will be subject to Norwegian law. Accepting shareholders and the Offeror agree that all matters<br />
pertaining to the Offer come under the jurisdiction of the Norwegian courts, with Oslo as the exclusive legal venue.<br />
__________________ ______________________ ______________________________________<br />
Place Date Binding signature *<br />
* If signed in accordance with power of authority, the power of authority (and in event of a company the company certificate) is to be attached.<br />
* If signed by a person having signatory powers, the company certificate is to be attached.<br />
Right holder:<br />
As a right holder, I consent to the transfer of the Tendered Shares to the Offeror free of any encumbrances or other third-party rights.<br />
__________________ ______________________ ______________________________________<br />
Place Date Right holder's signature *<br />
* If signed in accordance with power of authority, the power of authority (and in event of a company the company certificate) is to be attached.<br />
* If signed by a person having signatory powers, the company certificate is to be attached.<br />
88
Filipstad Brygge 1<br />
PO Box 1363 Vika<br />
N-0113 Oslo, Norway<br />
Awilco Offshore <strong>AS</strong>A<br />
Beddingen 8<br />
N-0250 Oslo, Norway<br />
Print: Sekkelsten & sønn as<br />
Grev Wedels plass 9<br />
PO Box 1158 Sentrum<br />
N-0107 Oslo, Norway