iesa Óleo & gÁs s.a.2011 that could not be allocated in the pertinent projects. general and...

IESA ÓLEO & GÁS S.A.

Financial Statements Business years ending on December 31st 2011 and 2010

IESA ÓLEO & GÁS S.A. Financial Statements Business years ending on December 31st 2011 and 2010

Content Administration Report Balance Sheets Financial Statements Statement of Comprehensive Income Statement of Shareholders’ Equity Cashflow Statement – Indirect Method Value Added Statement Explanatory Notes to the Financial Statements Auditors Report


MANAGEMENT REPORT Business Year 2011

Introduction

This report is intended to show the main activities of IESA Óleo & Gás S/A in the period from January 1st to December 31st, 2011. It also intends to show the Company´s strong commitment to sustainability in its projects and actions. The financial statements included herein have been prepared in full compliance with the Corporate Law and include the Independent Auditors’ report. The content of this publication is available on www.iesa.com.br.

Company’s Profile

IESA Óleo & Gás S/A is one of the most acknowledged and respected Brazilian companies in the sector for implementation of projects in Brazil’s oil market not only due to the great expertise of its engineering, procurement, construction and assembly staff, but also due to the ability in managing integrated solutions for the clients in Oil, Gas, Petrochemical and Thermal Generation industries. As a member of a Group with strong presence in the market for over four decades, IESA Óleo & Gás S/A has participated in the largest recent projects in the Brazilian Oil and Gas sector.

Headquartered in the city of Rio de Janeiro, IESA Óleo & Gás S/A has strongly performed under EPC (Engineering, Procurement and Construction) contracts, being supported by the synergy existing with industrial units of the Group in the State of Sao Paulo and with its two industrial bases – one located in Macaé in the State of Rio de Janeiro, and another in Santos lowland, in São Paulo, both specialized in the activities of maintenance, renovation and modernization of oil and gas platforms.

The Company will escalate its activities due to the purchase in 2010 of a land measuring 360 thousand m2 in Charqueadas, Rio Grande do Sul, to build an industrial unity with capacity for assembling up to 20 modules for oil platforms simultaneously. The construction of such facilities in the city of Charqueadas was decided due to the logistic items offered by this Southern city, specially the possibility of navigation to the city of Rio Grande, where there is already an oil platform production pole.



IESA Óleo & Gás S/A/is duly prepared to develop projects of operational partnerships with national and foreign financing agents, companies in the oil and techonolgy industries, in Built, Operate and Transfer (BOT), Built, Operate and Owns (BOO) and Built, Leasing and Transfer (BLT) forms, for energy industries, specially thermal generation, refining and petrochemical.

The principles of IESA Óleo & Gás S/A determine that quality, safety, environment and health in work and social accountability must be remarkable factors and make a difference in the market, therefore, each product or service supplied must bring all technical and managerial competence of the company and of its staff.

The basic principles required from all the professionals of IESA Óleo & Gás are commitment to quality, to professional respect and to the image of the company. Such principles orient the relationship of its staff with clients, shareholders and the whole market.

The various certifications of IESA Óleo & Gás S/A – OHSAS 18001, ISO 9001, ISO 14001, SA 8000 and ISO/TS 29001 - enlarges its capabilities level and its concerns with clients, workforce and environment.

To improve social conditions, IESA Óleo & Gás S/A fosters a number of cultural and charity actions to the benefit of dwellers in the communities in which it operates, developing educational programs aimed at including young people and adults in the labor market, thus reducing social and economic differences.

The “Best Company to Work For – Rio de Janeiro and Brazil”, “Best Companies in Personnel management” and “SESI Quality in Work” awards received in 2011, confirm that IESA Óleo & Gás is always looking for providing its workers with the best quality of life and welfare, keeping a pleasant working environment and a cohesive, motivated and trained team.

Comment on Operational Performance

The year of 2011 was characterized by the startup of the Gas Treatment Unit in Caraguatatuba, a project performed under EPC contract by the Consortium Queiroz Galvão – Camargo Correa – IESA Óleo & Gás for the client PETROBRAS. This unit will process 18 million m³/day of gas from



the fields of Santos Basin. The operation of the Hydrodesulphurization Unit of REDUC, constructed under EPC form by the consortium Queiroz Galvão-IESA Óleo & Gás, also started.

In 2011, QUIP, a jointly controlled society, completed the work of preparation of its headquarters’ construction site in Rio Grande – RS and consolidated the process of P-63 construction of modules. In China, the process of construction of some P-63 modules and the conversion of the BW Nisa vessel into hull to sustain the modules are in final stage. The final step of modules integration in Rio Grande – RS is scheduled to start in the middle of 2012, when the converted hull and the modules are expected to arrive from China.

The work for P55, which is also being constructed by QUIP, is about 75% completed, and the highlight in 2011 is the arrival at Rio Grande shipyard of the hull to allow the integration to the deck box and provide Brazil with the first Mating of the country. This process is scheduled for the first quarter of 2012.

The final backlog for 2011 was R$ 1,6 billion (R$ 2,4 billion in 2010). Such backlog lower level is a result of some investments of PETROBRAS being postponed for 2012, mainly the contract for the modules for 8 replicant FPSO that are being built by Engevix and are a priority in PETROBRAS’ strategic planning.

Based on such purchase orders and on the market perspectives – projects for construction of new refineries, fertilizer plant, as well as platforms and modules that will be necessary for pre-salt, which will certainly generate new businesses – a solid performance is estimated, thus keeping the positive expectations in the years to come. Gross operating income was R$ 960 million, amount 18,4% higher than 2010, maintaining a growth vertex in the annual sales thus evidencing the correct strategic targeting adopted and the competency of delivering products and services within the deadlines stipulated and with the quality set out by the industry.



Sales expenses amounted to R$ 17,7 million, which is an increase compared to 2010, when the amount was R$ 7 million, especially due to the increase in expenses with proposals delivered in 2011 that could not be allocated in the pertinent projects.

General and administrative expenses amounted to R$ 70,2 million, representing an increase of 27% in absolute values in relation to 2010 (R$ 56,1 million). When compared as net income percentage, general and administrative expenses kept in the same level of the previous year, 7,7% in 2011 against 7,5% in 2010. The infrastructure working sector for oil and gas industry have been through the shortage of qualified workforce and in this consideration the Company maintains an aggressive policy to retain and attract new talents required for the new investments demanded by the industry.

Shareholders’ equity showed a profit of R$ 50,4 million in 2011 against R$ 5 million in 2010. This remarkable result is a consequence of the construction projects for the oil and gas platforms P-55, P-62 and P-63, performed by the jointly controlled companies QUIP, CCI and RIG, respectively.

590,0

701,9 732,1 741,9

632,7

727,0 810,7

960,2

2008 2009 2010 2011

Controlling Company Consolidated In million s R$



IESA Óleo & Gás gross cash generation measured by EBITDA (Earnings Before Interests, Taxes, Depreciation and Amortization) in 2011 was R$ 94,6 million against R$ 76 million in 2010, with a margin of 10%.

At the end of business year 2011 indebtedness was R$ 297,7 million mostly represented by working capital operations and proper schedule of payment to the Company’s cash generation.

Social Management in 2011

Aiming at the development of the society, the company nurtures several cultural and beneficial actions in its neighborhoods, developing educational programs with the purpose of including young people and adults in the labor market, thus reducing social and economic differences.

Among such social programs developed in 2011, we highlight the following:

76,8 82,9 76,0 94,6

14% 13%10% 10%

1,00%

10,00%

100,00%

1,0

10,0

100,0

2008 2009 2010 2011

EBITDA EBITDA Margin In millions of R$



12,842 assistances offered at Providencia UPP (Peace Police Unit) (elementary and high school teaching, complementary courses, improvement of professional abilities, sport and “Knowledge Industry” in partnership with Firjan System.

Solidary June Party, with more than 5 thousand people, in benefit of seven institutions. Pedagogic actions on STD, AIDS, Drugs and Alcoholism in public schools in the cities of

Rio de Janeiro and Macae, in partnership with NGO Pela Vidda, Social Diversity Movement and with the Municipal Secretary of Education, benefiting more than 750 teachers and students;

Continuing Education courses for Barra de Macae and neighborhood dwellers, in partnership with Barra de Macae Resident Association and Firjan System;

Maintenance of graduation scholarships for IESA’s workers and their children, from daycare to university graduation, within Inepar Scholarship Program – Probein.

In 2011 IESA Óleo & Gás was offered the several awards such as:

February 2011 – SESI Quality in Work Award as Medium Company in Rio Grande do Sul – 2nd place

March 2011 – SESI Quality in Work Award in the category Personnel management - 2nd

place in Brazil August 2011 – Great Place to Work Award “Best Companies to Work for” – 5th place in

Rio de Janeiro August 2011 – Great Place to Work Award “Best Company to Work for in Rio de

Janeiro”, in the categories “thank, develop and care” August 2011 – Great Place to Work Award “Best Companies to Work for in Brazil”,

category “small and medium companies” – 10th place August 2011 – Great Place to Work Award “Best Companies to Work for in Brazil”,

category “quality of life” – 4th place August 2011 – Fifth place in the category “Mechanical and Electrical Construction” in the

Brazilian engineering ranking prepared by “O Empreiteiro” (the Entrepreneur) Magazine. September 2011 – “150 Best Companies to Work for” Award given by “Você S/A” and

“Exame” Magazines



October 2011 – “The Best in Personnel Management” Award, category “100 to 500 employees”, developed by AON Hewitt and “Valor Econômico” newspaper – 2th place.

Acknowledgements

IESA Óleo & Gás S/A Management thanks its shareholders, suppliers, partners, clients and financial institutions for their support enabling us to reach a quick process of corporate consolidation. We thank especially our employees for their efforts and full dedication.

Executive Board of Officers

IESA Óleo & Gás S/AC.N.P.J. M.F - Nº 07.248.576/0001-11

Balance sheetsBusiness years ending December 31st 2011 and 2010(In thousand of reais)

Assets Note 12/31/2011 12/31/2010 12/31/2011 12/31/2010

Current AssetsCash and Cash Equivalent 5 74.931 63.527 201.572 124.098 Clients 6 113.619 137.003 115.082 137.621 Note Receivables 7 218.344 - 218.344 Inventories 8 45.615 35.169 82.351 49.902 Tax Credits 9 5.550 9.691 6.178 9.737 Dividend Receivables 36.083 - - - Asset Kept for Sale - 128.897 - 128.897 Prepaid Expenses 359 957 421 998 Other Credits 6 1.108 1.964 5.340 1.827

Total of Current Assets 495.609 377.208 629.288 453.080

Non-Current AssetsLong Term Receivables

Associated Companies 18.1 16.599 - 19.749 - Note Receivable 7 4.007 - 4.007 - Deferred Taxes 16.1 4.063 506 4.063 554 Other Credits 6 1.357 7 1.469 122

Investments 10 16.994 26.478 447 21.050 Premises and Equipment 11 29.389 34.704 40.607 38.792 Intangible 12 9.082 3.218 9.725 3.885

Total of Non-Current Assets 81.491 64.913 80.067 64.403

Total of Assets 577.100 442.121 709.355 517.483

The Explanatory Notes are part of the Financial Statements

CONTROLLING COMPANY CONSOLIDATED

IESA Óleo & Gás S/AC.N.P.J. M.F - Nº 07.248.576/0001-11Balance sheetsBusiness years ending December 31st 2011 and 2010(In thousand of reais)

Liabilities Note 12/31/2011 12/31/2010 12/31/2011 12/31/2010

Current LiabilitiesSuppliers 13 10.049 12.551 15.706 14.521 Funding and Loans 14 160.113 138.165 160.113 138.165 Social Liabilities 13 28.415 13.845 30.212 14.663 Tax and Contribution Payable 13 5.972 2.578 6.903 3.538 Proposed Dividends 254 - 2.732 - Cost and Charges Provision 4.519 231 4.519 231 Advances on Purchases 13 - 149 151.206 88.238 Debentures 15 31.514 - 31.514 Other Accounts Payable 13 6.926 3.092 6.935 3.101

Total of Current Liabilities 247.762 170.611 409.840 262.457

Non-Current LiabilitiesFunding and Loans 14 80.025 105.462 80.025 105.462 Tax and Contribution Payable 13 6.324 8.063 6.324 8.063 Loan with Associated Companies 18.1 39.342 18.938 9.282 2.427 Deferred Taxes 16.1 26.270 12.201 26.270 12.201 Debentures 15 26.100 - 26.100 Contingency Provisions 17 1.890 1.488 1.890 1.488 Other Accounts Payable 13 - - 237 27

Total of Non-Current Liabilities 179.951 146.152 150.128 129.668

Shareholders' EquityCapital Stock 19.1 102.996 102.996 102.996 102.996 Profit Reserves 46.395 22.403 46.395 22.403 Shareholders' Equity Adjustment (4) (41) (4) (41) Total of Shareholders' Equity 149.387 125.358 149.387 125.358

Total of Liabilities 577.100 442.121 709.355 517.483




Financial StatementsBusiness years ending December 31st 2011 and 2010(In thousand of reais)

Note 12/31/2011 12/31/2010 12/31/2011 12/31/2010

Gross Operating Income 22 741.858 732.071 960.203 810.658 Deductions and Taxes on Sales (44.601) (62.987) (44.601) (62.987)

Net Operating Income 21 697.257 669.084 915.602 747.671 Costs of Products and Services (580.318) (545.067) (735.793) (609.877)

Gross Profit 116.939 124.017 179.809 137.794

Operating Income (Expenses) 9.706 (49.226) (55.805) (62.120) Sale Expenses (17.715) (7.098) (17.715) (7.098) General and Administrative (55.236) (48.641) (70.289) (56.184) Other Income (Expenses) 22 32.250 1.494 32.203 1.398 Equity Profit/Loss 50.407 5.019 (4) (236)

Income before Financial Expenses 126.645 74.791 124.004 75.674 and Revenue

Financial Expenses 23 (68.293) (43.768) (70.265) (45.145) Financial Revenues 23 5.265 17.294 17.060 20.728

Income before Tax on Profit 63.617 48.317 70.799 51.257

Deferred Income Tax and Contribution 16.2 (10.512) (383) (10.512) (335) Current Income Tax and Contribution 16.2 (3.281) (7.504) (10.463) (10.492)

Income before Interests 49.824 40.430 49.824 40.430

Employees' Interest (11.670) (10.612) (11.670) (10.612)

Business Year Net Profit 38.154 29.818 38.154 29.818

Amount of shares at the end of the business year 65.995.745 65.995.745 66.995.745 60.425.526 Basic and diluted earnings per lot of a thousand shares - R$ 578,13 451,82 569,50 493,47



IESA ÓLEO & GÁS S/AC.N.P.J. M.F - Nº 07.248.576/0001-11

Statement of Shareholders' EquityBusiness years ending December 31st 2011 and 2010(In thousand of reais)

Profits Equity Capital Profits available Retained Evaluation Shareholders'Stock Legal Withheld for Shareholders Earnings Adjustment Equity

Balances on December 31st 2009 97.426 4.228 974 26.525 (10.582) - 118.571

Business Year Net Profit 29.818 29.818 Other Comprehensive Income - Exchange Adjustment of Associated Company Abroad (41) (41) Total of Comprehensive Income 29.777

Capital Increase - 14th ESGM dated 12/17/2009 2.442 2.442 Capital Increase - 15th ESGM dated 12/20/2010 3.128 3.128 2009 Dividends (28.560) (28.560) Capital Transactions with Partners (22.990)

Legal Reserve 962 (962) Statutory Reserve 18.274 (18.274)

Balances on December 31st 2010 102.996 5.190 974 16.239 - (41) 125.358

Business Year Net Profit 38.154 38.154 Other Comprehensive Income - Exchange Adjustment of Associated Company Abroad 37 37 Total of Comprehensive Income 38.191

2010 Dividends (14.162) (14.162) Capital Transactions with Partners (14.162)

Legal Reserve 2.437 (530) (1.907) Withholding of Profit for Investment 1.547 (1.547) Statutory Reserve 36.247 (36.247)

Balances on December 31th 2011 102.996 7.627 2.521 36.247 - (4) 149.387

As Notas Explicativas são parte integrante das demonstrações financeiras

Surplus Reserve

IESA ÓLEO & GÁS S/AC.N.P.J. M.F - Nº 07.248.576/0001-11

Statement of Comprehensive IncomeBusiness years ending December 31st 2011 and 2010

12/31/2011 12/31/2010

BUSINESS YEAR NET PROFIT 38.154 29.818

Other Comprehensive IncomeExchange Adjustments of Associated Company Abroad 37 (41)

BUSINESS YEAR COMPREHENSIVE INCOME 38.191 29.777



Cash Flow StatementBusiness Years Ending December 31 st 2011 and 2010(In thousands of reais)

12/31/2011 12/31/2010 12/31/2011 12/31/2010OPERATING ACTIVITIESBusiness Year Net Income 38.154 29.818 38.154 29.818 Expenses (income) that do not affect cash and cash equivalent

Depreciations and amortizations 2.442 935 4.207 1.844 Gain on permanent asset disposal (22.423) - (22.423) - Loss on permanent asset disposal 2.452 2 2.452 6 Shareholders' equity (50.407) (5.019) 4 236 Monetary and exchange variance 49.314 21.555 49.314 21.554 Deferred taxes 10.512 (1.163) 10.560 (1.211) Provisions (Reversals) 4.690 (32.884) 4.690 (32.883) Fair Value Settlement (12.165) (8.817) (12.165) (8.817)

Adjusted Net Income for the Business Year 22.569 4.427 74.793 10.547

Asset (increase) reductionClients 23.383 8.558 22.538 8.415 Inventories (10.446) 17.172 (32.449) (885) Tax Credits 4.141 2.496 3.559 2.736 Prepaid expenses 598 2.551 577 2.496 Other credits (493) (1.159) (4.859) (1.131)

17.183 29.618 (10.634) 11.632 Liability (increase) reduction

Suppliers (2.502) 6.662 1.184 7.102 Social liabilities 14.570 3.290 15.548 3.726 Tax and contribution payable 1.656 (2.034) 1.628 (1.207) Advances on purchases (150) - 62.968 65.998 Other account payable 3.874 2.991 6.564 2.991

17.448 10.909 87.892 78.610

CASH ARISING FROM OPERATING ACTIVITIES 57.200 44.954 152.051 100.789

INVESTMENT ACTIVITIESAsset kept for selling - (38.734) - (38.734) Notes receivvable (13.310) - (13.310) - Dividend received from associated companies 4.775 1.548 - 1.548 New investiment purchase (1.529) - - - Payments for premises and equipment purchase (30.399) (21.055) (39.271) (23.055) Collection arising from investment sale - 814 - 814 Loan operations with associated companies (16.599) - (19.749) - Exchange accumulated adjustments - - 37 (41)

(57.062) (57.427) (72.293) (59.468)

FINANCING ACTIVITIESCollection from shares issuance - 5.570 - 5.570 Dividends payment (13.950) (29.423) (13.950) (29.987) Funding and Loan 341.636 294.252 341.636 294.252 Funding and loan amortization - principal (294.995) (240.390) (294.995) (240.390) Funding and loan amortization - interests (41.830) (23.877) (41.830) (23.877) Loan with associated companies 20.404 17.976 6.855 2.315

11.265 24.108 (2.284) 7.883

INCREASE (REDUCTION) IN CASH AND CASH EQUIVALENT 11.403 11.635 77.474 49.204

Cash and cash equivalents beginning balance 63.528 51.892 124.098 74.894 Cash and cash equivalents ending balance 74.931 63.527 201.572 124.098 INCREASE (REDUCTION) IN CASH AND CASH EQUIVALENT 11.403 11.635 77.474 49.204

The Explanatory Notes are part of the financial statements



Value Added StatementBusiness Years ending on December 31st 2011 and 2010(In thousand of reais)

12/31/2011 12/31/2010 12/31/2011 12/31/2010INCOME 776.039 733.651 994.336 812.238

Sales of goods, products and services 741.858 732.071 960.203 810.658 Other income (expenses) 34.196 1.580 34.148 1.580 Doubtful credits provision (15) - (15) -

INPUT PURCHASED FROM THIRD PARTIES (361.194) (340.829) (505.003) (399.396) Costs of products, goods and services sold (111.572) (205.580) (232.848) (259.244) Materials, energy, third-party services and other (249.622) (135.249) (272.155) (140.152)

GROSS VALUE ADDED 414.845 392.822 489.333 412.842 Depreciation and amortization (2.784) (689) (4.617) (1.597)

NET VALUE ADDED 412.061 392.133 484.716 411.245

VALUE ADDED RECEIVED ON TRANSFER 55.672 22.314 17.056 19.415 Equity Accounting Income 50.407 5.019 (4) (236) Financing Income 5.265 17.295 17.060 19.651

TOTAL VALUE ADDED AVAILABLE FOR DISTRIBUTION 467.733 414.447 501.772 430.661

VALUE ADDED DISTRIBUTIONPERSONNEL 246.002 240.230 267.513 251.377 Payroll 200.525 219.868 218.414 223.888 Benefits 30.518 7.209 33.504 14.005 FGTS (Government Severance Indemnity Fund for Employees) 14.959 13.153 15.595 13.484 TAXES, LEVIES AND CONTRIBUTIONS 100.292 97.336 107.741 100.597 Federal 87.574 69.052 95.023 72.207 State 3.323 7.509 3.323 7.615 Local 9.395 20.775 9.395 20.775 THIRD PARTIES CAPITAL REMUNERATION 83.285 47.063 88.364 48.869 Interests 68.293 43.768 70.252 43.836 Rentals 14.992 3.295 18.112 5.033 OWN CAPITAL REMUNERATION 38.154 29.818 38.154 29.818 Profits Available for Shareholders 38.154 29.818 38.154 29.818

TOTAL VALUE ADDED DISTRIBUTION 467.733 414.447 501.772 430.661

The Explanatory Notes are part of the financial statements

CONSOLIDATEDCONTROLLING COMPANY

IESA ÓLEO & GÁS S.A. Explanatory Notes to the Financial Statements for the business years

ending on December 31st 2011 and 2010 (In thousands of reais unless otherwise indicated)

NOTE 1 – OPERATIONAL CONTEXT IESA Óleo & Gás S.A. is a close company, which acts of incorporation dated 03/04/2005 are filed with JUCERJ under n.º 33.3.0027555-0. It is registered with CNPJ – Roll of Corporate Taxpayers under n.º 07.248.576/0001-11 and headquartered in the city of Rio de Janeiro – RJ, at Rua Mayrink Veiga, 09, 14th floor, part, zip code 20090-050. The main business of the Society is the rendering of services and the supply of materials to oil, gas, chemical and petrochemical industries, with the purpose of giving complete solutions by means of EPC (Engineering, Procurement and Construction) projects, developing from the engineering and consultancy studies and projects to the performance of maintenance, construction and assembling services and technical assistance. NOTE 2 – GROUNDS FOR THE PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Society as well as of its associated company comprise:

a) Individual Financial Statements of the Controlling Company

The individual financial statements of the controlling company were carried out and are submitted pursuant the accounting practices in force in Brazil, in full compliance with Act nº 11.638/07 and Act nº 11.941/09, and statements issued by CPC - Comitê de Pronunciamentos Contábeis (Accounting Standards Committee) and approved by CFC - Conselho Federal de Contabilidade (Brazilian self-regulating body of the accountancy profession) and by CVM (Brazilian Securities Commission). The individual financial statements show the evaluation of the investments on associated companies using the equity method, according to the Brazilian law in force. Thus, they are not in accordance with the IFRS, which request such evaluations in the separate financial statements of the controlling company by the cost or by the fair value. b) Consolidated Financial Statements The consolidated financial statements were prepared and are being submitted in accordance with the accounting international standards (IFRS) issued by International Accounting Standard Board - IASB and also according to the accounting practices in force in Brazil, in full compliance with Act nº 11.638/07 and Act nº 11.941/09, and statements issued by CPC - Comitê de Pronunciamentos Contábeis (Accounting Standards Committee) and approved by CFC - Conselho Federal de Contabilidade (Brazilian self-regulating body of the accountancy profession) and by CVM (Brazilian Securities Commission).



As there is no difference between the consolidated shareholders’ equity and the consolidated income to be assigned to the shareholders of the controlling company, both in the consolidated financial statements prepared according to the IFRS and the accounting practices in use in Brazil, and between the shareholders’ equity and the income of the controlling company showed on the individual financial statements prepared according to the accounting practices in use in Brazil, the Society chose to submit both the individual and consolidated financial statements in a single set of documents. NOTE 3 – SUMMARY OF THE MAIN ACCOUNTING POLICIES 3.1 Grounds for Consolidation The consolidated financial statements include the financial statements of IESA Óleo & Gás S.A. and its associated companies, where the control is shared with the other shareholders, described below: Associated Companies % Participating Interest 12/31/2011 12/31/2010 QUIP S.A. 13,25% 13,25% RIG OIL & GAS INC. 16,66% - CCI OIL & GAS CONTRACTORS INC. 30,00% - The criteria used in the consolidation are those provided by Act Lei Nº 6.404/76 with the amendments provided by Act nº 11.638/07 and Act nº 11.941/09, from which we emphasize the following:

a) Elimination of the balances of the asset and liability accounts deriving from the transactions between the societies included in the consolidation;

b) Elimination of the investments on the associated societies in the proportion of their respective assets.

c) Elimination of revenues and expenses deriving from businesses with the societies included in the consolidation; and

d) Standardization of the accounting policies and procedures used by the societies included in these consolidated financial statements to meet the controlling company standards, aiming at a presentation in a uniform classification and measurement basis.

3.2 Classification of Current and Non Current Items In Balance Sheets, assets and liabilities not yet due or expected to occur within the next 12 months are classified as current items and those with due date or expected to occur after 12 months are classified as non current items.



3.3 Compensation among Accounts As a general rule, in financial statements, neither assets and liabilities nor income and expenses are compensated one with another, except if such compensation is requested or allowed by any Brazilian accounting statement or rule and it reflects the essence of the transaction. 3.4 Transactions in Foreign Currencies The items in these financial statements are measured in Real (R$) functional currency, which is the currency of the main economic environment of the society’s business and in which currency most of its transactions is made, and they are presented in that same currency.

Transactions in other currencies are converted to the functional currency as per CPC 02 instructions – Effects of Changes in Exchange Rate and Financial Statements Conversion. Financial items are converted at the closing rates and non financial items at the rates at the date of the transaction. . 3.5 Cash and Cash Equivalent Cash and cash equivalent include cash with the company, demand bank deposits and short term high liquidity cash investments with original three month maturity or less. 3.6 Financial Assets The financial assets of the company are classified under the following categories: measured at fair value through profit or loss, loans and receivables and available for sale. The classification depends on what the financial assets were purchased for. The classification of the financial assets is defined by the administration in their initial recognition. (a) Financial assets measured at fair value through profit or loss The financial assets measured at fair value through profit or loss are those that are kept for negotiation. A financial asset is classified under this category if it was mainly purchased for a short term sale. Assets in this category are classified as current assets. (b) Loans and receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included as current assets, except for those with maturity term over 12 months after the issuing of the balance sheets (that are classified as non current assets). The loans and receivables of the Group include “trade receivables and other account receivables” and “cash and cash equivalent”.



(c) Financial assets available for sale Financial assets available for sale are non derivative assets, which are designated in this category or that are not classified in any other category. They are included in non current assets, unless the board of directors intend to dispose the investment within 12 months after the date of the balance sheets. Recognition and measurement: Regular purchases and sales of the financial assets are recognized in the date of the negotiation – that is, when the Company undertakes to purchase or to sell the asset. Investments are at first recognized at fair value, plus the costs of the transaction for all financial assets that are not measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are, initially, recognized at fair value and the costs of the transaction are charged to the financial statement. The financial assets are retired when the rights to receive investment cash flows on maturity or have been transferred; in this last case, once the Group has significantly transferred all the risks and benefits of the ownership. Financial assets available for sale and financial assets measured at fair value through profit or loss are then recorded by the amortizated cost, using the effective interest rate method. Gains or losses arising from variations in the fair value of the financial assets measured at fair value through profit or loss are showed in the financial statements in the period they happen. Variations in the value of the securities classified as available for sale are separated into variations in the amortizated cost and the variations in the fair value of the security. Variations in the amortizated cost are recognized in the evaluation of profit/loss. Variations in the fair value are recognized in assets. When securities classified as available for sale are sold or suffer loss (impairment), the accumulated adjustments of the fair value, recognized in the assets, are included in the financial statements. Company evaluates, at the balance sheets date, if there is any actual evidence that a financial asset or a Group of financial assets is devaluated (impairment). In the case of securities available for sale, a significant or drawn-out decrease of their fair value below their cost value is considered an indication that such securities are devaluated. If there is any of these evidences regarding the financial assets available for sale, the cumulative loss is retired from the assets and is recognized in the financial statements.



3.7 Trade Receivables Trade receivables correspond to amounts to be received from clients due to sales of products or performance or services during the ordinary activities of the Company. Trade receivables are initially recognized at their fair value and then measured by the amortizated cost using the effective interest rate method minus the impairment provision (loss in credit collection). Generally in practice they are recognized at the billed value adjusted to present value and adjusted by impairment provision, if necessary. 3.8 Inventories Inventories are reported at the purchasing cost of services in progress, net of recovered taxes and at no higher prices than those of the market prices. 3.9 Investments Permanent investments on associated companies and under joint control are evaluated by equity method. 3.10 Premises and Equipment Reported by their historical purchasing, formation or construction cost, less their accumulated depreciation. Subsequent costs are included in the asset accounting value or recognized as a separate asset, as appropriate, only when it is likely to flow future economic benefits associated to the item and that the cost of the item can be safely measured. Accounting value of replaced items or parts is retired. All other repairs and maintenance are recorded in contra account to the result of the business year, when incurred. Land is not depreciated. Depreciation of other assets is calculated using the straight-line method during the estimated service life. As provided in CPC 27, approved by CVM Deliberation nº. 583/09, the society hired a specialized company to revise the estimated terms of service life, of the residual value and of the depreciation methods of all its assets. The company based this analysis on the expectation on the use of the goods, and an estimate regarding the service life of the assets, as well as their residual value, according to previous experience with assets, with no change in the practices used so far.



3.11 Intangible Intangible assets purchased are measured by their cost at the moment of its initial recognition. After the initial recognition, the intangible assets are shown by their cost, less the accumulated amortization and losses of recoverable value. Intangible assets are amortized during the economic service life time and evaluated in relation to loss by reduction in the recoverable value whenever there is an indication of loss in the economic value of the asset. 3.12 Non Financial Assets Impairment Assets that have an undefined service life are not subject to amortization and are tested yearly for impairment. Assets subject to depreciation or amortization are revised to check impairment whenever events or changes in the circumstances indicate that the accounting value may not be recoverable. A loss by impairment is recognized by the value to which the accounting value surpass its recoverable value. This last one is the higher value between the fair value of an asset minus the sale costs and the value in use. For purposes of impairment evaluation, assets are grouped in the lowest levels for which there are cash flows that can be separately identified (Cash-Generating Units). Non financial assets that have suffered impairment are revised to check a possible reversion of the impairment at the date of submitttal of the financial statements. 3.13 Accounts Payable to Suppliers Accounts payable to suppliers are liabilities to be paid for goods or services that were purchased from suppliers in the ordinary course of business and that are, initially, recognized at fair value and then measured by the amortizated cost using the effective interest rate method. In practice, they are generally recognized at the value of the corresponding invoice, adjusted to present value, when relevant. 3.14 Funding and Loans Funding and loans are recognized initially at fair value, net from the incurred costs of the transaction and then they are demonstrated by the amortizated cost. Any difference between the obtained values (net from the costs of the transaction) and the redemption value (payments) is recognized in the financial statements during the period in which the loans are in force, using the effective interest rate method.



3.15 Provisions Provisions are recognized when the Company has a constructive obligation, safely estimated, as a result of previous events; it is possible that resource liberation is necessary to settle the obligation. The probability that the Company will settle a series of similar obligations is determined taking into account the class of the obligations as a whole. A provision is recognized even if the probability to settle related to any individual item included in the same class of obligations is small. The provisions are measured by the present value of the expenditures necessary to settle the obligation, using a rate before tax, which reflects the current evaluations of the market about the time value of money and the specific risks of the obligation. The increase in the amount of the obligation due to the time elapsed is recognized as financial expense. 3.16 Income Tax and Social Contribution Fiscal expenses during the period comprise current and deferred income tax. The tax is recognized in the financial statements, except for the proportion related to items directly recognized in assets. In this case, tax is also recognized in assets. The charge of current income tax is calculated based on the fiscal law promulgated, at the balance sheets date. The board of directors from time to time evaluate the positions taken by the Company in the income tax returns in what concerns such situations in which the relevant fiscal regulations allow interpretation. Provisions are made, when appropriate, based on the amounts to be paid to fiscal authorities. Deferred income tax and social contribution recorded in non current assets or in non current liabilities derive from temporary differences originated from revenues and expenses recorded in the profit/loss statement, however, temporarily added or removed in the taxable income and social contribution determination. 3.17 Leasing Financial leasing is a type of lease in which substantial transfer of the risks and benefits related to the ownership of an asset occurs. The ownership title may be transferred or not. Operational leasing is a leasing that does not conform to financial leasing. Financial leasing are recorded as assets and liabilities similarly to financing operations in amounts equal to the fair value of the leased asset or, if lower, to the present value of the minimum payments of the leasing, each of them determined in the beginning of the leasing. The payments of the leasing are separated between financial charge recorded in the loss/profit statement and reduction of the outstanding liability.



Payments of the operational leasing installments are recognized as expenses on a linear basis during the term of the leasing. 3.18 Benefits to Employees The company recognizes a liability and an expense deriving from profit-sharing program duly approved by the trade union and that takes into account quality and productivity goals and the profit to be determined to the Company’s shareholders after certain adjustments. 3.19 Income Determination Income is determined under the accrual basis and includes the recognition of the profit/loss of the turnkey and supply, construction contracts, taking into consideration the percentage of the stages of project performance based on the relation existing between the updated estimated income and the estimated costs and incurred costs, according to the rules applicable to CPC 17 (IAS 11). Expenses and costs are recognized when there is an asset reduction or a liability record and they can be reasonably measured. 3.20 Sales Income Recognition Sales income includes the fair value of the consideration received or to be received for the trading of products and services in the ordinary course of the Company activities. Income is shown net from taxes, returns, discounts and abatements and also after exclusion of the sales between companies of the Society. Company recognizes income when: (i) income value can be measured safely; (ii) future economic benefits are likely to flow for the society; and (iii) when specific criteria have been met for each of the Company activities. The amount of the income is not considered as safely measurable until all contingencies related to the sale are solved. The company bases its estimates on historical experiences, taking into account the type of client, the type of transaction and the specifications of each sale. 3.21 Dividends Dividends distribution for the Company’s shareholders is only provided as liability in the date it is approved by shareholders in a General Meeting.



3.22 Accounting Estimates and Judgment The preparation of financial statements requires the board of directors to base on estimates to record certain transactions that affect assets and liabilities, revenues and expenses, as well as the disclosure of information on data of the financial statements of the Company. The final result of such transactions and information, when actually realized, may differ from theses estimates. The accounting policies and areas that require a higher degree of judgment and use of estimates in the preparation of the financial statements are: a) doubtful credits that are initially provided and then recorded as loss after all the possibilities of

recovery are exhausted; b) service life and residual value of premises and equipment and intangible;

c) impairment of the premises and equipment and intangible; d) expectation for realization of tax credits for deferred income tax and social contribution;

e) contingent liabilities that are provisioned according to the expectation of realization, obtained and

measured together with the counseling of the Society. The company revises the estimates and assumptions at least quarterly and/or annually. NOTE 4 – FINANCIAL INSTRUMENT RISK MANAGEMENT To comply with CVM Deliberation n.º 604, dated November 19th 2009 that approved CPC Technical Statements n.ºs. 38, 39 e 40, and CVM Instruction 475, dated December 17th 2008, the Company revises the main asset and liabilities financial instruments, as well as the criteria for their valuation, assessment, classification and risks related to them, as shown below: (a) Receivables: Cash and cash equivalent, accounts receivable and other current assets, which

amounts approach those realized at the balance sheets date, are classified as receivables.

(b) Measured at fair value through profit or loss: Investments are classified as cash equivalent due to their high liquidity and to the fact that they can be immediately converted to a known amount of cash, being measured at fair value through profit or loss.

(c) Derivatives: The Company has operations with derivative instruments called Swap Contracts recorded at the financing and loan account. The counterparty of such swaps is the institution



providing the loan and is referred to in 100% of the CDI (Interbank Deposit Certificate) combined with pre-established interest rates, varying from 10% to 10,50%. These contracts amounts a reference value of R$ 11.598 on December 31st 2011 and the effects of the gains and losses realized on these contracts, in the amount of R$ 519 in losses, were recorded in the net loss/income.

(d) Other financial liabilities: Funding and loans, balances kept with suppliers and other current

liabilities are classified in this group. Funding and loans are not indexed with subsidized rates; all operations were made using market rates.

(e) Fair value: Fair values of the financial instruments are equal to the accounting values.

(f) Financial instrument management risk: The Company performs the management of rate,

Exchange, credit and liquidity exposure risks in its operations with financial instruments that are within the policies of its business.

Interest rate risks The purpose of the interest rate management policy is to minimize possible impacts caused by fluctuations of interest rates indexed to the financial instruments of the society. For this, the Company uses the strategy of diversifying its operations, supporting its financial instruments with fixed and variable rates.

The Company performed sensitivity analysis for adverse scenes, deteriorating the variable rates (CDI) in up to 25% (Julgamento da Administração), which would result in an increase of the financial expenses during the period in an amount of about R$ 2.921. Exchange rate risks

On December 31st 2011 the Company had an exchange exposure of US$ 10,9 million, which is detailed in the table “Sensitivity Analysis of the Exchange Rate Exposure” of this Explanatory Note. Credit and price formation risks The characteristic of the services and supplies performed by IESA Óleo & Gás S.A. is that of major projects, most of them with medium and long term construction stages, paid according to events performed, thus reducing the credit risks. All prices are adjusted annually, according to a contractual formula. Sensitivity Analysis of the Financial Instruments



In order to show the risks that may generate significant losses to the company, we submit herein, as determined by CVM in its instructions nºs 475 and 550/08, a demonstration of the sensitivity analysis of the financial instruments with associated risk to the exchange rate variation (high dollar risk).

Description 12/31/2011 Scene I Scene II Scene III

R$ Thousand R$ Thousand R$ Thousand R $ T ho us.

Liabilities

Bank Debts 20.555 16.614 25.363 30.171

Net Exposure- R$ Thousand 20.555 16.614 25.363 30.171

Net Exposure - US$ Thousand 10.958 10.958 10.958 10.958

Dollar Rate 1,88 1,52 2,31 2,75

Demonstrative Table for Exchange Rate Variation Exposure

NOTE 5 – CASH AND CASH EQUIVALENT CASH AND CASH EQUIVALENT

12/31/2011 12/31/2010 12/31/2011 12/31/2010C ash 56 83 58 84Banks Demand Deposit 2.349 1.778 12.508 2.079Banks Demand Deposit-Foreign C urrency 2.960 3.691Inv estments 72.526 61.666 186.046 118.244T otal of Cash and Cash Equivalents 74.931 63.527 201.572 124.098

Controlling Company Consolidated

The investments are supported by bank deposit certificates (CDB) and Compromised Operations, and their income is pegged to Interbank Deposit Certificate (CDI). NOTE 6 – CLIENTS AND OTHER CREDITS



12/31/2011 12/31/2010 12/31/2011 12/31/2010Trade receiv ables 7.729 25.829 9.192 26.447Unbilled Trade Receiv ables (a) 43.987 54.486 43.987 54.486Credits w ith Consortia (b) 56.729 56.688 56.729 56.688Supplies (c) 5.174 5.174Trade receivables 113.619 137.003 115.082 137.621Div idend Receiv ables (d) 36.083 263Adv ances 1.108 1.180 5.340 1.306Current Portion 150.810 138.446 120.422 138.927

Labor Appeals 13 5 70 5Judicial Deposits 1.344 1.345 60Other Credits 2 54 57Non Current Portion 1.357 7 1.469 122

Total of Trade Receiv ables 113.619 137.003 115.082 137.621Total of Other Account Receiv ables 38.548 1.450 6.809 1.428General Total 152.167 138.453 121.891 139.049

Controlling Com pany Consolidated

a) The balance of unbilled trade receivables refer to contracts in which the installments are

recognized under accrual basis according to the work progress. This procedure does not change the receiving terms settled in the contracts with clients, which follow the expenditure progress schedules.

b) Credits with consortia represent values receivable regarding the results deriving from the work in

which the Society participates together with other partners in EPC (Engineering, Procurement and Construction) contracts related to platforms, refineries and gas plant industries. The realization of such values is as follows: Consortia pay the associated corporations a monthly central administration fee and from times to times they provide income distributions. The breakdown of the balance on 12/31/2011 is as follows:



% Profit/Loss Balance

Consortia Assets Liability Equity Incom e Profit/Loss Interest Distribution Receiv.

Consórcio CII - Ipojuca Rnest Interligações 55.855 42.348 13.507 146.921 13.507 40,0% (261) 5.142

Consórcio QI - Reduc HDS 238.007 24.278 213.729 310.141 53.576 35,0% (56.182) 18.623

Consórcio QI - Reduc Plangás 143.368 22.408 120.960 266.935 (64.389) 35,0% (36.123) 6.213

Consórcio QI - Rev ap 30.969 30.969 3.632 (14.756) 35,0% (10.597) 242

Consórcio QGGI - Comperj HDT 10.940 5.071 5.869 5.869 24,5% (111) 1.327

Consórcio UTGCA - Caraguatatuba 456.002 172.886 283.116 1.004.789 152.110 17,5% (24.832) 24.713

Consórcio Odebei - Plangas 162.886 1.237 161.649 21.627 14.297 15,0% (24.433) (186)

Consórcio Odebei - F lare 46.129 46.129 8.636 914 15,0% (6.877) 42

Consórcio Marlim Leste 188.071 188.071 18 15,0% (27.639) 572

On Decem ber 31st 2010 1.332.227 268.228 1.063.999 1.762.681 161.146 (187.055) 56.688

Consórcio CII - Ipojuca Rnest Interligações 105.338 72.350 32.988 215.091 19.481 40,0% 29.809 43.004

Consórcio QI - Reduc HDS 207.481 26.852 180.629 74.308 (33.101) 35,0% (56.426) 6.794

Consórcio QI - Reduc Plangás 142.272 24.268 118.004 38.990 (2.956) 35,0% (39.340) 1.961

Consórcio QI - Rev ap 745 (30.222) 30.967 (3) 35,0% (10.596) 242

Consórcio QGGI - Comperj HDT 18.364 19.595 (1.231) 56.024 (7.100) 24,5% 5.385 5.083

Consórcio UTGCA - Caraguatatuba 412.698 102.860 309.838 252.528 26.723 17,5% (21.426) 32.796

Consórcio Odebei - Plangas 162.886 1.237 161.649 15,0% (24.433) (186)

Consórcio Odebei - F lare 46.129 46.129 15,0% (6.877) 42

Consórcio Marlim Leste 716 3 713 (22) 15,0% 460 567

On Decem ber 31st 2011 1.096.629 216.943 879.686 636.941 3.022 (123.444) 90.303

c) Represent resource supplies to the consortia to make their financial and economic activities

feasible, especially Consórcio CII – Ipojuca Interligações – Rnest, Consórcio QI – Reduc Plangás, Consórcio QGGI – Comperj HDT.

d) Refer to dividends proposed by the associated company Rig Oil & Gas Inc. and that were received during January 2012.



NOTE 7 – NOTE RECEIVABLES

12/31/2011 12/31/2010 Sale of CBD shares (a) 128.897 Real state sales (b) 80.143 Alberto Dav i Matone 5.524Other inv estments 7.787Total of Note Receivables 222.351

Current Portion 218.344

Non Current Portion 4.007

Controlling Com pany

(a) Refer to the amounts receivable for the sale of 86.659 ordinary shares of Companhia Brasileira de Diques

to Inepar Administração e Participações, maturing up to 12 months.

(b) Amounts receivable for the sales of Macae, Sao Vicente and Mage plants to Inepar S/A Ind. Construções, as part of the plan for centralization of real states in the controlling company.

NOTE 8 - INVENTORIES

12/31/2011 12/31/2010 12/31/2011 12/31/2010Services in progress 21.826 30.087 21.826 30.087Imports in progress 5.295 5.811Advances to suppliers 7.473 5.082 38.914 14.004Inputs and Materials 16.316 16.316Total of Inventories 45.615 35.169 82.351 49.902




NOTE 9 – TAX CREDITS IMPOSTOS A RECUPERAR

12/31/2011 12/31/2010 12/31/2011 12/31/2010ICMS (Value-added tax on sales&serv ices) 286 169 404 195PIS (Employ ees' Profit Participation Program) 503 1.331 587 1.331COFINS (Social Security Financing Tax ) 2.318 6.137 2.692 6.137IRRF (Withheld Income Tax ) 603 6 603CSLL (Social Contribution) 1.007 1 1.007IRPJ Income Tax Negative Balance 1.068 38 1.068 38CSLL Social Contrib. Negative Balance 556 215 556 215INSS Withheld 216 188 225 189


NOTE 10 - INVESTIMENTS

12/31/2011 12/31/2010 12/31/2011 12/31/2010Inv estments on Associated Societies 16.994 5.878 447 450Premises for inv estment 20.600 20.600Total of Investm ents 16.994 26.478 447 21.050

Controlling Com pany Consolidated

10.1 Investments on Associated Societies The following investments on associated societies are recognized in the financial statements of the controlling company, where the control is shared, evaluated by the net asset of the invested societies, according to the participation in each company.

12/31/2011 12/31/2010Initial Balance 5.878 2.711

Investment purchase 1.529 - Shareholders' equity

Participation in Profits 50.407 5.019 Comprehensive Income 37 (41)

Received dividends (40.857) (1.811)

Balance on December 31st 16.994 5.878



Associated CompaniesNet Profit/ % Investment Equity

Name Assets Liabilities asset Loss Interest Amount

On December 31st 2010QUIP S.A. 736.321 695.356 40.965 39.660 13,25% 5.428 5.255 QUEBEC - Constr.Mont.Transp. Estrut.Ltda 1.595 309 1.286 (699) 35,00% 450 (236)

737.916 695.665 42.251 38.961 5.878 5.019

On December 31st 2011RIG Oil & Gas 808.914 807.976 938 215.277 16,66% 156 35.865 QUIP S.A. 1.144.605 1.039.860 104.745 102.006 13,25% 13.879 13.516 CCI - Oil & Gas Contractor Inc 86.119 77.744 8.375 3.433 30,00% 2.513 1.030 QUEBEC - Constr.Mont.Transp. Estrut.Ltda 1.703 427 1.276 (10) 35,00% 447 (4)

2.041.341 1.926.007 115.334 320.706 16.994 50.407 Acquisition of CCI Oil & Gás In May 2011 IESA Oleo & Gás acquired 30% of the capital stock of CCI Oil & Gás Contractors Inc, a company organized jointly with Camargo Correa to the performance of the contract for modules construction, conversion, integration and commissioning of Platform P-62, FPSO type (floating, production, storage and offloading) to be installed at Roncador Field, in Campos Basin. Quip S/A Split-off During the Extraordinary General Meeting dated November 30, 2011, the shareholders of the associated company Quip S/A approved the split-off the company in favor of its own shareholders. The split portion then reversed to its shareholders was the investment on RIG OIL & GAS in the amount of R$ 861, appraised by its respective accounting values The above mentioned split-off process was subject to analysis of GWM Auditores e Consultores, as per award dated November 30,, 2011. The net inventory split-off of the associated company Quip S/A was distributed among its shareholders in the proportion of their respective participations, thus IESA Óleo & Gás absorbed 13,25% of the split-off net inventory, representing 2.650 shares of the company RIG Oil & Gás, a company organized for the construction of Platform P-63, which client is Petrobras Netherlands. In the 20º EGM of November 30 2011, IESA Óleo & Gás’ shareholders deliberated about the approval of the Split-Off of the associated company Quip S/A and the absorption of the split-off net inventory. In December 2011 IESA Óleo & Gás purchased from UTC Engenharia and from Estaleiro Atlântico Sul 682 shares of RIG Oil & Gás for the amount of R$ 43,05 per share, thus, IESA Óleo & Gás currently owns 3.332 shares, increasing its interest for 16,66%. NOTE 11 – PREMISE AND EQUIPMENT



PREMISES AND EQUIPMENT

Plots Buildings Machines Software Leased CurrentCONTROLLING COMP. of Land Im prov. & Equip Facilities Furniture Vehicles Hardware Hardware Prem ises Total

Depreciation annual rates 2% 4 to 20% 2% 10% 5 to 20% 10 to 20% 20%On Decem ber 31st 2010Cost 6.800 19.860 3.132 628 1.466 3.281 2.077 638 499 38.381Accum.Dep. & Impairment (1.186) (551) (377) (476) (7) (1.080) (3.677)Net accounting value 6.800 18.674 2.581 251 990 3.274 997 638 499 34.704

Initial balance 6.800 18.674 2.581 251 990 3.274 997 638 499 34.704Additions 65 13.625 56 1.448 1.902 46 6.990 24.132Retirements (6.800) (18.739) (290) (177) (852) (499) (27.357)Depreciation (369) (561) (67) (136) (467) (1.336) (64) (3.000)Depreciation w rite off 369 254 (17) 95 (107) 316 910Final balance 15.609 167 828 4.148 1.027 620 6.990 29.389

On Decem ber 31st 2011Cost 1.186 16.467 628 1.345 4.729 3.127 684 6.990 35.156Accum.Dep & Impairment (1.186) (858) (461) (517) (581) (2.100) (64) (5.767)

15.609 167 828 4.148 1.027 620 6.990 29.389

Plots Buildings Machines Software Leased CurrentCONSOLIDATED of Land Im prov. & Equip. Facilities Furniture Vehicles Hardware Hardware Prem ises Total

Depreciation rates 2% a 10% 4 a 20% 2% 10% 5% 5 a 20% 20%On Decem ber 31st 2010Cost 6.800 23.815 5.393 628 2.197 3.281 3.161 638 1.123 47.036Accum.Dep. & Impairment (4.345) (1.224) (377) (680) (7) (1.611) (8.244)Net accounting value 6.800 19.470 4.169 251 1.517 3.274 1.550 638 1.123 38.792

Initial balance 6.800 19.470 4.169 251 1.517 3.274 1.550 638 1.123 38.792Additions 3.796 16.927 338 1.448 2.742 46 7.579 32.876Retirements (6.800) (18.739) (290) (177) (852) (499) (27.357)Depreciation (1.483) (803) (67) (228) (467) (1.501) (64) (4.613)Depreciation w rite off 369 254 (17) 95 (107) 315 909Final balance 3.413 20.257 167 1.545 4.148 2.254 620 8.203 40.607

On Decem ber 31st 2011Cost 8.872 22.030 628 2.358 4.729 5.051 684 8.203 52.555Accum.Dep & Impairment (5.459) (1.773) (461) (813) (581) (2.797) (64) (11.948)

Methodology used to determine the new depreciation calculation



The basis for determination of the new depreciation calculation was the Company’s policy that demonstrates the new service life and the residual percentage for each item of the fixed assets of the evaluated units. The Company established a new service life for each family of items according to the assumptions, criteria and elements of comparison mentioned below:

Assets renovation policy; Expectation of the company based on the experience of the companies of the group; Information concerning the economic environment; Accounting information and asset control; Technical specifications; and, Assets maintenance policy.

In the determination of the service life estimate policy, the criteria used by expert were maintenance conditions of the assets, technological evolution, assets renovation policy, and the company’s expectations based on the market experience with similar assets. Residual value and service life of the assets and the depreciation methods were revised at the end of the business year and there was no adjustment to apply. During the business year of 2011 the Company did not find the existence of indicators that certain fixed assets could be over the recoverable value and, consequently, there was no need for any provision for loss of recoverable value of fixed assets. On December 31st 2011 the amount of R$ 1.265 (R$ 246 on December 31st 2010) referring to fixed assets depreciation was charged to “costs of products and services” and the amount of R$ 1.735 (R$ 578 on December 31st 2010) to “general and administrative expenses”. Due to several financing contracts, which debit balance on December 31st 2011 amounted R$ 18.246, fixed assets of the Company, such as computer equipment, software rights of use licenses and real states are under statutory lien. NOTE 12 – INTANGIBLE



Leased Im plem entation Current ERP

Controlling Com pany Software software of New Processes Im plem entation Total

On Decem ber 31st 2010

Cost 258 1.272 1.258 447 3.235

Accum.Amort. & Impairment 50 (67) (17)

Accounting net value 308 1.272 1.191 447 3.218

Initial Balance 308 1.272 1.191 447 3.218

Additions 5.634 460 68 1.200 7.362

Retirements (447) (389) (836)

Transfers 1.647 (1.647)

Amortization (257) (127) (156) (540)

Amortization w rite offs (110) (11) (1) (122)

Final Balance 6.775 1.594 713 9.082


Cost 7.092 1.732 937 9.761

Accum.Amort. & Impairment (317) (138) (224) (679)

Accounting net value 6.775 1.594 713 9.082

Leased Im plem entation Current ERP

CONSOLIDATED Software software of New Processes Im plem entation Total


Cost 1.498 1.272 1.258 447 4.475

Accum.Amort. & Impairment (523) (67) (590)

Accounting net value 975 1.272 1.191 447 3.885

Initial Balance 975 1.272 1.191 447 3.885

Additions 5.763 460 68 1.200 7.491

Retirements (480) (389) (869)

Transfers 1.647 (1.647)

Amortization (377) (127) (156) (660)

Amortization w rite offs (110) (11) (1) (122)

Final Balance 7.418 1.594 713 9.725


Cost 8.428 1.732 937 11.097

Accum.Amort. & Impairment (1.010) (138) (224) (1.372)

Accounting net value 7.418 1.594 713 9.725



On December 31st 2011 the amount of R$ 679 (R$ 111 on December 31st 2010) was recorded as “general and administrative expenses”. NOTE 12.1 – IMPAIRMENT Annually or whenever an indication of loss exists, the Company conducts the recoverability tests of accounting balance of intangible, fixed assets and other non-current assets in order to determine if these assets were impaired. These tests are conducted in accordance with the Technical Statement CPC 01 – Reduction to the Recoverable Value of Assets. On December 31st 2011 the company conducted recoverability tests for intangible, fixed assets and other non current assets and established no loss due to impairment. NOTE 13 – SUPPLIERS AND OTHER LIABILITIES

12/31/2011 12/31/2010 12/31/2011 12/31/2010Accounts Pay able to Suppliers 9.898 12.509 15.555 14.479Accounts Pay able to Associated Companies 151 42 151 42Accounts Payable to Suppliers 10.049 12.551 15.706 14.521Social Liabilities 28.415 13.845 30.212 14.663Tax Liabilities 5.972 2.578 6.903 3.538Adv ances on Purchases 149 151.206 88.238Other Accounts Pay able 6.926 3.092 6.935 3.101Current Portion 51.362 32.215 210.962 124.061

Tax Liabiities 6.324 8.063 6.324 8.063Loan w ith Associated Companies 39.342 18.938 9.282 2.427Other Accounts Pay able 237 27Non Current Portion 45.666 27.001 15.843 10.517

Total of Accounts Pay able to Suppliers 10.049 12.551 15.706 14.521Total of Other Accounts Pay able 86.979 46.665 211.099 120.057General Total 97.028 59.216 226.805 134.578


NOTE 14 – FUNDING AND LOANS



FUNDING AND LOANS

CurrentForm Medium Rate Securities 12/31/2011 12/31/2010Working Capital CDI 0,40 to 1,3061% /mo Promissory Note/Receivables 140.589 91.013Working Capital CDI + 0,40741 to 0,75%/mo Chattel Mortgage 4.345Advances against Exchanges EV + 6,2% py ACC 2.573 30.588Advances against Exchanges EV + 100% CDI ACC 17.653Advances against Exchanges EV + 105% CDI ACC 13.174Advances against Exchanges EV + 5,625% py ACC 1.074Fixed Assets 1,6%/mo Chattel Mortgage 628 986Financial Leasings 100% CDI Chattel Mortgage 577 439Costs with Financial Transactions (2.846) (2.514)

160.113 138.165

Non CurrentForm Medium Rate Securities 12/31/2011 12/31/2010Working Capital CDI 0,40 to 1,3061% /mo Promissory Note/Receivables 64.453 102.636Working Capital CDI + 0,40741 to 0,75%/mo Chattel Mortgage 9.624Advances against Exchanges VC + 5,625% py ACC 3.735Fixed Assets 1,6%/mo Chattel Mortgage 1.390 2.358Financial Leasings 100% CDI Chattel Mortgage 1.682 1.560Costs with Financial Transactions (859) (1.092)

80.025 105.462

Total of Funding and Loans 240.138 243.627

RatesFinancial Leasings 100% of CDIWorking Capital From 100% to 150% of CDIWorking Capital From 0,40% to 1,927464% /moAdvances agains Exchanges Exchange variancel + 5,625%/yearAdvances agains Exchanges Exchange variance + 6,2% /yearAdvances agains Exchanges Exchange variance + 100% of CDIPermanent Asset BZTJLP + 0,4915%/mo

12/31/2011 12/31/2010By Maturity DateUp to 12 months 159.973 138.165From 1 to 2 years 59.903 82.567From 2 to 3 years 17.679 18.163From 3 to 4 years 2.010 4.108From 4 to 5 years 574 624

240.138 243.627

31/12/11 31/12/2010By type of currencyReais - R$ 219.583 195.386US Dollars - US$ 20.555 48.241

Controlling Company

Controlling Company

Controlling Company

Controlling Company



NOTE 15 – DEBENTURES

Value AnnualIssue Type of Out st and ing at the FinancialDate Issue Securities issue date Charges 12/31/2011 12/31/2010

1st issue 01/07/2011 Particular 6.000 60.000 CDI + 6% 57.614

57.614

Portion in Current 31.514Portion in Non Current 26.100

On July 1st 2011 6,000 (six thousand) single series debentures were issued and completely subscribed, not convertible to shares, with real guarantee, in the amount of R$ 60.000, with the following main characteristics:

• Scheduled Amortizations: 2% in August 2011, 4,5% in November 2011, 8,5% in February 2012, 13% in May 2012, 15,5% in August 2012, 13% in November 2012, 20% in February 2013 and 23,% in May 2013.

• Final Maturity: 05/01/2013 • Remuneration: remuneratory interest equivalent to 100% of the accumulated variance of the

medium daily rates of the one-day interfinance deposits (“DI Rate”), expressed in percentage per year, based on 252 working days, calculated and informed daily by CETIP (Brazilian Company for Assets and Derivatives) plus a predetermined rate of 6,00 % per year based on base 252 working days.

The issue of debentures was approved in the 16th EGM, dated June 21st, 2011. The balance is fully recorded in liabilities and was updated until December 31st 2011, considering the rates in force in the contract. NOTE 16 – INCOME TAX AND SOCIAL CONTRIBUTION 16.1 Deferred Taxes



Deferred Fiscal Asset IRPJ CSLL Total IRPJ CSLL Total IRPJ CSLL Total IRPJ CSLL Total

Contingency Provisions 20 8 28 372 134 506 20 8 28 372 134 506Fiscal Loss 2.967 1.068 4.035 2.967 1.068 4.035Unrealized Profits 36 12 48Total Non Current Asset 2.987 1.076 4.063 372 134 506 2.987 1.076 4.063 408 146 554

Deferred Fiscal Liability IRPJ CSLL Total IRPJ CSLL Total IRPJ CSLL Total IRPJ CSLL Total

Deferred Profits on State Bodies 6.814 2.456 9.270 5.626 2.027 7.653 6.814 2.456 9.270 5.626 2.027 7.653Costs with Fin. Transactions 933 336 1.269 874 315 1.189 933 336 1.269 874 315 1.189Deprec. w/o Serv. Life Forecast 666 240 906 261 94 355 666 240 906 261 94 355Fair Value on Investment Property 5.245 1.888 7.133 2.204 793 2.997 5.245 1.888 7.133 2.204 793 2.997Chattel Mortgage 50 18 68 5 2 7 50 18 68 5 2 7Real State Disposals 5.606 2.018 7.624 5.606 2.018 7.624Total Non Current Liability 19.314 6.956 26.270 8.970 3.231 12.201 19.314 6.956 26.270 8.970 3.231 12.201

Controlling Company Consolidated31/12/2011 31/12/2010 31/12/2011 31/12/2010

Deferred income tax and social contribution are calculated on the temporary corresponding differences between income tax and social contribution calculation bases on assets and liabilities and the accounting values of the financial statements, determined in compliance with CVM Deliberation n.º 599/09 and CVM Instruction n.º 371/02. The rates of such taxes currently defined for the determination of these deferred credits, are 25% for income tax and 9% for social contribution. 16.2 Expenses with Tax on Profit The charges and taxes applicable to the profit accounted for in the period are given below:



Nominal Rate 34% 34% 34%

IRPJ and CSLL calculated at nominal rate (17.644) (12.798) (20.080)

Adjustment for determination of actual rateFiscal LossShareholders' Equity 4.746 1.707Fiscal Incentives 34 154 34Permanent Additions and Exclusions (929) 3.039 (929)Other Adjustments 11

IRPJ and CSLL in Loss/Profit (13.793) (7.887) (20.975)Deferred Tax (10.512) (383) (10.512)Current Tax (3.281) (7.504) (10.463)

Actual Rate 27% 21% 35%

17 – PROVISIONS In the course of business, Company is subject to labor and tax suits, and the suits which have a high probability of loss are recorded in the Non Current Liabilities.



CONTINGENCY PROVISIONS

Labor suits &

Controlling Company civil actions Tax Total

On December 31st 2010 1.349 139 1.488

Filed during the business y ear

Rev ersal of Prov isions (139) (139)

Prov isions Used 541 541

On December 31st 2011 1.890 1.890

Labor suits &

civil actions Tax Total

Short-Term installmentLong-Term Installment 1.349 139 1.488On 31st December 2010 1.349 139 1.488

Short-Term installmentLong-Term Installment 1.890 1.890On 31st December 2011 1.890 1.890

Tax and Labor Requirements Company’s income statements are subject to the revision and eventual additional issuance by Tax Authorities for a five year period. Other taxes, rates and charges are also subject to these conditions pursuant to the applicable law. Special Customs Regimen Company obtained through Executive Declaratory Acts no. 12 and 13 as of July 6, 2009, issued by Brazil Federal Revenue (RFB), the authorization to operate under the Warehouse Special Customs Regimen, based on Normative Instruction 513/2005 for the construction of modules to be integrated to floating oil and gas exploration platform P-55. This regimen allows that Brazilian and imported materials are admitted and manufactured fully exempted from federal taxes under the condition that such modules be destined for export. On December 31st, 2011, Company had an amount of R$ 25.958 (R$ 23.590 on December 31st, 2010) in suspended federal taxes.



NOTE 18 – RELATED PARTIES 18.1 Transactions with the Controlling Company and with Associated Company The following transactions were made with related parties: TRANSACTIONS WITH RELATED PARTIES

12/31/2011 12/31/2010 12/31/2011 12/31/2010IESA Projetos, Equipamentos e Montagens S/A (i) 1 5 14.375QUIP S/A (ii) 81 1.474RIG S/A (ii) 35.865CBD (iii) 750

35.947 5 16.599

12/31/2011 12/31/2010 12/31/2011 12/31/2010IESA Projetos, Equipamentos e Montagens S/A (i) 151 4QUIP S/A (ii) 39.342 18.938

151 4 39.342 18.938

Current Assets Non Current AssetsAccounts Receivable Loans

CONTROLLING COMPANY

Current Liabilities Non Current LiabilitiesAccounts Payable Loans

Result (Revenue) Result (Expenses)Sales Costs

18.2 Remuneration of Key Management Personnel In compliance with CPC 05 – Disclosure on Related Parties and as set out and approved in the minutes of meeting, the remuneration of officers, below described, in 2011 are given below:



12/31/2011 12/31/2010

Remuneration of Executive Officers - CLT 438 184Remuneration of Executive Officers - Statutory 2.879 2.337Profit Sharing Executive Officers - CLT 172 20Profit Sharing Executive Officers - Statutory 1.432 1.639Other Benefits 735 392

Controlling Company

NOTE 19 – SHAREHOLDERS’ EQUITY 19.1 Capital Stock Capital stock is R$ 102.996 represented by 65.995.745 (sixty-five million, nine hundred ninety-five thousand, seven hundred forty-five) common shares, with voting rights, non-split towards capital and at no par value. 19.2 Dividends Minimum obligatory dividends were not provisioned, as determined by the Company’s Estatuto Social, due to the existence of covenants clauses in financial contracts that provides that dividends exceeding 50% of the net profit of the consolidated financial statements of the controlling company IESA Projetos, Equipamentos e Montagens S/A are not to be declared. The destination of the 2011 result will be defined by the shareholders meeting. NOTE 20 – PROFIT SHARING The Company maintains a Results Leverage Program (PAR) to its employees binding to the goals accomplishment, which parameters for the year 2010 are included in the agreement signed in November, 2011. NOTE 21 – SALES INCOME



12/31/2011 12/31/2010 12/31/2011 12/31/2010

Resale 215 434 215 434Services 26.581 165.765 26.581 168.867Scrap Sale 4.026 815 4.026 815Consortia Income 657.968 440.524 657.968 440.524Foreign Market Sales 51.286 121.431 271.413 200.018Intercompany Sales 1.782 3.102Gross Income 741.858 732.071 960.203 810.658

( - ) Tax on Sales (44.601) (62.987) (44.601) (62.987)

Net Operating Income 697.257 669.084 915.602 747.671


NOTE 22 – OTHER REVENUES AND EXPENSES

12/31/2011 12/31/2010 12/31/2011 12/31/2010Income on Fixed Asset Sakes Sales Income 81.300 394 81.300 438 (-) Net accounting value write off (59.268) (430) (59.315) (570)Income/Loss on investment sale Sales Income (-) Net accounting value write off (7.200) (7.200)Fair Value Determination 12.165 8.817 12.165 8.817Other Revenues 647 5.753 647 5.753Other Expenses (2.594) (5.840) (2.594) (5.840)Other Revenues and Expenses 32.250 1.494 32.203 1.398


NOTE 23 – FINANCIAL REVENUES AND EXPENSES



FINANCIAL REVENUES AND EXPENSES

12/31/2011 12/31/2010 12/31/2011 31/12/2010Financial Expenses Banking Expenses 8.370 1.164 9.581 1.453 Interests on Loans and Loans with Associates 55.002 40.990 55.002 40.990 Interests on other Liabilities 4.449 1.532 4.572 1.532 Exchange Variance Liabilitiies 472 82 1.110 1.170 Total of Financial Expenses 68.293 43.768 70.265 45.145

Financial Revenues Investment revenues 4.296 3.356 13.666 3.356 Interests on other assets 107 13.606 1.806 16.537 Exchange variance on assets 381 162 1.107 665 Discount earned 481 170 481 170 Total of Financial Revenues 5.265 17.294 17.060 20.728


NOTE 24 – INSURANCE COVERAGES The contracts determine values in technical bases that estimate enough coverage of any losses derived from claims referring to Fixed Assets and Inventories. On 12/31/2011 the company had insurance policies for the following risks:

Loss of Profit; Liability; Transport; Heavy Equipment (Trucks, Cranes) Group Life; and

to reduce risks related to non completion of the contracts executed with clients the Company have performance bonds that guarantee the payment of up to R$ 140 million of any contractual fines. NOTE 25 – SECURITIES AND SURETIES In order to exclusively secure its financial operations, Company provided nearly R$22.4 million (market price) in fiduciary sale (note 14).



NOTE 26 – INFORMATION PER SEGMENT The information per segment are submitted in accordance with CPC 22 – Information per Segment, approved by CVM Deliberation 582/09. The Board of Officers determined the Company’s operating segments based on the model of its strategic plan, covering the following areas:

Income on 12/31/2011Platforms and

ModulesInfrast.work in

RefineriesOffshore

OperationsInfrastr.work in Gas

PlantsT otal

T otal Gross Income 122.634 440.771 87.921 90.532 741.858

Tax on Sales (7.636) (20.132) (9.209) (7.624) (44.601)

C osts of Products and Serv ices (92.569) (339.108) (74.674) (73.967) (580.318)

Gross Margin 22.429 81.531 4.038 8.941 116.939

Income on 12/31/2011Platforms and

ModulesInfrast.work in

RefineriesOffshore

OperationsInfrastr.work in Gas

PlantsT otal

T otal Gross Income 340.979 440.771 87.921 90.532 960.203

Tax on Sales (7.636) (20.132) (9.209) (7.624) (44.601)

C osts of Products and Serv ices (248.044) (339.108) (74.674) (73.967) (735.793)

Gross Margin 85.299 81.531 4.038 8.941 179.809

CONT ROLLING COMPANY

CONSOLIDAT ED

NOTE 27 – COMPLEMENTARY INFORMATION – EBITDA

12/31/2011 12/31/2010 12/31/2011 12/31/2010

Net Operating Income 697.257 669.084 915.602 747.671 Costs of Goods and/or Serv ices Sold (580.318) (545.067) (735.793) (609.877) Gross Operating Profit 116.939 124.017 179.809 137.794 (-) Ex penses w ith Sales (17.715) (7.098) (17.715) (7.098) (-) General, Administrativ e and Operating Ex penses (56.759) (48.728) (71.813) (56.271) (+) Depreciation/Amortization 2.482 880 4.315 1.788 (+/-) Shareholders' Equity 50.407 5.019 (4) (236) EBITDA 95.354 74.090 94.592 75.977

% on Net Operating Income 14% 11% 10,33% 10,16%

Controlling Com panies Consolidated



*****

BOARD OF OFFICERS: Valdir Lima Carreiro; Irajá Galliano Andrade; José Eduardo Catelli Soares de Figueiredo; Otto Garrido Sparenberg. Accountant: Gilberto Marques CPF 141.526.788-01 CRC - TC - 1SP231969/O-8-S-RJ

INDEPENDENT AUDITORS’ REPORT ON FINANCIAL STATEMENTS The Board of Officers and Shareholders of IESA ÓLEO & GÁS S/A We have audited the individual and consolidated financial statements of IESA ÓLEO & GÁS S.A., identified as Controlling Company and Consolidated respectively, which comprise the balance sheet as of December 31st, 2011 and corresponding income statements, comprehensive financial statements, shareholders’ equity and cash flows for the year ended on December 31st, 2011, as well as the summary of the main accounting practices and other explanatory notes. Administration Responsibility on Financial Statements The Executive Board of IESA ÓLEO & GÁS S.A. is responsible for preparing and properly submitting the individual financial statements in accordance with the accounting practices adopted in Brazil and for the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board – IASB, and in accordance with the accepted accounting practices in Brazil, as well as to the internal controls set out as necessary to allow the preparation of these financial statements free from any material misstatement, regardless if caused by fraud or error. Responsibility of the Independent Auditors Our responsibility is to express an opinion on these consolidated financial statements based on our audits conducted in accordance with Brazilian and international auditing standards. These standards require the accomplishment of ethical demands by the auditors and that the audit is planned and performed in order to obtain reasonable assurance about whether the financial statements are free of any relevant distortion. An audit includes the performance of procedures selected to evidence supporting amounts and disclosures submitted in the financial statements. The procedures selected depend on the auditor’s discretion, including the assessment of risks of pertinent distortion in the financial statements regardless of being caused by fraud or error. For this risks assessment the auditor examines the pertinent internal controls for preparation and properly submission of financial statements of the Company to plan suitable auditing procedures for the circumstances, but not to express an opinion on the efficacy of these internal controls of the Company. An audit also includes assessing accounting principles and significant estimates made by the Board of Officers, as well as evaluating the overall financial statements presentation. We believe that the evidence of audit obtained is suitable and sufficient to provide reasonable basis for our opinion.

Opinion on Individual Financial Statements In our opinion, the individual financial statements referred to above properly show, in all pertinent aspects, the financial condition of IESA ÓLEO & GÁS S.A. as of December 31st, 2011, the performance of its operations and cash flows for the year ended on that date, in compliance with accounting principles accepted in Brazil. Opinion on Consolidated Financial Statements In our opinion, the consolidated financial statements referred to above properly show, in all pertinent aspects, the consolidated financial condition of IESA ÓLEO & GÁS S.A. as of December 31st, 2011, the consolidated performance of its operations and consolidated cash flows for the year ended on that date, in compliance with International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board –IASB) and accounting principles accepted in Brazil. Emphasis As set out in Explanatory Note 2, the individual financial statements were prepared in accordance with accounting principles accepted in Brazil. In the case of IESA ÓLEO & GÁS S.A. these principles are different from IFRS, applicable to the separated financial statements only in what concerns the assessment of investment in controlled companies jointly by equity method, while according to IFRS this should be by cost or fair value. Other Issues Statements of Value Added We have also audited the individual and consolidated value added statements (DVA) for the year ending on December 31st, 2011, which submittal is required by the Brazilian Corporate Law for public companies, and as supplementary information by IFRS which do not require the DVA submittal. These statements have been submitted to the same auditing procedures referred to above and, in our opinion, are suitably presented, in all pertinent aspects, in what concerns the financial statements taken as a whole. Rio de Janeiro, March 30 2012.

CARLOS A. FELISBERTO Accountant CRC (PR) no. 037293/O-9-S-RJ

MARTINELLI Auditores CRC(SC) nº 001.132/O-9

iesa Óleo & gÁs s.a.2011 that could not be allocated in the pertinent projects. general and...

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