Annual accounts as at 31 December For the year ended 31 December Pacific Drilling S.A. Société anonyme. Pacific Drilling S.A.

Transcription

1 Annual accounts as at 31 December 2012 For the year ended 31 December 2012 (With the report of the Réviseur d Entreprises Agréé thereon) Société anonyme 37, rue d Anvers L-1130 Luxembourg R.C.S. Luxembourg: B

2 Table of contents: Page(s) Report of the Réviseur d Entreprises Agréé Balance sheet Profit and loss account... 5 Notes to the annual accounts

3 KPMG Luxembourg 5.8 d. 9. allee Scheffer L-2520 luxembourg Telephone Fax n Internet... kpmg lu Info@kpmg.lu To the Shareholde rs of Pac ific Drilling S.A. 37, rue d' Anvers L-I 130 Luxem bourg REPORT OF THE REVISEUR D' ENTREPRISES AGREE Fo llowing our appoint ment by the General Meet in g of the Shareholders dated May 14, 20 12, we have aud ited the accom panying ann ual accounts of Pac ific Drilling S.A., which comprise the balance sheet as at December 31, 2012, and the profit and loss account for the year then ended, and a summary of signi ficant accounting policies and other explanatory in formation, Board of Directors' responsibility f or the al1l1ual accoullls The Board of Directors is responsible for the preparation and fair presentation of these annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts, and for such internal contro l as the Board of Directors determines is necessary to enable the preparation of annua l accounts that are free from material mi sstatement, whether due to fraud or error. Responsibility of/he Revisellr d'entreprises agree Our responsibility is to express an opi nion on these annual accounts based on our audit. We conducted our aud it in accordance with International Standards on Aud iting as adopted for Luxembourg by the Commiss ion de Surveillance du Secteur Financier. Those standards require that we comply with eth ical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts are free from material mi sstatement. An audit involves perfonning procedures to obtain audit evidence about the amounts and di sc losures in th e annual accounts. The procedures selected depend on the judge ment of the Reviseur d 'Entreprises agree, includi ng the assessment of the ri sks of material misstatement of the annual accounts, whether due to fraud or error. In making those risk assessments, the Revi seu r d'entreprises agree considers internal control relevant to the entity's preparation and fa ir presentation of the annual accounts in order to design aud it procedures that are appropriate in the circumstances, but not for the pu rpose of ex pressing an opinion on the effecti veness of the entity's intemal control. An audit al so includ es eva luating the appropriateness of accounting poli cies used and the reasonableness of account ing estimates made by the Board of Directors, as we ll as evaluating the overall presentation of the annual accounts. We believe that the audit evidence we have obtai ned is sufficient and appropri ate to provide a basis fo r our audit opinion. r;fm(; lu<embouog lu>...-..g ed~ _~~oi""'kpmg... """, ~ oi_' -. ~ "'-'-_ (KPMG~J.~- TVA lu 2_1171 CopuI ( Res L.u.e<ntICu9 B 14\1133

4 Opinion In our opi nion, the annual accounts give a true and fair view of the fi nancial position of Pacific Dri ll ing S.A. as of December 31, 20 12, and of the resu lts of its operations fo r the year then ended in accordance with Luxembourg legal and regulatory requirements re lating to the preparation of the annual accounts. Luxembourg, March 27, 2013 KPMG Luxembourg S.a r. L Cabinet de rev ision agree -= 0, ~ S Ph. Meyer ; i

5 Balance sheet as at 31 st December 2012 Expressed in USD ASSETS Note C Fixed Assets III. Financial Assets 1. Shares in affiliated undertakings 3 2,429,309,669 2,128,309,669 2,429,309,669 2,128,309,669 D Current Assets II. Debtors 2. Amounts owed by affiliated undertakings a) becoming due and payable within one year 1,095,434 16, Other debtors b) becoming due and payable after more than one year - 1,636 IV.Cash at bank and in hand 174,226 7,305,762 1,269,660 7,324,084 E Prepayments 544, ,294 TOTAL ASSETS 2,431,123,472 2,135,769,047 The accompanying notes form an integral part of these annual accounts. 3

6 Balance sheet as at 31 st December 2012 (continued) Expressed in USD LIABILITIES Note A Capital and reserves 4 I. Subscribed capital 2,241,000 2,241,000 II. Share premium and similar premiums 2,150,821,250 2,150,821,250 V. Profit or loss brought forward - 28,438,713 - VI. Result for the financial year / period - 31,475,143-28,438,713 2,093,148,394 2,124,623,537 C Provisions 2. Provisions for taxation 8 4,121 2, Other provisions 135, , , ,128 D Non subordinated debts 1. Debenture loans 5 b) Non-convertible loans i) becoming due and payable within one year 8,731,250 - ii) becoming due and payable after more than one year 300,000, Trade creditors a) becoming due and payable within one year 635, , Amounts owed to affiliated undertakings a) becoming due and payable within one year 6 28,468,927 10,436, Tax and social security a) Tax debts ,127 b) Social Security debts - 3, Other creditors a) becoming due and payable within one year - 7, ,835,909 10,783,382 TOTAL LIABILITIES 2,431,123,472 2,135,769,047 The accompanying notes form an integral part of these annual accounts. 4

7 Profit and loss account For the year from 1 st January 2012 to 31 st December 2012 Expressed in USD A CHARGES Note 2012 Period from 11 March 2011 to 31 December Other external charges 3,898,619 28,203, Staff costs 7 a) Wages and salaries 3,324 10,135 b) social security costs 873 3, Other operating charges 9 337, , Interest payable and similiar charges b) other interest payable and similiar charges 5 27,232, Tax on profit or loss 8 2,081 2,039 TOTAL CHARGES 31,475,143 28,449,860 B INCOME 8. Other interests and other financial income b) other interest receivable and similiar income - 11, Loss for the financial year 31,475,143 28,438,713 TOTAL INCOME 31,475,143 28,449,860 The accompanying notes form an integral part of these annual accounts. 5

8 Notes to the annual accounts as at 31 December 2012 Note 1 - General information (hereafter "the Company") was incorporated on 11 March 2011 and organised under the laws of Luxembourg as a public company limited by shares (société anonyme) for an unlimited period. The Company is registered in Luxembourg with RCS number B The registered office of the Company was established at 16, avenue Pasteur, L-2310 Luxembourg and moved to 37, rue d Anvers, L-1130 Luxembourg, Grand Duchy of Luxembourg on 4 February The Company s object is the acquisition of participations in Luxembourg or abroad, in any company or enterprise in any form whatsoever, and the management of those participations. The Company may in particular acquire, by subscription, purchase or exchange or in any other manner, any stock, shares and other participation securities, bonds, debentures, certificates of deposit and other debt instruments and, more generally, any securities and financial instruments issued by any public or private entity. It may participate in the creation, development, management and control of any company or enterprise. Further, it may invest in the acquisition and management of a portfolio of patents or other intellectual property rights of any nature or origin. The Company may borrow in any form. It may issue notes, bonds and any other kind of debt and equity securities. It may lend funds, including, without limitation, the proceeds of any borrowings, to its subsidiaries, affiliated companies and any other companies. It may also give guarantees and pledge, transfer, encumber or otherwise create and grant security over some or all of its assets to guarantee its own obligations and those of any other company, and, generally, for its own benefit and that of any other company or person. For the avoidance of doubt, the Company may not carry out any regulated financial sector activities without having obtained the requisite authorisation. The Company may use any techniques, legal means and instruments to manage its investments efficiently and protect itself against credit risks, currency exchange exposure, interest rate risks and other risks. The Company may carry out any commercial, financial, or industrial operation and any transaction with respect to real estate or movable property, which directly or indirectly, favours or relates to its corporate object. The Company s financial year begins the first day of January and ends the last day of December of each year with the exception of the first financial period which started on 11 March 2011, and ended on 31 December Shares of the Company s common stock have traded on the Norwegian OTC List since 5 April 2011 under the symbol PDSA. Shares of the Company s common stock commenced trading on the New York Stock Exchange (the NYSE ) on 11 November 2011 under the symbol PACD. The NYSE listing is intended to be the Company s primary listing and the Norwegian OTC listing is intended to be the Company s secondary listing. 6

9 Notes to the annual accounts as at 31 December 2012 (cont.) Note 1 - General information (cont.) In accordance with Article 309 of Law of 10 August 1915 as subsequently amended, the Company is required to prepare consolidated accounts and a consolidated management report. These annual accounts are presented on a non-consolidated basis to be approved by the shareholders during the Annual General Meeting of the Company. A majority of the outstanding shares of the Company are controlled by Quantum Pacific (Gibraltar) Limited, a company incorporated under the laws of Gibraltar, whose consolidated accounts are not available. The Company will also prepare and file consolidated accounts in accordance with Generally Accepted Accounting Principles in the USA ( US GAAP ), including a reconciliation of equity to the accounting rules under the laws and regulations in Luxembourg ( Lux GAAP ), using the exemption under Article 27, paragraph 1 of the Luxembourg Law of 19 December 2002 granted by the Minister of Justice on 27 July The Company prepares the consolidated accounts for the smallest and largest body of undertakings of which the undertaking forms part as subsidiary, for the year ending on 31 December Note 2 - Summary of significant accounting policies 2.l Basis of preparation The annual accounts have been prepared in accordance with legal and regulatory requirements and generally accepted accounting principles in the Grand Duchy of Luxembourg. Accounting policies and valuation rules are, besides the ones laid down by the Law of 19 December 2002 as amended, determined and applied by the Board of Directors. 2.2 Significant accounting policies The main valuation rules applied by the Company are the following: Assets and liabilities Unless stated otherwise, assets and liabilities have been stated at their historical cost Financial assets Financial assets are accounted for at historical cost. A write down is recorded if there is a permanent impairment in the value Prepayments Expenditure before the balance sheet date that represents expenses for the subsequent year is reported as prepaid expenses. 7

10 Notes to the annual accounts as at 31 December 2012 (cont.) Note 2 - Summary of significant accounting policies (cont.) Foreign currency translation The Company maintains its books and records in US Dollars ( USD ). Transactions expressed in currencies other than USD are translated into USD at the exchange rate effective at the time of the transaction. Cash at bank is translated at the exchange rate effective at the balance sheet date. Exchange losses and gains are recorded in the profit and loss account of the period. Other assets and liabilities are translated separately respectively at the lower or at the higher of the value converted at the historical exchange rate or the value determined on the basis of the exchange rates effective at the balance sheet date. The unrealised exchange losses are recorded in the profit and loss account. The realised exchange gains are recorded in the profit and loss account at the moment of their realisation Provisions Provisions are intended to cover losses or debts the nature of which is clearly defined and which, at the date of the balance sheet are either likely to be incurred or certain to be incurred but uncertain as to their amount or as to the date on which they will arise Debts Debts are recorded at their repayment value. Note 3 Shares in affiliated undertakings Name of the Company: Pacific Drilling (Gibraltar) Limited Registered office: 57/63 Line Wall Road, Gibraltar % ownership by the Company at 31 December 2012: 100% USD USD Acquisition cost at the beginning of the year 2,128,309,669 - Increase 301,000,000 2,128,309,669 Acquisition cost at the end of the year 2,429,309,669 2,128,309,669 Value adjustment - - Net book value at the end of the year 2,429,309,669 2,128,309,669 8

11 Notes to the annual accounts as at 31 December 2012 (cont.) Note 3 Shares in affiliated undertakings (Cont.) On 17 January 2012, the Company made a capital contribution amounting to USD 7,000,000 to Pacific Drilling (Gibraltar) Limited s capital for no additional shares. On 24 February 2012, the Company made a capital contribution amounting to USD 294,000,000 to Pacific Drilling (Gibraltar) Limited s capital for no additional shares. Art. 65, paragraph (1) 2 of the commercial company Law of Luxembourg (the law ) requires the disclosure of the amount of capital and reserves and profit and loss for the last financial year of each affiliated undertaking. In conformity with Art. 67, paragraph (3) a) of the Law of 19 December 2002 on the commercial and companies register, these details have been omitted since the undertakings are included in the consolidated accounts drawn up by the parent company and these consolidated accounts and the related consolidated annual report and auditors report thereon will be lodged with the Luxembourg Trade Registry. Note 4 Capital and reserves The Company was incorporated on 11 March 2011 with a subscribed share capital of USD 50,000 represented by 50,000 shares without nominal value (the Incorporation Shares ) and an authorised share capital of USD 50,000,000. On 30 March 2011, an Extraordinary General Meeting ( EGM ) of the shareholder of the Company approved to: - Split of the Incorporation Shares into 5,000,000 shares without nominal value; - Increase the share capital of the Company by USD 1,450,000 by the issuance of 145,000,000 new shares without nominal value and a share premium attached of USD 1,498,550,000 in consideration of the contribution in kind of the shares of Pacific Drilling Ltd (Liberia). On 4 April 2011, the Board of Directors of the Company approved the increase of the share capital of the Company by USD 600,000 by the issuance of 60,000,000 new shares without nominal value and a share premium attached of USD 599,400,000 through a private placement to international and U.S. investors. Following resolutions taken by the Board of Directors on 1 August 2011 and 10 November 2011, the share capital of the Company was further increased through initial public offering in the USA as follows: - By USD 60,000 represented by 6,000,000 new shares without nominal value and a share premium attached of USD 45,975,000; - By USD 9,000 represented by 900,000 new shares without nominal value and a share premium attached of USD 6,896,250. 9

12 Notes to the annual accounts as at 31 December 2012 (cont.) Note 4 Capital and reserves (Cont.) On 2 November 2011, the Board of Directors of the Company approved the increase of the share capital of the Company by USD 72,000 by the issuance of 7,200,000 new shares without nominal value to one of our indirect subsidiaries. These shares, which represent 3.3% of the capital, are held for the purposes of administering our 2011 Omnibus Stock Incentive Plan. The movements of the Shareholders Equity for the year are per the below table. Ordinary Subscribed Capital Ordinary Share Premium Profit /(Loss) brought forward Result for the financial year Total As at 31 December ,241,000 2,150,821,250 - (28,438,713) 2,124,623,537 Result allocation (28,438,713) 28,438,713 - Result for the financial year (31,475,143) (31,475,143) As at 31 December ,241,000 2,150,821,250 (28,438,713) (31,475,143) 2,093,148,394 As of 31 December 2012, the subscribed share capital amounts to USD 2,241,000 represented by 224,100,000 shares and the authorised share capital amount to USD 50,000,000, represented by 5,000,000,000 shares. Note 5 Debenture loans non-convertible loans In February 2012, the Company completed a private placement of USD 300,000,000 in aggregate principal amount of 8.25% senior unsecured U.S. dollar denominated bonds (the Senior Unsecured Bonds ) due in 2015 to eligible purchasers. The bonds bear interest at 8.25% per annum, payable semiannually on 23 February and 23 August of each year and mature on 23 February Interest accrued as at 31 December 2012 amounted to USD 8,731,250. The Senior Unsecured Bonds contain provisions that limit, with certain exceptions, the ability of the company and its subsidiaries to (i) merge or demerge, (ii) dispose of assets, (iii) incur financial indebtedness and (iv) pay dividends exceeding 50% of consolidated net income for the preceding fiscal year. The Senior Unsecured Bonds also require compliance with financial covenants including (i) a minimum equity ratio of 35%, (ii) a minimum liquidity of USD 25 million and (iii) a leverage restriction limiting the outstanding secured and unsecured borrowings on a consolidated basis (excluding Temporary Import Bond Facilities) to an average of USD 475 million per drillship. The Senior Unsecured Bonds contain events of default that are usual and customary for a financing of this type, size and purpose. Upon the occurrence of an event of default, borrowings under the Senior Unsecured Bonds are subject to acceleration. 10

13 Notes to the annual accounts as at 31 December 2012 (cont.) Note 6 Amounts owed to affiliated undertakings On 31 December 2012, this item is composed as follows: USD USD Pacific Drilling Limited 545,827 - Pacific Drilling Operations Ltd. 1,170,650 8,292,150 Pacfic Drilling Services Inc 504,021 25,896 Pacific Drilling Administrator Ltd. 72,000 - Pacific Drilling (Gibraltar) Ltd. 26,176,429 2,118,478 28,468,927 10,436,524 Amounts owed to affiliated undertakings are not subject to interest. Note 7 Staff costs During the year under review, the Company employed one part-time employee. Note 8 Taxes The Company is subject in Luxembourg to the applicable general tax regulations. Note 9 Transactions with related parties Director s fees In 2012, a total of USD 337,521 was allocated to the members of the Board of Directors of the Company and the committees that emanate from it, with respect to their functions. (2011: USD 230,844). Share based compensation On 11 March 2011, the Board approved the creation of the 2011 Omnibus Stock Incentive Plan, which provides for issuance of common stock options, as well as share appreciation rights, restricted shares, restricted share units and other equity based or equity related awards to directors, officers, employees and consultants. On 31 March 2012, certain members of our Board of Directors, officers and employees of the Pacific Drilling Group received 297,180 restricted stock units pursuant to the Stock Incentive Plan. 11

14 Notes to the annual accounts as at 31 December 2012 (cont.) Note 9 Transactions with related parties (Cont.) Transactions with shareholders In 2012, the Company did not conclude any transaction with its shareholders (2011: USD 0). Note 10 Commitments On 16 November 2012, Pacific Drilling V Limited, a British Virgin Islands Company, and an indirect wholly-owned subsidiary of, has issued USD 500,000,000 Senior Secured Notes with an interest rate of 7.25% and due on 1 December acts as the sole guarantor of the notes, fully and unconditionally guaranteeing the notes on a senior secured basis. Note 11 Subsequent events In January 2013, Pacific Drilling Group exercised the option and entered into an additional contract with SHI for the construction of an eighth drillship, which is expected to be delivered in the first quarter of On 19 February 2013, Pacific Sharav S.à r.l. and Pacific Drilling VII Limited (collectively, the Borrowers ), and (the Guarantor ) (collectively, the Borrowing Group ) entered into a senior secured credit facility agreement with a group of lenders to finance the construction, operation and other costs associated with the Pacific Sharav and the Pacific Meltem (the Senior Secured Credit Facility Agreement or SSCF ). The SSCF includes a term loan (the SSCF Term Loan ) which consists of two tranches: (i) a tranche of USD million provided by a syndicate of nine commercial banks (the Commercial Tranche ) and (ii) a tranche of $500.0 million provided by Eksportkreditt Norge AS (and guaranteed by the Norwegian Guarantee Institute for Export Credits) (the GIEK Tranche ). The SSCF Term Loan will become available upon the satisfaction of customary conditions precedent, as described therein. Borrowings under the Commercial Tranche bear interest at the London Interbank Offered Rate ( LIBOR ) plus a margin of 3.5%. Borrowings under the GIEK Tranche bear interest, at the Borrower s option, at (i) LIBOR plus a margin of 1.50% (which margin may be reset 60 months after the first borrowing under the SSCF Term Loan) or (ii) at a Commercial Interest Reference Rate ( CIRR ) of (a) 3.96% for borrowings relating to the Pacific Sharav and (b) 2.37% for borrowings relating to the Pacific Meltem. Borrowings under the GIEK Tranche will also be subject to a guarantee fee of 2.00% per annum (the GIEK Premium ). Undrawn commitments for the SSCF Term Loan shall bear a fee equal to (i) in the case of the Commercial Tranche, 40% of the margin for such tranche and (ii) in the case of the GIEK Tranche, 40% of the applicable margin for such tranche and 40% of the GIEK Premium. 12

15 Notes to the annual accounts as at 31 December 2012 (cont. and end) Note 11 Subsequent events (cont.) The Commercial Tranche matures on the earlier of (i) five years following the delivery of the second vessel under the SSCF and (ii) 31 May The GIEK Tranche matures (for each vessel) twelve years following the delivery of the applicable vessel. The GIEK Tranche contains a put option exercisable if the Commercial Tranche is not refinanced on terms acceptable to GIEK. If the GIEK Tranche put option is exercised, each Borrower must prepay, in full, the portion of all outstanding loans that relate to the GIEK Tranche, on the maturity date of the Commercial Tranche, without any premium, penalty or fees of any kind. Amortization payments under the SSCF Term Loan are calculated on a 12 year repayment schedule and must be made every six months following the delivery of the relevant vessel. 13