annual report08 - agr reports/agr group 2008.pdfand pipeline trenching services. the 2008 ebit-da...

AnnuAl report08

Pe

tro

leu

m s

er

vic

es

Dr

illing

se

rv

ice

sFie

lD o

Pe

ratio

ns

CONTENTSagr grouP asa 2008

03 Key figures

04 Director’s report

12 Corporate governance report

16 Board’s statement of salaries

17 Consolidated income statement

18 Consolidated balance sheet

20 Consolidated statement of changes in equity

21 Consolidated cash flow statement

22 Notes

58 Profit and loss account & balance sheet

60 Consolidated cash flow statement

61 Notes

67 Auditor’s report

68 Responsibility statement

AnnuAl report2008

2

KEy FiguRESagr grouP asa (NOK 1 000)

Profit and Loss Account 2008 2007

Operating revenue 2 584 454 1 988 692 EBiTDA* 295 391 284 913 EBiT -3 639 111 680 Result after tax for continued operations -154 419 20 504

Balance/liquidity/capital

Equity 805 511 1 053 132 Cash and equivalents 393 508 138 634 Total Capital 3 711 165 3 736 102 interest-bearing liabilities 1 665 299 1 178 544

Key figures per share

Share capital 142 422 140 712 Average number of outstanding shares 70 783 308 69 016 557 Outstanding shares 31.12. 71 210 808 70 355 708 Dividend per share (NOK) - - EBiTDA per share (NOK) 4.17 4.13 Equity per share (NOK) 11.38 15.26

* Earnings before interest, tax, depreciation, amortization and asset write-down

AnnuAl report2008

3

DiRECTOR’S REPORT 2008agr grouP asa COmP. REg. NO: 986 922 113

Company Overview

AgR group ASA (AgR) is a leading supplier of services and technology to the global oil and gas industry. The group’s main operations are based at Straume (Bergen), with other offices around the world including Oslo, Stavanger, Kris-tiansund, Aberdeen, guilford, Varberg, Houston, melbourne, Brisbane, Perth, Almaty, moscow, Dubai, Singapore, and Kuala Lumpur. The com-pany provides technology, expertise and serv-ices to several of the world’s major oil and gas fields, with a customer base comprising several small and medium sized operators as well as a number of the large international oil companies. At the end of 2008, the group had 965 perma-nent employees, 58 project employees and 151 contracted-in staff. The annual turnover was NOK 2,584 million.

Corporate Governance

good corporate governance is a key goal of the AgR Board in order to ensure that our inves-tors and stakeholders can be confident that the actions we take are in the best long term interest of the Company. We aim to achieve the best possible profitability, while maintaining an efficient and viable utilisation of the company’s resources and ensuring adherence to HSE & Q best practice standards. We believe that adher-ing to the group’s values will benefit the com-pany’s shareholders, employees and society in general.

Corporate Governance Policy for AGR

This policy was adopted by the Board of Direc-tors on 5 November 2007 and amended on 26 February 2009. it is predominantly based on the Norwegian guidelines on Corporate governance of 4 December 2007.

Through its compliance with the policy the com-pany aims to maintain the shareholders’ trust in the company’s board and management as well as the group’s reputation. The policy lays down principles of transparency in its communications with stakeholders, independence of the board, equal treatment of shareholders, and control to ensure predictability and appropriate risk man-agement. in pursuit of the Corporate govern-ance Policy, the company has in place a code on Board Proceedings, a management Code and an

insider Trading Policy.

The Board of Directors also elected a Nomina-tion Committee at the Annual general meeting in 2008.

The Board and management of the group are continuously assessing the company’s risksand its approach to ethics. The Board of Direc-tors has evaluated potential conflicts of interest among the members of the board and manage-ment, and has concluded that to the knowledge of the board there were no such incidents in 2008.

The company has monthly financial reporting which is an important tool to enable suitable control of the Company and to monitor progress towards the achievement of its financial goals. This reporting enables the company to be confi-dent that it is in compliance with statutory and stock exchange reporting requirements.

information about the remuneration of the group CEO and executive management in 2008 can be found in footnote 25 in the annual ac-counts.

Operations

AgR consist of three business areas, AgR Petro-leum Services, AgR Drilling Services and AgR Field Operations. Today AgR is characterised by a strong focus on product development and a commitment to work with clients to understand and solve their individual requirements. Sound and ethical business practice is as important as ever while the group continues to focus on its growth and earnings performance.

management is currently completing the sepa-ration of AgR into three distinct business units, legally as well as operationally, following the Board of AgR group ASA’s proposal to demerge the company. A separate information memoran-dum was issued 25 of July 2008.

PETROLEum SERViCES

AgR Petroleum Services delivers reservoir, well, and integrated field management services to the upstream oil and gas industry. Our core compe-tencies include geology, geophysics, petrophys-ics, reservoir and petroleum engineering, well

construction, drilling management, completion design and installation, field development plan-ning, risk and economics, facilities and subsea tieback definition.

The Petroleum Services division had a very good year in 2008, increasing the technical serv-ices provided to our clients both with regards to products, geography and technical merits. This growth was also accompanied with the best fi-nancial year to date. The business area’s EBiTDA was NOK 273 million compared to NOK 191 million in 2007.

The Well management division with more than 350 engineers provides oil companies with drill-ing services, including planning, operations and reporting of wells. Doing so, AgR Petroleum Services continued to deliver its successful rig campaign model, constructing multi-client, multi-well drilling programs on behalf of oil com-panies wanting to access Petroleum Services’ skills, resources and access to the market to run their well operations safely and cost effectively. During 2008 the well management business experienced its highest activity levels to date with up to 7 concurrent offshore rig operations resulting in the drilling of 60 wells on behalf of clients in locations including Australia, Tunisia, the uK and Norway. in comparison 56 wells were drilled in 2007. The well management operations included the very successful deepwater drillship venture with Ophir in West Africa, completing the drilling of 5 deepwater wells in 99 days with the use of new promising technology.

in addition to the multi client rig campaigns the Petroleum Services uS subsidiary, F.J. Brown & Associates, delivered 10 well management oper-ations for clients with main activities in the gulf of mexico, West Africa and South America. This includes 3 high pressure rig operations with the drilling of the Black Beard well in gulf of mexico for mcmoran as a major achievement. The well is the deepest well ever drilled below mud line at a depth of 33.000 feet and with a mud weight of 19 ppg.

in the autumn of 2008 Petroleum Services start-ed to provide Turn Key Drilling of shallow wells in the gulf of mexico. The business model implies that AgR will drill a well for a client on a guaran-teed fixed-price basis while assuming the risk of drilling the well to its target depth.

AnnuAl report2008

4

in July 2008 AgR Petroleum Services added fur-ther strength and global reach to its reservoir management services through the acquisition of TRACS international Consultancy Ltd, one of the leading petroleum technology consultancies in the uK, for a total consideration of NOK 194 mil-lion. The combined Reservoir management divi-sion has offices in Norway (Oslo), uK (Aberdeen and guildford), Russia (moscow) and Kazakhstan (Almaty). The resulting organisation has 120 sub-surface consultants, sufficient to support oil companies, financial institutions and authorities worldwide. Our group of highly experienced res-ervoir engineers, geoscientists and economists work in multi-disciplinary teams to perform any type of subsurface evaluation from exploration, through field development and production opti-misation as well as asset valuations and reser-voir audits for our clients.

The Field management division of AgR Petro-leum Services was established in 2007. As an integrated service provider combining services from Well and Reservoir management with our Field Development engineering experts, we de-liver services from feasibility to field develop-ment studies.

Through our Consultancy Services, Petroleum Services also supplies recruitment and consul-tancy solutions to the global upstream oil and gas industry. During 2008 this operation aver-aged 240 consultants on a continuous basis, mainly within drilling and completion services.

DRiLLiNg SERViCES

The Drilling Services division develops and sup-plies market leading technologies and services for the offshore oil and gas market. Within the division are three specialist groups offering ad-vanced subsea drilling solutions, well work over and clean-out technologies, subsea excavation and pipeline trenching services. The 2008 EBiT-DA for Drilling Services was NOK 42 million com-pared to NOK 100 million in 2007.

A key service within the division is Riserless mud Recovery (RmR). The RmR technology, devel-oped within AgR, improves drilling operations by reducing the risk and cost of drilling top-hole sections in offshore wells. The system also al-lows for recovery and recycling of material dis-charged from the well during drilling, such as cut-tings and mud, ensuring a zero discharge to the

environment. The search for hydrocarbons is taking explora-tion drilling into deeper water depths and more challenging environments. This is continually increasing the range of applications for the RmR system. in 2008 a total of 23 wells were drilled with the RmR fleet and this is expected to rise significantly in 2009. The client feedback on the technology has been very positive, and it contin-ues to be utilised by major petroleum companies including Shell, BP and StatoilHydro.

During 2008 the RmR system was used in new applications on several occasions, including drilling from a jack-up rig in Eqypt and a full zero discharge environmental well on a coral reef in Australia. The range of applications is viewed as a positive signal of the potential size of the RmR market.

The RmR business underwent some extensive structural changes during 2008, to create a streamlined organization with increased focus on sales and marketing of the system globally. These changes are showing immediate positive results and the business is predicted to grow substantially in 2009.

The Well services business line within Drilling Services provides clean-out tools used to re-

move debris from inside the wellbore. This is a predictable and successful business stream with strong markets in Norway and Saudi Arabia. in the 2nd half of 2008 a geographical expan-sion plan was started, with target markets in North Africa, South East Asia and Australia. New agents have been appointed, and it is predicted that this initiative will drive growth throughout 2009. The well services group also operates the de-sander technology, which removes sol-ids during workover operations. The de-sander

was operated successfully for BP in the Caspian and for Halliburton in the uK during 2008, and AgR sees significant future potential to expand these services.

The third business line within Drilling Services undertakes seabed excavation and trenching of subsea pipelines. During 2008 AgR’s new ClayCutter-X technology was used to prepare pipeline routes on StatoilHydro’s Ormen Lange development offshore Norway. This project was highly successful and has subsequently led to the award of a 5 year frame contract with Sta-toilHydro for excavation services. During 2008 the excavation services were also provided for clients in Taiwan, indonesia, North Sea, uS gulf of mexico and Australia. AgR predicts steady growth for these services throughout 2009.

Director’s rePort 2008

AnnuAl report2008

5

FiELD OPERATiONS

AgR Field Operations offers a variety of prod-ucts and services within field development, op-erations and operational support of oil and gas infrastructures through the entire life of a field. The services include integrity & inspection Serv-ices, maintenance management, Operations & maintenance, Project management & Engineer-ing, Subsea Services and Alternative Energy. The EBiTDA increased from NOK 87 million in 2007 to NOK 90 million in 2008.

The majority of the business in the Asia Pacific region, previously upstream Petroleum Pty. Ltd., was transferred from Petroleum Services to Field Operations on January 1, 2008. The inten-tion of this transferral was to further strength-en, utilise and increase the synergies between Field Operations’ product lines in Europe and Asia Pacific.

There were some challenges within the Australian business and these challenges made an impact on the profitability for Q1 2008. How-ever, a successful turnaround was implemented and profitability was restored by the end of Q2 2008.

The integration of the Asia Pacific business into Field Operations has enabled Field Operations to provide additional services from Europe to Asia Pacific. in 2008 six maintenance management projects were delivered successfully within the Asia Pacific region by using concepts and work processes developed in Europe.

During October 2008 AgR Field Operations en-tered into a partnership with Flexlife Ltd., a uK based company specialised in technology relat-ing to the integrity and repair of flexible risers. in conjunction with Flexlife, AgR developed an application for external inspections of flexible risers during operations. This application uses the in-house designed Neptune inspection tool, as well as software and electronics delivered by AgR Technology Design. The partnership with Flexlife enables AgR to continue focusing on specialised inspection technologies.

in addition the intelligent Video Technology (iVT) was launched, a new inspection tool specially de-signed for internal visual inspection of flexible risers. This tool has proven to be highly success-ful and as many as 50% of all risers which were inspected with iVT in 2008 identified internal

damages to the riser. The increasing number of flexible risers within the global O&g market, as well as the increasing need to manage the techni-cal conditions of these risers, gives Field Opera-tions a strong growth potential.

AgR Project Partner was sold in October 2008 for an enterprise value of NOK 85 million in or-der to increase the focus on core services of the business.

2008 proved to be a successful year for Field Operations. in addition to the integration of the Asia Pacific business, a global Sales and market-ing organisation was established, securing con-tracts, projects and project extensions for 2008 and 2009.

A milestone was set when Field Operations en-tered into a three year contract with Reliance in india. This contract was Field Operations first contract in india and confirms the quality and competitiveness of Subsea Services.

Research & Development 2008

Technology is a core part of AgR group s busi-ness and it has a number of technologies in de-velopment. During 2008 NOK 98 million was invested in research and development and this includes some significant projects that were still in development at year end 2008, such as:

Deepwater RMR – The Deepwater RmR system, developed by AgR over the last 2 years together with major operators BP and Shell and the Nor-wegian Research institute, was successfully field tested on a “live” offshore well during September 2008. The location for the trial was Sarawak, malaysia, with the RmR utilised in 1,500m water depth for Shell Sarawak. On completion of this trial the participants have declared the system ready for commercial utilisation, and AgR is cur-rently receiving strong interest from deepwater regions on a global basis for the first commercial application. it is expected that this will occur during 2009.

Dual Gradiant Drilling – in September 2008 AgR was issued a letter of agreement (LOA) by Chev-ron uSA inc. to project manage, engineer, build and deploy a Dual gradient Drilling System which has the potential to be an enabling technology for certain deep water assets globally. it is es-timated that the system will be deployed by 1Q

2011. On successful negotiation of the contracts, expected in Q2 2009, AgR will be awarded a 2.5 year Engineering and Project management con-tract and a further 5 year Operational Services Contract. in the meantime a joint Chevron/AgR project team has been created in AgR’s Houston offices to undertake this exciting development.

CannSeal - a tool for sealing off water and gas inflow into the wells. The CannSeal field trials in 2008 were delayed and the field trials have been postponed until 2009. Expenses related to research and development is recognized on the balance sheet according to the accounting prin-ciples in Note 1.

2008 Key Events

march:On 5 march, Altor Oil Service invest AS (Altor), issued a mandatory offer for all outstanding shares in AgR group ASA at NOK 40 per share. Altor received acceptance for 19,781,323 shares, bringing its total ownership to 53,913,249 shares, or 76.6% of the company.

April:in April 2008 AgR group communicated its plan to spin off Petroleum Services, one of its three business units. in November 2008 it was decided to postpone this work due to the market condi-tions.


AnnuAl report2008

6

June:AgR group acquired TRACS international Con-sultancy Ltd in June 2008, a leading world wide provider of integrated services and training within geology and petroleum engineering with offices in Aberdeen,guilford, London and mos-cow.

October:AgR Field Operations and Flexlife Ltd. formed a partnership to provide a ground-breaking new application to help prevent the failure of flexible risers and flexible flow lines, thereby minimising lost production and associated environmental impact of a leak.

AgR Drilling Services, together with their Joint industry Project partners Shell, BP and the Nor-wegian Research Council undertook a successful field trial of the Deepwater Riserless mud Re-covery (RmR) system at 1,500m water depth.

AgR group sold 100% of AgR Project Partner AS, a leading provider of Project management and Engineering Services within the Crane re-placement niche, providing services to the Nor-wegian Continental Shelf for an enterprise value of NOK 85 million.

Subsequent events:On Friday 27/2-2009 AgR and NLi AS signed an agreement regarding the sale and purchase of the shares in AgR Dpal AS, which is subject to certain customary conditions.

Working Environment and Personnel A core aim of AgR group is to have a safe and healthy working environment. The business areas will continue to increase their efforts to reduce the level of absence due to illness by con-sidering implementation of new measures.

PETROLEum SERViCESDuring 2008, there were no incidents resulting in absence. Hence, the frequency of lost time inju-ries is 0.The employee turnover in 2008 was 21%, higher than expected.

illness related absence is 1.8% (Norway 2.7%, uK 1.0%, Asia Pacific 1.1%), slightly higher than for 2007. The increase is mainly due to some long term sick leaves, assessed as not work related.

DRiLLiNg SERViCESDuring 2008, there was 1 injury resulting in ab-

sence of more than 3 days, and 1 injury resulting in restricted work activity. The rate of lost time injury is 3.6 per million man-hours compared to 5.2 in 2007. in 2008 there were reported 250 HSE improvement suggestion compare to 15 in 2007.illness related absence for Drilling Services in 2008 was 3.7% compare to 3.6% in 2007. The employee turnover in 2008 was 23%. Due to reduced operational activity in spring 2008, 45 offshore personnel were made redundant during autumn 2008.

FiELD OPERATiONSDuring 2008, there were 2 injuries resulting in an absence of more than 3 days and 1 injury resulted in absence of less than 3 days. The rate of lost time injury is 2.5 per million man-hours compared to 2.6 in 2007, (5,411 days in 2007), and represent-ed an average over the year of approximately 2.0 % (1.7 % in 2007) of total working hours. The em-ployee turnover in 2008 was 30% which is above target. The main contributor to this figure was AgR Asia Pacific.

Gender equality

As at 31 December 2008 the Board of AgR group had 8 Board members of which 3 were women.

The group aspires to provide a workplace where full gender equality between women and men is the norm. in its policy, the company has imple-mented conditions to ensure equal opportuni-ties regardless of gender in areas such as salary, promotion and recruitment.

Environmental Reporting

All our work that effects the environment is managed by means of well established systems and processes in order to reduce any negative impact, and to ensure, as a minimum, compliance with legislation and regulations set out by the authorities. We aim to facilitate the continuous environmental improvement in our operations by adopting the principles of iSO 14001, inter-national standard for environmental manage-ment. Currently the environmental management system of AgR Asia Pacific is accredited to the standard, and management system develop-ment utilising iSO 14001 principles is ongoing in other business units. Furthermore, many of the operational activities and products of the busi-ness are focused on protecting the environment. As an example the RmR is a product which in ad-dition to its operational advantages offers envi-ronmental friendly solutions to our clients, by al-lowing zero discharge of chemicals and cuttings in drilling of top hole sections.


Additional Events of note during 2008 included:

AGR’s ROV system Neptune that can map pipelines down to a depth of 6,000 meters was successfully •

launched.

Launch of Intelligent Video Technology (IVT), a new inspection tool specially designed for internal •

visual inspection of flexible risers

StatoilHydro signed frame agreement with AGR Drilling Services for worldwide provision of seabed •

excavation services.

The Norwegian Petroleum Directorate entered into a framework agreement with AGR Petroleum •

Services to provide geological and technical studies.

BP-Egypt & AGR successfully completed the first use of RMR technology on a Jack-Up Rig•

Korean National Oil Company selected AGR Group’s RMR for drilling challenges in eastern Russia •

The Chevron Dual Gradient Drillling development project started in Q4 2008•

AGR Field Operations opened office in Singapore•

Tom Hasler was appointed EVP of AGR Drilling Services •

Sjur Talstad was appointed CEO of AGR Petroleum Services •

AnnuAl report2008

7


2009 Operations

AgR ’s Board of Directors emphasizes that there is always an element of uncertainty related to the delivery of business performance and for-ward looking projections.

PETROLEum SERViCES

going into 2009, Petroleum Services is operating 2 rigs and performing well planning for a variety of clients in most offshore petroleum provinces. At the time of writing the effect of the economic downturn and low oil prices has been more sig-nificant than expected and the demand for rigs is expected to be lower in the short term than in 2008, resulting in lower rig rates. Lower rig rates will not affect Petroleum Services margins much directly but may create new opportunities. AgR will be active in the rig market to ensure rig cam-paigns at a level where the rig rates will attract clients to commit to increased drilling activity. Should the current oil price level continue, this may lead to adjustments in the oil companies’ investment plans and cause termination or post-ponement of exploration studies and drilling. in this scenario Petroleum Services is likely to be negatively affected.

The Reservoir management business has been strengthened throughout last year and will con-tinue to deliver services to national, major and independent oil companies as well as financial institutions and authorities.

Petroleum Services aims to continue the 2008 growth of integrated services to our clients, de-livering solutions and operations in all phases of the field from exploration to production.

17 November 2008 AgR group announced that the previously communicated plan to spin off Pe-troleum Services was postponed due to market conditions. The three operating divisions, Petro-leum Services, Drilling Services and Field Opera-tions would therefore remain under the existing ownership and remain listed as AgR group ASA. When markets improve, the board will reconsid-er the listing of Petroleum Services.

DRiLLiNg SERViCES

A key focus in 2009 is further penetrating the drilling market with the RmR technology. There was a slowdown of the number of wells drilled by the RmR in the latter half of 2007. This has been attributed to client delays as well as some lack of focus in the sales and marketing of the technol-ogy in 2007. However, demand remains strong and growing. AgR expects to complete the work of building an operational organization capable of supporting the high growth and activity level and expects performance to improve towards the end of the year. The excavation business continues to perform well and with a success-ful utilisation of new technology at the Ormen Lange gas field, the business will be in a position to further build on its success.

FiELD OPERATiONS

Field Operations does not expect any major drop in demand for services as a result of the drop in the oil price or the changes in the financial mar-ket. Both customers and regulatory authorities have an increasing environmental focus, which combined with aging infrastructure, is expected to lead to additional growth for Field Operations. During 2008 Field Operations was awarded new contracts and projects as well as project exten-sions, giving predictability and a strong order back log going into 2009.

The one area with reduced activity is Project management and Engineering work, a smaller part of the business in Australia. After the sale of Project Partner in 2008 AgR no longer offers engineering services in Europe. The rest of the business foresees strong continued demand for operational support services, such as inspec-tion, maintenance management, operations and subsea services throughout 2009.NEW BOARD COmPOSiTiON

At the Extraordinary general meeting held on 7 April 2008, Hugo maurstad was elected Chair-man and Per inge Remmen, Sjur Talstad, Thomas Nilsson, Reynir indahl and maria Tallaksen were elected board members.Tove magnussen and Fiona Walker continued as board members. Jonas Jonhede was elected as a deputy board member. Hugo maurstad, Tove magnussen and Fiona Walker were all board members prior to the Egm . Former Chairman greg Coleman, directors Svein Eggen, Synne Syrrist and Anna Cecilie Holst and deputy direc-tors Per Jonny Hanøy, Fredrik Stromholm and gavin maitland Kerr resigned their positions. information concerning remuneration of the Board of Directors, the Chief Executive Officer and the group’s Executive management can be found in Note 25 to the consolidated financial statements. The compensation for the group’s external auditor can also be found in Note 25.

Risk Management and Internal Control

Every manager at AgR is responsible for risk management and internal control and must en-sure exploitation of business opportunities, cost-effective operations, reliable financial re-porting and compliance with current legislation and regulations.

The board receives an operational report and consolidated accounts for each business unit monthly. in addition to this, an annual evaluation of the group’s major risks is carried through.

Results, Cash Flow, Investments, Finance and Liquidity

Turnover for the group increased from NOK 1,989 million in 2007 to NOK 2,584 million in2008. Operating profit for the group was nega-tive NOK 4 million compared to positive NOK 112 million in 2007. Net profit for the financial year 2008 was negative NOK 317 million compared to positive NOK 144 million in 2007.

Based on impairment testing a write down of NOK 101 million of goodwill has been made in Drilling Services. However, AgR is still very confident in this business area and especially in the large potential of the RmR technology. The impairment test is based on a scenario with sig-nificantly increased utilization of the RmR fleet compared to 2008. Currently AgR has 19 RmRs and equipment for an additional 9 RmRs that

Environmental Performance Summary 2008

• Energy consumption is at a normal level for our type of business

• Waste management is performed to minimise waste amounts, and to facilitate reuse and recycling of generated waste

• Chemicals are managed to reduce use and discharge of environmentally hazardous chemicals

AnnuAl report2008

8

will be completed when demand increases. The goodwill for the other business areas remains unchanged.

impairment testing of intangible assets has led to a write down of NOK 30 million, mainly related to Drilling Services. Further, asset write down of NOK 106 million has been made mainly in relation to the sales agreement for AgR Dpal (discontin-ued operation).

Accumulated cash flow from the group’s op-erational activities was NOK 156 million. Total investments for the group was NOK 316 million (excluding acquisition of operations), and was mainly related to RmR equipment, construction work and equipment for DPAL AS and Pipetech AS and development projects such as CannSeal and the multi Column Floater.

Cash and cash equivalents for the group on 31.12.08 was NOK 394 million.

The group’s total interest-bearing debt at year end 2008 was NOK 1,665 million, which represented 45% of the group’s total assets, compared with 32% at year end 2007. AgR has financial covenants related to its loans and the company considers that it is in compliance with these at Q4 2008. The company’s lenders have linked certain conditions to this, which AgR has not agreed to and the banks therefore claim that AgR is in breach of its covenants. As a conse-

quence all debt to credit institutions has been classified as short-term in the annual accounts for 2008 according to iFRS (iAS 1.65). By year-end 2008, the short-term interest-bearing debt represented 99.5% of the total interest-bearing debt. The group’s net interest-bearing debt at the end of 2008 was NOK 1,271 million.

At the end of the year, total assets amounted to NOK 3,711 million, compared with NOK 3,736 million the previous year. The equity to total as-sets ratio at 31.12.2008 was 22%, compared with 28% at 31.12.2007. The debt to equity ratio per 31.12.2008 was 3,6.

Financial Risk

FiNANCiAL RiSK FACTORS

The group’s activities are exposed to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The group’s overall risk man-agement program focuses on the unpredictabil-ity of financial markets and seeks to minimize potential adverse effects on the group’s finan-cial performance. The group uses derivative financial instruments to hedge certain risk ex-posures. Risk management is carried out by a central treasury department (group Treasury) under

policies approved by the board of directors. group Treasury identifies, evaluates and hedges financial risks in close co-operation with the group’s operating units. The board provides risk management guidelines covering specific areas, such as foreign exchange risk, interest rate risk and credit risk. mARKET RiSK

Foreign exchange riskThe group operates internationally and is ex-posed to foreign exchange risk arising from vari-ous currency exposures, primarily with respect to the uS dollar, Australian dollar and the uK pound. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign opera-tions.

The group Treasury’s risk management policy is to hedge between 60% and 100% of anticipated cash flow in each major foreign currency for the subsequent 12 months. Currencies that amount to less than 5% of the estimated cash flow in the projected 12 months period will not be hedged. Positions are reviewed quarterly.

At 31st December 2008 the group had hedged approximately 60% of its expected 12 month net cash flow in gBP and uSD through forward exchange contracts and currency derivatives.

Price riskThe group is exposed to equity securities price risk due to investments held by the group and classified on the consolidated balance sheet as fair value through profit or loss. The group’s equity securities investments are limited to So-noran which is publicly traded at NASDAQ. Book value is equal to fair market value.

The group is indirectly exposed to changes in the oil price, however current group policy is to not hedge oil price changes.

interest rate riskThe group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. group policy is to hedge at least 40% of interest bearing debt through implementa-tion of efficient hedging strategies. The hedging position will be reviewed quarterly.

The group manages its interest rate risk by using


AnnuAl report2008

9

floating-to-fixed interest rate swaps. Such inter-est rate swaps have the economic effect of con-verting borrowings from floating rates to fixed rates. generally, the group raises long-term borrowings at floating rates and swaps them into fixed rates. under the interest rate swaps, the group agrees with other parties to exchange the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts.

At 31 December 2008 the group held 3 interest rate swap contracts with a total amount of NOK 728 million, which constitutes approximately 44% of the group’s interest bearing debt. The weighted average swap rate was 4.44% p.a.

CREDiT RiSK

The risk that counterparties fail to fulfill their financial obligations is considered low as the group’s historical loss on receivables has been low. During 1st half 2008, there was one large outstanding receivable within the Petroleum Services division where payment was signifi-cantly delayed, however the situation was re-solved in June 2008. in Q1 2008, a general provi-sion of NOK 18 million was made for outstanding recivables.

The majority of the group’s debtors are publicly listed Norwegian and international oil compa-nies. The group’s customers in the divisions Drilling Services and Field Operations are mainly the large international oil companies with lim-ited to low credit risk potential. The Petroleum Services customers consist of medium to small oil companies. Some of these customers have moderate credit risk potential. The group policy is to obtain financial guarantees from debtors where the credit risk and exposure is considered to be high. in addition, the group has put in place credit insurance where a majority of the group’s receivables are insured to avoid potential losses. The credit risk is thus considered to be low.

LiQuiDiTy RiSK

AgR has relatively few large customers where delayed payments may have a severe impact on the group liquidity situation. Partly due to de-layed payments from one Petroleum Services client, partly due to an expansive investment program and partly due to weaker than antici-pated results in Q1 2008, liquidity became tight

during 1st half 2008.

in June 2008 the group’s multicurrency revolv-ing credit facility, term loans and guarantee fa-cilities provided by a bank syndicate comprising DnB NOR and Nordea, was refinanced with ef-fect from 30th June 2008. The group obtained sufficient liquidity reserves through an increase in the total credit commitment under the new credit facility.

At 31 December 2008 the group had undrawn committed credit lines amounting to NOK 250 million.

in accordance with AgR strategy, the group has initiated sales of some non core assets in order to reduce interest bearing debt and strengthen liquidity reserves.

As announced in Q1 2008 AgR received a letter from the Norwegian FSA where they advised that they would make three rulings; i) the compa-ny must book delayed payments at net present value, ii) the company should book about uSD 3 million “hold back amount” related to the ac-quisition of FJ Brown as salary and iii) that AgR needed to reassess the purchase price alloca-tion in relation to the acquisitions of RES and Peak. AgR complied with i), disagreed with ii) and related to iii) reassessed the purchase price allo-cation and allocated excess values to customer relations. After receiving complementary infor-mation the FSA agreed to this treatment.

Parent Company

AgR group ASA is the listed parent company and the main activity is to act as the owner of the shares in the group’s companies. The company did not have any turnover in 2008. The net result in 2008 was NOK 10 million compared to NOK 12 million in 2007. The operating costs increased in 2008 compared to 2007 mainly as a consequence of consultancy costs related to the restructur-ing activities including the process where Altor Oil Services invest AS increased its ownership and the demerger process. To a large extent this was compensated by increased interest income from group companies.

Accumulated cash flow from the company’s op-erations was NOK 17 million. A capital increase made in relation to the acquisition of TRACS had a further positive effect of NOK 34 million. Pay-ment of group contributions and payments in

connection with acquisitions amounted to NOK 53 million. Net cash flow for the year was slightly negative.

The total assets are NOK 1,018 million compared to NOK 972 million the previous year. The equity to asset ratio was 98% at 31.12.2008. Of the to-tal equity of NOK 996 million, share capital ac-counts for 14%

Continued Operation

AgR has financial covenants related to its loans and the company considers that it is in compli-ance with these at Q4 2008. The company’s lend-ers have linked certain conditions to this, which AgR has not agreed to and the banks therefore claim that AgR is in breach of its covenants. As a consequence all debt to credit institutions has been classified as short-term in the annual ac-counts for 2008 according to iFRS (iAS 1.65) AgR has a good cash flow and liquidity situation and no issues with debt service. However, at the time of writing, the 2009 Q1 results are below expectations and it is probable that AgR will be in technical breach with one or more of the bank covenants. As a consequence AgR will enter into discussions with the banks to adjust the capital structure.

As most other oil services companies, AgR has been somewhat negatively affected by the drop in oil price and following activity level. The com-pany has, however, good liquidity and cash flow and is therefore able to comply with its interest and amortizations. The board has considered the factors above in relation to continued opera-tions and concluded that in accordance with the Accounting Act §3-3a, we confirm that the finan-cial statements have been prepared under the assumption of a going concern.

The key assumptions made in the impairment test reflect the Board’s current assessment of AgR’s potential to adapt to and benefit from trends in the oil services industry. management believes that the expectations reflected in the forward looking forecasts used as a basis for the impairment reviews, are reasonable. However, as the impairment valuations are based on for-ward looking information, they will involve risk and uncertainty. For more information, please refer to note 3.


AnnuAl report2008

10

Annual Result and Allocations The Board proposes the following allocations of the group’s net profit for the financial year:

Retained earnings negative 317 184 TNOK

Total net income allocated negative 317 184 TNOK The parent company’s distributable equity at 31.12.2008 was:

Retained earnings 10 218 TNOK

Distributable equity 62 859 TNOK


Reynir IndahlBOARD mEmBER

Per Inge RemmenBOARD mEmBER

Fiona WalkerBOARD mEmBER

Hugo Lund MaurstadCHAiRmAN OF THE BOARD

Tove MagnussenBOARD mEmBER

Maria TallaksenBOARD mEmBER

Thomas NilssonBOARD mEmBER

Sjur TalstadBOARD mEmBER

Sverre SkogenCEO

AnnuAl report2008

11

1. Implementation and reporting on corporate governance

The Board of Directors of AgR group ASA(“AgR ”) originally adopted its Corporate govern-ance Policy on the 22 may 2006 and updated it5 November 2007 and 26 February 2008. This isavailable on AgR ’s website (www.agr.com).

AgR’s principles for corporate governance shall secure an adequate division of the tasks and positions of AgR’s owners, the Board and the executive management. The separation of tasks and positions provides for the adoption andimplementation of objectives and strategies, andthe achievement of the objectives is subject toevaluation and is followed up.Furthermore, the principles contribute to keepingthe business of AgR under appropriate supervi-sion. The separation of tasks and supervisioncontribute to the best possible long termprofitability, to the benefit of the shareholdersand other stakeholders.

This statement sets out AgR’s compliance witheach section of the Code of Practice, and alsonotes any deviations from the Code of Practiceand the reasons for such deviation.AgR will not be issuing an extensive AnnualReport in 2009. it is not a legal requirement thatAgR issue such an annual report and instead,AgR is issuing this statement of compliance withthe Code of Practice, the Directors Report anda summary of the 2008 figures together withthe full audited annual accounts. This approachhas been taken as a result of the change in AgR’sshareholder base, whereby AgR has one majorshareholder owning 77% of AgR (as at 25 April2008). With fewer retail investors this approachis seen as more cost effective whilst still provid-ing all shareholders with sufficient informationand reporting as required by the law. The Board ofAgR has laid down AgR’s values and ethical guide-lines. The values of AgR are outlined onAgR ’s website.

2. Business

AgR’s objectives are laid down in article 3 of the Articles of Association which reads as fol-lows: The objective, as laid down in the Articles, outlines the parameters within which AgR oper-ates, and offers the shareholders certainty with regards to the type of activities which AgR will undertake. AgR’s main objectives and strategies are presented on AgR ’s website.

3. Equity and dividends

The book equity of AgR as of 31 December 2008 was NOK 806 million which represents an equity ratio of 22%. Based on the company’s objectives, strategies and risk profile, AgR considers the equity ratio as satisfactory. it is an objective for AgR to yield a competitive profit from the share-holders’ investment. AgR’s dividend profile shall at the same time ensure AgR’s need for stability and development in accordance with its objec-tives and strategies. AgR has not distributed any dividends, and does not expect to distribute any dividends within the next few years.

The Extraordinary general meeting resolved in April 2008 to authorize the AgR Board of Directors to increase AgR ’s share capital for general funding needs. The Board was authorised to increase the share capital by an amount up to NOK 14,071,162. The Board has not yet used this authorization.

At the general meeting in may 2008, the AgR Board of Directors was further authorized to

increase AgR’s share capital by an amount limited to 14,071,162 NOK in connection with financing of acquisitions of companies or businesses or the financing of specific projects or investments. The Board used this authorization on 26 June 2008 when it resolved to increase the share capital by NOK 1,710,000 for the acquisition of TRACS.

All of the above authorizations expire at the annual general meeting in 2009. in accordance

with the Norwegian Code of Practice neither of the authorizations given in 2008 was given for periods exceeding the date of the next Annual general meeting. The authorization given at the Extraordinary meeting in April 2008 expires at the Annual general meeting in 2009. The Board does not consider this to be a deviation from the recommendation in the Code of Practice because the extraordinary general meeting was held only shortly before the annual general meeting in 2008. The Board has no authorisation to buy back AgR’s own shares.

4. Equal treatment of shareholders and trans-actions with close associates

AgR has one class of shares, and all shares hold equal voting rights in AgR. AgR prioritises the furtherance of the interests of the shareholders, and equal treatment of shareholders.

The authorisations given to the board at the Extraordinary general meetings in April 2008 and may 2008 allow for the shareholders’ pre-emptive rights to be waived. in the event of any

CORPORATE gOVERNANCE REPORT – 2009This statement presents a review of AGR Group’s principles for corporate governance and compliance with the Norwegian Code of Practice for Corporate Governance of 4 December 2007 (Code of Practice) and notes AGR’s actions and where relevant any deviations from each of the requirements. If no deviation is stated then there have been no deviations from the Code of Practice.

“The Company is engaged in trade, industry, real property investments and related activities, including participation in other companies with similar activities as well as investments in real property, securities and other assets”

AnnuAl report2008

12

share issues pursuant to the authorisations, the Board will not waive the pre-emptive rights unless it is considered to be in the best interest of the shareholders and the company, and such justified reasons will be communicated to the shareholders. AgR’s Corporate governance Policy establishes the guiding principle that the Board shall act in the best interests of all shareholders. To date there has not been any trade by the company in the company’s own shares.

in the event of transactions, other than immate-rial transactions, between AgR and sharehold-ers, Board members, members of the executive management or any persons related to these, the Board shall in accordance with its policies, procure that the transaction is based on a valuation prepared by an independent third party. if required pursuant to section 3-8 of the Public Limited Com-panies Act and when the consideration exceeds 5% of AgR’s share capital, the transaction will be put to the general meeting for approval.

AgR’s Corporate governance Policy establishes principles which require members of the Board and the executive management to report to the Board in the event that they have any material interest in AgR’s agreements.

5. Freely negotiable shares

AgR’s shares are listed on the Oslo Stock Exchange and are freely negotiable. No form of restriction on the negotiability of the shares is included in the Articles of Association.

6. General meeting

AgR encourages shareholders to attend at AgR’s general meetings. AgR’s Corporate governance Policy details, that notices for general meetings shall be distributed no later than two weeks in advance and placed on its website 21 days in advance of a general meeting.

AgR seeks to ensure that the notice of meeting and accompanying materials include sufficient information about the items on the agenda. For practical purposes the company includes in its notices to general meetings a combined notice of attendance and proxy form which the sharehold-ers are invited to use for registering attendance

and submitting proxies. However, the Articles of Association of AgR does not provide for the use of mandatory prior notices of attendance at the general meeting and all shareholders who wish to attend will be welcome at the general meeting.

AgR ensures those shareholders not able to attend the general meeting in person can vote via proxy and proxy forms are supplied with the notice of meeting.

it is AgR’s preference to have the members of the board and the Nomination Committee and the auditor attend the general meeting. A representa-tive of AgR’s auditors, PWC, has been present at all general meetings during the reporting period.

Proxy forms have been supplied with all notices of a general meeting. in accordance with the Public Limited Companies Act shareholders may raise items for consideration by the meeting prior to the meeting, provided that such suggestions are submitted at least two weeks prior to the general meeting.

The notices of meeting issued during the reporting period note the address of the AgR web page and note that copies of the notices of meeting and supporting materials are available or referred to on the website. All notices issued since this recommendation was included in the Code of Practice clearly state on which web page the notice and supporting documents are made available.

AgR had a copy of the notice of meeting for all general meetings held during the period available or referred to on its website and the notices include proxy forms. Each candidate nominated for election was described by the Chairman of the Nomination Committee and elected by voting for all, as a group. AgR did not conduct a vote on each candidate for election, however, if this had been requested by the shareholders present then this would have been done.

7. Nomination committee

Pursuant to AgR’s Articles of Association AgR has established a Nomination Committee, which is comprised of three members elected by the general meeting.

The remuneration of the members of the Nomina-tion Committee was resolved at the 2007 annual

general meeting and altered by resolution of the extraordinary general meeting of April 2008.

Article 6 of AgR’s Articles of Association requires AgR to establish a Nomination Committee.

The first Nomination Committee of AgR was elected at the Annual general meeting in 2007 and following a change to the Board members as a result of the Extraordinary meeting held in April 2008, new members of the Nomination Committee were elected at the general meeting in may 2008. The current Nomination Commit-tee is comprised of 3 members. The Nomination Committee does not include the chief executive officer nor any member of the executive team. The chairman of the Nomination Committee is also board member.

The Nomination Committee instructions state that the purpose of the committee is to nominate candidates for election as Board members, and make recommendations for the remuneration of the members of the Board. in the notice of meetings sent during the reporting period the Nomination Committee supplies sufficient information regarding proposed candidates and their background to justify the recommendations made to shareholders.

During the reporting period AgR has provided information regarding the membership of its Nomination Committee with the notices of meet-ing issued for the 2008 Egm and the 2008 Agm.

There has been no specific mention on the Company’s website or in the notices or accom-panying documentation to the effect that the shareholders may propose candidates to the board of directors. However, this is acknowledged in the Nomination Committee instructions and the Nomination Committee has approached the major shareholders of AgR when formulating its recommendations.

8. Corporate assembly and board of directors: composition and independence

AgR does not have a corporate assembly. The Board of Directors is elected by the general meeting.

Pursuant to the Company’s Articles of Associa-tion the Board shall be comprised of between 3 to 9 members.

corPorate governance rePort 2008

AnnuAl report2008

13

The experience of all the board members has been published with the notice of meeting for the extraordinary general meeting and demonstrates a broad range of experience amongst the individ-uals on the board. The skills represented include a range of general business administration skills, financial markets competence and industry ap-propriate operational experience. in selecting the members of the board consideration was given to how the individual members would operate as a collegiate body.

According to AgR’s Corporate governance Policy a majority of the members of the board shall be independent of AgR ’s management and main business partners. Furthermore, at least two board members shall be independent of the com-pany’s major shareholders. This is the case with the current composition of the board.

With the exeption of Sjur Talstadt there are no representatives from the executive management among the members of the Board.

Article 5 of AgR’s Articles of Association state that the chairman shall be appointed by the general meeting.

The term of office for the board members is two years pursuant to the Public Limited Companies Act.

The expertise and capacity of the board members was included with the documentation which was sent to shareholders with the notice of extraordi-nary meeting of 7 April 2008. A further summary, noting which members are independent has been placed on AgR ’s website.

The members of the board of directors for the period 26 April 2007 to 7 April 2008 were encouraged to be shareholders of the company via the AgR employee share scheme. Directors shareholdings are noted in note 25 in the Annual Accounts.

9. The work of the board of directors

The Board has adopted and implemented a code regulating board proceedings. The guidelines are evaluated in connection with the Board’s annual review of its own work. The Board prepares an an-nual plan for its work, particularly focusing on ob-jectives, strategies and implementation, as well as any other tasks devolved as a consequence of

the Board’s by Laws, Regulations, resolutions of the general meeting or the Stock Exchange Rules. Article 5 of AgR’s Articles of Association stated that the chairman and the vice chairman shall be appointed by the general meeting. This was changed at the Annual general meeting in may 2008, so that only the chairman is elected by the general Assembly. The Board assesses on a continuous basis the need for sub committees of the Board.

The Board has in 2008 established an audit Com-mittee, headed by Thomas Nilsson. Furthermore a Remuneration Committee has been established, providing advice to the Board on CEO compensa-tion, Executive Compensation and overall guid-ance on bonus, share awards and remuneration for the employees of AgR.

in 2007 and 2008 the board undertook an evalua-tion of its performance using the assistance and expertise of an external party and the results of the review have been made available to the Nomination Committee.

10. Risk management and internal Control

AgR’s approach to risk management is described in the Director’s Report. in addition to monthly operational reporting the board carries out an annual evaluation of the group’s major risks.

11. Remuneration of the board of Directors

Remuneration of the Board is decided by the general meeting and is believed to reflect the responsibilities, time commitment, complexity of the company’s activities and expertise of the board members. The Board’s remuneration is not linked to AgR’s performance. No member of the Board has been granted share options. The Board members of AgR have not been engaged in any specific assignments for AgR or its associated companies in addition to their appointment to the board. The remuneration of the board of directors is detailed in the accounts, which can be viewed on the AgR website.

12. Remuneration of the executive Management

The Board has set guidelines for remuneration of the executive management. The guidelines are

presented to the general meeting for an advisory vote. Although advisory, the guidelines will be binding, and thus subject to the general meetings approval, in respect of any remuneration related to shares in the Company. Salary and other remu-neration to the CEO are determined by the Board. AgR’s guidelines for remuneration to the execu-tive management are described in the attach-ment to the Agm notice and therefore appear on AgR’s website and remuneration to the members of the executive management is presented in footnote 25 in the Annual Accounts. The executive management of AgR have the opportunity to be members of AgR’s employee share company, a co-investment incentive scheme whereby both AgR and the employee invest funds in the scheme to purchase shares. The scheme takes three years to mature and the value is pegged to the share price. Executive management of AgR are also en-titled to bonuses of up to 40% of their salary. The bonus scheme is linked to company performance. AgR does not offer any other form of remunera-tion to executives other than where expatriate packages may require some additional benefits. AgR does not have a share option scheme.

13. Information and communications

AgR has adopted and implemented an insider Trading Policy and a management code with as-sociated guidelines for the reporting of financial and other information.

it is a paramount principle of AgR that all infor-mation and communications shall be timely and relevant.

AgR’s financial calendar is available on AgR’s website, and provides an overview of the dates of major events. Other information is continu-ously made available to shareholders via AgR’s website.

AgR ensures through policy and established practice that all information provided to the market or to shareholders is also posted on the AgR website to keep all stakeholders informed of AgR’s activities.

14. Takeovers

The board of directors has established guid-ing principles for how it will act in the event of a takeover bid. These guiding principles are


AnnuAl report2008

14

included in the Corporate governance Policy. AgR’s Corporate governance Policy states that the Board shall not carry out measures to prevent take-overs, unless otherwise resolved by the general meeting by no less than a 2/3 supermajor-ity vote.

Altor Oil Service invest AS made a mandatory bid to take all shares in AgR in April 2008. The Board acted in accordance with the guiding principles and, acting in the best interests of all sharehold-ers took steps to assess the suitability of the offer, identify competing bidders and advise shareholders regarding the bid.

During the course of the mandatory bid period shareholders were provided with sufficient infor-mation for them to form a view of the offer. See the AgR website and OSE releases, in particular the Board’s recommendation regarding the mandatory bid, released 27 march 2008. During the reporting period the Company has not been involved in any other take-over process, neither as the target company nor as the party making an offer, with the exception of the acquisition of TRACS.

During the course of the mandatory bid period the board did not exercise any mandates or pass any resolutions seeking to obstruct the bid process.

During the course of the mandatory bid period the board appointed financial advisors to evalu-ate the offer and provide a fairness opinion. The board issued its recommendation to sharehold-ers, in accordance with the Code of Practice requirements, with the fairness opinion appended to the board’s statement. See the AgR website and OSE releases, in particular the Board’s recom-mendation regarding the mandatory bid, released 27 march 2008. The Board’s guiding principles ensure that if any transaction was in effect a dis-posal of the business that this would be decided by the general meeting.

15. Auditor

in compliance with the Code of Practice and pursuant to AgR’s Corporate governance Policy, AgR’s auditor attends Board meetings which deal with the Annual Accounts. The auditor meets annually with the Board for an evaluation of the auditor’s views on the Company’s accounting prin-ciples, risk exposures, internal control etc. The Board has not met with the auditor without the CEO or management being present. However, the Board has communicated to the auditor that the auditor should notify the board if the auditor ever wishes to have such a meeting with the board without management being present. The Board has adopted a management code which includes, inter alia, guidelines for the management’s use of the auditor for tasks other than the statutory audit. The auditor has been instructed to provide the board with a report annually detailing all the work undertaken by PWC for AgR in addition to the audit work and to provide confirmation of the auditors continued independence. The remunera-tion to the auditor is presented in note 25 in the Annual Accounts.


AnnuAl report2008

15

Main Principles

The main principles for AgR group ASA’s (“AgR ”) management remuneration policy are that executive management shall be offered competi-tive compensation, when salaries, benefits in kind, bonuses, share awards and pension arrangements are taken into consideration.

Salaries and other benefits for executive manage-ment to be determined in the current year will be in accordance with the abovementioned main prin-ciples. Currently, the executive management in the various group companies comprises a great vari-ety of conditions of employment originating from the companies pre AgR existence. The group has, however, as a long term objective to harmonise the principles for management remuneration through-out the group, subject to necessary adaptations to local conditions.

Remuneration Committee

The Board has formed a Remuneration Committee to provide advice to the Board on CEO compensa-tion, Executive Compensation and overall guid-ance on bonus, share awards and remuneration for the employees of AgR. Hugo maurstad, Reynir in-dahl and maria Tallaksen are the current members of the Committee. No additional compensation is awarded to the Committee members for their par-ticipation in the work of the Committee.

Bonuses and other additional benefits

As a guideline, annual bonuses in addition to base salary may be offered to executive management. Such bonuses shall however, be limited to certain percentages of the base salary and to achievement of certain predetermined objectives. guidelines for distribution of bonuses shall be determined by the Board of Directors. Bonuses to the group CEO shall be determined by the Board of Directors, af-ter consulting with the company’s Remuneration committee.

Executive management shall as a general rule, be entitled to participate in pension schemes that ensure pension benefits in proportion to their level of salary as employees. The executive man-agement of the company are members of the com-pany’s collective pension scheme.

The members of the company’s executive manage-ment have other ordinary benefits in kind, such as free phone, newspapers and trade magazines etc, but do not have other material benefits in kind. Some members of the current executive man-agement are entitled to car allowances. Where appropriate employees working under expatriate conditions may also receive a car allowance. As a guideline car allowances shall not be offered to group employees, and existing arrangements will be phased out when the employment contracts are due for renegotiation.

in respect of severance payments these will be agreed on an individual basis. Some of the cur-rent members of the executive management have rights to severance payment, corresponding from 6 to 18 months base salary, if their employment is terminated by the company. As a guideline sever-ance payments shall be in accordance with the company’s main principles, i.e. that the level of re-muneration shall be competitive when all benefits are seen as a whole.

Share related incentive schemes

AgR does not have a share option scheme for its employees, or other forms of remuneration which are linked to the shares in the company or the quoted price of the company’s shares. The Board did, however, establish a share incentive program for the group in 2007. The incentive program in-cludes share related benefits along with the fol-lowing principles: Eligible members of the execu-tive management, in addition to certain other key employees and board members in the group, as determined by the board of directors may invest in a single purpose company, which has as its only business to invest in share in AgR group ASA. The investment in AgR shares by the single purpose company is partially funded by AgR in accordance with the incentive program.

***Please also refer to note 25 for AgR group ASA’s annual accounts for details aboutremuneration of the executive management in 2008.

BOARD’S STATEmENT OF SALARiES

AnnuAl report2008

16

CONSOLiDATED iNCOmE STATEmENT

Figures in TNOK

GROUP

Continuing operations Note 31.12.2008 31.12.2007

Net revenue 6,7,29 2 547 177 1 971 861

Other operating revenue 6,7,29 37 277 16 831

Total operating revenue 2 584 454 1 988 692

Raw materials and consumables used 34 1 146 067 820 436

Payroll expenses 19,25 883 983 656 654

Depreciation, amortisation and impairments 8,9 299 030 173 233

Other operating expenses 25,27,30 259 013 226 689

Total operating expenses 2 588 093 1 877 012

Operating profit/(loss) (3 639) 111 680

Financial income 28 301 002 107 714

Financial expenses 28 400 223 191 993

Net financial items (99 221) (84 279)

Share of profit of associated companies 10 (145) (7)

Profit/(loss) before income tax (103 005) 27 394

income tax expense/(benefit) 20 51 414 6 890

Profit(loss) from continued operations (154 419) 20 504

Profit after tax from discontinued operations 36 (191 685) (13 017)

gain from sale of discontinued operations 36 28 920 136 562

Profit/(loss) for the year (317 184) 144 049

minority interests’ share of profit/(loss) for the year (1 804) (1 915)

Profit/(loss) attributable to equity holders (315 380) 145 964

Earnings per share (basic and dilutive in NOK) 24 (4,46) 2,11

AnnuAl report2008

17

CONSOLiDATED BALANCE SHEET

Figures in TNOK

GROUP Note 31.12.2008 31.12.2007

Assets

Deferred tax assets 20 32 412 6 176

Other intangibles 4,8 431 304 382 025

goodwill 4,8 1 081 435 1 105 570

Intangible assets 1 512 738 1 487 595

Land, buildings and other property 9 56 37 094

machinery and operating equipment 9 599 531 538 137

Tangible fixed assets 599 587 575 231

investments in associated companies 10 - 5 074

Long term receivables 707 16 249

Financial fixed assets 707 21 323

Total non current assets 2 145 445 2 090 325

Inventories 11 17 055 40 225

Trade receivables 12,13,29 1 024 802 1 365 356

Other receivables 14,23 91 918 98 089

Receivables 1 116 720 1 463 445

Financial assets at fair value 33 571 3 473

Assets of disposal group classified as held for sale 36 37 865 -

Cash and cash equivalents 15 393 508 138 634

Current assets 1 565 720 1 645 777

Total assets 3 711 165 3 736 102

AnnuAl report2008

18

CONSOLiDATED BALANCE SHEET

Figures in TNOK

GROUP Note 31.12.2008 31.12.2007

Equity and liabilities

Share capital 17,18 142 422 140 712

Share premium fund 17,18 790 603 758 513

Total paid-in equity 933 024 899 225

Retained earnings (144 470) 144 702

minority interest in equity 16 957 9 205

Total equity 805 511 1 053 132

Pension liabilities 19 10 630 15 424

Deferred tax 20 66 757 61 591

Provisions 26 75 156 85 072

Debt to credit institutions 21 - 935 000

Other long-term liabilities 21 7 568 3 544

Total non-current liabilities 1 699 858 1 100 631

Debt to credit institutions 21 1 639 748 240 000

Trade payables 29 729 035 1 106 384

Tax payable 20 55 397 7 097

VAT payable and other taxes payable 48 520 46 175

Other current liabilities 22,23 267 164 182 683

Liabilities of disposal group classified as held for sale 36 5 679 -

Total current liabilities 1 205 796 1 582 339

Total liabilities 2 905 653 2 682 970

Total equity and liabilities 3 711 165 3 736 102

(SigNED) Reynir indahl

Board member

(SigNED)Per inge Remmen

Board member

(SigNED)Fiona Walker

Board member

(SigNED)Hugo Lund maurstad

Chairman of the Board

(SigNED)Tove magnussen Board member

(SigNED)maria TallaksenBoard member

(SigNED) Thomas Nilsson Board member

(SigNED)

Sjur TalstadBoard member

(SigNED) Sverre Skogen

CEO

Oslo, 30 April 2009

AnnuAl report2008

19

CONSOLiDATED STATEmENT OF CHANgES iN EQuiTy

Figures in TNOK

Share Total Transla- Share premium paid-in tion Retained Total minority TotalGROUP capital fund equity effects earnings group interests equity

Opening balance 01.01.07 137 548 689 484 827 032 35 110 37 847 899 989 - 899 989

increase in share capital from cash deposit 3 164 69 028 72 192 - - 72 192 - 72 192

minority interest from acquisitions - - - - - - 12 531 12 531

Total other equity movements 2007 3 164 69 028 72 192 - - 72 192 12 531 84 723

Profit for the period - - - - 144 049 144 049 (1 915) 142 134

Translation effects foreign subsidiaries - - - (72 305) - (72 305) (1 411) (73 716)

Total recognised income and expense for 2007 (72 305) 144 049 71 744 (3 326) 68 418

Adjustment to equity for 2007 3 164 69 028 72 192 (72 305) 144 049 143 936 9 205 153 141

Closing balance 31.12.07 140 712 758 512 899 224 (37 195) 181 897 1 043 926 9 205 1 053 131

Opening balance 01.01.08 140 712 758 512 899 224 (37 195) 181 897 1 043 926 9 205 1 053 131

increase in share capital from cash deposit 1 710 32 090 33 800 - - 33 800 - 33 800

minority share of equity issue - - - - - - 13 710 13 710

Total other equity issue 1 710 32 090 33 800 - - 33 800 13 710 47 510

Profit for the period - - - - (315 380) (315 380) (1 804) (317 184)

Translation effects foreign subsidiaries - - - 26 208 - 26 208 (4 154) 22 054

Total recognised income and expense for 2008 26 208 (315 380) (289 172) (5 958) (295 130)

Adjustment to equity for 2008 1 710 32 090 33 800 26 208 (315 380) (255 372) 7 752 (247 620)

Closing balance 31.12.08 142 422 790 602 933 024 (10 987) (133 483) 788 554 16 957 805 511

AnnuAl report2008

20

CONSOLiDATED CASH FLOW STATEmENT

Figures in TNOK

GROUP 31.12.2008 31.12. 2007

Ordinary profit(loss) before taxes (306 553) (6 130)

Adjustment for tax grants - -

Taxes paid (9 110) (28 510)

Depreciation,amortisation and impairment of tangible assets 400 845 181 312

Adjustment for market value on shares 2 902 1 511

Share of loss/(profit) from associates 21 524 1 739

Change in inventory 26 071 (14 154)

Change in trade receivables 1 346 311 (727 830)

Change in trade payables 1 (376 986) 696 996

Change in pension liabilities (4 794) 2 076

Change in other accruals 1 56 206 14 997

Net cash flow from operational activities 156 416 122 007

Cash inflows from sale of property, plant and equipment and other assets 70 456 227 191

Cash outflows for additions to property, plant and equipment and intangible assets 2 (316 299) (785 022)

Cash outflows for acquisitions less acquired cash (122 955) 37 108

Cash outflows for investments in associated companies (20 100) -

Net cash flow from investment activities (388 898) (520 723)

issuance of debt 453 556 317 433

issuance of shares 33 800 72 191

Net cash flow from finance activities 487 356 389 624

Net change in cash and cash equivalents 254 874 (9 092)

Cash and cash equivalents at start of period 138 634 147 726

Cash and cash equivalents at end of period 393 508 138 634

1 Adjustment for acquisition has been made in trade receivables, payables and other accruals. 2 Applies to fixed asset investments in existing operation as well as acquisition of new operation.

AnnuAl report2008

21

FuNDAmENTAL POLiCiES

AgR group ASA (‘the Company’) and its subsidiaries (together ‘the group’), is a leading supplier of services and technology to the oil and gas offshore industry. The group’s main operations are based at Straume (Bergen), with other offices around the world includ-ing Stavanger, Kristiansund, Oslo, Aberdeen, Houston, melbourne, Brisbane, Perth, Almaty, Varberg, Dubai and Kuala Lumpur.

The company has provided goods and services for sev-eral of the world’s major oil and gas fields, with a cus-tomer base comprising several small and medium sized operators as well as a number of the large international oil companies

The company is a limited liability company incorpo-rated and domiciled in Norway. The address of its reg-istered office is Lonaveien 12-14, Straume.

The Company is listed on the Oslo stock exchange.

The group consolidated financial statements were au-thorised for issue by the board of directors on 30 April 2008.

The consolidated income statement for 2007 are amended wiht the figures for discontinued operations, they are moved to the line “profit after tax from dis-continued operations”, the consolidated balance sheet for 2007 is not amended .

The demerger of AgR Holdings AS is treated as com-pleted in the group accounts, although it is not yet final-ly registered in the Register of Business Enterprises (Brønnøysund).

SummARy OF SigNiFiCANT ACCOuNTiNg POLiCiES

The principal accounting policies applied in the prepa-ration of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

The consolidated financial statements of AgR group ASA have been prepared in accordance with interna-tional Financial Reporting Standards as adopted by Eu (iFRS).

The group’s financial statements have been prepared under the historical cost convention, with exception of certain items: Financial assets and financial liabilities (including derivative instruments), which are reflected at fair value through profit or loss.

The financial year follows the calendar year. income statement items are classified by nature.

The preparation of financial statements in conformity with iFRS requires the use of certain critical account-ing estimates. it also requires management to exercise its judgement in the process of applying the group’s ac-counting policies. The areas involving a higher degree of judgement or complexity, or areas where assump-tions and estimates are significant to the consolidated financial statements, are disclosed in note 3.

CONSOLiDATiON PRiNCiPLES

The consolidated financial statements for the group include AgR group and the entities controlled by the company. Control normally exists when the group owns, directly or indirectly, more than 50 % of the vot-ing power in a company, and the group is in a position to govern the financial and operating policies of an entity so as to obtain benefits from activities.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

The purchase method is used in accounting for acquired entities. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and li-abilities incurred or assumed, at the date of exchange, plus costs directly attributable to the acquisition. iden-tifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are meas-ured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

The excess of the cost of acquisition over the fair value of the group’s share of the identifiable net assets ac-quired is recorded as goodwill. if the cost of acquisition is less than the fair value of the net assets of the sub-sidiary acquired, the difference is recognised directly in the income statement.

inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. unrealised losses are also eliminated but considered an impairment indicator of the asset trans-ferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

The consolidated financial statements are prepared under the assumption of uniform accounting policies for uniform transactions and other events given uni-form circumstances.

investments in associates (normally investments in a range of 20 % to 50 % of the voting right shares in a company), in which the group has significant influ-ence, are accounted for under the equity method. The group’s investment in associates includes goodwill

identified on acquisition, net of any accumulated im-pairment loss

The group’s share of its associates’ post-acquisition profits or losses is recognised in the income state-ment, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its in-terest in the associate, including any other unsecured receivables, the group does not recognise further loss-es, unless it has incurred obligations or made payments on behalf of the associate.

unrealised gains on transactions between the group and its associates are eliminated to the extent of the group’s interest in the associates. unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the poli-cies adopted by the group.

interests in joint ventures are accounted for under the equity method.

SEgmENT REPORTiNg

The primary reporting segment is business segment and the secondary reporting segment is geographical segment. Segment revenues and costs constitute the group’s operating revenue and operating costs that can be directly classified as activities in the segments. Segment assets and liabilities are balance sheet items that can be directly related to the segment activity. Segment revenue and costs include transactions be-tween the different segments (group-internal transac-tions). geographical segment information is presented and is specified if the region’s accumulated external revenues and assets exceed 10 % of total revenue/assets for the regions as a whole. Secondary segment information that fails to satisfy the requirement for specified reporting is presented as other revenues. Transactions between segments are made on arm’s length terms.

NOTE 1 ACCOuNTiNg PRiNCiPLES

AnnuAl report2008

22

FuNCTiONAL CuRRENCy AND PRESENTATiON CuRRENCy

items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Norwegian Kro-ner (‘NOK’), which is the company’s functional and pres-entation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevail-ing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities de-nominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net invest-ment hedges.

Foreign exchange gains and losses that relate to bor-rowings and cash and cash equivalents are presented in the income statement within ‘finance income or ex-pense’. All other foreign exchange gains and losses are presented in the income statement.

Changes in the fair value of monetary securities de-nominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the se-curity and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Translation differences on non-monetary financial as-sets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differ-ences on non-monetary financial assets such as equi-ties classified as available-for-sale are included in the available-for-sale reserve in equity.

The results and financial position of all the group enti-ties (none of which has the currency of a hyper-infla-tionary economy) that have a functional currency dif-ferent from the presentation currency are translated into the presentation currency as follows:

(a) assets and liabilities for each balance sheet pre-sented are translated at the closing rate at the date of that balance sheet;

(b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cu-mulative effect of the rates prevailing on the trans-

action dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

(c) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign op-erations, and of borrowings and other currency instru-ments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the in-come statement as part of the gain or loss on sale. goodwill and fair value adjustments arising on the ac-quisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

CLASSiFiCATiON OF ASSETS AND LiABiLiTiES

Assets are classified as current assets when:

- the asset is a part of the unit’s service cycle and is expected to be realised or used during the course of the unit’s normal production period;

- the asset is held for trading purposes and is expected to be realised within 12 months of balance sheet date;

- the asset is cash or cash equivalent

All other assets are classified as non-current.

Liabilities are classified as current liabilities when:

- the liability is a part of the unit’s service range, and is expected to be settled during the course of normal production period;

- the liability is kept for trading purposes;

- settlement has been agreed within 12 months after balance sheet date;

- the unit does not have an unconditional right to postpone settlement of the liability until at least 12 months after balance sheet date;

All other liabilities are classified as non-current.

FiXED ASSETS

Property, plant and equipment, are valued at cost less accumulated depreciation and write-downs. When assets are sold or divested, cost and accumulated de-preciation are reversed in the financial statements, and any loss or gain on the disposal is recognised in the income statement. The cost of property, plant and equipment comprises the purchase price, including duties/taxes and direct acquisition costs linked to making the asset fit for use. Expenses accrued after the asset has been taken into use, such as repairs and maintenance, are normally recognised in the income statement. in cases where increased earnings can be demonstrated as a result of repairs/maintenance, the expenditure on this will be recognised in the balance sheet as additions to prop-erty, plant and equipment.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows: - Buildings 20-40 years - machinery 5-10 years - Vehicles 3-5 years - Furniture, fittings and equipment 3-8 years

The assets’ residual values and useful lives are re-viewed, and adjusted if appropriate, at each balance sheet date.

Assets under construction are classified as property, plant and equipment. Assets under construction are not depreciated until the asset has been taken into use.

The write-down requirement for fixed assets is as-sessed if there is indications of impairment. if the carrying amount of an asset is higher than the recover-able amount, a write-down is recognised in the income statement. The recoverable amount is the higher of fair value less expected costs to sell and value in use.

Fair value less expected costs to sell is the amount which can be obtained if the asset is sold to an inde-pendent third party, less costs to sell. Recoverable amounts are determined separately for all assets, but – if impossible – recoverable amount is calculated to-gether with the unit to which the asset belongs.

Write-downs which have been recognised in the income statement in previous periods are reversed if there is information to suggest that the write-down no longer exists. However, no reversal is made if the carrying amount is higher than it would have been if normal de-preciation had been used.

gains and losses on disposals are determined by com-

NOTE 1 ACCOuNTiNg PRiNCiPLES (CONT.)

AnnuAl report2008

23


paring the proceeds with the carrying amount and are recognised within ‘other operating revenue’ in the in-come statement.

iNTANgiBLE ASSETS

(a) goodwillgoodwill represents the excess of the cost of an acqui-sition over the fair value of the group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. goodwill on acquisitions of sub-sidiaries is included in ‘intangible assets’. goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. impairment losses on goodwill are not reversed. gains and losses on the dis-posal of an entity include the carrying amount of good-will relating to the entity sold. goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination. (b) Trademarks and licencesSeparately acquired trademarks and licences are shown at historical cost. Trademarks and licences ac-quired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less ac-cumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of 15 to 20 years.

(c) Contractual customer relationshipsContractual customer relationships acquired in a busi-ness combination are recognised at fair value at the acquisition date. The contractual customer relations have a finite useful life and are carried at cost less ac-cumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship (3-8years)

(d) Computer softwareAcquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives (3-4years).

Costs associated with maintaining computer software are recognized as an expense as incurred. Costs that are directly associated with the production of identi-fable and unique software products controlled by the group, and that are probable to generate economic benefits exceeding costs beyond one year, are recog-nized as intabible assets. Direct costs include the soft-ware development employee costs and an appropriate

portion of relevant overheads.

Computer software development costs recognized as assets are amortized over their estimated useful lives (3-4 years).

e) Research and developmentExpenses relating to research are recognised in the income statement when they are incurred. Expenses relating to development are recognised in the income statement when they are incurred unless the following criteria are met in full:

• ability to measure reliably the expenditure attribut-able to the intangible asset during its development;• the technical feasibility of completing the intangible asset so that it will be available for use or sale , has been demonstrated;• the intention and ability to complete the intangible as-set and sell it or use it in the company’s operations has been demonstrated;• the intangible asset will generate probable future economic benefits; and• availability of sufficient technical, financial and other resources for completing the project are present.

When all the above criteria are met, the costs relating to development start to be recognised in the balance sheet. Costs that have been charged as expenses in previous accounting periods are not recognised in the balance sheet.

Recognised development costs are depreciated on a straight-line basis over the estimated useful life of the asset (5-8years). The recoverable amount of the development costs will be estimated when there is an indication of a impairment or that the need for previous periods’ impairment losses no longer exists and should be reversed to the original cost.

f) Other intangible assetsAquired technology, licenses and customer relation-ships are capitalized and carried at cost less accumu-lated amortization.Amortization is calculated using the straight-line method over their estimated useful lives, as follows:

Developed technology 2-5 yearsCustomer relationships 3-5 yearsOrder backlog 1 yearLicenses 16 yearsPatents 13 years

imPAiRmENT OF NON-FiNANCiAL ASSETS

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are test-ed annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount may not be recoverable. An impair-ment loss is recognised for the amount by which the as-set’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpos-es of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi-able cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

NON-CuRRENT ASSETS (OR DiSPOSAL gROuPS) HELD FOR SALE

Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered prin-cipally through a sale transaction rather than through continuing use.

FiNANCiAL ASSETS

The group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. management determines the classifica-tion of its financial assets at initial recognition. (a) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are clas-sified as current assets.

(b) Loans and receivablesLoans and receivables are non-derivative financial as-sets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The group’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the balance sheet

(c) Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category or not clas-sified in any of the other categories. They are included

AnnuAl report2008

24


in non-current assets unless management intends to dispose of the investment within 12 months of the bal-ance sheet date.Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to purchase or sell the asset. invest-ments are initially recognised at fair value plus trans-action costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the invest-ments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial as-sets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the ef-fective interest method.

gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement.

The fair values of quoted investments are based on current bid prices.

The group assesses at each balance sheet date wheth-er there is objective evidence that a financial asset or a group of financial assets is impaired.

imPAiRmENT OF FiNANCiAL ASSETS

Financial assets which are valued at amortised cost are written down when it is probable that the company will not recover all the amounts relating to contrac-tual terms for loans, receivables or held-to-maturity investments. The amount of the impairment loss is recognised in the income statement. A reversal of an impairment is presented as income. However, an in-crease in the carrying amount is only recognised to the extent that it does not exceed what the amortised cost would have been if the impairment loss had not been recognised.That part of the instrument that can be recovered is valued at the fair value of the future cash flow discounted at the original effective interest rate. A reversal of a previous impairment loss is recognised when there is new objective information on an event re-lating to a previous impairment loss. A reversal of a pre-vious impairment loss is recognised directly in equity for equity instruments, but is recognised in the income statement for other financial assets.

DERiVATiVE FiNANCiAL iNSTRumENTS AND HEDgiNg ACTiViTiES

Derivatives are initially recognised at fair value on the

date a derivative contract is entered into and are sub-sequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging in-strument, and if so, the nature of the item being hedged.The group does not use hedge accounting according to iAS 39, and all financial derivatives are thus posted at fair value where changes in values are accounted for in the income statement.

iNVENTORiES

inventories, including work in progress, are stated at the lower of cost and net realisable value. Cost is de-termined using the first-in, first-out (FiFO) method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on nor-mal operating capacity). it excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

Obsolete inventories have been fully recognised as im-pairment losses.

TRADE RECEiVABLES

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for im-pairment. A provision for impairment of trade receiva-bles is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receiva-bles. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of esti-mated future cash flows, discounted at the original ef-fective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previ-ously written off are credited against ‘selling and mar-keting costs’ in the income statement.

CASH AND CASH EQuiVALENTS

Cash includes cash in hand and at bank. Cash equiva-lents are short-term liquid investments that can be converted into cash within three months and to a known

amount, and which contain insignificant risk elements.

The cash and cash equivalent amount in the cash flow statement includes overdraft facilities.

SHARE CAPiTAL

Ordinary shares are classified as equity. incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduc-tion, net of tax, from the proceeds.

TRADE PAyABLES

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the ef-fective interest method.

LOANS

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subse-quently stated at amortised cost; any difference be-tween the proceeds (net of transaction costs) and the redemption value is recognised in the income state-ment over the period of the borrowings using the effec-tive interest method.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settle-ment of the liability for at least 12 months after the bal-ance sheet date.

CuRRENT AND DEFERRED iNCOmE TAX

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income state-ment, except to the extent that it relates to items rec-ognised directly in equity. in this case, the tax is also recognised in equity.

The current income tax charge is calculated on the ba-sis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. it establishes provisions where ap-propriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liabil-ity method, on temporary differences arising between the tax bases of assets and liabilities and their carry-

AnnuAl report2008

25


ing amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liabil-ity in a transaction other than a business combination that at the time of the transaction affects neither ac-counting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differ-ences arising on investments in subsidiaries and asso-ciates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not re-verse in the foreseeable future.

EmPLOyEE BENEFiTS

(a) Pension obligationsgroup companies operate various pension schemes. The schemes are generally funded through payments to insurance companies , determined by periodic actu-arial calculations. The group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contri-butions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retire-ment, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or present value of the defined benfit obligation at the end og the previous reporting period, are charged or credited to income over the employees’ expected aver-age remaining working lives.

Past-service costs are recognised immediately in in-come, unless the changes to the pension plan are condi-tional on the employees remaining in service for a spec-ified period of time (the vesting period). in this case, the past-service costs are amortised on a straight-line basis over the vesting period.

For defined contribution plans, the group pays con-tributions to publicly or privately administered pen-sion insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Share-based compensationAgR has established a share investment program where the company and the employees invest in the Company’s shares. (For further description of the pro-gramme see note 16 and 24) The fair value of the em-ployee services received in exchange for the grant of shares is recognized as an expense. The total amount to be expensed over the lock in period is determined by reference to the fair value of the investment pro-gramme.

(c) Termination benefitsTermination benefits are payable when employment is terminated by the group before the normal retirement date, or whenever an employee accepts voluntary re-dundancy in exchange for these benefits. The group recognises termination benefits when it is demonstra-bly committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.

d) Bonus plansThe group recognises a provision where contractually obliged or where there is a past practice that has cre-ated a constructive obligation.

PROViSiONS

Provisions are recognised when, and only when, the company has a present liability (legal or constructive)

as a result of events that have taken place, it is proba-ble (over 50%) that a financial outflow will take place as a result of this liability, and that the size of the amount can be estimated reliably. Provisions are reviewed on each balance sheet date and their level reflects the best estimate of the liability. When the effect of time is insignificant, the provisions will be equal to the size of the expense necessary to be free of the liability. When the effect of time is significant, the provisions will be the present value of future payments to cover the liability. Any increase in the provisions due to time is presented as interest costs.

CONTiNgENT LiABiLiTiES

Contingent liabilities are defined as:(i) possible obligations resulting from past events whose existence depends on future events;(ii) obligations that are not recognised because it is not probable that they will lead to an outflow of resources; and(iii) obligations that cannot be measured with sufficient reliability.

Contingent liabilities are not recognised in the annual financial statements, apart from contingent liabilities which are acquired through the acquisition of an entity. Significant contingent liabilities are disclosed, with the exception of contingent liabilities where the probabil-ity of the liability occurring is remote.

Contingent liabilities acquired upon the purchase of op-erations are recognised at fair value even if the liability is not probable. The assessment of probability and fair value is subject to constant review. Changes in the fair value are recognised in the income statement.

A contingent asset is not recognised in the annual finan-cial statement unless deemed virtually certain to give rise to an inflow, but are disclosed where it is deemed probable that a benefit will accrue to the group.

REVENuE RECOgNiTiON

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and serv-ices in the ordinary course of the group’s activities. Revenue is shown net of value-added tax, returns, re-bates and discounts and after eliminating sales within the group.

Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases in eq-uity. Therefore, they are excluded from revenue. Simi-

AnnuAl report2008

26


larly, when an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. instead, revenue is the amount of commission.

The group recognises revenue when the amount of rev-enue can be reliably measured, it is probable that fu-ture economic benefits will flow to the entity and when specific criteria have been met for each of the group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all con-tingencies relating to the sale have been resolved. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

The group’s operations mainly consist of services re-lated to personnel and equipment hire. Consequently, the revenue recognition is based on daily/monthly rates and actual registered hours. Revenue is recog-nised when it is probable that transactions will gener-ate future economic benefits that will flow to the com-pany and the revenue amount can be reliably estimated. Revenues from the sale of goods are recognised in the income statement once delivery has taken place, the risk has been transferred and the company has estab-lished a receivable due by customer.

Revenues relating to projects are recognised in the in-come statement in line with the project’s progress and when the project’s results can be reliably estimated. Level of completion is calculated as an incurred cost’s percentage of anticipated total cost. For projects ex-pected to generate a loss, the full estimated loss is re-corded as cost immediately.

interest income is recognised on a time-proportion basis using the effective interest method. When a re-ceivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective in-terest rate of the instrument, and continues unwinding the discount as interest income. interest income on im-paired loans is recognised using the original effective interest rate.

PuBLiC gRANTS

grants received are classified as either income grants or investment grants. income grants are accounted for together with the income as reduction of the costs to which it relates. investment grants are posted as a pre-tax figure by recording the asset at gross acquisition cost and the asset is depreciated over its usful life. The grant is treated as deferred income, and is accounted for as an adjustment entry for depreciations in line with the depreciation period.

OTHER gRANTS

The group receives grants from some of its collaborat-ing partners to develop new technology. if there is no commitments related to the grants they are included in revenue in accordance with iAS 18. in some situations the group has agreed that the collaborating partners can have a first right of refusal to rent the technology with a discount. if so the discount is estimated to fair market value and accounted for as an accrual over the rental period. The group have decided to not early adopt iFRiC D 24.

LEASES

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

EARNiNgS PER SHARE

Earnings per share is calculated by the majority’s share of the result for the period being divided by a time-weighted average of ordinary shares for the period.

EVENTS AFTER DATE OF BALANCE SHEET

New information on the company’s positions at the balance sheet date is taken into account in the annual financial statements. Events after the balance sheet date that do not affect the company’s position at the balance sheet date but which will affect the company’s position in the future are disclosed if significant.

CASH FLOW STATEmENT

The cash flow statement presents the accumulated cash flow for operational, investment and financial ac-tivities. The statement outlines the effect each activity has on liquid assets. The cash flow statement has been prepared in line with the indirect model.

DiSCONTiNuED OPERATiONS.

if a significant part of the group’s operations is divest-ed or a decision has been made to divest it, this busi-ness is presented as “Discontinued operations” on a separate line of the income statement and the balance sheet. As a result, all the other figures presented are exclusive of the discontinued operations.The comparative figures in the income statement are restated and presented on a single line with the discon-

tinued operations. Comparative figures in the balance sheet are not correspondingly restated.

STANDARDS, AmENDmENT AND iNTERPRETATiONS EFFECTiVE iN 2008

iFRiC 14, ‘iAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’, provides guidance on assessing the limit in iAS 19 on the amount of the surplus that can be recognised as an asset. it also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the group’s financial statements, as the group has a pension deficit and is not subject to any minimum funding requirements.

iFRiC 11, ‘iFRS 2 – group and treasury share transac-tions’, provides guidance on whether share-based transactions involving treasury shares or involving group entities (for example, options over a parent’s shares) should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and group compa-nies. This interpretation does not have an impact on the group’s financial statements.

STANDARDS AND AmENDmENTS EARLy ADOPTED By THE gROuP

Not applicable for the group in 2008.

iNTERPRETATiONS EFFECTiVE iN 2008 BuT NOT RELEVANT

The following interpretation to published standards is mandatory for accounting periods beginning on or af-ter 1 January 2008 but is notrelevant to the group’s operations:• IFRIC 12, ‘Service concession arrangements’; and

STANDARDS, AmENDmENTS AND iNTERPRETA-TiONS TO EXiSTiNg STANDARDS THAT ARE NOT yET EFFECTiVE AND HAVE NOT BEEN EARLy ADOPTED By THE gROuP

The following standards and amendments to existing standards have been published and are mandatory for the group’s accounting periodsbeginning on or after 1 January 2009 or later periods, but the group has not early adopted them:• IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009).• IAS 1 (Revised), ‘Presentation of financial statements’ (effective from 1 January 2009).• IAS 8 (Amendment), Segment reporting (effective

AnnuAl report2008

27

NOTE 2 FiNANCiAL RiSK mANAgEmENT

FiNANCiAL RiSK FACTORS

The group’s activities are exposed to a variety of finan-cial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group’s overall risk management program focuses on the unpredict-ability of financial markets and seeks to minimise potential adverse effects on the group’s financial per-formance. The group uses derivative financial instru-ments to hedge certain risk exposures. Risk management is carried out by a central treasury department (group treasury) under policies approved by the board of directors. group treasury identifies, evaluates and hedges financial risks in close co-oper-ation with the group’s operating units. The board pro-vides risk management guidelines covering specific areas, such as foreign exchange risk, interest rate risk and credit risk. (A) mARKET RiSK(i) Foreign exchange riskThe group operates internationally and is exposed to foreign exchange risk arising from various currency

exposures, primarily with respect to the uS dollar, Australian dollar and the uK pound. Foreign exchange risk arises from future commercial transactions, rec-ognised assets and liabilities and net investments in foreign operations.

The group treasury’s risk management policy is to hedge between 60% and 100% of anticipated cash flows in each major foreign currency for the subsequent 12 months. Currencies that amount to less than 5% of the estimated cash flow in the projected 12 months pe-riod will not be hedged. Positions are reviewed every 3 months. At 31 December 2008, if the currency had weakened/strengthened by 10% against the uS dollar with all oth-er variables held constant, EBiTDA for the year would have been approximately NOK 11,3 million higher/low-er, mainly as a result of foreign exchange gains/losses on translation of net uS Dollar revenues At 31 December 2008, if the currency had weakened/strengthened by 10% against the AuD dollar with all other variables held constant, EBiTDA for the year would have been approximately NOK 3,6 million high-

er/lower, mainly as a result of foreign exchange gains/losses on translation of net Australian Dollar revenues

At 31 December 2008, if the currency had weakened/strengthened by 10% against the uK pound with all other variables held constant, EBiTDA for the year would have been approximately NOK 6,7 million high-er/lower, mainly as a result of foreign exchange gains/losses on translation of net uK pound revenues

At 31st December 2008 the group had hedged approx-imately 60% of its expected 12 month net cash flow in gBP and uSD through forward exchange contracts and currency derivatives.

(ii) Price riskThe group is exposed to equity securities price risk due to investments held by the group and classified on the consolidated balance sheet as fair value through profit or loss. The group’s equity securities investments are limited to Sonoran which is publicly traded at NASDAQ. Book value is equal to fair market value.

The group is indirectly exposed to changes in the oil

from 1 January 2009).• IFRS 2 (Amendment), ‘Share-based payment’ (effec-tive from 1 January 2009).• IAS 32 (Amendment), ‘Financial instruments: Pres-entation’, and iAS 1 (Amendment), ‘Presentation of financial statements’ – ‘Puttable financial instruments and obligations arising on liquidation’ (effective from 1 January 2009).• IFRS 1 (Amendment) ‘First time adoption of IFRS’ and iAS 27 ‘Consolidated and separate financial statements’(effective from 1 January 2009).• IAS 27 (Revised), ‘Consolidated and separate financial statements’ (effective from 1 July 2009).• IFRS 3 (Revised), ‘Business combinations’ (effective from 1 July 2009).• IFRS 5 (Amendment), ‘Non-current assets held for sale and discontinued operations’ (and consequential amendment to iFRS 1, ‘First-time adoption’) (effective from 1 July 2009).• IFRS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009). • IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to iAS 32, ‘Financial instru-ments: Presentation’ and iFRS 7, ‘Financial instruments: Disclosures’) (effective from 1 January 2009).• IAS 36 (Amendment), ‘Impairment of assets’ (effec-tive from 1 January 2009).• IAS 38 (Amendment), ‘Intangible assets’(effective from 1 January 2009).• IAS 19 (Amendment), ‘Employee benefits’ (effective from 1 January 2009).• IAS 39(Amendment), ‘Financial instruments: Recogni-tion and measurement’(effective from 1 January 2009).

• IAS 1 (Amendment), ‘Presentation of financial state-ments’ (effective from 1 January 2009).• There are a number of minor amendments to IFRS 7, ‘Financial instruments: Disclosures’, iAS 8, ‘Accounting policies, changes in accounting estimates and errors’, iAS 10, ‘Events after the reporting period’, iAS 18, ‘Rev-enue’ and iAS 34, ‘interim financial reporting’, which are part of the iASB’s annual improvements project published in may 2008 (not addressed above). These amendments are unlikely to have an impact on the group’s accounts and have therefore not been analysed in detail.• IFRIC 16, ‘Hedges of a net investment in a foreign op-eration’ (effective from 1 October 2008).

iNTERPRETATiONS AND AmENDmENTS TO EXiST-iNg STANDARDS THAT ARE NOT yET EFFECTiVE AND NOT RELEVANT FOR THE gROuP’S OPERATiONS

The following interpretations and amendments to ex-isting standards have been published and are manda-tory for the group’s accountingperiods beginning on or after 1 January 2009 or later pe-riods but are not relevant for the group’s operations:• IFRIC 13, ‘Customer loyalty programmes’ (effective from 1 July 2008).• IAS 16 (Amendment), ‘Property, plant and equipment’ (and consequential amendment to iAS 7, ‘Statement of cash flows’)(effective from 1 January 2009).• IAS 27 (Amendment), ‘Consolidated and separate fi-nancial statements’ (effective from 1 January 2009).

• IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to iAS 32, ‘Financial instru-ments: Presentation’and iFRS 7, ‘Financial instruments: Disclosures’) (effec-tive from 1 January 2009).• IAS 29 (Amendment), ‘Financial reporting in hyperin-flationary economies’ (effective from 1 January 2009).• IAS 31 (Amendment), ‘Interests in joint ventures (and consequential amendments to iAS 32 and iFRS 7) (ef-fective from 1 January 2009).• IAS 38 (Amendment), ‘Intangible assets’, (effective from 1 January 2009).• IAS 40 (Amendment), ‘Investment property’ (and consequential amendments to iAS 16) (effective from 1 January 2009).• IAS 41 (Amendment), ‘Agriculture’ (effective from 1 January 2009).• IAS 20 (Amendment), ‘Accounting for government grants and disclosure of government assistance’ (ef-fective from 1 January 2009).• The minor amendments to IAS 20 ‘Accounting for gov-ernment grants and disclosure of government assist-ance’ and iAS 29, ‘Financial reporting in hyperinflation-ary economies’ iAS 40, ‘investment property’ and iAS 41, ‘Agriculture’, which are part of the iASB’s whichare part of the iASB’s annual improvements project published in may 2008 (not addressed above). These amendments will not have an impact on the group’s op-erations as described above.• IFRIC 15, ‘Agreements for construction of real estates’ (effective from 1 January 2009).

AnnuAl report2008

28

price, however current group policy is to not hedge oil price changes.

(iii) Cash flow and fair value interest rate riskAs the group has no significant interest-bearing as-sets, the group’s income and operating cash flows are substantially independent of changes in market inter-est rates. The group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates ex-pose the group to cash flow interest rate risk. group policy is to hedge at least 40% of interest bearing debt through implementation of efficient hedging strate-gies. The hedging position will be reviewed quarterly. During 2008 and 2007, the group’s borrowings at vari-able rate were denominated in NOK.

The group analyses its interest rate exposure on a dy-namic basis. Scenarios are simulated on the basis of total gross interest bearing debt, taking into account interest hedge contracts entered into.

Based on the risk analysis where a 1% interest rate increase/decrease is applied, the impact of pre-tax profit would be NOK (9.0) million and NOK. 9.0 million respectively

The group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such inter-est rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. gener-ally, the group raises long-term borrowings at floating rates and swaps them into fixed rates. under the inter-est rate swaps, the group agrees with other parties to exchange the difference between fixed contract rates and floating-rate interest amounts calculated by refer-ence to the agreed notional amounts. At 31st December 2008 the group held 3 interest rate swap contracts with a total amount of NOK 728 million, which constitutes approximately 44% of the group’s interest bearing debt. The weighted average swap rate was 4,4% p.a.

(B) CREDiT RiSKCredit risk is managed on group basis. Credit risk arises from cash and cash equivalents, derivative financial in-struments and deposits with banks, as well as credit exposures to customers, including receivables and committed transactions.

The majority of the group’s debtors are publicly list-ed Norwegian and international oil companies. The group’s customers in the divisions Drilling Services

and Field Operations are mainly the large international oil companies with limited to low credit risk potential. The Petroleum Services customers consist of medium to small oil companies. Some of these customers have moderate credit risk potential. The group seek to obtain financial guarantees from debtors where the credit risk and exposure is considered to be high. in ad-dition, the group has taken out credit insurance where a significant share of the group s receivables are in-sured to avoid potential losses. The credit risk is thus considered to be low.

The group’s main bank is DnB NOR where all long- and short therm loan facilities are placed. in addition the group has other local banking relations mainly for cash management purpose. The table below shows the rating of the groups main bank.

NOTE 2 FiNANCiAL RiSK mANAgEmENT

31 DECEMBER 2008 31 DECEMBER 2007

Counterparty Rating Credit limit Balance Credit limit Balance

moody`s S&P

DnB NOR ASA Aa1 A+ 100 000 238 507 190 000 95 269

(C) LiQuiDiTy RiSKPrudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, group treasury maintains flexibility in funding by maintaining availability under committed credit lines. At 31st December 2008 the group had undrawn commited credit lines amounting to TNOK 250,000 management monitors rolling forecasts of the group’s liquidity reserve and cash and cash equivalents on the basis of short-term and long-term cash flow forecasts

The table below analyses the group’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date.

Less than Between 1 Between 2At 31 December 2008 (thousand NOK) 1 year and 2 years and 5 years Over 5 years Borrowings - DnB NOR 1 665 299 - - - Derivative financial instruments (interest rate swaps) - - 21 747 - Trade and other payables 996 199 - - -

Less than Between 1 Between 2At 31 December 2007 (thousand NOK) 1 year and 2 years and 5 years Over 5 years Borrowings - DnB NOR 240 000 140 000 795 000 - Derivative financial instruments (interest rate swaps) - - (12 586) - Trade and other payables 1 246 044 - - -

AnnuAl report2008

29

CAPiTAL RiSK mANAgEmENT The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. in order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The gearing ratios, defined as net debt to total capital, at 31 December 2008 and 2007 were as follows:

2008 2007Less: cash and cash equivalents (393 508) (138 634) Net debt 1 246 240 1 039 910 Total equity 805 511 1 053 132 Total capital 3 711 165 3 736 102 Gearing ratio 34 % 28 %

NOTE 2 FiNANCiAL RiSK mANAgEmENT (CONT.)

Less than Between 1 Between 2At 31 December 2008 (thousand NOK) 1 year and 2 years and 5 years Over 5 Years Borrowings - DnB NOR 100 000 200 000 1 365 299 - Derivative financial instruments (interest rate swaps) - - 21 747 - Trade and other payables 1 024 809 - - -

Less than Between 1 Between 2At 31 December 2007 (thousand NOK) 1 year and 2 years and 5 years Over 5 Years Borrowings - DnB NOR 240 000 140 000 795 000 - Derivative financial instruments (interest rate swaps) - - (12 586) - Trade and other payables 1 246 044 - - -

Less than Between 1 Between 2At 31 December 2008 (thousand NOK) 1 year and 2 years and 5 years Over 5 Years Forward exchange contracts - cash flow hedges 813 - - - Forward exchange contracts - held for trading - - - -

Less than Between 1 Between 2At 31 December 2007 (thousand NOK) 1 year and 2 years and 5 years Over 5 Years Forward exchange contracts - cash flow hedges (400) - - - Forward exchange contracts - held for trading - - - -

AnnuAl report2008

30

NOTE 2 FiNANCiAL RiSK mANAgEmENT (CONT.)

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Estimated impairment of goodwillThe group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (see note 8). An impairment charge of TNOK 130,606 arose in the Drilling Services Segment during the course of the 2008 year, resulting in the carrying amount of the Cgu being writ-ten down to its recoverable amount. if the budgeted EBiTDA used in the value-in-use calculation for the Drilling Services Segment had been 2% lower than management’s estimates at 31 December 2008, the group would have recognised a further impairment of goodwill by TNOK 106,000. if the estimated pre-tax discount rate applied to the discounted cash flows for the Drilling Service Segment had been 1% higher than management’s estimates, the group would have recognised a further impairment against goodwill by TNOK 76,000.

if the budgeted EBiTDA used in the value-in-use calculation for the Field Operation services Segment had been 2% lower than management’s estimates at 31 December 2008, the group would have recognised an impairment of goodwill by TNOK 108,000. The cash flow from Field Operation Services are not very sensitive ot minor changes in discont rate.

Capitalized development costsCertain development costs are capitalized when it is probable that a development project will generate future economic benefits and certain criteria, including commercial and technological feasibility, have been met. These costs are then amortized on a systematic basis over their expected useful lives. During the development stage, manage-ment must estimate the commercial and technological feasibility of these projects as well as their expected useful lives.

Whenever there is an indicator that development costs capitalized for a specific project may be impaired, the recoverable amount of the asset is estimated. An asset is impaired when the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is defined as the higher of an asset’s net selling price and value in use. Value in use is the present value of discounted estimated future cashflows. While we believe that the assumptions are appropriate, such amounts estimated could differ materially from what will actually occurin the future.

Trade receivablesCalculation of provision for impairment of trade receivables is based on a number of estimates. Area including significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are all considered indicators that the trade receivable is impaired. However, assessing the fair value of the amounts recoverable is highly judgemental and incomplete or incorrecte informartion could lead to significant changes in the recolverable amounts.

Income taxesThe group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision forincome taxes, deferred tax assets and liabilities and the extent to which deferred tax assets can be recognized. There are many transactionsand calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

NOTE 3 CRiTiCAL ACCOuNTiNg ESTimATES AND JuDgEmENTS

Fair value estimation The fair value of financial instruments traded in active markets (such as trading) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the group is the current bid price. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.

AnnuAl report2008

31

Valuation allowances are recorded to reduce the deferred tax assets to an amount that is more likely than not to be realized. Our valuation allowances relate primarily to our foreign operations. Deferred tax assets are recognized if it is probable that sufficient taxable income will be available in the future against which the temporary dif-ferences and unused tax losses can be utilized. We have considered future taxable income and tax planning strategies in assessing whether deferred tax assets should be recognized.

However, assessing the fair value of the amounts recoverable is highly judgemental and incomplete or incorrecte informartion could lead to significant changes in the recolverable amounts.

Revenue recognitionThe group have during 2008 recognized TNOK 26,8 as income related to grants received from it collaborating partners.

On 1 July 2008, the group acquired 100% of the share capital of TRACS internatinal Consultancy Ltd , a leading world wide provider of integrated services and training within geology and petroleum engineering with offices in Aberdeen, London and moscow. The acquired business contributed revenues of TNOK 65 ,052 and net profit of TNOK 7,560 to the group for the period from 1 July 2008 to 31 December 2008. if the acquisition had occurred on 1 January 2008, group revenue would have been TNOK 2 661,581, and loss before allocations would have been TNOK 154,117. These amounts have been calculated using the group’s accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 January 2008, together with the consequential tax effects.

Details of net assets acquired and goodwill are as follows: Purchase consideration: Cash paid 148 118 Earn-out (note 26) 44 075 Direct costs relating to the acquisition 2 173 Total purchase consideration 194 366 The assets and liabilities as of 1 July 2008 arising from the acquisition are as follows: Acquiree’s carrying Fair value amountCash and cash equivalents 27 336 27 336 Property, plant and equipment (note 6) 1 586 1 586 Contractual customer relationship (included in intangibles) (note 8) 48 238 - Other intangibles (note 8) 16 815 - Deferred tax assets (note 20) 67 67 inventories 2 901 2 901 Trade and other receivables 32 828 32 828 Trade and other payables (17 844) (17 844)Deferred tax liabilities (note 20) (19 516) - Fair value of net assets 92 411 46 873 goodwill (note 8) 101 956 - Total purchase consideration 194 366

Purchase consideration settled in cash 150 291 Cash and cash equivalents in subsidiary acquired (27 336) Cash outflow on acquisition 122 955

NOTE 3 CRiTiCAL ACCOuNTiNg ESTimATES AND JuDgEmENTS

NOTE 4 BuSiNESS COmBiNATiONS

AnnuAl report2008

32

All the activities of the acquired companies have continued after acquisition. Excess value analyses are shown below. Payment for the acquisitions was made in cash and shares. For some aquisitions purchase price is determined by financial performance in subsequent financial years (earn-out). Cost prices include earn-out where it is likely that such payments will occur. Excess value related to patents/data bases is depreciated in line with the underlying items’ anticipated useful life (2.5 - 4 years).The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after the group’s acquisitions of the different busi-nesses mentioned below:

Identifiable intangible Deferred tax Net booked Acquisition Excess value assets patents on intangible value at AcquisitionThe group’s acquisition of operations date Owner share goodwill /database assets acquisition date cost Acquisition cost 01.01.07 967 778 310 239 (86 867) 180 588 1 349 918 upstream 01-01-07 100 % 169 762 82 467 (24 740) 24 514 252 002 FJ Brown 18-04-07 100 % 69 452 67 691 (10 826) 36 394 162 711 SafeControl AB 02-01-07 100 % - 6 369 (1 783) 813 5 399 Deepwater 02-01-07 51 % - 17 214 (4 820) 13 050 25 444 Disposal of RCC 01-06-07 100 % (58 591) (13 889) 3 889 - (68 591)Exchange differences (43 901) (21 655) 5 167 - - Acquisition cost 31.12.07 1 104 500 448 436 (119 980) 255 359 1 726 884 TRACS international Consultancy Ltd 101 956 65 053 (19 516) 46 873 194 366 Disposal of AgR Project Partner AS (34 108) - - - (34 108)Exchange differences 6 298 13 070 (1 964) - - Acquisition cost 31.12.08 1 178 646 526 558 (141 460) 302 232 1 887 141 Accumulated depreciations 01.01.2007 - 123 357 34 540 - - Depreciations of excess value incl disposals in 2007 - 91 336 24 815 - - Depreciations of excess value in 2008 - 64 706 17 473 - - impairment 2008 100 000 24 974 6 993 - - Accumulated depreciations 31.12.08 100 000 304 373 83 821 - - Carrying value at 31.12.2008 1 078 646 222 185 (57 639) - - Depreciations and amortization for the year 100 000 64 706 - - - Depreciation period 2,5-8 years 2,5-8 years Depreciation plan Straightline Straightline

Payment / acquisition cost includes expenses related to financial and legal advisory in total TNOK 2,173 for acquisitions made in 2008. in connection with the acquisitions, book value was considered the best estimate of fair value for tangible assets or liabilities. Allocation of excess value of intangible assets is outlined in the table above. Furthermore, deferred tax related to patents/databases are accounted for at nominale value.

in 2007 the PPA for Peak, TD and SeaVation was adjusted due to final calculation of acquisition cost and final acceptance of closing balance. This is reflected in the adjust-ments reflected in the table above.

NOTE 4 BuSiNESS COmBiNATiONS, CONT.

AnnuAl report2008

33

Acquisitions in 2007: FJ Brown 18.04.2007 Upstream 01.01.2007 Deepwater 02.01.2007 SafeControl 02.01.2007 Book Value Fair Value Book Value Fair Value Book Value Fair Value Book Value Fair Value

Assets Contracts, customer relationship, Patents, R&D - 67 691 1 478 83 945 2 271 19 485 - 2 165 Deferred tax asset - - 2 352 2 352 - - - - goodwill * - 69 452 - 169 762 - - - - Intangible assets - 137 143 3 830 256 058 2 271 19 485 - 2 165 Land, buildings and other property - - - - - - machinery and operating equipment - - 7 375 7 375 831 5 035 Tangible fixed assets - - 7 375 7 375 - - 831 5 035 investments in associated companies - - - - 464 464 - - Financial fixed assets - - - - 464 464 - - Total non current assets - 137 143 11 205 263 433 2 736 19 949 831 7 200 inventories - - - - 56 56 Trade receivables 42 460 42 460 96 604 96 604 857 857 Other receivables 2 123 2 123 12 746 12 746 6 172 6 172 92 92 Receivables 44 583 44 583 109 350 109 350 6 172 6 172 1 005 1 005 Cash and cash equivalents 12 210 12 210 7 879 7 879 18 532 18 532 15 15 Current assets 56 793 56 793 117 229 117 229 24 704 24 704 1 020 1 020 Total assets 56 793 193 936 128 433 380 662 27 440 44 653 1 851 8 220 Book Value Fair Value Book Value Fair Value Book Value Fair Value Book Value Fair Value Equity and liabilities Share capital 138 138 0 0 25 588 37 982 91 91 Share premium fund - - - - 18 18 Total paid-in equity 138 138 0 0 25 588 37 982 109 109 Retained earnings 36 256 162 573 24 514 252 002 - 704 5 290 Total earned equity 36 256 162 573 24 514 252 002 - - 704 5 290 Equity** 36 394 162 711 24 514 252 002 25 588 37 982 813 5 399 Deferred tax 11 861 22 687 - 24 740 - 4 820 146 1 929 Other long-term liabilities - - 478 478 - - - - Pension liabilities - - - - - - - - Total non-current obligations 11 861 22 687 478 25 218 - 4 820 146 1 929 Debt to credit institutions - - 24 403 24 403 228 228 Trade payables 8 538 8 538 72 892 72 892 219 219 Tax payable - - - - - - Other current liabilities - - 6 147 6 147 1 852 1 852 445 445 Total current liabilities 8 538 8 538 103 442 103 442 1 852 1 852 892 892 Total liabilities 20 399 31 225 103 919 128 660 1 852 6 671 1 038 2 821 Total equity and liabilities 56 793 193 936 128 433 380 662 27 440 44 653 1 851 8 220

* goodwill is a residual in the purchase price allocation ** Equity stated in the fair value column represents the acquisition cost at the date of purchase

NOTE 4 BuSiNESS COmBiNATiONS, CONT.

AnnuAl report2008

34

Figures in TNOK Petroleum Drilling FieldBusiness areas Services Services Operation Group Elimin. TotalProfit and Loss Account 2007 External operating revenues 1 008 367 237 992 760 112 (590) (17 188) 1 988 692 intercompany operating revenues 37 407 80 702 24 267 (21 770) (120 607) - Project expenses/payroll expenses (854 525) (218 768) (697 744) (72 375) 139 632 (1 703 779)EBITDA1 191 249 99 926 86 635 (94 735) 1 837 284 913 Depreciation and amortisation (84 658) (43 913) (44 661) (210) 209 (173 233)Operating profit(loss) 106 591 56 013 41 974 (94 945) 2 046 111 680 Net financial items (4 644) (19 122) (6 873) 193 405 (247 053) (84 286)Tax (27 228) (6 144) (834) (45 995) 73 311 (6 890) Key figures 2007 Assets 2 577 274 895 475 351 187 3 837 469 (3 925 303) 3 736 102 Liabilities 1 495 347 624 955 216 530 2 031 493 (1 685 355) 2 682 970 investments 490 974 298 563 31 125 49 433 870 095 investments ex.acquisition 72 400 298 563 25 726 26 178 422 867

Petroleum Drilling FieldBusiness areas Services Services Operation Group Elimin. TotalProfit and Loss Account 2008 External operating revenues 1 400 040 363 480 820 090 843 2 584 453 intercompany operating revenues 16 063 4 136 10 948 39 261 (70 408) - Project expenses/payroll expenses (1 143 285) (325 440) (740 548) (150 196) 70 408 (2 289 061)EBITDA1 272 818 42 176 90 490 (110 092) - 295 391 Depreciation and amortisation (43 300) (193 517) (53 493) (8 721) (299 030)Operating profit(loss) 229 518 (151 340) 36 997 (118 814) - (3 639)Net financial items 42 118 (5 334) (1 079) (135 073) (99 366)Tax 83 000 1 602 24 965 (47 360) (10 793) 51 414 Key figures 2008 Assets 1 583 313 1 116 600 469 375 5 294 325 (4 790 313) 3 673 300 Liabilities 1 212 154 910 554 380 033 4 015 868 (3 618 635) 2 899 974 Assets from discontinued operations 37 865 37 865 Liabilities from discontinued operatins 5 679 5 679 investments 232 948 189 639 33 313 65 248 521 148 investments ex.acquisition 37 675 189 639 27 313 61 672 316 299 1 EBiTDA is short for Earnings Before interest, Tax, Depreciation and Amortisation, excluding stock write downs and is a non-gAAP measure which management uses to measure its operations.

inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.

inter company eliminations are done in relevant business units only in 2008, in 2007 all intercompany was reported in the elimination collum.

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, trade and other receivables, and cash and cash equivalents.

Segment liabilities comprise operating liabilities. unallocated liabilities comprise items such as taxation and borrowings including related hedging derivatives. Capital expenditure comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combina-tions.

NOTE 5 SEgmENT iNFORmATiON

At 31 December 2008, the group is organised on a worldwide basis into three main business segments as indicated in the table below. The segment results are as follows:

AnnuAl report2008

35

Figures in TNOK Operating revenues 2008 2007Norway 772 171 700 986 Europe excl. Norway 564 806 238 651 Asia and Australia 768 425 753 824 America 349 664 133 510 Africa 129 387 161 721 Total 2 584 454 1 988 692

AgR has not allocated total assets due to the fact that total assets constantly are moved between regions based on the location of the different projects.

NOTE 6 gEOgRAPHiCAL SEgmENT iNFORmATiON

NOTE 7 OPERATiNg REVENuES

Figures in TNOK Operating revenue comprises: 2008 2007Net sale of goods 53 955 27 403 Net sale of services 2 493 222 1 944 458 Total net sales revenue 2 547 177 1 971 861 Profit from sale of fixed assets 39 78 Skattefunn (tax incentive scheme) - - Other sales 37 238 16 753 Total other operating revenue 37 277 16 831 Total operating revenue 2 584 454 1 988 692

NOTE 8 iNTANgiBLE ASSETS

Figures in TNOK Acquired patents Self-developed development patents developm.2007 Goodwill projects projects Total Historical cost 01.01.07 982 659 303 308 51 463 1 337 430 Additions 227 920 174 080 121 242 523 242 Disposals 60 976 13 899 140 75 015 Exchange differences (44 033) (21 655) 2 566 (63 122)Historical cost 31.12.07 1 105 570 441 834 175 131 1 722 535 Accumulated amortisation 01.01.08 - 122 290 4 694 126 984 Amortization of the year - 80 020 5 116 85 136 Disposals amortisation during the year - 6 945 11 6 956 Exchange differences - 4 434 5 860 10 294 Amortization 31.12.07 - 199 799 15 659 215 458 Accumulated impairments 31.12.07 - 11 427 8 055 19 482 Book value 31.12.07 1 105 570 230 608 151 417 1 487 595 Amortisation rates 2.5 - 5 years 5 years Amortisation method Linear Linear

AnnuAl report2008

36

NOTE 8 iNTANgiBLE ASSETS (CONT.) Acquired patents Self-developed Figures in TNOK development patents developm.2008 Goodwill projects projects Total Historical cost 01.01.08 1 105 570 441 834 175 131 1 722 535 Additions 103 756 65 053 97 841 266 650 Disposals 34 109 - 29 262 63 371 Exchange differences 7 045 3 953 (1 155) 9 843 Historical cost 31.12.08 1 182 262 510 840 242 555 1 935 657 Accumulated amortisation 01.01.08 - 199 799 15 659 215 458 Amortisation of the year - 64 540 8 544 73 084 Disposals amortisation during the year - - 972 972 Conversion variances - (15 343) 604 (14 739)Amortisation 31.12.08 - 248 996 23 835 272 831 Accumulated impairments 01.01.08 - 11 427 8 055 19 482 impairments for the year 100 829 26 073 3 704 130 606 Accumulated impairments 31.12.08 100 829 37 500 11 759 150 088 Book value 31.12.08 1 081 435 224 343 206 961 1 512 738 Amortisation rates 2.5 - 5 years 5 years Amortisation method Linear Linear

Based on impairment testing, a one-off write down of NOK 30 million of intangible assets has been made. The intangible assets include patents and research and develop-ment, and is mainly related to the acquisition of AgR Subsea Ltd.

AgR is still confident in the Drilling Services business area and the RmR technology in particular. However, due to the general economic downturn and delayed market penetration of the RmR system, an impairment charge of NOK 100 million has been made.

The table below specifies goodwill per acquisition for the group:

Goodwill RCC DPT Triangle AGR Acquired 2004 - - - 331 878 Acquired 2005 34 109 87 468 25 162 - Acquired 2006 - 20 000 - - Acquired 2007 - - - - Acquired over the year - - - - Disposal during the year (34 109) - - - Exchange differences - - - - Acquisition cost 31.12.08 - 107 468 25 162 331 878 Amortisation for the year - - - - Amortisation 31.12.08 - - - - impairments for the year - - - 73 486 Accumulated impairments 31.12.08 - - - 73 486 Book value 01.01.08 34 109 107 468 25 162 331 878 Book value 31.12.08 - 107 468 25 162 258 392

Goodwill Cleanup Well TD RES Acquired 2004 9 893 13 558 - - Acquired 2005 - - - - Acquired 2006 - - - 103 462 Acquired 2007 - - - - Acquired over the year - - - - Disposal diring the year - - - - Exchange differences - - - - Acquisition cost 31.12.08 9 893 13 558 - 103 462 Amortisation for the year - - - - Amortisation 31.12.08 - - - - impairments for the year - - - - Accumulated impairments 31.12.08 - - - - Book value 01.01.08 9 893 13 558 - 103 462 Book value 31.12.08 9 893 13 558 - 103 462

AnnuAl report2008

37

NOTE 8 iNTANgiBLE ASSETS (CONT.)

Goodwill Peak SeaVation Upstream FJ Brown Acquired 2004 - - - - Acquired 2005 - - - - Acquired 2006 241 626 38 683 - - Acquired 2007 (5 241) (6 053) 169 762 69 452 Acquired over the year - - - - Disposal during the year - - - - Exchange differences (26 732) (5 287) (1 876) 12 276 Historical cost 31.12.08 209 653 27 343 167 886 81 728 Amortisation for the year - - - - Amortisation 31.12.08 - - - - impairments for the year - 27 343 - - Accumulated impairments 31.12.08 - 27 343 - - Book value 01.01.08 223 601 28 276 165 053 63 100 Book value 31.12.08 209 653 - 167 886 81 728 MarineGoodwill SafeControl Deepwater Engineering TRACS Total Acquired 2004 - - - - 355 329 Acquired 2005 - - - - 146 739 Acquired 2006 - - - - 403 771 Acquired 2007 - - - - 227 920 Acquired over the year - - 1 800 101 956 103 756 Disposal during the year - - - - (34 109) Exchange differences - - - 475 (21 144) Historical cost 31.12.08 - - 1 800 102 431 1 182 262 Amortisation for the year - - - - - Amortisation 31.12.08 - - - - - impairments for the year - - - - 100 829 Accumulated impairments 31.12.08 - - - - 100 829 Book value 01.01.08 - - - - 1 105 560 Book value 31.12.08 - - 1 800 102 431 1 081 433

goodwill is allocated to the group’s cash-generating units (Cgus) identified according to the business segment.A segment-level summary of the goodwill allocation is presented below.

Goodwill per segment Petroleum Services Drilling Services Field Operation Total goodwill as of 31.12.2008 629 904 169 106 282 423 1 081 433 goodwill as of 31.12.2007 687 856 241 473 176 241 1 105 570 goodwill as of 31.12.2006 493 934 251 528 237 197 982 659 The recoverable amount of a Cgu is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the Cgu operates.

AnnuAl report2008

38

The key assumptions used for value-in-use calculations are as follows: Petroleum Drilling Field Services Services Operation EBiTDA-margin 1 13.5 %-21.3 % 27.0 %-30.0 % 10.0 %-11.0 % growth rate 2 2.0 % 2.0 % 2.0 % Discount rate 3 13.4% 15.0 % 11.1 % 1 Budgeted EBiTDA-margin. The margin varies in the budget period 2 Weighted average growth rate used to extrapolate cash flows beyond the budget period. 3 After-tax discount rate applied to the cash flow projections.Based on the input factor described above a negative change in such factors could result in impairment for the goodwill allocated to the different segments.

NOTE 8 iNTANgiBLE ASSETS (CONT.)

NOTE 9 FiXED ASSETS

Machinery and operating Land and2007 equipment real estate Total Historical cost 01.01.07 359 405 39 598 399 003 Additions 346 323 4 346 327 Disposals 31 511 - 31 511 Conversion variances (2 884) - (2 884)Historical cost 31.12.07 671 333 39 602 710 935 Accumulated deprecation 01.01.07 60 412 562 60 974 Amortisation of the year 64 083 1 946 66 029 Disposals deprecation during the year 1 418 - 1 418 Conversion variances (546) - (546)Accumulated depreciations 31.12.07 122 531 2 508 125 039 Accumulated impairments 31.12.07 10 665 - 10 665 Book value 31.12.07 538 137 37 094 575 231 Depreciation rates 3 - 8 years 20 years/ indefinitelyDepreciation method Linear Linear Machinery and operating Land and2008 equipment real estate Total Historical cost 01.01.08 671 333 39 602 710 935 Additions 263 580 58 263 638 Disposals 120 605 39 466 160 071 Conversion variances (1 672) - (1 672)Historical cost 31.12.08 812 636 194 812 830 Accumulated deprecation 01.01.08 122 531 2 508 125 039 Amortisation of the year 84 150 2 84 152 Disposals deprecation during the year 13 577 2 371 15 948 Conversion variances (1 843) (1) (1 844)Accumulated depreciations 31.12.08 191 261 138 191 399 Accumulated impairments 01.01.08 10 665 - 10 665 impairments for the year 11 179 - 11 179 Accumulated impairments 31.12.08 21 844 - 21 844 Book value 31.12.08 599 531 56 599 587 Depreciation rates 3 - 8 years 20 years/ indefinitely Depreciation method Linear Linear

AnnuAl report2008

39

NOTE 10 gROuP ENTiTiES AND iNVESTmENTS iN JOiNT VENTuRES AND ASSOCiATED COmPANiES

Figures in TNOKGroup Share capital Equity interest Voting share Joint Ventures / Associated companies Pipetech innovation AS 260 50 % 50 %FPSO Shiraz Pty Ltd 54 039 50 % 50 % Triangel FPSO Shiraz PipetechOverview of balance sheet value 31.12.2008 SDCI AS Pty Ltd Innovation AS Share of fair value associate’s identifiable net assets at acquisition - 15 141 Excess value recorded as identifiable assets - - 9 Excess value recognised as goodwill - - - Historical cost 31.12.07 - 15 150 Share of annual net result - (21 379) (145)Depreciation excess value identifiable assets - - - Depreciation goodwill - - - Share of profit for the year - (21 379) (145) Book value 01.01.08 16 15 120 Additions - 20 346 - Provision for impairment (16) (19 186) - Share of profit for the year - - (145)Exchange differences - - - Book value 31.12.08 - 1 174 0 Excess value goodwill - - - Excess value identifiable assets - - - Excess value not depreciated 31.12.08 - - -

The companies follow the same financial year as the group. in 2008, the companies had a revenue of TNOK 1,000 and a net result of TNOK (42,800) inclusive provision for impairment. Book value of total assets at 31.12.08 was TNOK 8,593 and book value of liabilities at 31.12.08 was TNOK 4,404. Equity accounted for totalled TNOK 4,189.

FPSO Shiraz Pty Ltd is hold for sale, and is reported in the line for discontinued operations.

Triangel SDCi AS was Liquidated the 30 of September 2008.

AnnuAl report2008

40

NOTE 10 gROuP ENTiTiES AND iNVESTmENTS iN JOiNT VENTuRES AND ASSOCiATED COmPANiES (CONT.)

Group entitiesThe following subsidiaries are included in the consolidated financial statements: The company’s Head total share Equity VotingOverview group companies Office capital interest share Subsidiary companies: AgR Holdings AS Fjell - Norway 4 307 100 % 100 % AgR Emi Team AS Fjell - Norway 2 959 100 % 100 % AgR Pipetech AS Fjell - Norway 3 945 100 % 100 % AgR Subsea AS Fjell - Norway 1 900 100 % 100 % AgR Dpal AS Fjell - Norway 1 000 100 % 100 % AgR Petroleum Services AS Oslo - Norway 424 100 % 100 % AgR Peak group Holdings Ltd Aberdeen - uK 9 652 100 % 100 % AgR group Americas inc Houston-uSA 3 500 100 % 100 % AgR Asia Pacific Pty Ltd melbourn - Australia 24 100 % 100 % AgR Asia Pacific Holdings Pty Ltd melbourn - Australia 486 100 % 100 % AgR Asia Pacific Sdn Bhd Kuala Lumpur - malaysia 868 100 % 100 % AgR malaysia Sdn Bhd Kuala Lumpur - malaysia 0 100 % 100 % AgR Business Partner AS Fjell - Norway 100 100 % 100 % Altinex inc Houston-uSA 140 100 % 100 % AgR Triangle Technology AS Stavanger - Norway 150 100 % 100 % AgR Technology Design Ltd manchester - uK 1 100 % 100 % AgR Subsea Ltd Aberdeen - uK 10 100 % 100 % AgR Subsea inc Houston-uSA 7 100 % 100 % DPT Canada Ltd St. John’s-Canada - 100 % 100 % AgR integrity uK Ltd Aberdeen - uK 11 100 % 100 % AgR Peak Well management Ltd Aberdeen - uK 1 100 % 100 % AgR Peak Consultancy Services Ltd Aberdeen - uK 10 100 % 100 % AgR Peak Solutions Systems Ltd Aberdeen - uK 1 100 % 100 % AgR Peak Well mangagement m.E. Ltd Aberdeen - uK 55 100 % 100 % AgR Peak group Asia Pacific Pty Ltd Perth - Australia 5 100 % 100 % Liquegas Energy Pty Ltd melbourn - Australia 32 800 100 % 100 % Teredo AS Oslo - Norway 100 100 % 100 % AgR Reservoir Evaluation Services Kazakstan Ltd Aberdeen - uK 1 100 % 100 % AgR Reservoir Evaluation Services Kazakstan - Branche Almaty - Kazakstan - 100 % 100 % AgR Central Asia AS Oslo - Norway 100 100 % 100 % AgR EmiTeam AB Varberg - Sweden 90 100 % 100 % AgR mexico inc Houston-uSA 7 100 % 100 % AgR Petroleum Services inc. Houston-uSA 7 100 % 100 % AgR group Canada inc Houston-uSA 7 100 % 100 % FJ Brown inc Houston-uSA 162 100 % 100 % Turn Key Drilling inc Houston-uSA 7 100 % 100 % AgR Field Operation inc Houston-uSA 7 100 % 100 % AgR Oil and gas Services Pty Ltd melbourn - Australia 0 100 % 100 % AgR Drilling Services Holdings AS Fjell - Norway 3 865 100 % 100 % AgR Field Operations Holdings AS Fjell - Norway 3 028 100 % 100 % AgR CannSeal AS Fjell - Norway 1 000 100 % 100 % marin Engineering AS Ålesund - Norway 100 100 % 100 % AgR Tunisia AS Oslo - Norway 100 100 % 100 % AgR Peak Solutions Systems Pty Ltd Perth - Australia 5 100 % 100 % TRACS international Consultancy Ltd Aberdeen - uK 300 100 % 100 % TRACS international Training Ltd Aberdeen - uK 65 100 % 100 % TRACS Consult LLC moscow - Russia 71 100 % 100 % AgR Deepwater inc Delaware - uSA 44 478 51 % 51 % Reservoir Service Ltd Liabilities Co. moscow - Russia 2 51 % 51 %

AnnuAl report2008

41

NOTE 11 iNVENTORy

NOTE 12 TRADE RECEiVABLES

NOTE 14 OTHER CuRRENT RECEiVABLES

NOTE 13 AgiNg TRADE DEBTORS AT NOmiNAL VALuE

Figures in TNOK 2008 2007Stocks 3 695 31 555 Work in progress - - Finished goods 13 360 8 670 Total inventories 17 055 40 225 goods valued at historical cost 17 055 4 865 goods valued at net realisable value - 35 360 Total inventories 17 055 40 225

The inventory at AgR Dpal AS has been written down with TNOK 85,502 and is reported under discontinued operations from 2008 and is not included in the 2008 column. This was the original cost price.

Figures in TNOK 2008 2007Trade debtors at nominal value 939 024 1 202 263 Revenues not invoiced 100 179 181 491 Provisions for bad debt -14 401 -18 398 Trade receivables 31.12. 1 024 802 1 365 356

Trade receivables related to rig campaign are reported gross even though income is reported net, since AgR has settlement risk on these agent agreements. The table below indicates the aging structure of trade receivables and the total provision for bad debt.

Figures in TNOK 2008 2007Other taxes payables 14 393 19 126 Advanced payments to suppliers 6 911 14 242 Overseas witholding taxes 2 138 6 082 Advanced payments employees 1 834 788 Other prepaid expenses 60 369 31 128 Other current assets 6 273 26 723 Other current receivables 31.12. 91 918 98 089

Figures in TNOK 2008 2007Receivables not overdue 497 646 943 320 Receivables overdue up to 3 months 462 621 409 254 Receivables overdue more then 3 months 78 937 31 180 Provision (14 402) (18 398)Trade debtors 31.12. 1 024 802 1 365 356

AgR Dpal AS is in a dispute with a supplier. Legal action has been taken, and legal proceedings will be taken in June 2009. The provision raised in 2008 was TNOK 18,300. in 2008 AgR Dpal AS is reported under discontinued operations, hence not included in the 2008 column above.

AgR Asia Pacific Pty Ltd has raised a provision relating to invoicing disputes. The total provision is TAuD 2,302 (TNOK 11,184)

AgR Pipetech AS is involved in a dispute with a customer. This issue is taken to court in the uSA. AgR Pipetech believes all of the receivable of TuSD 1,155 will be paid. Therefore, there are no provision raised regarding this dispute.

AnnuAl report2008

42

NOTE 15 CASH AND CASH EQuiVALENTS

Figures in TNOK 2007 2006Cash 11 789 59 Bank deposits 381 719 138 575 Cash and cash equivalents 31.12. 393 508 138 634 Of which is restricted deposits* 18 352 29 297 Unused overdraft facilities 31.12. 250 000 94 731

* Deducted employee tax due within 3 months

NOTE 16 FiNANCiAL iNSTRumENTS By CATEgORy Figures in TNOK Assets at fair value Loans and through the receivables profit and loss Total31 December 2008 Assets as per balance sheet Derivative financial instruments − - Trade and other receivables 1 116 720 − 1 116 720 Other financial assets at fair value − 571 571 Cash and cash equivalents 393 508 − 393 508 Total 1 510 228 571 1 510 799 Liabilities at fair Derivatives Other value through the used financial profit and loss for hedging liabilities TotalLiabilities as per balance sheet Borrowings - DnB NOR/Nordea − − 1 665 299 1 665 299 Derivative financial instruments (22 560) − − − Total − − 1 665 299 1 665 299

Assets at fair value Loans and through the receivables profit and loss Total31 December 2007 Assets as per balance sheet Derivative financial instruments − 12 987 12 987 Trade and other receivables 1 450 458 − 1 450 458 Other financial assets at fair value − 3 473 3 473 Cash and cash equivalents 138 634 − 138 634 Total 1 589 092 16 460 1 605 552 Liabilities at fair Derivatives Other value through the used financial profit and loss for hedging liabilities TotalLiabilities as per balance sheet Borrowings - DnB NOR/Nordea − − 1 175 000 1 175 000 Derivative financial instruments - − − − Total − − 1 175 000 1 175 000

AnnuAl report2008

43

NOTE 17 SHARE CAPiTAL AND SHAREHOLDER iNFORmATiON

Share capital: At 31st December 2008, the company had a share capital of TNOK 142,422 (TNOK 140,712) distributed in 71,210,808 (70,355,808) shares, each with a nominal value of NOK 2.

26th June 2008, the company completed a private placement, resulting in the issue of a total of 855,000 new shares at a price of NOK 40 per share. gross proceeds from the private placement amounted to TNOK 33,800. The purpose of the private placement was to secure funding in connection with the acquisition of 100 % if the shares in TRACS international Consultancy Ltd.

issue of shares to employeesThe Board of Directors of AgR group ASA (“AgR”) on 5 November 2007 resolved to increase the company’s share capital pursuant authorizations given by the Annual general meeting on 26 April 2007. The shares were issued as part of AgR group’s incentive plan for employees and board members in the group companies, as presented to and approved by the general meeting. The Board resolved to issue a total of 1,581,863 shares as follows:

1 SHARE iSSuE TOWARDS AgR ANSATTEFOND i AS AND AgR ANSATTEFOND 1 A ASThe Board resolved to issue 1,401,837 shares to AgR Ansattefond i AS and 140,896 shares to AgR Ansattefond 1 A AS, at a share price of NOK 46 per share. in accord-ance with the authorization given to the Board by the general meeting in April 2007 the share price was set to a volume weighted average of the quoted share price on Oslo Børs in march 2007, with a rebate of NOK 12 per share.AgR Ansattefond i AS and AgR Ansattefond 1 A AS are Norwegian limited companies owned by employees and board members in AgR group ASA and its subsidiaries, including primary insiders. AgR owns one B-share in each of the companies, controlling 50% of the votes in each company, but with no financial rights.

2 DiSCOuNTED SHARES TO OTHER EmPLOyEESEmployees in AgR and its subsidiaries were offered and subscribed shares in AgR at a share price equal to the last quoted share price on Oslo Børs on 5 November 2007, NOK 47,80, minus a 20% discount, where the discount is limited to a maximum of NOK 1,500 per person. This implies that each employee could subscribe AgR shares worth maximum NOK 7,500. The terms were in accordance with the employee share program as presented to and approved by the Annual general meeting on 26 April 2007.The discounted shares has a lock up for 1 year, during which the shares cannot be traded by the employees. The offered shares were ordinary shares in AgR and will entitle the shareholders to ordinary shareholder rights in the Company.in accordance with the above the Board of Directors resolved to issue a total of 39,130 shares pursuant to an authorization by the general meeting on 26 April 2007, at a share price of NOK 38,24.

Shareholder overview: Shareholders in AgR group ASA with a minimum of 1% share of ownership, as well as shares held by executive employees and board members including shares owned by affiliated individuals and companies, were at 31 December 2008 as follows:

Shareholders Number of shares Equity interest ALTOR OiL SERViCE iNVEST AS 54 543 849 76,6 %RBC DEXiA iNVESTOR SERViCES BANK 3 561 550 5,0 %HEmACA A/S 1 724 993 2,4 %AgR ANSATTEFOND i AS 1 229 787 1,7 %JPmORgAN CHASE BANK 1 197 328 1,7 %CiTiBANK N.A. (LONDON BRANCH) 1 025 308 1,4 %JPmORgAN BANK LuXEmBOuRg 685 000 1,0 %Total 63 967 815 89,8 % Board: Tove magnussen (direct own and indirect own via employee fond) 36 496 0,1 %Fiona Walker (indirect own via employee fond) 2 909 0,0 % 39 405 0,1 %Management Sverre Skogen (indirect own via Hemaca AS and the employee fond) 1 831 764 2,6 %Åge Landro (indirect own via the employee fond) 38 979 0,1 %Tom Hasler (indirect own via the employee fond) 19 485 0,0 %Svein Sollund (indirect own via the employee fond) 38 979 0,1 %Total of shares owned by executive employees 1 929 207 2,7 %

AnnuAl report2008

44

NOTE 18 SHARE CAPiTAL AND PREmium

NOTE 19 PENSiON AND PENSiON COmmiTmENTS

Number of shares (thousands) Ordinary shares Share premium Total

At 1 January 2006 10 510 105 099 4 105 103 Share issue 2005 registered in 2006 117 1 173 1 173 2 346 Prior to the iPO the the share was split in a ratio 1:5 42 509 - – Proceeds from iPO issued July 2006 12 217 24 434 530 972 555 406 – Proceeds from shares issued December 2006 3 421 6 842 157 335 164 178 At 31 December 2006 68 774 137 548 689 484 827 032 Employee share option scheme: – Proceeds from shares issued December 2007 1 582 3 164 69 028 72 192 At 31 December 2007 70 356 140 712 758 513 899 224 – Proceeds from shares issued June 2008 855 1 710 32 090 33 800 At 31 December 2008 71 211 142 422 790 603 933 024

The group’s pension costs show the future pension entitlement earned by employees in the financial year. in a defined contribution plan the company is responsible for paying an agreed contribution to the employee’s pension assets. The employee bears the risk related to the investment return on the pension assets. in a defined benefit plan, the company is responsible for paying an agreed pension to the employee based on his or her final pay.

Contribution plans Contribution plans comprise arrangements whereby the company makes annual contributions to the employees’ pension plans, and where the return on the pension plan assets will determine the amount of the pension. The premium related to the contribution plans are expensed when occured as operating expenses. in 2008 the total expense for defined contribution schemes was mNOK 19,4 and in 2007 mNOK 13,6.

Defined benefit plans The group also has pension plans that are classified as funded benefit plans and benefit plans that are financed through the companies’ operations. The group’s benefit plans are concentrated in Norway.

Some employees in Norway are covered by contribution-based pension plans. Net pension liabilities in Norway largely consist of special pension schemes financed through company operations and contractual early retirement (AFP) schemes.

374 employees in Norway are covered by contractual early retirement (AFP) schemes. it is assumed that 30 % of the employees will make use of these schemes. The pen-sion liabilities related to AFP are calculated on the basis of the same assumptions as the other pension plans.

The group’s secured pension plan is invested with an insurance company which manages the plan assets. The special pension schemes financed through company opera-tions covers 13 employees.

Specification of the year’s pension cost 2008 2007Costs according to defined benefit schemes: Current service cost 2 920 2 072 interest cost 905 662 Expected return on plan assets (642) (422)Net actuarial losses 10 7 Administrative expenses 137 92 Pension cost excl. social security tax 3 330 2 411 Employers’ social security tax 469 326 Pension cost incl. social security tax 3 799 2 737

AnnuAl report2008

45

NOTE 19 PENSiON AND PENSiON COmmiTmENTS

NOTE 20 TAX

Balance sheet specification of net pension commitments 2008 2007guaranteed schemes: Accumulated benfit obligation 19 065 33 949 Gross pension commitments 19 065 33 949 Pension funds as of 31.12 13 219 19 747 Net pension commitments 5 846 14 202 Social security tax 825 2 003 Estimate devations not recognised in the proft and loss accounts 3 959 (781)Net pension commitment on the balance sheet 31.12 10 630 15 424 The movement in the defined benefit obligation over the year is as follows: 2008 2007 Beginning of year 15 424 13 858 Liabilities assumed in business combinations (6 450) (1 058)Net pension cost 3 799 4 319 Estimated payment to pension funds including administration costs (2 143) (1 695)Net pension commitment on the balance sheet 31.12. 10 630 15 424 Expected contributions of pension plan assets in 2009 amount to TNOK 1,886. Actuarial assumptions for the group 2008 2007Expected return on funds 5.80 % 5.50 %Discount rate 3.80 % 4.50 %Annual salary increase 4.00 % 4.50 %Annual adjustment of the national insurance base amounts 3.75 % 4.25 %Annual adjustment of current pension payments 1.50 % 1.75 %Turnover 2.0-5.0 % 2.0-5.0 %Expected average remaining servicetime 12 13Demographic tariff K2005 K2005

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. Deferred income tax assets and liabilities are reversed after more then 12 months. The weighted average applicable tax rate was 29.4% (2007 32.4%). Figures in TNOK 2008 2007Tax payable Norway 11 173 4 286 Tax payable international 62 878 35 939 Changes in deferred tax Norway (46 590) (19 289)Change in deferred tax abroad (5 070) (14 585)Corrections for previous years 29 023 539 Tax on ordinary results 51 414 6 890 Reconciliation of tax payable Tax payable in profit and loss account 65 488 12 055 Prepaid tax (22 357) - Credit deduction, international (1 464) (11 680)Tax, international 3 571 1 737 Corrections previous years 10 159 4 985 Tax payable in balance sheet 55 397 7 097 Reconciliation of nominal and effective tax rate Pre-tax result (103 955) 27 394 Applicable avarage tax rate (28 443) 8 876 Variance, actual and expected income tax expense 79 857 (1 986)

AnnuAl report2008

46

NOTE 20 TAX

Explanation of why actual tax cost deviates from expected tax cost Tax effect from non-deductible costs 62 363 4 465 Tax effect from non-taxable income (9 259) (7 234)international tax rate deviates from Norwegian tax rate 1 263 2 304 Corrections previous years 25 490 (1 520)Variance compared to apllicable tax rate 79 857 (1 986) Change in book value of deferred tax Balance sheet value at 01.01. 55 415 48 896 Currency conversion 2 625 (5 890)Effect of business combinations 27 965 51 685 Charged to income in the period (51 660) (39 276)Balance sheet value 34 345 55 415 Deferred tax assets as of 31 December 2008 32 412 6 176 Deferred tax liability as of 31 December 2008 66 757 61 591 Balance sheet value 34 345 55 415

Deferred taxBelow is a specification of temporary differences between accounting and tax values, as well as calculation of deferred tax / tax advantage at the end of the financial year. All deferred tax liability and assets will be recovered after more than 12 months.

Basis for deferred tax 2008 2007Receivables 14 982 54 512 inventory 298 (31 900)Other current balance sheet items (47 545) (17 393)Amount linked to current balance sheet items (32 265) 5 219 Fixed assets and intangible assets 271 660 285 784 Shares (19 748) (10 189)Pensions (10 630) (15 424)Profit and loss account 252 406 Loss carried forward (77 294) (13 482)Amount linked to long-term balance sheet items 164 240 247 095 Total basis for deferred tax assets 131 975 252 314 Calculation of deferred tax / tax advantage Deferred tax recognised in balance sheet 66 757 61 591 Deferred tax asset recognised in balance sheet - Australia, Norway (2008) and uK(2007) 32 412 (6 176)

AnnuAl report2008

47

NOTE 21 DEBT TO CREDiT iNSTiTuTiONS AND OTHER NON-CuRRENT LiABiLiTiES

Figures in TNOK

Overview of debt to credit institutions and non-current liabilities 2008 2007Other non-current liabilities 7 568 3 544 Debt to credit institutions* 1 665 299 1 035 000 Capitalized arrangement fee deducted (25 551)Total non-current liabilities 1 647 316 1 038 544

* As described in note 37 the Lenders are in the opinion that the financial covenants attached to the loan agreement are breached as per 31st December 2008. There-fore all debt to credit institutions is accounted for as short-term debt. The group has a revolver credit of TNOK 150,000 and an overdraft facility of TNOK 100,000. At 31.12.2008 TNOK 0 was used, accordingly the company had an unused credit facility of TNOK 250,000. Debt to credit institution is recorded at amortised cost, and the table below specifies the actual repayment schedule. TNOK 1,565,220 of the total borrowings is denominated in NOK and the remaining TNOK 100,079 is denominated in gBP (TgBP 9,881) as of 31 December 2008. Instalment profile Debt to Credit Institutions 2009 2010 2011 2012 2013 Thereafter Total Other non-current liabilities - - - - - - - Debt to credit institutions 1 665 299 - - - - - 1 665 299 Total 1 665 299 - - - - - 1 665 299 Guaranteed liabilities 2008 2007Debt to credit institutions 1 665 299 1 178 544

Total liabilities 1 665 299 1 178 544

Average interest rate (effective) 8.5 % 5.6% Refinancing

in June 2008 the group´s multicurrency revolving credit facility, term loans and guarantee facilities provided by a bank syndicate comprising DnB NOR and Nordea, was refinanced with effect from 30th June 2008:

• Term loans amounting to TNOK 710,000 was replaced with a new term loan of TNOK 1,600,000• An additional term loan of TNOK 100,000 was raised in order to part-finance the acquisition of TRACS International ConsultancyLtd • Revolving Credit Facility of TNOK 865,000 was refinanced and replaced with a new facility of TNOK 250,000• In October 2008 part of the Revolving Credit Facility was converted to a TNOK 100,000 Overdraft Facility

Long-term liabilities to credit institutionsThe group’s agreement with DnBNOR and Nordea on borrowing includes covenants related to profitability (EBiTDA) and equity requirements.

CovenantsThe loan for DnBNOR and Nordea is on the following financial terms and conditions as per 31.12.2008:

(a) gross interest Bearing Debt (giBD) to EBiTDA:

the ratio of giBD to EBiTDA for each period referred to in Column A below shall not be greater than the ratio set out in Column B below opposite that period:

Column A Column BPeriod (preceding twelve months to the respective dates set out below) Ratio31st December 2008 4.9031st march 2009 4.2030th June 2009 3.7530th September 2009 3.2031st December 2009 2.9031st march 2010 2.7530th June 2010 and each quarter thereafter 2.50

AnnuAl report2008

48

NOTE 21 DEBT TO CREDiT iNSTiTuTiONS AND OTHER NON-CuRRENT LiABiLiTiES

NOTE 22 OTHER CuRRENT LiABiLiTiES

NOTE 23 OuTSTANDiNg FROm ASSOCiATED COmPANiES

(a) EBiTDA to gross Cash interest Expenses (gCiE):

the ratio of EBiTDA to gCiE for each period referred to in Column A below shall not be greater than the ratio set out in Column B below opposite that period:

Column A Column BPeriod (preceding twelve months to the respective dates set out below) Ratio31st December 2008 1.9531st march 2009 2.3030th June 2009 2.5030th September 2009 2.9531st December 2009 3.2031st march 2010 3.4530th June 2010 3.7530th September 2010 4.1031st December 2010 4.4531st march and each quarter thereafter 5.00

c) Book equity to total assets:

The ratio book equity to total assets of the group shall not at any time be less than 20.00% at 31st December 2008 and the first three quarters of 2009. The ratio shall at 31st December 2009 not be less than 22.50% and 25.00% as from 31st December 2010 and onwards.

According to the borrowing agreement with DnBNOR and Nordea, there are other conditions related to negative pledge, disposals of assets, substantial change in the nature of business, mergers and further encumbrances.

The Group has entered into three interest rate swap agreements: Start Currency Principal amount per 31.12.08 Expiration Interest rate Market value per 31.12.08 29.09.06 NOK 360 000 10.12.12 4.33% p.a. (8 692) 08.06.07 NOK 68 000 10.12.12 5.27% p.a. (3 135) 29.10.08 NOK 300 000 28.06.13 4.38% p.a (9 920)

Figures in TNOK 2008 2007Holiday pay and wages due 71 884 54 812 Advances from customers 50 239 12 266 incurred interest cost 1 297 4 620 Accrued grants received for R&D 30 842 30 757 Settlement share purchase 61 - Current portion of earn-out 9 681 - Other current liabilities 103 160 80 228 Current liabilities 267 164 182 683

Figures in TNOK Specification of outstanding from associated companies 2008 2007

Other receivables 4 081 15 442 Other current liabilities - - Net outstanding from associated companies 4 081 15 442

AnnuAl report2008

49

NOTE 24 EARNiNgS PER SHARE

NOTE 25 WAgES, FEES, NumBER OF EmPLOyEES ETC.

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue dur-ing the year excluding ordinary shares purchased by the company and held as treasury shares (note 18). There are no dilution effects.

Basis for calculation of earnings per share 2008 2007 Weighted average number of outstanding shares 70 783 308 69 016 557 Earnings per share from continuing operations (NOK) (2.16) 0.32 Earnings per share including discontinuing operations (NOK) (4.46) 2.11

Figures in TNOK 2008 2007Wages 707 941 535 452 Employers’ social security contributions 86 449 79 529 Pension costs 22 762 14 435 Other remunerations 66 831 27 238 Total 883 983 656 654 Average number of man-labour years 1 124 903

Pension costs are described in detail in note 19.Accumulated expenses for wages, pension premiums and other remuneration to managing director, other group executives and members of the parent company’s board accordingly for 2007 and 2008 were: 2007 Pension OtherManagement Directors (MD): Wages premiums remuneration Total Sverre Skogen - Chief Executive Officer 2 189 46 87 2 322 Haakon Berg - Chief Financial Officer 1 424 44 110 1 578 Sveinung Olsen - EVP Drilling Services (01.01.07 - 01.11.07) 1 230 41 52 1 323 Stig Andersen - EVP Drilling Services (02.11.07 - 31.12.07) 192 8 26 226 Per inge Remmen - EVP Petroleum Services (01.01.07 - 31.03.07) 378 4 50 432 Richard Erskine - EVP Petroleum Services (01.04.07 - 31.12.07) 1 030 35 28 1 093 Arne Aune - EVP group functions and Deputy CEO 2 017 46 150 2 213 Johan Warmedal - EVP Field Operations (01.01.07 - 31.07.07) 599 20 58 677 Åge Landro - EVP Field Perations (01.08.07 - 31.12.07) 375 29 31 435 Johan Warmedal - CEO Asia Pacific (01.09.07 - 31.12.07) 787 16 - 803 Erling Storaune - CEO Americas 2 080 - 37 2 118 Erik grantangen - EVP HSEQ (01.04.07 - 31.12.07) 673 29 54 755 Robert mcPherson - EVP Human Resources (05.02.07 - 31.12.07)) 1 238 111 - 1 349 Total 14 212 430 683 15 324 2008 Pension OtherManagement Directors (MD): Wages premiums remuneration Total Sverre Skogen - Chief Executive Officer 2 100 58 42 2 201 Svein Sollund - Chief Financial Officer 1 586 55 25 1 666 Stig Andersen - EVP Drilling Services (01.01.08 - 31.03.08) 345 13 27 385 Arne Aune - EVP Drilling Services (01.04.08 - 30.06.08) 262 14 181 456 Tom Hasler - EVP Drilling Services (01.08.08 - 31.12.08) 942 4 131 1 077 Richard Erskine - EVP Petroleum Services (01.01.08 - 31.08.08) 1 186 33 38 1 257 Sjur Talstad - Chief Executive Officer Petroleum Seriveces (01.10.08 - 31.12.08) 2 925 15 67 3 007 Arne Aune - EVP group functions (01.01.08 - 31.03.08) 425 14 117 556 Åge Landro - EVP Field Operations 1 256 51 46 1 354 Total 11 027 259 674 11 959

Pr. 31.12.2008 there are no loans or guarantees to the group CEO, members of the board, members of the group Executive management directors , or any related parties of these.

All the Executive management has a bonus agreement that entitel them to up to 40% bonus of annual salary. in 2007 the bonus was paid out according to the share pro-gram, in 2009 there will be paid out a bonus related to 2008 to the group CEO on TNOK 139, to the CFO on TNOK 105, to the CEO Petroleum Services on TNOK 280 and to the EVP Field Operations TNOK 359.

The Executive management has a bonus agreement over a 3 years program, where they received an individual offer between 150,000 and 1,600,000 shares in the com-panies AgR Ansattefond 1 AS and AgR Ansattefond 1A AS in 2007, that equals 4,739 and 75,830 shares in AgR group ASA. The company matched with 94.7% of the amount of shares the employee purchased. The employee cannot sell the shares before the expiration of 3 years from the purchasing date. The price per shares was NOK

AnnuAl report2008

50


46, this was inclusive a rebate of NOK 13 per share based on valuation from FiRST over the lockup period. The Executive management has together 2,235,158 shares in AgR Ansattefond 1 AS and Ansattefond 1 A AS in 2008. That equals 204,214 shares in AgR group ASA.

All of the Executive management except for the group CEO has between a 3 and 6 month notice period and their wage is paid during the notice period. The group CEO has 12 month severance pay , with deduction of any other wages received during this period.

The CEO Petroleum Services has received a signon fee on TNOK 2,400.

The resign EVP Drilling Services received a termination fee on TNOK 963 inclusiv other remunerations.

The chairman of the board acting from 1 January to the 7 April receive a annual remuneration of TNOK 350. At the extraordinary general meeing on 7 April 2008 a new board of directors were elected. The new chairman of the board does not receive any annual remuneration. Three of the eight borard members have a remuneration of TNOK 150. No remuneration has been paid to the new board members in 2008.

The board members have together 779,552 shares in AgR Ansattefond 1 AS in 2008 That equals 41,889 shares in AgR group ASA.

Remuneration policy:

mAiN PRiNCiPLESThe main principles for AgR management remuneration policy are that executive management shall be offered competitive remuneration, when salaries, benefits in kind, bonuses and pension arrangements are taken into consideration.

BONuSES AND OTHER ADDiTiONAL BENEFiTSAs a guideline, compensation in the form of a cash bonus in addition to base salary may be offered to executive management. Such bonuses shall however, be limited to certain percentages of the base salary and to achievement of certain predetermined objectives. guidelines for distribution of bonuses shall be determined by the Board of Directors, after consulting with the company’s remuneration committee.

Executive management shall as a general rule be entitled to participate in pension schemes that ensure pension benefits in proportion to their level of salary as employees. The executive management of the company are members of the company’s collective pension scheme.

The members of the company’s executive management have other ordinary benefits in kind, such as free phone, car allowance, etc, but do not have other material benefits in kind. Some members of the company’s executive management are working under expatriate agreements, including benefits such as housing.

in respect of severance payments or benefits these will be agreed on an individual basis. Some of the current members of the executive management have rights to sever-ance payment, corresponding to 6 to 18 months base salary, if their employment is terminated by the company. As a guideline severance payments shall be in accordance with the company’s main principles, i.e. that the level of remuneration shall be competitive when all benefits are seen as a whole.

SHARE iNVESTmENT PROgRAmin 2007 a Share investment Program was launched. AgR has invited the executives, in Norway, uK, Australia and uS, to share in this potential future value creation.The Employees have invested up to NOK 800,000 each in the EBC i and EBC 1A, AgR Ansattefond i AS and AgR Ansattefond i A AS –limited liability companies registered in Norway and governed by Norwegian Law. The Employees have received Class A shares in EBC i and EBC 1A. The Company is registered in the Norwegian central Registry of Business Enterprises.

The purpose of EBC i and EBC 1A is to purchase shares in AgR to give the shareholders of EBC i and EBC 1A part of the future growth of AgR.AgR have subscribed for 1 B-share in EBC i and EBC 1A with an amount equal to 94.7% of the amount invested by the Employees. Furthermore, a 12,5% debt financing agreement has been put in place. The employees will not own shares directly but through a new company solely for the purpose of owning shares in AgR on behalf of Share investment Program participants. The shares will be “locked up” for three calendar years. The Board of Directors was given an authority by the general meeting to issue shares for NOK 46, by a private placing in EBC i. This shareprice had a discount of NOK 13, due to the lock-up period on these shares.

AgR owns one Class B share in EBC i and EBC 1A. The B share has 50 % voting rights, and will accordingly have the majority at the shareholders’ meeting and also the power to prevent changes to the by-laws. The B shareholder does not have right to receive dividends under the by-laws of EBC i and EBC 1A. A prerequisite to owning shares in EBC i and EBC 1A is to be employed in AgR. Should employment in AgR be terminated prior to the period starting 1 of June, 2007 and ending 1 of June, 2010 (“Lock-in Period”), the shares in EBC i and EBC 1A will be redeemed by EBC i and EBC 1A. The compensation to the employees will in this case be based on the actual value of the shares, limited upwards to the employee’s initial investment. The compensation will be deducted with a proportional part of finance- and administration cost.

The Employee’s shares in EBC i and EBC 1A cannot be sold, transferred or pledged before the expiration of the Lock-in Period.Shares may though be transferred to a company wholly-owned by the shareholders (private investment company). in addition, shareholders (the employees) of the share-holders (private investment company) are obliged to not transfer any of their shares in the shareholders to other than companies wholly-owned by the shareholders of the shareholders.

AnnuAl report2008

51


NOTE 26 PROViSiONS

under the by-laws of EBC i and EBC 1A, dividends cannot be determined before the expiration of the Lock-in period. At that date, EBC i and EBC 1A will be wound up under its by-laws, and the equity will be distributed to the shareholders provided that the Employee is still an employee at AgR or one of its subsidiaries at the end of the Lock-in Period. EBC 1 and EBC 1A was merged in 2008.

AuDiTOR’S FEE The Board has reviewed the level and distribution of fees paid to our auditors, PwC, and considers them to be appropriate. Specification of auditor’s fee excl. VAT 2008 2007Fees for audit of annual accounts 4 813 3 623 Fees for other attestation services 1 942 318 Fees for tax-related services 4 975 1 750 Fees for other services* 3 283 2 951 Total 15 013 8 642

* Fees for other services includes due diligence service and various technical assistance.

AgR acquired 100% of the outstanding share capital of F.J. Brown & Associates inc (F.J. Brown) in 2007 for a cash consideration of uSD 20 million. There will be an earn-out structure of maximum uSD 15 million. The earn-out amount will be payable to the sellers the 5th of may 2010.

The Earn-out agreement for FJ Brown has two elemts. Part one regards the sellers employment in AgR for the next three years.Part two regards the accumulated cash flow created in the Turnkey division per 31th of December 2011. The Turnkey division was demerged from FJ Brown just after the acquision to a company called AgR Turnkey Drilling inc. The obligation of a maximum amount of uSD 10 million regarding Turnkey has not been allocated to the group balance as not considered probable.

AgR aquired 100% of the outstanding share capital of TRACS international Consultancy Ltd (TRACS) in June 2008 for a cash consideration of gBP 14,6 million. The earn out structure has a maximum agreed amount of gBP 5,4 million. divided in 3 instalments. The condision for full payment is both employment in 30 months and revenue growth. The earn out is expected to be settled no later than march 2011.

The amount of a provision is the present value of the expenditures expected to be required to settle the obligation. The interest element is charged through profit and loss.

Figures in TNOKEarnout per 2008-12-31 Compamy Company Agreement Maximum Balance Due date obligatedF.J.Brown TuSD 5,000 TuSD 5,000 32 392 2010-05-05 AgR group Americas incTurnkey 20% of cash flow TuSD 10,000 - 2011-12-31 AgR group Americas incTRACS TgBP 5,421 TgBP 5,421 45 937 2011-03-07 AgR Peak group Holdings Ltd Current portion of earn-out (reclassified to current liability) (9 501) Other provisions 6 328

Total provisions as of 31 December 2008 75 156 Earnout per 2007-12-31 Compamy Company Agreement Maximum Balance Due date obligatedF.J.Brown TuSD 5,000 TuSD 5,000 23 595 2010-05-05 AgR group Americas incTurnkey 20% of cash flow TuSD 10,000 - 2011-12-31 AgR group Americas incAgR Asia Pacific Pty Ltd TAuD 12,000 57 359 2011-03-07 AgR Peak group Holdings LtdOther provisions 4 118

Total provisions as of 31 December 2008 85 072

AnnuAl report2008

52

NOTE 27 LEASiNg COSTS.

NOTE 28 FiNANCiAL iNCOmE AND EXPENCES

NOTE 29 FiNANCiAL mARKET RiSK

The group has entered into the following operating lease agreements for tangible assets not recognised in the balance sheet, but expensed as incurred:

Figures in TNOK 2008 2007Land, buildings and permanent property 61 575 25 112 Apartments 4 755 2 810 machinery and operating equipment 8 463 3 471 Total 74 793 31 393

The group has entered into lease agreements for premises, among others at Straume, Oslo and Stavanger, in Norway, Houston in uSA, Aberdeen and manchester in uK, Perth and melbourn in Austalia, Kuala Lumpur in malaysia, Almaty in Kazakstan, Varberg in Sweden, moscow in Russia and in Baku in Azerbaijan.

The group has entered into the following operating lease agreements for tangible assets not recognised in the balance sheet, but expensed as incurred:

Figures in TNOK 2008 2007interest income 21 332 8 551 Other financial income* 279 670 99 163 unrealised gain/(loss) of financial instruments calculated at fair value (Sonoran Energy inc) (3 100) (3 748)interest expense (145 139) (80 101)Other financial expense (251 984) (108 144)Total (99 221) (84 279) *include loss on interest rate swap of TNOK 23,978 in 2008 and gain TNOK 5,421 in 2007 Foreign exchange gains and -losses are included in other financial income and -expense.

The group has financial instruments linked to ordinary activities such as trade debtors, trade creditors and similar.

Short-term and medium-term interest rate risk arises from floating interest rates on parts of the company’s debt. The group has entered into interest rate swaps of mNOK 728 accounted for at fair value in accordance with iAS 39. in 2008, a loss of TNOK 21.746 has been recognised for interest rate swaps under other financial income.

The majority of the group’s debtors are publicly listed Norwegian and international oil companies. The group seek to obtain financial guarantees from debtors where the credit risk and exposure is considered to be high. in addition, the group has taken out credit insurance where a significant share of the group´s receivables are insured to avoid potential losses. The credit risk is thus considered to be low.

A proportion of the group’s turnover is in foreign currency, primarily uSD, gBP and AuD, whereas a major part of the cost payable is in NOK. As a result of the interna-tional operation, the group is exposed to fluctuations in currency exchange rates. in accordance with the group’s financial policy part of this exposure is hedged with FX-contracts. The existing FX-contracts are shown below. The group’s main foreign currency risk at the end of the year was NOK vs. uSD and gBP. The group is not directly exposed to fluctuations in commodity prices. Below is an outline of the group’s turnover, trade debtors and -creditors converted into NOK at balance sheet date:

AnnuAl report2008

53


2008 2007 Currency Currency (1.000) TNOK Share % Currency (1.000) TNOK Share % Turnover: uSD 132 739 748 966 32 % 71 569 419 098 20 %NOK 799 866 799 866 28 % 792 490 682 386 38 %gBP 47 814 494 004 17 % 28 315 330 024 16 %CAD 2 880 15 198 1 % 1 411 7 712 0 %AuD 102 458 485 506 21 % 102 398 502 865 24 %EuR 4 008 32 973 2 % 2 899 23 241 1 %AED 3 6 0 % 936 1 495 0 %DKK 855 944 0 % 6 778 7 292 0 %SEK 8 178 6 992 0 % 12 277 10 639 1 %Others - - 0 % 3 940 0 %Total 2 584 454 100 % 1 988 692 100 %

Debtors: uSD 64 918 454 369 44 % 72 065 389 451 29 %NOK 277 424 277 424 27 % 331 423 331 423 24 %DKK (88) (117) 0 % 3 420 3 652 0 %gBP 10 080 102 085 10 % 43 283 467 504 34 %AuD 32 057 155 750 16 % 34 129 163 031 12 %CAD 495 2 850 0 % 420 2 324 0 %SEK 683 618 0 % 400 338 0 %EuR 3 202 31 588 3 % 934 7 439 1 %Others - 235 0 % 194 0 %Total 1 024 802 100 % 1 365 356 100 % Creditors:

uSD 48 988 342 869 47 % 74 768 404 059 40 %NOK 172 708 172 708 24 % 174 811 174 811 17 %gBP 11 956 121 091 17 % 36 362 400 225 30 %DKK 0 0 0 % 27 29 0 %SEK 1 966 1 779 0 % 454 385 0 %CAD 6 35 0 % 37 204 0 %AuD 17 851 86 733 12 % 22 909 109 435 11 %EuR 204 2 014 0 % 2 188 17 420 2 %Others* - 1 808 0 % (184) 0 % Total 729 035 100 % 1 106 384 100 %

FX- forward contracts Bought Sold Due date Amount TNOK Unrealised gain/(loss) AgR Holdings AS NOK gBP 26-01-09 5 380 632 AgR Holdings AS NOK gBP 13-03-09 6 687 269 AgR Holdings AS NOK uSD 17-03-09 12 583 -607 AgR Holdings AS NOK gBP 15-06-09 6 685 245 AgR Holdings AS NOK uSD 15-06-09 12 611 -615 AgR Holdings AS NOK gBP 11-09-09 6 679 235 AgR Holdings AS NOK uSD 11-09-09 12 624 -599 AgR Holdings AS NOK gBP 12-10-09 6 666 221 AgR Holdings AS NOK uSD 12-10-09 12 623 -594

AnnuAl report2008

54


FX- options (Bought Puts) Bought Sold Due date Amount TNOK Unrealised gain/(loss) AgR Holdings AS NOK uSD 17-03-09 6 047 105 AgR Holdings AS NOK gBP 17-03-09 3 273 183 AgR Holdings AS NOK uSD 11-06-09 6 047 191 AgR Holdings AS NOK gBP 11-06-09 3 273 235 AgR Holdings AS NOK uSD 11-09-09 6 047 255 AgR Holdings AS NOK gBP 11-09-09 3 273 275 AgR Holdings AS NOK uSD 12-10-09 6 047 302 AgR Holdings AS NOK gBP 12-10-09 3 273 310 FX- options (Sold Calls) Bought Sold Due date Amount TNOK Unrealised gain/(loss) AgR Holdings AS NOK uSD 17-03-09 14 063 -318 AgR Holdings AS NOK gBP 17-03-09 7 013 -101 AgR Holdings AS NOK uSD 11-06-09 14 063 -542 AgR Holdings AS NOK gBP 11-06-09 7 013 -201 AgR Holdings AS NOK uSD 11-09-09 14 063 -692 AgR Holdings AS NOK gBP 11-09-09 7 013 -280 AgR Holdings AS NOK uSD 12-10-09 14 063 -795 AgR Holdings AS NOK gBP 12-10-09 7 013 -345

NOTE 30 RELATED PARTiES

NOTE 31 CONTiNgENCiES

NOTE 32 PuBLiC gRANTS

Figures in TNOK Purchase of goods /other operating costs 2008 2007AgR Eiendom AS 10 719 - Altor Equity Partners AB 1 107 Altor Equity Partners AS - 18 Total 10 720 125

AGR Eiendom AS: One employee has ownership interests in AgR Eiendom AS. All transactions with the company are carried out in market prices. The transactions in 2007 and 2008 relate to rental of premises.

Altor Equity Partneres AB / AS: investor Advisors to the main shareholder in parent company which has assisted in connection with acquisition of subsidiary companies.

The group was not involved in any significant disputes or legal action regarding contigencies as of 31.12.2008. As a result, provision for possible claims has not been made. For provision regarding trade debtors, please refer to note 13.

The group has received grants from the Research Council of Norway. No terms and conditions applies to these grants. The grants from the Research Council of Norway are recognised in the balance sheet and are posted as revenue in line with depreciation on the fixed assets to which they are linked.

Figures in TNOKSpecification of public grants received: 2008 2007The Research Council of Norway 9 442 958 Total 9 442 958

AnnuAl report2008

55

NOTE 33 FiNANCiAL ASSETS AT FAiR VALuE

NOTE 35 EVENTS AFTER THE BALANCE SHEET DATE

NOTE 36 ASSETS OF DiSPOSAL gROuP CLASSiFiED AS HELD FOR SALE AND DiSCONTiNuED OPERATiONS

NOTE 34 RAW mATERiALS AND CONSumABLES uSED

The company owns 4,590,338 shares in Sonoran Energy, inc which was purchased in December 2005 at a share price of 0.65 uSD. 25,000 shares was sold in 2007. The shares are classified as held for trading in the accounts and are entered in the balance sheet at market value as per 31.12.2008. Sonoran Energy inc is listed on NASDAQ and the quaoted price as of the balance sheet date is the basis for the market value below:

Figures in TNOKSpecification of market-based shares: 2008 2007Acquisition cost shares in Sonoran Energy in 20 230 20 230 Conversion to market price at 31.12. (19 659) (16 757)Market value 31.12. 571 3 473

AgR has sought to sell its subsidiary AgR Dpal AS which is the owner of a drill pipe factory at mongstad. AgR and NLi AS have on Friday 27/2-2009 signed an agreement regarding the sale and purchase of the shares in AgR Dpal AS, which is subject to certain customary conditions.

The assets and liabilities related to the companies AgR Dpal AS and Liquegas Energy Pty Ltd (part of the Drilling Service segment) have been presented as held for sale following the approval of the group’s Board of Directors to sell the companies. AgR Dpal AS was sold in February 2009 and Liquegas Energy Pty Ltd is also expected to be sold during 2009. in addition the result from the investment in FPSO Shiraz Pty Ltd (joint venture company) is classified as discontinued operations in the income state-ment following the approval of the group’s Board of Directors to sell the investment during 2009.

AgR group ASA entered into an agreement on November 14th 2008 to sell 100% of AgR Project Partner AS with subsidiaries for an enterprise value of NOK 85 million to Semco maritime AS, the Stavanger subsidiary of the Semco maritimegroup in Denmark. Closing of the agreement on November 28th 2008.The sale did not include the activities in Ålesund and Oslo, which remains in AgR and operate as AgR marine Engineering AS.

The results from AgR Project Partner AS and its subsidary is included in disconutinued operations in the income statement.

2008 2007Operating cash-flows (32 851) (29 720)investing cash-flows (23 932) (6 985)Financing cash-flows - (349)Total cash-flows (56 783) (37 054) Assets of disposal group classified as held for sale: 2008 2007 Patents, research and development 972 Land, buildings and other property 30 491 investments in associated companies 1 175 Trade receivables 4 443 Other receivables 530 Cash and cash equivalents 254 Total 37 865 - Liabilities of disposal group classified as held for sale 2008 2007 Trade payables 3 893 Public charges 512 Other current liabilities 1 274 Total 5 679 -

Expenses classified as raw materials and consumables used are directly related to projects, such as project equipment, travelling expenses, loading etc.

AnnuAl report2008

56

NOTE 36 ASSETS OF DiSPOSAL gROuP CLASSiFiED AS HELD FOR SALE AND DiSCONTiNuED OPERATiONS

NOTE 37 FuNDiNg

Analysis of the result of discontinued operations 2008 2007External operating revenues 122 668 395 301 Project expenses/payroll expenses (99 404) (335 914)Other operating expenses (45 031) (26 132)EBITDA1 (21 767) 33 255 Depreciation and amortisation (153 509) (41 407)Operating profit(loss) (175 276) (8 152)Net financial items (6 893) (7 002)Share of profit of associated companies (21 379) (1 732)Operating profit(loss) before tax (203 548) (16 886)Tax 11 863 3 869 Profit after tax from discontiuned operations (191 685) (13 017) Gain from sale of discontinued operations 28 920 136 562

AgR has financial covenants related to its loans and the company considers that it is in compliance with these at Q4 2008. The company’s lenders have linked certain condi-tions to this, which AgR has not agreed to and the banks therefore claim that AgR is in breach of its covenants. As a consequence all debt to credit institutions has been classified as short-term in the annual accounts for 2008 according to iFRS (iAS 1.65) At the time of writing, the 2009 Q1 results are below expectations and it is probable that AgR will be in technical breach with one or more of the bank covenants. As a consequence AgR will enter into discussions with the banks to adjust the capital structure.

AnnuAl report2008

57

PROFiT AND LOSS ACCOuNT

PARENT

Figures in TNOK Note 2008 2007

Operating income

Employee benefit expense 11 1 390 1 805

Other operating expenses 11 16 424 2 747

Total operating costs 17 814 4 552

Operating profit (17 814) (4 552)

Financial income 12 32 047 20 927

Financial expenses 12 42 8

Net financial items 32 005 20 919

Ordinary profit before taxes 14 191 16 367

Tax on ordinary result 7 3 974 4 507

Profit for the period 10 217 11 860

BALANCE SHEET

Note 31.12.2008 31.12.2007

Assets

investment in subsidiaries and associated companies 2 503 749 456 500

Loan to subsidiaries 10 502 149 423 546

Financial fixed assets 1 005 898 880 046

Total fixed assets 1 005 898 880 046

group receivables 10 11 451 89 271

Other receivables 3 894 2 097

Receivables 12 345 91 368

Cash and cash equivalents 4 156 210

Current assets 12 501 91 578

Total assets 1 018 399 971 624

AnnuAl report2008

58

BALANCE SHEET (CONT.)

Figures in TNOK Note 31.12.2008 31.12.2007

Equity and liabilities

Share capital 5,6 142 422 140 712

Share premium fund 6 790 603 758 513

Total paid in equity 933 025 899 225

Earned equity 6 62 859 52 642

Total earned equity 62 859 52 642

Total equity 6 995 884 951 867

Trade payables 1 941 100

Public duties payable 1 160 137

group debt 10 18 678 18 000

Other current liabilities 9 737 1 520

Total current liabilities 22 515 19 757

Total liabilities 22 515 19 757

Total equity and liabilities 1 018 399 971 624

(SigNED) Reynir indahl

Board member

(SigNED)Per inge Remmen

Board member

(SigNED)Fiona Walker

Board member

(SigNED)Hugo Lund maurstad

Chairman of the Board

(SigNED)Tove magnussen Board member

(SigNED)maria TallaksenBoard member

(SigNED) Thomas Nilsson Board member

(SigNED) Sjur Talstad

Board member

(SigNED) Sverre Skogen

CEO

Oslo, 30 April 2009

AnnuAl report2008

59

CONSOLIDATED CASH FLOW STATEMENT

Figures in TNOK

group 2008 2007

Ordinary profit before taxes 14 191 16 367

Adjustment for group contribution entered as financial revenue - -

Change in trade payables 1 840 (552)

Change in other accruals (working capital) 1 443 (2 837)

Net cash flow from operational activities 17 474 12 978

Cash inflows/outflows from group debtors 1 799 (321 812)

Cash outflows for acquisitions less acquired cash (37 030) -

Net cash flow from investment activities (35 231) (321 812)

group contribution deposits (16 098) 43 481

issuance of shares 33 800 72 193

Net cash flow from finance activities 17 702 115 674

Net change in cash and equivalents (55) (193 160)

Cash and equivalents at start of period 210 193 370

Cash and equivalents at end of period 155 210

NOTE 01 ACCOuNTiNg PRiNCiPLES

The annual accounts have been prepared in accordance with the Accounting Act and NgAAP

Sales revenue Services are recognized as revenue when performed.

Classification and valuation of balance sheet items Assets meant for permanent ownership or use are classified as non-current assets. Assets held as a part of the company’s service cycle and is expected to be realized or used during the course of the unit’s normal production period are classified as current assets. Receivables are classified as current if they are to be settled within one year. Analogous criteria apply for liabilities. Current assets are valued at the lowest of acquisition cost and fair value. Current liabilities are entered at nominal value at the time they arise.

Non-current assets are valued at historical cost. Tangible fixed assets that deteriorate in value are depreciated on a linear basis over estimated financial lifespan. Tangible fixed assets are written down to real value in the event of a permanent decrease in value. Long-term liabilities in NOK, excluding other provisions, are entered in the balance sheet at nominal value at the time they arise. Provisions are discounted if the interest rate element is material.

Subsidiary companiesSubsidiary companies are valued in accordance with the cost method in the company accounts. The investment is calculated according to acquisition cost of the shares unless a write-down has been required. group contributions are entered as revenue in the same year as allocation in the subsidiary company is made.

ReceivablesDebtors and other receivables are entered in the balance sheet at nominal value less provision for bad debt. Provision for bad debt is estimated based on individual as-sessment of the debtors.

AnnuAl report2008

60


Short-term investments Short-term investments (shares classified as current) are valued at lowest of average acquisition cost and fair value at the balance sheet date. Dividends and other dis-bursements are recognized as other financial income.

Currencymonetary items in foreign currency is converted according to the exchange rate of the balance sheet date

TaxThe cost of tax in the profit and loss account comprises both the period’s tax payable, and changes in deferred tax. Deferred tax is calculated at a rate of 28% based on the temporary differences between accounting and tax values, as well as any loss to be carried forward at the end of the financial year. Deferred tax assets are recognized when it is probable that the company will have a sufficient future profit to utilize the tax asset. Tax increasing and tax reducing temporary differences are disclosed net.

Cash Flow StatementThe cash flow statement presents the accumulated cash flow for operational, investment and financial activities. The statement outlines the effect each activity has on liquid assets. The cash flow statement has been prepared in line with the indirect model.

NOTE 2 gROuP ENTiTiES

The company’s total Overview group companies Head Office share capital Equity interest Voting share Figures in TNOK Subsidiary companies: AgR Holdings AS Fjell - Norway 4 307 100 % 100 % AgR Emi Team AS Fjell - Norway 2 959 100 % 100 % AgR Pipetech AS Fjell - Norway 3 945 100 % 100 % AgR Subsea AS Fjell - Norway 1 900 100 % 100 % AgR Dpal AS Fjell - Norway 1 000 100 % 100 % AgR Petroleum Services AS Oslo - Norway 424 100 % 100 % AgR Peak group Holdings Ltd Aberdeen - uK 9 652 100 % 100 % AgR group Americas inc Houston-uSA 3 500 100 % 100 % AgR Asia Pacific Pty Ltd melbourn - Australia 24 100 % 100 % AgR Asia Pacific Holdings Pty Ltd melbourn - Australia 486 100 % 100 % AgR Asia Pacific Sdn Bhd Kuala Lumpur - malaysia 868 100 % 100 % AgR malaysia Sdn Bhd Kuala Lumpur - malaysia 0 100 % 100 % AgR Business Partner AS Fjell - Norway 100 100 % 100 % Altinex inc Houston-uSA 140 100 % 100 % AgR Triangle Technology AS Stavanger - Norway 150 100 % 100 % AgR Technology Design Ltd manchester - uK 1 100 % 100 % AgR Subsea Ltd Aberdeen - uK 10 100 % 100 % AgR Subsea inc Houston-uSA 7 100 % 100 % DPT Canada Ltd St. John’s-Canada - 100 % 100 % AgR integrity uK Ltd Aberdeen - uK 11 100 % 100 % AgR Peak Well management Ltd Aberdeen - uK 1 100 % 100 % AgR Peak Consultancy Services Ltd Aberdeen - uK 10 100 % 100 % AgR Peak Solutions Systems Ltd Aberdeen - uK 1 100 % 100 % AgR Peak Well mangagement m.E. Ltd Aberdeen - uK 55 100 % 100 % AgR Peak group Asia Pacific Pty Ltd Perth - Australia 5 100 % 100 % Liquegas Energy Pty Ltd melbourn - Australia 32 800 100 % 100 % Teredo AS Oslo - Norway 100 100 % 100 % AgR Reservoir Evaluation Services Kazakstan Ltd Aberdeen - uK 1 100 % 100 % AgR Reservoir Evaluation Services Kazakstan - Branche Almaty - Kazakstan - 100 % 100 % AgR Central Asia AS Oslo - Norway 100 100 % 100 % AgR EmiTeam AB Varberg - Sweden 90 100 % 100 % AgR mexico inc Houston-uSA 7 100 % 100 % AgR Petroleum Services inc. Houston-uSA 7 100 % 100 % AgR group Canada inc Houston-uSA 7 100 % 100 % FJ Brown inc Houston-uSA 162 100 % 100 % Turn Key Drilling inc Houston-uSA 7 100 % 100 % AgR Field Operation inc Houston-uSA 7 100 % 100 % AgR Oil and gas Services Pty Ltd melbourn - Australia 0 100 % 100 %

AnnuAl report2008

61

NOTE 2 gROuP ENTiTiES (CONT.)

The company’s totalOverview group companies Head Office share capital Equity interest Voting share AgR Drilling Services Holdings AS Fjell - Norway 3 865 100 % 100 % AgR Field Operations Holdings AS Fjell - Norway 3 028 100 % 100 % AgR CannSeal AS Fjell - Norway 1 000 100 % 100 % marin Engineering AS Ålesund - Norway 100 100 % 100 % AgR Tunisia AS Oslo - Norway 100 100 % 100 % AgR Peak Solutions Systems Pty Ltd Perth - Australia 5 100 % 100 % TRACS international Consultancy Ltd Aberdeen - uK 300 100 % 100 % TRACS international Training Ltd Aberdeen - uK 65 100 % 100 % TRACS Consult LLC moscow - Russia 71 100 % 100 % AgR Deepwater inc Delaware - uSA 44 478 51 % 51 % Reservoir Service Ltd Liabilities Co. moscow - Russia 2 51 % 51 %

NOTE 3 OTHER CuRRENT RECEiVABLES

Figures in TNOK 2008 2007 Prepaid wages - 350 Other current receivables - 238 Prepaid costs 894 1 508 Other current receivables 31.12. 894 2 096

NOTE 4 CASH AND CASH EQuiVALENTS

Figures in TNOK 2007 2006 Cash - - Bank deposits 156 210 Cash and cash equivalents 31.12. 156 210 Of which is restricted deposits: - -

NOTE 5 SHARE CAPiTAL AND SHAREHOLDER iNFORmATiON

Share capital: At 31.12.2008, the company had a share capital of TNOK 142,422 distributed in 71,210,808 shares, each with a nominal value of NOK 2.

Issue of shares to employeesThe Board of Directors of AgR group ASA (“AgR”) on 5 November 2007 resolved to increase the company’s share capital pursuant authorizations given by the Annual general meeting on 26 April 2007. The shares was issued as part of AgR group’s incentive plan for employees and board members in the group companies, as presented to and approved by the general meeting. The Board resolved to issue a total of 1,581,863 shares as follows:

1 SHARE iSSuE TOWARDS AgR ANSATTEFOND i AS AND AgR ANSATTEFOND 1 A ASThe Board resolved to issue 1,401,837 shares to AgR Ansattefond i AS and 140,896 shares to AgR Ansattefond 1 A AS, at a share price of NOK 46 per share. in accord-ance with the authorization given to the Board by the general meeting in April 2007 the share price was set to a volume weighted average of the quoted share price on Oslo Børs in march 2007, with a rebate of NOK 13 per share.AgR Ansattefond i AS and AgR Ansattefond 1 A AS are Norwegian limited companies owned by employees and board members in AgR group ASA and its subsidiaries, including primary insiders. AgR owns one B-share in each of the companies, controlling 50% of the votes in each company, but with no financial rights.

2 DiSCOuNTED SHARES TO OTHER EmPLOyEESEmployees in AgR and its subsidiaries were offered and subscribed shares in AgR at a share price equal to the last quoted share price on Oslo Børs on 5 November 2007, NOK 47,80, minus a 20% discount, where the discount is limited to a maximum of NOK 1,500 per person. This implies that each employee could subscribe AgR shares worth maximum NOK 7,500. The terms were in accordance with the employee share program as presented to and approved by the Annual general meeting on 26 April 2007.The discounted shares have a lock up for 1 year, during which the shares cannot be traded by the employees. The offered shares were ordinary shares in AgR and will entitle the shareholders to ordinary shareholder rights in the Company.in accordance with the above the Board of Directors resolved to issue a total of 39,130 shares pursuant to an authorization by the general meeting on 26 April 2007, at a share price of NOK 38,24.

Shareholder overview: Shareholders in AgR group ASA with a minimum of 1% share of ownership, as well as shares held by executive employees and board members including shares owned by affiliated individuals and companies, were at 31 December 2008 as follows:

AnnuAl report2008

62

NOTE 5 SHARE CAPiTAL AND SHAREHOLDER iNFORmATiON (CONT.)

Shareholders Number of shares Equity interestALTOR 2003 gP LimiTED AS gENERAL 54 543 849 76,6 %RBC DEXiA iNVESTOR SERViCES BANK 3 561 550 5,0 %HEmACA A/S 1 724 993 2,4 %AgR ANSATTEFOND i AS 1 229 787 1,7 %JPmORgAN CHASE BANK 1 197 328 1,7 %CiTiBANK N.A. (LONDON BRANCH) 1 025 308 1,4 %JPmORgAN BANK LuXEmBOuRg 685 000 1,0 % Total 63 967 815 89,8 % Board: Tove magnussen (direct own and indirect own via the employee fund) 36 556 0,1 % Per inge Remmen (indirect own via PiR AS ) 4 208 0,0 % Fiona Forbes Walker (indirect own via the employee fond) 2 909 0,0 % Total shares owned by board members 43 673 0,1 %

Management group: Sverre Skogen (indirect own via Hemaca AS and the employee fund) 1 831 764 2,57 % Arne Aune (indirect own via the employee fund) 90 430 0,13 % Svein Sollund (indirect own via the employee fund) 38 979 0,05 % Åge Landro (indirect own via the employee fund) 38 979 0,05 % Thomas Hasler (indirect own via the employee fund) 19 485 0,03 % Stig T. Andersen (indirect own via the employee fund) 19 490 0,03 % Total shares own by the management group 2 039 127 2,9 %

NOTE 6 CHANgES iN EQuiTy

Share Premium Total invested TotalTHE PARENT COMPANY: capital funds capital Reserves reserves Opening balance 01.01.08 140 712 758 513 899 225 52 641 951 866 Result for financial year - 10 217 10 217 increase in share capital from cash deposit 1 710 32 090 33 800 - 33 800 Adjustment to equity for 2008 1 710 32 090 33 800 10 217 44 017 Closing balance 31.12.08 142 422 790 603 933 025 62 858 995 883

NOTE 7 TAX

Figures in TNOK 2008 2007 Tax payable Norway 3 974 4 507 Amendments, deferred tax Norway - - Income tax expense 3 974 4 507 Reconciliation of tax payable Tax payable 3 974 4 507 Tax payable of group contribution (3 974) (4 507) Tax payable in balance sheet - - Reconsiliation of tax payable Pre-tax result 14 191 16 367 Expected 28% tax cost 3 974 4 583 Variance, actual and expected tax cost (0) (75)

AnnuAl report2008

63

NOTE 7 TAX

Explanation why actual tax cost deviates from expected tax cost: Tax effect from non-deductible costs - 75 Variance compared to expected tax cost - 75 Calculation of tax payable: 2008 2007 Pre-tax result 14 191 16 367 Non- deductible costs - (270) Amendments, deferred tax - - Basis for tax calculation 14 191 16 098

Deferred taxBelow is a specification of interim variations between account-related and tax-related values, as well as calculation of deferred tax / tax advantage at the end of the financial year.

Basis for deferred tax 2008 2007 Loss carried forward - - Amount linked to long-term balance sheet items - - Total, interim variances - - Calculation of deferred tax / tax advantage Deferred tax advantage entered in balance sheet - -

NOTE 8 OTHER LONg-TERm LiABiLiTiES

NOTE 10 iNTRA gROuP BALANCES

All interest bearing loans are raised by the subsidiary company AgR Holdings AS

Joint and severally responsibility:The company does not have any interest bearing loans, but they are joint and severally responsible for the long term loan for the group. The group has in its agreement with the bank issued a negative pledge, this also applies to all of the subsidiaries in the group.

For further information see the notes to the group accounts.

Specification of intra group balances 2008 2007Long term-loan: AgR Petroleum Services Holdings AS 189 294 423 546 AgR Field Operations Holdings AS 312 855 - Total long term-loan 502 149 423 546 interest charge on intra group loans is NiBOR + 2,5%. instalments by further agreements. AgR Holdings AS was demerged to 3 Holding companies by the 1st of January 2008. The loan to AgR Holdings is divided to the three companies according to the demerge balance split. AgR Holdings AS has changed its name to AgR Petroleum Services AS.

Short-term group receivables: 2008 2007AgR Cannseal AS 11 315 - AgR Petroleum Services Holdings AS - 89 271 AgR Drilling Services Holdings AS 9 AgR Field Operations Holdings AS 127 - Total short term 11 451 89 271

AnnuAl report2008

64

NOTE 10 iNTRA gROuP BALANCES

Figures in TNOKSpecification of intra group balances 2008 2007

Long term-loan: AgR Petroleum Services Holdings AS 189 294 423 546 AgR Field Operations Holdings AS 312 855 - Total long term-loan 502 149 423 546 interest charge on intra group loans is NiBOR + 2,5%. instalments by further agreements.

AgR Holdings AS was demerged to 3 Holding companies by the 1st of January 2008. The loan to AgR Holdings is divided to the three companies according to the demerge balance split. AgR Holdings AS has changed its name to AgR Petroleum Services AS. Short-term group receivables: 2008 2007 AgR Cannseal AS 11 315 - AgR Petroleum Services Holdings AS - 89 271 AgR Drilling Services Holdings AS 9 AgR Field Operations Holdings AS 127 - Total short term 11 451 89 271


Short-term group paybles: 2008 2007 AgR Petroleum Services Holdings AS - 1 903 AgR Drilling Services Holdings AS 2 776 AgR Triangle Technology AS 1 643 - AgR Business Partner AS 67 - group contribution 14 191 16 098 Total 18 678 18 000

AgR group ASA has no employees. There are only payments to the board members. Wages to Chief Executive for the company is paid from the subsidiary AgR Petroleum Services Hold-ings AS.

Accumulated expenses for wages, pension premiums and other remuneration to managing director, other group executives and members of the company’s board accordingly for 2008 were: Pension Other Figures in TNOK Wages premiums remuneration Total Chief Executive 2 100 58 42 2 200 The board 800 - 800 Total 2 900 58 42 3 000

under other remuneration there are mainly electronic communication, car allowance, traveling expenses for the partner and assurance.

The Chief Executive has a bonus agreement over a 3 years program; he has received an offer to buy shares in the company AgR Ansattefond 1 AS in 2007. The company matched whit 94.7% of the amount of shares the employee purchased. The employee cannot sell the shares before the expiration of 3 years from the purchasing date. The price per shares was NOK 46, this was inclusive a rebate of NOK 13 per share. The Chief Executive bought 2,004,785 shares in the program. in addition the Chief Executive has a right to a bonus agreement that entitle him to up to 40 % of his annual salary based on the group’s profit. in 2008 it will be paid out a bonus to the group CEO on TNOK 139.

AnnuAl report2008

65

NOTE 11 WAgES, FEES, NumBER OF EmPLOyEES ETC. (CONT.)

Per 31.12.2008 there are no loans or guarantees to the group CEO, members of the board, members of the group management directors, or any related parties of these.

The group CEO has a 12 month notice period. Wage is paid during the notice period, with the deduction of any other wages received during this period.

The chairmen of the board acting from 1 of January to the 7 of April receive an annual remuneration of TNOK 350. At the extraordinary general meeting on April 7 2008 new boards of direcotrs were elected. The new chairman of the board does not receive any annual remuneration. Three of the eight board members have a remuneration of TNOK 150. No remuneration has been paid to the new board members in 2008.

The board members have together 779,552 shares in AgR Ansattefond 1 AS in 2008. That equals 41,889 shares in AgR group ASA.

Specification of auditor’s fee 2008 2007 Fees for audit of annual accounts 1 346 22 Fees for tax-related and corporate legislation advice 2 751 - Fees for other attestation services 1 382 - Fees for other services - 49 Total 5 479 71

NOTE 12 FiNANCiAL iNCOmE AND EXPENSE

Figures in TNOK 2008 2007 interest income from group companies 31 642 20 451 Other interest income 31 472 Other financial income 374 5 Other interest expense (37) - Other financial expense (5) (8) Total 32 005 20 919

NOTE 13 RELATED PARTiES

Refers to note 30 in the group accouts.

NOTE 14 CONTiNgENCiES

The group was not involved in any significant disputes or legal action regarding contigencies as of 31.12.2008. As a result, provision for possible claims has not been made.

NOTE 15 EVENTS OCCuRRiNg AFTER DATE OF BALANCE SHEET

Refers to note 35 in the group accounts .

AnnuAl report2008

66

AUDITOR’S REPORT

To the Annual Shareholders’ meeting of AgR group ASA

Auditor’s report for 2008

We have audited the annual financial statements of AgR group ASA as of December 31, 2008, showing a profit of TNOK 10 217 for the parent company and a loss of TNOK -317 184 for the group. We have also audited the information in the directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit. The annual financial statements comprise the financial statements of the parent company and the group. The financial statements of the parent company comprise the balance sheet, the statements of income and cash flows, the statement of changes in equity and the accompanying notes. The financial statements of the group comprise the balance sheet, the statements of income and cash flows, the statement of changes in equity and the accompanying notes. The regulations of the Norwegian accounting act and accounting standards, principles and practices generally accepted in Norway have been applied in the preparation of the financial statements of the parent company. international Financial Reporting Standards as adopted by the Eu have been applied in the preparation of the financial statements of the group. These financial statements are the responsibility of the Company’s Board of Directors and managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors.

We conducted our audit in accordance with laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by The Norwegian institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and auditing standards an audit also comprises a review of the management of the Company’s financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion.

in our opinion,• the financial statements of the parent company have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the company as of December 31,2008 and the results of its operations and its cash flows and the changes in equity for the year then ended, in accordance with accounting standards, principles and practices generally accepted in Norway • the financial statements of the group have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the group as of December 31, 2008, and the results of its operations and its cash flows and the changes in equity for the year then ended, in accordance with international Financial Reporting Standards as adopted by the Eu• the company’s management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway• the information in the directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit are consistent with the financial statements and comply with the law and regulations.

Without qualifying our opinion above, we emphasise that there is significant uncertainty as to the company’s ability to continue operations. We refer to further remarks in the financial statements and the Annual Report. We also emphasise that there is significant uncertainty connected to the prognoses which form the basis of the company’s impairment tests in the Drilling segment. We refer to further remarks in the Annual Report and in note 4 and 8 to the financial statements.

Bergen, April 30, 2009PricewaterhouseCoopers AS

Sturle DøsenState Authorised Public Accountant (Norway)

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

AnnuAl report2008

67

Reynir IndahlBOARD mEmBER

Per Inge RemmenBOARD mEmBER

Fiona WalkerBOARD mEmBER

Hugo Lund MaurstadCHAiRmAN OF THE BOARD

Tove MagnussenBOARD mEmBER

Maria TallaksenBOARD mEmBER

Thomas NilssonBOARD mEmBER

Sjur TalstadBOARD mEmBER

Sverre SkogenCEO

RESPONSIBILITY STATEMENT

Responsibility Statement

We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2008 have been prepared in accordance with current ap-plicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and the group taken as a whole. We also confirm that the management report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group.

Oslo, 30 April 2009

AnnuAl report2008

68

annual report08 - agr reports/agr group 2008.pdfand pipeline trenching services. the 2008 ebit-da...

Documents