BASSDRILL BETA LIMITED. Management Accounts. For the period from 1 January 2014 to 31 March 2014

Transcription

1 Company Registration No. C BASSDRILL BETA LIMITED Management Accounts For the period from 1 January 2014 to 31 March 2014 General Remarks As previously discussed these unaudited draft management accounts do not include information in respect of related party transactions, or a detailed calculation of current or deferred tax. The current taxation included in these unaudited, draft management accounts is a 35% flat rate, which is included for indicative purposes only. In addition, these management accounts include a 13 day depreciation amount, arising from 19 March 2014, when the company s tender support vessel was placed into service and the 1,500 day contract with the Petrobras started. In this respect, amortisation of deferred revenue has been taken to the Statement of Comprehensive Income. We compiled the management accounts of BassDrill Beta Limited. We have not audited or reviewed the accompanying management accounts and accordingly, do not express an opinion or provide any assurance on these management accounts. Management is responsible for the preparation and fair presentation of these management accounts. The management of BassDrill Beta Limited is responsible for the information presented in this report. Our responsibility is to prepare these management accounts to assist management in presenting financial information in the form of management accounts.

2 CONTENTS Pages Statement of Comprehensive Income 2 Statement of Financial Position 3 Notes to the Management Accounts

3 STATEMENT OF COMPREHENSIVE INCOME For the period from 1 January 2014 to 31 March 2014 Period from Year to to Notes Income 3 1,923,673 - Administrative expenses 4 (576,863) (824,466) Finance income Profit before tax 1,347,607 (824,422) Income tax expense 5 (471,662) - Profit for the period 875,945 (824,422) The notes on pages 4 to 18 form an integral part of the management accounts. 2

4 STATEMENT OF FINANCIAL POSITION As at 31 March 2014 Notes ASSETS Non-current assets Investment in subsidiary 6 22,778 22,778 Plant and equipment 7 305,711, ,977, ,734, ,000,090 Current assets Pledged receivables 8 8,963,501 8,962,914 Related party receivables 9 26,410,660 28,983,950 Trade and other receivables 10 6,034,081 1,186,823 Cash at bank 11 10,040,113 9,738,656 51,448,356 48,872,343 TOTAL ASSETS 357,183, ,872,433 EQUITY AND LIABILITIES Capital and reserves Issued capital 12 2,500 2,500 Accumulated losses 12 (597,344) (3,377,265) Total equity (594,844) (3,374,765) Non-current liabilities Borrowings ,456, ,592,000 Related party payables 14 77,559,168 77,559,168 Deferred revenue 15 36,098,464 21,640, ,113, ,792,150 Current liabilities Borrowings 13 16,544,000 12,408,000 Deferred revenue 15 11,743,262 3,818,997 Related party payables 16 23,719,292 20,027,844 Trade and other payables 17 8,186,127 11,200,207 Taxation 471,662-60,664,343 47,455,048 Total liabilities 357,777, ,247,198 TOTAL EQUITY AND LIABILITIES 357,183, ,872,433 The rate of exchange as at 31 March 2014 was EUR1: The notes on pages 4 to 18 form an integral part of the management accounts. 3

5 NOTES TO THE MANAGEMENT ACCOUNTS 1. CORPORATE INFORMATION BassDrill Beta Limited is registered in Malta as a limited liability company under the Companies Act, Cap. 386 of the Laws of Malta. The company s registration number is C55272 and its registered office is 6 th floor, Tagliaferro Business Centre, 14, Gaiety Lane, Sliema, Malta. The principal activity of the company is charter, lease, operate and commercially exploit oil and gas well drilling rigs and other offshore equipment, vessels and systems relating to oil and gas activities. 2.1 BASIS OF PREPARATION These Management Accounts have been prepared on a historical cost convention and are presented in United Stated Dollars (), being the Company s presentation and functional currency and the currency in which the share capital is dominated. These Statements have been prepared for the limited purpose of providing the Directors with. Accordingly, these Management Accounts do not purport to be General Purpose Financial Statements. Going concern As at 31 March 2014 the Company s total liabilities exceed its total assets by 594,844. However, these management accounts have been prepared on a going concern basis which assumes that the Company will continue on a going concern in the foreseeable future. The validity of this assumption is dependent on the shareholders commitment to continue to provide financial support to BassDrill Beta Limited in the foreseeable future, so as to ensure that the Company continues as a going concern SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below: Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts and taxes. The following specific recognition criteria must also be met before revenue is recognised: Rendering of Services Revenue is recognised on the performance of the service, net of sales taxes and discounts. Reimbursable Income (Expense) Reimbursements received for the purchases of supplies, personnel services and other services provided on behalf of and at the request of our customers in accordance with a contract or agreement are recorded as revenue. The related costs are recorded as reimbursable expenses in the same period. 4

6 NOTES TO THE MANAGEMENT ACCOUNTS 2.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Revenue recognition - continued Dividends Dividends are recognised when the Company s right to receive payment has been established. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to the asset s net carrying amount. Foreign currency translation The currency of Malta, the country of domicile, is the Euro (EUR). The financial statements are presented in United States Dollars (), which is the company s presentation and functional currency. The share capital of the Company is also denominated in United States Dollars. Transactions in foreign currencies, being currencies other than the functional currency of the Company, have been converted into United States Dollars at the rates of exchange ruling on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated into United States Dollars at the rates of exchange ruling at the reporting date. All resulting differences are taken to the Statement of Comprehensive Income. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquire. For each business combination, the Company elects whether to measure the non-controlling interests in the acquire at fair value or at the proportionate share of the acquiree s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. Taxes Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Deferred income tax Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 5

7 NOTES TO THE FINANCIAL STATEMENTS continued 2.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Taxes - continued Deferred income tax - continued Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation company. Value added tax Revenues, expenses and assets are recognised net of the amount of value added tax except: where the value added tax incurred in the purchase of assets or services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the asset or as part of the expense item as applicable; and receivables and payables that are stated with the amount of value added tax included. The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Construction in Progress The carrying value of the rigs under construction (BassDrill Beta) represents the accumulated costs at the balance sheet date. Cost components include payments for yard installments and variation orders, construction supervision, equipment, spare parts and capitalised interest. No charges for depreciation will be made until commissioning of BassDrill Beta is completed and ready for its intended use. Investment in subsidiary A subsidiary is an entity that is controlled by the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The investment in subsidiary is accounted for on the basis of the direct equity interest and is stated at cost less any accumulated impairment losses. Income from the investment is recognised only to the extent of distributions received by the company from post-acquisition 6

8 profits. Distributions received in excess of such profits are regarded as a recovery of investment and are recognised as a reduction of the cost of the investment. 7

9 NOTES TO THE FINANCIAL STATEMENTS - continued 2.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Loans receivable Loans receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement the financial assets are recognised at cost less any impairment losses. This category generally applies to pledged receivables, related party receivables and trade and other receivables. For more information on receivables, refer to notes 8, 9 and 10. Trade and other receivables Trade and other receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate is made for doubtful receivables based on a review of all outstanding amounts at the year-end. Impaired debts are written off during the year in which they are identified. Impairment of assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the company estimates the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the company makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment losses recognised in relation to goodwill are not reversed for subsequent increases in its recoverable amount. 8

10 NOTES TO THE FINANCIAL STATEMENTS - continued 2.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the statement of financial position) when: The rights to receive cash flows from the asset have expired, or The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass through arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risk and rewards of the asset, but has transferred control of the asset. Cash and cash equivalents Cash in hand and at banks and short-term deposits which are held to maturity are carried at cost. Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits. Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables net of directly attributable transaction costs. The Company s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Loans payable and borrowing costs Loans payable are non-derivative financial liabilities with fixed or determinable payments that are not quoted in an active market. After initial measurement the financial assets are recognised at cost. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. 9

11 NOTES TO THE FINANCIAL STATEMENTS - continued 2.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Trade and other payables Liabilities for amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for services received, whether or not billed to the Company. Payables to related parties are carried at cost. Related parties In these financial statements, related parties include any entity that, directly, or indirectly controls, is controlled by, or is under common control with the Company (this includes the parent, and ultimate parent); has an interest in the Company that gives it significant influence over the entity or has joint control over the entity (refer to note 18). Leases The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. Company as lessee Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased item to the Company, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of comprehensive income. A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Operating lease payments are recognised as an operating expense in the statement of comprehensive income on a straight-line basis over the lease term. 3. REVENUE Revenue comprise of the following components: Period from Year to to Bareboat charge daily rate 1,495,000 - Amortisation of mobilisation fee 428,673-1,923,673-10

12 NOTES TO THE FINANCIAL STATEMENTS - continued 4. ADMINISTRATIVE EXPENSES Period from Year to to Professional and accounting fees 101, ,253 Legal fees ,595 Auditors remuneration 8,859 13,791 Directors emoluments 4,177 11,554 Net exchange differences 10,428 (1,597) Rent 10,552 19,755 Reimbursable expenses (note i) (100,000) 311,257 Other expenses 27,457 44,859 Amortised liquidated damages 10,420 - Depreciation 503, , ,466 (i) Reimbursable expenses are subject to reimbursement from the suppliers. During this period the company was reimbursed for certain expenses which were previously expensed, and therefore recorded as revenue when received. 5. INCOME TAX EXPENSE The current tax calculation included in these unaudited Management Accounts is calculated at 35% of profit before tax and is included for indicative purposes only. Generally, the tax on the company s profit before tax differs from the theoretical tax expense that would arise using the applicable tax rate in Malta of 35%. Period from Year to to Profit/(loss) before tax 1,347,607 (824,422) Theoretical taxation credit at 35% 471,662 (288,547) Tax effect of: - pre-trading expenses not deductible for tax purposes - 288,547 Current tax expense 471,662-11

13 NOTES TO THE FINANCIAL STATEMENTS continued 6. INVESTMENT IN SUBSIDIARY The investment in subsidiary consists of an investment holding of shares as follows: Name Registered office Number and class of shares held Cost Cost BassDrill Beta B.V CM 18,000 ordinary 22,778 22,778 Amsterdam Zuidoost Herikerbegweg 238 Luna Arena The Netherlands The investment in BassDrill Beta B.V. is accounted for at cost. 7. PLANT AND EQUIPMENT Tender support vessel Cost or valuation: - Acquisitions during ,977,312 At 31 December ,977,312 Acquisitions during the period 24,238,249 At 31 March ,215,561 Depreciation and impairment: - Depreciation charge for the year Depreciation charge for the period ,563 At 31 March ,563 At 31 March ,711,998 At 31 December ,977,312 The Tender Support Vessel ( the Vessel ) was delivered from the yard, Dalian Shipbuilding Industry Co. Ltd., on 19 November 2013 and immediately departed from China to the operation site in Brazil. The vessel was held for the client until 19 March 2014 when the vessel was formally accepted by the client Petrobras and the 1,500 day contract commenced. The depreciation charge for the period under review represents the depreciation from 19 March 2014 to 31 March

14 NOTES TO THE FINANCIAL STATEMENTS continued 8. PLEDGED RECEIVABLES Pledged receivables (note i) 8,963,501 8,962,914 (i) Pledged receivables represent restricted cash balances which are held by the lenders Norsk Tillitsmann ASA (the bond trustee) and ABN AMRO Bank NV, SWEDBANK AB, NIBC Bank BV and Pareto Bank ASA respectively as a guarantee with respect to the 75,000,000 Bond Issue and the 125,000,000 Senior Secured Term Loan Facility. 9. RELATED PARTY RECEIVABLES BassDrill Beta B.V. 24,120,114 27,908,865 BassDrill Brazil LTDA 2,272,938 1,052,576 Atlantica Delta Limited (previously BassDrill Delta Ltd) 9,050 13,951 BassDrill Beta Holding Limited 8,558 8,558 26,410,660 28,983,950 The amounts receivable from the related parties relate to expenses paid by BassDrill Beta Limited on their behalf and deposits made to their respective bank accounts. The balances are unsecured, interest free and repayable on demand. 10. TRADE AND OTHER RECEIVABLES Trade receivables 3,424,825 - Other debtors 1,495, ,412 Prepayments 1,072, ,002 VAT receivable 41,994 31,409 6,034,081 1,186,823 13

15 NOTES TO THE FINANCIAL STATEMENTS continued 11. CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise of the following amounts in the statement of financial position:- Cash at bank 10,040,113 15,514,086 Restricted bank balance (note i) - (5,775,430) 10,040,113 9,738,656 (i) Restricted bank balances represent amounts held by the lenders ABN AMRO Bank NV, SWEDBANK AB, NIBC Bank NV and Pareto Bank ASA as a guarantee with respect to the 125,000,000 Senior Secured Term Loan Facility. 12. ISSUED CAPITAL AND RESERVES Authorised, issued and fully paid shares 2,500 ordinary shares of 1 each 2,500 2,500 Accumulated losses Accumulated losses represent the losses incurred by the Company from incorporation to 31 March 2014, in addition to the accumulated losses of 2,515,380 acquired from Atlantica Beta Ltd as part of the Asset Sale and Purchase Agreement, less an amount of 46,213, being amounts due by the Company to Atlantica Tender Drilling Limited prior to the Agreement. During the period under review an amount of 1,903,978 previously expensed in Atlantica Beta Ltd has been transferred to part of the cost of the Tender Support Vessel. 13. BORROWINGS Short term Bank loan (note ii) 16,544,000 12,408,000 Long term Bonds (note i) 75,000,000 75,000,000 Bank loan (note ii) 108,456, ,592, ,456, ,592,000 Total borrowings 200,000, ,000,000 i. The 75,000,000 Bonds at par value of 1 were issued on 24 April The purpose of the bonds is to part finance the construction of the tender drilling unit and to fund the debt services and working capital requirements. The bonds are subject to an 14

16 interest rate of 8.5% per annum paid in 2 annual instalments and will mature on 24 April

17 NOTES TO THE FINANCIAL STATEMENTS continued 13. BORROWINGS - continued ii. On 31 May 2013, Atlantica Beta Ltd entered into a Senior Secured Term Loan Facility of 125,000,000 to part finance the construction of the tender drilling unit. The loan is subject to an interest rate of 4.25% plus LIBOR. The repayment of the loan is due in 17 consecutive quarterly instalments of 4,136,000 commencing 6 months after the drawdown date (being 15 November 2013), together with a final balloon payment of 54,688,000 due on 31 May LONG TERM RELATED PARTY PAYABLES Atlantica Tender Drilling Limited (note i) 77,559,168 77,559,168 i. A subordinated loan agreement has been entered into with Atlantica Tender Drilling Limited on 31 October 2013 where it can lend up to 83,000,000 to the Company to finance the construction of the asset. The loan is subject to 2.5% interest and repayable by 31 May DEFERRED REVENUE At 1 January 25,459,979 - Deferred during the period/year 22,800,000 26,662,252 Released accrued penalties on contract (note i) - (1,202,273) Amortised during period/year Revenue (428,673) - Penalties 10,420-47,841,726 25,459,979 Current 11,743,262 3,818,997 Non-current 36,098,464 21,640,982 47,841,726 25,459,979 i. The amount of deferred revenue relates to income for services which will be provided to the client over a period of 60 months. Accrued penalties on the contract have been incurred due to the delay in delivery of the tender drilling vessel to the client on 4 October The amount accrued was for the period from 5 October to 29 November 2013 as agreed with Petrobras. 16

18 NOTES TO THE FINANCIAL STATEMENTS continued 16. RELATED PARTY PAYABLES Atlantica Alpha Ltd 13,243 - Atlantica Management (USA) Inc (note i) 65, ,917 Atlantica International Ltd (note i) 417, ,500 Atlantica Tender Drilling Limited (note ii) 23,223,865 19,451,427 23,719,292 20,027,844 i. The amounts due to related parties relate to payments made by them on behalf of BassDrill Beta Ltd. The amounts are unsecured, interest free and repayable on demand. ii. The balance with Atlantica Tender Drilling Limited is unsecured and interest free. The ultimate parent has confirmed that it will only claim repayment when the company s financial position permits. 17. TRADE AND OTHER PAYABLES Accruals 5,703,767 4,041,618 Trade payables 2,482,360 7,158,589 8,186,127 11,200, RELATED PARTY TRANSACTIONS AND DISCLOSURES Terms and conditions All transactions with the related party, including financial transactions, were carried out on an arm s length basis in accordance with the Company s policy. Outstanding balances at yearend are unsecured, interest free and have no fixed date of repayment. There have been no guarantees provided or received for any related party receivable or payable. Related company balances Outstanding balances with related companies are separately disclosed in notes 9, 14 and 17 to the financial statements. 17

19 NOTES TO THE FINANCIAL STATEMENTS continued 19. ULTIMATE PARENT ENTITY BassDrill Beta Limited is a limited liability company and is incorporated in Malta. The immediate parent entity of BassDrill Beta Limited is BassDrill Beta Holding Ltd., a company registered in Malta, with its registered address at 6th Floor, Tagliaferro Business Centre, 14 Gaiety Lane, Sliema, Malta. The ultimate parent entity of BassDrill Beta Ltd is Atlantica Tender Drilling Ltd (formerly BassDrill Ltd), a company registered in Bermuda with its registered address at Canon s Court, 22, Victoria Street, Hamilton HM 12, Bermuda. Atlantica Tender Drilling Ltd is ultimately owned by HVAS Invest Zeta AS, a company registered at Jattavagveien, 7, 4020, Stavanger, Norway. 20. COMMITMENTS In June 2010, a turn-key contract with DSIC (the Builder ) to design, was entered into by Atlantica Tender Drilling Ltd, to construct and sell a tender support vessel (BassDrill Beta). The delivery point was alongside the Builder s shipyard in Dalian, China for an original contract price of 184,388,536 subject to adjustment in accordance with certain provisions (such adjustments to date include a July 2012 variation order for a 40,744,563 upgrade to the vessel s mooring system and other required enhancements for a revised contract price of 225,133,099). The Company made a 20% (of the original contract price) installment payment of 36,877,707 in April 2011; the 2nd installment payment of 921,943 was made in July 2011, five working days after steel cutting; the 3rd installment payment of 921,943 was paid in April 2013, five working days after the launching of the vessel; and the 4th and final installment payment of 186,411,506 (26,622,251 of which will be funded by Petrobras (the customer) after the acceptance of BassDrill Beta in China), plus any outstanding increase or less any decrease due to any additional adjustments, due upon delivery. Any amounts not paid by the due dates to bear interest at LIBOR (one month) plus 1.5%. In September 2010, BassDrill Beta Limited (BDB) signed a 945 day commitment (modified subsequently to a 1,500 day contract) with Petroleo Brasilicros S.A. Petrobras for the chartering, and servicing of the BassDrill Beta vessel to be used in the drilling and/or evaluation and/or completion and/or maintenance of oil and/or gas wells in Brazilian waters. In July 2012, Petrobras approved the aforementioned upgrade, and a revised delivery date of October 2013 was agreed to between the parties. The agreement with Petrobras also stipulates that the Company will pay liquidated damages in the amount of 10% of the day rate of 218,595 or 21,859 per day for each day after the delivery date of 4 October Subsequently it was agreed between the Company and Petrobras that on the basis that the vessel was formally accepted by Petrobas on 19 November 2013 and left China for Brazil on 29 November 2013, the daily penalty would be suspended while the vessel was in transit. There are also provisions in the DSIC agreement that will require the Builder to pay penalties of 30,000 per day escalating to 60,000 if delayed more than 61 days but limited to 10.8 million. However an agreement has been entered into with DSIC that no penalties shall be charged. 18

20 NOTES TO THE FINANCIAL STATEMENTS continued 20. COMMITMENTS - continued On 31 May 2013, the Company entered into a Senior Secured Term Loan Facility agreement amounting to 125,000,000 to part finance the purchase of the vessel under construction. The Company will repay the Loan in quarterly installments of 4,136,000, commencing six months after the drawdown date. A final balloon payment of 54,688,000 is due on 31 May In addition to security provided to lenders in the form of the pledged asset, (the tender support vessel named BassDrill Beta ), the Senior Secured Term Loan contains certain financial covenants for the company including the following: An interest coverage ratio of not less than 2.5 to 1.0; A debt service coverage ratio of not less than 1.1 to 1.0; A leverage ratio not exceeding 0.75 to 1.0; and A minimum book equity of 70,000,000. Atlantica Tender Drilling Limited (incorporated in Bermuda with registration number 42347), BassDrill Beta Holding Limited (incorporated in Malta with registration number C55269), BassDrill Beta BV (incorporated in the Netherlands with registration number ), Atlantica Management (USA) Inc (incorporated in Texas with company identification number ) and BassDrill Brazil Serviças De Petróleo LTDA (incorporated in Brazil with registration number / ) shall irrecoverably and unconditionally jointly and severally act as guarantors to the senior secured loan facility agreement. In May 2013, the Company raised an additional 75,000,000 via a Second Lien Bond Issue for the purpose of financing the remaining portion of delivery installments to DSIC for the tender support vessel named BassDrill Beta. Proceeds from the Bond Issue have been used to fund the company s bond debt service account as well as working capital for operations. These Bonds were issued pari passu with all other senior obligations of the Company and are secured with a combination of a second lien on the BassDrill Beta, Atlantica Tender Drilling Limited s equity interest in BDB, and future earnings, warranties and insurance. The term of the Bonds is for five years with the first interest payment of 3,187,500 being paid in October Interest on the Bonds is 8.5% per annum. The Bonds are subject to financial covenants including minimum liquidity, current ratio and asset coverage ratio that will be tested on a semi-annual basis and are defined as follows: Asset coverage ratio The market value of the tender support vessel named BassDrill Beta will exceed 120% of the aggregated outstanding amount under the Senior Secured Term Loan and the Bond Issue; Liquidity: BassDrill Beta Limited s will have access to free and available cash in excess of 15 million; and The Company will need to maintain the minimum current ratio of 1:1 at all times. By virtue of the above 125,000,000 loan facility agreement, a pledge of shares agreement between Atlantica Tender Drilling Ltd (formerly BassDrill Ltd) and BassDrill Beta Holding Ltd (as pledgers), ABN AMRO Bank N.V (as pledgee) and BassDrill Beta Ltd (Malta) was signed on 3 July 2013 whereby the ordinary shares held by Atlantica Tender Drilling Ltd and BassDrill Beta Holding Ltd in the company have been pledged in favour of ABN AMRO Bank N.V. An amendment to the above pledge agreement was signed on 28 October 2013 covering also the 75,000, % Second Lien Callable Bond Issue 2013/2018 between BassDrill Beta Ltd and Norsk Tillitsmann ASA (the bond trustee). 19

21 NOTES TO THE FINANCIAL STATEMENTS continued 20. COMMITMENTS - continued During the year under review, the Company entered into an operating lease agreement for the lease of an office and car parking space for a period of three years expiring on 31 March At the end of this lease term the lessee shall have the option to extend the lease for a further one year unless the lessee gives prior written notice of termination to the lessor at least four months prior to the expiration of the initial three years. A security deposit for the lease agreement was paid by the Company on commencement of the agreement date. At the end of the term, the landlord shall return the security deposit in full to the Company. Future minimum rentals payable under non-cancellable operating lease as at 31 December are as follows: Within one year 30,153 29,869 After one year but not more than five years 31,359 38,905 61,552 68,774 20