Spike Exploration Annual Report 2013

EMPOWERED TO LOOK – SKILLED TO FIND

2013 ANNUAL REPORT


CONTENT—

ABOUT SPIKE EXPLORATION 3

MILESTONES 4

KEY FIGURES 8

LICENCES 9

THE CEO'S STATEMENT 11

MANAGEMENT TEAM 12

OIL AND GAS DISCOVERED IN FOUR WELLS 13

PORTFOLIO 16

HSEQ 20

CORPORATE GOVERNANCE 22

FINDING THE RIGHT MATCH 25

THE BOARD 29

CHAIRMAN OF THE BOARD 30

BOARD OF DIRECTORS' REPORT 32

FINANCIAL STATEMENT 38

NOTES 43

AUDITOR'S REPORT 70

Success is never guaranteed, and never comes easy. With that in mind, we intend to maintain the same humble and hardworking approach that has brought us the good results we are happy to share in this report.—BJØRN INGE TØNNESSEN, CEO

2013 ANNUAL REPORT 5 INTRODUCTION

Take several hundred million years of geology, condense your understanding of it into five years of work, make money and have fun – that is the central idea behind Spike Exploration, a concept conceived, born, and living on the fast track.

—Spike Exploration was established in 2012 by CEO Bjørn Inge Tønnessen, VP Exploration David Poole, CFO Harald Grøsfjeld, VP Walter Sognnes, and Chief Geologist Tor Arne Hansen. This group of seasoned oil and gas veterans believed it was possible to acquire good exploration assets, both in the market and through licensing rounds, and find plenty of oil and gas.

The business model for Spike was to quickly establish a pure exploration company with sufficient means to build up significant assets, and find enough oil to turn a profit within a five- to six-year timeframe. Seeking to maximise the chances for success, Spike in 2013 determined to focus their activities on the Norwegian Continental Shelf.

GET THE RIGHT FUNDINGThe Spike Exploration adventure is not cheap, and not without risk. Spike found its benefactor in HitecVision, who are investing up to USD 300 million in the effort, giving Spike the means with which to drill between 20 and 30 wells over the span of the next four to six years.

HitecVision has done this before, so they bring with them considerable experience and competence in the oil and gas industry, and they are seasoned enough to know that the Spike founders are capable of delivering.

FIND THE RIGHT PEOPLEIn order to achieve their goals, Spike Exploration has to be an attractive partner for other oil and gas companies, and they have to convince the Norwegian authorities of their competence, in order to qualify for license participation and operator status. The way to do that is simply to put together a strong team, and that is what Spike Exploration has done. Together, the Spike team holds hundreds of years of exploration experience, most of it concentrated within the subsurface disciplines, complemented by financial, transactional, operational, HSEQ and managerial expertise.

Spike employees are empowered to make decisions, and willing to take responsibility. The team of experienced explorationists are encouraged to use their insight to challenge established truths and try new ideas in ways that would be unacceptable in a typical oil major. Adding to their motivation, Spike employees are offered to acquire shares in the company, a key factor in Spike’s ability to recruit experts.

DO THE RIGHT THINGSpike Exploration believes that starting off on the right foot gives the venture the best possible chance to achieve its ambitious goals. To that end the founders defined the company’s core values early in the process, sticking to robust ethical and business principles, and values that serve to keep the enterprise on track:

INTEGRITYWe practice openness and honesty in all our relationshipsWe treat people with respectWe follow rules and regulations

KNOWLEDGEWe base our business decisions on knowledgeWe build knowledge and develop competence systematicallyWe use and share information prudently

ENERGYWe devote our energy to value creationWe pursue opportunity and mitigate riskWe stay motivated and have fun

ABOUT SPIKE EXPLORATION—Empowered to look – skilled to find

6 SPIKE EXPLORATIONMILESTONES

MILESTONES—

2012

2013

HitecVision commits up to USD 300 million in Spike

JUN

E 2

01

2

Spike acquires15% in PL586

OC

TOB

ER

20

12

Spike acquires 10% in PL299 and 10% in PL590

MA

Y 2

01

3

Spike acquires 30% in P1214 and P1892 (Cairngorm) UKCS

JUN

E 2

01

3

A team of 20 experiencedpeople recruited

SE

PTE

MB

ER

20

12

Spike acquires another 15% in PL586

AP

RIL

20

13

Spike acquires 15% in the UKCSproducing field Athena

MA

Y 2

01

3

Spike acquires 15% in PL645 and 10% in PL475

AU

GU

ST

20

13

Spike prequalifiedas licensee on NCS

AP

RIL

20

13

2013 ANNUAL REPORT 7 MILESTONES

2014

Bridge acquisitioncomplete

Pil discovery

NO

VE

MB

ER

20

13

MA

RC

H 2

01

4

Spike acquires 30% in PL230from Statoil

DE

CE

MB

ER

20

13

Four APA2013awards

JAN

UA

RY

20

14

Spike swapsinto PL722

Solberggas/condensatediscovery

AP

RIL

20

14

AP

RIL

20

14

Cairngormdiscovery

AP

RIL

20

14

New integratedorganisation

Early participant in Barents Southeast seismic

DE

CE

MB

ER

20

13

DE

CE

MB

ER

20

13

JAN

UA

RY

20

14

Minor oildiscovery inNovus

Spike prequalifiedas operator on NCS

MA

RC

H 2

01

4

8 SPIKE EXPLORATIONMILESTONES

2013 ANNUAL REPORT 9

The Pil discovery is potentially a company maker, and it serves as ‘proof of concept’ for Spike.

—DAVID POOLE, VP EXPLORATION

MILESTONES

10 SPIKE EXPLORATION

KEY FIGURES—

GROUP 2012 GROUP 2013

APRIL 2014

Licences # 1 19 23

Proven and Probable reserves million boe 0 1 1

Contingent Resources million boe 0 18 57

Prospective Resources - Risked million boe 0 152 204

Wells drilled * # 0 2 4

Firm wells in drill queue ** # 0 7 5

Net Risked Resources targeted in drill queue million boe 0 61 107

Employees # 19 36 32

* Excluding sidetracks

** Wells in 2013 year-end drill queue that are planned to be drilled during the period 2014–2015

GROUP 2012 GROUP 2013

Total assets 11 043 417 481

Oil and Gas properties – 21 474

Capitalised exploration and acquisition cost – 127 822

Cash and cash equivalents 1 423 26 905

Total equity 8 921 140 174

Revenues from crude oil and gas sales – 19 579

Profit/loss (–) before income tax –6 582 –74 430

Net profit/loss (–) –2 949 –20 713

OPERATIONAL

FINANCIAL (USD MILLION)

KEY FIGURES

Total assets Oil / gas properties Cash / cash equivalents

10K 5K 5K

////K 10K 10K

200K 15K 15K

400K 20K 20K

500K

USD USD USD

25K 25K

0K 0K 0K

2012 2012 20122013 2013 2013


LICENCES—As of end April 2014

LICENCE FIELD / DISCOVERY / PROSPECT WI% OPERATOR STATUS

UK NORTH SEA

P1214 / P1892 Cairngorm 30.00 % EnQuest Suspended well

P1293 Athena 15.00 % Ithaca Producing field

NORWEGIAN NORTH SEA

PL299 Kark 11.00 % Talisman Evaluating

PL494 / B / C Heimdalshø 30.00 % Det norske Firm well Q3.14

PL617 Eidsvoll 15.00 % Ithaca DoD 02. 15

PL623 Walnut 33.00 % Premier DoD 08. 14

PL457 Asha 20.00 % Wintershall Discovery

PL504 BS /CS Brandhaug 12.14 % Det norske Evaluating

PL027 ES Iving 10.00 % Det norske Evaluating

PL737S Slåtterøy 30.00 % Dana DoD 01.16

PL629 Cornfred 40.00 % Centrica DoD 08.14

PL248C Grosbeak 10.00 % Statoil Discovery

PL554 /B /C Garantiana 20.00 % Total Firm well Q2.14

PL748 Oftenåsen 20.00 % Det norske DoD 02.15

NORWEGIAN SEA

PL511 Foxy Lady 7.50 % Wintershall DoC 07.14

PL586 Pil 30.00 % VNG Discovery

PL475 /D Rodriguez/Solberg 10.00 % Wintershall Discoveries

PL590 /B Sierra 10.00 % North Energy DoD 08. 14

PL690 Spinell North 40.00 % Bayerngas DoD 02. 15

PL645 Novus 15.00 % Faroe Discovery

BARENTS SEA

PL230 Saturn 30.00 % Statoil Firm well

PL722 Inca 15.00 % GdF Suez DoD 06.16

Source of licences Number of licencesDistribution of licences

Licence awards

Farm-ins and acquisitions

North Sea Norwegian Sea

Barents Sea

5

10

15

20

0

2012 2013 2014until April

20

10

15

20

25

5

0

2012 2013 2014until April

15

6

2

LICENCES

2013 ANNUAL REPORT 13 THE CEO REPORT

With the accomplishments of 2013, Spike accelerated its growth and is now ahead of schedule.

—2013 was the year that Spike Exploration began to deliver results. From an already fast start in 2012, Spike picked up the pace in 2013, achieving at a rate generally expected of more established companies. Prequalifying in April 2013 as a licensee on the NCS was an early major milestone, though Spike had already entered into an agreement for the first exploration licence acquisition in late 2012. In July 2013, Spike spudded its first well. Though some initial results in 2013 were disappointing, sticking to our game plan proved to be fortuitous.

The best example of this was perhaps the decision to drill a play on PL586 that led to the Pil discovery in early 2014, a find with commercial potential that could in itself ensure the success of Spike.

The acquisition of Bridge Energy in November was another major move for a young Spike. While the purchase added valuable assets to the Spike portfolio, Bridge had an experienced team as well, and most of them have chosen to stay on and invest in Spike's future. The result is two good teams that have merged into an even better one.

We feel the integration of so many skilled Bridge employees is confirmation of Spike's ability to attract and retain talent. We were initially able to recruit in a tough market, and we believe that was due to the combination of energy, expertise and opportunity that Spike could offer. Reflecting this, Spike now employs more than 30 professionals with an average of 23 years of industry experience from 33 different companies, giving us diversity and maturity beyond our years, and ensuring a dynamic and inspiring working environment.

For our efforts in 2013, Spike was recognized as the 'E&P Newcomer of the Year' at the 2014 Gullkronen Awards.

We believe the jury´s assessment reflects Spike´s dedication to achievement in all facets during 2013:

"The winner has already managed to make an impact on the Norwegian E&P landscape. It has secured a strong financial backing from a professional investor and has also built a strong organisation. The jury is particularly impressed with the winner’s business development activities, which have demonstrated great creativity and agility."

While we appreciate the recognition, Spike is keenly aware of the high risk inherent in the oil and gas exploration business. Success is never guaranteed, and never comes easy. With that in mind, we intend to maintain the same humble and hardworking approach that has brought us the good results we are happy to share in this report.

Looking forward, Spike will continue to strengthen our portfolio in Norway, currently with the bulk of activity in the North and Norwegian Seas, while building up our assets in the highly promising Barents Sea region.

The ambitious 2014 drilling program is another reflection of Spike´s capabilities, with six firm exploration and appraisal wells. In addition Spike will expand farm-in and licence round activities in order to continue to grow resources and add value.

With the accomplishments of 2013, Spike accelerated its growth and is now ahead of schedule. We intend to keep up that pace, turning our expertise and resources into assets, while fulfilling our responsibilities to employees and the environment.

We are happy to have our first full year of results in the books, and look forward to an even stronger year in 2014.

Bjørn Inge Tønnessen CEO Spike Exploration

THE CEO'S STATEMENT—Bjørn Inge Tønnessen


MANAGEMENT TEAM—

DAVID POOLEVP EXPLORATION / DEPUTY CEO

PER TORFINN KNUDSENVP BUSINESS DEVELOPMENT

BJØRN INGE TØNNESSENCHIEF EXECUTIVE OFFICER

WALTER SOGNNESVP & ADVISOR TO CEO

HARALD GRØSFJELDCHIEF FINANCIAL OFFICER

TROND GRAVEMVP OPERATIONS & HSEQ

MANAGEMENT TEAM

Pho

to: PG

S Med

ia Gallery


PIL IN PL586 ON THE NCSThe Pil well 6406/12–3S is located in PL586 offshore Mid-Norway, where Spike holds a 30% working interest in March 2014. The well encountered a gross 226m hydrocarbon-bearing reservoir section in March 2014, with approximately 135m of oil and 91m of gas in mid-late Jurassic sandstones with very good reservoir properties. An extensive data acquisition programme has been carried out in the well, including a successful production test. The production rate was approx. 6700 barrels of oil equivalent through a 56/64 inch choke. The test showed good flow properties and the gas/oil ratio was 853 scf/stb. Preliminary estimates place the size of the discovery at between 50 and 170 million barrels of oil equivalents, mainly light oil (estimate announced by operator and NPD). A first sidetrack has increased the lower number, while a second sidetrack is drilled towards the end of 2nd quarter of 2014. Considerable additional volumetric potential exists within the licence and the operator has already started the planning for new exploration wells in PL586 in 2015.

NOVUS IN PL645 ON THE NCSSpike holds a 15% interest in PL645 where the Novus well 6507/10–2S encountered a 12.5m oil column and a 12m gas column in the Middle Jurassic Garn formation, with thicker reservoir rocks and better reservoir quality than expected. Preliminary estimation of the size of the discovery is between 6 and 16 million barrels of recoverable oil equivalent. The well result will be used to refine the geological model and de-risk additional prospects and leads in the licence for potential future drilling.

OIL AND GAS DISCOVERED IN FOUR WELLS

SOLBERG IN PL475 ON THE NCSIn PL475 offshore Mid-Norway, where Spike holds a 10% working interest, the Solberg well 6407/1-7 plus a sidetrack 6407/1-7A have been completed. The wells were drilled about 8km northeast of the Tyrihans field and 5km northeast of the 6407/1-6S gas/condensate discovery. The preliminary resource estimate for the Solberg discovery within PL475 is in the range 6 to 25 million barrels of oil equivalents, whereof 1 to 5 million barrels is condensate. In addition, the revised preliminary resource estimate for the Rodriguez discovery within PL475 is in the range 6 to 38 million barrels of oil equivalents. The combined current resource estimate in PL475 is between 12 and 63 million barrels of oil equivalents, mainly gas.

CAIRNGORM IN P1892/1214 ON THE UKCSCairngorm appraisal well 16/3d-16z, located in licence P1892 in the UK North Sea, encountered the expected fractured granite basement reservoir target and was suspended. Spike holds a 30% working interest in the license. Current analysis of data obtained suggests relatively good porosity development for comparative reservoirs, with indications of moveable hydrocarbons over approximately 53m. Combined with the results of vintage well 16/3a-11z located to the north-west and available seismic data, early suggestions are that the Cairngorm structure may have a total hydrocarbon column of approximately 243m. Well 16/3d-16z is suspended with the intention for the group to return to the location for testing at a subsequent date.

2013 ANNUAL REPORT

North Sea

Norwegian Sea

OIL AND GAS DISCOVERED IN FOUR WELLS

We in Spike are very pleased to see that our exploration efforts are showing positive results – the team has worked hard to achieve this. The Pil discovery is excellent, with an exciting upside – we are very much looking forward to exploring the full potential of that licence. Furthermore, Spike has built a significant licence portfolio on the Norwegian Continental Shelf. Spike’s dedicated search for oil and gas on the Norwegian Continental Shelf will continue in the years to come.

—BJØRN INGE TØNNESSEN, CEO

When we were planning these four wells in 2013, we knew that they were going to define Spike, one way or the other. When all four came in with discoveries, it confirmed our exploration strategy and had a tremendous energising effect on the organisation. Confidence is high in Spike right now.

—DAVID POOLE, VP EXPLORATION

Solberg

Cairngorm

Novus

Pil

17


PORTFOLIO —David Poole on exploration strategy, licences and resources

Spike focuses on building a strong portfolio on the Norwegian Continental Shelf through a clear exploration strategy. This implies staying within the prolific hydrocarbon generating areas of the shelf, focusing on selected play models and building core areas where we are able to dive deeper into the data generating new ideas. To be able to deliver this strategy, a high quality database and talented and experienced people are prerequisites. Spike now has in excess of 20 G&G staff located in Stavanger and Asker and has access and commit-ments to vast amounts of state of the art 3D seismic data.

Spike has a total of 23 exploration licences located in the UK and Norwegian North Sea, Norwegian Sea and Barents Sea.

UK LICENCESP1214 and P1892 were farmed into through a deal with Enquest where we hold a 30% equity interest in each licence. The licences are located on the Fladen Ground Spur. The Cairngorm discovery is located up dip from the Brae/Miller/Kingfisher oil fields and comprises of a four way dip closure with eroded and fractured granites forming the reservoir immediately beneath the BCU. Upside potential is on the basement flanks due to enhanced fracturing and deposition of granite wash onlapping potential Upper Jurassic shoreface sediments as well as a potential deeper contact in the Granite reservoir. The Cairngorm appraisal well was spudded in December 2013 with the aim to test commerciality and also a deeper upside contact. The well encountered 55 metres of pay with an oil water contact at 2446m TVDSS, which was close to the anticipated contact in the discovery well 16/3a-11z. Technical evaluation of the discovery is ongoing and the preliminary mean reserves estimate is 16 million boe. The well is currently suspended, awaiting testing.

NORWEGIAN NORTH SEASpike currently holds three licences in the central Graben area;PL299 (10%, Frode), PL494 (15%, Heimdalshø) and PL617 (15%, Toni). The Upper Jurassic play is the focus on all three licences. The Frode exploration well tested Upper Jurassic Ula Formation sandstones on a downthrown fault block on the Steinbit Terrace. The well encountered more than 250 metres of excellent sand of Upper Jurassic age, however, water-wet.

The licence has subsequently been partly relinquished; the remaining western part contains part of the Kark prospect. Spike has 10% equity in PL299.

PL494 and PL617 are located on the western flank of the Mandal high. The Heimdalshø well will be spudded 3Q 2014 testing Upper Jurassic sandstones on a fault closure on the downthrown Piggvar Terrace.

Spike holds currently six licences on the western flanks of the Greater Utsira High area: PL623 (20%), PL457 (20%, Asha), PL504 (12.143%), PL27ES (10%), PL737 (30%), and PL629 (40%).

PL623 contains the Wildcat prospect which straddles the UK/Norwegian border. Further upside in the licence lies in the Hugin formation play in the Wishbone and Walnut prospects. The licence has a drill or drop in 2014.

PL457 is located partly on the Gudrun Terrace and partly on the Utsira High. The Asha well was drilled by Wintershall on the licence in 2012 discovering oil in the both the Hugin and Sleipner formations. The discovery is an extension of the Ivar Aasen field and a unitization agreement is negotiated for the field. Initial indications of reserve estimates quoted were between 25 and 35 mmboe of recoverable resource. A two well campaign during the 2Q of 2013 was completed to test the upside and further delineate the discovery. Unfortunately both the Asha East and Amol prospects had negative outcomes and the reserve estimate for Asha remains unchanged. The licence contains further upside in the Mukta and Aglaja prospects.

PL504 and PL027S are located on the northern part of the Utsira High and contain the Brandhaug and Iving prospects. A technical evaluation is ongoing to evaluate the potential of the licences before further commitments are taken.

PL629 and PL737S are located on the Heimdal Terrace to the North of the Utsira High. Both licences are primarily testing the Paleocene play in the area with the Cornfred and Northfred prospects as the main targets. A technical evaluation is ongoing and PL629 has a drill or drop in August 2014. PL737 was obtained through the 2013 APA licencing round with a drill or drop in 2016.

PORTFOLIO


Norwegian Sea North Sea Barents Sea

Contingent resources and total risked prospect book (mill boe)

Norwegian Sea North Sea Barents Sea

Current risked 2014 & 2015firm and probable well program Contingent resources

107mill boe

19

51

37

510

42

261 mill boe

107

57

97

Firm and probable wells

Prospects*

Contingent resources

* includes existing Spike prospects

with larger than 50% probability

that a drill decision will be made

within the next three years.

57mill boe

PORTFOLIO


Spike currently has one licence north of Troll area; PL248C. The licence was acquired through a farm-in deal with Statoil.PL248C is located on the Uer Terrace and contains the Western part of the Grosbeak discovery. The licence lies in a very prolific hydrocarbon province. The licence contains a number of other prospects and leads of which the Harden prospect is the largest. Technical work is ongoing to evaluate the potential and work towards a potential well in 2015.

Spike currently has two licences in Tampen spur Area; PL554 (20%) and PL748 (20%)

PL554 contains the Garantiana discovery (well 34/6-2s) which was drilled in 2012. Preliminary estimates of 25–75mmboe of recoverable oil on a gross basis have been quoted within the mid Jurassic Cook formation reservoir. There is significant upside in the licence with Angulata, Garantiana North and Akkar Updip being potential drilling targets. To reduce the uncertainty of the reserve estimates the joint venture partnership will drill an appraisal well on Garantiana in 2Q 2014 with a potential sidetrack to test the Akkar updip prospect. The well will also be deepened to test the Statfjord formation potential.

PL748 was obtained in the 2013 APA licencing round and contains the Pitahaya prospect. Technical work is ongoing and the licence has a February 2015 deadline whether to acquire new seismic or relinquish.

NORWEGIAN SEASpike currently has one licence in the Frøya High Area; PL586 (30%) (Pil) was acquired through two farm-in deals in 2012/2013. The licence is located on the northern extension of the Frøya High and the main play is the Upper Jurassic Rogn Formation and Melke Formation sands. There is additional potential in the deeper Ile and Tilje Formations. The main prospect on the licence is Pil, which was spudded 21 January 2014. The well encountered 226 metres of pay with both gas and oil and tested 6700 barrels/d through a 56/64 inch choke. Current estimation of the reserves is 50-170 million boe (operator’s numbers). The Pil discovery is one of the largest discoveries made on the Norwegian shelf in the last decade and unlocks a very interesting play around the northern extension of the Frøya high. The well will now drill two side-tracks to further delineate the discovery. Discussions on a drilling strategy with the joint venture are ongoing to unleash the

potential in the area. The most obvious targets in the licence are Boomerang, Langbue and Fjær. All of which have very large upsides.

Spike currently has three licences in the Grinda Graben Area;PL475(10%), PL590(10%) and PL645(15%)

PL475 contains the Rodriguez Intra Lange Formation discovery which was drilled by Wintershall in 2013. The licence was obtained through a farm-in via Faroe Petroleum. The Solberg well was spudded in February 2014 to further delineate the discovery which currently has resource estimates of 16–71 mmboe within the licence. The well encountered 12 metres net of gas condensate and a side-track was consequently drilled 500m east to understand the sand distribution of the discovery. There is further upside in the licence with the Mirage prospect which has now been de-risked with the Solberg discovery

PL590 is located north of PL475 and has the Sierra prospect which is a similar play type as the Solberg/Rodriguez discovery. A drill or drop decision is pending the results of the Solberg well.

PL645 contains the Novus prospect and is operated by Faroe. The Novus well was spudded November 2013. The aim of the Novus will was to test the Garn Formation in a separate fault closure south of the Heidrun field. The well encountered 24m of net pay, both oil and gas. The reserves estimate is currently 6–15 mmboe (operators), which is currently below a commercial threshold. Technical and commercial discussions are ongoing with the joint venture to understand the potential of the licence and a way forward.

BARENTS SEAPL230 (30%) (Saturn) was obtained through a farm-in via Statoil. PL230 contains the Saturn prospect and will hopefully be tested in 2015. Saturn lies in the exciting Nordkapp basin.

Spike has swapped into a 15% working interest in the Hoop area giving a 15% in PL494 /B /C in return.

Activity for 2013 and 1Q of 2014 has been very high with seven wells (Frode, Amol, Asha, Novus, Solberg, Cairngorm, Pil) completed and 4 discoveries (Novus, Solberg, Cairngorm and Pil) made. The high drilling activity will continue into the later part of 2014 with an additional 4 wells to be drilled (2 sidetracks on Pil, Garantiana and Heimdalshø).

PORTFOLIO

The Barents Sea has been re-defined through new knowledge, new technology, and a change in the geological mindset —DAVID POOLE, VP EXPLORATION

22 SPIKE EXPLORATIONHSEQ

Our vision is to create a successful oil and gas company operationally active on the Norwegian Continental Shelf. We aspire to innovative and dynamic exploration and appraisal activity to fulfill our ambitions for large value creation to benefit all stakeholders. To do this efficiently and effectively we have to ensure that all operations, but particularly with respect to seismic and drilling activity, are performed with utmost diligence, with a goal of no harm to people, minimum impact on the environment and without damage to the assets used.

—SPIKE HSEQ POLICY

Our business ethics and code of conduct are based upon the Spike Exploration values of integrity, knowledge and energy.

We believe having good relations internally, as well as with our partners, contractors and government, and building good teams with all partners and contractors are keys to success. We aim to build these relations and teams by communicating openly, behaving honestly and with integrity, and treating people with respect. Trust can only be achieved by communicating openly and behaving honestly.

We follow and comply to laws, rules and regulations including laws on bribery, corruption, insider dealings, trading shares and competition laws. We treat market information fairly and avoid spreading market rumours or misleading the market. We protect our information and property. The property of the company can be office, equipment, funds, software, know-how, data and other Intellectual Property and it is every employee’s responsibility to safeguard it. Information of a confidential nature that the employee becomes aware of during his/her work shall be handled in confidence and with due care. IT and communications facilities should be used responsibly.

We are characterised by energy, drive and value creation. We understand that both business opportunities and offshore operations are complex and associated with risk and approach these with vigilance and awareness.

HSEQ—Trond Gravem, VP Operations & HSEQ

The HSEQ policy includes a list of measures for the company to execute in order to achieve objectives. For 2013, please find comments below linked to each of the statements in the Spike Exploration – HSEQ Policy

—

Spike will use a risk-based assessment methodology in all key business decisions and all operations we are associated with to ensure that risks taken that effect people, the environment and assets, are properly understood and are as low as reasonably practicable. Risk management is integral to all major processes in Spike. This is reflected in the management system and how we do our day-to-day business. During 2013, we have worked with risk on different levels. Enterprise risk reviews have been carried out regularly and incorporated in business decisions. For licence management and partner operated wells, internal Spike risk reviews have been performed.

— Spike will verify that our operating partners place the necessary emphasis on issues that could lead to major incidents and accidents.In the planning process, Spike actively works to understand the risks involved with the operators' activities and based on this communicates the resulting views on risk, including major accident risk, to the operator.

— Spike will employ sufficient personnel with the appropriate level of experience and expertise to evaluate the projects we are part of, to ensure that all our operations are well planned and executed. We will participate in prospect/well planning and other events organised by license operators with representation in relevant disciplines (Geology & Geophysics, Reservoir, HSEQ and Well Engineering).Spike internal staff (subsurface, drilling, reservoir, HSEQ) and external well testing experts have reviewed programs and plans and participated where relevant in all licence meetings, well specific risk assessments and pre-operational reviews.

— Spike will follow up incidents, contribute to identifying measures to prevent recurrence and strive to ensure lessons are learnt and best practices are shared.During 2013, Spike have actively followed up operators in the operations phase. Spike experienced no major accidents, injuries or any environmental claims during the year. Spike have also participated in numerous PSA seminars, the Drilling Managers Forum and SOL-network to partake in information gathering and sharing.

Spike will communicate openly, internally and externally, to ensure that information is shared and our views are understood. Set realistic and challenging targets for our employees and the company, to achieve these targets.Spike has been and will continue to be an active partner that contributes in the licences. Through our business plan and HSEQ plan, we set challenging goals and targets. These are com-municated on a regular basis to all employees through townhall meetings, mail, teambuilding activities and one-to-one appraisals.

— Spike will ensure that all employees understand that they are accountable for their actions and are responsible for taking care of their own safety, as well as others.Spike has introduced business ethics and a code of conduct and HSEQ policy. These have been communicated and reiterated at appropriate times. Reference is also made to the employee handbook stating the same.

— Spike will verify on a regular basis that our management system is working efficiently and make changes where appropriate.Early in 2013 the first version of the Spike management system was completed and introduced. During 2013, we have further developed the Spike management system. As a part of the integration of Bridge, the Bridge management system was reviewed and relevant parts integrated in the Spike management system to reflect the new, integrated company. Training for all involved personnel has been conducted.

— Spike will provide our employees and consultants with a safe and healthy workplace with modern office equipment and communication tools to ensure they are, and remain, in good health and that their expertise is fully utilised.Spike have through 2013 strived to give all employees modern equipment and communication tools. This includes modern office interior, videoconferencing and efficient IT and software solutions. As an added health and safey initiative, heart starters are available in both offices and courses have been held for the employees. The working environment in Spike Exploration is satisfactory. Absence on sick leave was 1.9 per cent in 2013. Spike Exploration aims to keep sick leave at low levels.

— The Spike Exploration HSEQ policy also states that HSEQ is a line Management Team responsibility requiring visible commitment, leadership and involvement. The CEO has overall responsible for HSEQ with the day-to-day responsibility for HSEQ Management being with VP Operations & HSEQ. In 2013 Spike Exploration has conducted its business in line with this statement.

HSEQ2013 ANNUAL REPORT 23

24 SPIKE EXPLORATIONCOPRORATE GOVERNANCE

Spike Exploration believes that sound governance, risk management and control enhance Spike's ability to achieve its objectives and create sustainable value for its shareholders and other stakeholders. Spike Exploration is transparent in its commitment to best practice in corporate governance, and makes public commitments to its adherence to the Spike Exploration business ethics and code of conduct, which are based upon the values of integrity, knowledge and energy.

—A robust model of governance, risk management and control has been implemented at all company levels, enabling management and staff to work towards achieving Spike Exploration's objectives in the common interest of all stakeholders.

BUSINESS"Our vision is to create a successful oil and gas company operationally active on the Norwegian Continental Shelf. We aspire to innovative and dynamic exploration and appraisal activity to fulfill our ambitions for significant value creation to benefit all stakeholders. To do this efficiently and effectively we strive to ensure that all operations, but in particular seismic and drilling activities, are performed with utmost diligence, without harm to people, with minimum impact on the environment and without causing damage to the assets used."

EQUITY AND DIVIDENDSThe Board of Directors emphasises the importance of main-taining a sound level of equity capital. The company's equity at 31 December 2013 amounted to USD 147,5 million, equivalent to 51.6% of Spike Exploration's total assets. Spike Exploration's governance model incorporates governance activities at the shareholder and financial market level, the Board level, and the management level. Interaction occurs between all levels, and risk management and internal control is integrated into the daily operation of the company.

Main principles at this governance level include:• full and open disclosure about transactions with associates• clear policy for shareholder and market communication• clear procedure for representation at the general meeting through proxy• openness and fairness in remuneration of Board of Directors and management members• policy for auditor communication with the Board of Directors

SHAREHOLDERS' MEETINGSpike Exploration's highest corporate body is the general meeting of the shareholders. The ordinary shareholders' meeting (OSM) must be held by end of June each year, which is in accordance with Norwegian law and regulations.

The following matters are decided at the OSM: Approval of the Board of Directors report and financial statement, approval of the auditor's remuneration, and any other matter listed in the notice convening the OSM. Minutes of the OSM are made available to the shareholders as soon as possible after the meeting.

THE WORK OF THE BOARD OF DIRECTORSThe Board of Directors of Spike Exploration is responsible for supervising the company's activities. This includes setting strategies and objectives, defining instructions, policies

CORPORATE GOVERNANCE—Harald Grøsfjeld, Chief Financial Officer

2013 ANNUAL REPORT 25 COPRORATE GOVERNANCE

and risk limits, and monitoring operations, reporting and compliance. Recurring items on the Board's agenda are HSEQ status, approval of annual and periodic results, management's performance reporting, project status review, people- and organisation strategy. The Board has adopted an enterprise risk management policy that requires pro-active identification, mitigation and reporting of all material risks to Spike Exploration's corporate objectives. The Board evaluates risks and controls on a continuous basis as an integrated part of decision making, implementation and monitoring. The Board has appointed a Chief Executive Officer (CEO). The mandate of the CEO are set out by the Board and the CEO is required to work within that mandate and report regularly to the Board. A key governance element at the management level is the Spike Exploration management system, which includes formalised business processes for all main activities in the Company, including top level management process, the value creation process and all necessary support processes.

RISK MANAGEMENT AND INTERNAL CONTROLRisk management and internal control are integrated into all activities and levels of Spike Exploration. Internal controls take a variety of forms as appropriate to the circumstances, but are designed to detect weaknesses in the system and provide appropriate information to management to allow for proper and timely management action.

Prior to each Board meeting, the enterprise risk is evaluated and updated. In addition, twice a year the Spike Exploration management team undertakes a more thorough evaluation of the risk environment.

The assessment process is action oriented and designed to identify:• material risks Spike Exploration is exposed to• what Spike Exploration does to mitigate risks• whether additional measures are necessary to reduce the risk to an acceptable level

Risks identified in the process are prioritised, and appropriate actions are formalised and implemented through the management system. Key control elements are subjected to independent monitoring. As the risk environment evolves over time the management system continuously identifies new and emerging risks, and ensures evaluation, mitigation and reporting to the appropriate level, and if necessary, all the way to the Board.

REMUNERATION OF MANAGEMENT AND THE BOARD OF DIRECTORSThe remuneration committee receives and evaluates the proposal from the CEO with regard to remuneration of the organisation and the management and presents it to the Board of Directors. Information about remuneration of the CEO is presented in the company's financial statement, note 24. Members of the Board of Directors receive remuneration in accordance with their individual roles. Information about remuneration to the Board of Directors is presented in the company's financial statements, note 24.

INFORMATION AND COMMUNICATIONSGuidelines for the company's reporting of financial and other information have been established. Financial reporting is presented to the Board of Directors at each Board meeting.

AUDITORThe Board of Directors is responsible for ensuring that the company is subject to an independent audit. Our registered public accounting firm is independent in relation to Spike Exploration.

Spike now employs more than 30 professionals with an average of 23 years of industry experience from 33 different companies.—BJØRN INGE TØNNESSEN, CEO

CASE 1

Interview with Lea Boborykina

—SENIOR EXPLORATIONIST

28 SPIKE EXPLORATIONINTERVIEW WITH LEA BOBORYKINA

You can always gain from success, but you can also learn from mistakes, so I am not afraid of the risks.

—LEA BOBORYKINA

2013 ANNUAL REPORT 29 INTERVIEW WITH LEA BOBORYKINA

Svetlana, or Lea as she is more often referred to, is a third generation geologist whose career of ten years has taken her through many aspects of the oil and gas industry. Her varied tasks in the Gazprom system brought her into contact with the international oil community, and eventually with her Norwegian counterparts. She worked with what was then Norsk Hydro on the Shtokman project, giving her insight into both the Norwegian way of working, and the geology of the Barents Sea.

I was quite surprised to realise that there are people close by in Europe with a completely different way of working, and that was interesting to me.

Encouraged by her experience on international projects, she submitted her CV to a global placement agency working out of Murmansk. She got a call from the agency, interviewed with the CEO of start-up North Energy, and was offered the job on the spot. Next stop: Alta in the far north of Norway, a ten-hour bus ride from Murmansk.

North was then a new company seeking international perspectives, and Lea joined a team of seasoned professionals with a focus on the Barents.

It was great to learn from international experts, and I gained a good perspective on the Barents geology, but after four years with North I wanted to expand into other areas.

Fledgling Bridge Energy was in the market for new talent, and Lea joined the team. Next stop: Oslo, arriving after an epic drive down the length of the country from Alta. Her two years with Bridge confirmed Lea’s preference for the dynamics of small organisations.

Things can be so restrictive in a big company, and I found I liked the flexibility of smaller teams.

So when Bridge was bought up by Spike, she went on the Spike website, liked what she saw, and decided to give it a try. One thing became clear early on, a thing that Lea feels sets Spike apart.

Everything was so open, it was different than anything before. The openness applied equally to processes and strategies, goals and results, and information. When the goal is clear and there are no hidden surprises, you can move in a straight- forward line. And when you know all the parameters, it’s easier to make decisions.

Empowering and encouraging Spike employees to make their own decisions is a key element of CEO Bjørn Inge Tønnessen’s management strategy, and Lea’s experience confirms the positive effect of this policy.

After ten years in the business I was ready to start making my own calls. It’s an honor to get the chance to make decisions. When you know you are responsible for decisions, you treat your job more seriously. To be able to rely on my experience feels great!

The independence that Lea values at Spike also involves exposure to risk, for the company and for its employees. Risk is always present in the oil business, but in a venture like Spike, with a short time perspective and aggressive goals, it can be even more pervasive. Can too much uncertainty be distracting?

I knew the company could go either way. I figure you can always gain from success, but you can also learn from mistakes, so I am not afraid of the risk. It’s more interesting to see how far you can go with your decisions.

Lea’s journey to Spike would seem to have landed her in the right place – for now, of course.

The winner has already managedto make an impact on the NorwegianE&P landscape.—JURY OF GULLKRONEN 2014


ÅKE HESSELBOM – BOARD MEMBER

GUNNAR HALVORSEN – BOARD MEMBER OLE ERTVAAG – BOARD MEMBER

– since April 2014

STIG BERGSETH – BOARD MEMBER

HARALD VABØ – BOARD MEMBER

– until April 2014MICHAEL WHYATT – CHAIRMAN

THE BOARD—

THE BOARD


THE CHAIRMAN'S STATEMENT—Mike Whyatt

It has been my great privilege to serve as Chairman of the Board of Spike Exploration Group since January 2014. What I have learned about the company since my first visits in December 2013 makes me confident that Spike is one of those ambitious enterprises that will deliver value as promised.

—From a shareholder perspective, Spike is one-third of the way through its intended life cycle. While the start-up year of 2012 was dedicated to building the company, 2013 was the year that Spike started producing results. Some of those were disappointing, and some extremely encouraging, but all activities contributed to getting Spike ready to take flight, and that is exactly what we are doing right now.

The Pil discovery, made in March of 2014, is a game changer for Spike. This significant find happily confirms my gut intuition from my first meetings with the Spike team: that they are going about the business of oil and gas exploration in the right way.

Spike is a group of proven entrepreneurs who operate with great technical skill, and not just within exploration. We have shown our ability to make various types of deals, bringing valuable assets and expertise to Spike. We have managed to attract talent in a tight employment market and forge a new Spike culture, demonstrating the ability to cultivate value in all facets.

The company has done a fantastic job in terms of the speed of its growth, acquiring so many opportunities in just under two years of existence. But the ambitious 2014 drilling program, an impressive effort for such a young company, will serve to drill out a significant portion of the current Spike portfolio. The license portfolio will need to be replenished, and a major part of the renewal strategy lies in the Barents Sea.

The Barents is a proven hydrocarbon province, with the largest upside potential on the NCS. Spike wants to be there and be a part of it, and I feel confident that activities in the Barents will be a good fit with Spike’s ambitious growth strategy.

It is significant that the stakeholder model in Spike, with HitecVision as the main investor, allows the company to retain keen focus on the goal of ambitious growth and delivering value to the shareholders. Given the results from 2013, and the direction that Spike’s fortunes have taken in early 2014, I believe that this model is beginning to prove itself as a wise investment for HitecVision, while providing a unique adventure for the Spike team.

The Pil discovery, together with the other smaller finds made in early 2014, has energised Spike, as well it should. Pil was a bold move, working a play that experienced operators had passed over. The Spike team recognised the potential for something bigger, and their confidence has been rewarded.

The excitement is palpable among team members, and I fully share their enthusiasm. Spike is the most exciting enterprise I have been involved in over the last ten years - for what they already have delivered, and for what’s still to come.

MIKE WHYATTCHAIRMAN SPIKE EXPLORATION

THE CHAIRMAN'S STATEMENT

The company has done a fantastic job in terms of the speed of its growth.—MIKE WHYATT, CHAIRMAN OF THE BOARD


THE BOARD OFDIRECTORS' REPORT—

ABOUT SPIKE EXPLORATION HOLDINGSpike Exploration Holding AS ('the Company', 'Spike', 'the Parent Company') was incorporated 25 May 2012 by the founders Bjørn Inge Tønnessen, David Poole, Harald Grøsfjeld, Walter Sognnes and Tor Arne Hansen. The founders have entered into a Subscription and Shareholders Agreement with HitecVision’s HV VI INVEST OMEGA II AS securing the Company access to equity of up to USD 232 million with an option for HV VI INVEST OMEGA II AS to increase by USD 68 million in equity or loan. This gives the Company access to up to USD 300 million in capital.

The Company’s vision is to create an attractive and successful oil and gas company in the Norwegian Continental Shelf (NCS) through innovative and aggressive exploration and appraisal activity resulting in value creation for all stakeholders. 26 April 2013, Spike Exploration Holding received notification from the Norwegian Ministry of Petroleum and Energy that the Company had been prequalified as a licensee in Norway. On 14 March 2014 Spike was also pre-qualified as an operator.

The Company had its first exploration license acquisition approved in May 2013 (PL586) with the Pil prospect that was drilled in 1Q 2014, and discovered oil and gas. During 2013 the Company continued to acquire four exploration licences on the NCS, in addition to a producing field (Athena) and two exploration licenses on UKCS. Spike participated in 2013 in the Frode well in PL299 – this was a dry well. Beyond the Pil-discovery, Spike has also participated in hydrocarbon discoveries in the Novus (spudded in PL645 in 2013 and finalised in 2014) and Solberg (drilled in PL475 in early 2014)) wells. Further, Spike is a partner in the Cairngorm appraisal well on the UKCS – this well was spudded in 2013 and finalised in 2014 – more hydrocarbons have been detected in this well.

At the end of 2013, Spike Exploration Holding continued to grow with the acquisition of Bridge Energy AS, which at the time was listed on the Oslo Stock Exchange (OSE) and AIM (London). The Company was delisted from OSE in November and AIM in December. Through this acquisition, the Company became participant in the Asha (PL457) and Garantiana (PL554) oil discoveries, in addition to several exploration licenses to be drilled in 2014 and 2015 and competent exploration staff.

Spike will only keep the Norwegian part of Bridge and is in the process of integrating the license portfolio and organisations. Spike has made an agreement with a HitecVision-controlled company for divestment of Bridge Energy UK in the beginning of second quarter 2014.

At year-end Spike Exploration Holding and its subisidiaries ("the Group") had an interest in 19 licenses, with an additional two pending approval from relevant authorities. In addition, the Group was awarded four new licenses in the APA 2013 round.

The Group consisted as per year-end of 37 employees located in Stavanger, Asker and Central London. The functional base is principally in geoscience disciplines, however, supported by business development, finance and HSEQ. The Company has implemented a structure and functions that enable efficient and safe contribution to value-creation in Norway.

The team in the Group has an average experience of 23 years and a diverse background from 33 different oil companies in addition to an experienced Board of Directors.

Furthermore, the Group has ongoing business development activities in order to farm into exploration wells and licenses. The Group submitted an application in the APA 2014 licensing round and was awarded participation in four licences in early 2014. The Group also intends to submit applications in the coming licensing rounds, both the yearly APAs and the ordinary numbered licensing rounds.

Spike Exploration Holding AS’ financial statements are prepared on a consolidated basis. This Directors’ report covers the activities of both the Group and the Parent Company.

THE FINANCIAL STATEMENTSPursuant to §3-3a of the Norwegian Accounting Act the Board of Directors confirms that the conditions for continued operations as a going concern are present for Spike Exploration Holding and for the Group, and that the annual financial statements for 2013 have been prepared on the basis of this presumption.

THE BOARD OF DIRECTORS

2013 ANNUAL REPORT 35 THE BOARD OF DIRECTORS

The Board of Directors of Spike Exploration Holding expresses that the annual financial statements for the Parent company and for the Group represent a true and fair view of the financial position as of 31 December 2013. The annual financial statements for the Parent Company and for the Group have been prepared in accordance with simplified application of International Financial Reporting Standards (IFRS) according to the Norwegian Accounting Act § 3-9. The reporting period for the financial statement is 1 January 2013 to 31 December 2013.

Consolidated Statements of Income Loss from operating activities was USD -71 665 thousand in 2013. The only revenue source for the Group was relating to production from the Athena field. The losses mainly derive from exploration expenses, in addition to production expenses from Athena, payroll and other related expenses. Net financial items amounted to a loss of USD 2 765 thousand. Loss before income tax amounted to USD -74 430 thousand.

The Group incurred an income tax benefit of USD 53 717 thousand for 2013. Included in this, is a claim relating to a tax refund of USD 87 300 thousand, of which USD 26 772 thousand relates to tax refund from expenses in Bridge Energy before acquisition. Net loss was USD 20 713 thousand in 2013.

CONSOLIDATED STATEMENTS OF CASH FLOWSThe Group generated cash from operating activities of USD 2 485 thousand. Net cash flow from investing activities amounted to USD -205 590 thousand. Net cash flow from financing activities was USD 228 012 thousand. At the end of 2013 cash and cash equivalents were USD 26 905 thousand.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONTotal assets amounted to USD 417 481 thousand at the end of 2013, of which total current assets represented USD 210 131 thousand. Tax receivables amount to USD 87 300 thousand at the end of 2013. The cash position at year-end amounted to USD 26 905 thousand. Total current liabilities were USD 277 307 thousand at the end of 2013. Spike Exploration Holding has a solid equity with an equity-ratio of 51.6 per cent, which amounts to USD 147 547 thousand.

ALLOCATION OF PROFIT/LOSS FOR THE YEAR IN SPIKE EXPLORATION HOLDINGIn 2013, Spike Exploration Holding posted a net loss of USD 17 070 thousand, and the Group posted a net loss of 20 173 thousand. The Board of Directors proposes the following allocation: Transferred to retained earnings USD –17 070 thousand for Spike Exploration Holding. The Company has no free equity available for dividends at year-end.

MALEFEMALE

32APR '14

20-2930-39

+60

40-4950-59 49AVERAGE

10-19

20-29

+30

0-9

23AVERAGE

Years of experience AgeEmployees

36 SPIKE EXPLORATIONTHE BOARD OF DIRECTORS

RISK MANAGEMENTSpike Exploration is subject to a variety of inherent risks deriving from the nature of the oil and gas exploration and production business.

The Board of Directors is responsible for the development of a risk management strategy and processes within the Group and for overseeing the implementation of the requirements of this strategy. It does this by ensuring that the framework for the identification, assessment, mitigation and reporting on all areas of risk is "fit for purpose" and that appropriate systems and procedures are in place in relation to these risks.

The Group’s strategic risk identification process feeds into the annual strategy review as part of the overall annual planning cycle. Annual objectives and targets covering key company activities are established with the identification, management and reporting of risk as an integral part of the process and the Management System. Risk is inherent across the Group’s operations, and all activities with a potential corporate or business impact are subject to an appropriate review to ensure that risks can be mitigated and controlled.

OPERATIONAL RISKSOperational risks are dependent on the continued performance of the Group’s operational assets. Future production of crude oil and natural gas is dependent on the Group’s ability to find, acquire and develop reserves and resources. Environmental, geological and infrastructural conditions are often challenging and as a consequence costs can be higher than originally estimated.

Cost of exploration, including seismic acquisition and drilling of wells, is often uncertain. As a result, the Group may incur cost overruns or may be required to curtail, delay or cancel exploration efforts.

CREDIT RISKSA credit risk arises if a customer or other counterparty to a financial instrument fails to meet its contractual obligations. The Group has no significant exposure to credit risk from its operating activities.

Education

PhD MSc / MBA or eqv. BSc / BA or eqv.

Other

Function

Subsurface Business development

Operations & HSEQ Management / Administration

2013 ANNUAL REPORT 37 THE BOARD OF DIRECTORS

FINANCING AND LIQUIDITY RISKSLiquidity risks arise from not having the necessary resources available to meet maturing liabilities with regard to timing, volume and currency structure. Based on the committed capital from HV VI INVEST OMEGA II AS of USD 232 million, the Group regards the occurrence probability of financing and liquidity risks, which could also lead to significant higher interest costs, as low. In addition, the Group increased the EFF loan facility to NOK 1.1 billion. Nevertheless, it is important to note that failure to maintain liquidity could have a high financial impact on the Group’s performance.

CURRENCY RISKSCurrency risks for Spike Exploration Holding are a direct result of multi-currency cash flows within the Group. The biggest single driver behind this risk arises from the mismatch of the currencies required for funding exploration and development initiatives and the currencies of the Group’s source of funding.

INTEREST RISKSChanges in market interest rates affect future interest payments for variable interest liabilities. As a result, significant interest rate increases can have an adverse effect on the Group’s profitability, liquidity and financial position.

EQUAL OPPORTUNITYSpike Exploration Holding is committed to being an attractive employer for all groups of prospective employees in all their practices. All employees and applicants will be provided equal employment opportunities without regard to age, race, colour, creed, sex, sexual orientation, national origin, religion, marital status, disability, or any other protected status.

Spike Exploration Holding requires that all employees co-operate fully to ensure the fulfilment of this commitment in all actions and decisions, including hiring, promotions, upgrades, transfers, layoffs, training, education, pay, benefits, and social and recreational programs. Selection of personnel for hiring and promotion is based on such factors as education, experience, proven skills, initiative, dependability, cooperation, availability, and growth potential. Employees are encouraged to recommend for promotion those individuals whose past

performance demonstrates an ability to assume greater responsibility. Such recommendations are in no way allowed to be influenced by an individual’s race, sex, or other protected factors. Female employees made up 24 per cent of the total number of employees at year-end for the Group. Currently, no member of the Board of Directors is female.

HEALTH, SAFETY AND ENVIRONMENTHealth, safety and environmental care are top priorities for Spike Exploration Holding. The Group aims to carry out its operations to the best health and safety standards and is seeking to promote a strong safety oriented culture. Spike Exploration Holding experienced no major accidents, injuries or any environmental claims during the year. In general, the working environment in the Group is satisfactory. Absence on sick leave was 1.9 per cent in 2013. The Group aims to keep sick leave at low levels by continuously improving the working and safety conditions.

The Group is continuously working on ensuring the quality in its entire operations. The operations of the Group could potentially pollute the external environment and the Group, together with its joint venture partners, will work actively on measures that can reduce any negative impact on the environment. The Group’s operations are within the environmental requirements set by the authorities and its activities satisfied all statutory environmental requirements. SHAREHOLDERS RELATIONSSpike Exploration Holding will proactively seek to provide shareholders with full details to enable them to assess the true financial position as well as risks and opportunities facing the Company. Spike Exploration Holding’s share capital is divided into common shares and preference shares. The two share classes are subject to various differences with regards to distribution rights and voting rights. As of 31 December 2013 Spike Exploration Holding had 24 shareholders.

CORPORATE GOVERNANCEThe foundation of good corporate governance is a sound company culture underpinned by adequate operational and financial control systems. The Board of Directors of


Lars Åke HesselbomBoard Member

Harald VabøBoard Member

Gunnar HalvorsenBoard Member

Stig Jarle BergsethBoard Member

Bjørn Inge TønnessenChief Executive Officer

Michael Whyatt Chairman

Stavanger, 27 March 2014

THE BOARD OF DIRECTORS

Spike Exploration Holding seeks to provide effective gover-nance of its business and affairs to ensure long-term benefits for the Company’s stakeholders.

OUTLOOKSpike Exploration Holding is an exploration company focusing on oil and gas exploration on the Norwegian Continental Shelves (NCS). With recent discoveries, a growing license

portfolio and drilling program, the company is in a good position to participate in the undiscovered hydrocarbon potential on the NCS. The Company plans to continue to be an active player in the market and farm into exploration wells. Using good data and tools, the company will also grow organically through participation in licensing rounds. Spike aims to become an attractive partner for other oil and gas companies as well as the governments.

FINANCIALS—NOTES—


COMPREHENSIVE INCOME STATEMENT

USD '000 NOTE GROUP 2013 GROUP 2012 PARENT 2013 PARENT 2012

Operating revenue

Income 19 579 – 8 –

Other intercompany income – – 2 935 1 044

Total operating revenue 2 19 579 – 2 943 1 044

Operating expenses

Production expenses –10 046 – – –

Exploration expenses 7 –55 596 –2 190 –58 047 –1 474

Depreciation, amortisation and impairment 11, 12 –9 640 –14 –117 –14

Payroll and other related expenses 8, 24 –11 061 –2 513 –9 104 –2 402

Intercompany expenses

Other general and administrative expenses 4, 6 –4 901 –1 951 –3 788 –1 489

Total operating expenses –91 244 –6 667 –71 057 –5 379

Operating profit/(loss)

–71 665 –6 667 –68 114

–4 335

Financial income/(expenses)

Financial income 1 638 86 804 91

Financial expenses –4 403 –1 –2 989 –1

Net financial items 9 –2 765 85 –2 185 90

Profit/(loss) before taxes –74 430 –6 582 –70 299 –4 245

Income tax (expense)/income 10 53 717 3 633 53 229 3 633

Net profit/(loss) from continuing operations –20 713 –2 949 –17 070 –612

NET PROFIT/(LOSS) FOR THE YEAR –20 713 –2 949 –17 070 –612

Other comprehensive income, net of income tax

Items that may be reclassified subsequently to profit or loss:

Currency translation differences –1 393 – – –

Total other comprehensive income/(loss) –1 393 – – –

Total comprehensive result, net of tax –22 105 –2 949 –17 070 –612

Net result attributable to the equity holders of the parent

–20 713

–2 949

–17 070

–612

Earnings per share

Basic (USD) 16 –0.367 –0.538 –0.302 –0.112

Diluted (USD) 16 –0.367 –0.538 –0.302 –0.112

FINANCIAL STATEMENT

FINANCIAL STATEMENT—

2013 ANNUAL REPORT 41 FINANCIAL STATEMENT

BALANCE SHEET ASSETS


NON-CURRENT ASSETS

Intangible assets

Goodwill 11 56 939 – – –

Deferred income tax assets 10 – 1 130 – 1 130

Intangible assets 11 127 822 – –

Total intangible assets 184 762 1 130 8 962 1 130

Tangible assets

Oil and gas properties 12 21 474 – – –

Furniture, fixtures and office machines 12 1 114 137 417 137

Total tangible assets 22 588 137 417 137

Other non-current assets

Investment in subsidiaries 17 – – 167 013 485

Intercompany receivable, long term 17,23 – – 33 670 2 096

Total other non-current assets – – 200 683 2 580

Total non-current assets 207 350 1 267 210 062 3 847

CURRENT ASSETS

Accounts receivable 195 – – –

Inventory 323 –

Tax receivable NCS 10,19 87 300 2 563 57 585 2 563

Receivables on operations held for sale 4 29 143 – 3 367 –

Other receivables 13 11 822 5 796 1 643 5 771

Intercompany receivable, short term – – 8 8

Cash and cash equivalents, restricted 14 2 196 233 298 233

Cash and cash equivalents, unrestricted 14 24 709 1 190 12 946 725

155 686 9 782 75 848 9 301

Assets classified as held for sale 4 54 445 – – –

Total current assets 210 131 9 782 75 848 9 301

TOTAL ASSETS 417 481 11 048 285 910 13 148


BALANCE SHEET EQUITY AND LIABILITIES


EQUITY

Paid-in capital

Share capital 15 25 286 1 058 25 286 1 058

Share premium reserves 125 943 5 528 125 943 5 528

Paid in not registered share capital 2 290 28 2 290 28

Paid in not registered share premium 11 710 256 11 710 256

Unregistered capital increase – 5 000 – 5 000

Retained earnings (25 055) (2 949) (17 682) (612)

Total equity attributable to equity holders of the parent

140 174

8 921

147 547

11 258

LIABILITIES

Non-current liabilities

Deferred tax liabilities 10 81 105 – 2 934 –

Abandonment provision 20 8 372 – – –

Total non-current liabilities 89 476 – 2 934 –

Current liabilities

Borrowings, short term 19 122 989 – 100 025 –

Accounts payable 11 055 880 10 120 701

Other taxes and social security costs 3 081 390 494 362

Other current liabilities 18 50 706 857 24 790 826

Total current liabilities 187 831 2 127 135 429 1 889

Total liabilities 277 307 2 127 138 363 1 889

TOTAL EQUITY AND LIABILITIES 417 481 11 048 285 910 13 148

Lars Åke HesselbomBoard Member

Harald VabøBoard Member

Gunnar HalvorsenBoard Member

Stig Jarle BergsethBoard Member

Bjørn Inge TønnessenChief Executive Officer

Michael Whyatt Chairman

Stavanger, 27 March 2014

FINANCIAL STATEMENT


USD '000 NOTESHARE

CAPITAL

SHARE PREMIUM RESERVES

UNREGISTERED CAPITAL

RETAINED EARNINGS

CURRENCY TRANSLATION

TOTAL EQUITY

Equity at incorporation, 25 May 2012 98 867 – – 964

– Transaction cost at incorporation – –7 – – –7

Net profit/(loss) for the period – – – –2 949 –2 949

Total comprehensive income/(loss) for the period – – – –2 949 –

–2 949

Net capital increase 961 4 808 – – – 5 769

Unregistered capital increase – – 5 284 – – 5 284

Transaction costs for issued share capital, net of tax – –140 – – – –140

Equity 31 December 2012 15 1 058 5 528 5 284 –2 949 – 8 921

Equity 1 January 2013 1 058 5 528 5 284 –2 949 – 8 921

Net profit/(loss) for the period –20 713 –20 713

Other comprehensive income/(loss) for the period –1 393 –1 393

Total comprehensive income/(loss) for the period –20 713 –1 393

–22 105

Net capital increase 24 228 121 490 –5 284 – – 140 433


Transaction costs for issued share capital, net of tax – –1 075 – – – –1 075

EQUITY 31 DECEMBER 2013 15 25 286 125 943 14 000 –23 662 –1 393 140 174

USD '000 NOTESHARE

CAPITAL

SHARE PREMIUM RESERVES

UNREGISTERED CAPITAL

RETAINED EARNINGS

CURRENCY TRANSLATION TOTAL EQUITY

Equity at incorporation, 25 May 2012 98 867 964

– Transaction cost at incorporation –7 –7

Net profit/(loss) for the period –612 –612

Total comprehensive income/(loss) for the period – – – –612 –

–612

Net capital increase 961 4 808 – – – 5 769

Unregistered capital increase 5 284 – – 5 284

Transaction costs for issued share capital, net of tax – –104 –36 – – –140

Equity 31 December 2012 15 1 058 5 564 5 248 –612 – 11 258

Equity 1 January 2013 1 058 5 564 5 248 (612) – 11 258

Net profit/(loss) for the period (17 070) (17 070)

Total comprehensive income/(loss) for the period

(17 070) – (17 070)

Net capital increase 24 228 121 454 (5 248) – – 140 433


Transaction costs for issued share capital, net of tax – (1 075) – – – (1 075)

EQUITY 31 DECEMBER 2013 15 25 286 125 943 14 000 (17 682) – 147 547

STATEMENT OF CHANGE IN EQUITY

STATEMENT OF CHANGES IN EQUITY FOR PARENT

FINANCIAL STATEMENT



Operating activities

Profit/(loss) before taxes –74 430 –6 582 –70 299 –4 245

Adjustments for

Net interest expense/-income 9 1 403 –13 19 –21

Tax refund NCS exploration expenses 10 40 446 – 2 421 –

Depreciation, amortisation and impairment 11, 12 9 640 14 117 14

Interest received 345 13 669 21

Interest paid –1 642 –0 –619 –0

Changes in accounts receivable –195 – – –8

Changes in accounts and other payables 59 591 2 127 32 644 1 889

Changes in other current balance sheet items –32 673 –832 –4 290 –771

Net cash flow from operating activities 2 485 –5 273 –39 337 –3 121)

Investing activities

Acquisition of subsidiaries, net of cash acquired –157 472 – 162 858 –485

Purchase of oil & gas properties through business com-binations

–20 217 – – –

Purchase of tangible and intangible assets 11,12 –27 901 –151 –9 359 –151

Investment in subsidiaries – – –34 374 –2 096

Net cash flow from investing activities –205 590 –151 –206 592 –2 731

Financing activities

Net capital increase 15 143 965 6 861 143 965 6 825

Net unregistered capital increase 14 000 –14 14 000 –14

Proceeds from issuance of short-term debt 19 106 180 – 100 126 –

Repayment of short-term debt 19 –36 133 – – –

Net cash flow from financing activities 228 012 6 847 258 091 6 811

Effect of changes in exchange rates on cash and cash equivalents 574 –

124 –

Net change in cash and cash equivalents 25 482 1 423 12 286 959

Cash and cash equivalents at the beginning of the period 1 423 – 959 –

CASH AND CASH EQUIVALENTS 31.12* 14 26 905 1 423 13 245 959

*Included in cash and cash equivalents are restricted cash. See note 14 for specification of restricted amounts.

See note 19 for information about available credit facility.

SUMMARISED CASH FLOW

FINANCIAL STATEMENT

2013 ANNUAL REPORT 45 NOTES

1 GENERAL INFORMATION

The consolidated financial statements of Spike Exploration Holding AS were approved by the board of directors and CEO at 27 March 2014.

Spike Exploration Holding AS is a limited company incorporated and domiciled in Norway, with its main office in Stavanger.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted by the Group in the preparation of these financial statements are set out below.

STATEMENTS OF COMPLIANCEThe Consolidated Financial Statements of the Group have been prepared in accordance with the Norwegian Accounting Act of 17 July 1998, § 3-9 and regulation regarding the simplified application of International Financial Reportings Standards (IFRS) as determined by the Ministry of Finance 21 January 2008. This mainly implies that recognition and measurement are followed by the Simplified International Financial Reporting Standards (IFRSs) pursuant to the Norwegian Act 3-9, presentation and disclosures are prepared in accordance with the Norwegian Accounting Act.

BASIS FOR PREPARATIONThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with the additional requirements following the Norwegian Accounting Act.

The financial statements have been prepared on a historical cost basis.

BASIS OF CONSOLIDATIONThe consolidated financial statements comprise the financial statements of Spike Exploration Holding AS and its subsidiaries (together referred to as “the Group”). Subsidiaries are all entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed during the year are included in the consolidated financial statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intercompany balances and transactions have been eliminated upon consolidation.

The acquisition of a subsidiary is considered on a case by case basis to determine whether the acquisition should be deemed as a business combination or as an asset acquisition.

Business combinations are accounted for using the acquisition method of accounting. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Transaction costs are expensed as incurred. The excess of the consideration transferred over the fair value of the identifiable net assets of the subsidiary acquired is recorded as goodwill.

When acquisitions are deemed as asset acquisitions no deferred tax on initial differences between carrying values and tax bases are recorded, nor are any goodwill recorded at the date of acquisition.

NOTES—


REVENUE RECOGNITIONRevenue from sale of oil and gas is recognised when the significant risks and rewards of ownership have been transferred, which is when title passes to the customer. This generally occurs when product is physically transferred into a vessel, pipeline or other delivery mechanism.

Revenue from the production of oil, in which the Group has an interest with other producers, is recognised based on the Group’s working interest and the terms of the relevant production sharing contracts. Differences between oil lifted and sold and the Group’s share of production are not significant.

Revenue is measured at the fair value received, excluding discounts, rebates, royalties, and sales taxes and similar levies.

FOREIGN CURRENCYFunctional currency and presentation currency

The Parent company’s and the subsidiary’s functional currency is US dollar (USD). The basis for applying USD as functional currency is that all of the Groups revenue and a major part of the operating expenses will be denominated in USD. Furthermore it is assessed that any major transactions such as acquisition or disposal of licences will be denominated in USD. In addition, a major part of the Groups funding is expected to be with USD capital. Consequently USD as functional currency will best reflect the economic environment in which the companies operates.

The Group’s and the Parent company’s presentation currency is also USD.

Transactions in foreign currency

Foreign currency transactions are translated into USD using the exchange rates at the transaction date. Monetary balances in foreign currencies are translated into USD at the exchange rates on the date of the balance sheet. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are stated at historical cost less accumulated depreciation and any impairment charges. Depreciation is calculated on a straight line basis over the assets expected useful life and adjusted for any impairment charges. Expected useful lives of long-lived assets are reviewed annually and where they differ from previous estimates, depreciation periods are changed accordingly. Ordinary repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred. The costs of major renovations are included in the asset’s carrying amount when it is probable that the company will derive future economic benefits. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in operating profit. Major assets with different expected useful lives are reported as separate components. Each component is depreciated on a straight line basis over its expected useful life.

Property, plant and equipment are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount.

The recoverable amount is the higher of the asset’s fair value less costs required to sell the asset and its value in use. The value in use is determined by reference to discounted future net cash flows expected to be generated by the asset. The difference between the assets carrying amount and its recoverable amount is recognised in the in income statement as an impairment. Property, plant and equipment that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

CAPITALISED EXPLORATION AND LICENSE COSTS AND OIL AND GAS PROPERTIESExploration costs for oil and gas properties

The Group uses the successful efforts method to account for exploration costs. All exploration costs, with the exception of acquisition costs of licenses and drilling costs of exploration wells are expensed as incurred. Costs related to drilling of exploration wells are temporarily capitalised pending the evaluation of the potential existence of oil and gas reserves. If reserves are not found, or if discoveries are assessed not to be commercially recoverable, the drilling costs of exploration wells are expensed. Costs of acquiring licenses are capitalised as intangible assets.

NOTES


Capitalised costs of acquiring licenses and capitalised costs of drilling exploration wells are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed the recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs required to sell the asset and its value in use. The value in use is determined by reference to discounted future net cash flows expected to be generated by the asset. The difference between the assets carrying amount and its recoverable amount is recognised in the in income statement as impairment. Capitalised exploration and license costs will be depreciated using the unit-of-production method, if and when reserves are produced.

Development of oil and gas properties

Exploration expenditures and Acquisition costs - oil and gas prospects (Intangible assets) are transferred to Assets under development (Oil and gas properties) at the time of sanctioning of the development project. The exploration assets are assessed for impairment before reclassification.

All costs of developing commercial oil and/or gas fields are capitalised, including direct costs. Pre-operating costs are expensed in the period which they are incurred. Capitalised development costs are classified as tangible assets.

Oil and gas field in production

When a field commence the production of oil and gas, the capitalised costs for the oil and gas properties, including reclassified exploration costs and all development costs, are depreciated using the unit-of-production method. The rate of depreciation is equal to the ratio of oil and gas production for the period over the estimated remaining proved and probable reserves at the beginning of the period. The future development expenditures necessary to bring those reserves into production are included in the basis for depreciation, and are estimated by the management based on current period end unescalated price levels. Any changes in the reserves and cost estimates that affect unit-of-production rates are dealt with prospectively.

Impairment of oil and gas properties

Oil and gas properties are assessed for impairment annually and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indications of impairment may be decline in oil price, changes in future investments or changes in reserve estimates.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows. An oil and gas field is considered one cash generating unit. An impairment loss is the amount by which the carrying amount of the assets exceeds the recoverable amount. The recoverable amount is the higher of the asset’s net selling price and its value in use. The value in use is determined by reference to discounted future net cash flows expected to be generated by the asset. Cash flows are discounted using a pre-tax discount rate that reflects current market assessments of the time-value of money and the risks specific to the asset.

A previously recognised impairment loss is reversed through profit or loss only if there has been a change in the estimates used to determine the recoverable amount. It is not reversed to a higher amount than if no impairment loss had been recognised. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value.

FARM IN AND FARM OUT IN THE EXPLORATION PHASEA farm-in/farm-out involves a situation where the owner of a working interest (the farminor) transfers all or a portion to another party (the farminee) in return for a farminee’s performance of some agreed upon action. For example, the farminee may agree to undertake the exploration of a property, drill a well(s), or develop the property. In return, the farminor agrees to transfer all or a portion of the working interest in the property to the farminee.

The farminee should capitalise or expense the exploration, drilling and development costs as incurred in accordance with the applied accounting method, i.e. successful efforts method. The farminee does not record any receivable nor any of its costs assigned to the acquisition of a mineral interest. In other words, the farminee may capitalise wells and equipment costs but not capitalised property acquisition costs. The farminor does not record any well or equipment costs. There are no accruals for future commitments


in farm-in/farm-out agreements in the exploration and evaluation phase, and no profit or loss is recognised by the farminor. In the development phase, a farm-in/farm-out agreement will be treated as a transaction recorded at fair value as represented by the costs borne by the farminee.

A farm-in agreement is recognised when the risk and reward is transferred from the farminor, which normally is at the time necessary governmental approval is obtained.

INVESTMENT IN SUBSIDIARIESThe investment in subsidiaries is carried in the balance sheet valued at historical cost in the Parent Company’s Financial Statements. The cost is valued at cost of the shares in the subsidiary, less any impairment losses.

Dividends, group contributions and other distributions from subsidiaries are recognized in the same year as they are recognized in the financial statement of the provider. If dividends/group contribution exceeds withheld profits after the acquisition date, the excess amount represents repayment of invested capital, and the distribution will be deducted from the recorded value of the acquisition in the balance sheet for the Parent Company.

INTERESTS IN JOINT VENTURESThe Group’s investments in joint ventures, including jointly controlled operations (oil and gas licenses), are accounted for by recognising the company’s share of the joint ventures’ individual income, expenses, assets, liabilities and cash flows. Each item is classified and presented in its respective line-items in the financial statements.

LEASES (AS LESSEE)Financial leases

Leases where the Group assumes most of the risk and rewards of ownership, are classified as financial leases. The Group does not have any such leases.

Operating leases

Leases in which most of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

BALANCE SHEET CLASSIFICATIONCurrent assets and short-term liabilities include items due less than a year from the balance sheet date, and items related to the operating cycle, if longer. The current portion of long-term debt is included under current liabilities. Investments in shares held for trading are classified as current assets, while strategic investments are classified as non-current assets. Other assets are classified as non-current assets.

TRADE AND OTHER FINANCIAL RECEIVABLES Receivables are initially recognised at fair value, net of transaction costs. Receivables are subsequently measured at amortised cost using the effective interest rate method. This classification is used for non-derivative assets with fixed or determinable payments that are not quoted in an active market. Profit and loss is recognised in the income statement when the loan or receivable is derecognised, impaired or through the amortisation process.

CASH AND CASH EQUIVALENTSCash and the equivalents include cash on hand, deposits with banks and other short-term highly liquid investments with original maturities of three months or less. DECOMMISSIONINGWhere a material liability for the removal of production facilities and site restoration at the end of the productive life of a field exists a provision for decommissioning is recognised. The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements. A non-current asset of an amount equivalent to the provision is also created and subsequently depreciated as part of the asset.

NOTES


Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated fixed asset. The unwinding of the discount on the decommissioning provision is included within finance costs.

BORROWINGSAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.

INCOME TAXESThe tax expense consists of tax payable and changes to deferred tax. Tax payable and deferred taxes are recorded directly in equity to the extent that they relate to factors that are recorded directly in equity.

Deferred tax/tax assets are calculated on all taxable temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes except goodwill. Tax increasing and tax decreasing temporary differences, as well as tax losses carried forward which are offset or can be offset in the same period, are recorded net, and are the basis for deferred tax assets for the Group. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Net deferred tax assets are recorded as intangible assets and net deferred tax liabilities are recorded as long term liabilities. Deferred tax assets are recorded to the extent that sufficient taxable profit will be available to allow the deferred tax assets to be utilised.

Oil companies that operate on the Norwegian Continental Shelf are subject to the Norwegian oil taxation regime. Under this regime oil companies that are not in a taxable position can claim a 78 per cent refund of its exploration costs, limited to the taxable loss for the current year. The deferred tax can only be netted off within each tax regime.

INTEREST-BEARING DEBTInterest-bearing debt is initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, the Group is recognising the loan at amortised cost, where the transaction costs are expensed over the relevant period.

DERIVATIVE FINANCIAL INSTRUMENTSThe Group has a limited use of derivative financial instruments such as forward contracts to hedge its oil and gas price risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and financial liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on gas hedges are recognised in the income statement.

The Group does not apply hedge accounting.

PENSION PLANSThe Group has only defined contributions plans. Contributions are paid to pension insurance plans and charged to the income statement in the corresponding period. Once the contributions have been paid, there are no further payment obligations.

PROVISIONSA provision is recorded when the Group has a present legal or constructive obligation as a result of past events and it is probable that payments will be demanded from the Group to fulfil the obligation.

TRADE CREDITORSTrade creditors are recognised initially at fair value, net of any transaction costs and subsequently measured at amortised cost using the effective interest method.


CONTINGENT LIABILITIESContingent liabilities are not recognised in the financial statements. Significant contingent liabilities are disclosed, with the exception of contingent liabilities where the probability of the liability occurring is remote.

NON-CURRENT ASSETS (OR DISPOSAL GROUPS) HELD FOR SALENon-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is highly probable. They are stated at lower of carrying amount and their fair value less cost to sell.

EARNINGS PER SHAREThe calculation of basic earnings per share is based on the profit attributable to total (both ordinary and preference shares) shares using the weighted average number of total shares outstanding during the year after deduction of the average number of treasury shares held over the period.

The calculation of diluted earnings per share is consistent with the calculation of the basic earnings per share, but gives at the same time effect to all dilutive potential ordinary shares that were outstanding during the period, by adjusting the profit/loss and the weighted average number of shares outstanding for the effects of all dilutive potential shares, i.e.: • The profit/loss for the period attributable to total shares is adjusted for changes in profit/loss that would result form the conversion of the dilutive potential shares.• The weighted average number of shares is increased by the weighted average number of additional shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

COST OF EQUITY TRANSACTIONSTransaction costs directly linked to an equity transaction are recognised directly in equity, net after deducting tax.

CASH FLOW STATEMENTThe cash flow statement is prepared by using the indirect method.

EVENTS AFTER THE BALANCE SHEET DATEThe financial statements are adjusted to reflect events after the balance sheet date that provide evidence of conditions that existed at the balance sheet date (adjusting events). The financial statements are not adjusted to reflect events after the balance sheet date that are indicative of conditions that arose after the balance sheet date (non-adjusting events). Non-adjusting events are disclosed if significant.

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

3.1 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONSThe preparation of the financial statements in accordance with IFRS, requires management to make judgments, use estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are considered to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis.

Estimates and assumptions which represent a considerable risk for material changes in carrying amounts of assets and liabilities during the next fiscal year, are presented below.

a) TaxesUncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. The Norwegian entities are subject to the Norwegian oil taxation regime which involves an allocationof indirect costs to exploration expenses as items allowable for tax deductions and subsequent tax refunds. The allocation and the calculated tax receivable is based on judgments and understanding by the Group regarding items allowable for tax deduction,

NOTES


the view may differ from the Norwegian Authorities’ practice in the final settlement of the tax refund. Judgment is also required in determining whether deferred income tax assets are recognised in the statement of financial position. Deferred income tax assets, including those arising from un-utilised tax losses, require management to assess the likelihood that the Group will generate sufficient taxable earnings in future periods, in order to utilise recognised deferred income tax assets.

b) Hydrocarbon reserve and resource estimatesProduction assets within property, plant and equipment are depreciated on a unit of production basis. The depreciation rate is calculated by reference to proven plus probable reserves determined in accordance with Society of Petroleum Engineers rules and the estimated future cost of developing those reserves is incorporated. The Group estimates its commercial reserves based on information compiled by appropriate qualified persons relating to the geological and technical data on the size, depth, shape and grade of the hydrocarbon body and suitable production techniques and recovery rates. Commercial reserves are determined using estimates of oil and gas in place, recovery factors and future oil and gas prices. Changes in reserves will consequently influence future depreciation rate of production assets.

c) Business combinationAssets acquired and liabilities assumed in acquiring Bridge shall (with some exceptions) be recognized at fair value at the acquisition date. Valuing oil and gas related assets are subject to substantial judgment. The Company has used external parties to give assessments to the purchaser price allocation. See note 4 for further information.

d) DecommissioningDecommissioning costs will be incurred by the Group at the end of the operating life of the gas and oil producing fields. The Group assesses its decommissioning provision at each reporting date. In determining the estimated fair value of the provision for decommissioning, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove installations from the site and the expected timing of those costs. The ultimate decommissioning estimates may also vary in response to many factors to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites.

e) Recoverability of oil and gas assetsDiscoveries and licenses in the Group are assessed for impairment every reporting period. Goodwill is assessed for impairment annually and whenever there is an indication that the assets may be impaired. The Group assesses each asset or cash generating unit (CGU). Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions which are subject to risk and uncertainty such as long-term oil prices (considering current and historical prices, price trends and related factors), discount rates, operating costs, future capital requirements, decommissioning costs, exploration potential, reserves (discussed above) and operating performance (which includes production and sales volumes). Changes in circumstances impacting these projections may change the recoverable amount of oil and gas assets and/or CGUs. Any impairment is recorded through the income statement.

3.2 CRITICAL JUDGMENTS IN APPLYING THE COMPANY’S ACCOUNTING POLICIESManagement has made judgments also in the process of applying the Group's accounting policies. Such judgments with the most significant effect on the amounts recognised in the financial statements are presented in the following:

a) Accounting policy for exploration expensesThe Group uses the successful efforts method to account for exploration costs. All exploration costs, with the exception of acquisition costs of licenses and drilling costs of exploration wells, are expensed as incurred.

The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgment in determining whether it is likely that future economic benefits are likely either from future exploitation or sale or where activities have not reached a stage which permits a reasonable assessment of the existence of reserves. These estimates directly impact the point of deferral of exploration and evaluation expenditure. The deferral policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether an economically viable extraction operation can be established. Any such estimates and assumptions may change as new information becomes available. Circumstances may suggest that the carrying amount may exceed the recoverable value of the asset, and such assessment of circumstances involves judgment as to likely future commerciality of the asset and also when such commerciality should be determined.

52 SPIKE EXPLORATIONNOTES

USD '000BRIDGE AT

ACQUISITION DATEATHENA AT

ACQUISITION DATE TOTAL

Exploration and evaluation related assets 101 671 – 101 671

Oil and gas assets (including abandonment assets) – 21 136 21 136

Property, plant and equipment 760 – 760

Tax receivable NCS, current and non-current 67 258 – 67 258

Intercompany receivable from asset held for sale 26 604 – 26 604

Working capital assets including cash 15 223 1 019 16 242

Net assets classified as held for sale 54 094 – 54 094

Total identifiable assets 265 609 22 155 287 764

Deferred tax liabilities –69 756 –6 766 –76 522

Abandonment liability (Ref. note 20) – –4 136 –4 136

Interest bearing debt –54 305 –54 305

Accounts payable and other short term liabilities –28 072 –3 124 –31 196

Total identifiable liabilities –152 133 –14 026 –166 159

Total identifiable net assets 113 476 8 129 121 606

Goodwill arising on acquisition

Consideration transferred 159 893 20 217 180 110

Fair value of non-controlling interest 3 835 – 3 835

Less: fair value of net identifiable assets acquired –113 476 –8 129 –121 606

Goodwill arising on acquisition (Ref note 11) 50 252 12 088 62 339

Transaction costs expensed as other operating expenses: 2 295 137 2 432

4.1 BUSINESS ACQUISITIONS

PURCHASE OF BRIDGE ENERGY ASAIn October 2013 the Group have acquired 97,7% of the share capital of Bridge Energy ASA ("Bridge"), in several tranches. It is assessed that on the 25. October control was obtained, and thus represents the acquisition date. Remaining outstanding shares have been acquired shortly after the acquisition and if required, by support from the through compulsory trasfer in accordance with The Public Limited Liability Companies Act.

Bridge's principal activities are exploration, development and production of oil and gas resources on the Norwegian and UK Continental shelves through unincorporated joint ventures. The UK-related business acquired will be sold following the completion of this transaction, and thus is classified as held for sale. Bridge has been listed on Oslo Stock Exchange and the London based AIM market, and has been delisted following this transaction.

PURCHASE OF 15% WORKING INTEREST IN ATHENA OIL FIELD The Group acquired a 15% working interest in the Athena Oil Field from Dyas UK Limited's 32.5% ownership. The Athena Oil Field is located in the Outer Moray Firth Area on the UKCS, in Block 14/18b (License 1293).

The effective date of the acquisition was 1 January 2013. The net consideration was USD 20,2 million, and the transaction was completed on the 18 July 2013. The consideration was based on a fixed payment of USD 28 million and a variable element. The variable amount reflects agreed adjustment for changes in working capital, certain expenses and income between signing date and the completion date ("pro & contra").

The working interest is recognised in the financial statement as a jointly controlled operations which involve recognising the Group’s share of the working interest individual income, expenses, assets, liabilities and cash flows. Each item is classified and presented in its respective line-items in the financial statements. Close to all of recognised goodwill, are "technical goodwill" that arise from recognition of deferred tax on excess values. Goodwill will not be deductible for tax purposes.

The following table summarises the consideration paid, the fair value of assets acquired, liabilities assumed:

4 BUSINESS ACQUISITIONS AND DISCONTINUED OPERATIONS


BRIDGE ACQUISITION Acquired intangible assets recognised above relates to license related assets and seismic. Of the recognised amount fair value of seismic is assessed to be USD 13.4 million. Goodwill is assessed to arise from value of workforce and other general synergies. In addition a "technical" goodwill arise from recognition of deferred tax on excess values. This "technical" goodwill amounts to USD 39.7million. Goodwill will not be deductible for tax purposes.

Non-controlling interest:Non-controlling interest is measured at fair value at the acquisition date. The fair value is measured as number of outstanding shares times estimated amount that must be paid to execute compulsory acquisition of the non-controlling interest. IMPACT OF ACQUISITIONS ON THE RESULTS OF THE GROUP The income included in the consolidated statement of comprehensive contributed by Bridge was USD 0 from continuing operations and Athena USD 19.5 million. Included in the profit/-loss for the year is USD -0.3 million from Bridge and USD 2.1 million from Athena from continuing operations (the figure is exclusive goodwill impairment of USD 5.4 million from the Athena field). The acquisitions had been consolidated from 1 January 2013, the consolidated statement of comprehensive income would show pro-forma income of USD 48.5 million from continuing operations, operating profit/-loss of USD –98.8 million from continuing operations and net loss for the year of USD –32.2 million from continuing operations.

The pro forma figures assumes no amortisation or impairment of excess values identified in the acquisitions, and includes no effect from operations classified as discontinued operations. 4.2 ASSETS CLASSIFIED AS HELD FOR SALE Bridge Energy ASA has a subsidiary Bridge Energy UK Ltd, which operates on the UK Continental shelf. This subsidiary will be sold when the practical circumstances are in place. An agreement with an acquirer is already entered into, however the transaction has not closed at the balance sheet date. The assets and liabilities that relates to Bridge Energy UK Ltd. have been presented as assets held for sale in the statements of financial position.

At the date of acquisition, the net carrying amount of the assets held for sale was USD 54 million. Net carrying amount as at December 2013 is USD 54.4 million.


5 SEGMENT INFORMATION

Information is organised by business area and geography. The reporting format is based on the Group’s management and internal reporting structure as well as risk and reward similarities.

Transfer pricing between segments is based on estimated market value. The segment result, assets and liabilities include items that are directly related to the segments. Items that are not allocated are mainly intercompany sales, interest-bearing loans and other associated expenses and assets related to administration of the Group. The Group key management is the chief decision maker in the Group.

The segments’ investing activities comprise total expenses in the period for the acquisition of assets that have an expected useful life of more than one year. BUSINESS SEGMENTSThe Group operates in only one business, which is exploration and production activities for offshore oil and gas. For management reporting purposes the Group has identified reportable segments based on geographical location of business. GEOGRAPHIC SEGMENTSThe Group's operations are carried out on the Norwegian Continental Shelf and on the UK Continental Shelf. The activities in Norway and UK are operated through companies domiciled in those countries. Geographic segments are mainly based on the Group’s corporate structure. The business segments do not carry independent external financing. The overall financing has been obtained by the parent entity Spike Exploration Holding AS, which again finances the various subsidiaries/ business segments. Hence, financing, financial items and working capital are not allocated amongst these.

USD '000 NORWAY UK NON–ALLOCATED TOTAL

Other operating income, external 8 19 571 19 579

Other operating income, internal 2 935 –2 935 –

Operating profit/(loss) –66 876 –4 779 –10 –71 665

Net financial income/(expenses) –1 784 –981 – –2 765

Income tax 52 244 1 473 – 53 717

Net profit/(loss) from continuing operations –16 416 –4 287 –10 –20 713

Total assets in continuing operations 274 664 58 712 29 660 363 036

Total liabilities in continuing operations 120 600 25 340 131 367 277 307

Cash flow from investing activities* –113 428 –38 068 –54 094 –205 590

USD '000 NORWAY UK NON–ALLOCATED TOTAL

Other operating income, external – – – –

Other operating income, internal 1 044 –1 044 –

Operating profit/(loss) –4 335 –2 332 – –6 667

Net financial income/(expenses) 90 –5 – 85

Income tax 3 633 – – 3 633

Net profit/(loss) from continuing operations –612 –2 337 – –2 949

Total assets 13 153 484 –2 589 11 048

Total liabilities 1 889 2 342 –2 104 2 127

Cash flow from investing activities –151 – – –151

*Consideration allocated to assets held for sale is presented as part of Non-allocated.

2013

2012


USD '000 GROUP 2013 GROUP 2012 PARENT 2013 PARENT 2012

Professional services 2 624 1 099 1 838 688

Office expenses, office leases, IT development and similar 1 446 615 1 370 578

Travel 426 154 261 142

Other expenses 405 83 429 81

Recharged to group companies – – –109 –

Total 4 901 1 950 3 788 1 489


Auditor fee 70 – 51 –

Attesting services 9 7 9 7

Other advisory services 14 – 14 –

Total 93 7 74 7

In addition to the above, USD 37 thousands in fees to EY has been expensed for regular audit of Bridge Energy and Bridge Energy Norge. Furthermore USD 34 thousands been expensed for fees to EY in Spike Exploration Holding related to the acquisition of Bridge Energy.


Exploration expenses related to dry well 36 679 – 36 679 –

Exploration expenses related to license participation 2 759 – 1 999 –

Exploration expenses, other external expenses (seismic, EM, etc) 16 157 2 190 19 369 1 474

Exploration expenses 55 596 2 190 58 047 1 474

In addition to the exploration cost above, a part of the other operating costs are classified as exploration cost for tax purpose.

6 OTHER GENERAL AND ADMINISTRATIVE EXPENSES

SPECIFICATION OF OTHER EXPENSES

7 EXPLORATION EXPENSES

AUDITOR FEES Fees paid to the auditor (excluding VAT)



Salaries, bonuses and holiday pay 9 104 2 014 7 536 1 916

Social security costs 1 032 309 819 296

Pensions 345 168 273 168

Other employee costs 580 22 476 22

Total 11 061 2 513 9 104 2 402

Average number of man years employed 22.4 7.5 18.4 7.0

See note 24 for remuneration to the key management.


Interest income 345 13 669 21

Net currency gain 1 288 73 135 70

Other financial income 6 – – –

Total financial income 1 638 86 804 91

Interest expenses –1 748 – –688 –0

Other financial expenses –2 655 –1 –2 300 –1

Total financial expenses –4 403 –1 –2 989 –1

Net financial income/(expenses) through profit and loss –2 765 85 –2 185 90

8 EMPLOYEE EXPENSES

9 NET FINANCIAL INCOME (/EXPENSES)

PENSIONSSpike Exploration Holding (the Parent Company) has a defined contribution scheme for employees in Spike Exploration Holding AS. The Parent Company meets the requirements for mandatory pension ("obligatorisk tjenestepensjon") in Norway. See note 24 regarding Top-hat arrangement.

There are no pension obligations for the employees in the UK subsidiary.

NOTES

10 INCOME TAX

THE TAX (EXPENSES)/INCOME RECOGNISED IN THE INCOME STATEMENT


Tax (expense)/income for the year

Tax refund on exploration expenses NCS 59 722 2 563 57 585 2 563

Changes in deferred tax –5 990 1 070 –4 341 1 070

Adjustment to prior periods –16 – –16 –

Total tax (expenses)/income recognised in the income statement 53 717 3 633 53 229 3633

– of which tax (expense)/income Norway 52 244 3 633 53 229 3633

– of which tax (expense)/income UK 1 473 – – –


RECONCILIATION OF TAX (EXPENSES)/INCOME

TAX EFFECT OF TEMPORARY DIFFERENCES


Profit/–loss before taxes –74 430 –6 582 –70 299 –4 245

Tax according to ordinary rate [28%] 20 840 1 843 19 684 1 189

Tax according to special tax rate [50%] 33 428 2 123 34 057 2 123

Effect of taxable income outside Norway 3 086 –187 – –

Tax effect of permanent differences –3 398 –64 –116 –64

Foreign currency effect –55 –81 –315 386

Change in current taxes previous years 93 – 93 –

Change in deferred taxes previous years –109 – –109 –

Change in tax rate –172 – –46 –

Change in deferred tax assets, not recognised in the financial statements 4 – –18 –

Tax (expenses)/income for the period 53 717 3 633 53 229 3 633

Effective tax rate 72.2% 55.2% 75.7% 85.6%


Property, plant and equipment –104 719 –25 –6 982 –25

Other temporary differences 1 644 374 1 113 374

Tax loss carried forward, Norway 9 558 781 2 953 781

Tax loss carried forward, UK 13 031 469 – –

Basis for deferred tax assets/-liabilities –80 486 1 598 –2 916 1 130

Valuation allowance for deferred tax assets in UK – –469 – –

Valuation allowance for deferred tax assets in Norway –619 – –18 –

Total deferred tax assets/-liablities recognised –81 105 1 130 –2 934 1 130

– of which deferred tax asset/-liability Norway –75 812 1 130 –2 934 1 130

– of which deferred tax asset/-liability UK –5 293 – – –

RECONCILIATION OF DEFERRED TAX ASSETS/LIABILITIES


Opening balance 1 130 – 1 130 –

Deferred tax through income statements –6 098 1 070 –4 449 1 070

Deferred tax recorded on acquisitions and disposals –76 521 – – –

Deferred tax on share issue cost, recognised directly in equity 385 60 385 60

Closing balance as of 31 December –81 105 1 130 –2 934 1 130

Tax refund on the Norwegian Continental Shelf

Tax refund from this years expenses 60 434 2 563 57 492 2 563

Adjustment to previous years 94 – 94 –

Tax refund from expenses in Bridge before acquisition 26 772 – – –

Tax refund on the Norwegian Continental Shelf 87 300 2 563 57 585 2 563

Companies operating on the Norwegian Continental Shelf (NCS) were subject to a 50% special petroleum tax in addition to the ordinary 28% corporate tax n 2013. From 1 January 2014, the tax rates have change to 51% oil taxation in addition to the ordinary 27% corporate tax. Companies that are not in a taxable position can claim a 78% refund on exploration costs on the NCS, limited to the taxable losses for the year. This refund is normally payable in December the following year. This tax income totals USD 0.873 million for 2013 and 0.256 million for 2012.


USD '000

CAPITALIZED EXPLORATION COSTS AND LICENCE RIGHTS SEISMIC GOODWILL TOTAL

Acquisition cost 31 December 2012 – – – –

Additions 26 151 – – 26 151

Acquisitions through business combinations 88 219 13 452 62 339 164 010

Acquisition cost 31 December 2013 114 370 13 452 62 339 190 162

Accumulated amortisation and impairments

Accumulated amortisation and impairments 31 December 2012 – – – –

Amortisation*Impairment –5 400 –5 400

Accumulated amortisation and impairments 31 December 2013 – – –5 400 –5 400

Net carrying amount

Carrying amount 31 December 2012 – – – –

Carrying amount 31 December 2013 114 370 13 452 56 939 184 762

*Capitalised exploration costs and licence rights are not depreciated until production.

USD '000 NORWAY (BRIDGE ACQUISITION) UK (15% INTEREST IN ATHENA) TOTAL GOODWILL

Open balance 1 January 2013 – – –

Acquisitions in 2013 (Reference to note 4) 50 252 12 088 62 339

Impairments – –5 400 –5 400

END BALANCE 31 DECEMBER 2013 50 252 6 688 56 939

Impairment of intangible assets and production facilities incl. wells Intangible assets including goodwill and capitalized production facilities incl. wells (ref note 12) have been subject to impairment testing at year end 2013. Book values have been compared to expected cash flows from the assets (value in use) calculated as the net present value of the asset. Goodwill allocated to Norway has been tested together with assets acquired from the Norwegian part of Bridge. Goodwill allocated to UK has been tested together with assets acquired from the 15% Athena interest.

Value in use has been calculated by discounting estimated future cash flows with post-tax discount rate of 10%. Cash flows is based on the best estimate production profiles. The oil price is based on a forward curve at the balance sheet date. Based on this test, no impairment has been recognised in 2013 related to the Bridge acquisition, and an

impairment of USD 5.4 million has been recognised related to Athena.

USD '000CAPITALIZED EXPLORATION

COSTS AND LICENCE RIGHTS

Cost

Acquisition cost 31 December 2012 –

Additions 8 962

Disposals –

Acquisition cost 31 December 2013 8 962

Accumulated depreciation and impairments

Accumulated depreciation and impairments 31 December 2012 –

Accumulated depreciation and impairments 31 December 2013 –

Net carrying amount

Carrying amount 31 December 2012 –

Carrying amount at 31 December 2013 8 962

11 INTANGIBLE ASSETS

GROUP

SPECIFICATION OF GOODWILL

PARENT COMPANY


USD '000PRODUCTION FACILITIES

INCL. WELLSFURNITURE, FIXTURE AND

OFFICE EQUIPMENT TOTAL

Cost

Acquisition cost 25 May 2012 – – –

Additions – 151 151

Acquisition cost 31 December 2012 – 151 151

Additions 4 396 399 4 795

Acquisitions through business combinations 21 136 760 21 896

Acquisition cost 31 December 2013 25 533 1 310 26 843


Depreciaiton – –14 –14

Accumulated depreciation and impairments 31 December 2012 – –14 –14

Depreciaiton –4 058 –182 –4 240

Accumulated depreciation and impairments 31 December 2013 –4 058 –196 –4 254

Net carrying amount

Carrying amount 31 December 2012 – 137 137

Carrying amount 31 December 2013 21 474 1 114 22 589

Depreciation plan Unit of production Linear 3–5 years

Impairment assessments for production facilities and wells, see note 11.

USD '000FURNITURE, FIXTURE AND

OFFICE EQUIPMENT

Cost

Acquisition cost 25 May 2012 –

Additions 151

Acquisition cost 31 December 2012 151

Additions 397

Acquisition cost 31 December 2013 548


Depreciaiton –14

Accumulated depreciation and impairments 31 December 2012 –14

Depreciaiton –117

Accumulated depreciation and impairments 31 December 2013 –131

Net carrying amount

Carrying amount 31 December 2012 137

Carrying amount 31 December 2013 417

12 TANGIBLE ASSETS

GROUP

PARENT COMPANY


13 OTHER RECEIVABLES

14 CASH AND CASH EQUIVALENTS


Claim on share capital – 5 000 – 5 000

Working capital in joint ventures 4 021 – 542 –

Prepayments 934 – 336 –

VAT receivables 794 – 759 –

Accrued revenue 6 195 – – –

Other receivables –122 796 5 771

Total 11 822 5 796 1 643 5 771

None of the receivables are due later than one year from the balance sheet date.


Bank deposit, restricted as a guarantee 2 196 233 298 233

Bank deposit, non-restricted 24 709 1 190 12 946 725

Total 26 905 1 423 13 245 959

Restricted cash relates to employees' witholding tax. Bank deposits are subject to a floating interest, and the depository interest rate will therefore fluctuate during the year.

The cash equivalents are equal to their nominal value.

Cash and cash equivalents are denominated in NOK, GBP and USD. The carrying amounts of cash and cash equivalents are denominated as follows

at year-end:


USD 11 141 183 11 039 183

GBP 750 558 748 99

EUR 1 – – –

NOK 15 013 682 1 458 676

Total 26 905 1 423 13 245 959


15 SHARE CAPITAL

NUMBERS OF SHARES SHARE CAPITAL

COMMON SHARES PREFERENCE SHARES NOK ('000) USD ('000)

Incorporation 25 May 2012 586 640 – 586.6 97.5

Issued for cash 27 June 2012 – 5 765 186 5 765.2 960.8

Total as of 31 December 2012 586 640 5 765 186 6 351.8 1 058.3

Issued in 2013 213 360 144 797 726 145 011.1 24 228.0

Issued in 2013, registered in 2014 14 000 000 14 000.0 2 290.0

Total as of 31 December 2013 800 000 164 562 912 165 362.9 27 576.3

SHAREHOLDERS % INTEREST COMMON SHARES PREFERENCE SHARES TOTAL SHARES

HV VI INVEST Omega II AS 97.13% – 147 022 798 147 022 798

Zycor Equity 1 0.11% 120 000 45 786 –

Waci Invest AS 1 0.89% – 1 351 663 –

Gramstadhaugen Invest AS 2 0.22% 120 000 209 183 329 183

Waxa AS 3 0.18% 133 360 134 958 268 318

Kvitnjuk Invest AS 4 0.15% 146 640 73 898 220 538

Taishan AS 5 0.11% 66 640 96 882 163 522

GE Consulting AS 6 0.03% – 51 471 51 471

Lars Åke Hesselbom, Board Member 0.03% – 50 948 50 948

Other shareholders 1.26% 213 360 1 525 325 1 738 685

Total 100.0% 800 000 150 562 912 151 362 912

The Parent Company has two classes of shares with a nominal value of NOK 1.00. All shares are fully paid. Each share represents one vote at the Parent Company's General meeting. DIVIDENDSAt year-end 2013, no dividend was proposed for any of the Group companies for 2013. PREFERENCE SHARE In the articles of association it is specified that Common shares and Preference shares can be subject to different dividend distributions. Pursuant to the Norwegian Private Limited Companies Act, all decisions regarding distribution of proceeds from the Parent Company or issuance of new shares shall be determined by the shareholders meeting (and in some cases the board, if validly authorised by the shareholders' meeting). Except for normal rights at the shareholders meeting, Preference shares do not give the holders of these instruments the right to impose an obligation for the Parent Company to deliver cash or issue own equity instruments, and thus Preference shares represents equity of the Parent Company.

Major shareholders, and shares held by Directors, key management and other related parties personnel as at 31 December 2013:

1 Controlled by Walter Sognnes, VP Project Evaluation2 Controlled by Harald Grøsfjeld, CFO3 Controlled by David Poole, VP Exploration4 Controlled by Bjørn Inge Tønnessen, CEO5 Controlled by Tor Arne Hansen, Chief G&G6 Controlled by Stig Jarle Bergseth, Board Member


16 EARNING PER SHARE

WEIGHTED NUMBER OF SHARES GROUP 2013 GROUP 2012 PARENT 2013 PARENT 2012

Net profit/(loss) attributable to ordinary equity holders of the parent

–20 713 –2 949 –17 070 –612

Weighted average number of shares 56 513 203 5 487 048 56 513 203 5 487 048

Basic earnings per share –0.367 –0.538 –0.302 –0.112

Diluted earnings per share (1) –0.367 –0.538 –0.302 –0.112


Working capital liabilities in joint ventures 19 914 – 4 413 –

Wages, holiday pay and bonus 1 031 782 528 751

Accrued expenses 19 856 – 19 849 –

Other current liabilities 9 905 75 – 75

Total 50 706 857 24 790 826

BASIC EARNINGS PER SHAREThe calculation of basic earnings per share is based on the net income attributable to the shareholders of the parent company and a weighted average number of shares outstanding during the years ending 31 December 2013 and 2012 respectively. Both ordinary and preference shares are included in the calculations of weighted average number of shares. Shares issued during the periods are included in the calculations of weighted average number of share from the date the shares issue was approved by the general meeting.

USD '000

COMPANY HEAD OFFICEOWNERSHIP/

VOTING RIGHTS

BOOK VALUE IN PARENT COMPANY

IFRS 2013PROFIT/-LOSS EQUITY

Spike Exploration AS Stavanger, Norge 100% 5 -8 -2

Spike Exploration UK Ltd London, UK 100% 3 279 -4 287 -3 345

Bridge Energy AS* Stavanger/Asker 100% 163 728 -47 646 186 175

Total 167 013 -51 941 182 828

* Bridge Energy AS was acquired 25 October 2013 and accounted for as a business combination in the consolidated financial statement. Further information regarding this acquisition is provided in note 4.

Bridge Energy AS has two subsidiaries, Bridge Energy Norge AS and Bridge Energy UK Ltd. The UK entity is classified as held for sale in the consolidated financial statements.

Profit/-loss from Bridge Energy AS disclosed above covers the full year, and not only the period after the acquisition.

17 GROUP COMPANIES

18 OTHER CURRENT LIABILITIES


USD '000 GROUP PARENT

Provisions for decommissioning at 1 January 2013 – –

Provision arising from acquisition of Athena interest (Ref. note 4) 4 136 –

Additional provision post acquisition 3 970 –

Unwinding of discount 266 –

Provisions for decommissioning at 31 December 2013 8 372 –

The Group's removal and decommissioning liabilities relate to the Athena field. Timing of removal is expected to be 2017. The liability is based on an implementation concept in accordance with the Petroleum Activities Act and international regulation and guidelines. The calculations assume an inflation rate of 2,5% before tax and a nominal discount rate of 5,26%.

20 ABANDONMENT PROVISION

19 OTHER CURRENT LIABILITIES

CARRYING AMOUNTSGROUP

CARRYING AMOUNTSPARENT

CURRENCYAVAILABLE

FACILITY INTERESTAVAILABLE

UNTIL31.12.2013 31.12.2012 31.12. 2013 31.12.2012

Liabilities to financial institutions M NOK 1 100 NIBOR +1.80%

31.12. 2015 43 989 – 21 025 –

Liabilities to HV VI Invest ETA Ltd M USD 79 LIBOR +1.75%

08.11.2014 79 000 – 79 000 –

122 989 – 100 025 –

The NOK 1 100 million facility is available until 31 December 2015, however the terms require that for each year the tax refund received shall be used to repayment of outstanding amounts. Thus the facility is presented as short term borrowings. The facility may be used by different entities in the Group. Available undrawn facility as at 31 December 2013 is USD 134.8 million. The Group pays 0,72% a committment fee for undrawn facilities.

The loan from HV VI Invest ETA Ltd was issued in relation to the acquisition of Bridge. The lender is a related party to the Groups controlling shareholder HV VI Omega II AS.

Security: The NOK 1 100 million has to first priority assignment of receivables over tax refunds of the Group.



Within one year 678 366 306 342

After one year, but less than five years 961 348 306 348

More than five years – – –

Total 1 639 714 611 690

EXPECTED CONTRACTUAL OBLIGATIONS / LICENSE COMMITMENTS As a condition for being awarded production licenses, participants may be committed to drill a certain number of wells. At 31 December 2013, the Group was committed to participate in exploration wells on the UK Continental Shelf related to continuing operations. Expected committed expenditures related to Cairngorm (P1892) is USD 5.5 million. GUARANTEESAs of 31 December 2013 the Parent Company has given a general PCG to DECC covering all liabilities for Spike Exploration UK. In addition, the Parent Company has given a PCG towards EWE Vertrieb GmbH covering for Spike Exploration UK's responsibilities under the Athena JOA, and a guarantee to Enquest Heather Limited for covering Spike Exploration UK's share related to dry well costs on Cairngorm, detailed in the Farm-In agreement.

As of 31 December 2013 the Parent Company has given a guarantee to DnB of USD 3.7 million related to the purchase of non-controlling interests. LEGAL DISPUTES At 31 December 2013 the Group is not subject to any legal disputes. LIABILITY FOR DAMAGES / INSURANCE The Group has an extensive insurance programme in place, which covers wells (well out of control), third party liability and pollution.

OPERATING LEASE COMMITMENTS The Group has several agreements for office premises with lease periods of one to three years with options for renewal. The leases are index-regulated annually. The agreements for leasing office facilities in Stavanger (Norway) expire in 2015. Future minimum rentals payable under non-cancellable operating leases as of 31 December are as follows:

21 COMMITMENTS, GUARANTEES, CONTINGENT COMMITMENTS, AGREEMENTS AND CONTINGENCIES

NOTES



FINANCIAL ASSETS

Loans and receivables:

Accounts receivable 195 – – –

Intercompany receivable, long term – – 33 670 2 096

Tax receivable NCS 87 300 2 563 57 585 2 563

Other receivable* 4 693 5 796 547 5 771

Intercompany receivable, short term – – 8 8

Cash and cash equivalents, restricted and unrestricted 26 905 1 423 13 245 958

Total financial assets 119 092 9 782 105 056 11 397

FINANCIAL LIABILITIES

Financial liabilities at amortised cost:

Borrowings 122 989 – 100 025 –

Accounts payable 11 055 880 10 120 701

Other taxes and social security costs 3 081 390 494 362

Other current liabilities* 30 850 857 4 941 826

Total financial liabilities 167 975 2 127 115 580 1 889

*Prepayments, accrued income and accrued expenses are not included since they do not represent financial assets and liabilities.

There are no material differences between the book value and fair value of the financial instruments as of 31 December 2013 and 2012.

FINANCIAL INSTRUMENTS

22 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Exploration for oil and gas involves a high degree of risk, and the Group is subject to the general risk factors pertaining to this business, such as (i) volatility of oil and gas prices, (ii) uncertainty pertaining to estimated oil and gas reserves, (iii) operational risk related to oil and gas exploration and (iv) volatility in exchange rates. In order to reduce and control these risks, management periodically examines and evaluates the Group's most important financial market risks. In addition to the above mentioned risks, the Group is primarily exposed to risk in connection with fluctuations in exchange rates and interest rates. The relevant risks are discussed below:

A. CREDIT RISKCredit risk is arising from credit exposure of financial counterparties and their ability to meet their payment obligations. The Group is mainly exposed to credit risk related to bank deposits, licence partners and other receivables. The exposure to credit risk is monitored on an on-going basis. There are no expectations that any of the counterparties will not be able to fulfil their obligations, and no provision have been made for bad debt. In addition the Group is exposed to credit risk pertaining to the tax receivable from the Norwegian Government (the tax refund is described in note 10). The credit risk exposure related to the tax refund is regarded as insignificant. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

B. LIQUIDITY RISKThe Parent Company's liquidity risk is the risk that it will not be able to meet its financial obligations as they fall due. Based on the committed equity from HV VI INVEST OMEGA II AS of USD 232 mill, the Group regards the occurrence probability of financing and liquidity risks as low.

Maturity for accounts payables are general three months. Information about maturity for interest bearing loans is provided in note 19.

NOTES


C. MARKET RISKS i) Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Group has in 2013 entered into a NOK 1 100 million Revolving Exploration Financing Facility Agreement and a short-term loan from HV VI Invest ETA Ltd. Both loans are at floating rate conditions, and thus the Group are exposed to interest rate risks. Currently the Group has not entered into any arrangements to reduce this exposure. Further information about interest bearing debt are provided in note 19. ii) Currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Parent Company’s functional currency and presentation currency is USD. Subsidiaries have USD, NOK and GBP as functional currency. (The subsidiary classified as held for sale, is the one with GBP as functional currency). The different entities are then exposed to currency risk from transactions in other currencies than its functional currency. The majority of the business has USD as functional currency, and the most substantial currency risk comes from operating expenses and tax expenses nominated in NOK and GBP. Currently the Group has not entered into any agreements to reduce its exposure to foreign currency risk. D. CAPITAL RISK MANAGEMENT The Parent Company is managing the capital structure in order to optimize profit to its shareholders and contributions to other interest groups. The Group may pay dividends to its shareholders, issue new shares or sell assets/licences in order to maintain or change the capital structure in the future.

The Parent Company will handle any increased future capital requirements through raising new capital, selling assets, taking up loans, strategic alliances and any combination of these, and by adjusting the company's level of activity, if required.

NOTES


USD '000

RELATED PARTY TRANSACTION GROUP 2013 GROUP 2012 PARENT 2013 PARENT 2012

HV VI Invest Omega II AS Negotiation fee 1 438 188 1 438 188

HV VI Invest Omega II AS Advisory fee 34 17 34 17

Total 1 472 205 1 472 205

The subscription and shareholders agreement regulates the fees payable to HitecVision:a) negotiation fee of three (3) % of the aggregate subscription amount payable by Omega on Closing.b) the solicitor’s fees and expenses accrued for Omega in connection with the negotiations of Omega’s contemplated investment in the Company.c) an annual advisory fee of NOK 200 000 plus VAT, payable quarterly in advance on the first Business Day of January, April, July and October pursuant to a separate agreement.d) a negotiation fee of one (1) % of funds paid in capital calls made after closing.e) fees and expenses (including any VAT) of Omega incurred in connection with (i) any subsequent variations, amendments, waivers, consents and/or approvals relating to this agreement, the Articles of Association or any ancillary documents agreed between Shareholders; and (ii) the preservation and/or enforcement of any of Omega under any

documents or action referred to under (i) above.

USD '000 YEAR ENDED 2013 25.05–31.12.2012

Sale of business services * 2 935 1 044

Interest revenue ** 567 8

Total 3 502 1 052

*Spike Exploration Holding provides administrative, technical and project bases services to its subsidiaries. Such services may involve services related to a) Assets and licenses (Acquisition and disposals, project management etc.) b) Finance services (preparation and supervisory of accounts and budgets, cash management etc.) c) Administrative services (human resources, legal and legal support, IT and software support etc.). Fees are based on hourly rates priced on an arms-length basis.

** Interest rate terms as at 31 December are LIBOR plus 3.5% margin, representing a total of 3.77%.

USD '000 FACILITY AMOUNT 31.12.2013 31.12.2012

Receivable from Spike Exploration UK Ltd* 100 000 28 798 2 104

Receivable from Bridge Energy AS 10 000 1 504 -

Receivable from Bridge Energy Norge AS 50 000 3 376 -

Receivable Spike Exploration AS 300 000 - -

Total receivables from Group companies** 33 678 2 104

*Includes both short term and long term receivables. **Receivables from Bridge Energy UK Ltd, which is a 100% subsidiary classified as held for sale, amounts to 3 367 is not included in the table above. All loan facilities are available until 31 December 2019. Interest rate terms as at 31 December are LIBOR plus 3.5% margin, representing a total of 3.77%.

The following table provides details of the related party transactions for the Group:

Transactions with group companies:

Balances with related parties:To support financing the business executed in its subsidiaries, the Parent Company has provided credit facilities to its subsidiaries.

The following table summarise the status as at 31 December 2013.

PARENT COMPANY

23 RELATED PARTIES

NOTES


USD '000 POSITION SALARY ACCRUED BONUSOTHER EMPLOYEE

BENEFITS PENSION TOTAL

Bjørn Inge Tønnessen CEO 397 61 4 79 541

Harald Grøsfjeld CFO 300 38 3 38 380

David Poole VP Exploration / Deputy CEO 386 60 4 66 517

Total 1 084 160 12 183 1 438

USD '000 POSITION SALARY ACCRUED BONUSOTHER EMPLOYEE

BENEFITS PENSION TOTAL

Bjørn Inge Tønnessen CEO 262 65 4 37 369

Harald Grøsfjeld CFO 131 41 2 17 191

David Poole VP Exploration / Deputy CEO 258 64 4 32 358

Total 651 171 10 86 917

There is no share based remuneration for the key managment personell or the directors of the board in 2012 or 2013.

No loans have been granted and no guarantees have been issued for executives, shareholders or directors of the board. Fees to Board of Directors Åke Hesselbom has in 2013 received USD 51 thousand in total remuneration of this amount 50% relates to 2012 when no fee was paid. Stig Jarle Bergseth received in 2013 USD 31 thousand in total remuneration. Of this amount USD 6 thousand relates to 2012. Severance pay agreement If the Parent Company terminates the employment for the managing director, he is entitled to severance pay corresponding to twelve months ordinary salary. Non-compete clause The key management personnel and the Parent Company has agreed to a non-compete clause, which may entitle the key management personnel to receive 100% salary up to a 12 months period following the expiry of the said notice period. Pension benefits Key management is covered by the same defined contribution plan as the rest of the employees. Pension cost to key management is included in the tables above under Pension. Bonus program and Top-hat arrangement The Parent Company has a bonus program for all employees based on ordinary salary. At least 50% of the bonus obtained net after tax must be invested in Preference shares in Spike Exploration Holding AS.

Further, the Parent Company has a "top hat arrangement" for employees for salaries above 12G. The net proceeds after tax has to be invested in Preference Shares. Shares held by directors and key managament For information about shares held by directors and key management personnel, see note 15.

Key management compensation in 2013:

Key management compensation in 2012:

24 RENUMERATIONS

NOTES


LICENCE OWNERSHIP SHELF OPERATOR NOTE

PL 299 10% NO Talisman Exploration

PL 475 10% NO Wintershall Exploration

PL 586 30% NO VNG Exploration

PL 590 10% NO North Energy Exploration

PL 645 15% NO Faroe Exploration

P1214 30% UK Enquest Exploration

P1293 15% UK Ithaca Energy Athena oil field

P1892 30% UK Enquest Appraisal

LICENCE OWNERSHIP SHELF OPERATOR NOTE

PL 027 ES 10% NO Det norske oljeselskap ASA Exploration

PL 457 20% NO Wintershall Norge ASA Exploration

PL 494 30% NO Dana Petroleum Norway AS Exploration

PL 494 B 30% NO Dana Petroleum Norway AS Exploration

PL 494 C 30% NO Dana Petroleum Norway AS Exploration

PL 497 15% NO Det norske oljeselskap ASA Exploration

PL 497 B 15% NO Det norske oljeselskap ASA Exploration

PL 504 CS 12% NO Det norske oljeselskap ASA Exploration

PL 504 BS 12% NO Det norske oljeselskap ASA Exploration

PL 511 7.5% NO Wintershall Norge ASA Exploration

PL 554 20% NO Total E&P Norge AS Exploration

PL 554 B 20% NO Total E&P Norge AS Exploration

PL 617 15% NO Valiant Petroleum Norge AS Exploration

PL 623 20% NO Talisman Energy Norge AS Exploration

PL 629 40% NO Bridge Energy Norge AS Exploration

PL 690 40% NO Bridge Energy Norge AS Exploration

For information about Licences awarded after the balance sheet date, see note 26. Assets classified as held for sale Licences acquired through the business combination with Bridge Energy that relates to the UK-sector are classified as held for sale in the statement of financial position, and are not disclosed above.

25 LICENCE PORTFOLIO

The following licences was acquired through the business combination with Bridge Energy ASA:

NOTES


In February 2014 Spike Exploration Holding AS and Bridge Energy Norge AS were awarded two licenses each in the APA 2013 round. Three in the North Sea and one in the Norwegian Sea. The Parent Company has increased its share capital in March 2014 by issuing 1 134 759 Preference Shares directed to the Group's employees, directors and Board members. The proceeds from the share issue was NOK 7.5 million, equivalent to approximately USD 1.2 million.

27 OIL AND GAS RESERVES AND RECOURES (UNAUDITED)

The Group has a production licence in UK through its subsidiary Spike Exploration UK Ltd. related to the Athena field, which the Group acquired in July 2013. Reserves as of 31 December 2013 Oil (million bbl) Proven and probable reserves 0.837 (Spike Exploration UK Ltd's share) Reserves are assessed and monitored continuously as when new information becomes available. Contingent reserves are excluded from the table above, though they might become proven reserves in the future.

26 EVENTS AFTER THE REPORTING PERIOD

NOTES

We focus on subsurface studies as the foundation for decisions on farm-ins and licensing rounds – this is fundamental for value creation of exploration companies. —BJØRN INGE TØNNESSEN, CEO

72 SPIKE EXPLORATIONAUDITOR'S REPORT

AUDITOR'S REPORT—

2013 ANNUAL REPORT 73 AUDITOR'S REPORT

Stavanger Office

—Spike ExplorationNykirkebakken 24013 Stavanger

Norway

Phone: +47 51 53 60 00Email: [email protected]

Postal address:PO Box 858

4004 StavangerNorway

Oslo Office

—Spike ExplorationLensmannslia 4

1386 Asker

Postal address:PO Box 9

1371 Asker

London Office

—Spike Exploration UK Ltd

17 Cavendish SquareLondon W1G 0PHUnited Kingdom

Phone: +44 (0) 203 008 7642

spike-x.com

Spike Exploration Annual Report 2013

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Transcript of Spike Exploration Annual Report 2013