A N N U A L R E P O R T 2 0 0 1

The Prosafe group . . . . . . . . . . . . . . . . . . . . 1

Group structure . . . . . . . . . . . . . . . . . . . . . . 2

The year in brief . . . . . . . . . . . . . . . . . . . . . 4

Financial highlights . . . . . . . . . . . . . . . . . . . 6

President´s review . . . . . . . . . . . . . . . . . . . . 8

Directors´ report . . . . . . . . . . . . . . . . . . . . 10

Offshore Support Services. . . . . . . . . . . . . 14

Drilling Services . . . . . . . . . . . . . . . . . . . . 20

Floating Production . . . . . . . . . . . . . . . . . . 24

Health, safety, environment and quality . . 30

Focus: Intellectual capital . . . . . . . . . . . . . 32

Shareholder information . . . . . . . . . . . . . . 34

Analytical information. . . . . . . . . . . . . . . . 36

Consolidated accounts . . . . . . . . . . . . . . . . 38

Parent company accounts . . . . . . . . . . . . . 54

Auditor´s report. . . . . . . . . . . . . . . . . . . . . 59

Management . . . . . . . . . . . . . . . . . . . . . . . 60

Addresses . . . . . . . . . . . . . . . . . . . . . . . . . 61

FINANCIAL CALENDAR:

First quarter . . . . . . . . . . . . . . . . 8 May 2002

Second quarter . . . . . . . . . . . . 6 August 2002

Third quarter . . . . . . . . . . . . 30 October 2002

Fourth quarter . . . . . . . . . . . 6 February 2003

C o n t e n t s

Prosafe aims to be a leading and innovative supplier of products and

services in selected niches of the global oil and gas industry. In line with

this strategy, the company has consolidated the world market for accom-

modation/service rigs and now owns eight units operating in the North

Sea and the Gulf of Mexico. Prosafe also commands a leading position

in production drilling in the Norwegian sector of the North Sea, with a

market share of around 50%, and is a major player in floating production

in Asia and Africa.

Prosafe ASA was formed in 1997 through the merger of the listed

companies Safe Offshore ASA and Procon Offshore ASA, which were

also founded that year. Safe Offshore was set up to take over the accom-

modation/service rigs Safe Britannia, Safe Caledonia and Safe Lancia

and related business from Offshore Accommodation Group plc, while

Procon Offshore was the result of the demerger of Transocean ASA's

production drilling operation, which was originally started up back in

1972 when Moran Brothers first came from Texas to begin drilling on

Ekofisk.

In 1998 Prosafe acquired the listed company Discoverer ASA, which

owned the accommodation/service rigs Safe Regency and Jasminia. The

company has since gone on to purchase the accommodation/service rig

Safe Scandinavia (formerly the Polycrown) from the Statfjord licensees

in 1999, the MSV Regalia from Halliburton in 2000 and the accom-

modation/service rig Polyconcord from K/S Rasmussen Offshore A/S in

February 2002.

In March 2001 Prosafe acquired Singapore-based Nortrans Offshore Ltd

(now Prosafe Production Pte Ltd), a company then listed on the Oslo

Stock Exchange whose business is the conversion, chartering and opera-

tion of FPSO/FSO vessels.

Prosafe now has three divisions: Offshore Support Services, Drilling

Services and Floating Production. Offshore Support Services currently

has five rigs in the Gulf of Mexico and three in the North Sea. Drilling

Services has production drilling contracts on Gullfaks, Snorre, Heidrun,

Jotun, Oseberg, Ringhorne (from 2002) and Kvitebjørn (from 2003).

The division also operates the Rubicon, a modularised lightweight rig

for drilling and well workovers, and provides drilling-related technical

services. Floating Production owns and/or operates a fleet of six

FPSO/FSO vessels off Angola, the Ivory Coast, Vietnam, India, Egypt

and Indonesia, with a seventh vessel currently under conversion to FPSO

duties and due to begin operation off Nigeria in the spring of 2003.

T h e P r o s a f e g r o u p

1PROSAFE ANNUAL REPORT 2001 • THE PROSAFE GROUP

■ OFFICE▲ FPSO/FSO OPERATION● ACCOMMODATION/SERVICE RIG❍ DRILLING OPERATION

■ STAVANGER■ BERGEN

■ ABERDEEN

■ HOUSTON

■ SINGAPORE▲ IVORY COAST

▲ ANGOLA

▲ VIETNAM

▲ SUEZ

▲ JAVA

▲ INDIA

GULF OF MEXICO●●●●

●●

●

❍❍❍

❍

❍

PROSAFE ASA

Stavanger

OFFSHORE SUPPORT SERVICES FLOATING PRODUCTION DRILLING SERVICES

Aberdeen Singapore/Houston Bergen/Stavanger

ACCOMMODATION/SERVICE RIG FPSO/FSOs PLATFORM DRILLING AND

• Gulf of Mexico • Ivory Coast RELATED SERVICES

• North Sea • Angola • North Sea

• Vietnam • Heidrun

• Egypt • Snorre

• India • Gullfaks

• Indonesia • Oseberg

• Heidrun

2

G r o u p s t r u c t u r e

PROSAFE ANNUAL REPORT 2001 • GROUP STRUCTURE

OPERATING REVENUES 2001

49% 37%

14%

Offshore Support Services 918

Floating Production (pro forma) 341

Drilling Services 1 252

EBITDA 200112%

65%23%

Offshore Support Services 619

Floating Production (pro forma) 216

Drilling Services 118

EMPLOYEES 31/12/2001

76%

8%

16%

Offshore Support Services 122

Floating Production 251

Drilling Services 1 152

▲

▲ ▲▲

●

3

V IS ION

PROSAFE SHALL BE A LEADING

AND INNOVAT IVE SUPPL IER OF PRODUCTS

AND SERV ICES IN SELECTED N ICHES

OF THE GLOBAL O IL AND GAS INDUSTRY.

• PGS extends the

Regalia's charter

on Banff in the UK

sector until March

2001

T h e y e a r i n b r i e f

J a n u a r y F e b r u a r y M a r c h A p r i l M a y J u n e J u l y

• Statoil charters the

Safe Britannia for

use on Statfjord in

the Norwegian

sector for 90 days in

the second quarter

of 2001

• Statoil extends the

maintenance and

modification

contract on Heidrun

in the Norwegian

sector until the end

of 2002

• Petronas extends

the Ruby Princess's

charter on Ruby

off Vietnam until

22 October 2002

• Prosafe further

focuses its business

by selling Procon

Engineering AS to

Hydralift ASA

• Prosafe acquires

Singapore-based

company Nortrans

Offshore Ltd to

become a major

player in floating

production in Asia

and Africa

• Offshore Support

Services wins a

contract from Norsk

Hydro to provide

services on Fram in

the Norwegian sector

for two months in

2003

• Norsk Hydro

extends the

Rubicon's charter

on Snorre TLP in

the Norwegian

sector until 15

August 2002

• Offshore Support

Services is

awarded a two-

to three-month

contract to supply

accommodation

services in the

North Sea from

mid-June 2001

• Offshore Support

Services wins a

one-year charter for

the Safe Lancia on

Cantarell in the Gulf

of Mexico running

until August 2002

• Prosafe makes a

strategic break-

through in subsea

well intervention

when Statoil charters

the Regalia for the

maintenance of four

wells on Statfjord,

Gullfaks, Åsgard

and Norne in the

Norwegian sector

in 2003

4 PROSAFE ANNUAL REPORT 2001 • THE YEAR IN BRIEF

A u g u s t S e p t e m b e r O c t o b e r N o v e m b e r D e c e m b e r J a n 2 0 0 2 F e b 2 0 0 2

• Vaalco charters the

Petroleo Nautipa for

use off Gabon for

two years from the

autumn of 2002 with

options to extend by

a further three years

• Offshore Support

Services is awarded a

300-day charter for

the Safe Britannia on

Cantarell running

until August 2002

• Offshore Support

Services wins a

three-month contract

from Chevron to

supply flotel services

on Alba in the UK

sector in the second

quarter of 2002

• Statoil awards

Offshore Support

Services a contract to

supply flotel services

on Sleipner for four

months and Statfjord

for three months in

2002

• The Regalia is gua-

ranteed employment

until the autumn of

2003 thanks to new

contracts from Statoil

on Åsgard in 2001

and BP west of

Shetland in 2002

• The Espoir Ivoirien

is named at the

Keppel yard in

Singapore

5PROSAFE ANNUAL REPORT 2001 • THE YEAR IN BRIEF

• Floating Production's

contract to operate

the Al Zaafarana is

extended until

November 2005

• Statoil extends the

drilling contract on

Gullfaks until April

2003

• Offshore Support

Services is awarded a

charter for the Safe

Caledonia on

Cantarell running

until May 2002

• Statoil extends the

drilling contract on

Heidrun until June

2003

• The Espoir Ivoirien

arrives on Espoir off

the Ivory Coast

• Agip awards Floating

Production an eight-

year deepwater FPSO

contract on Abo off

Nigeria starting in

the spring of 2003

• The Endeavor's

charter is extended

until August 2002

• Prosafe further

streamlines its

business by selling

off the remainder of

the Other Business

division

• Offshore Support

Services wins a

two- to three-week

contract from Statoil

to supply flotel

services on Gullfaks

starting in April 2003

• Prosafe enters into an

agreement with K/S

Rasmussen Offshore

A/S on the purchase

of the semisubmer-

sible accommo-

dation/service rig

Polyconcord

• FPSO Espoir Ivoirien

commenees

production on Espoir

F i n a n c i a l h i g h l i g h t s

Operating revenues (NOKm) 2 418 1 946 1 243

EBITDA (NOKm) 888 791 359

EBIT (NOKm) 515 594 207

EBIT margin (%) 21 31 17

Profit for the year (NOKm) 350 386 23

Cash flow from operating activities (NOKm) 820 572 322

Capital expenditure (NOKm) 2 925 1 031 459

Total assets (NOKm) 6 518 3 777 2 739

Working capital (NOKm) 667 683 526

Cash and deposits (NOKm) 763 627 405

Interest bearing debt (NOKm) 2 903 1 614 1 120

Net interest bearing debt (NOKm) 1 2 140 987 715

Book equity (NOKm) 2 893 1 682 1 274

Equity ratio (%) 2 44,4 44,5 46,5

Net asset value (NOKm) 3 5 351 2 875 1 684

Enterprise value (NOKm) 4 6 186 4 547 2 843

Market capitalisation (NOKm) 4 046 3 560 2 128

Return on capital employed (%) 5 12,1 22,1 10,2

Return on equity (%) 6 15,3 26,1 1,8

Number of outstanding shares (1 000 shares) 33 719 26 179 25 798

Average number of outstanding shares (1 000 shares) 7 32 139 26 439 25 978

Share price (NOK) 120,00 136,00 82,50

Book equity per share (NOK) 8 85,80 64,25 49,38

Net asset value per share (NOK) 158,69 109,83 65,29

Earnings per share (NOK) 9 10,89 14,60 0,88

Cash flow per share (NOK) 10 30,12 21,63 12,40

Market capitalisation / EBITDA 4,6 4,5 5,9

Market capitalisation / EBIT 7,9 6,0 10,3

Market capitalisation / Profit for the year 11,6 9,2 92,5

Market capitalisation / Cash flow from operating activities 4,2 6,2 6,6

Market capitalisation / Book equity 1,4 2,1 1,7

Market capitalisation / Net asset value 0,8 1,2 1,3

Note 2001 2000 1999

6 PROSAFE ANNUAL REPORT 2001 • FINANCIAL HIGHLIGHTS

1 Interest bearing debt - Cash and deposits2 Book equity / Total assets3 Book equity adjusted for market value on vessels as per estimates from brokers4 Market capitalisation + Net interest bearing debt5 EBIT + Interest income / Average total assets - Average interest free debt6 Profit for the year / Average book equity7 Average outstanding and potential shares8 Book equity / Number of outstanding shares9 Profit for the year / Average outstanding and potential shares

10 Cash flow from operating activities / Average outstanding and potential shares

7

MISS ION

BY PROVID ING OUR CL IENTS WITH INNOVAT IVE

AND COST-EFF IC IENT SOLUT IONS, PROSAFE

SHALL MAXIMISE SHAREHOLDER VALUE AND

CREATE A CHALLENGING AND MOTIVAT ING

WORKPLACE.

P r e s i d e n t ' s r e v i e w

8 PROSAFE ANNUAL REPORT 2001 • PRESIDENT'S REVIEW

30 years ago Moran Brothers came to Norway from Texas

and laid the first foundations for Prosafe with the drilling

contract on Ekofisk. Today Prosafe is a high-profile player

in the Norwegian offshore business and a major inter-

national supplier in key markets. In the early days we knew

little about offshore oil production, but over the years the

industry has become a major driver behind economic

growth not only in Norway, but also elsewhere in the

world. However, our current prosperity was by no means a

given: it has been built up through hard work, innovation

and perseverance.

Norwegian oil production has now peaked, but there are

still sufficient reserves for another 50 years of oil produc-

tion and another 100 years of gas production in the

Norwegian sector. Prosafe plans to continue to play a major

role in this market, thanks in part to the solutions we have

developed in areas like subsea well intervention that ensure

higher recovery rates and longer field lifetimes.

Oil is an international industry and so Prosafe further

focused its attention on selected growth niches in 2001,

with the acquisition of Nortrans Offshore proving a key

step in this direction. We have set our sights high when it

comes to Prosafe's international expansion and our move

into floating production marked an important milestone.

I am confident that Prosafe's human and technological

resources leave us well equipped at every level to handle

growing international competition. We will continue to

pursue an industrial strategy and take things one step at a

time in the future. Concrete targets, efficient operation and

a sharp strategic focus will enable us to build an enduring

business.

Our vision is to be a leading and innovative supplier of

products and services in selected niches of the global oil

and gas industry. We are well on our way to realising this

vision after the major progress made in recent years.

Prosafe Offshore is the world's leading owner and operator

of semisubmersible service rigs, Prosafe Drilling Services

is the market leader in platform drilling in the Norwegian

9PROSAFE ANNUAL REPORT 2001 • PRESIDENT'S REVIEW

sector and Prosafe Production is a leading owner and

operator of floating production vessels outside the North

Sea. We now employ some 1,600 people worldwide and

generated operating revenues of NOK 2.4 billion in 2001.

2001 was a year of healthy earnings thanks to good results

at all three divisions. Prosafe Offshore put in a strong

financial performance on the strength of high rig utilisation

during the year, and the outlook for 2002 is promising.

Demand for flotel services in the North Sea is growing and

so we are planning to bring one rig back from the Gulf

of Mexico in May 2002. The contract with Statoil for the

maintenance of subsea wells marked a strategic break-

through for our focus on this new growth niche. The work

will be carried out by the MSV Regalia, which is now

secured continuous employment until autumn 2003, only

interrupted by a yard stay. In the coming years Prosafe will

continue to develop its strategy of offering a flexible rig fleet

suitable for use in different niches and regions.

Prosafe's move into floating production has given us access

to a rapidly growing market. Prosafe Production was recently

awarded an eight-year contract by Agip for the operation of

an FPSO vessel at a depth of 550 metres on Abo off Nigeria.

This marked another strategic breakthrough for Prosafe as

Nigeria is one of the most important markets for future

deepwater FPSO developments. In addition the contract will

introduce Prosafe to new and important customers in the

FPSO market. The year also brought a one-year extension of

the Endeavor's charter, a four-year extension of the contract

to operate the Al Zaafarana, a one-year extension of the

Ruby Princess's charter from Petronas and a new two-year

charter from Vaalco for the Petroleo Nautipa off Gabon.

Prosafe Drilling Services put in a solid financial perform-

ance in 2002. The company is currently working intensively

on preparations for the start-up of drilling on Ringhorne for

Esso in the autumn of 2002. Statoil extended the mainte-

nance and modification contract on Heidrun by one year in

2001 and exercised the first of three one-year extension

options on the Gullfaks and Heidrun drilling contracts.

Platform drilling is a stable business in the Norwegian

sector and Prosafe aims to grow further in this market by

developing its existing contract portfolio, providing related

supplementary services and focusing on selective inter-

national expansion.

We stepped up our work on integrating the group during

the year to create a common identity for all companies on

the basis of our core values. We are also looking to give

Prosafe's expertise and capacity an even higher profile in the

international oil market. You can read more about Prosafe´s

intellectual capital elsewhere in this report.

We have been working hard to bring about further improve-

ments when it comes to health, safety and the environment.

Over the last three to four years we have cut lost-time

injuries by 50%, but we will not rest until occupational

injuries and illnesses are eradicated altogether. My goal is

for all of our employees to return home in at least as good

health as when they left.

Arne Austreid

President

FINANCIAL PERFORMANCE

Oil prices were relatively volatile in 2001, albeit around

a level that can be considered normal historically.

Nevertheless, volatility at levels below the USD 22/bbl floor

for OPEC's target range results in uncertainty that impacts

pricing in the capital markets. The terrorist

attacks in the USA on 11 September 2001

also led to general uncertainty about the

outlook for the global economy and oil

prices.

In a turbulent year, Prosafe has remained

committed to safe and profitable operations,

pursued a focused strategy and achieved a

number of key milestones. Prosafe sold off

the remaining operations within Other

Business that were no longer part of its core

business and assumed a leading position in

the fast-growing market for FPSO/FSO

vessels. This represented a major step in the

group's international expansion and Prosafe

is now represented in the world's most

important offshore regions.

The group's operating revenues grew by NOK 472 million

to NOK 2,418 million, and the operating profit was NOK

515 million. The group generated net profit for the year of

NOK 350 million, which equates to earnings per share

of NOK 10.89. Excluding capital gains on the sale of

Procon Engineering AS, non-recurring charges relating

to the discontinuing business in Azerbaijan, unrealised

currency losses on the company's long-term USD loans of

NOK 41 million and goodwill amortisation charges of NOK

51 million, the net profit for the year was NOK 406 million

and earnings per share NOK 12.63.

The group's assets increased by NOK 2,741 million to

NOK 6,518 million during the year as a result of the

acquisition of Prosafe Production (Nortrans Offshore Ltd)

and the conversion of the FPSO Espoir Ivoirien. Prosafe had

cash holdings of NOK 763 million and an equity ratio of

44% at the year-end.

In accordance with § 3-3 of the Financial Reporting

Act (Norway), the board confirms that the company is a

going concern and that the accounts have been prepared

accordingly.

FINANCING

The acquisition of Prosafe Production for NOK 1,768

million in 2001 was financed by a 50/50 combination of

loans from the company's main bankers and a placing of

new shares with the former shareholders of Nortrans

Offshore. A total of 7.3 million shares were issued, in-

creasing the average number of shares in issue during the

year up to 32.2 million.

The group had gross interest-bearing debt of NOK 2,903

million and net interest-bearing debt of NOK 2,140 million

at the year-end. Based on the current financing structure,

this equates to annual payments of around NOK 400 million

(USD 45 million). As a natural part of the company's

development in 2001 following the acquisition of Prosafe

Production, Prosafe is now in a phase where its long-term

financing structure is under review. The company aims to

have a permanent solution in place by the end of 2002. Its

main bankers are currently Nordea, Den norske Bank,

Fortis, Skandinaviska Enskilda Banken, Bank of Scotland

and Sparebank1 SR-Bank.

PROSAFE GENERATED AN OPERAT ING PROF IT OF NOK 515 MILL ION IN 2001.

THE COMPANY CONT INUED TO PURSUE A FOCUSED STRATEGY, ACHIEV ING A NUMBER

OF KEY MILESTONES, AND ENTERS 2002 IN A STRONG POSIT ION TO FURTHER ITS

V IS ION OF BE ING A LEADING SUPPL IER OF PRODUCTS AND SERV ICES IN SELECTED

NICHES OF THE GLOBAL O IL AND GAS INDUSTRY.

10 PROSAFE ANNUAL REPORT 2001 • DIRECTORS' REPORT

D i r e c t o r s ' r e p o r t

11PROSAFE ANNUAL REPORT 2001 • DIRECTORS' REPORT

OPERATIONS AND OUTLOOK

Drilling Services

This division consists of Prosafe Drilling Services AS and

changed name during the year from Offshore Drilling &

Related Services. The division boasts a strong domestic mar-

ket, a broad customer base and extensive expertise. The divi-

sion has drilling contracts on Gullfaks and Heidrun for

Statoil, Oseberg and Snorre for Norsk Hydro, and Jotun for

Esso. It is also involved in planning and preparations for the

start-up of drilling on Ringhorne for Esso in the autumn of

2002 and Kvitebjørn for Statoil in the summer of 2003. In

addition Prosafe Drilling Services owns the lightweight

drilling rig Rubicon, which is currently working on Snorre B

for Norsk Hydro, and provides a range of technical services

and maintenance and modification services for operators in

the Norwegian sector. Activity levels were generally high in

2001 and Statoil exercised options to extend the drilling con-

tracts on Gullfaks and Heidrun by 12 months during the sec-

ond half of the year.

The general outlook for the Norwegian sector of the North

Sea is bright in both the short and the long term. A focus on

higher recovery rates is resulting in a steadily growing need

for drilling, upgrading and maintenance services. This in

turn is fuelling demand for the types of service offered by

Prosafe. The North Sea and the Norwegian sector look set to

remain a strong domestic market for decades to come.

The main challenge for 2002 will again be to focus on safe

and profitable operations. The company will also be looking

to have the drilling contracts on Oseberg and Snorre extended,

secure continued employment for the Rubicon and pursue a

possible contract for Phillips on Ekofisk. The company's

strategy is still first and foremost to be a leading platform

drilling company in the Norwegian sector, while the possi-

bility of selective project-oriented international expansion

remains a part of the strategy.

Offshore Support Services

Prosafe owns eight of the ten purpose-built semisubmersible

accommodation/service rigs in service worldwide. The

company's strategy is unchanged: to build on its position as

the market leader in this deepwater market and consider

potential new sources of employment and geographical

markets. In 2001 Prosafe won a contract from Statoil to carry

out maintenance on four subsea wells, with Statoil holding

options on a further eight wells. This contract marked a break-

through for the company's strategy of identifying new rig

applications and has taken Prosafe into a new growth niche.

2001 was another good year for the rig fleet, with rig utili-

sation of 80% and operating profit of NOK 421 million.

The division continues to account for the bulk of the group's

cash flow, generating operating profit before depreciation of

NOK 619 million on operating revenues of NOK 918 million.

Prosafe plans to upgrade the MSV Regalia in the fourth

quarter of 2002 and early 2003 so that it can be used for the

maintenance of subsea-completed wells, starting with the

Statoil contract in the spring of 2003. Otherwise the main

focus in 2002 will be on securing continued employment for

the Safe Britannia and Safe Lancia.

Activity in the Gulf of Mexico remains high. Cantarell

remains the most important field, but there are plans to

develop other fields too in the years ahead. There are also

signs that the USA will increasingly be looking to expand its

reserves both in the Gulf of Mexico and off Alaska. All in

all, this bodes well for continued demand in the Gulf of

Mexico.

The drivers behind demand in the North Sea include the

hook-up of new installations, the tie-back of subsea-

completed wells, maintenance projects and upgrade needs.

Prosafe is confident of continued demand for oil and

attention on increasing recovery rates and so anticipates

continued demand for its rigs also in this part of the world.

Floating Production

This division consists of Prosafe Production (formerly

Nortrans Offshore Ltd) and its subsidiaries. The division has

its operational head office in Singapore and has vessels

operating off West Africa and in Southeast Asia. The

business was taken over with effect from 1 April 2001 for

accounting purposes and so only the last nine months of

2001 are consolidated in the group's results for the year.

The division operates a fleet of six FPSO/FSO vessels, of

which it owns three units 100%, has a 50% stake in two

units (the Madura Ayu and Petroleo Nautipa) and is only the

operator of one (the Al Zaafarana). A seventh vessel, the

Grey Warrior, is being converted in 2002 and will begin

production for Agip on a firm eight-year charter off Nigeria

in the spring of 2003. The Espoir Ivoirien, which began

production for Canadian Natural Resources (CNR) off the

Ivory Coast in February 2002, was at an early stage of con-

version when the acquisition of Nortrans Offshore took

place in the spring of 2001. The conversion of the vessel was

completed on time and on budget and will contribute to a

substantial increase in earnings from the division in 2002.

The charters for the Al Zaafarana, Endeavor and Ruby

Princess were extended during the year and the division won

a new charter for the Petroleo Nautipa.

The overall outlook for the FPSO market is bright, with par-

ticularly high levels of activity in regions other than the

North Sea, which are Prosafe's principal focus areas. The

main challenges in 2002 will be to secure continued employ-

ment for the Ruby Princess from the autumn of 2002 and

complete the conversion of the Grey Warrior for operation on

Abo off Nigeria. The company will also be looking for addi-

tional projects and working on strengthening its organisation

in Singapore in line with growing levels of activity.

RISK

Operational risk

Prosafe's business focuses primarily on the final phases of an

oilfield's lifecycle: production. This part of the value chain is

where the operators generate their income and is therefore

less sensitive to fluctuations in oil prices than the earlier

phases of exploration and development. Prosafe's business is

also based on firm dayrate contracts of varying duration, but

with the emphasis on medium/long-term contracts for both

platform drilling and floating production. Flotel charters in

the Gulf of Mexico have also traditionally been long-term

contracts. Following Prosafe's move into the floating produc-

tion market, the company's income base has been extended

to include the most important offshore regions worldwide

and so the company now has a far higher degree of opera-

tional security than before also in geographical terms.

In line with standard industry practice, the group's contracts

may contain clauses that, under certain circumstances,

entitle customers to terminate them early. Provided that this

is not due to negligence on Prosafe's part, the group may be

entitled to compensation from the customer to offset to some

extent the impact of such early termination on its earnings.

Financial risk

Prosafe is a Norwegian company and prepares its accounts

in line with Norwegian and international accounting

standards. In 2001 around 70% of the company's operating

revenues came from the North Sea, 20% from the Gulf of

Mexico and 10% from Southeast Asia and West Africa.

USD revenues accounted for around 85% of the company's

operating profit before depreciation of NOK 888 million in

2001 and virtually all of the underlying assets are valued

and traded in USD. As part of the company's financial man-

agement strategy, all interest-bearing debt is drawn down in

USD and can therefore be viewed as a direct hedge. As a

result, from 2002 the company will no longer revalue

its USD debt in line with fluctuations in the USD/NOK

exchange rate, but carry loans in the consolidated accounts at

the exchange rates ruling when they were drawn. On balance,

a strong USD against the NOK is beneficial to Prosafe.

12 PROSAFE ANNUAL REPORT 2001 • DIRECTORS' REPORT

Reidar LundChairman

Christian Brinch Bengt EskilsonGeir WorumVice Chairman

Egil Bergsager

HEALTH, SAFETY, ENVIRONMENT AND ORGANISATION

Health, safety and the environment (HSE) play a key role in

the company's core values and in the management of the com-

pany's resources and the planning and implementation of its

operations. The company is continuing to sharpen its focus on

training, safety precautions and follow-up work. The number

of lost-time injuries per million working hours was 2.6 in

2001 and has therefore halved over the last three to four years.

Attention is being drawn to this major improvement, not only

internally through experience transfer and reward schemes,

but also externally among customers and suppliers in connec-

tion with reporting, prequalifications and tendering. All in all,

the combination of high priority, good results and close

follow-up is providing even greater motivation to develop and

improve our preventive HSE programme focusing on both

procedures and work processes.

Prosafe sets great store by auditing its own procedures and

those of its suppliers and partners. All work carried out by

Prosafe is to comply with the requirements laid down by

customers and relevant authorities. However, the company's

operations can still lead to accidental discharges of pollutants

into the sea and air and so Prosafe works actively to protect

the natural environment from pollution by setting internal

targets, constantly improving its procedures and optimising

employee attitudes.

Relationships between employees, trade unions, management

and board were again good in 2001. The reduction in injuries

and a drop in absence through illness from 4.1% to 3.4% are

good indications of a safe and good working environment.

Prosafe plans to build further on the experience gained and

results achieved in 2001 and continue its preventive work,

concentrating on training, experience transfer and attitudes.

The group had 1,737 employees at the end of the year: 1,152

within Drilling Services, 122 within Offshore Support

Services, 251 within Floating Production, 14 within the

parent company Prosafe ASA and 198 within the Other

Business division sold in January 2002.

SHAREHOLDERS

The register of shareholders on 31 December 2001 showed

that no one shareholder controlled more than 20% of the

company's shares. The ten largest shareholders had a com-

bined 51.5% stake in the company, with its remaining shares

held between more than 3,000 different investors.

POST-BALANCE-SHEET EVENTS

In January 2002 Agip awarded Prosafe a new deepwater

FPSO contract off Nigeria running for a firm period of eight

years from the spring of 2003 with two one-year extension

options. The firm part of the contract is worth around USD

220 million.

In February 2002 Prosafe purchased the semisubmersible

accommodation/service rig Polyconcord for USD 34.5

million as part of its strategy of building up a fleet of

purpose-built accommodation/service rigs for the global

deepwater market.

In February 2002 Prosafe sold the remaining operations in

the Other Business division to a group of senior employees

in Aberdeen. The transaction had only a minor impact on

the consolidated balance sheet and no impact on the con-

solidated profit and loss account.

DISTRIBUTABLE RESERVES AND COVERING OF LOSS

AT PROSAFE ASA

The parent company Prosafe ASA had distributable reserves

of NOK 319 million on 31 December 2001. The board

proposes that the parent company's net loss for the year of

NOK 60.7 million be covered as follows:

Group contribution NOKm 56.4

Transferred from other equity NOKm 4.3

Total NOKm 60.7

Tananger, 19 March 2002

13PROSAFE ANNUAL REPORT 2001 • DIRECTORS' REPORT

Arne AustreidPresident & CEO

Jon M. Fjose Olav Gjesteland Torild R. Alvheim Karl Urdshals

O f f s h o r e S u p p o r t S e r v i c e s

OPERATIONS

Accommodation/service rigs have traditionally

been used wherever there is a need for additional

accommodation, engineering or storage capacity

offshore. Examples of when these needs arise

include the installation and testing of new installa-

tions, the upgrading and maintenance of platforms

and the hook-up of satellite fields to existing

installations. The rig can be linked to other instal-

lations by gangways or personnel can be tran-

sported to and from the rig by boat. The accommo-

dation/service rig will typically supply power and

fresh water to the installation to which it is con-

nected. These rigs boast a large number of berths

and deck cranes and can provide welfare and cater-

ing services. The MSV Regalia can also be used in

the subsea construction market and will be used in

the subsea well intervention market from 2003.

STRATEGY

Prosafe has consolidated the global market for

accommodation/service rigs over the last four years

and now owns eight units, including the

Polyconcord purchased in February 2002. The

company's strategy is unchanged: to build on its

position as the market leader in this deepwater

market and consider potential new sources of

employment and geographical markets.

2001

Prosafe won a contract from Statoil during the year

to carry out maintenance on four subsea wells, with

Statoil holding options on a further eight. This con-

tract marked a breakthrough for the company's strat-

egy of identifying new rig applications and has

taken Prosafe into a new growth market.

Three of the company's units – the Safe Lancia,

Jasminia and Safe Regency – were employed in the

Gulf of Mexico throughout the year and a fourth –

the Safe Caledonia – began working there in

February 2001. The Safe Britannia worked a charter

for Statoil on Statfjord in the North Sea during the

second quarter and was then transferred to the Gulf

of Mexico where it began a ten-month charter on 15

October. The Safe Scandinavia worked two charters

in the North Sea during the year with a combined

duration of around four months.

Utilisation of the multi-service vessel Regalia pur-

chased by Prosafe in 2000 was high. The rig was

employed by PGS on Banff, by BP west of Shetland

and by Statoil on Åsgard. The Regalia is a flexible ves-

sel with state-of-the-art dynamic positioning (DP3)

that can be used both in the traditional flotel market

and in the subsea construction market. It is now

planned to bring in the rig in the autumn of 2002 for

upgrade to subsea well intervention duties.

PROSAFE COMMANDS A LEADING POSIT ION IN THE GLOBAL MARKET FOR ACCOMMO-

DAT ION/SERV ICE R IGS. THE COMPANY´S R IGS OPERATED UNDER LONG-TERM BAREBOAT

CHARTERS IN THE GULF OF MEX ICO AND T IME CHARTERS IN THE NORTH SEA IN 2001.

PROSAFE ALSO MADE A STRATEGIC BREAKTHROUGH IN SUBSEA WELL INTERVENT ION

DURING THE YEAR AND WILL BEGIN ITS F IRST CONTRACT IN TH IS N ICHE IN THE SPR ING

OF 2003. OFFSHORE SUPPORT SERV ICES EMPLOYED 122 PEOPLE AT THE END OF 2001.

14 PROSAFE ANNUAL REPORT 2001 • OFFSHORE SUPPORT SERVICES

15PROSAFE ANNUAL REPORT 2001 • OFFSHORE SUPPORT SERVICES

FINANCIAL PERFORMANCE

(2000 figures in brackets)

Offshore Support Services generated operating revenues of

NOK 918 million (NOK 982 million) and operating profit of

NOK 421 million (NOK 554 million). Rig utilisation was

80% (84%). The decrease in operating revenues and profit

was due primarily to lower utilisation of the Safe

Scandinavia and Safe Britannia and the inclusion of a capi-

tal gain of NOK 20 million on the sale of the drillship

Discoverer I in the 2000 figures. These factors were offset in

part by the fact that the Regalia was in operation virtually

throughout the year.

The useful life of the accommodation/service

rigs is assumed to be 30 years, but their actual

lifetime is hard to establish since no units

have yet been condemned on the grounds of

age. However, there is every indication that

well-maintained accommodation/service rigs

will have a useful life of more than 30 years.

Activities within Offshore Support Services

are organised through a rig-owning company,

Prosafe Rigs AS, which is eligible for

Norway's special tax scheme for shipping

companies. This means that the rig-owning

company's profits are not taxed until they are

distributed as dividends or the company leaves the scheme.

The division had assets of NOK 2,609 million at the year-

end.

MARKET

The market in the Gulf of Mexico has picked up since the

mid-1990s, with the development of Cantarell providing an

important stimulus for demand for accommodation/service

rigs. Charters in this market run for longer than in the North

Sea where the main drivers behind demand are upgrades,

maintenance and the hook-up of satellite fields, all of which

are normally more short-term projects than continuous field

development. Prosafe has already won contracts for 2003

from Norsk Hydro on Fram and Grane and from Statoil on

Gullfaks and for subsea well intervention.

OUTLOOK

Activity in the Gulf of Mexico remains high. Cantarell

remains the most important field, but there are plans to

develop other fields too in the years ahead. There are also

signs that the USA will increasingly be looking to expand its

reserves both in the Gulf of Mexico and off Alaska. All in

all, this bodes well for continued demand in the Gulf of

Mexico.

The drivers behind demand in the North Sea include the

hook-up of new installations, the tie-back of subsea-

completed wells, maintenance projects and upgrade needs.

Prosafe is confident of continued strong demand for oil and

attention on increasing recovery rates and so anticipates

continued demand for its rigs also in this part of the world.

Offshore Support Services enters 2002 with a strong order

backlog. The most important challenges in 2002 will be to

secure continued employment for the Safe Britannia and

Safe Lancia and complete the upgrading of the Regalia for

subsea well intervention duties. Contracts already entered

into by the year-end guarantee rig utilisation of around 70%

in 2002. The Safe Caledonia and Safe Britannia are current-

ly on charters in the Gulf of Mexico running until mid-May

and mid-August 2002. The Safe Caledonia will then return

to the North Sea for a four-month contract for Statoil on

Sleipner starting on 1 July. Statoil has an option to extend

this charter by two months. The Safe Lancia, Jasminia and

Safe Regency are on charters in the Gulf of Mexico expiring

in August, November and December 2002, respectively.

KEY FIGURES

(NOKm) 2001 2000 1999Operating revenues 918 982 347

EBITDA 619 719 277

EBIT 421 554 156

EBIT margin 46 % 56 % 45 %

Assets 2 609 2 800 1 863

Investments 95 923 399

Fleet utilisation 80 % 84 % 61 %

Employees 122 69 41

HIGHLIGHTS

January 2001• PGS extends the Regalia's charter on

Banff until March 2001

February 2001• Statoil charters the Safe Britannia for

use on Statfjord for 90 days in the

second quarter of 2001

March 2001• Offshore Support Services wins a

contract from Norsk Hydro to provide

services on Fram for two months in

2003

June 2001• Offshore Support Services is awarded

a two- to three-month contract to supply

accommodation services in the North

Sea from mid-June 2001

16 PROSAFE ANNUAL REPORT 2001 • OFFSHORE SUPPORT SERVICES

OPERATING PROFIT

(NOKm)700

600

500

400

300

200

100

0

1999 2000 2001

July 2001• Offshore Support Services wins a

one-year charter for the Safe Lancia

on Cantarell running until August

2002

• Prosafe makes a strategic break-

through in subsea well intervention

when Statoil charters the Regalia for

the maintenance of four wells on

Statfjord, Gullfaks, Åsgard and Norne in

2003, with options on a further eight

September 2001• Offshore Support Services is

awarded a 300-day charter for the

Safe Britannia on Cantarell running

until August 2002

• Offshore Support Services wins a

three-month contract from Chevron to

supply flotel services on Alba in the

second quarter of 2002

• Statoil awards Offshore Support

Services a contract to supply flotel

services on Sleipner for four

months and Statfjord for three

months in 2002

October 2001• The Regalia is guaranteed

employment until the autumn of

2003 thanks to new contracts from

Statoil on Åsgard in 2001 and BP

west of Shetland in 2002

November 2001• Offshore Support Services is awar-

ded a charter for the Safe Caledonia

on Cantarell running until May 2002

February 2002• Offshore Support Services wins a

two- to three-week contract from

Statoil to supply flotel services on

Gullfaks starting in April 2003

• Acquisition of the Polyconcord

17PROSAFE ANNUAL REPORT 2001 • OFFSHORE SUPPORT SERVICES

Safe Britannia

Safe Caledonia

Safe Scandinavia

Safe Lancia

Safe Regency

Jasminia

MSV Regalia

Polyconcord

Fixed contracts Options Yard stay

1997 1998 1999 2000 2001 2002 2003 2004

CONTRACT OVERVIEW

In mid-April the Safe Scandinavia will begin a three-and-a-

half-month charter from Chevron on Alba in the UK sector

of the North Sea before transferring to Statfjord for a three-

month charter to Statoil, which holds an option to extend

this charter by two months until the end of 2002. In April

2003 the rig is due to begin a charter for Statoil on Gullfaks

with a firm duration of 15 days and a seven-day extension

option. The rig has also been fixed by Norsk Hydro for use

on Grane for 152 days beginning in June 2003.

The Regalia has been hired by Statoil for use on Åsgard

until mid-April and will then transfer immediately to a proj-

ect west of Shetland for BP until September. It is then

planned to bring in the rig to be upgraded for subsea well

intervention duties. The Regalia has already been fixed by

Statoil for subsea well intervention work in the spring of

2003 and by Norsk Hydro for flotel services on Fram for

two months starting on 1 July 2003.

PROSAFE ÅRSRAPPORT 2001 • OFFSHORE SUPPORT SERVICES FLÅTEOVERSIKT

F l e e t O f f s h o r e S u p p o r t S e r v i c e s

Design: Pacesetter - enhanced Yard: GVA, SwedenBuilt: 1980, enhanced 1987Class: DnV, + 1A1, "Column Stabilised

Unit", EO-LOCATION, HELDK, DYNPOS AUTR, POSMOOR V ATA, FF1, SBM

Compliance with Regulations:Isle of Man/UK/Norway

Length/breadth: 120.96 m x 73.65 mOperating Draft: 22.07 mDisplacement: 24,303 tDeck Area: abt 1,300 m2

Payload: abt 1.245 t (620 DP mode)Workshop/Warehouse: 5 workshops -

382 m2. 8 warehouses/stores - 770 m2

Office Facilities: 104 workstationsHelideck: EH101 MerlinGangway: MA 36.5 m +/- 6.0 m

Crane - Portside:Main hoist - 50 t at 20.0 mWhip hoist - 15 t at 57.0 m

Crane - Starboard Side:Main hoist - 40 t at 13.5 mWhip hoist - 5 t at 47.0 m

Max no. of Beds: 812No. of Beds in 2 Bed Cabins: 637Life Saving Capacity: 812Mooring System: 9 point wire winchesStation Keeping System:

TAMS/DP system, NMD2Thrusters: 4 x 2.4 MW azimuthing

Thrusters. 2 x 1.5 MW fixed thrusters Power Generation: 7 diesel generator

sets - total 13,100 kWFresh Water Production:

200 t/24 hours

SAFE BRITANNIA

18

Design: Pacesetter Yard: GVA/Kockums, SwedenBuilt: 1982Class: DnV, + 1A1, "Column

Stabilised Unit", EO-LOCATION, HELDK,POSMOOR V ATA, DYNPOS AUT, SBM

Compliance with Regulations:Isle of Man/UK/Norway

Length/breadth: 91.29 m x 68.52 mOperating Draft: 22.07 mDisplacement: 20,615 tDeck Area: abt 900 m2

Payload: abt 700 t Workshop/Warehouse:

5 workshops - 300 m2

1 warehouse/store - 260 m2

Office Facilities: 75 workstationsHelideck: EH101 Merlin

Gangway: MA 30 m + 6.5/-5.5 mCrane - Portside:

Main hoist - 50 t at 21.2 mWhip hoist - 5 t at 69.0 m

Crane - Starboard Side:Main hoist - 40 t at 16.5 mWhip hoist - 5 t at 47.0 m

Max no. of Beds: 550No. of Beds in 2 Bed Cabins: 510Life Saving Capacity: 550Mooring System: 10 point wire winchesStation Keeping System:

TAMS/DP systemThrusters: 4 x 2.4 MW azimuthing thrustersPower Generation: 6 diesel generator

sets - total 12,050 kWFresh Water Production:

200 t/24 hours

POLYCONCORD

SAFE LANCIASAFE CALEDONIA

Design: Aker H3 – modified Yard : Rauma Repola, FinlandBuilt: 1977, modified/enhanced

1979/1992/1994Class: DnV + 1A1 “Column Stabilised

Accommodation Unit”Compliance with Regulations:

Bahamas/UKLength/breadth: 108.20 m x 67.36 mOperating Draft: 21.34 mDisplacement : 21,895 tDeck Area: 500 m2

Payload : abt 1,000 t Workshop/Warehouse :

1 workshop, 250 m2 storeOffice Facilities: 77 workstations

Helideck:2 x Sikorsky S61N. 1 hangar

Gangway:Telescopic 36.5 m +/- 6.0 m

Cranes: 1 x 40 t, 1 x 25 tNo. of Beds in 2 Bed Cabins: 500Life Saving Capacity: 500Mooring System:

12 point winch, 76 mm wireThrusters: 2 x 2,4 MW propellersPower Generation:

4 diesel generator sets - total 6,000 kW

Fresh Water Production:100 t/24 hours

Design: GVA 2000 Yard: GVA, SwedenBuilt: 1984Class: LRS, + OU, 100 A1,

Accommodation Unit, + LMC UMS,HELIDECK

Compliance with Regulations:Isle of Man/UK

Length/breadth: 92.37 m x 65.40 mOperating Draft: 19.40 mDisplacement: 13,284 tDeck Area: abt 1,100 m2

Payload: abt 626 t Workshop/Warehouse:

3 workshops - 114 m2

1 store - 13 m2

Office Facilities: 46 workstationsHelideck: Sikorsky S61N

Gangway: MA 30 m + 6.5/-5.5 mCrane - Portside:

Main hoist - 25 t at 28.0 mWhip hoist - 5 t at 53.0 m

Crane - Starboard Side:Main hoist - 50 t at 20.0 mWhip hoist - 15 t at 50.0 m

Max no. of Beds: 600No. of Beds in 2 Bed Cabins: 340Life Saving Capacity: 600Mooring System: 10 point wire winchesThrusters:

2 x 2.4 MW azimuthing thrustersPower Generation:

3 diesel generator sets - total 8,970 kW

Fresh Water Production:270 t/24 hours

PROSAFE ANNUAL REPORT 2001 • FLEET OFFSHORE SUPPORT SERVICES

JASMINIA SAFE REGENCY

19

SAFE SCANDINAVIA MSV REGALIA

Design: GVA 2000 Yard: GVA, SwedenBuilt: 1982Class: LRS, + 100 A1 OU,

Accommodation Unit, + LMC UMS,HELIDECK

Compliance with Regulations: LiberiaLength/breadth: 77.00 m x 65.40 mOperating Draft: 19.40 mDisplacement: 12,800 tDeck Area: abt 690 m2

Payload: abt 640 t Workshop/Warehouse:

4 workshops - 385 m2

2 stores - 185 m2

Office Facilities: 25 workstationsHelideck: Sikorsky S61NGangway: Fixed J4.2 +/- 3.0 m

Crane - Portside:Main hoist - 25 t at 24.0 mWhip hoist - 7 t at 46.0 m

Crane - Starboard Side:Main hoist - 12.5 t at 40.0 mWhip hoist - 5 t at 60.0 m

Max no. of Beds: 535No. of Beds in 2 Bed Cabins: 477Life Saving Capacity: 540Mooring System: 8 point wire winchesThrusters:

2 x 2.4 MW azimuthing thrustersPower Generation:

3 diesel generator sets - total 6,300 kW

Fresh Water Production:270 t/24 hours

Design: Pacesetter Yard: FELS, SingaporeBuilt: 1982Class: DnV, + 1A1 ”Column Stabilised

Unit”, EO-LOCATION, HELDK, FF1Compliance with Regulations:

BahamasLength/breadth: 91.00 m x 65.00 mOperating Draft: 22.07 mDisplacement: 20,850 tDeck Area: abt 800 m2

Payload: abt 550 t Workshop/Warehouse:

2 workshops - 102 m2

1 store - 315 m2

Office Facilities: 88 workstationsHelideck: Chinook 234Gangway: MA 29.5 +/- 5.0 m

Crane - Portside:Main hoist - 100 t at 15.0 mWhip hoist - 8 t at 58.0 m

Crane - Starboard Side:Main hoist - 40 t at 13.5 mWhip hoist - 5 t at 47.0 m

Max no. of Beds: 771No. of Beds in 2 Bed Cabins: 598Life Saving Capacity: 780Mooring System: 8 point wire winchesStation Keeping System: TAMS systemThrusters:

4 x 2.4 MW azimuthing thrustersPower Generation:

5 diesel generator sets - total 9,400 kW

Fresh Water Production:200 t/24 hours

Design: Aker H-3.2E Yard: Aker Verdal, NorwayBuilt: 1984Class: DnV, + 1A1 ”Column Stabilised

Unit”, EO-LOCATION, HELDK, FF1Compliance with Regulations:

Norway, UK, Isle of ManLength/breadth: 106.00 m x 98.00 mOperating Draft: 22.00 mDisplacement: 27,784 tDeck Area: abt 1,200 m2

Payload: abt 1,930 t Workshop/Warehouse:

2 workshops - 180 m2

1 store - 950 m2

Office Facilities: 59 workstationsHelideck: Chinook 234

Gangway: MA 36.5 +/- 6.0 mCrane - Portside:

Main hoist - 50 t at 15.0 mWhip hoist - 5 t at 58.0 m

Crane - Starboard Side:Main hoist - 50 t at 15.0 mWhip hoist - 5 t at 58.0 m

Max no. of Beds: 327 (527)No. of Beds in 2 Bed Cabins: 327Life Saving Capacity: 742Mooring System:

12 point chain winchesPower Generation:

3 diesel generator sets - total 6,780 kW

Fresh Water Production:150 t/24 hours

Design: GVA 3000 - enhancedYard: GVA, SwedenBuilt: 1985Class: LR + OU 100 A1, Support Unit,

Fire Fighting Unit 3, PC, LMC, UMS,DP (AA), Diving System, 100AT

Compliance with Regulations:Bahamas/UK/Norway

Length/breadth: 95.30 m x 91.60 mOperating Draft: 21.30 mDeck Area: 3,250 m2

Payload: 1,000 – 2,200 tOffice Facilities: 6 offices

& 1 conference RoomHelideck: Chinook 234Gangway: MA 42.5 m +/- 5.0 mDeck Cranes (Liebherr):

Main Crane: 400 t swl at 20.0 m,

max water depth 650.0 m, 200 t swl at 40.0 m, max water depth 1,350.0 mAuxiliary Crane: 100 t swl at 25.0 m,max water depth 424.0 m, 10 t swl at 60.0 m, max water depth 593.0 m

Max no. of Beds: 260/380Life Saving Capacity: 280/400Mooring System: 8 point wire winchesStation Keeping System: DP system NMD3Thrusters: 6 x 2,640 kW azimuthing thrustersPower Generation: 6 diesel generator sets

- total 18,600 kWFresh Water Production: 270 t/24 hoursDiving System: Dräger 18 man saturation

system, 2 bells, 3 x 6 man chambers,SPHL 1 x 18 man, max op depth 380 MSW

D r i l l i n g S e r v i c e s

TH IS D IV IS ION BOASTS A STRONG DOMEST IC MARKET, A BROAD CUSTOMER BASE AND

EXTENSIVE EXPERT ISE . PROSAFE IS THE LEADING PLAYER IN PLATFORM DRILL ING IN

THE NORWEGIAN SECTOR OF THE NORTH SEA, WITH A MARKET SHARE OF AROUND 50%.

THE D IV IS ION ALSO PROVIDES MAINTENANCE AND UPGRADE SERV ICES, TECHNICAL

SERV ICES, WELL WORKOVERS, AND PLUGGING AND ABANDONMENT SERV ICES FOR

REDUNDANT PRODUCT ION WELLS. IN ADDIT ION THE D IV IS ION OWNS AND OPERATES

THE MODULARISED L IGHTWEIGHT R IG RUB ICON. THE BUS INESS HAS A H ISTORY DAT ING

BACK TO THE EARLY 1970S AND EMPLOYED 1 ,152 PEOPLE AT THE END OF 2001.

20 PROSAFE ANNUAL REPORT 2001 • DRILLING SERVICES

OPERATIONS

Drilling Services operates primarily in the following

fields: production drilling, maintenance and modifi-

cation services, technical services, well workovers,

and the plugging and abandonment of redundant

production wells. The company has active drilling

and maintenance contracts on Gullfaks, Heidrun,

Oseberg South, Oseberg East, Oseberg C, Snorre

TLP, Snorre B, Jotun B, Ringhorne and Kvitebjørn,

the last two in the planning phase. Drilling contracts

are based on dayrates with additional performance

incentives. The size of the drilling crew will depend

on the size and type of drilling unit, but on average

there will be around 30 people working offshore

and a further five onshore to support the offshore

operation.

The technical services department carries out mod-

ification and upgrade work on drilling units, oper-

ates the company's CRI cutting reinjection units and

provides maintenance and modification services on

Heidrun.

The company's modularised lightweight rig

Rubicon is a flexible solution that can be used for

drilling, well workovers and snubbing. Thanks to its

design, the rig can be mobilised to a fixed or mobile

installation relatively quickly using supply vessels,

lifted into place in modules by the installation's own

cranes and be up and running within two to three

weeks. The rig competes with cantilevered jack-up

platforms, which are sometimes used for well main-

tenance over wellhead platforms that do not have

their own drilling units. The Rubicon can also be

used as a second rig to increase the output from a

field, as on Snorre TLP.

STRATEGY

Drilling Services aims to retain its leading position

in production drilling in the Norwegian sector of

the North Sea. The division also aims to develop its

specialist technical services and other related

products and services. The possibility of selective

project-oriented international expansion remains a

part of the strategy.

21PROSAFE ANNUAL REPORT 2001 • DRILLING SERVICES

22 PROSAFE ANNUAL REPORT 2001 • DRILLING SERVICES

2001

It was a busy year for Drilling Services, with all the con-

tracts expiring in 2001 being extended. The contract from

Norsk Hydro for the use of the Rubicon was extended until

August 2002, the contract from Statoil for maintenance and

modification services on Heidrun until the

end of 2002 and the drilling contracts from

Statoil on Gullfaks and Heidrun until April

2003 and July 2003. The division also began

preparing for the drilling contracts on

Ringhorne and Kvitebjørn for Esso and

Statoil, which are due to start up in the autumn of 2002 and

the summer of 2003 respectively.

FINANCIAL PERFORMANCE

(2000 figures in brackets)

Drilling Services generated operating revenues of NOK

1,252 million (NOK 991 million) and operating profit of

NOK 82 million (NOK 66 million). One

major reason for the increase in earnings was

that the Rubicon was employed throughout

the year, but the rest of the business also

improved its performance. The division had

assets of NOK 718 million at the year-end.

MARKET

Drilling Services operates in a stable to slowly growing

market. Recent years have seen more and more new fields in

the Norwegian sector being developed and the lifetime of

existing fields being extended thanks to improved techno-

logy, the hook-up of satellite fields and a focus on higher

recovery rates. There is also a growing need for maintenan-

ce and modification services as the region's installations

grow older and production profiles are extended.

OUTLOOK

The general outlook for the Norwegian sector of the North

Sea is bright in both the short and the long term. A focus on

higher recovery rates is resulting in a steadily growing need

for drilling, upgrading and maintenance services. This in

turn is fuelling demand for the types of service offered by

Prosafe. The North Sea and the Norwegian sector look set to

remain a strong domestic market for decades to come.

The main challenge for 2002 will again be to focus on safe

and profitable operations. The company will also be looking

to have the contracts on Oseberg and Snorre extended by

Norsk Hydro and secure continued employment for the

Rubicon. At the same time the division will be working

actively with the tender for the Ekofisk contract from

Phillips. The contract is due to be awarded in the second

quarter of 2002, with work starting up offshore in the fourth

quarter.

The company's contracts on Gullfaks and Heidrun have

been extended and drilling on Ringhorne and Kvitebjørn is

expected to commence in the autumn of 2002 and summer

of 2003. The company will also be maintaining its focus on

the maintenance and modification market, spying particular

potential in all-in-one solutions that combine maintenance,

modification and drilling on an installation. The company's

strategy is unchanged: to develop its existing contract port-

folio, provide related supplementary services and focus on

selective international expansion.

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

CONTRACT OVERVIEW

1) Draugen and Jotun have been in the maintenance phase since Sep 1995 and Feb 2001 respectively.

Statoil

BP

BP Shell

Statoil

Fixed contracts OptionsProject phase

Rubicon

Valhall

Jotun1)

Oseberg East, South, C

Snorre TLP

Snorre B

Draugen1)

Gullfaks 1983

Heidrun

Troll

Ringhorne

Kvitebjørn

Heidrun M&M

Norsk Hydro

Statoil

Esso

Statoil

Statoil

Esso

Norsk Hydro

Norsk Hydro

Norsk Hydro

Shell

KEY FIGURES

(NOKm) 2001 2000 1999Operating revenues 1 252 991 899

EBITDA 118 96 105

EBIT 82 66 78

EBIT margin 7 % 7 % 9 %

Assets 718 662 538

Investments 46 97 39

Employees 1 152 1 001 964

HIGHLIGHTS

April 2001• Statoil extends the maintenance and

modification contract on Heidrun until

the end of 2002

June 2001• Norsk Hydro extends the Rubicon's

charter on Snorre TLP until 15 August

2002

November 2001• Statoil extends the drilling contract on

Gullfaks until April 2003

December 2001• Statoil extends the drilling contract on

Heidrun until June 2003

23PROSAFE ANNUAL REPORT 2001 • DRILLING SERVICES

OPERATING PROFIT

(NOKm)90

75

60

45

30

15

0

1999 2000 2001

F l o a t i n g P r o d u c t i o n

THE ACQUIS IT ION OF NORTRANS OFFSHORE IN THE SPR ING OF 2001 HAS MADE

PROSAFE A MAJOR OWNER AND OPERATOR OF FLOAT ING PRODUCT ION, STORAGE AND

OFFLOADING (FPSO/FSO) VESSELS OUTS IDE THE NORTH SEA. THE D IV IS ION OPERATES

A FLEET OF S IX MODERN VESSELS OFF WEST AFR ICA, V IETNAM, EGYPT, INDONESIA AND

INDIA . THE D IV IS ION ALSO HAS ITS OWN ENGINEER ING RESOURCES USED FOR STUDIES,

PREQUAL IF ICAT IONS AND TENDERS AND FOR DEVELOPING ITS OWN CONCEPTS AND

INNOVAT IVE SOLUT IONS. THE D IV IS ION HAS ITS HEAD OFF ICE IN S INGAPORE AND

OFF ICES IN HOUSTON AND THE COUNTRIES IN WHICH IT OPERATES. FLOAT ING

PRODUCT ION EMPLOYED 251 PEOPLE AT THE END OF 2001.

24 PROSAFE ANNUAL REPORT 2001 • FLOATING PRODUCTION

OPERATIONS

Floating Production focuses on the design, engineer-

ing and conversion of oil tankers into FPSO/FSO

vessels and the operation of the finished vessels. The

division owns and operates four vessels (the FPSO

vessels Ruby Princess, Espoir Ivoirien and Petroleo

Nautipa (50% stake) and the FSO vessel Endeavor),

owns 50% of the FSO vessel Madura Ayu, which is

operated by its joint venture partner, and operates the

FPSO vessel Al Zaafarana, which is owned by the

customer. All of these vessels have been converted

into FPSO/FSO vessels by Prosafe. A seventh vessel,

the Grey Warrior, is under conversion and will be

owned and operated by Prosafe on Abo off Nigeria

for the operator Agip from the spring of 2003.

An eighth vessel, the Sky, which is a sister ship of

the Espoir Ivoirien and Grey Warrior, was pur-

chased in March 2002 and may also be converted to

FPSO duties.

The division has a team of engineers in Singapore

and Houston working on design, engineering and

project management. Particularly high priority is

given to the development of mooring systems and

fluid swivels, which is an area where the division

has built up substantial expertise and patented tech-

nology. The division has supplied a number of con-

version projects on time and on budget.

STRATEGY

The company's goal is to be a leading owner and

operator of FPSO/FSO vessels. This is to be achieved

by supplying, owning and operating cost-effective

vessels with the emphasis on projects where the com-

pany can differentiate itself through, for example,

proprietary mooring systems and fluid swivels.

2001

The division completed a major conversion project

during the year, the Espoir Ivoirien. The project was

completed on time and the vessel began a ten-year

charter off the Ivory Coast in February 2002. The

customer holds options to extend this charter by up

to ten further years. The vessel has a production

capacity of 40,000 bbls/day and a storage capacity

of 1.1 million bbls.

The Ruby Princess has worked a charter from

Petronas on Ruby off Vietnam since October 1998.

25PROSAFE ANNUAL REPORT 2001 • FLOATING PRODUCTION

The Petroleo Nautipa has been operating for Canadian

Natural Resources on Kiame off Angola since June 1998.

The Endeavor has been working for Hitech Drilling

Services off the eastern coast of India since July 1997. The

Madura Ayu has been employed by Kodeco off Java in

Indonesia since May 2000. The Al Zaafarana, which the

company operates on behalf of Zaafarana Oil Company, has

been working in the Suez Canal since

November 1994. In 2001 Prosafe purchased

the tanker Grey Warrior for conversion to

FPSO duties. Preparations for its conversion

began in the autumn of 2001 so that it could

be completed quickly once employment was

found. Agip awarded Prosafe an eight-year charter for the

vessel early in January 2002 and the conversion project is

due to be completed in the spring of 2003.

FINANCIAL PERFORMANCE

Floating Production has been consolidated in Prosafe's

accounts from 1 April 2001, the date of its acquisition. The

division generated operating revenues of NOK 253 million

and operating profit before goodwill amortisation of NOK

84 million after this date. The goodwill arising in connec-

tion with the acquisition is being written off over 20 years

and goodwill amortisation charges of NOK 51 million were

taken in 2001. The division had assets of NOK 2,825 mil-

lion at the end of the year. The vessels are written off over

the life of their charters, allowing for their estimated resid-

ual value. Most of the vessels are covered by a special

scheme for the taxation of shipping companies based in

Singapore, which means that Prosafe is not liable to pay tax

to Singapore or Norway on income from the chartering and

operation of FPSO/FSO vessels. However,

the company is liable to pay source-

deductible taxes to some of the countries in

which it operates. The Petroleo Nautipa is

covered by Norway's special tax scheme for

shipping companies.

MARKET

The market for FPSO vessels is the fastest-growing market

in the offshore industry. The greatest growth is anticipated

outside the North Sea in regions like West Africa, Asia,

Brazil and, in the longer term, the Gulf of Mexico. The main

driver behind demand for the FPSO vessel as a development

concept is the need for cost-effective solutions for marginal

fields. FPSO vessels can also be reused on new fields and

their use cuts the cost of abandonment at the end of a field's

life. Tendering activity in the FPSO market was high

throughout 2001, especially in West Africa. Prosafe is

taking its share of the market, having won an eight-year

charter for the deepwater field Abo off Nigeria.

OUTLOOK

Floating Production will be focusing primarily on com-

pleting the conversion of the Grey Warrior to FPSO duties

on Abo and finding continued employment for the Ruby

Princess in 2002. The division will also be looking for

additional projects and working on strengthening its organi-

sation in Singapore in line with growing levels of activity.

The overall outlook for the FPSO market is bright, with

particularly high levels of activity in regions other than the

North Sea, which are Prosafe's main focus areas.

The division's earnings are expected to grow in 2002

following the start-up of the ten-year charter for the Espoir

Ivoirien in February 2002 and again in 2003 thanks to the

Agip charter on Abo commencing in the spring of 2003. The

existing charters for the Ruby Princess and the Petroleo

Nautipa expire in 2002, but the charterer has an option to

extend the charter for the former by one year and continued

employment has already been secured for the latter. On

completing the charter off Angola in the second quarter

2002, the Petroleo Nautipa will be upgraded for a new

charter for Vaalco on Etame off Gabon expected to start up

in the third quarter 2002.

26 PROSAFE ANNUAL REPORT 2001 • FLOATING PRODUCTION

Al Zaafarana

Madura Ayu

Endeavor

Petróleo Nautipa

Ruby Princess

Espoir Ivoirien

Grey Warrior

Contracts Options

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

CONTRACT OVERVIEW

Zaafarana Oil Company

Kodeco

Hitech Drilling Services

Canadian Natural Resources Vaalco

Petronas

Canadian Natural Resources

Agip

2022

27PROSAFE ANNUAL REPORT 2001 • FLOATING PRODUCTION

HIGHLIGHTS

March 2001• Prosafe acquires Singapore-based company

Nortrans Offshore Ltd to become a major

player in floating production in Asia and Africa

April 2001• Petronas extends the Ruby Princess's

charter on Ruby off Vietnam until 22 October

2002

August 2001• Vaalco charters the Petroleo Nautipa for use off

Gabon for two years from the autumn of 2002

with options to extend by a further three years

October 2001• The Espoir Ivoirien is named at the Keppel

yard in Singapore

November 2001• Floating Production's contract to operate the

Al Zaafarana is extended until November 2005

December 2001• The Espoir Ivoirien arrives on Espoir off the

Ivory Coast

January 2002• Agip awards Floating Production an

eight-year deepwater FPSO contract on

Abo off Nigeria starting in the spring of 2003

• The Endeavor's charter is extended until

August 2002

February 2002• The Espoir Ivoirien commences production

on Espoir off the Ivory Coast

KEY FIGURES

(NOKm) 2001Operating revenues 253

EBITDA 170

EBIT 33

EBIT margin 13 %

Assets 2 825

Investments 719

Employees 251

PROSAFE ÅRSRAPPORT 2001 • OFFSHORE SUPPORT SERVICES FLÅTEOVERSIKT

F l e e t F l o a t i n g P r o d u c t i o n

28

Length: 280 mBreadth: 54 mDWT: 155 000Storage capacity: 1 100 000 bblsProduction capacity: 40 000 bbls/dayWater injection capacity: 60 000 bbls/dayGas compression capacity: 60 MMscfd

FPSO ESPOIR IVOIRIEN

Length: 270 mBreadth : 43 mDWT: 140 900Storage capacity: 1 000 000 bblsProduction capacity: 30 000 bbls/day

FPSO RUBY PRINCESS

Length: 266 mBreadth : 44 mDWT: 141 330Storage capacity: 1 000 000 bblsProduction capacity: 30 000 bbls/day

FPSO PETROLEO NAUTIPA

Length: 247 mBreadth : 32 mDWT: 70 000Storage capacity: 500 000 bbls

FSO ENDEAVOR

Length: 171 mBreadth : 25 mDWT: 27 000Storage capacity: 200 000 bbls

FSO MADURA AYU

Length: 260 mBreadth : 40 mDWT: 120 000Storage capacity: 799 000 bblsProduction capacity: 30 000 bbls/day

FPSO AL ZAAFARANA

PROSAFE ANNUAL REPORT 2001 • FLEET FLOATING PRODUCTION 29

H e a l t h , s a f e t y , e n v i r o n m e n t a n d q u a l i t y

30 PROSAFE ANNUAL REPORT 2001 • HEALTH, SAFETY, ENVIRONMENT AND QUALITY

AMBITIOUS TARGETS - INTERNATIONAL STANDARDS

Safety is a fundamental core value for the company. This

includes prevention of losses related to human life and

health, the external environment, property, knowledge

and information. Our goal is for our business to have no

detrimental impact on health, safety and the environment

(HSE). High safety standards in our operations also give us

an important competitive advantage and so HSE must

always be an integral part of all our activities.

All three divisions have quality management systems certi-

fied under the international quality management standard

ISO 9001. The safety management systems for the rig and

FPSO/FSO fleets have been approved under the

International Safety Management (ISM) Code. The HSE

management system at Drilling Services is based on the

international guidelines developed by E&P Forum.

Systematic preventive HSE work is a line management

responsibility. Therefore HSE has high priority in the

group's management training programmes. An active and

high-profile management commitment is a key factor in

realising our aim of leading the way in HSE.

However, each individual employee also has a responsibili-

ty for carrying out his duties with safety in mind and so help

to minimise safety risks. Our practical HSE initiatives –

including seminars, training and focused campaigns – help

to motivate and reinforce this commitment on the part of

the individual. We have also been building up our HSE

resources.

LTI FIGURES HALVED RECENT YEARS

The number of lost-time injuries (LTIs) per million working

hours is now down at 2.6 for the group as a whole, which

means that Prosafe has managed to halve the LTI frequency

over the last three to four years.

Thanks to a systematic and targeted safety management

programme, 2001 was the safest year yet in the history of the

drilling business. The LTI frequency for drilling alone was just

1.8, which is, as far as we are aware, one of the best per-

formances in the Norwegian sector during the year. There has

also been a considerable decrease in minor injuries. The

drilling business has concentrated hard on selected problem

areas like crane and lifting operations and falling objects. This

work has really paid off, with the number of falling objects

dropping by more than 40% in 2001.

WORLD-CLASS PERFORMANCE

The table below shows that many of our offshore operations

have a very good safety record:

1995 1996 1997 1998 1999 2000 2001

LTI frequency – No. of lost time injuries per million hours worked

15

10

5

0

SAFETYFIRST

31PROSAFE ANNUAL REPORT 2001 • HEALTH, SAFETY, ENVIRONMENT AND QUALITY

Days since last LTI (as at 31 December 2001)

Technical Services Stavanger 1,571

Petroleo Nautipa 1,263

Heidrun M&M 1,261

Oseberg East 1,188

Ruby Princess 1,168

Jotun B 1,145

Gullfaks C 957

Oseberg C 519

Rubicon 519

Technical Services Bergen 496

Gullfaks A 495

Oseberg South 371

Snorre TLP 359

Al Zaafarana 265

MSV Regalia 239

Endeavor 230

Snorre B 214

Gullfaks B 178

Safe Scandinavia 162

Espoir Ivoirien 101

Cuttings reinjection 75

Heidrun TLP 70

(vessels on b/b-charters not included)

ABSENCE THROUGH ILLNESS

The average number of employees absent from work due to

illness fell from 4.1% to 3.4% in 2001, continuing the

downward trend of recent years.

Drilling Services reported the highest level of absence

through illness (5.6%) while Offshore Support Services

and Floating Production reported very low figures.

Besides causing personal discomfort and inconvenience,

absence through illness is costly to the company and so it

has stepped up its work to minimise absence through ill-

ness at Drilling Services, with management, departments

and union representatives all working together.

Drilling Services focused on following up specific absen-

tees during the year in an attempt to help them regain

fitness as quickly as possible and make appropriate

adjustments to the workplace wherever possible. As far as

we are aware, typical levels of absence through illness at

drilling contractors in the Norwegian sector are 4-8%.

We will not rest until we are the best in this respect.

CUSTOMERS´ RECOGNITION

Several customers honoured the company for its good

safety work during the year:

• Esso awarded Prosafe Drilling Services an HSE prize for

completing the drilling operation on Jotun B with world-

class results and no lost-time injuries

• Petronas Carigali awarded Prosafe Production its annual

contractor safety prize for an excellent safety record on

board the Ruby Princess

• Canadian Natural Resources awarded Prosafe Production

an HSE prize for excellent safety results and safety attitu-

des on board the Petroleo Nautipa

• BP awarded Prosafe Offshore a safety prize for MSV

Regalia's injury-free project west of Shetland

• Statoil nominated Prosafe Drilling Services' Technical

Services´ work on Gullfaks C for an HSE prize

However, we will not rest on our laurels, but aim to improve our

performance further through internal experience transfer and ex-

ternal benchmarking. Prosafe will not be content until all our em-

ployees return home in at least as good health as when they left.

EXTERNAL ENVIRONMENT

All work is carried out in accordance with the requirements laid

down by customers and the authorities. The company's offshore

operations may nevertheless result in unintentional discharges of

pollutants into the sea or air in the event of accidents. However,

Prosafe has adopted a zero-mindset philosophy to accidental

pollution of the environment and therefore strives actively to pro-

tect the environment from pollution from both its own activities

and those of its partners by setting internal targets, constantly

improving its procedures and optimising employee attitudes.

The company's operations result in lawful emissions of exhaust

and other gases into the atmosphere. Any other emissions and

discharges are reported and followed up in the same way as

personnel injuries and damage to property. No undesirable events

causing harm to the environment were recorded in 2001.

CONTINGENCY PLANNING

The company has prepared contingency plans to minimise injuri-

es, environmental impacts and damage to property and to ensure

that adequate quality-assured information is provided to the out-

side world should circumstances so dictate. There were no events

in 2001 providing for these contingency plans to be activated.

1997 1998 1999 2000 2001

Absence through illness 1997-2001

5

4

3

2

1

0

F o c u s : I n t e l l e c t u a l c a p i t a l

32 PROSAFE ANNUAL REPORT 2001 • FOCUS: INTELLECTUAL CAPITAL

PROSAFE IS A PROGRESS IVE COMPANY.

INNOVAT ION AND N ICHE OR IENTAT ION

COMBINED WITH A FOCUS ON COSTS AND

A CLEAR MANAGEMENT PH ILOSOPHY ARE

THE BEST GUARANTEES OF INTERNAT IONAL

SUCCESS. DEMANDING CUSTOMERS,

LEADING-EDGE TECHNOLOGY, COMPET IT IVE

PR ICES AND SK ILLED PEOPLE ARE THE

COMPANY'S SUCCESS FACTORS. ALTHOUGH

WE HAVE SUBSTANT IAL STRATEGIC ASSETS

IN THE FORM OF R IGS AND PRODUCT ION

VESSELS, IT IS OUR EMPLOYEES TOGETHER

WITH OUR CUSTOMERS AND SUPPL IERS WHO

GENERATE RESULTS IN OUR DAY-TO-DAY

OPERAT IONS THROUGH FOCUSED AND

EFF IC IENT WORKING PROCESSES. WE

BEL IEVE IN TAK ING ONE STEP AT A T IME

AND TH INK ING LONG-TERM. AND IN THE

YEAR AHEAD WE PLAN TO STEP UP OUR

WORK ON DEVELOPING AND V ISUAL IS ING

THE COMPANY'S INTELLECTUAL CAP ITAL.

«Our business operations shall be conducted in a professional way

in order to satisfy the interests of our clients, shareholders

and employees, always based on our core values».

CORE VALUES

P RO F I TA B I L I T Y

R E S P E C T

I N NO VAT I O N

SA F E T Y

AM B I T I O N

F O C U S

E NVI RO N M E N T

33PROSAFE ANNUAL REPORT 2001 • FOCUS: INTELLECTUAL CAPITAL

Prosafe has a straightforward management philosophy that

lays the foundations for the visionary strategic management

of growing the company. This is vital when it comes to

developing the company's intellectual capital.

The main features of Prosafe's management philosophy are

as follows:

• Clear and concise vision, mission and corporate strategy

• Company culture based on corporate core values

• Clear organisational structure and parent company

governance

• Systematic recruitment and development of human

resources

• Communication with markets and customers at divisional

level

• Active relationship-building both internally and externally

Prosafe's vision, mission and corporate strategy are as follows:

VISION

Prosafe shall be a leading and innovative supplier of products and

services in selected niches of the global oil and gas industry.

MISSION

By providing our clients with innovative and cost-efficient

solutions, Prosafe shall maximise shareholder value and create

a challenging and motivating workplace.

CORPORATE STRATEGY

Our mission shall be achieved through innovation and organic

growth combined with strategic mergers and acquisitions.

The divisions have their own more specific visions and

strategies reflecting their particular markets, always with

the spotlight on customers, suppliers, shareholders and

employees. The common denominator for the Prosafe

group is "Leadership through innovation". Strategic

planning is a continuous process at Prosafe and underlies

all development plans and budgets.

It is neither possible nor desirable to define procedures for

absolutely everything. We want people to think for them-

selves – within the constraints of the various management

systems put in place. However, everything we do at Prosafe

must be anchored in the company's core values.

These core values are the result of 30 years of learning about

our own business and in many ways reflect the company's

success factors and company culture. We do not want

anyone at the company to compromise on these core values

for short-term gain. These values are an important part of

our reason for existence. They are not subject to annual

negotiation and revision, but set in stone – our customers

and shareholders must be able to depend on our core values

underpinning everything we do.

Prosafe has a straightforward corporate structure – a group

of companies divided into three divisions, each an inde-

pendent unit with the skills and capacity to meet the needs

of both customers and the authorities. The listed parent

company serves a number of central functions: it provides

frameworks for the divisions in areas like management,

reporting and risk management; realises economies of scale

in areas like insurance, financing and IT; handles communi-

cation with the stock market and investors; and provides

efficient operational control, experience transfer and

development of the divisions.

Prosafe considers recruitment and follow-up of new recruits

to be among the most important processes at the company

and so gives priority to a systematic and thorough

recruitment process. The company's human resources are

the backbone of its intellectual capital. We set great store by

professional development and providing interesting and

challenging duties at every level. Prosafe also believes in

home grown management and so has extensive management

development programmes under way in all three divisions.

Relationship-building, health, safety and the environment

are key topics in these programmes.

Our business development activities are based always on the

customer's need for added value, be it in the form of more

efficient operation and utilisation of existing resources or

better working methods and innovative new solutions. Close

contact with customers and good market insight are vital in

this respect. Prosafe has demonstrated – for example in

subsea well intervention and floating production – that the

company is capable of coming up with attractive new ideas

by combining skills and know-how from different parts of

the company to develop new value-adding solutions for the

global market.

In 2002 we will be stepping up our work to develop and

visualise our intellectual capital. This will include active

relationship-building both internally and externally.

S h a r e h o l d e r i n f o r m a t i o n

34 PROSAFE ANNUAL REPORT 2001 • SHAREHOLDER INFORMATION

SHAREHOLDER POLICY

Prosafe's overriding objective is to generate a competitive

long-term return on the capital invested by its shareholders

so that the company remains an attractive investment option

for both Norwegian and foreign investors. The company's

management must actively further the development of the

company and manage its assets in such a way as to highlight

the value of the company as best possible at all times.

Prosafe has focused on growth and development since its

formation in 1997 and has yet to pay any dividends. In the

light of the company's investments in the past year and its

future plans, the board is not recommending that any divi-

dend be paid this year either. However, the company will

consider the possibility of paying dividends in the future on

the basis of its financial performance, financial position and

anticipated investment needs. The board has been authorised

to buy back up to 10% of the company's shares. This autho-

rity is valid until 3 November 2002. Prosafe does not

currently hold any of its own shares.

Prosafe considers it important to provide the stock market

with accurate and complete information about the compa-

ny's business and financial position at all times and so pro-

mote the most accurate possible pricing of the company's

shares. One way in which the company intends to achieve

this is through prompt publication of detailed interim results

and the distribution of quarterly and annual reports.

Additional information material to the company's underly-

ing value and prospects is reported to the Oslo Stock

Exchange and made available on the company's website at

www.prosafecorp.com. The company also holds presentati-

ons for analysts and the press when publishing its interim

results, which can be accessed live or in recorded form at

www.financialhearings.com and on the company's website.

Prosafe distributes all press releases and interim reports via the

Hugin financial information service at www.huginonline.com.

Further information on the company can be found at

www.prosafecorp.com.

SHARE CAPITAL AND SHAREHOLDERS

The company had share capital of NOK 337 million at the

year-end, divided into a single class of 33.7 million shares

each with a par value of NOK 10. The shares are quoted on

the Oslo Stock Exchange's main list under ticker code PRS

and are freely transferable.

On 31 December 2001 Prosafe had 3,118 shareholders, with

foreign investors holding 43% of its share capital. Prosafe

aims to increase the proportion of non-Norwegian sharehol-

ders in order to maximise the liquidity of its shares and so

optimise their pricing. The company's largest shareholders

were as follows at the year-end:

1 Cherryhayes Shipping 4,363,065 12.9%

2 JCE 4,082,867 12.1%

3 Folketrygdfondet 1,737,800 5.2%

4 Odin 1,725,128 5.1%

5 Storebrand 1,621,706 4.8%

6 Denver Investment Advisors 938,576 2.8%

7 Skandinaviska Enskilda Banken 789,220 2.3%

8 Gjensidige NOR 724,379 2.1%

9 Avanse 717,500 2.1%

10 GMO 671,600 2.0%

11 Vital 552,465 1.6%

12 Chase Manhattan Bank 544,200 1.6%

13 Orkla 518,155 1.5%

14 State Street Bank & Trust Co 510,448 1.5%

15 Oslo Betong Fabrikk 385,100 1.1%

16 Skibs AS Abaco 381,255 1.1%

17 Delphi 370,149 1.1%

18 Jim McMillan 358,932 1.1%

19 Nordea 340,937 1.0%

20 Vesta 326,216 1.0%

Total 20 largest shareholders 21,659,698 82.7%

Prosafe's senior officers have been issued options to subscri-

be for shares in the company. Further information on this

incentive scheme can be found in note 20 to the consolidated

accounts. Further information on the shares held by senior

officers and directors of the company can be found in note

19 to the consolidated accounts.

SHARE PRICE AND LIQUIDITY

Prosafe's share price was NOK 120 at the year-end, giving

the company a market capitalisation of NOK 4.1 billion,

down 12% on a year earlier. By way of comparison, the Oslo

all-share index fell 14% during the year and the Oslo ener-

gy index by 11%. The graph on the right shows movements

in Prosafe's share price, the Oslo all-share index and the

Oslo energy index between 31 December 1999 and 8 March

2002. While Prosafe's share price largely followed the two

indices in 2001, it has performed far better than they have

since 1 December.

JAN 2000

SHARE PRICE DEVELOPMENT 31-12-1999 TO 08-03-2002 oseax energy prs

JAN 2002

160

150

140

130

120

110

100

90

80

70

60

50

MAY 2000 SEP 2000 JAN 2001 MAY 2001 SEP 2001

35PROSAFE ANNUAL REPORT 2001 • SHAREHOLDER INFORMATION

As can be seen from the table below, a total of 20.1 million

Prosafe shares were traded on the Oslo Stock Exchange

during the year and turnover for the year was NOK 2,405

million.

FINANCIAL CALENDAR

Prosafe plans to publish its interim results on the following

dates:

First quarter: 8 May 2002

Second quarter: 6 August 2002

Third quarter: 30 October 2002

Fourth quarter: 6 February 2003

RISK SCHEME FOR NORWEGIAN TAXPAYERS

To prevent double taxation, the RISK scheme allows

Norwegian taxpayers to adjust the cost of shares for capital

gains tax purposes in line with changes in taxed capital in

the company. The annual RISK adjustment applies only to

those investors who hold the shares on 1 January each year.

The following RISK adjustments have been calculated for

Prosafe ASA:

1 January 2001: NOK 1,86 per share

1 January 2000: NOK 0,60 per share

1 January 1999: NOK 1,45 per share

1 January 1998: NOK 1,49 per share

Since Prosafe was not formed until 1997, no RISK adjust-

ments have been calculated for previous years. In December

1998 Discoverer ASA merged with Prosafe Rigs AS against

payment in Prosafe ASA shares. The exchange ratio of

0.7205 Prosafe shares for each Discoverer share means that

a correction factor of 1.38792 needs to be used by former

Discoverer shareholders to calculate the RISK adjustment

for 1 January 1998. This results in a corrected RISK adjust-

ment of NOK 0.69.

Foreign shareholders are taxed under the rules applying in

their home countries and are not covered by the RISK scheme.

Key share data 2001 2000 Change

Number of shareholders 3,118 2,810 308

Foreign ownership (%) 43.2 34.5 8.7

Share price at year-end (NOK) 120 136 -16

Shares in issue at year-end (1,000) 33,719 26,179 7,540

Market capitalisation at year-end (NOKm) 4,046 3,560 486

Turnover (NOKm) 2,405 3,175 -770

Shares traded (1,000) 20,085 24,392 -4,307

Average daily trading volume 80,663 97,179 -16,517

Average share price (NOK) 120 130 -10

Number of transactions 13,326 15,488 -2,162

Average number of shares per transaction 1,507 1,575 -68

Turnover rate (%) 65.7 93.8 -28.1

A n a l y t i c a l i n f o r m a t i o n

36 PROSAFE ANNUAL REPORT 2001 • ANALYTICAL INFORMATION

VALUATION

Prosafe does not wish to provide guidance or recommend

methods for assessing the underlying value of its business as

it believes that it is up to the capital markets themselves to

come up with a valuation on the basis of their own assess-

ments of the group's operations, development and prospects,

together with other information in the public domain. To

promote this process, Prosafe aims to maximise coverage

and interest in the company by providing a steady flow of

information to the stock market.

Prosafe's operations consist of independent, but complemen-

tary businesses. Offshore Support Services and Floating

Production are capital-intensive while Drilling Services is

more labour-intensive. As a result, the capital markets have

tended to base their valuations of Prosafe on a combination

of net asset value and earnings-based measures.

Prosafe commissions estimates of the value of its accom-

modation/service rigs from brokers twice a year. The esti-

mates obtained for January 2002, January 2001 and January

2000 are shown in the table below (values for charter-free

vessels).

(USDm) 2002 2001 2000

Safe Britannia 75.0 71.3 53.8

Safe Caledonia 55.0 52.8 45.0

Safe Lancia 45.0 40.5 32.5

Jasminia 41.8 38.0 29.5

Safe Regency 60.5 53.8 44.0

Safe Scandinavia 46.0 39.5 37.8

Regalia 110.0 100.0 –

Total 433.3 395.8 242.6

A USD/NOK exchange rate of 9.0 puts the market value of

the rigs at NOK 3,900 million, which is 83% above their

book value of NOK 2,128 million.

The following column shows the estimates of the value of

Prosafe's FPSO/FSO vessels obtained from brokers in

January 2002.

(USDm)

Espoir Ivoirien 120.0

Ruby Princess 50.0

Petroleo Nautipa (50% of 48.8) 24.4

Endeavor 15.0

Madura Ayu (50% of 4.8) 2.4

Total 211.8

A USD/NOK exchange rate of 9.0 puts the market value of

the vessels at NOK 1,906 million, which is 56% above their

book value of NOK 1,220 million.

The estimated market value of the rigs and vessels together

is therefore NOK 2,458 million above their book value at

the year-end. Assuming no other unrealised gains in the

group's balance sheet, this gives the group value-adjusted

equity of NOK 5,351 million or NOK 159 per share at the

year-end.

INVESTMENTS

The company has made six major investments since its for-

mation in 1997: the acquisition of Discoverer ASA in 1998

for NOK 919 million, the purchase of the accommodati-

on/service rig Safe Scandinavia in 1999 for USD 50 milli-

on, the purchase of the multi-service vessel Regalia in 2000

for USD 97 million, the acquisition of Nortrans Offshore

Ltd in March 2001 for NOK 1,768 million, the conversion

of the Espoir Ivoirien to FPSO duties in 2001 for around

USD 100 million and the purchase of the accommodation/

service rig Polyconcord in February 2002 for USD 34.5

million.

Offshore Support Services invests around NOK 10-12 mil-

lion annually in maintaining each rig. Drilling Services

invests NOK 10-25 million in connection with the start-up

of each new drilling contract, but recoups these amounts

through the dayrates payable by the customer; otherwise

capacity investments within Drilling Services will generally

be in line with depreciation charges. Floating Production

makes limited investments beyond those in new conversion

projects and upgrades of existing vessels for new contracts.

37PROSAFE ANNUAL REPORT 2001 • ANALYTICAL INFORMATION

ORDER BACKLOG

Offshore Support Services had orders in hand of NOK

1,106 million at the year-end, of which NOK 781 million

relate to 2002, guaranteeing rig utilisation of around 70%

for the year ahead. The charters for the Safe Britannia and

Safe Lancia expire in August 2002 and the Jasminia's char-

ter in November 2002, but Prosafe has high hopes that these

charters will be extended given the market outlook for the

Gulf of Mexico.

Floating Production had orders in hand of NOK 5,075 mil-

lion at the year-end, including the Agip FPSO contract off

Nigeria and the extension of the Endeavor's charter in

January 2002. Orders in hand for 2002 in isolation totalled

NOK 469 million. The Ruby Princess's charter expires in

October 2002, but the customer holds a one-year extension

option and Prosafe has high hopes that it will be exercised.

Drilling Services' contract for the Rubicon expires in August

2002, but Prosafe has high hopes that Norsk Hydro will

exercise its option to extend the contract by a further year

until August 2003. Similarly, the drilling contracts on

Oseberg and Snorre expire in the autumn of 2002, but Norsk

Hydro has options to extend them by up to maximum five

and four years respectively, one year at a time. Excluding

extension options, Drilling Services had orders in hand

worth an estimated NOK 1,565 million at the year-end, of

which NOK 873 million relate to 2002.

Further information on the divisions' various contracts can

be found on pages 17, 22 and 26.

SENSITIVITY ANALYSIS

Oil prices

Oil prices largely dictate the level of activity in the oil and

gas industry and so activity in the oil and gas industry has

historically been cyclical. However, activity at Prosafe has

traditionally proved relatively robust to this volatility

because the company's operations focus on the oilfields'

production phase and include dayrate charters of varying

duration. The oil companies generally increased their bud-

gets when oil prices began to climb in 2000; on balance this

bodes well for demand for Prosafe's services going forward.

Dayrates and rig utilisation

Dayrates for accommodation/service rigs and FPSO/FSO

vessels are denominated in USD. An increase of USD 1,000

in the dayrate for each rig will increase the year's earnings

by NOK 23 million (NOK 0.68 per share), assuming 100%

utilisation of all rigs and a USD/NOK exchange rate of 9.0.

A 5% increase in rig utilisation will increase the year's

operating profit by NOK 38 million (NOK 1.13 per share),

assuming average daily earnings of USD 33,000 before

depreciation charges.

Exchange and interest rates

At present 50-60% of the group's revenues are generated in

NOK, but 80-90% of operating profit before depreciation is

derived from revenues in foreign currencies, primarily USD.

Prosafe therefore estimates future net USD profits and

traditionally hedges around 80-90% of these against NOK

using forward contracts. This strategy is now being reviewed

in the light of the fact that the company is increasingly

generating revenues in USD from assets that are valued,

traded and financed in USD.

A strong USD against the NOK is beneficial to Prosafe

given that such a high proportion of profits are derived

from USD revenues and that the company's most impor-

tant assets are traded in USD. Assuming that revenue

flows are not hedged, an increase of NOK 0.10 in the

value of the USD will increase operating profit by around

NOK 8 million.

The group's financial management strategy involves con-

stantly monitoring whether all or part of its interest-bearing

debt should be hedged against movements in interest rates.

Some 50% of the group's debt was hedged in this way at the

year-end. Assuming floating rates of interest and current

levels of interest-bearing debt, a change of one percentage

point in USD interest rates will increase the group's annual

interest charges by USD 2.8 million, which is equivalent to

NOK 25 million translated using the exchange rate ruling at

the year-end.

C o n s o l i d a t e d P r o f i t a n d L o s s A c c o u n t

38 PROSAFE ANNUAL REPORT 2001 • CONSOLIDATED PROFIT AND LOSS ACCOUNT

(NOKm) Note 2001 2000 1999

Charter revenues 1 047 864 335

Other operating revenues 1 371 1 082 908

Total operating revenues 4 2 418 1 946 1 243

Wages and other personnel expenses 7, 8 1 066 789 656

Depreciation and amortisation 10 373 197 152

Other operating expenses 3, 9 464 366 215

Merger and reorganisation expenses 0 0 13

Total operating expenses 1 903 1 352 1 036

Operating profit 515 594 207

Financial income 11 36 56 28

Financial expenses 12 -213 -217 -175

Net financial items -177 -161 -147

Profit before other items 338 433 60

Other items 13 41 -35 -30

Profit before taxes 379 398 30

Taxes 14 29 12 7

Profit for the year 350 386 23

Profit per share (fully diluted) 15 10,89 14,60 0,88

39PROSAFE ANNUAL REPORT 2001 • CONSOLIDATED BALANCE SHEET

C o n s o l i d a t e d B a l a n c e S h e e t

(NOKm) Note 2001 2000 1999

ASSETS

Goodwill 10 1 309 18 18

Rigs 10 2 379 2 487 1 636

Ships 10 1 323 0 0

Other tangible assets 10 155 140 244

Long term receivables 11 5 3

Total fixed assets 5 176 2 650 1 901

Stocks 52 48 36

Accounts receivable 16 412 337 252

Other short term receivables 17 116 115 94

Shares 0 0 51

Cash and deposits 18 763 627 405

Total current assets 1 342 1 127 838

Total assets 4 6 518 3 777 2 739

EQUITY AND LIABILITIES

Share capital 19 337 262 258

Other equity 19 2 556 1 420 1 016

Total equity 2 893 1 682 1 274

Pension liabilities 8 43 32 30

Other provisions 22 47 37 33

Total provisions 90 69 63

Interest bearing long term debt 23 2 860 1 582 1 090

Total long term debt 2 860 1 582 1 090

Interest free short term liabilities 24 675 444 312

Total short term liabilities 675 444 312

Total equity and liabilities 6 518 3 777 2 739

C o n s o l i d a t e d C a s h F l o w S t a t e m e n t

40 PROSAFE ANNUAL REPORT 2001 • CONSOLIDATED CASH FLOW STATEMENT

(NOKm) 2001 2000 1999

CASH FLOW FROM OPERATING ACTIVITIES

Profit before taxes 379 398 30

Gain/loss on sale of fixed assets -4 -20 1

Gain on sale of shares -60 -20 0

Depreciation and amortisation 378 207 160

Write down of investment 0 0 42

Unrealised currency gain/loss 40 -2 43

Taxes paid -25 -21 -23

Change in stocks -6 -12 -6

Change in accounts receivable -62 -85 107

Change in other short term receivables -63 -21 115

Change in interest free short term liabilities 234 132 -154

Change in other cut-off items 16 13 4

Change in translation difference foreign subsidiaries -5 2 3

Net cash flow from operating activities 820 572 322

CASH FLOW FROM INVESTING ACTIVITIES

Proceeds from sale of tangible assets 5 96 5

Acquisition of tangible assets -878 -1 031 -459

Proceeds from sale of shares 118 71 0

Acquisition of shares 0 0 -93

Acquisition of subsidiary -929 0 0

Cash in subsidiary at acquisition 230 0 0

Net cash flow from investing activities -1 454 -864 -547

CASH FLOW FROM FINANCING ACTIVITIES

New interest bearing long term debt 1 430 1 576 505

Repayment of interest bearing long term debt -666 -1 082 -398

Change in interest bearing short term liabilities 0 0 -12

Paid in capital from share issues 6 20 3

Net cash flow from financing activities 770 514 98

Net change in cash and deposits 136 222 -127

Cash and deposits at 01-01 627 405 532

Cash and deposits at 31-12 763 627 405

Undrawn revolving credit facility 0 0 150

41PROSAFE ANNUAL REPORT 2001 • ACCOUNTING PRINCIPLES

A c c o u n t i n g P o l i c i e s

GENERAL

The consolidated accounts are prepared in accordance with Norwegian

accounting principles.

SEGMENT REPORTING

The division into business segments is based on the various types of

products and services that the group renders. The group comprises

three divisions: Offshore Support Services, Drilling Services and Floating

Production. All items relating to the discontinuing business in Azerbaijan

and the module business in Aberdeen, which was sold in January 2002,

are classified net under other items. This also applies for Procon

Engineering AS which was sold in March 2001.

No material transactions take place between the various divisions.

Non-allocated expenses relate to corporate administration and other

expenses that cannot reasonably be allocated to the various divisions.

Non-allocated balance sheet items relate mainly to cash and

deposits owned by the parent company.

CONSOLIDATION PRINCIPLES

The consolidated accounts include Prosafe ASA and subsidiaries. All

subsidiaries are wholly owned. The subsidiaries' accounts are included in

the consolidated accounts as from the acquisition date. The acquisition

cost of the shares is set off against the equity in the subsidiaries in accor-

dance with the acquisition method. Any values in excess of book value is

entered into the accounts at gross value with a provision for deferred tax.

Any residual value is recorded as goodwill. Goodwill and other excess

values are amortised/depreciated over their estimated useful lives.

All transactions and balances between the companies included in the

consolidation are eliminated. When consolidating foreign subsidiaries, the

profit and loss account is translated into NOK at the average exchange

rate for the year, while balance sheet items are translated at the exchange

rate at year end. Translation differences are taken directly to equity.

Investments in joint ventures are accounted for by proportionate

consolidation.

RECOGNITION OF REVENUES AND EXPENSES

Revenues are recognised as earned. Costs are expensed in the same

period as related revenue.

CLASSIFICATION OF BALANCE SHEET ITEMS

Assets for long term ownership or use are classified as fixed assets. Other

assets are classified as current assets. Liabilities which fall due more than

one year after they incur, are classified as long term liabilities. Next year's

instalment of long term debt is included in long term liabilities. Liabilities

which fall due less than one year after they incur, are classified as short

term liabilities.

PENSIONS

Pension liabilities incurred are based on present value of future pension

benefits earned on the balance sheet date. Payroll taxes are included

in liabilities relating to non-insured schemes. The value of the pension

funds is the estimated actuarial value. The value is adjusted every year

according to statements provided by the insurance companies.

The effect of changes in estimates and pension plans are amortised over

the average remaining service period. The effect of changes in estimates

is only recognised in the profit and loss account when such changes

exceed 10% of gross pension liabilities or pension funds, whichever is

the higher. Net pension expenses are classified as wages and other

personnel expenses.

Net pension expenses include present value of the pension earnings for

the period, interest expenses on pension obligations incurred, expected

return on the pension funds as well as the amortised effect of changes

in estimates and plans.

Payroll taxes relating to group pension schemes are recorded as

expenses on the basis of pension premiums paid. In the balance sheet,

underfunded schemes are classified as a provision and overfunded sche-

mes as a long term receivable.

SUBSCRIPTION RIGHTS

At the time when subscription rights are awarded under the company's

established incentive scheme, the exercise price is set equal to the share

price. Thus, the intrinsic value of the subscription rights is zero and no

costs are expensed at the date of award. Payroll taxes on the estimated

time value of outstanding subscription rights are expensed over the

exercise period. Changes in estimates are recognised in the same

period as such changes are established.

GOODWILL AND TANGIBLE FIXED ASSETS

Goodwill and tangible fixed assets are stated at acquisition cost less

cumulative amortisations, depreciations and write downs. Assets are

amortised/depreciated on a straight line basis over their estimated eco-

nomically useful lives. When fixing the depreciation rates, allowance is

made for any residual value at the end of the depreciation period. Write

downs are made if the fair value of a fixed asset is lower than its book

value and this is not considered to be a temporary reduction. A write

down is reversed to the extent that the basis for the write down is no

longer present.

42 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

CLASSIFICATION AND PERIODIC MAINTENANCE

The company provides for classification costs of the company's rigs and

for periodic maintenance of the company's lightweight rig. The company

is also responsible for classification and maintenance of parts of the

drilling equipment on the fixed installations owned by clients, and the

company makes provisions to cover these costs. The provisions are

recognised as short term liabilities or provisions dependent on the

planned dates for classification and maintenance.

FINANCIAL INSTRUMENTS

Forward currency exchange contracts which secure contractual cash flows

are treated as financial hedging for accounting purposes. Cash flow from a

fixed contract is booked at the exchange rate fixed under a forward

currency exchange contract. The difference between the spot rate when

entering into the forward exchange contract and the exchange contract rate

is recognised at the realisation of the forward exchange contract.

Interest rate swaps which meet the requirements for hedging are booked

as an adjustment to the interest costs in the initial loan agreement.

BORROWING COSTS

As a general rule, fees incurred in connection with the arrangement of

loan facilities are capitalised and amortised over the loan term. When

assets are manufactured internally, a proportional part of the financing

costs is allocated to the cost of the asset and depreciated according to

the depreciation plan of the asset. The residual proportion is capitalised

and amortised over the remaining loan term.

TAXES

Taxes in the profit and loss account include taxes payable and changes

in deferred tax. Deferred tax is calculated on the basis of temporary

differences between book and tax values that exist at the end of the

financial period. Tax decreasing temporary differences are offset against

tax increasing temporary differences, with the exception of temporary

differences within different tax regimes. Net deferred tax asset is

recognised if it can be utilised through future taxable income. Deferred

tax and deferred tax asset are presented net in the balance sheet.

STOCKS

Stocks are valued at purchase cost or estimated net sales value,

whichever is the lower. Goods manufactured internally are valued at

manufacturing cost or estimated net sales value, whichever is the lower.

MONETARY ITEMS IN FOREIGN CURRENCY

Bank deposits, receivables and liabilities in foreign currencies are

translated at year end exchange rates. Regarding Prosafe's long term

interest bearing debt, the company will change accounting principle from

2002, and no longer revaluate loan in USD according to fluctuations

in the USD/NOK exchange rate.

CASH AND DEPOSITS

Cash and deposits include cash, bank deposits and other liquid

investments with a maturity of three months or less.

43PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

N o t e s t o t h e c o n s o l i d a t e d a c c o u n t s

NOTE 1 • COMPARISON FIGURESRevenues and expenses relating to the module business in Aberdeen, which was sold in January 2002, are classified net under other items. This also applies for

Procon Engineering AS, which was sold in March 2001, and for the discontinuing business in Azerbaijan. Comparison figures are adjusted accordingly.

NOTE 2 • COMPANIES INCLUDED IN THE CONSOLIDATED ACCOUNTSCompany's total Group's

Company name Country share capital (in 1 000) ownership

Prosafe ASA Norway NOK 337 189 100%

Prosafe Rigs AS Norway NOK 421 394 100%

Prosafe Offshore AS Norway NOK 51 100%

Prosafe Offshore Norge AS Norway NOK 50 100%

Prosafe (UK) Holdings Ltd United Kingdom GBP 11 000 100%

Prosafe Rigs Ltd United Kingdom GBP 0 100%

Prosafe Offshore Ltd United Kingdom GBP 0 100%

Prosafe Drilling Services AS Norway NOK 77 000 100%

Consafe Engineering (UK) Ltd United Kingdom GBP 10 100%

Consafe (Burntisland) Ltd United Kingdom GBP 600 100%

Consafe (Azerbaijan) Ltd United Kingdom GBP 0 100%

Consafe (Caspian) Ltd United Kingdom GBP 1 100%

Consafe Recruitment Ltd United Kingdom GBP 14 100%

Consafe International LLC USA USD 6 100%

Prosafe Production Services Pte Ltd Singapore USD 5 490 100%

Prosafe Production Pte Ltd Singapore USD 4 000 100%

GW Shipping Pte Ltd Singapore USD 0 100%

Prosafe Services Cote d'Ivoire Pte Ltd Singapore USD 0 100%

Egyptian Winlines Shipping Co. SAE Egypt USD 350 100%

Offshore Mooring Services Limited Liberia USD 0 100%

Prosafe Production Corporation Liberia USD 0 100%

Prosafe Production Inc USA USD 1 100%

Nortrans Offshore do Brasil Ltda Brazil USD 18 100%

Prosafe Production Nigeria Limited Nigeria USD 0 100%

Tinworth Limited Bermuda USD 6 50%

Shaun Investments S.A. Panama USD 0 50%

Sandaband Well Plugging AS Norway NOK 152 34%

Voting rights equal ownership share.

NOTE 3 • REMUNERATION TO THE BOARD, THE PRESIDENT & CEO AND THE AUDITORS(NOK 1 000) 2001 2000

Board 1 437 1 280

Chairman 1 336 1 316

President & CEO 1 740 1 552

Auditors (audit) 1 287 992

Auditors (other services) 565 227

Presidents in the corporate management team (see note 19), hold agreements covering salary following termination of their employment contracts.

The agreements read that the company guarantees two-year remuneration in addition to the notification period if appointments cease. Salary and other remune-

ration received from other sources in the period will be deducted.

Remuneration to the Chairman includes director's fee, salary as Executive Chairman to November 2001 and pension from that time.

44 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 • OPERATING REVENUES AND ASSETS BY GEOGRAPHICAL AREAS2001 2000

Operating revenues

Norway 1 344 1 442

Mexico 480 340

United Kingdom 341 163

Vietnam 140 0

Angola 48 0

India 35 0

Egypt 21 0

Indonesia 7 0

Singapore 1 0

Total operating revenues 2 418 1 946

Assets

Norway 2 126 2 299

Singapore 1 520 0

Mexico 981 805

The Ivory Coast 925 0

United Kingdom 573 646

Vietnam 178 0

Angola 108 0

India 67 0

Indonesia 18 0

Egypt 9 0

USA 1 0

Other countries 13 26

Total assets 6 518 3 777

NOTE 5 • SEGMENT INFORMATIONOffshore Support Services 2001 2000 1999

Operating revenues 918 982 347

Operating expenses -299 -263 -62

Depreciation -198 -165 -121

Merger and reorganisation expenses 0 0 -8

Operating profit 421 554 156

Assets 2 609 2 800 1 863

Liabilities 1 158 1 394 870

Investments 95 923 399

Floating Production 2001 2000 1999

Operating revenues 253 – –

Operating expenses -83 – –

Goodwill amortisation -51 – –

Depreciation -86 – –

Operating profit 33 – –

Assets 2 825 – –

Liabilities 1 045 – –

Investments 719 – –

45PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Drilling Services 2001 2000 1999

Operating revenues 1 252 991 899

Operating expenses -1 134 -895 -794

Depreciation -36 -30 -27

Operating profit 82 66 78

Assets 718 662 538

Liabilities 444 400 288

Investments 46 97 39

Corporate expenses and eliminations 2001 2000 1999

Operating revenues -5 -27 -3

Operating expenses -14 3 -15

Depreciation -2 -2 -4

Merger and reorganisation expenses 0 0 -5

Operating profit -21 -26 -27

Assets 366 315 338

Liabilities 978 301 307

Investments 18 11 21

Prosafe consolidated 2001 2000 1999

Operating revenues 2 418 1 946 1 243

Operating expenses -1 530 -1 155 -871

Goodwill amortisation -51 – –

Depreciation -322 -197 -152

Merger and reorganisation expenses 0 0 -13

Operating profit 515 594 207

Assets 6 518 3 777 2 739

Liabilities 3 625 2 095 1 465

Investments 878 1 031 459

NOTE 6 • QUARTERLY RESULTS4Q 01 3Q 01 2Q 01 1Q 01 2001

Operating revenues 624 654 683 457 2 418

Operating expenses -392 -403 -396 -339 -1 530

Goodwill amortisation -17 -17 -17 0 -51

Depreciation -81 -92 -92 -57 -322

Operating profit 134 142 178 61 515

Net financial items -60 26 -68 -75 -177

Profit before other items 74 168 110 -14 338

Other items -9 -1 -3 54 41

Profit before taxes 65 167 107 40 379

Taxes -1 -9 -2 -17 -29

Profit for the period 64 158 105 23 350

46 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 • WAGES AND OTHER PERSONNEL EXPENSES2001 2000

Wages and holiday pay 695 500

Pension expenses 26 23

Other remunerations 15 15

Payroll taxes 97 84

Hired-in personnel 187 151

Other personnel expenses 45 16

Total wages and other personnel expenses 1 066 789

Number of employees (quarterly average) 1 572 1 311

NOTE 8 • PENSION LIABILITIESEmployees in the Norwegian companies are covered by pension schemes which entitle them to future pension benefits (defined benefit plans). The major

proportion of the liability is covered by means of investment plans in life insurance companies. 1.000 employees are members of these schemes. Prosafe has also

pension liabilities in respect of the Chairman which is partly financed through operations.

Foreign subsidiaries have pension schemes in accordance with local practice and legislation. The pension schemes are formalised by means of the subsidiary

making an agreed contribution to the individual's pension fund (defined contribution plans), and are consequently not recognised in the balance sheet.

Pension expenses - benefit plans 2001 2000

Present value of current year earnings 19 18

Interest expenses on pension liabilities incurred 19 16

Expected return on pension funds -15 -13

Allocated effect of changes in estimates and pension plans 1 2

Pension expenses - benefit plans 24 23

Pension liabilities 2001 2000

Estimated pension liabilities incl. future wage growth 302 256

Value of pension funds -212 -183

Estimated net pension liabilities 90 73

Non-amortised plan changes -2 -2

Non-amortised estimate variance -45 -39

Net pension liabilities 43 32

Assumptions: 2001 2000

Discount rate 7,0% 7,0%

Expected return on pension funds 8,0% 8,0%

Expected wage growth 3,5% 3,5%

Expected pension adjustment 3,0% 3,0%

Expected national insurance base rate adjustment 3,0% 3,0%

Expected annual utilisation of AFP (early retirement from the age of 62) 5,0% 5,0%

47PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 • OTHER OPERATING EXPENSES2001 2000

Materials 55 35

Repair and maintenance 85 117

Travel 88 53

Catering offshore 22 48

Office and administration 28 24

Leasing 49 26

Fees 22 14

Insurance 20 8

Other 96 42

Total operating expenses 464 366

NOTE 10 • TANGIBLE FIXED ASSETS AND GOODWILLMachinery and

Rigs FSO/FPSO equipment Buildings Goodwill Land Total

Acquisition cost 01-01-01 2 938 0 251 51 27 11 3 278

Additions 97 1 408 46 14 1 360 0 2 925

Disposals at acquisition cost 0 0 -41 -4 -27 0 -72

Acquisition cost 31-12-01 3 035 1 408 257 61 1 360 11 6 131

Cum. depreciation 01-01-01 451 0 161 12 9 0 633

Cum. depreciation on disposals 0 0 -36 0 -9 0 -45

Depreciation for the year1) 205 85 33 3 51 0 378

Cum. depreciation 31-12-01 656 85 159 15 51 0 9661) out of which 5 allocated to other items

Net book value 31-12-01 2 379 1 323 98 45 1 309 11 5 165

Depreciation rate (%) 6-8 10-33 20-30 3 5 – –

Economically useful life (years) 20-30 3-10 3-5 30 20 – –

Capitalised borrowing costs 0 31 0 0 0 0 31

Leasing expenses 0 0 35 14 0 0 49

Estimated economically useful life is 30 years for accomodation and service rigs and 20 years for lightweight rigs. FSO/FPSO's are depreciated over their fixed contract

period to their estimated residual value. Existing fixed contract periods are 3-10 years. Goodwill relates to Nortrans Offshore Ltd, which was acquired in March 2001.

NOTE 11 • FINANCIAL INCOME 2001 2000

Interest income 36 34

Gain on sale of shares 0 20

Unrealised currency gain - net 0 2

Total financial income 36 56

NOTE 12 • FINANCIAL EXPENSES 2001 2000

Interest expenses 158 103

Realised currency loss - net 6 107

Unrealised currency loss - net 41 0

Other financial expenses 8 7

Total financial expenses 213 217

48 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 • OTHER ITEMS2001 2000

Operating revenues 241 322

Operating expenses -236 -338

Depreciation -5 -5

Discontinuation expenses -19 -15

Gain on sale of Procon Engineering AS 60 0

Net other items 41 -35

Other items relate to the module business in Aberdeen, which was sold in January 2002, the discontinuing business in Azerbaijan and Procon Engineering AS,

which was sold in March 2001.

NOTE 14 • TAXES Specification of taxes in the profit and loss account: 2001 2000

Profit before taxes in Norway 324 416

Profit/loss before taxes abroad 55 -18

Total profit before taxes 379 398

Taxes payable in Norway 19 10

Taxes payable abroad 15 3

Changes in deferred tax in Norway -6 -2

Total taxes 29 12

Specification of taxes in the balance sheet statement:

Basis of deferred tax 2001 2000

Temporary differences:

Fixed assets 36 29

Current assets -10 11

Pension liabilities -43 -32

Long term liabilities -14 0

Short term liabilities -4 -23

Basis for calculation of deferred tax -35 -15

Deferred tax / deferred tax asset (-) -10 -4

Other tax issues:

The rig-owning company within the Offshore Support Services business area and Tinworth Ltd, which owns Petroleo Nautipa, are subject to taxation based on the special rules

for taxation of shipping companies in Norway. This system of taxation leads to a deferment of taxation from the time when a profit is earned until the time when the profit is dis-

tributed as a dividend or when the company ceases to be subject to the taxation scheme for shipping companies. There is no provision for the present value of deferred tax

relating to these tax increasing temporary differences, as it is not expected that the taxable income which these differences represent will materialise in the foreseeable future.

Prosafe Production Pte Ltd, which owns FPSO Espoir Ivoirien, FPSO Ruby Princess and FSO Endeavor, are subject to taxation based on the special rules for taxation of ship-

ping companies in Singapore. This system of taxation leads to tax exemption in Singapore, but the company pays tax deducted at source in the countries in which it operates.

NOTE 15 • PROFIT PER SHARE (FULLY DILUTED)Profit per share (fully diluted) is calculated on the basis of profit for the year and average outstanding and potential shares during the year. Average number of

outstanding and potential shares was 32.138.615 for 2001 and 26.439.000 for 2000.

NOTE 16 • ACCOUNTS RECEIVABLE2001 2000

Accounts receivable at gross value 412 337

Provision for expected loss 0 0

Net accounts receivable 412 337

49PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 • OTHER SHORT TERM RECEIVABLES2001 2000

Revenues earned 81 96

Other short term receivables 35 19

Total other short term receivables 116 115

NOTE 18 • CASH AND DEPOSITSRestricted cash (taxes withheld) amounted to NOK 32m.

NOTE 19 • EQUITYShare Other Translation

capital equity difference Total

Equity 01-01-01 262 1 411 9 1 682

Profit for the year – 350 – 350

New equity 75 791 – 866

Change in translation difference – – -5 -5

Equity 31-12-01 337 2 552 4 2 893

Number of shares: 33 718 900

Par value: 10

Number of shareholders: 3 118

20 largest shareholders/group of shareholders as at 31-12-01: Number of shares Percentage

Cherryhayes Shipping 4 363 065 12,9%

JCE 4 082 867 12,1%

Folketrygdfondet 1 737 800 5,2%

Odin 1 725 128 5,1%

Storebrand 1 621 706 4,8%

Denver Investment Advisors 938 576 2,8%

SEB 789 220 2,3%

Gjensidige NOR 724 379 2,1%

Avanse 717 500 2,1%

GMO 671 600 2,0%

Vital 552 465 1,6%

Chase Manhattan Bank 544 200 1,6%

Orkla 518 155 1,5%

State Street Bank & Trust Co 510 448 1,5%

Oslo Betong Fabrikk 385 100 1,1%

Skibs AS Abaco 381 255 1,1%

Delphi 370 149 1,1%

McMillan 358 932 1,1%

Nordea 340 937 1,0%

Vesta 326 216 1,0%

Total 20 largest shareholders/group of shareholders 21 659 698 82,7%

Foreign shareholders 43,2%

Norwegian shareholders 56,8%

50 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Shares and subscription rights owned by management and members of the board: Shares Subscription rights

31-12-01 31-12-01

Management:

Arne Austreid - President & CEO 0 50 000

Stig Christiansen - Chief Financial Officer 1 419 50 000

Bjørn Henriksen - President Prosafe Production 0 50 000

Petter Tomren - President Drilling Services 0 50 000

Trygve Arnesen - President Offshore Support Services 225 40 000

Roy Hallås - Vice President Corporate Relations 0 30 000

Board of Directors:

Reidar Lund *) - Chairman 59 740 0

Geir Worum - Vice Chairman 0 0

Karl Urdshals - Board member 48 600 0

Egil Bergsager - Board member 0 0

Christian Brinch - Board member 0 0

Bengt Eskilson - Board member 4 846 0

Torild R. Alvheim - Employees' representative 0 0

Jon M. Fjose - Employees' representative 0 0

Olav Gjesteland - Employees' representative 0 0

*) Shares owned privately and/or through companies.

NOTE 20 • SUBSCRIPTION RIGHTSIn connection with the incentive scheme in Prosafe established by the general meeting 28 February 1998 and the conversion of share options in Nortrans Offshore

Ltd 20 April 2001, the board has per 31 December 2001 awarded 1.613.861 subscription rights to the company's management.

The subscription rights are awarded as follows:

Date Number of rights Exercise price (NOK)

26-02-99 730 000 45,00 + 1% per month

14-12-00 50 000 77,00 + 1% per month

13-09-00 330 000 150,00 + 1% per month

08-02-01 80 000 128,00

20-04-01 154 871 24,76

20-04-01 144 431 40,66

20-04-01 124 559 148,50

In the initial scheme established by the General Meeting 28 February 1998, the exercise price equals the share price at the time of the award + 1% per month until the

subscription rights are exercised. The maximum exercise period for these subscription rights is 36 months. Following the acquisition of Nortrans Offshore Ltd (NOL), share

options in NOL were converted to 299.302 subscription rights in Prosafe on 20 April 2001 at a price below the share price at time of award, as per existing agreements

in NOL. The maximum exercise period for these subscription rights are 60 months. Exercise of a subscription right implies that the company issues a new share. 87.000

subscription rights were exercised during 2001. Actual value of these subscription rights amounted to NOK 5,6 mill. The number of outstanding subscription rights at

31-12-01 was 968.835 at an estimated total value of NOK 34,1 mill. Actual value is calculated as the difference between the share price and the exercise price.

NOTE 21 • JOINT VENTURESCompany´s total Group´s

Company Country share capital (in 1 000) ownership

Sandaband Well Plugging AS Norway NOK 152 34%

Tinworth Limited Bermuda USD 6 50%

Shaun Investments S.A. Panama USD 0 50%

51PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2001 2000

Included in profit and loss account

Operating revenues 55 –

Profit before taxes 25 –

Profit for the year 21 –

Included in balance sheet

Fixed assets 89 –

Current assets 33 –

Total assets 122 –

Long term liabilities 34 –

Short term liabilities 29 –

Total liabilities 63 –

Equity 59 –

NOTE 22 • OTHER PROVISIONS2001 2000

Accrued classification costs for rigs 16 25

Deferred revenues 14 12

Other provisions 17 0

Total other provisions 47 37

NOTE 23 • INTEREST BEARING LONG TERM DEBT2001 2000

Loans in USD 2 860 1 582

Total interest bearing long term debt 2 860 1 582

As at 31-12-01 total interest bearing long term debt amounted to USD 317,4m, out of which USD 119,4m is related to the company's rigs (fleet loan), USD

115m is related to group purposes (of this USD 80m is related to the aquisition of Prosafe Production), and USD 83m is related to the company's FSO/FPSO's.

The fleet loan of USD 119,4m is drawn down by Prosafe Rigs AS, which owns the company's accomodation and service rigs. The loan is repaid based on semi-

annual repayments of USD 9,18m with a profile of 8 years, and a balloon payment of USD 27,55m after 7 years from draw down. Of the USD 115m loan in

Prosafe ASA the initial agreement says that USD 80m fall due in September 2002, but this loan will be refinanced by that time. The remaining USD 35m is an

interest-only loan which is due 28-02-05. The debt of USD 83m related to the company's FSO/FPSO's is divided into 5 project facilities with different repayment

profiles. Of this USD 28,6m are due in 2002, USD 23,5m in 2003, and thereafter USD 12m yearly in 2004 and 2005, while remaining USD 6,9m are due in

2006. Consequently, debt which fall due later than 31-12-06 amount to USD 27,55m or NOK 248,3m translated at the prevailing exchange rate at 31-12-01.

The interest margins are fixed at 0,875% p.a. for the fleet loan in Prosafe Rigs AS and 1% for the interest-only loan of USD 35m in Prosafe ASA. The margins

are adjusted yearly according to a table dependent on the Leverage Ratio as defined below. Consequently, the interest margins were adjusted to 1% p.a. for the

fleet loan and 1,125% p.a. for the interest-only loan at the beginning of 2002, and thereafter they may vary between 0,875% and 1,125% p.a., and between

1% and 1,375% p.a. The interest margin on the aquisition loan of USD 80m is 1,75% p.a. For the remaining USD 83m the different facilities are subject to vari-

ous margins at 0,7% p.a., 1,25% p.a., 1,375% p.a. and 2% p.a.

The loan facilities are subject to financial covenants based on consolidated figures:

Net Worth Ratio: Net Worth / (Net Worth + Total Debt)1) shall be minimum 0,4

Leverage Ratio: Total debt / EBITDA shall not exceed 5,0

Working capital: Minimum NOK 150m

Liquidity: Minimum NOK 175m, out of which minimum NOK 100m must reside in Prosafe Rigs AS

Market value of accomodation and service rigs: Market value of accommodation and service rigs / Loan in Prosafe Rigs AS shall be minimum 2,0

1) Total Debt = interest bearing debt + bank guarantees issued + net liability on interest hedging agreements.

52 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 24 • INTEREST FREE SHORT TERM LIABILITIES2001 2000

Accounts payable 353 113

Holiday pay and accrued wages 105 75

Public taxes 62 56

Taxes payable 23 11

Classification and maintenance - drilling equipment 11 8

Interest costs 15 11

Other accrued costs 99 160

Other interest free short term liabilities 7 10

Total interest free short term liabilities 675 444

NOTE 25 • MORTGAGES AND GUARANTEESIn line with industry practice, Prosafe has issued bank guarantees to customers in connection with award and performance of contracts. Total bank guarantees

issued amounted to NOK 191,1m at year end.

The interest bearing long term debt of NOK 2.860m, see note 23, is guaranteed by first priority ship mortgage on the accommodation and service rigs, accounts

receivable and bank deposits within the Offshore Support Services business area, ships within Floating Production and bank deposits in Drilling Services. Book value

of assets pledged as security:

Accommodation and service rigs 2 209

Accounts receivable 68

Ships 1 308

Cash and bank deposits 410

Total 3 995

NOTE 26 • FINANCIAL MARKET RISKProsafe operates internationally and within capital intensive industry, and is exposed to market risk relating to the development of foreign exchange rates and

interest rates.

Foreign currency

Today 50-60% of the operating revenues are generated in NOK. Operating profit before depreciation measured in foreign currency - mainly USD - amounts

however to 80-90%. Consequently, Prosafe will continuously assess the net surplus of USD, and normally about 80-90% of this will be secured against

NOK through monthly forward exchange contracts. This strategy is being revalued based on the fact that the company's revenues generated in USD are

increasing, and that these revenues are generated from assets which are valued, traded and financed in USD.

A strong USD/NOK rate will be favourable for Prosafe based on the relative contribution of profit in USD, as well as the fact that the company's most valuable assets

are traded in USD. Under the assumption of the revenues not being hedged against currency movements, and increase of NOK 0.10 in the USD/NOK exchange

rate will increase the operating profit by circa NOK 8m.

At year end the group had entered into the following forward exchange contracts (amounts in USD 1.000):

Amount Exchange Rate

2.000 31-01-02 8,8200

2.000 28-02-02 8,8475

Interests

According to Prosafe's financial strategy, the company shall continuously assess interest hedging options for its interest bearing debt. At year end 48% of total debt

in the group was fixed by a combination of an interest rate swap agreement for floating to fixed interest and an interest corridor with a floor and a cap. Interest rate

hedging will increase to cover about 60% of total interest bearing debt during the first quarter of 2002, in time with repayment. Thereafter interest rate hedging

remains at about 60% of total debt, based on existing debt and in time with repayment until the end of 2003.

Under the assumption of a floating interest rate, an increase in the USD interest rate of one percentage point would - based on the current interest bearing debt -

amount to circa USD 2.8m per year, equivalent to NOK 25m based on the USD/NOK exchange rate prevailing at 31-12-01.

53PROSAFE ANNUAL REPORT 2001 • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 27 • MATERIAL SINGLE TRANSACTIONSIn March 2001 Prosafe acquired Nortrans Offshore Ltd for NOK 1.768m. In the same month Procon Engineering AS was sold to Hydralift ASA for NOK 118m.

The gain from this sale was NOK 60m. In January 2002 the module business in Aberdeen was sold to leading personnel in Consafe. This sale had a neutral impact

on Prosafe's consolidated profit. In February 2002 Prosafe acquired the semi-submersible accommodation and service rig Polyconcord for USD 34,5m.

NOTE 28 • PRO FORMA ACCOUNTS INCL. FLOATING PRODUCTIONBelow is pro forma accounts for Prosafe under the assumption that the acquisition of Nortrans Offshore Ltd took effect from 1 January 2000. All amounts in

NOK million.

Profit & Loss Account 2001 2000

Operating revenues 2 506 2 530

Operating expenses -1 559 -1 478

Operating profit before depreciation and amortisation 948 1 051

Goodwill amortisation -68 -67

Depreciation -355 -334

Operating profit 525 651

Interest income 38 46

Interest expenses -185 -211

Other financial items -55 -93

Profit before other items 323 393

Other items 41 -44

Profit before taxes 364 349

Taxes -26 -13

Profit for the period 337 336

Balance Sheet 31-12-00

Goodwill 1 376

Rigs 2 487

Ships 577

Other fixed assets 147

Total fixed assets 4 587

Other current assets 544

Cash and deposits 788

Total current assets 1 333

Total assets 5 920

Share capital 335

Other equity 2 206

Total equity 2 541

Interest free long term liabilities 37

Interest bearing long term liabilities 2 830

Total long term liabilities 2 867

Interest free short term liabilities 512

Total short term liabilities 512

Total equity and liabilities 5 920

P a r e n t c o m p a n y a c c o u n t s

54 PROSAFE ANNUAL REPORT 2001 • ACCOUNTS - PARENT COMPANY

BALANCE SHEET

(NOK 1 000) Note 2001 2000

Deferred tax asset 6 3 182 2 562

Tangible fixed assets 4 26 959 15 004

Shares in subsidiaries 7 3 025 637 1 579 743

Other fixed assets 8 75 076 121 607

Total fixed assets 3 130 854 1 718 916

Other current assets 9 78 282 67 389

Cash and deposits 10 212 323 43 977

Total current assets 290 605 111 366

Total assets 3 421 459 1 830 282

Share capital 11 337 189 261 789

Share premium reserve 11 1 698 582 907 157

Other equity 11 325 643 329 878

Total equity 2 361 414 1 498 824

Pension liabilities 3 5 050 3 965

Total provisions 5 050 3 965

Interest bearing long term debt 13 1 036 334 309 698

Total long term debt 1 036 334 309 698

Interest free short term liabilities 12 18 661 17 795

Total short term liabilities 18 661 17 795

Total equity and liabilities 3 421 459 1 830 282

PROFIT AND LOSS ACCOUNT

(NOK 1 000) Note 2001 2000

Operating revenues 1 670 1 625

Operating expenses 2,3 24 282 25 568

Depreciation 4 2 556 2 372

Total operating expenses 26 838 27 940

Operating profit -25 168 -26 315

Net financial items 5 -53 177 -52 242

Loss before taxes -78 345 -78 557

Taxes 6 17 683 21 491

Loss for the year -60 662 -57 066

Dividends 0 0

CASH FLOW STATEMENT

(NOK 1 000) 2001 2000

Net cash flow from operating activities -104 235 -14 574

Net cash flow from investing activities -508 964 -1 175

Net cash flow from financing activities 781 545 -11 948

Net change in cash and deposits 168 346 -27 697

Cash and deposits 01-01 43 977 71 674

Cash and deposits 31-12 212 323 43 977

55PROSAFE ANNUAL REPORT 2001 • NOTES TO THE ACCOUNTS - PARENT COMPANY

N o t e s – P a r e n t c o m p a n y a c c o u n t s

NOTE 1 • ACCOUNTING POLICIES

The accounting principles used for the consolidated accounts also apply for the parent company Prosafe ASA. Investments in subsidiaries are treated according to

the cost method. Group contribution received is booked net against equity.

NOTE 2 • OPERATING EXPENSES

2001 2000

Wages and holiday pay 5 798 7 464

Pension expenses 1 230 2 231

Board fees 1 437 1 280

Other remunerations 911 601

Payroll taxes 2 956 6 124

Hired-in personnel 483 963

Other personnel expenses 512 204

Other operating expenses 10 955 6 701

Total operating expenses 24 282 25 568

Average number of employees 17 15

NOTE 3 • PENSION LIABILITIES

Prosafe ASA holds pension schemes for employees which entitle them to future pension benefits (defined benefit plans). The number of people included in this

scheme is 15. The company also has pension liabilities in respect of the Chairman which is partly financed through operations. For assumptions underlying the

actuary calculation, see note 8 to the consolidated accounts.

Pension expenses in the profit and loss account: 2001 2000

Present value of current year earnings 439 1 612

Interest expenses on pension liabilities incurred 1 424 928

Expected return on pension funds -860 -743

Allocated effect of changes in estimates and pension plans 342 533

Pension expenses for the year 1 346 2 329

Pension liabilities in the balance sheet:

Estimated pension liabilities incl. future wage growth 22 735 15 792

Value of pension funds -11 960 -10 714

Estimated net pension liabilities 10 775 5 078

Non-amortised plan changes 0 -143

Non-amortised estimate variance -5 725 -974

Net pension liabilities excl. payroll taxes 5 050 3 961

Accrued payroll taxes 0 4

Net pension liabilities incl. payroll taxes 5 050 3 965

56 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE ACCOUNTS - PARENT COMPANY

NOTE 4 • TANGIBLE FIXED ASSETSMachinery, equipment Buildings Land Total

Acquisition cost 01-01-01 6 592 16 759 821 24 172

Additions 967 13 786 0 14 753

Disposals at acquisition cost -331 0 0 -331

Acquisition cost 31-12-01 7 228 30 545 821 38 594

Cum. depreciation 01-01-01 3 498 5 670 0 9 168

Cum. depreciation on disposals -88 0 0 -88

Depreciation for the year 1 065 1 490 0 2 556

Cum. depreciation 31-12-01 4 474 7 161 0 11 635

Net book value 31-12-01 2 754 23 384 821 26 959

Depreciation rate (%) 20-30 3 – –

Leasing expenses 363 2 621 – 2 984

NOTE 5 • FINANCIAL ITEMS2001 2000

Interests receivable from group companies 907 887

Other interest income 6 525 3 789

Gain on sale of subsidiary 60 017 0

Interest expenses -69 901 -24 192

Interests payable to group companies 0 -1 240

Realised currency loss - net -1 580 -31 169

Unrealised currency loss - net -26 685 4 598

Write-down of receivable in subsidiary -15 051 0

Other financial expenses -7 409 -4 915

Net financial items -53 177 -52 242

NOTE 6 • TAXES Specification of taxes in the profit and loss account: 2001 2000

Loss before taxes -78 345 -78 557

Permanent differences -736 1 002

Changes in temporary differences 2 215 4 749

Basis for taxes payable in the profit and loss account -76 866 -72 806

Group contribution received 76 866 72 806

Taxable income 0 0

Taxes payable -17 063 -20 161

Changes in deferred tax -620 -1 330

Total taxes -17 683 -21 491

57PROSAFE ANNUAL REPORT 2001 • NOTES TO THE ACCOUNTS - PARENT COMPANY

NOTE 6 • TAXES CONT.

Specification of deferred tax in the balance sheet: 2001 2000

Temporary differences relating to:

Fixed assets 4 084 2 606

Short term liabilities 2 230 2 578

Pension liabilities 5 050 3 965

Basis for calculation of deferred tax asset 11 364 9 149

Recognised deferred tax asset 3 182 2 562

Utilisation of deferred tax asset is substantiated through future group contributions from Norwegian subsidiaries.

NOTE 7 • SHARES IN SUBSIDIARIES

Number of Book value

Company: Share capital (1 000) shares (1 000) Ownership

Prosafe Rigs AS NOK 421 394 421 394 1 054 515 100%

Prosafe Offshore AS NOK 51 51 1 829 100%

Prosafe (UK) Holdings Ltd GBP 11 000 11 000 001 159 001 100%

Prosafe Drilling Services AS NOK 77 000 15 400 000 130 171 100%

Prosafe Offshore Norge AS NOK 50 50 50 100%

Prosafe I AS NOK 50 50 50 100%

Prosafe Production Services Pte Ltd USD 5 490 10 000 000 1 642 049 100%

Shaun Investments S.A. USD 6 250 27 007 50%

Offshore Mooring Services Ltd USD 0 500 10 803 100%

Nortrans Offshore do Brazil Limitada USD 18 50 000 161 100%

Total book value 3 025 637

NOTE 8 • OTHER FIXED ASSETS2001 2000

Shares 0 84

Long term receivables from group companies 75 076 121 523

Total other fixed assets 75 076 121 607

NOTE 9 • OTHER CURRENT ASSETS2001 2000

Short term receivables from group companies 75 606 66 001

Other short term receivables 2 676 1 388

Total other current assets 78 282 67 389

NOTE 10 • CASH AND DEPOSITS

Restricted cash (taxes withheld) was 1.005.

58 PROSAFE ANNUAL REPORT 2001 • NOTES TO THE ACCOUNTS - PARENT COMPANY

NOTE 11 • EQUITYShare Share premium Other

capital reserve equity Total

Equity 01-01-01 261 789 907 157 329 878 1 498 824

New equity 75 401 791 424 – 866 825

Loss for the year – – -60 662 -60 662

Group contribution received (net) – – 56 427 56 427

Equity 31-12-01 337 189 1 698 582 325 643 2 361 414

Number of shares: 33 718 900

Par value: 10

NOTE 12 • INTEREST FREE SHORT TERM LIABILITIES2001 2000

Short term liabilities to group companies 2 988 86

Accounts payable 2 537 4 072

Public taxes 3 421 5 329

Other interest free short term liabilities 9 715 8 308

Total interest free short term liabilities 18 661 17 795

NOTE 13 • MORTGAGES, INTEREST BEARING LOAN AND GUARANTEES

In line with industry practice, Prosafe ASA has issued bank guarantees and parent company guarantees (performance guarantees) on behalf of subsidiaries in

connection with the award and performance of contracts. Total issued bank guarantees amounted to NOK 92m at year end.

The interest bearing long term debt in Prosafe ASA of NOK 315m is guaranteed by security in shares in Prosafe Drilling Services AS. The loan is an interest-only

loan and is due 28 February 2005. The remaining long term debt of NOK 721m is related to the investment in the Floating Production division, and is

guaranteed by security in the shares in Prosafe Production Services Pte Ltd and the shares in Prosafe Rigs AS. This is also an interest-only loan and is due in

September 2002, but this loan will be refinanced by that time. Book value of pledged assets in Prosafe ASA amounted to NOK 2.827m per 31-12-01.

Tananger, 19 March 2002

Reidar LundChairman

Egil Bergsager

Christian Brinch Bengt Eskilson Torild R. Alvheim

Jon M. Fjose Olav Gjesteland Arne AustreidPresident & CEO

Geir WorumVice Chairman

Karl Urdshals

59PROSAFE ANNUAL REPORT 2001 • AUDITOR´S REPORT

A u d i t o r ´ s r e p o r t

60

M a n a g e m e n t

PROSAFE ANNUAL REPORT 2001 • MANAGEMENT

Arne AustreidPresident & CEO

Stig ChristiansenChief Financial Officer

Trygve ArnesenPresident Offshore Support Services

Bjørn HenriksenPresident Floating Production

Petter TomrenPresident Drilling Services

Roy HallåsVice President Corporate Relations

A d d r e s s e s :

PROSAFE ASA

Risavika Havnering 224

P.O. Box 143

N-4098 Tananger

Norway

Telephone: 51 64 25 00

Telefax: 51 64 25 01

mail@prosafecorp.com

PROSAFE OFFSHORE LTD

Greenwell Road

East Tullos Industrial Estate

Aberdeen AB12 3AX

Scotland

Telephone: +44 1224 406 900

Telefax: +44 1224 406 901

mail@uk.prosafecorp.com

PROSAFE PRODUCTION PTE LTD

1 International Business Park

#10-01 The Synergy

Singapore 609917

Telephone: +65 6665 6200

Telefax: +65 6567 5110

mail@sg.prosafecorp.com

PROSAFE PRODUCTION INC

14825 St. Mary's Lane Suite 260

Houston TX 77079

USA

Telephone: +1 281 496 7001

Telefax: +1 281 496 1877

mail@us.prosafecorp.com

PROSAFE DRILLING SERVICES AS

Sandslimarka 185

P.O. Box 47 Sandsli

N-5861 Bergen

Norway

Telephone: 55 98 68 00

Telefax: 55 98 68 01

mail@no.prosafecorp.com

www.prosafecorp.com

Design and production: Printers, Stavanger

Photo: Prosafe, Statoil, Tom Haga, Kjetil Alsvik

Illustrations: Ståle Ådland