Maracc Annual Report 2008

maracc Annual Report 2008

How to get the most out of your subsea wells

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

Contents annual report 2008 maracc 3

04 Highlights

05 Key Figures

06 About the Company

08 Island Innovator in profile

13 Board of Directors’ Report

16 Board of Directors

18 Annual Accounts

19 Profit and Loss Account

20 Balance Sheet

22 Cash Flow Statement

24 Notes

38 Auditor’s Report

40 Corporate Governance Report

42 Shareholder Information

4 maracc annual report 2008 Highlights

Maracc and Cosco agreed to split the work between Zhoushan Yard for fabrication of substructure and Nantong Yard for the fabrication of the deck box. This decision was made on the basis of Cosco’s strategy to centralize all their offshore projects under their Nantong yard includ-ing the new site at Quidong, and better utilization of yard capacity.

Maracc entered into an exclusive Co-operation Agree-ment with Halliburton for the supply of integrated well services work including the full range of Halliburton scope of work. The Agreement is limited to Statoil and Norway, but can be expanded geographically if mutually agreed.

Steel cutting ceremony held at Cosco for the deck box construction at Nantong.

Maracc tendered the Island Innovator as a drilling rigto StatoilHydro. Tender was submitted in August, but the process was terminated by Statoil in November due to the negative market development.

Maracc ordered Drilling Riser and BOP systemfrom Vetco Gray and Cameron respectively.

A MUSD 30 Convertible Bond issue was raised in September. The transaction was underwritten by the major owners.

Agreed with Cosco to move delivery date from 10th January 2010 to 30th April 2010 due to certain engineering changes.

Island Innovator put on the market globally as both a Well Intervention Unit and a combined Drilling and Well Intervention Unit.

Increasingly difficult to obtain financing throughout 3rd and 4th quarter.

Oil price dropped from USD 146 to USD 38 per barrel in 2nd half basically stalling the entire rig market.

2008 Highlights

February

March

May

August

August

September

October

December

Key Figures annual report 2008 maracc 5

Key figures 2008 2007 2006Figures in USD million

Profit and loss account

Operating income 0,0 0,0 0,0

Operating expenses 6,2 0,6 0,4

Operating profit -6,2 -0,6 -0,4

Net financial items 0,0 0,0 0,0

Pre-tax profit -6,2 -0,6 -0,4

Balance sheet

Fixed assets 205,0 139,4 0,0

Current assets 97,0 129,9 0,1

Total assets 302,0 269,3 0,1

Equity capital 82,5 77,9 0,1

Non current liabilities 206,7 186,0 0,0

Current liabilities 12,8 5,4 0,0

Liquidity

Liquid assets 96,0 128,5 0,1

Working capital1 84,2 124,5 0,1

Capital

Total assets 302,0 269,3 0,1

Equity capital 82,5 77,9 0,1

Equity ratio2 27,3% 28,9% 100,0%

Definitions

1 Current assets – current liabilities2 Equity capital as % of total assets

6 maracc annual report 2008 About the company

About the Project –Island Innovator Maracc was established in 2006 in Stavanger by

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

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

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

Maracc further entered into a contract with Island Offshore Management in March 2007 for the construction super vision and operation of the rig.

The Company was OTC listed in April 2007 under the ticker MARA.

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

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

Island Innovator provides the full toolbox

Full size 18-3/4" BOP system and 21-1/4" drilling riser for 1300 meters waterdepth drilling applications if applicable Well Intervention size BOP and 5" to 8" riser

for 3000 meter to fit all types of x-mas trees Full range of Coil Tubing services up to 3-1/2"

including spooling on deck Wireline services, all types Through Tubing Rotary Drilling (TTRD) capabilities 165 tonnes AHC crane with subsea lift

capabilities to 2000 meters Stimulation and fraccing services Well test services Central Control Room for all services Multiskilled operators

About the company annual report 2008 maracc 7

The Board of Directors decided in October 2007 the name of the unit to be Island Innovator. The name reflects both that the unit shall be an integral part of the Island Offshore Well Intervention fleet, and that the unit repre-sents a new innovative approach to well intervention.

Island Innovator is due to be completed and ready for operation at the end of 2011. The unit will be built to Norwegian NORSOK and DNV standards and specifica-tions, and its port of registry will be Aalesund in the NOR register. The Unit Island Innovator will represent a new approach

to well intervention and Maracc/Island Offshore intend to offer complete and integrated services in this field.

Company structure:

The intention is to offer a unit capable to perform all types of well intervention activities such as wireline, coil tubing and through tubing rotary drilling for drilling of short side tracks. The unit will also be prepared for a number of other and related services. The goal is to achieve a 30% reduction of time per operation compared to conv-entional drilling rigs by significantly reduce time spent on mobilisation, demobilisation, transit and other.

The response from the market has so far been very positive. It is expected a long term contract for the unit will be signed some-time in 2009. There is currently dialogue with several operators, but as always, when a new service is introduced, the first contract takes time to establish.

MarineCrew

TechnicalOperations

Berit Rynning

ProjectManagement

Morten Ulstein

Marketing

Dionne Chouest

Finance

ØyvindJordanger

Asle Solheim

CEO

Øivind Lund

Chairman

Innovative topside solutions: 590 tonnes hydraulic derrick system Derrick mast providing access from 3 sides Can change operations between Wireline,

Coil Tubing and Drill Pipe in one hour Full automatic pipe handling system

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

Efficient BOP handling: Can provide for BOP weights up to 300 tonnes Efficient BOP handling capabilities Can be configured for Drilling services only,

Well Intervention services only or with certain limitations a combination of Drilling and Well Intervention services

The operating modus between services can be altered in one hour

On Island Innovator intervention equipment is permanently in-stalled on the rig floor and are skidded in and out as required.

Board of Directors’ report annual report 2008 maracc 13

1. The nature of businessThe purpose of Maracc – Marine Accurate Well ASA

(hereinafter “Maracc” or “the Company”) is to build and operate rigs and appliances for support of operations in the offshore oil industry. The Company was founded in 2006. In February 2007 the Company ordered its first semi submersible rig based on the GM 4000 design, developed by Global Maritime.

The Company’s registered office is in Stavanger.

2. Continued operationIn accordance with the Norwegian Accounting Act

§ 3–3a it is confirmed that the presumptions for continued operation are present. The Board of Directors will however emphasize that behind this presumption there are 3 significant elements of uncertainty; securing a financing solution for the remaining 50 % of the total project cost, final delivery date for the rig from the yard in China and point in time for signing an operational contract for the rig post delivery. Even though these three elements of uncertainty are considered significant, and make the presumption for continued operation somewhat uncertain, the Board of Directors, based on the efforts made and the resources laid down, consider the presumption for continued operation still to be present. For further informa-tion see section 6.

3. Working environment and personnelThe Company had no employees as of 31st December

2008. The Company’s needs for competence and accom-panying resources have been secured through a full-service long-term management agreement with Island Offshore Management AS (IOM). According to the agree-ment IOM shall assist the Company within administration, construction supervision and later operation services.

No Lost-Time Incidents, resulting in greater material damages or personal injuries, has been reported during the year.

The working environment is considered good, and continuous efforts for improvement are carried out.

4. Equal opportunitiesThe Company has an aim to be a working place where

equal opportunities prevail between men and women.The Board consists of 5 members, three men and two women.The Company satisfies the requirement of representa-

tion of both sexes according to the the Norwegian Public Limited Companies Act § 6-11a.

5. Environmental reporting The Company’s business as of 31st December 2008 is

not regulated by licenses or public orders. The business does not pollute the external environment over and above what is customary for this kind of operation.

6. Future development Maracc was established in 2006 with an aim to bring

forward a semisubmersible rig solution for heavy intervention activities on subsea wells. The rig is tailor made for Norwegian operations but able to work globally.

To accomplish this, Maracc has one semi-submersible intervention rig under construction at the Cosco Shipyard Group Ltd. in China. The rig, to be named Island Innovator, is based on the GM 4000 design.

The plan was and still is to address the issue of low oil recovery from subsea wells and the need for more service related work for a steady increasing number of subsea wells around the world. The basis is to build on the experiences gained from Light Well intervention services performed by Island Offshore in the North Sea. Island Offshore will manage and operate the rig when in operation.

The rig is the first purpose built well intervention rig and is prepared for the full range of services such as Coil Tubing and Through Tubing Rotary Drilling (TTRD) down to 3000 meters water depth.

GM4000 – Project statusThe project is generally progressing according to

schedule. The one exception is the deck box construction at Cosco Nantong which has fallen behind and is expected to impact delivery from the yard. How this delay eventually will impact the overall project schedule and date for ready for operation is not yet quantified, however, the deck box is on critical line and some impact is expected. It is expected that a worst case scenario could be a delay of start up of up to 12 months from current plan, moving ready for operations date towards the end of 2011.

The reason for the delay is both that the yard has underesti-mated the time to be consumed based on the original specification, coincident with there having been some adjustments on the way. A delay from the yard of 7 – 10 months are inevitable.

A project team consisting of about 30 persons doing construction supervision has been established in China under IOM’s direction. The team has daily contact with the yard in relation to engineering, progress and quality. The follow-up towards the yard has been emphasized to avoid further delays.

The Board of Directors’Annual Report 2008

14 maracc annual report 2008 Board of Directors’ report

All engineering work is now finished and the project progress is above 50 %, which in turn forms a solid basis for considering further progress and delivery based on the presumption that no major surprises arise going forward.

The project is partly financed with 290 MUSD of a total cost of 560 MUSD. Of the remaining financing requirement of 270 MUSD about 180 MUSD is due for payment during 2009. Eksportfinans ASA has indicated that they are willing to provide a loan in the amount of up to USD 235 million, based on GIEK or other acceptable financial institutions guaranteeing the entire loan. GIEK is positive to issue a guarantee covering the major part of the loan amount.

The base case scenario is to secure a long term contract by the end of 2009 and thereby fully secure bank financing for the remaining part of the project. Failing this, the Board of Director’s has drawn up an alternative proposal were a certain amount will be paid to suppliers during 2009, and the rest to be postponed for payment until early 2010. There is currently a constructive dialog with these suppliers. The proposal is based on the suppli-er’s approval and Maracc having secured some additional financing by the end of November 2009.

The participation required from commercial banks has proven difficult to obtain in today’s market without having a long term operational contract in place, and the main challenge is therefore to secure a long term contract for the rig either in Norway or internationally. Several banks have signaled that they are prepared to contribute as soon as a long term, acceptable contract is in place.

Market UpdateThe oil service market has deteriorated as a result

of the weakening oil price and rig rates have also wea- kened although from a strong level. Several prospects are being pursued with oil majors, of which 3 prospects are considered very firm. It is expected that oil companies will award contracts in 2009 for intervention units poten-tially combined with drilling.

It is expected the oil price will slowly strengthen through 2009. As this will have a positive effect on the oil service market in general and on the rig market in particular, it is expected that the number of contracts to be awar- ded in the drilling and intervention segment will increase in 2009 and 2010.

7. Achievement, cash flow, investments, financing and liquidity The Board of Directors is of the opinion that the annual

accounts give a true and fair view of Maracc’s assets and liabilities, financial position and result. There have not been any significant incidents after the 31.12.2008 that have not been considered in the annual accounts, or that are of impor- tance to assess the Company’s result or financial position.

The Company had no turnover in 2008. The result before taxes showed a loss of USD 6 160 612. The loss is mainly caused by two circumstances. First it is the impairment of the ‘Right of redemption own bonds’ totaling USD 2 777 048, and secondly it is the impairment of ‘Forward Exchan- ge Currency Contracts’ totaling USD 3 037 295. Further-more, a part of the loss is due to the Company being in the establishment phase. The Company aims at limiting

expenditure, but has no ambitions of obtaining a positive annual result before 2012. Despite the negative annual result for 2008, the Board finds the financial statements satisfac-tory. Both the result for 2008 and the cost of building the vessel are within the plan.

The Company has no expenditure in connection with Research and Development.

Total cash flow from operational activities in the Com- pany was minus USD 346 269. The operating result for the Company shows a deficit of USD 6 160 612. Total investments relating to plant and equipment in 2008 were USD 68 742 089.

The Company’s cash position was USD 95 995 319 as of 31.12.08. The Company borrowed USD 30 000 000 in the Bond market in 2008. The Company’s long-term debt is recorded at USD 206 663 550 at the end of 2008. The long-term debt is adjusted downwards by USD 23 336 450 as a consequence of the value of built-in options related to the Bonds at the disbursement date having been deducted, and the value of repurchased bonds having been deducted.

The Company’s short-term debt was USD 12 790 489 as of 31.12.08. The total capital at year end was USD 301 983 228. The equity capital was USD 82 529 189 as of 31.12.08, which gives a solidity of 27.3%.

8. Financial risk

8.1 Market riskThe Company is exposed to market risk as no long-term

operating contract for the vessel under construction has been entered into. However, the Company is in discussions with several oil companies regarding potential time char-ters. The Company’s aim was to enter into a long-term contract within 2008, however the revised ambition is to enter into a long-term contract before year end 2009.

8.2 Currency riskThe Company is to some extent exposed to changes

in the foreign exchange markets. All long term debt is in USD (USD denominated bonds) and the major part of the Company’s expenses is in USD. Some expenses are in NOK; however the Company has reduced most of the risk by entering into forward foreign exchange contracts.

8.3 Interest riskSimilarly the Company is exposed to changes in

the interest rate level, since 52 % of the Company’s debt has floating interest.

8.4 Credit riskThe risk related to opposite parties not having the means

to fulfill their obligations is seen as low, as the Company does not have unsettled claims. To reduce risks in relation to large suppliers’ delivery obligations the company has obtained performance guarantees from the relevant suppliers’ banks. The company has received a repayment guarantee from Bank of China in connection with the Construction Contract with Cosco shipyard. Set off agree-ments or similar financial instruments in order to minimize the credit risk have not been entered into by the Company.

Board of Directors’ report annual report 2008 maracc 15

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

Up-/downrigging when changing operation-mode is generally eliminiated Integration of Service-Equipment reduces

number of manhours significantly 10 knots transit speed35%

8.5 Liquidity riskAs at year end 2008, the Company has obtained

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

is more limited now than what was the case a year ago.From November 2009 and up until June 2010 the financing need is estimated to USD 190 million. The plan is to secure this through commercial banks and Eksportfinans ASA.

9. Annual results and disposalsThe Board suggests the following disposal of the annual

result in the Company: Uncovered loss: USD 6 570 106. The Company had no distributable reserve at the end of 2008.

Oslo, 27th May 2009

Øivind Lund Øyvind Jordanger Berit RynningChairman of the Board Board Member Board Member

Dionne Chouest Morten Ulstein Asle SolheimBoard Member Board Member Chief Executive Officer

16 maracc annual report 2008 The Board of Directors

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

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

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

Dionne Chouest

Board Member

Morten Ulstein

Board Member

Øivind Lund

Chairman of the Board

The Board of Directors

The Board of Directors annual report 2008 maracc 17

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

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

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

Øyvind Jordanger

Board Member

Berit Rynning

Board Member

Asle Solheim

Chief Executive Officer

Annual accounts

Annual accounts annual report 2008 maracc 19

Profit and Loss account Note 2008 2007In USD

Salaries 3 175 473 –

Other operating expenses 3,15 170 796 600 148

Other gains and losses (net) 7,13 5 814 343 -

Total operating expenses 6 160 612 600 148

Operating result -6 160 612 -600 148

Financial income and expenses

Other financial income - -

Net financial items - -

Result before tax -6 160 612 -600 148

Tax on ordinary result 5 409 494 -56 598

Result for the year -6 570 106 -543 550

Earnings per share 16 -0.44 -0.04

Diluted earnings per share 16 -0.44 -0.03

Transfers

Uncovered loss 11 -6 570 106 -543 550

Total transfers -6 570 106 -543 550

20 maracc annual report 2008 Annual accounts

Assets 31.12 Note 2008 2007

In USD

Fixed assets

Intangible assets

Deferred tax asset 5 440 140 849 634

Total intangible assets 440 140 849 634

Property, plant and equipment

Rig under construction 6,8,15 204 561 394 135 819 305

Total tangible assets 204 561 394 135 819 305

Financial fixed assets

Long term financial instruments 7, 17 - 2 777 048

Total financial fixed assets - 2 777 048

Total fixed assets 205 001 534 139 445 987

Current assets

Receivables

Other short term receivables 4, 17 986 374 865 746

Total receivables 986 374 865 746

Short term financial instruments 13, 17 - 505 665

Cash and cash equivalents 9,17 95 995 319 128 508 324

Total current assets 96 981 693 129 879 735

Total assets 301 983 228 269 325 723

Balance sheet


Equity and Liabilities Note 2008 2007

In USD

Equity

Paid in equity

Share capital 10,11,15 2 891 027 2 891 027

Share premium 11 58 951 535 58 951 535

Equity from convertion right 11 27 868 128 16 706 322

Total paid in equity 89 710 690 78 548 884

Retained earnings

Uncovered loss 11 -7 181 502 -611 395

Total retained earnings -7 181 502 -611 395

Total equity 82 529 189 77 937 489

Liabilities

Other long term liabilities

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

Total long term liabilities 206 663 550 186 038 411

Current liabilities

Accounts payable 4 726 231 809 493

Other short term debts 13 8 064 258 4 540 330

Total current liabilities 12 790 489 5 349 823

Total liabilities 219 454 039 191 388 234

Total equity and liabilities 301 983 228 269 325 723

Balance sheet

Oslo, 27th May 2009

Øivind Lund Øyvind Jordanger Berit Rynning Dionne Chouest Morten Ulstein Asle SolheimChairman of the Board Board Member Board Member Board Member Board Member Chief Executive Officer

22 maracc annual report 2008 Annual accounts

Cash flow statement Note 2008 2007

In USD

Cash flow from operating activities

Result before tax -6 160 612 -600 148

Decline in fair vaule call right and forwards 7,13 5 814 343 -

Changes in accounts payable * - -

Changes in other accruals * - 3 168 919

Net cash flow from operating activities -346 269 2 568 771

Cash flows from investing activities

Purchases of property, plant and equipment 6 -68 742 089 -135 819 305

Other investments 7 - -2 777 048

Changes in accounts payable and other accruals related to investments

* 4 788 408 809 493

Net cash flows from investing activities -63 953 681 -137 786 860


Note 2008 2007

Cash flows from financing activities

Proceeds from issuance of bonds (convertible and non-convertible) 8 20 625 139 186 038 411

Proceeds from issuance of equity - 60 870 472

Proceeds from issuance of convertible bonds (equity) 8, 11 11 161 806 16 706 322

Net cash flow from financing activities 31 786 945 263 615 205

Net change in cash and cash equivalents -32 513 005 128 397 116

Cash and cash equivalents at beginning of year 128 508 324 111 208

Cash and cash equivalents at end of year 9 95 995 319 128 508 324

Definitions

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

Notes annual report 2008 maracc 25

Maracc – Marine Accurate Well ASA is a public limited company incorporated and domiciled in Norway and OTC listed in Oslo. The address of its registered office is Lagerveien 23, 4033 Stavanger, Norway.

The financial statements have been prepared in accordance with simplified IFRS (International Financial Reporting Standards) pursuant to section 3-9 of the Norwegian Accounting Act and with the Directives of simplified IFRS specified by the Norwegian Ministry of Finance on 21th January 2008. This implies that estimates and measure ments follows IFRS, and that presentation and notes to the financial statement are in accordance with the Norwegians Accounting Act and generally accepted accounting principles in Norway. 1.1 Simplified IFRSThe Company has applied all relevant simplifications in regard to IFRS, including: Dividend is treated in accordance with the Norwegian Accounting Act and deviates form IAS 10 no. 12 and 13.

The cost method is applied for investments in associate companies and jointly owned assets, and deviates from IAS 28 and IAS 31.

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

1.3 Currency The financial statements are presented in “US dollars” (USD) which is the Company’s functional and presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

The assets and liabilities of non-USD currency are translated into USD at the rate of exchange as of the balance sheet date. Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the available-for-sale reserve in equity.

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

and judgments are continually evaluated and are based on historical experience and other factors, including expec-tations of future events that are believed to be reasonable under the circumstances. Changes in accounting estimates are accounted for in the same period as the change occurs. The changes concerns future periods, the effects of the changes will be spread throughout current and future periods.

The majority of the company’s estimates are related to the construction of the rig, its progression and any need for impairment.

1.5 Revenue recognitionThe Company recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity. As this is a start-up period for the Company, the Company does not have operating revenues in 2008 and 2007. Interest income is recognised on a time-proportion basis using the effective interest method.

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

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

Deferred tax is calculated as expected future tax rate of temporary differences and the tax effect of tax losses carried forward.

Deferred tax assets are recorded in the balance sheet when it is more likely than not that the tax assets will be utilized.

Taxes payable and deferred taxes are recognised directly in equity to the extent that they relate to equity transactions.

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

1 Accounting principles

26 maracc annual report 2008 Notes

in use. In assessing value in use, the discounted estimated future cash flows from the asset are discounted.

Property, plant and equipment under processing are classified as fixed assets.

As the Company is in a start-up period and all of the fixed assets are under processing, there are no deprecitations for 2008 and 2007.

1.9 Financial instrumentsIn accordance to IAS 39, the Company classifies its financial instruments in the following four categories: at fair value through profit or loss, loans and receivables, available for sale and other obligations, with the excep-tions described in note 1.1.

Financial instruments at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. Liabilities in this category are classifies as current liabilities.

Financial assets with specific or determinable cash flows that are not listed in an active market is classified as loans and receivables, with exceptions of instruments that the Company has classified as at fair value carried through profit or loss, or available for sale. Loans and receivables are carried at amortised cost using the effective interest method. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets.

All other financial assets are classified as available for sale. Assets classifies as available for sale is measured at fair value with changes in fair value recognised in equity and reversed to profit or loss at time of derecognition or impair-ment. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Financial obligations that are not held for trading and classified as at fair value through profit or loss are classi-fied as other liabilities. Other liabilities are carried at amortised cost using the effective interest method.

Holdings of own bonds are presented as net obligations.

1.10 Derivative financial instruments and hedging activitiesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising gain or loss depends on whether the derivative is designated

as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as either:(a) hedges of the fair value of recognised assets or liabilities

or a firm commitment (fair value hedge);(b) hedges of a particular risk associated with a recognised

asset or liability or a highly probable forecast transaction (cash flow hedge); or

(c) hedges of a net investment in a foreign operation (net investment hedge).

The entity has not applied hedge accounting.

1.11 Derivates financial instruments not used in hedging activitiesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.

An embedded derivative is separated and accounted for as a separate financial instrument provided that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, and a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the host contract is not accounted for at fair value. Embedded derivatives are classified both in profit and loss and on the balance sheet based on the derivatives’ underlying nature.

1.12 Impairment of financial assetsIntangible assets that have an indefinite useful life and goodwill are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Impairment of financial assetsThe Company assesses at each balance sheet date whether there is objective evidence that a financial asset classified as loans and receivables or available for sale or a group of financial assets classified as loan and receivable is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from


equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instru-ments are not reversed through the income statement.

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

Cash and cash equivalents, as defined for reporting purposes in the statement of cash flows, consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts connected to cash management activities.

1.14 EquityFinancial instruments are classified as debt or equity in accordance to the underlying economic reality.

Interest, dividend, gains or loss related to a financial instru-ment classified as debt are presenteted as cost or revenue. Distributions to bearers of financial instruments that are classified as equity are accounted directly towards equity.

Convertible obligations and similurar instruments, that includes both debt and equity elements, are divided into two components by emission, and accounted seperately as respectively debt and equity.

Cost of equity transactions:Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Other equity:(a) Fund of valuation varianceThe fund includes the unified net-change in fair value of financial instruments that is classified as available for sale, until investment is disposed or where it has been determined that the investement has no value. 1.15 Year-end provisionsA provision is accounted when the Company has obligation (legal og self-imposed) as a consequence of a former incident, it is probable (more likely than not) that an economic settlement will occur as a consequense of the obligation and the amount can be reliably measured. If the effect is substantial, the provision would be estimated by disconting expected future cashflows with a discount rate before tax that reflects the market price of cash and, if relevant, risks spesifically attached to the obligation.

1.16 Contingent liabilities and assetsContigent liabilities are not accounted in the financial statement. Substantial contigent liabilities, except contigent liabilities where the probability of the liabality is low, are reported.

Contigent assets are not accounted in the financial statement, but reported if there exists a certain probability that the Company will accrue an advantage.

1.17 Events after the balance sheet dateNew information after the balance sheet date concerning the Company’s financial standing is taken into account in the financial statement. Events after the balance sheet date that not affect the Company’s financial standing on the balance sheet date, but will affect the Company in the future are reported if it is considered substantial.


Auditor 2008 2007-Statutory Audit 27 490 5 822-Other assurance services 27 290-Tax advisory fee 27 290-Other advisory services 11 642Total fee of the auditor 82 070 17 464

VAT is not included in the fee specified above.

Specification of other operating costs 2008 2007Fee of the auditor 82 070 17 464Consultant's fee 25 205 321 829Legal costs 13 862 231 807Other 49 658 29 049Total 170 796 600 148

Specification of other gains and losses (net) 2008 2007Decline in fair value call right 2 777 048 0Forwards to fair value 3 037 295 0Total 5 814 343 0

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

The Company had no employees during 2008. The Board of Directors have received remunera-tion for their work amounted to USD 157 437 in 2008. Social expenses amounts to USD 18 036. There was no such remuneration in 2007. Salaries to leading personnelIn connection with hiring a CEO from another company, the Company has paid fees and travelling expenses amounted to USD 368 570 in 2008 and USD 188 360 in 2007. The expense has been capitalized as the expense is considered obtained as a part of acquiring fixed assets.

Management remunerationNo loans/securities have been granted to the CEO, chairman of the board or other related parties. There are no obligations regarding post employment benefits.

2008 2007Prepaid costs 780 000 705 882 Outstanding VAT 206 374 159 864 Total 986 374 865 746

Other short-term receivables

Segment information

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

2

3

4


Components of the Income Tax Expense 2008 2007Tax payable - - Changes in deferred tax -1 571 930 -849 634Changes in deferred tax to equity - 793 036Total income tax expense -1 571 930 -56 598

Tax base calculationProfit/loss before income tax -6 160 612 -600 148 Permanent differences *) 7 623 091 941 521 Permanent differences charged to equity - -2 832 585 Changes in temporary differences -21 381 242 -9 629 646 Basis for the tax expense of the year -19 918 763 -12 120 858

Tax payable (28%) of the tax base of the year

Temporary diefferences 31.12.2008 31.12.2007Fixed assets 31 010 888 9 629 646 Tax losses carried forward -32 582 818 -12 664 055 Total -1 571 930 -3 034 409 28 % deferred tax -440 140 -849 634

Deferred tax (asset) not in the balance sheet - - Deferred tax (asset) in the balance sheet -440 140 -849 634

Explanation why profit before tax differs from the amount that would arise using the 28% tax rate 2008 200728 % of profit before income tax -1 724 971 -168 041 Insufficient/excess provision last year - - Expenses not deductible for tax purposes 2 134 465 263 625 Differences arisen as a consequence of tax determined in accordance to NOK-accounts -27 971 Exchange differences activated deferred tax asset 1.1 -16 692 Reversal of impairment of deferred tax asset -107 520 Total income tax expense 409 494 -56 598

Effective tax rate in % **) -6.6 % 9.4 %

* ) Permanent differences consist of non deductible costs**) Tax expense related to profit before tax.

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

Tax 5


2008Heavy Well

Intervention UnitTotal

tangible assets

Acquisition cost at 01.01.08 135 819 305 135 819 305 Additions 47 360 847 47 360 847 Disposals - - Additions capitalized financial costs 21 381 242 21 381 242 Acquisition cost 31.12.08 204 561 394 204 561 394

Accumulated depreciation 31.12.08 - -Accumulated impairment loss 31.12.08 - - Reversed impairment loss 31.12.08 - -

Net carrying value at 31.12.08 204 561 394 204 561 394

Depreciation of the yearImpairment loss of the year - -

2007Heavy Well

Intervention UnitTotal

tangible assets

Acquisition cost at 01.01.07 - - Additions 120 846 728 120 846 728 Disposals - - Additions capitalized financial costs 14 972 577 14 972 577 Acquisition cost 31.12.07 135 819 305 135 819 305

Accumulated depreciation 31.12.07Accumulated impairment loss 31.12.07 - - Reversed impairment loss 31.12.07 - -

Net carrying value at 31.12.07 135 819 305 135 819 305

Depreciation of the yearImpairment loss of the year - -

Maracc has one Semi submersible Intervention Rig ‘Island Innovator’ under construction at the Cosco Shipyard Group Ltd. in China. The contractual obligation towards the yard is at USD 203 000 000 plus expected 10 % contract growth. In addition the Company has signed contracts with several subcontractors. Total contract obligations are estimated at approximately USD 450 000 000.

The rig is based on the GM 4000 design and is due to be completed and ready for operation by end of 2011. The rig is the first purpose built Well Intervention Rig and is prepared for the full range of services such as Coil Tubing and Through Tubing Rotary Drilling down to 3000 meters water depth.

The overall project progress has been satisfactory across the board with one exception. The deckbox fabrication at the Cosco Nantong Yard has fallen behind and impacting the delivery from the yard with approx. 7 months from the original schedule. Several causes have contributed to this delay and it is a mix between yard capacity, expanded workscope and knock on effects from other projects being late.

The progress of the pontoon and column fabrication at the Cosco Zhoushan Yard has developed satisfactorily and is now off the critical path.

Mating is now scheduled for March 2010 at the Quidong Yard and delivery from Cosco is 1st December 2010.

Tangible assets 6


Company Currency Book value Market valueRight of redemption of own bonds USD 0 0Total 0 0

Right of redemption own bonds and other financial assets 7

The topside delivery schedule from NOV and Nymo will be revised to suit new rig delivery from Cosco and installation of topside is scheduled to take place during the 1st half of 2011, with operations start at the end of 2011.

Maracc has established a comprehensive Site Team following all aspects of engineering, material and fabrication quality in China. Several external companies have been contracted to follow the various stages of production. Some of these companies were already established at the Cosco yards to follow other offshore projects, and therefore already has significant knowledge of the yard and associated work processes.

In 2008 capitalized financial costs includes capitalized interest on bond loans by a total of USD 28 792 303 (2007: USD 14 358 883). Rate of interest on the bond loans is shown in note 8 to the financial statements. Interest income on bank deposits has according to IAS 23.15 reduced capitalized financial costs by a total of USD 7 411 061 in 2008 (2007: USD 5 769 834) and thus net interest expenses are capitalized.

All expenses which are related to construction of the rig are capitalized. This includes management fee from Island Offshore Management AS. The management fee is mainly consisting of construction supervision. According to IAS 16.19 administration expenses and general service expenses are not capitalized.

As the rig is under construction there are no depreciations in either 2008 or 2007. Economical life for the rig is not yet estimated. The company will estimate economical lifetime of the rig at delivery.

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


2008 2007Bank deposits 95 995 319 128 508 324Short term investments 0 0Cash and cash equivalents in the balance sheet 95 995 319 128 508 324Bank overdraft 0 0Cash and cash equivalents in the cash flow statement 95 995 319 128 508 324

to the benefit of Cosco USD 39 000 000to the benefit of Nymo AS USD 4 250 500to the benefit of Vetco Grey AS USD 1 628 300to the benefit of Cameron USD 7 737 773to DNB NOR (future trade) USD 4 500 000Total USD 57 116 573

The company does not have credit facilities. Of the total bank deposits at a nominal value of USD 95 995 319, the following is restricted

There are information terms and general terms connected to the loans. The general terms connected to the bond loan at a nominal value of 120 MUSD is somewhat extended. The general terms of this loan includes prohibition of disbursement of dividends, repurchase of shares, or grant loans to the shareholders. The terms of this loan also includes prohibition of using pledged assets connected to the loan for other purposes. Regarding the convertible bond loans there are no pledges. For more details regarding the bond loans and loan terms, the loan contracts are available at www.stamdata.no.

Cash and cash equivalents 9

Bond loans 2008Nominal

valueBook value

Marketvalue

Nominal interest rate

Effective interest rate

Loan 1 120 000 000 120 000 000 36 752 3463m LIBOR

+5.0%3m LIBOR

+5.0%Holdings of own bonds (loan 1) -1 000 000 -945 280 -945 280

3m LIBOR +5.0%

3m LIBOR +5.0%

Net Loan 1 119 000 000 119 054 720 35 807 066Loan 2 (convertible) 80 000 000 68 524 948 20 410 123 9.0% 14.3%Loan 3 (convertible) 30 000 000 19 083 882 7 500 145 12.0% 25.4%Total 229 000 000 206 663 550 63 717 334

Bond loans 2007Nominal

valueBook value

Marketvalue

Nominal interest rate

Effective interest rate

Loan 1 120 000 000 120 800 833 116 528 3213m LIBOR

+5.0%3m LIBOR

+5.0%Holdings of own bonds (loan 1) -1 000 000 -927 958 -927 958

3m LIBOR +5.0%

3m LIBOR +5.0%

Net Loan 1 119 000 000 119 872 875 115 600 363Loan 2 (convertible) 80 000 000 66 165 536 64 742 447 9.0% 14.3%Total 199 000 000 186 038 411 180 342 810

Bond loans

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

2008 2007Debts secured by pledges 120 000 000 120 800 833

Pledged assets:Property, plant, and equipment 204 561 394 135 819 305Total 204 561 394 135 819 305

8


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

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

Share capital and shareholder information

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

10

The share capital consists of Shares Nominal value Registered in NOK Book value in USD

Shares 17 640 000 1 17 640 000 2 891 027Total 17 640 000 1 17 640 000 2 891 027

The largest shareholdings as at 31.12.08. Shares Ownership Voting rights

Island Offshore V AS 5 590 000 31.7 % 31.7 %JCE Group AB 2 066 000 11.7 % 11.7 %Trond Mohn 1 260 000 7.1 % 7.1 %Euroclear Bank S.A./N.V. ('BA') 1 200 000 6.8 % 6.8 %Morgan Stanley & CO INTL PLC 1 168 000 6.6 % 6.6 %Alpha Marine Services L.L.C 932 000 5.3 % 5.3 %Skagen Vekst 901 000 5.1 % 5.1 %Cheyne Global Catalyst 715 343 4.1 % 4.1 %Island Offshore Management AS 560 000 3.2 % 3.2 %Innovative Design Solutions AS 506 664 2.9 % 2.9 %Mancorp AS 506 664 2.9 % 2.9 %Barclays Bank PLC 504 000 2.9 % 2.9 %Naustneset AS 233 000 1.3 % 1.3 %Behrman Associates L.L.C 224 000 1.3 % 1.3 %Sneingen AS 200 000 1.1 % 1.1 %Island Offshore Invest DA 144 957 0.8 % 0.8 %Timetall Holding AS 80 000 0.5 % 0.5 %Hodne Shipping AS 70 000 0.4 % 0.4 %Alden AS 65 000 0.4 % 0.4 %Emar Invest AS 65 000 0.4 % 0.4 %Total 16 991 628 96.3 % 96.3 %Others (shareholders < 1%) 648 372 3.7 % 3.7 %Total shares 17 640 000 100.0 % 100.0 %

Shares owned by Members of the board and CEOMorten Ulstein See below Dionne Chouest See below Øyvind Jordanger 30 536 Asle Solheim 80 000 Total 110 536


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

Share capital

Share premium

Equity from conversion right

Uncovered loss Total

Equity per 31.12.2006 179 054 - - -67 845 111 209 Result for the year -543 550 -543 550 Issue of shares 2 711 973 58 951 535 61 663 508 Equity from conversion right 16 706 322 16 706 322 Equity per 31.12 2007 2 891 027 58 951 535 16 706 322 -611 395 77 937 489 Result for the year -6 570 106 -6 570 106 Issue of shares - Equity from conversion right 11 161 806 11 161 806 Equity per 31.12 2008 2 891 027 58 951 535 27 868 128 -7 181 501 82 529 189

Equity11

Pensions

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

Other financial instruments

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

12

13


Financial risk

Market riskThe Company is exposed to market risk since no long-term operating contract for the vessel under construction has been entered into. However, the Company is in discussions with several oil companies regarding potential term charters. The company’s aim was to enter into a long-term contract within 2008, however the revised ambitions is to enter into a long-term contract before year end 2009.

Currency riskThe Company is to some extent exposed to changes in the foreign exchange markets. All long term debt is in USD (USD denominated bonds) and the major part of the Company’s expenses is in USD. Some expenses are in NOK; however the Company has reduced most of the risk by entering into forward foreign exchange contracts.

Interest riskSimilarly the Company is exposed to changes in the interest rate level, since 52 % of the Company’s debt has floating interest.

Credit riskThe risk related to opposite parties not having the means to fulfil their obligations is seen as low, as the Company does not have unsettled claims. To reduce risks in relation to large suppliers’ delivery obligations the company has obtained performance guarantees from the relevant suppliers’ banks. The company has received a repayment guarantee from Bank of China in connection with the Construction Contract with Cosco shipyard. Set off agreements or similar financial instruments in order to minimize the credit risk have not been entered into by the Company.

Liquidity riskAs at year end 2008, the Company has obtained financing of approximately 50 % of the total project costs (construction-, supervision- and financing costs during the construction phase as well as mobilization / start up costs). The Company has sufficient cash reserves until the end of November, 2009 at which point in time additional financing needs to be secured. Given the general economic recession and the crisis in the financial markets, the availability of financing is more limited now than what was the case a year ago. Please see the board of directors annual report for further information.

14


Related parties

All transactions with related parties is based upon market terms.

The company has been part of the following transactions with related parties:

Island Offshore Management ASIsland Offshore Management AS (IOM) owns 3.2 % of the shares in Maracc ASA. IOM has an agreement of delivering services connected to administration and management, supervision of construction and operation. Within the construction period the agreed upon contract rate is fixed at 15.6 MUSD, while there is agreed a fixed and a variable rate for the operating period.

Island Offshore V ASIsland Offshore V AS (IOV) owns 31.7 % of the shares in Maracc. IOV concluded an investment agreement with Maracc dated 26.01.2007 concerning purchase of shares in the company. The agreement gave IOV the right to purchase 560.000 shares by the first issue in February 2007 at a price of NOK 1 per share. The agreement also gave IOM a equivalent right to purchase shares in the company. In return IOV is obliged to subscribe for shares from 25 to 30 % in the subsequent issue to a price above NOK 20 per share.

Jordanger Invest ASThis company is owned 100 % by Øyvind Jordanger, a member of the board in Maracc.

Healey Consulting Services ASThis company is owned 100 % by Nigel John Rose, a shareholder in Maracc.

Global Maritime ASThis company is owned by Innovative Design Solutions AS where the former member of the board Jan Vatsvåg is CEO and owner. Jan Vatsvåg resigned as a member of the board in Maracc in 2007.

Island Offshore Subsea ASThe Company is owned 55 % by Island Offshore Management AS.

15

Purchase of services 2008 2007Management and supervision of construction via IOM 6 101 476 4 132 827Engineering services from Island Offshore Subsea AS 25 202 0Member of the board Øyvind Jordanger through Jordanger Invest AS 29 519 85 714Shareholder Nigel John Rose, through Healey Consulting Services 0 53 894Member of the board Heidi Baugstø through Mancorp AS 0 146 754Rent and engineering services from Global Maritime AS 580 710 350 601Total 6 736 908 4 769 790

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


Earnings per share

Earnings per share is calculated by dividing the result attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is calculated by taking into account the number of shares connected to convertible bonds as if conversion has occurred. There are no expenses solely connected to the convertible bonds in the financial statement. The expenditures connected to the convertible bonds are capitalized as part of fixed assets (see note 6).

16

2008 2007Financial assets Category Book value Fair value Book value Fair value

Receivables 1) 986 374 986 374 865 746 865 746Call rights 2) 0 0 2 777 048 2 777 048Bank deposits 2) 95 995 319 95 995 319 128 508 324 128 508 324Total 96 981 693 96 981 693 132 151 118 132 151 118

2008 2007Financial liabilities Category Book value Fair value Book value Fair value

Accounts payables 1) -4 726 231 -4 726 231 -809 493 -809 493Accrued interest 1) -5 019 562 -5 019 562 4 050 000 4 050 000Currency futures 2) -3 037 295 -3 037 295 -505 665 -505 665Bond loans, se note 8 for spesifications 3) -206 663 550 -63 717 334 -186 038 411 -180 342 810Total -214 720 407 -71 774 191 -182 494 076 -176 798 475

Financial assets and liabilities17

2008 2007Result for the year attributable to shareholders -6 570 106 -543 550Weighted average number of ordinary shares 15 014 904 15 014 904Weighted average number of ordinary shares (incl. conversion right) 32 964 852 20 796 668Earnings per share -0.44 -0.04Diluted earnings per share -0.44 -0.04

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

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

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

To the Annual Shareholders' Meeting of Maracc - Marine Accurate Well ASA Auditor’s report for 2008 We have audited the annual financial statements of Maracc - Marine Accurate Well ASA as of December 31, 2008, showing a loss of USD 6 570 106 for the company. We have also audited the information in the directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss. The annual financial statements comprise the financial statements of the company. The financial statements of the company comprise the balance sheet, the statements of income and cash flows and the accompanying notes. Simplified IFRS according to the Norwegian accounting act § 3-9 have been applied in the preparation of the financial statements of the company. These financial statements are the responsibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors. We conducted our audit in accordance with the laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by The Norwegian Institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and auditing standards an audit also comprises a review of the management of the Company's financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion. In our opinion, • the financial statements of the company have been prepared in accordance with the law and

regulations and give a true and fair view of the financial position of the Company as of December 31, 2008, and the results of its operations and its cash flows for the year then ended, in accordance with simplified IFRS according to the Norwegian accounting act § 3-9

• the company's management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway

• the information in the directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss are consistent with the financial statements and comply with the law and regulations

Without qualifying our opinion above we would like to emphasize that completion of the construction contracts demands new equity and/or debt financing. We refer to further discussion in the notes to the financial statements and in the directors’ report. Bergen, May 27, 2009 PricewaterhouseCoopers AS Bjørn Gravdal Roald Viken State Authorised Public Accountant (Norway) State Authorised Public Accountant (Norway) Note: This translation from Norwegian has been prepared for information purposes only.

38 maracc annual report 2008 Auditor’s report

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

40 maracc annual report 2008 Corporate Governance Report

Corporate Governance Report

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

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

2. OperationsMaracc is currently developing a special purpose and first of its kind semi-submersible rig for heavy well intervention operations and increased oil recovery. The Company’s business is defined in § 3 of the Articles of Association of the Company, which reads: ‘The Company’s objective is to construct, market, sell and operate vessels for supporting subsea operations and accommo-dation connected to the oil industry, including to participate in other companies, acquisition and sale of property and what is connected with this.’

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

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

4. Equal treatment of shareholders and transactions with close associatesMaracc’s shares are all of one class with identical voting rights. All shares are equal. A Management Agreement and a Construction Supervision Agree-ment is entered into between Maracc (the Company) and Island Offshore Management AS (the Manager). The Manager owns 3.2% of the Com- pany’s shares – under which the Company has requested the Manager to provide it with certain management services, including construction supervision, technical operation of the rig, commercial management ser-vices/marketing related to the rig, corporate governance services, investor relations, Budgets – Reports, Accounting, auditing, company re-cords, stock exchange, government relations – taxes, finance and treasury functions. The management fee is based on market terms. An Investment Agreement is

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

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

6. General meetingsThe Annual General Meeting is the forum where the Company’s share-holders participate in the Company’s major decisions. According to the Norwegian law the general meeting

Corporate Governance Report annual report 2008 maracc 41

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

7. Nomination committeeDeviation from the Code of Practice: Maracc ASA has not established a nomination committee.

8. Corporate assembly and board of directors: composition and independenceCorporate assembly is not applicable nor binding to the Company since there are no employees. The Board comprises 3-7 directors in accordance with the Articles of Association, and currently it consists of five members, three men and two women. All directors are appointed by the shareholders at the annual general meeting, and are elected for two years terms. The chairmen of the Board was appointed by the share-holders meeting. The Board does not include representatives of the Company’s executive management. The Board’s task is regulated by Norwegian law and includes the overall administration and manage-ment of the Company. Members of the Company’s management are not members of the Board, although the Company’s management does attend Board meetings.

9. The work of the Board of DirectorsThe Board meetings are held six to eight times per year on a regular basis, and additional meetings are called as required. The Board of Directors does prepare a meeting plan within January each year, of the ordinary Board meetings for such year. Board meeting agendas are set by the Chairman of the Board in consultation with the CEO.

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

10. Risk management and internal controlThe Board, in conjunction with the management, evaluates the risks in- herent in the business operations of Maracc. Currently these risks are limited to the construction and financing of one intervention rig. The risks are managed through control systems which carefully handle the supervision of the construction process and the safety reporting systems at yard. Construction supervision and business management services are taken care of by Island Offshore Management AS through a Management Agreement (full service provider). Maracc may terminate the agreement in the event of change of control occurring in Island Offshore Management or Island Offshore, or in case Island Offshore reduces its ownership in Maracc to below 10% of the share capital. The Board receives updated cash flow statements in every ordinary Board meeting, and has close follow- up discussions with the management between the meetings as needed. The Board can raise questions with regard to financial reporting in the annual meeting with the auditor. The Board is also presented financial statement on quarterly bases which are carefully reviewed with ma- anagement and the external auditors.

11. Remuneration of the Board of DirectorsNone of the Board members have other assignments in Maracc ASA except for the position of being a Board member. The general meeting approves the remunerations paid to the members of the Board of Directors annually.

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

13. Information and communicationsMaracc ASA does openly provide shareholders and the market with relevant information about its business and corporate governance practices, to assist investors in making informed decisions about their interest in the Company. The Company’s objectives are to ensure equal treatment of all sharehold-ers and to provide balanced, complete and correct information regularly to all shareholders and bondholders, financial analysts, media and other interested parties. Information about the Company is published to the Company’s website www.maracc.no.

14. Take-oversThe Company’s share is publicly traded on the OTC list. Island Offshore Man-agement may terminate the manage-ment agreement in the event of change of control occurring in Maracc. Given the current shareholders structure the likelihood of a takeover bid being made for the Company is regard-ed as small. The Board has therefore not drawn up any main principles for how it would act in the event of a take over bid being made. Articles of association providing for a mandatory offer obligation triggered at 40% in accordance with the Norwegian Securities Trade Act.

15. AuditorPriceWaterhouseCoopers AS is respon-sible for the financial auditing of the Company. The auditor is present during the board meeting that deals with the annual accounts. The Board can meet auditors without the management being present if this so desired.

42 maracc annual report 2008 Shareholder Information

Shareholder Information

Maracc ASA was founded in 2006 and listed on the OTC list on the Oslo Stock Exchange in February 2007. The shares of Maracc are all of one class with identical voting rights. All shares are equal.

As Maracc is within the establishment phase, dividends will not be considered in the short term. The Company’s dividend policy will be re-evaluated once the company is generating positive cash flow and is able to maintain compliance with its financial covenants.

The Company carried through an Equity issue in 2007 which brought in 60,9 USD million, and furthermore borrowed USD 200 mill in the Bond market in 2007 and USD 30 mill in 2008. The purpose of the company’s capital increase has been to finance the Company’s first Semi Submers-ible Rig, which is under construction at Cosco›s Zhouchan and Nantong shipyard in China. The Company needs to secure an additional USD 270 mill to fulfil the financing of the construction project. Export Finance and GIEK is expected to contribute, subject to one or more commercial banks committing a portion of the additional funding needed.

The 20 largest shareholders of Maracc held 96,3 % of the outstanding shares by year end 2008, and approximately 27,1 % of the shares was owned by investors located outside Norway. The largest shareholder is Island Offshore V AS, which holds at date 5 590 000 shares ( 31,7 %).

At December 31, 2008 the share price was NOK 3,5, which corresponds to a decrease of 87,2 % from 1st January 2008.

Information about the Company is published to the Company’s website www.maracc.noand under the Company’s ticker-code MARA on www.newsweb.no.

DefInItIOn:

MArket CApItALISAtIOn =

tOtAL SHAreS* SHAre prICe

At 31.12.2008

17 640

3.5

61 740

28.0

3.5

17.64 mill

SHAre CApItAL

(NOK 1 000)

MArket prICe 31.12.2007

(NOK)

MArket CApItALISAtIOn

(NOK 1 000)

SHAre prICe HIGH

(NOK)

SHAre prICe LOw

(NOK)

AVerAGe nuMber

Of OutStAnDInG SHAreS

trADeD VOLuMe per quArter 2008

SHAre prICe DeVeLOpMent

Q1

01.0

1.0

8

20.0

2.0

8

10.0

4.0

8

30.0

5.0

8

19.0

7.0

8

07.0

9.0

8

27.1

0.0

8

16.1

2.0

8

Q2 Q3 Q4

Volume2 000 0001 800 0001 600 0001 400 0001 200 0001 000 000

800 000 600 000400 000200 000

0

NOK 130.0

25.0

20.0

15.0

10.0

5,0

0

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Maracc Annual Report 2008

Documents

Transcript of Maracc Annual Report 2008