SEVAN MARINE ANNUAL REPORT

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1 20 09 SEVAN MARINE

2 CONTENTS 09 2 SEVAN MARINE Contract Status 5 Board of Directors Report Statement Regarding Establishment of Salary and Other Benefits for Senior Management 10 The Board of Directors 12 Board of Directors Statement on Policy for Corporate Governance 13 Senior Management 18 Auditor s Report 86 Responsibility Statement 87 Sevan Marine Group Consolidated Balance Sheet 20 Consolidated Income Statement 21 Consolidated Statement of Comprehensive Income 22 Consolidated Statement of Changes in Equity 22 Consolidated Cash Flow Statement 23 Notes to the Consolidated Financial Statement Note 1 Corporate Information 24 Note 2 Summary of Significant Accounting Policies Basis of Preparation Changes in Accounting Policy and Disclosures Consolidation Segment Reporting Foreign Currency Translation Property, Plant and Equipment Construction in Progress Construction Contracts Intangible Assets Impairment of Non-Financial Assets Financial Assets Inventory Trade Receivables Cash and Cash Equivalents Share Capital Interest-Bearing Debt Deferred Income Tax Employee Benefits Provisions Revenue Recognition Leases Dividend Distribution 30 Note 3 Financial Risk Management Financial Risk Factors Market Risk Credit Risk Liquidity Risk Cash Flow and Fair Value Interest Rate Risk Fair Value Estimation 31 Note 4 Critical Accounting Estimates and Judgments Critical Accounting Estimates and Assumptions Critical Judgments in Applying the Group s Policies 33 Note 5 Segment Information 34 Note 6 Property, Plant and Equipment 36 Note 7 Intangible Assets 37 Note 8 Investment in Associates 39 Note 9 Derivative Financial Instruments 39 9a Financial Instruments by Category 40 9b Credit Quality of Financial Assets 41 Note 10 Trade and Other Receivables 42 Note 11 Cash and Cash Equivalents 43 Note 12 Share Capital 43 Note 13 Share-Based Payments 44 Note 14 Current Liabilities 45 Note 15 Interest-Bearing Debt 45 Note 16 Deferred Income Tax 49 Note 17 Retirement Benefit Obligations 50 Note 18 Provisions 52 Note 19 Construction Contracts 52 Note 20 Employee Benefit Expense 53 Note 21 Financial Income and Financial Expense 56 Note 22 Income Tax Expense 56 Note 23 Earnings per Share 57 Note 24 Dividend per Share 57 Note 25 Cash Generated from Operations 57 Note 26 Contingencies 58 Note 27 Commitments 59 Note 28 Related Party Transactions 59 Note 29 Operating Leases 59 Note 30 Events After Balance Sheet Date 60 Note 31 Other Operating Expense 61 Note 32 Inventory 61 Note 33 Other Non-Current Assets 61

3 09 3 SEVAN MARINE Sevan Marine ASA Balance Sheet 63 Income Statement 64 Cash Flow Statement 65 Notes to the Financial Statements Accounting Policies 66 Note 1 Equity 68 Note 2 Taxes 69 Note 3 Tangible and Intangible Assets 70 Note 4 Investment in Subsidiaries and Receivables and Liabilities to Companies within the Group 71 Note 5 Other Non-Current Assets 73 Note 6 Cash and Cash Equivalents 73 Note 7 Shares and Share Options Owned or Controlled by the Board of Directors and Senior Management 73 Note 8 Shareholder Information 74 Note 9 Employee Benefit Expense 75 Note 10 Retirement Benefit Obligations 77 Note 11 Other Operating Expense 79 Note 12 Rental and Lease Agreements 79 Note 13 Earnings per Share 79 Note 14 Construction Contracts 79 Note 15 Share-Based Incentive Plans 80 Note 16 Related Party Transactions 81 Note 17 Financial Risk Management 81 Note 18 Contingent Liabilities, Loans, Guarantees, Securities and Collateral 82 Note 19 Events After Balance Sheet Date 82 Note 20 Interest-Bearing Debt 83 Note 21 Derivative Financial Instruments 85 Note 22 Financial Income and Financial Expense 85 Photo: SOMAFOTO :Sevan Driller outside of Rio de Janeiro

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5 09 SEVAN MARINE 5 CONTRACT STATUS FPSOs Year FPSO Sevan Piranema Petrobras S.A. 11 years fixed + 6 x 1 year options + 5 x 1 year mutually agreed 2.5 years fixed + options FPSO Sevan Hummingbird Centrica Energy Upstream Life of field FPSO Sevan Voyageur Premier Oil and Gas Services Ltd Sevan 1000 FPSO Eni Norge AS Licensed to Eni Norge AS O&M contract at Eni s option Available for clients Sevan 300 No. 4 Sevan 300 No. 5 Drilling Units Available for clients Year years fixed Sevan Driller Petrobras S.A. 6 years fixed Sevan Driller II Petrobras S.A. 3 years fixed Sevan Driller III ONGC Project phase Fixed period Option Available

6 09 SEVAN MARINE 6 BOARD OF DIRECTORS REPORT 2009 Sevan Marine ASA ( Sevan Marine or the Company ) and its subsidiaries (together with the Company; Sevan or the Group ) is a leading company within floating production of oil and gas and also has activities within deepwater drilling, based on the Company s proprietary cylindrical hull technology. The Company is also developing other applications, including floating LNG production and power plants with CO2 capture. The business is based on a build-own-operate model. Alternatively, a license model may be applied. The Company is a Norwegian public limited liability company. Several of its subsidiaries are Singaporean private companies with registered offices in Singapore. The Group also has subsidiaries in Brazil and UK. Floating Production FPSO Sevan Piranema became the world s first cylindrical FPSO to commence operation in October 2007, and continued to demonstrate high efficiency during Despite downtime in April and May relating to problems with the gas systems, the unit remained within the contractually allowed level of downtime for the year as the Unit Uptime for the remaining 10 months was as high as 99.8%. However, instabilities in the gas injection process of the processing plant resulted in high operating expenses and penalties from Petrobras which reduced the Revenue Utilization to 94.9% for the year. Measures have been taken to rectify the situation and it is expected that normal levels of Revenue Utilization and operating expense will be reached during first half of Interconnection of a third producing well and a second and third gas injector well was successfully completed in September which increased the production volumes significantly. The FPSO is currently operating for Petrobras S.A. on the Piranema field in Brazil under an 11 year fixed contract plus extension options. In August 2008, FPSO Sevan Hummingbird became the first cylindrical FPSO to be installed in the North Sea. Actual measurements from the unit have confirmed performance in accordance with model tests and theoretical analysis. The ability of helicopters to land on the FPSO even during severe winter storms and no processing restrictions experienced in relation to weather conditions, have additionally demonstrated the suitability of the Sevan design for operations in harsh environments. FPSO Sevan Hummingbird has continued to deliver stable operation and production throughout 2009, with Unit Uptime of 97.4% for the year and Revenue Utilization of 106.8% including bonus achieved for high production levels. The FPSO is currently operating for Centrica Energy Upstream on the Chestnut field in the Central UK North Sea under a 2.5 year fixed contract plus extension options. The Group s third FPSO to commence operations, the Sevan Voyageur, achieved first oil on the Shelley field in the Central UK North Sea on August 6, When Oilexco North Sea, the original client for the unit, was put under administration in early 2009, Sevan entered into a contract with Premier Oil and Gas Services Ltd in March Production at the Shelley field has decreased faster than originally anticipated with average production for the operating period in 2009 amounting to approximately 5,000 BBL/day. Decommissioning of the Shelley field is scheduled for third quarter of 2010 and securing a follow-on contract is a main priority for Sevan. In February 2009, Eni Norge AS selected the Sevan 1000 Goliat FPSO as the preferred concept for the floating production platform to be installed on the Goliat field in the Barents Sea. Sevan and Eni subsequently entered into a Post FEED Engineering Contract, a Technology License Agreement and a Project Services Contract relating to the Goliat project. The Group has as of the date only entered into commitments in relation to the construction of the hulls for FPSO Sevan 300 no. 4 and 5. Negotiations are ongoing with the shipyard regarding construction scope and progress. During 2009 and 2010, Sevan Marine has been working on a number of feasibility studies for companies like Chevron, Statoil, BG Norway, Det norske oljeselskap and Lundin. The studies have focused on the potential application of the Sevan technology for specific field developments. This includes demonstrating the feasibility of the Sevan cylindrical FPSO being bridge-linked to a wellhead platform as well as verifying the feasibility of using steel catenary risers (SCRs) for harsh deepwater applications. The results from the studies have been positive with successful model testing in significant wave heights of up to 22 meters. Drilling In June, the revised charter contract for Sevan Driller was approved by Petrobras, entailing an assignment of the contract from Petrobras Americas Inc. to Petrobras S.A. for operations offshore Brazil instead of US Gulf of Mexico as initially agreed. In November, the Sevan Driller successfully completed an extensive commissioning and sea trial program which confirmed performance in accordance with model tests. The rig was delivered from the Cosco Shipyard in China in 30 months from start of steel cutting and started its voyage towards Brazil for commencement of the six year contract in late November. The Sevan Driller arrived in Brazil late March 2010, and will be operating in the pre-salt area with its first location of operation in the Campos basin at a water depth of 1,800 m. In June 2008, Sevan was awarded its second six year contract by Petrobras S.A. (Sevan Driller II). Block fabrication for Sevan Driller II commenced under an EPCI contract (subject to financing) at the Cosco Nantong Shipyard in the second half of Sevan Driller II is based on the same design and major equipment items as Sevan Driller and is scheduled for delivery from the shipyard during first quarter of 2012.

7 09 SEVAN MARINE 7 In June 2008, a third drilling unit (Sevan Driller III) was contracted to India s ONGC with delivery at the end of During the global financial crisis, it proved difficult to secure the required financing for the unit. Sevan is discussing with ONGC how to resolve the situation and negotiations are as of date of this report still ongoing. Potential liabilities relating to the ONGC contract are disclosed in Note 26 in the consolidated financial statements. Income Statement and Balance Sheet Consolidated revenue for 2009 totaled USD 195 million, compared to USD 120 million in The Group incurred an operating loss of USD 83 million, an improvement of USD 47 million from 2008, mostly relating to increase in activities as new units commenced operations as well as one-off expense items in An increase in net financial loss of USD 114 million was mainly a result of unrealized financial currency losses from NOK nominated bonds. Net loss came to USD 143 million, compared to a loss of USD 108 million in At December 31, 2009, total consolidated assets amounted to USD 2,349 million, of which Sevan capital assets amounted to USD 1,904 million and USD 163 million was cash and cash equivalents. At year end, the equity ratio was 43% and the Group had an undrawn bank facility of USD 44 million and an unused long term vendor credit facilities relating to Sevan Driller II of approximately USD 80 million. The Group has prepared the financial statements in accordance with International Financial Reporting Standards (IFRS). Research and Development Between 2001 and 2009, Sevan invested a total of USD million in relation to the development of the Sevan technology which was expensed through the Profit and Loss when incurred. USD 0.1 million was expensed in In addition, Sevan Marine has capitalized USD 0.3 million in relation to development of the Sevan design for floating LNG during Sevan Marine expects to capitalize on those expenses in the future. Capital and Financing Net consolidated cash flow for 2009 was USD 113 million. Cash flow from operations amounted to minus USD 106 million. Cash flow to investment activities amounted to minus USD 345 million and cash flow from financing activities amounted to USD 564 million. A detailed cash flow statement is included in the financial statements and a specification of the cash flow from operating activities is included in Note 25 in the consolidated financial statements. In order to strengthen its liquidity position, the Company issued convertible bonds at an aggregate nominal value of USD 48 million in second quarter of 2009 to Luxor Capital Partners, LP and Luxor Capital Partners Offshore, Ltd. and affiliates thereof. The convertible bonds, which were issued for general corporate purposes, have a term of four years and a fixed coupon of 15% p.a. of parity value to conversion price. Reference is made to Note 15 in the consolidated financial statements for further details of the convertible bond. From June through August 2009, the Company carried out share issues with gross proceeds of USD 417 million, mainly in order to complete the construction, out-fitting and commissioning of Sevan Driller, to fund required working capital for Sevan Voyageur and Sevan Driller, equity financing of Sevan Driller II as well as for general corporate purposes. In November 2009, Sevan Marine ASA signed a mandate with ING Bank N.V. as Mandated Lead Arranger for the financing of Sevan Driller II. The loan facility of USD 525 million was fully underwritten in April 2010 by a group of lenders consisting of international banks and Chinese and Norwegian Export Credit Agencies. During the year, Sevan also established credit facilities with vendors, enabling deferring of payments of approximately USD 80 million until months after delivery of Sevan Driller and of approximately USD 80 million months after the delivery of Sevan Driller II. In response to the unexpected developments on the Shelley field, a revised repayment schedule has been agreed with the first priority lenders providing USD 150 million financing relating to the FPSO Sevan Voyageur. Under the arrangements, the USD 150 million bank facility was reduced to USD 105 million and a new USD 45 million secured bond with a fixed coupon of 11% p.a. was issued. Accordingly, the repayment schedule has been adjusted, allowing the Group sufficient flexibility to find a new contract for FPSO Sevan Voyageur after expiry of the existing charter contract. Certain project delays have been encountered relative to milestone dates stipulated in the loan agreements for FPSO Sevan Voyageur and Sevan Driller, respectively. Under the loan agreements, unanimous consent from all banks is required in order to change the milestone dates. One of the lenders, with minority participations in both facilities, was not willing to accept the changes as proposed by Sevan and as supported by the majority lenders. Following the disagreement within the syndicates, it was agreed that the minority lender in question would exit its position and be replaced by new lenders. During the interim period up to such exit, a mandatory prepayment event is in existence, but no repayment was made by Sevan or demanded by the syndicates in anticipation of the imminent replacement of the minority lender and resulting adjustments to the relevant milestone dates. While the Board of Directors is of the firm opinion that the debt in reality is non-current in nature, the accounting regulations require that amounts which formally could be held to be mandatorily repayable as at the balance sheet date be classified as current irrespective of whether such repayment was required by the lenders or the basis therefore has subsequently been eliminated. The Company has become aware that the situation that a minority lender was not in agreement with the majority lenders as described above, might be regarded as a technical breach relative to certain bond agreements at balance sheet date, but the actual circumstances did not call for this. Accordingly, relevant liabilities have been classified as current in the financial statements as per December 31, However, as all necessary actions have been resolved by the date of this financial report, the debt will be classified back to non-current for future reporting periods. During 2010 the Company targets to continue to strengthen its balance sheet with an aim to improve on the alignment of repayment of debt to cash flows from operations as well as to achieve a reduction in its cost of capital and to strengthen the general liquidity position of the Group. The Goliat project started generating revenues from the License contract in February 2010 and commencement of contract for Sevan Driller is expected to take place in May Both events will significantly contribute to an improvement in cash flows from operations. However, in the event of unforeseen operational issues or in the event of unforeseen liabilities or business opportunities arising, the Company may require additional capital in the future. There is no assurance that the Group will be able to obtain necessary financing in a timely manner on acceptable terms.

8 09 SEVAN MARINE 8 Going Concern In accordance with the Norwegian Accounting Act s section 3-3, the Board confirms that the annual accounts have been prepared based on the going concern assumption. The basis for this assumption is the Company s strategic plan, financial prognoses and successful outcome of the financing measures described above. Risk The Company was founded in 2001 and has since its inception focused on the engineering, construction and the subsequent operation of the Sevan units, based on its proprietary technology. The Group s new-building projects require continuous monitoring and ability to control and adapt to inherent risks. Following more than 30 months operation in Brazil and 20 months in the North Sea, the Sevan technology is proven in these areas and the technology risk is therefore reduced. Recorded motions have been in line with model testing and analyses. The Group s activities expose it to a variety of financial risks, including market risks, credit risks and liquidity risks. The Company s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects of such risks on its financial performance. The Company will therefore continue to manage its currency and interest exposures through certain derivative financial instruments in accordance with market practice and to maintain flexibility in the liquidity by keeping committed credit lines available. Parts of the Group s loan financing carry floating interest rates, which fluctuates with the market. The Group may therefore be exposed to risks due to changes in interest rates for any unhedged portion of such exposure. The value of the Group s charter contracts may be affected by changes in currency exchange rates or exchange control regulations. The Group utilizes a combination of equity and bank/bond financing to finance the construction of the Sevan units. Obtaining such financing may be subject to market risks and other risks that may influence the availability, structure and terms of such financing. When the financial markets do not function efficiently, this risk becomes particularly prevalent for a capital intensive company like Sevan Marine which is not yet in a position to support its new building program with cash flow from operations. In addition to the capital required to fund existing projects and operations, the Group may require additional capital in the future due to unforseen operational issues, unforseen liabilities or potential acquisitions, joint ventures or other business opportunities that may be presented to it. There can be no assurance that the Group will be able to obtain necessary financing in a timely manner on acceptable terms. Historically, demand for offshore exploration, development and production has been volatile and closely linked to the price of hydrocarbons. The demand for the Group s services in connection with production and exploration in the offshore oil and gas sector is particularly sensitive to price decreases, fluctuations in production levels and disappointing exploration results. Contracts in the offshore sector require high standards of performance and safety, entailing considerable risks and responsibilities. These include technical, operational, commercial and political risks. There is often considerable uncertainty as to the duration of offshore charters because most of the agreements give the operator extension options. Changes in the legislative and fiscal framework, including tax rules, governing the activities of the oil companies could have material impact on exploration, production and development activity or affect the Group s operations directly. The clients of the Group are generally oil companies with a strong financial basis, but as with suppliers and customers in general there is always a risk that unforeseen financial difficulties on the counterparty side may arise which could have material adverse effects on the financial condition, the cash flows and/or the prospects of the Group. In connection with the construction of the Sevan units, the Group has used its best efforts to prepare proper specifications, including the supply and installation of equipment. Despite these efforts, there can be no assurances that delays and cost overruns will not occur and such events, if occurring, could have an adverse impact on the Company s financial position. The experience gained to date by Sevan, the shipyards and main suppliers, is expected to benefit the construction of future units. However, the Company cannot guarantee that cost increases and delays in delivery of future units will not occur. HSE and Corporate Governance Developing sound health, safety and environment (HSE) principles is a critical success factor for the Company. The Group has an environmentally friendly profile and continually seeks new ways to reduce the environmental impacts of its operations. Sick leave came to 2.6% for the Company and 2.5% for the Group for the year. No serious work incidents or accidents resulting in personal injuries or damages to materials or equipment occurred in FPSO Sevan Piranema has operated for more than 800 days without any Lost Time Incidents. The Company is certified according to several ISO standards with respect to concept development, design, engineering, procurement, construction, installation and operation of mobile offshore units, including ISO 9001:2000 (quality), ISO 14001:2004 (environment), OHSAS :2007 (health and safety), as well as ISM (international safety code) and ISPS (international ship and port facility security code). The Company is also registered in the FPAL and Achilles supplier management information systems. The working environment is good. The Board and the management continue to focus on equal positions and opportunities for men and women among its employees and Board members. 30% and 23% of the employees in the Company and the Group respectively, are women. Three of eleven members of the senior management team are women. Two of five board members elected by the shareholders at the Ordinary General Meetings in 2008 and 2009 were women. The Company strives to ensure that there is no discrimination due to ethnicity, national origin, descent, race, religion or functional disability. Currently, the Company has not implemented any specific measures in order to meet the objective of the Discrimination Act and of the Anti-discrimination and Accessibility Act. The need for specific measures in this respect is continuously considered by the Board of Directors, the management and the HR function.

9 09 SEVAN MARINE 9 The Company aims at maintaining sound corporate governance routines that provide the basis for long-term value creation, to the benefit of shareholders, employees, other interested parties and the society at large. As a guiding basis for its conduct of corporate governance, the Company uses the national Norwegian Code of Practice for Corporate Governance of The status of corporate governance is addressed in a separate section of the English language annual financial report. During 2009, the number of employees increased from 343 to 404. The Board of Directors Kristin Urdahl and Kjetil Soma served as Employee representatives until May 25, 2009, when their term expired. On the same date, Jorunn Haugen and Jørgen Skotnes entered the Board of Directors as Employee representatives. Vibeke Strømme (Deputy Chairman) resigned from the Board of Directors in December Supplementary election will take place at the next Ordinary General Meeting. No further changes to the composition of the Board of Directors have taken place during the course of the financial year. Outlook Sevan Marine s main focus is to optimize the current contract portfolio and financing structure, reduce operating cost and maintain a high uptime on operating units. A special focus is given to the executing of the Sevan Driller start-up of operations. Sevan has one of the most modern FPSO fleets in the world and the Board sees good opportunities for cost efficient solutions also in the future. For new projects, the Group is working to secure redeployment of FPSO Sevan Voyageur and contracts for the available hulls in addition to pursuing opportunities for additional license model contracts. Activity in the market place continues to pick up and Sevan is well positioned to benefit from this development. The Board would like to thank the employees for the great efforts and achievements during a challenging year. Annual Results and Year-End Appropriations The Board proposes the following appropriation of the annual loss of USD 20,085,195 in the parent company Sevan Marine ASA: Loss transferred from other equity: USD 20,085,195 Total appropriation: USD 20,085,195 The Company had unrestricted equity of USD 304,106,000 as of December 31, Arendal, April 30, 2010 The Board of Directors of Sevan Marine ASA Arne Smedal Kåre Syvertsen Hilde Drønen Chairman Board member Board member Stephan M. Zeppelin Jorunn Haugen Jørgen Skotnes Jan Erik Tveteraas Board member Employee representative Emloyee representative CEO

10 09 SEVAN MARINE 10 STATEMENT REGARDING ESTABLISHMENT OF SALARY AND OTHER BENEFITS FOR SENIOR MANAGEMENT Pursuant to 6-16a of the Public Limited Liability Companies Act, the Board of Directors shall prepare a specific statement on the establishment of salary and other benefits to Senior Management. It is further stated in 5-6 (3) of the Public Limited Liability Companies Act that an advisory voting shall be held at the Annual General Meeting regarding the Board of Directors guidelines for determining remuneration of Senior Management for the next accounting year (ref. (ii) below). To the extent the guidelines are linked to share-based incentive schemes, they will also be subject to approval by the General Meeting (ref. (iii) below). (i) Remuneration and Other Benefits to Senior Management for the Previous Accounting Year The Board of Directors adopts the terms and conditions for the CEO, as well as the principal resolutions regarding the Group s remuneration policy and benefit schemes for all employees. Information Regarding Senior Management Senior Management includes the following employees: Jan Erik Tveteraas, CEO Oskar Mykland, CFO Birte Norheim, Vice President Finance Erling Andreas Ronglan, Vice President Operations Fredrik Major, Vice President Business Development/R&D Helle Hundseid, Vice President Projects Hanna Moland, Vice President HR & Administration Morten Martens Breivik, Vice President QHSE Jon Helge Willmann, Vice President Drilling Aslak Hjelde, Managing Director KANFA AS Gerson Peccioli, President Sevan Brasil Remuneration of Senior Management for the accounting year 2009 are disclosed in Note 20 of the consolidated financial statements. The CEO will receive 6-24 months salary upon termination of employment, dependant on fulfilment of certain conditions. The guidelines for determination of remuneration of Senior Management and the allotment of options were discussed at the Annual General Meeting in May The amount of stock options for allotment was increased at the Extraordinary General Meeting in June The Board of Directors has not derogated from these guidelines for the accounting year (ii) Remuneration and Other Benefits to Senior Management for the Next Accounting Year For advisory voting at the Annual General Meeting in 2010, the Board of Directors will present the following guidelines for determination of remuneration and other compensation to Senior Management for the next accounting year: Salary and Payment-in-Kind The main objective of the Company s remuneration policy for Senior Management is to provide a framework for remuneration, contribute to the recruitment of employees with the required skills and secure relevant development of expertise. The compensation package for the CEO and Senior Management comprises company car, newspapers, mobile phone and refund of expenses for internet subscription in accordance with common market practice. Senior Management participates in the Group s schemes for bonus, stock options, collective pension and insurance along with all employees in the Group. The Board of Directors may grant loans from the Company to key employees. Satisfactory security arrangements must be provided and the interest rate shall correspond to the current standard interest rate for loans granted to employees. The Company s remuneration policy is based on defined roles and responsibilities, clear goals and performance indicators, combined with evaluation of results and achievements. The total compensation package shall be at a level that corresponds to the market median in the different markets in which the Group operates. The annual wage ajustment takes place on July 1, and shall be based on the general wage and development in the market, combined with an evaluation of the previous year s achievements and results. Any individual salary adjustment shall be based on the annual performance appraisal. Bonus Scheme and Performance Incentives The Group s and the business areas financial and non-financial results, shall form the basis of the bonus scheme. Bonus schemes tied to individual performance and results may also be granted to key employees. The relevant performance targets are tied to the Group s main objectives. The Company s bonus scheme rewards all employees when the objectives are met, and the collective and individual bonus schemes may collectively constitute up to 20-50%

11 09 SEVAN MARINE 11 of the base salary. Bonus may be paid annually, based on a performance appraisal of results and achievement and subject to approval by the Board of Directors. The Board of Directors intention with the bonus scheme is to align objectives of the Company and the employees by means of increasing motivation, enthusiasm and team spirit in the organisation, as well as to reward strong leadership and cooperation. The Board of Directors may grant key employees a stay-on bonus measured over a three year period with a maximum payment of up to 20% of the base salary per year in the bonus period. Consequences for the Company and the Shareholders The Board of Directors has confidence in the employees and their motivation and capacity to contribute to the Company s results. The Board of Directors is of the opinion that the Company s future success to a high degree depends on highly motivated, qualified and competent staff. A well defined compensation program program enables the Company to remain competitive. Remuneration of employees is considered an essential contributor to the strategy of creating shareholder value. (iii) Particulars on Share-Related Incentive Schemes Stock Option Scheme The Board of Directors propose to continue the stock option scheme. The Company uses stock options as part of its compensation package for key employees. The general framework for the option scheme, including the number of options that may be allotted, is presented to the Annual General Meeting for approval every year. The number of stock options allotted shall not exceed 3-5% of the outstanding shares. The exercise price for stock options will minimum correspond to the market price at the date of allotment. Within the said frames, the Board of Directors is free to allot options to key employees. Bonus Linked to the Development of Shares The Board of Directors may grant key employees a bonus scheme linked to the development of the price of the Company s shares during a period of at least three years. The bonus amount shall not exceed 50% of the annual base salary. Within these frames, the Board of Directors is free to grant bonus schemes linked to the development of the Company s share price to key employees. Arendal, April 30, 2010 The Board of Directors of Sevan Marine ASA Arne Smedal Kåre Syvertsen Hilde Drønen Chairman Board member Board member Stephan M. Zeppelin Jorunn Haugen Jørgen Skotnes Jan Erik Tveteraas Board member Employee representative Emloyee representative CEO

12 09 SEVAN MARINE 12 THE BOARD OF DIRECTORS Arne Smedal (1947) Chairman Mr. Smedal has served as a member of the Board of Directors since the Company s inception in Mr. Smedal holds an MSc in hydrodynamics from the Norwegian Institute of Technology (NTNU) in Trondheim. Mr. Smedal has previous experience as President and CEO of Navis ASA from 1997 to 2001; Executive Vice President of Hitec ASA from 1996 to 1997; founder and President of Marine Consulting Group and Advanced Production and Loading (APL) from 1989 to 1996; as well as various positions, incl. Project Manager, VP marketing and President, at Pusnes from 1979 to 1988; and Det Norske Veritas (DNV) from 1974 to Mr. Smedal has served as Board member of various companies within the shipping and electronics industries and is a Norwegian citizen with residence in Arendal, Norway. Stephan M. Zeppelin (1974) Board member Mr. Zeppelin has served as a member of the Board of Directors since Mr. Zeppelin holds a Bachelor of Science degree in Business Administration with emphasis on finance from the University of Colorado, Leeds School of Business (1997). From 2004 to 2009 he worked as Vice President of Wexford Capital LLC focusing on oil services, shipping and shipbuilding. Mr. Zeppelin has previous experience as Analyst/ Associate at Bear Stearns & Co., New York, from 2000 to 2004; as Associate at Globecon Group Ltd, New York, from 1999 to 2000; and as Associate at Bankers Trust, New York, from 1998 to Mr. Zeppelin is a U.S. citizen with residence in CT, USA. Kåre Syvertsen (1950) Board member and Group Manager Technology Mr. Syvertsen has served as a member of the Board of Directors since the Company s inception in Mr. Syvertsen holds an MSc in naval architecture from the Norwegian Institute of Technology (NTNU) in Trondheim. Mr. Syvertsen has previous experience as Vice President Technology of Navis from 1997 to 2001; Vice President Technology of Advanced Production and Loading (APL) from 1994 to 1997; Project Manager of Marine Consulting Group from 1990 to 1994; and Ass. Professor in Marine Technology at the Norwegian Institute of Technology (NTNU), Trondheim, from 1976 to Mr. Syvertsen is a Norwegian citizen with residence in Kristiansand, Norway. Hilde Drønen (1961) Board member Mrs. Drønen has served as a member of the Board of Directors since Mrs. Drønen holds a Business Administration degree from the Norwegian School of Management (BI) and is currently CFO of DOF ASA and has extensive experience from the offshore sector. Mrs. Drønen is represented in several other Boards of Directors; inter alia the Board of Directors of Tide ASA and DOF Subsea AS. Mrs. Drønen is a Norwegian citizen with residence in Bekkjarvik, Norway. Jorunn Haugen (1966) Employee representative of the Board and Project Administration Manager Mrs. Haugen has served as a member of the Board of Directors since Mrs. Haugen holds a degree in Administration and Management from Høgskolen i Nord-Trøndelag. Mrs. Haugen has previous experience within the offshore industry from The Ugland Group from 1987 to 1995; Det Søndenfjeldsnorske Dampskibsselskap (DSND) from 1995 to 2002; Subsea 7 from 2002 to 2004; Atlantis Deepwater Technology AS from 2004 to 2005; and Aker Pusnes from 2006 to Mrs. Haugen has also worked as Lecturer at Folkeuniversitetet in Arendal from 2005 to Mrs. Haugen is a Norwegian citizen with residence in Arendal, Norway. Jørgen Skotnes (1971) Employee representative of the Board and Senior Structural Engineer Mr. Skotnes has served as a member of the Board of Directors since Mr. Skotnes holds a B.eng (Hons) in Naval Architecture and Offshore Engineering from University of Strathclyde, Glasgow from Mr. Skotnes has previous experience from working with oil, chemical and gas carriers with Det Norske Veritas AS from ; Hitec Framnæs from ; Cammell Laird from Mr. Skotnes is a Norwegian citizen with residence in Revetal, Norway.

13 09 SEVAN MARINE 13 BOARD OF DIRECTORS STATEMENT ON POLICY FOR CORPORATE GOVERNANCE Corporate Governance in Sevan Marine Sevan Marine shall be managed based on principles that seek to ensure openness, integrity and equal treatment of shareholders. The Company follows the Norwegian Code of Practice for Corporate Governance of The management and Board of Directors annually review the principles for corporate governance and how they are implemented in the Group. The description below accounts for the Company s compliance with the Norwegian Code of Practice. Business Sevan Marine s vision is to be a world-class company in the technologically challenging segments of the offshore market. The Company shall utilize its competitive advantages within design, engineering, project execution and operations to offer cost-efficient and innovative products and solutions to its clients, based on the proprietary Sevan technology. The Company shall aim at maintaining a local presence in international markets. Growth is to be achieved mainly through organic development and partnership arrangements. The Board of Directors is of the opinion that the business objectives laid down in the Company s Articles of Association provide predictability and direction for the Company s business strategy and the activities that it may acquire or initiate. The Company s Articles of Association is posted at the corporate website. Equity and Dividend The Company shall aim at establishing a sound financial structure, reflecting the capital intensive nature of its business, the offshore market fluctuations and the duration of the contract portfolio for the fleet. In this respect, the Company shall ensure that its equity basis is sufficient. At December 31, 2009, the Group had total equity of USD 1.0 billion. The Board of Directors continually reviews the capital situation in light of the Company s targets, strategies and risk profile. The Company shall provide its shareholders with a competitive return on investment over time. The Company s target is that the underlying values shall be reflected in the share price. Long-term, the Company shall aim at paying a dividend to its shareholders on a regular basis. Near-term, the Company s focus will be on expanding the fleet of units based on the proprietary Sevan design and on growth in the Company s share price based on the market s valuation of existing and future earnings. At the Ordinary General Meeting on May 25, 2009, the shareholders, as proposed by the Board of Directors, granted the Board of Directors the authorisations described below. The authorisations are valid for a period ending at the next Ordinary General Meeting, unless otherwise specified. The full details of the authorisations are set out in the minutes from the meeting and are available at the corporate website. - New shares, financing The Board of Directors was authorised to issue up to 19,612,840 new shares to part finance capital requirements of the Company, including capital requirements relating to engineering, construction, equipment and/or operations of Sevan units and acquisition of enterprises. - Share options and new shares to employees The Board of Directors was authorised to award up to 2,000,000 share options until the next Ordinary General Meeting and to issue up to 8,654,277 new shares in connection with exercise of awarded stock options and bonus programme. At the Extraordinary General Meeting held on June 17, 2009, the authorisation was increased to 20,000,000 share options and 26,654,277 new shares. The authorization to issue the new shares is effective for the maximum statutory period of two years and is not limited to the time of the next Ordinary General Meeting. This is because the rights granted under the employee stock option programme are effective also for the period following the next Ordinary General Meeting. - Treasury shares The Board of Directors was authorised to acquire up to 19,612,840 treasury shares. - Convertible loans The Board of Directors was authorised to obtain convertible loans in the aggregate amount of up to USD 100,000,000 which can be converted into up to 30,000,000 shares. Equal Treatment of Shareholders and Transactions with Close Associates The Company has only one class of shares and each share entitles the holder to one vote at General Meetings. Transactions with close associates shall be on arm s-length basis and always in compliance with the Norwegian Public Limited Companies Act. Convertible Bonds In April, May and June 2009 the Company issued convertible bonds in aggregate nominal value of USD 48 million to Luxor Capital Partners, LP and Luxor Capital Partners Offshore, Ltd. or affiliates thereof ( Luxor ). Convertible bonds of USD 12 million were issued pursuant to the authorisation to issue convertible bonds granted to the Board of Directors at the Ordinary General Meeting held in April 2008 and convertible bonds of USD 36 million were issued pursuant to resolution passed at the Extraordinary General Meeting held on May 4, The terms and conditions of the convertible bonds are identical and are regulated by the agreement published by the Company on April 22, 2009, (15.0 per cent Sevan Marine ASA Callable Convertible Bond Issue 2009/2013), which is available at the corporate website. The convertible bonds have a term of four years

14 09 SEVAN MARINE 14 and a fixed coupon of 15% p.a. of parity value to conversion price. The interest may, as the Company s option, be paid in cash or by issuance of additional bonds. The bondholders may exercise a put option in April 2011 for a repayment at par plus accrued interest. The Company may require the bonds to be converted if the closing price of the Company s shares for 20 trading days within the period of 30 trading days equals or exceeds 200% of the conversion price. The bonds are convertible at a rate of the NOK equivalent of USD 0.97 per share, and change of control and other customary provisions, as well as certain security rights, apply. Prior to the issue of the convertible bonds, the Board of Directors and the management of the Company had evaluated and invested significant efforts in exploring the possibilities of securing necessary funding of the Company by way of equity issue, asset sales, alternative financing schemes and combinations. In February 2009, the Company announced that investment banks had been engaged to assist in exploring and assessing strategic options for the Company. As a part of this process, representatives of the Company and its advisors have discussed various options with existing stakeholders, potential partners and investors. Despite the challenging conditions in the financial markets, and the resulting difficulties in obtaining adequate financing, Luxor, being the Company s largest shareholder, decided to step up and offered to the Company financing of between USD 12 and 48 million in the form of convertible debt. On this basis, it was the Board of Directors view that the willingness of Luxor to support the Company and for the issue of the convertible bonds would be to the benefit of all stakeholders. This, combined with the fact that these were the conditions offered by Luxor, and an offer directed towards all shareholders would require time, expense and resources, the Board of Directors were of the firm view that it was appropriate under the circumstances to deviate from the shareholders pre-emptive rights. Private Placement and Subsequent Offering of New Shares - No 1 On June 2, 2009, the Company approached potential investors with an offer to participate in a private placement. During June 2, 2009, the Company entered into agreements with investors for the issue of 137,500,000 new shares at a subscription of NOK 8 per share ( Private Placement 1 ). The price was set through a book-building process. Further, the Company conducted a subsequent offering of up to 48,000,000 new shares at NOK 8 per share directed towards shareholders as of June 2, 2009, that were not offered or invited to participate in Private Placement 1. The size of Subsequent Offering 1, in relation to the size of Private Placement 1, was determined by the Board of Directors taking into consideration the proportion of Private Placement 1 that were subscribed by existing shareholders, aiming at achieving proportional allocation. 41,441,534 shares were issued in Subsequent Offering 1. A total of 178,941,534 new shares were issued in Private Placement 1 and Subsequent Offering 1. The issue was approved at the Extraordinary General Meeting on June 17, Private Placement and Subsequent Offering of New Shares - No 2 On June 26, 2009, The Company approached potential investors with an offer to participate in a private placement. During June 26, 2009, the Company entered into agreements with investors for the issue of 121,000,000 new shares at a subscription of NOK 8 per share ( Private Placement 2 ). The price was set through a book-building process. Further, the Company conducted a subsequent offering of up to 30,000,000 new shares at NOK 8 per share with a partial preferred allocation to shareholders as of 26 June, 2009, that held 59,999 shares or less, unless they participated in Private Placement 2. The size of Subsequent Offering 2, in relation to the size of Private Placement 2, was determined by the Board of Directors taking into consideration the proportion of Private Placement 2 that were subscribed by existing shareholders, aiming at achieving proportional allocation. 30,000,000 shares were issued in Subsequent Offering 2. A total of 151,000,000 new shares were issued in Private Placement 2 and Subsequent Offering 2. The issue was approved at the Extraordinary General Meeting on July 14, In relation to Private Placement 1 and Private Placement 2, the Board of Directors considered the prevailing market conditions and was of the view that the additional equity should be raised in a share issue directed towards large investors with a limited subscription period to be followed by subsequent offers to the other shareholders. Also, the amount of equity desired dictated that professional investors beyond the existing group of shareholders should be invited to participate. Based on this, the Board of Directors concluded that derogation from existing shareholders preferential right to subscribe for the new shares as set out in the Public Limited Liability Companies Act were in the best interest of the Company and the shareholders in general. Employee stock option programme The Company has not issued any new shares in connection with the exercise of options under the Company s employee stock option programme during the financial year. The Company has not granted any new share options under the Company s employee stock option programme during the financial year. Freely Negotiable Shares The Company s shares are listed on Oslo Børs and are freely negotiable. General Meetings The General Meeting is the Company s supreme corporate body. It elects the Board of Directors and the auditor and is the forum for presentation and discussion of other issues of general interest to shareholders. Every shareholder of the Company has the right to attend the General Meetings. The date of the Ordinary General Meeting is published as a part of the Financial Calendar for the year. The Financial Calendar is posted at the corporate website. Notice of the General Meetings shall be sent to shareholders no later than three weeks before the meeting is to be held. The Articles of

15 09 SEVAN MARINE 15 Association stipulate (effective from January 2010) that documents that are to be considered at a General Meeting may be published on the corporate website instead of being enclosed to the notice of the meeting. This also applies to documents which by law must be attached to the notice of the General Meeting. Individual shareholders are nonetheless entitled to have the documents sent to them free of charge, upon request to the Company. General Meetings of the Company may be held in Arendal or Oslo. Attendance forms may be sent to the Company until the day before the General Meeting in order to enable as many shareholders as possible to attend. If any shareholder is unable to attend, he or she may attend by proxy. The minutes from the General Meeting are published as soon as possible at the corporate website. On May 4, 2009, the Company held an Extraordinary General Meeting to resolve to issue the convertible bonds. On June 17, 2009, the Company held an Extraordinary General Meeting to approve a private placement and a subsequent offering of new shares. On July 14, 2009, the Company held an Extraordinary General Meeting to approve a private placement and the subsequent offering of new shares. The Company published the notice and other relevant documentation two weeks in advance of these meetings and not at least three weeks in advance as recommended by the Code of Practice. This was done to secure timely required financing. Nomination Committee A Nomination Committee, which works under the mandate and authority of the General Meeting, makes preparations and recommends candidates for the General Meeting s election of the Board members, as well as proposing the remuneration of the Board of Directors. Pursuant to the Articles of Association, the Nomination Committee consists of the Chairman of the Board of Directors and two members elected by the General Meeting. The members elected by the General Meeting are appointed for two years. Currently, the Nomination Committee consists of Arne Smedal (in capacity of being the Chairman of the Board of Directors), Mimi Kristine Berdal, and Christel Borge. The Board of Directors has considered the current arrangement whereby the Chairman of the Board shall be one of the three members of the Nomination Committee. The Board of Directors were of the view that this alternative is in the best interest of the Company and the shareholders in general. The Board of Directors will address this issue in its annual evaluation of performance and expertise and continue to obtain and consider the views of the Nomination Committee. The report of the Board of Directors evaluation of performance and expertise is made available to the Nomination Committee. The Chairman of the Board, Arne Smedal, has desisted from participating in the process of nominating the Chairman of the Board of Directors for the recommendation published by the Nomination Committee for the Ordinary General Meeting in Mimi Kristine Berdal works as a lawyer in private practice. Christel Borge is a business and management graduate and works with strategic development at the Telenor group. Prior to the General Meeting, the Nomination Committee will provide contact information for its members and any deadlines for submitting proposals to the committee at the corporate website. Corporate Assembly and Board of Directors As of today, the Company is not required to have a Corporate Assembly. The Company s Board of Directors shall, pursuant to the Articles of Association, consist of five to nine members. Two members shall be elected by and amongst the employees in the Group and the remaining members shall be elected by the General Meeting. The Chairman and the Deputy Chairman were appointed as such by the General Meeting. The members have been elected for a period of two years. To facilitate continuity election of Board of Directors has been arranged so that the services periods for Directors do not expire at the same General Meeting. During 2009, the Board of Directors has consisted of seven members (five elected by the General Meeting and two by and amongst the employees). Biographical information on each Director is outlined on page 12 of the annual financial report. The composition of the Board of Directors in 2009: Arne Smedal Chairman (29 meetings) Vibeke Strømme Deputy Chairman (27 meetings) (until December 18, 2009) Hilde Drønen Board member (28 meetings) Stephan M. Zeppelin Board member (27 meetings) Kåre Syvertsen Board member (28 meetings) Kristin Urdahl Employee representative (10 meetings) (until May 25, 2009) Kjetil Soma Employee representative (11 meetings) (until May 25, 2009) Jørgen Skotnes Employee representative (18 meetings) (from May 25, 2009) Jorunn Haugen Employee representative (17 meetings) (from May 25, 2009) Pursuant to the Company s Articles of Association, two Directors shall be elected by and amongst the employees (the Employee representatives ). Kristin Urdahl and Kjetil Soma served as Employee representatives until May 25, From May 25, 2009, Jorunn Haugen and Jørgen Skotnes have served as Employee representatives. Vibeke Strømme (Deputy Chairman) resigned from the Board of Directors in December The Board of Directors decided to postpone the supplementary election until the next Ordinary General Meeting, as it still constituted a quorum, cf. 6-8 of the Public Limited Liability Companies Act. No further changes to the composition of the Board of Directors have taken place during the course of the financial year.

16 09 SEVAN MARINE 16 All Directors elected by the shareholders are deemed to be independent of the Company s main shareholders and material business contacts. Three out of five Directors elected by the shareholders are deemed independent of the Company s Senior Management. Smedal and Syvertsen are not deemed independent due their employment with and engagements for the Company. The Work of the Board of Directors The Board of Directors is ultimately responsible for administering the Company s affairs and for ensuring that the Company s operations are organized in a satisfactory manner. Moreover, the Board is responsible for establishing supervisory systems and for overseeing that the business is run in accordance with the Company s core values and ethical guidelines. A Deputy Chairman has been elected by the shareholders to chair meetings of the Board of Directors in the event that the Chairman cannot or should not lead the work of the Board. The Board of Directors meets minimum 6 times a year and more frequently if required. A total of 29 Board meetings (including those by means telephone conferences) have been held in the course of the financial year. The overview on the previous page shows the composition of the Board of Directors during 2009 and additionally includes information on the number of meetings for which each Director has participated. Audit Committee The Board of Directors has established an Audit Committee. In 2009 the committee has consisted of Board member Hilde Drønen, Deputy Chairman Vibeke Strømme (until December 18, 2009) and Board member Steve Zeppelin (from December 18, 2009). The Audit Committee assists the Board of Directors in matters relating to the integrity of the Company s financial statements, financial reporting processes and internal controls, and the qualifications, independence and performance of the external auditor. The members of the Audit Committee receive additional remuneration for duties relating to the committee responsibilities. Such remuneration is approved by the Ordinary General Meeting. Risk Management and Internal Control The Board of Directors shall ensure that the Company has good internal control functions and appropriate systems for risk management tailored to its operations and in accordance with the Company s core values and ethical guidelines. A review of the Company s most important risk areas and its internal control functions is conducted by the Board on an annual basis. The Group s activities expose it to a variety of risks; including market risks, financial risks and operational risks. The Group s overall risk management programme seeks to minimize the potential adverse effects on the Group s financial performance likely to be caused by its exposure to such risk factors, including but not limited to the use of derivative financial instruments and development of sound health, safety and environment (HSE) principles as well as prudent monitoring of constructional and operational activities. Remuneration of the Board of Directors The remuneration of the Board of Directors is determined on a yearly basis by the Ordinary General Meeting. The Directors may also be reimbursed for travelling, hotel and other expenses incurred by them in attending Board meetings or in connection with the business of the Company. Remuneration of the Board of Directors, as proposed by the Nomination Committee and approved by the Ordinary General Meeting, is not linked to the Company s performance nor based on stock options. At the Company s Ordinary General Meeting in May 2009, the remuneration of the Board of Directors for the financial year 2008 was set to NOK 400,000 for the Chairman, NOK 275,000 for the Deputy Chairman and NOK 225,000 for each of the Board members. Remuneration of each of the Employee representatives was set to NOK 112,500 with equivalent amounts reserved in an Employee Benefit Fund to benefit all employees in Sevan. The members of the Audit Committee received additional remuneration of NOK 50,000 each. The Board of Directors has authorized that in principal stock options may be awarded to the Directors Smedal and Syvertsen due to their other engagements for the Company. As of the date of this report no such options have been awarded. A Director who has been given a special assignment, besides his or her normal duties as a Director, in relation to the business of the Company, may be paid such additional remuneration as the Board of Directors may determine. Remuneration of the Senior Management The Board of Directors has established guidelines for the remuneration of Senior Management. These guidelines are presented to and approved by the Ordinary General Meeting and are described in the Statement Regarding Establishment of Salary and Other Benefits for Senior Management, and is included on page 10 of the Annual Report. Information and Communication The Board of Directors has established guidelines for the Company s reporting of financial and other information based on openness and taking into account the requirements for equal treatment of all participants in the securities market. In order to ensure equal treatment of its shareholders, an important aim is to make sure that the securities market is in possession of correct, clear and timely information about the Company s operations and condition at all times. This is essential for an efficient pricing of the shares and bonds and for the market s confidence in the Company. Approaches taken to meet this aim include timely and comprehensive reporting of the Company s interim results and publication of the annual and quarterly financial reports. In addition, information of significance for assessing the Company s underlying value and prospects is reported through Oslo Børs and are made available at the corporate website as well as distributed to -subscribers.

17 09 SEVAN MARINE 17 Further details, such as contact details and general updates and news about the Company, are available at the corporate website. The Company will also strive to ensure that its progress is monitored by securities analysts. The Company has established a designated Investor Relations position for relations with shareholders, bondholders, Oslo Børs, analysts and investors in general. The Company shall seek to clearly communicate its long-term potential, including its strategy, value drivers and risk factors. The Company shall maintain an open and proactive investor relations policy, a best practice website and shall give presentations regularly in connection with interim financial reports. Sevan Marine has been awarded the Oslo Børs Information and English symbols. These symbols have been established to identify issuers working professionally and systematically to make financial information readily available to investors and other market players, both nationally and internationally. The Company s Financial Calendar is available at the corporate website. Shareholder information is published at the website as well as sent directly to -subscribers. Takeovers The Board of Directors will handle any possible takeover in accordance with Norwegian corporate law. There are no mechanisms against takeover bids in the Articles of Association or in any underlying steering document, nor are any measures to limit the opportunity to acquire shares in the Company implemented. The Board of Directors will not seek to hinder or obstruct an offer for the Company s activities or shares unless there are particular reasons for this. The Board of Directors has otherwise so far chosen not to publish any explicit guiding principles for how it will act in the event of a takeover bid. Auditor The Board of Directors has established an Audit Committee. The auditor participates in relevant agenda items at meetings with the Audit Committee and meets with the committee at least once each year. In addition, and at least once a year, the Audit Committee holds a meeting with the auditors at which no member of the Company is present. The auditor annually reports the main features of the plan for the audit of the Company to the Audit Committee. Once a year, the auditor presents a review of the Company s internal control procedures, including identifying weaknesses and proposals for improvement. The auditor presents the view on internal control procedures through the annual management letter. In connection with the issue of the auditor s report, the auditor provides the Board of Directors with a declaration of independence and objectivity, and the auditor participates in the Board meeting at which the annual accounts are approved. The proposal for approval of the remuneration of the auditor provides a breakdown of remuneration relating to statutory audit tasks and other assignments and is reported to the Ordinary General Meeting.

18 09 SEVAN MARINE 18 SENIOR MANAGEMENT Jan Erik Tveteraas (1960) CEO Mr. Tveteraas holds an MBA from Norwegian School of Economics and Administration (NHH) in Bergen. Mr. Tveteraas has been the Company s CEO since its inception in 2001 and has previous experience as Chief Financial Officer of Navis from 1998 to 2001; Vice President Corporate Planning of Sonat Offshore (Transocean Offshore), Houston, from 1996 to 1998; and Chief Financial Officer in Transocean AS from 1991 to From 1985 to 1991, Mr. Tveteraas held various management positions within the offshore industry. Mr. Tveteraas is a Board member of INTSOK and a Norwegian citizen with residence in Tananger, Norway. Oskar Mykland (1966) CFO Mr. Mykland holds a Bachelor degree in Business and Administration from BI Norwegian School of Management (BI) in Skien from Mr. Mykland has previous experience as Chief Financial Officer of Siem Offshore from 2006 to 2009 and Finance Director of Viking Supply Ships AS from 1998 to From 1994 to 1998, Mr. Mykland held various management positions within the offshore industry. Mr. Mykland is a Norwegian citizen with residence in Kristiansand, Norway. Fredrik Major (1950) Vice President Business Development/ R&D Mr. Major holds a BSc in Naval Architecture and an MSc in Computer Science from NTNU in Trondheim Mr. Major has previous experience as Vice President Business Development in Advanced Production and Loading from 1995 to 2005; Technical Director in Ericsson AS from 1994 to 1995; Founder and Managing Director of Semafor Data, later Semafor AS from 1983 to 1994 (acquired by Ericsson AS in 1994); Independent Consultant from 1979 to 1983; and Research Engineer at NSFI, The Ship Research Institute of Norway (now Marintek), from 1976 to Mr. Major is a Norwegian citizen with residence in Arendal, Norway. Birte Norheim (1973) Vice President Finance Mrs. Norheim holds a Master of Applied Finance from Queensland University of Technology, Australia, from From 2005 to 2008, Mrs. Norheim was Group Controller for Sevan Marine ASA, and she has previous experience as Finance Analyst for MI-SWACO, Houston, from 2004 to 2005; Chief Accountant for MI-SWACO, Norway, from 2003 to 2004; and Accountant for Laerdal Medical AS from 1993 to Mrs. Norheim is a Norwegian citizen with residence in Sola, Norway. Helle Hundseid (1965) Vice President Projects Mrs. Hundseid holds a Master of Science degree in Mechanical Engineering from NTNU from Mrs. Hundseid has 17 years experience from DNV within the onshore/offshore industry both nationally and internationally; including positions as Project Manager from 1990 to 2006; Section Leader for Safety from 1998 to 2002; Service Area Leader - Norway from 2002 to 2004; Market Sector Leader - Upstream from 2004 to 2006; and Customer Service Manager from 2002 to Mrs. Hundseid has experience from several Boards of Directors and is a Norwegian citizen with residence in Asker, Norway. Erling Andreas Ronglan (1969) Vice President Operations Mr. Ronglan holds an MSc from the Norwegian Institute of Technology, Faculty of Marine Technology. Mr. Ronglan has previous experience as Operations Manager for FPSO Petrojarl I, PGS Production AS since 2001; Operations Engineer for PGS Production AS from 1999 to 2001, Customer Service Manager for DNV Oslo from 1997 to Mr Ronglan is a Norwegian citizen with residence in Trondheim, Norway.

19 09 SEVAN MARINE 19 Hanna Moland (1955) Vice President HR & Administration Mrs. Moland has previous experience as Administrative Services Manager, Advanced Production and Loading AS from 2003 to 2005; Human Resource Manager, Advanced Production and Loading AS from 2002 to 2003; and various positions within Hitec Marine AS from 1993 to Mrs. Moland is a Norwegian citizen with residence in Vegardshei, Norway. Jon Helge Willmann (1961) Vice President Drilling Mr. Willmann holds an MBA from Norwegian school of Economics and Administration (NHH) in Bergen from Mr. Willmann has previous experience as Managing Director and Head of Offshore Oil & Gas Financing in GE Transportation Finance (GE Capital) from 2002 to 2009; Senior Vice President Offshore Oil & Gas Financing in ABB Financial Services from 1998 to 2002; and Deputy General Manager Corporate Division in DnB NOR in Oslo and Luxembourg from 1985 to Mr. Willmann is a Norwegian citizen with residence in Oslo, Norway. Morten Martens Breivik (1969) Vice President QHSE Mr. Breivik holds a degree in Master Mariner and a Bachelor BA from Stord/ Haugesund University College and a Bachelor degree in Asset Management from Sør-Trøndelag University College. Mr. Breivik joined Sevan in 2007 and has previous experience as QHSE Manager in APL ASA from 2005 to 2007; and as Marine Superintendant in Hydro O&G from 2002 to From 1996 to 2002, Mr. Breivik held various management positions in operations in Smedvig Offshore. Mr. Breivik is a Norwegian citizen with residence in Arendal, Norway. SENIOR MANAGEMENT - SUBSIDIARIES Aslak Hjelde (1953) Managing Director KANFA AS Mr Hjelde holds a degree in Mechanical engineering from 1979 and a degree in Economics from Mr. Hjelde has previous experience from Kongsberg Våpenfabrikk, Consultas Engineering, SB Verksted and Kvaerner Process Systems as designer, technical director, QA responsible, project manager and sales director. Mr. Hjelde is a Norwegian citizen with residence in Hokksund, Norway. Gerson Peccioli (1955) President Sevan Brasil Mr. Peccioli holds B.Sc. in Civil Engineering from Universidade Federal do Parana from 1979 and Petroleum Engineering from SENBA of Petrobras from Mr. Peccioli has previous experience as Integrated Projects Operations Manager in Iran and Brazil, Business Development Manager, and New Technology Manager of Schlumberger from 2000 to 2005; General Manager of the branches in Libya and Angola and Operations Manager of Braspetro Oil Services from 1988 to 2000; and various project management positions in offshore well construction projects including deepwater within Petrobras from 1980 to Mr. Peccioli holds a PMP certificate from Project Management Institute. Mr. Peccioli is a Brazilian citizen with residence in Rio de Janeiro, Brazil.

20 09 SEVAN MARINE 20 CONSOLIDATED BALANCE SHEET Figures in USD 1,000 Note ASSETS Non-current assets Sevan capital assets 6 1,904,282 1,692,958 Other fixed assets 6 48,918 38,686 Intangible assets 7 14,691 16,597 Investment in associates 8 1,406 1,290 Deferred tax assets ,087 65,434 Other non-current assets 33 31,801 13,245 Total non-current assets 2,110,184 1,828,210 Current assets Trade and other receivables 10,19 54,228 36,156 Inventory 32 21,306 12,087 Derivative financial instruments Cash and cash equivalents ,019 50,268 Total current assets 238,609 98,511 Total assets 2,348,792 1,926,721 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 12 16,633 6,187 Other equity 957, ,307 Total shareholders equity 974, ,493 Minority interest 37,969 38,590 Total equity 1,012, ,084 LIABILITIES Non-current liabilities Interest-bearing debt * 15 85, ,662 Derivative financial instruments ,881 Retirement benefit obligations 17 1, Deferred tax liability 16 2, Total non-current liabilities 90, ,024 Current liabilities Interest-bearing debt * 15 1,103,005 13,965 Trade payables , ,143 Other current liabilities 14,19 30,968 28,906 Provisions 18 11, Total current liabilities 1,246, ,613 Total liabilities 1,336,277 1,187,638 Total equity and liabilities 2,348,792 1,926,721 * As described in further detail in Note 15 and in the Board of Directors Report, the Board of Directors is of the firm opinion that the debt in reality is non-current in nature. However, the accounting regulations require that amounts which formally could be held to be mandatorily repayable as at the balance sheet date be classified as current irrespective of whether such repayment was required by the lenders or the basis therefore has subsequently been eliminated. Accordingly, relevant liabilities have been classified as current in the financial statements as per December 31, However, as all necessary actions have been resolved by the date of this financial report, the debt will be classified back to non-current for future reporting periods.

21 09 SEVAN MARINE 21 CONSOLIDATED INCOME STATEMENT Figures in USD 1,000 Note Operating income 5,19 194, ,455 Operating expense 5-117, ,908 Depreciation, amortisation and impairment 6,7-64,697-31,571 Employee benefit expense 20-56,004-32,514 Other operating expense 31-33,520-76,240 Net operational currency gain/(loss) -6,654 4,710 Total operating expense -277, ,524 Operating profit/(loss) -83, ,069 Financial income 21 73, ,610 Financial expense , ,481 Share of profit/(loss) from associates Net financial profit/(loss) -97,279 16,953 Profit/(loss) before tax -180, ,116 Tax income/(expense) 22 36,931 5,192 Annual net profit/(loss) -143, ,923 Attributable to: Equity holders of the Company -142,793-94,482 Minority interest ,442 Earnings per share for profit/(loss) attributable to the equity holders of the Company during the year (USD per share): - Basic Diluted Arendal, April 30, 2010 The Board of Directors of Sevan Marine ASA Arne Smedal Kåre Syvertsen Hilde Drønen Chairman Board member Board member Stephan M. Zeppelin Jorunn Haugen Jørgen Skotnes Jan Erik Tveteraas Board member Employee representative Emloyee representative CEO

22 09 SEVAN MARINE 22 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Figures in USD 1,000 Note Annual net profit/(loss) -143, ,923 Foreign currency translation 3,377-4,353 Comprehensive income -140, ,277 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Figures in USD 1,000 Attributable to equity holders of the Company Other equity Note Share capital Share premium CTA Retained earnings Minority interest Total equity January 1, , ,401-1, ,381 38, ,084 Total proceeds from share issues 10, , ,859 Share issue costs -21,781-21,781 Tax effect of share issue costs 6,099 6,099 Expensed portion of value of share options 1,170 1,170 Convertible bond, equity portion 14,058 14,058 Tax effect of convertible bond, equity portion -3,936-3,936 Comprehensive income for the year 3, , ,037 December 31, , ,132 1,902 1,879 37,969 1,012,515 Figures in USD 1,000 Attributable to equity holders of the Company Other equity Note Share capital Share premium CTA Retained earnings Minority interest Total equity January 1, , ,958 2, ,004 6, ,740 Total proceeds from share issues ,740 45, ,060 Share issue costs -8,746-8,746 Tax effect of share issue costs 2,449 2,449 Expensed portion of value of share options 2,858 2,858 Comprehensive income for the year -4,252-94,482-13, ,277 December 31, , ,401-1, ,381 38, ,084

23 09 SEVAN MARINE 23 CONSOLIDATED CASH FLOW STATEMENT Figures in USD 1,000 Note Cash flows from operating activities Cash from operations 25-32, ,849 Interest paid -74,118-38,895 Net cash flow from operating activities -106, ,744 Cash flows from investment activities Purchase of property, plant and equipment (PPE) 6-344, ,248 Purchase of intangible assets ,832 Net cash flow from investment activities -344, ,080 Cash flows from financing activities Net proceeds from issuance of ordinary shares 396, ,315 Net proceeds from interest-bearing debt , ,000 Repayment of interest-bearing debt 15-5,000-5,000 Repurchase of bond loan 15-2,900 0 Net cash flow from financing activities 563, ,315 Net cash flow for the period 112, ,509 Cash and cash equivalents at the beginning of the year 11 50, ,777 Cash and cash equivalents at the end of the year ,019 50,268 :3D illustration of Sevan 1000 FPSO for the Goliat field

24 SEVAN MARINE GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT NOTE 1 CORPORATE INFORMATION 09 SEVAN MARINE 24 Sevan Marine ASA (the Company ) and its subsidiaries (together with the Company the Group ) are engaged in development, construction, ownership, and chartering of floating production units and drilling units, which are based on the proprietary technology of the Company. The Group is also developing other application types for its cylindrical Sevan hull, including floating LNG production and power plants with CO2 capture. The Company is a public limited liability company incorporated and domiciled in Norway. The address of its registered office is Kittelsbuktveien 5, 4836 Arendal. The Company s shares are listed on the Oslo Stock Exchange. These consolidated financial statements were approved by the Board of Directors on April 19, Overview of Group structure as of December 31, 2009: Subsidiaries Registered office Interest held Equity Profit/(loss) KANFA AS Norway 100% 23, Mator AS Norway 100% KANFA Aragon AS Norway 50% 1, Sevan Production Pte Ltd Singapore 100% 155,574-6,278 Sevan Marine do Brasil Ltda Brazil 100% 520-4,221 Sevan Piranema Servicios De Petroleo Ltda Brazil 100% ,537 Sevan Production AS Norway 100% 51,535-3,529 Sevan Invest AS Norway 100% 262, Sevan Production General Partnership Singapore 80% 223, Sevan Production Services Ltd UK 80% -37,379-3,277 Sevan Production UK Ltd UK 100% -6,477-7 Sevan Pte Ltd Singapore 100% -2, Sevan Drilling AS Norway 100% 206,358-43,547 Sevan Drilling Rig Pte Ltd Singapore 100% -2,949-2,471 Sevan Drilling Pte Ltd Singapore 100% 357,718-26,172 Sevan 300 Pte Ltd Singapore 100% 221,037-43,732 Sevan Drilling ASA Norway 100% 4,496 4,618 Sevan Holding I AS Norway 100% 48, Sevan Holding II AS Norway 100% 8,100-4,092 Sevan Holding III AS Norway 100% Sevan Holding IV AS Norway 100% Sevan Holding I Pte Ltd Singapore 100% Sevan Holding II Pte Ltd Singapore 100% -4,089-4,315 Sevan Holding III Pte Ltd Singapore 100% Sevan Holding IV Pte Ltd Singapore 100% Sevan Drilling Limited UK 100% Sevan Marine Servicos de Perfuracao Ltda Brazil 100% -1,724-1,684 Sevan Services AS Norway 100% 14 1 Sevan Drilling Rig AS Norway 100% 9-5 Sevan Drilling Rig II AS Norway 100% Sevan Drilling Rig IV AS Norway 100% 15 1 Sevan Drilling Rig V AS Norway 100% 15 1 Sevan Drilling Rig VI AS Norway 100% 15 1 Sevan Drilling Rig VII AS Norway 100% 15 1 Sevan Drilling Rig VIII AS Norway 100% 15 1 Sevan Drilling Rig IX AS Norway 100% 15 1 Sevan Drilling Rig II Pte Ltd Singapore 100% 39,076-1,598 Sevan Drilling Rig IV Pte Ltd Singapore 100% Sevan Drilling Rig V Pte Ltd Singapore 100% Sevan Drilling Rig VI Pte Ltd Singapore 100% Sevan Drilling Rig VII Pte Ltd Singapore 100% Sevan Drilling Rig VIII Pte Ltd Singapore 100% Sevan Drilling Rig IX Pte Ltd Singapore 100% Sevan Drilling Holding Pte Ltd Singapore 100% -6-6 Associated companies Registered office Interest held Equity Profit/(loss) 2009 KANFA-TEC AS Norway 49.99% 2, (Amounts in the tables above are prepared in local GAAP and presented in USD 1,000)

25 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 25 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all financial years presented. The presentation currency of the Group is USD which corresponds to the functional currency of the majority of the entities in the Group. All numbers are in USD 1,000 unless otherwise stated. 2.1 Basis of Preparation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and valid as of December 31, The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group s accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note Changes in Accounting Policy and Disclosures income. Comparative information is also presented in conformity with the revised standard. As the change in accounting policy impacts presentation aspects only, there is no impact on earnings per share. IFRS 2 Share-Based Payment (amendment) IFRS 2 deals with vesting conditions and cancellations and clarifies that vesting conditions comprise service conditions and performance conditions only. Other features of a share-based payment are not defined as vesting conditions. These features would need to be included in the grant date fair value for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation there of subsequent to grant date. All cancellations, whether by the entity or by other parties, shall receive the same accounting treatment. The amendment does not have any material effect on the Group s financial statements. IAS 23 Borrowing Cost (revised) The standard requires an entity to capitalize borrowing cost directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing cost has been removed. As the Group has practiced capitalization of qualifying borrowing cost during the construction period, the financial statements have not been impacted by this change. a) New and amended standards adopted by the Group The Group has adopted the following new and amended IFRS as of January 1, 2009: IFRS 7 Financial Instruments -Disclosures (amendment) The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. As the change in accounting policy results in additional disclosures only, there is no impact on earnings per share. IFRS 8 Operating Segments IFRS 8 replaces IAS 14 Segment reporting and requires a management approach, under which segment information is presented on the same basis as that used for internal reporting purposes. This change in accounting standard has not resulted in any change in number of reportable segments presented in the annual financial accounts. Consequently, there was no need for any restatement of comparative figures for IAS 1 Presentation of Financial Statements (revised) The revised standard prohibits the presentation of items of income and expenses (that is, non-owner changes in equity ) in the statement of changes in equity, requiring non-owner changes in equity to be presented separately from owner changes in equity in a statement of comprehensive income. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group The following standards and amendments to existing standards have been published and are mandatory for the Group s accounting periods beginning on or after January 1, 2010 or later periods, but the Group has not early adopted them: IFRIC 17 Distribution of Non-Cash Assets to Owners This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. IFRS 5 has also been amended to require that assets are classified as held for distribution only when they are available for distribution in their present condition and the distribution is highly probable. The Group will apply IFRIC 17 from January 1, The adoption is not expected to have any material impact on the Group s financial statements. IAS 27 Consolidated and Separate Financial Statements (revised) The revised standard requires effects of all transactions with noncontrolling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair value, and a gain or loss is recognized in profit or loss. The Group will apply IAS 27 (revised) from January 1, 2010.

26 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 26 IFRS 3 Business Combinations (revised) The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at acquisition date, with contingent payments classified as debt to be subsequently remeasured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest s proportionate share of the target s net assets. All cost associated with acquisitions should be expensed. The Group will apply IFRS 3 (revised) from January 1, IAS 38 Intangible Assets (amendment) The Group will apply IAS 38 (amendment) from the date IFRS 3 (revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The amendment is not expected to result in any material impact on the Group s financial statements. IFRS 5 Measurement of Non-Current Assets (or disposal groups) Classified as Held for Sale (amendment) The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the general requirements of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The Group will apply IFRS 5 (amendment) from January 1, The adoption is not expected to have any material impact on the Group s financial statements. IAS 1 Presentation of Financial Statements (amendment) The amendment provides clarification that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. The Group will apply IAS 1 (amendment) from January 1, The adoption is not expected to have any material impact on the Group s financial statements. IFRS 2 Group Cash-Settled and Share-Based Payment Transactions (amendment) In addition to incorporating IFRIC 8, Scope of IFRS 2, and IFRIC 11, IFRS 2-Group and treasury share transactions, the amendment expand on the guidance in IFRIC 11 to address the classification of group arrangements that were not covered by the interpretation. The new guidance is not expected to have any material impact on the Group s financial statements. 2.2 Consolidation Subsidiaries Subsidiaries comprise all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than 50% of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group, and are de-consolidated from the date that control ceases. The Group uses the purchase method to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred assumed at the date of exchange, plus cost directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of the acquisition over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the income statement immediately. Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group. Transactions and minority interests The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests resulting in gains and losses for the Group are recorded in the income statement. Purchases of shares in subsidiaries from minority interests may result in goodwill, being the difference between any considerations paid and the relevant share acquired of the carrying value of net assets of the subsidiary. Associates Associates comprise all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The Group s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition. The Group s share of associates post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealized gains on transactions between the Group and associates are eliminated to the extent of the Group s ownership share in the associate. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of

27 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 27 associates are changed where necessary to ensure consistency with the policies adopted by the Group. 2.3 Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to Senior Management and Board of Directors, responsible for making strategic decisions. Senior Management is responsible for allocating resources and assessing performance of the operating segments. Operating segments The Group is organized in four business areas, Floating Production, Drilling, Topside and Process Technology, and Corporate. The activities within the Floating Production segment relate to the design, engineering, construction, and operation of the Sevan platforms (FPSOs). This includes licensing of the Sevan proprietary technology for floating production units. The activities within the Drilling segment relate to the design, engineering, construction and operation of the Sevan drilling units. The segment Topside and Process Technology consists of the activities of KANFA AS and subsidiaries which mainly relate to the provision of services and equipment to the processing plants of the Sevan FPSOs and external clients. The activities within Corporate relate to general administration and marketing activities including studies made for clients. Geographic perspective The Group s operating segments operate in the global offshore market and have common marketing and Senior Management functions. Currently, the Group does not consider the business from a geographic perspective. As further units are completed and start operations, dividing business into main geographical areas will be assessed. 2.4 Foreign Currency Translation Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which each entity operates ( the functional currency ). The consolidated financial statements are presented in USD, which is the Group s presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from settlement of such transactions (realized items) and from translation at exchange rates prevailing at balance sheet date of monetary assets and liabilities denominated in foreign currencies (unrealized items) are recognized in the income statement, except when deferred in equity as qualifying cash flow hedges. Translation differences are recognized in equity. Group companies The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency, are translated into the presentation currency as follows: Assets and liabilities are translated at exchange rates prevailing at balance sheet date Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at exchange rates prevailing at the dates of the transactions) All resulting exchange differences are recognized as a separate component of equity Upon consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders equity. When a foreign operation is sold, exchange differences that were recorded in equity are recognized in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. 2.5 Property, Plant and Equipment Fixed assets are stated at historic cost less accumulated depreciation. The Group has not used, and has no plans of utilizing the revaluation option in IAS 16. Depreciation is calculated using the straight-line method. Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of an asset to estimated discounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated discounted future cash flows, an impairment charge is recognized. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Subsequent cost are included in the asset s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement as incurred. Borrowing cost is capitalized when the cost is directly attributable to the construction of a qualifying asset. Each major component of the Sevan Capital Assets is depreciated separately when the units are available for intended use. A major component is defined as a part with a cost that is significant in relation to the total cost of the asset. An estimation of useful lives indicates an average depreciation period of years.

28 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 28 Other fixed assets consist of furniture, fixtures and equipment that are depreciated using the straight-line method over their estimated useful lives ranging from three to ten years. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the income statement. 2.6 Construction in Progress Construction contracts are capitalized as construction in progress based on installments payable to the yard and other suppliers. Insurance and net financial expense during the construction period are capitalized as construction in progress. Cost of labour directly attributable to the construction of the Sevan units is also capitalized. Cost of training, manning and other pre-operational activities are expensed as incurred. 2.7 Construction Contracts Contract cost is recognized when incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent that contract cost incurred is likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognized over the period of the contract. When it is probable that total contract cost will exceed total contract revenue, the expected loss is recognized as an expense immediately. The Group uses the percentage of completion method to determine the appropriate amount to recognize in a given period. The stage of completion is estimated, using judgmental assessment, of the progress of completion of subcomponents of identified milestone deliverables in each contract up to the balance sheet date as a percentage of total identified contract milestone deliverables. The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which cost incurred plus recognized profits (less recognized losses) exceed progress billings. Progress billings not yet paid by customers and retention are included as trade and other receivables. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed cost incurred plus recognized profits (less recognized losses). 2.8 Intangible Assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Computer software Acquired computer software is capitalized on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives, ranging from three to five years. Cost associated with developing or maintaining computer software programs are recognized in the income statement as incurred. Research and Development Cost associated with research is expensed as incurred. Qualifying cost associated with development activities are capitalized and depreciated over expected useful life. 2.9 Impairment of Non-Financial Assets Assets that have an indefinite useful life are not subject to amortization but are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less cost to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels at which separate cash flows are identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that has suffered impairment are reviewed for possible reversal of the impairment at each reporting date Financial Assets The Group classifies its financial assets as loans and receivables measured at fair value at transaction date, subsequently remeasured at amortized cost. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets are included in current assets, except for those with maturities greater than 12 months after balance sheet date, in which case they are classified as non-current assets. Derivative financial instruments are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured at fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates derivatives as hedges of a particular risk associated with a recognized asset or liability or a highly probable forecast transaction (cash flow hedge). Hedge accounting has not been applied in 2009 or Inventory Inventory is stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Cost is determined using the average cost method Trade Receivables Trade receivables are recognized at fair value less provision for

29 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 29 impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The provision is recognized in the income statement as other operating expense Cash and Cash Equivalents Cash and cash equivalents includes cash in hand, bank deposits, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within interest-bearing debt in the current liabilities section in the balance sheet Share Capital Ordinary shares are classified as equity. Incremental cost directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company acquires the Company s equity share capital (treasury shares), the consideration paid, including any directly attributable cost (net of income taxes) is deducted from equity attributable to the Company s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable transaction cost and income tax, is included in equity attributable to the Company s equity holders Interest-Bearing Debt Interest-bearing debt is initially recognized at fair value, net of transaction cost incurred and including the value of any embedded call options. Interest-bearing debt is subsequently stated at amortized cost; any difference between the proceeds (net of transaction cost and embedded value of call options) and the nominal value is recognized in the income statement over the period of the interest-bearing debt using the effective interest method. The value of call options embedded in bond loans are treated as separate financial assets and are initially recognized at fair value and subsequently remeasured at fair value each balance sheet date. Gains and losses are recognized in the income statement immediately. Interest-bearing debt is presented net of the separated financial asset and is classified as current liabilities unless the Group has an unconditional right to defer settlement for more than 12 months after the balance sheet date. Compound financial instruments issued by the Group comprise convertible bonds that can be converted to share capital at the option of the holder, where the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have en equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction cost is allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition except on conversion or expiry Deferred Income Tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit and loss. Deferred income tax is determined using tax rates (and legislation) that have been enacted or substantially enacted by balance sheet date and are expected to apply when the deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. The tax base included in the calculation of deferred income tax is calculated in local currency and translated into USD at foreign exchange rates prevailing at balance sheet date Employee Benefits Pension obligations Group companies operate both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate juridical entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Cost associated with defined contribution plans are expensed as incurred. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefits plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The pension expenses and pension commitments are calculated on a straight-line earning profile basis, based on assumptions relating to discount rates, projected salaries, the amount of benefits from the National Insurance Scheme, future return on pension assets, and actuarial calculations relating to mortality rate, voluntary retirement, etc. Pension funds are valued at net realizable value and deducted from the net pension obligation in the balance sheet. Changes in the pension obligation due to changes in the pension plans are amortized over the expected remaining service period. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10%

30 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 30 of the value of plan assets or 10% of the defined benefit obligation are charged or credited to income over the employees expected average remaining working lives. Past-service cost is expensed immediately. Share-based compensation The Group operates a share-based compensation plan. In line with IFRS 2, the cost represented by the fair value at award date is expensed over the vesting period. The fair value at the time of the award is supported by a third party calculation using the Black & Scholes option-pricing model. Cost represented by employer s contribution tax of the excess of fair value of the share relative to the strike prices (intrinsic value) is expensed over the vesting period in line with the changing market price of the Company s shares. Profit-sharing and bonus plans The Group recognizes a provision where contractually obliged or where there is a constructive obligation Provisions A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are not recognized for future operating losses. Where there is a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured as the present value of the expected expenditures required to settle the obligation using a pre-tax discount rate that accounts for time value of money and risks specific to the obligation Revenue Recognition Revenue comprises the fair value of the consideration receivable for the sale of goods and services in the ordinary course of the Group s activities. Revenue is shown, net of value-added tax, estimated returns, rebates and discounts and after eliminated sales within the Group. Interest income is recognized on a time-proportion basis using the effective interest method. Design fee/license revenue is recognized on an accrual basis in accordance with the substance of the relevant agreements. Dividend income is recognized when the right to receive payment is established. Mobilization expenses are offset by mobilization revenues and recognized using the straight line method over the full fixed term of the underlying charter contract. Charter revenues are recognized on a straight-line basis over the contract period during which the services are rendered, and at the rates established in the underlying contracts. Penalties imposed as compensation to client for delivery of a unit later than contractually agreed shall be accrued for on a separate account in the balance sheet at the date the charter contract commences. If any part of the penalties is recoverable from vendors due to directly correlated delays caused by them, the penalty recoverable from the vendor shall offset the accrual of penalties payable to the client. Net accrued amount shall subsequently be amortized as a reduction of income over the fixed term of the charter contract Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. When assets owned by the Group are leased to clients under an operating lease, the asset is included in the balance sheet based on the nature of the asset. Lease income is recognized in accordance with the underlying contract Dividend Distribution Dividend distribution to the Company s shareholders is recognized as a liability in the Group s financial statements in the period in which the dividend is approved by the Company s shareholders. Revenue is recognized as follows: Other operating revenues are recognized in line with the development of the underlying projects. Sale of services is recognized in accordance with the underlying contracts under the percentage of completion (POC) method. Under the POC method, revenue is generally recognized based on the services performed to date as percentage of the total services to be performed. Reference is made to Note 2.7 for further details of accounting treatment of construction contracts.

31 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 31 NOTE 3 FINANCIAL RISK MANAGEMENT 3.1 Financial Risk Factors The Group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group s financial performance. Risk management for the Group is carried out by Treasury under policies approved by the Board of Directors. Treasury identifies, evaluates and hedges financial risks in close co-operation with the operating units within the Group. The Board approves the principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and investment of excess liquidity Market Risk Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the NOK, USD, EURO and GBP. Foreign exchange risk arises from future commercial transactions, recognized assets or liabilities, and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not an entity s functional currency. To manage foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities within the Group use forward contracts and similar instruments. Hedging of foreign exchange exposures are executed on a gross basis and foreign exchange contracts with third parties generally designated at Group level.the Group s risk management policy is to hedge anticipated transactions in each major currency. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Price risk The Group is exposed to commodity price risk at two main levels; The demand for Sevan units is sensitive to oil price developments, fluctuations in production levels, exploration results and general activity within the oil industry Liquidity Risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities, and the ability to close out market positions. The Group aims to maintain flexibility in its liquidity by keeping committed credit lines available Cash Flow and Fair Value Interest Rate Risk The Group s interest rate risk arises from non-current debt. Debt subject to floating interest rates expose the Group to cash flow interest rate risk. Debt subject to fixed interest rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group s policy is to maintain part of its debt at fixed rates. The Group simulates various scenarios taking into consideration refinancing, renewal of current positions, alternative financing and hedging. Based on the different scenarios, the Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of convertion from floating interest rates to fixed interest rates. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional amounts. The Group s policy is to maintain liquidity through placement of excess cash at bank-deposits and/or short-term, marketable investments at limited risk. 3.2 Fair Value Estimation Effective January 1, 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value. IFRS 7 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 - Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) Level 3 - Inputs that are not based on observable market data (that is, unobservable inputs) The cost of construction of future units is sensitive to changes in market prices of the input factors Credit Risk Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers. The Group has no significant concentration of credit risk towards single financial institutions and has policies that limit the amount of credit exposure to any single financial institution. Credit exposures to customers are mainly concentrated around the charter contracts.

32 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 32 The Group s assets and liabilities which are measured at fair value: December 31, 2009 Level 1 Level 2 Level 3 Total Assets Financial assets at fair value through profit or loss - Forward foreign exchange contracts Call options bond loans 0 4, ,214 Total assets 0 4, ,270 At December 31, 2009, the Group does not have any financial laibilities at fair value through profit or loss. The fair value of financial instruments traded in active markets is based on quoted market prices at each balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on arm s-length basis. Such instruments are classified as level 1. At balance sheet date, the Group does not have any level 1 financial instruments. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on estimates specific to the Group. If all significant inputs required to estimate the fair value of an instrument are observable, the instrument is classified as level 2. The Group uses valuation techniques in determining the fair value of forward foreign exchange contracts and call options embedded in bond loans. Assumptions in the calculations are based on market conditions prevailing at each balance sheet date. If one or more of the significant inputs is not based on observable market data, the instrument is classified as level 3. At balance sheet date, the Group does not have any level 3 financial instruments. Reference is made to Note 9 and 15 for further details of financial instruments. Fair value for disclosure purposes: Fair value of bond loans is based on the market price of the bonds at balance sheet date. Reference is made to Note 15 for further details of fair value of bonds. Fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate for similar financial instruments.

33 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 33 NOTE 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are assumed to be reasonable under current circumstances. 4.1 Critical Accounting Estimates and Assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the actual results. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below. Estimated impairment of Sevan Capital Assets The Group has tested whether the Sevan Capital Assets have suffered any impairment, in accordance with the accounting policy stated in Note 2.5. The recoverable amounts of the assets have been determined based on value-in-use calculations. These calculations require the use of estimates. Estimated impairment of goodwill The Group annually tests whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.8. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. Income taxes The Group is subject to income taxes in various jurisdictions. Judgment is required in determining the provision for income taxes. During the ordinary course of business, transactions and calculations occur for which the ultimate tax effect is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The accounting for deferred income taxes relies upon management s judgment of the Group s ability to generate future positive taxable income in each respective jurisdiction. Revenue recognition The Group uses the percentage-of-completion method in accounting for its sales of construction contracts. Use of the percentage-ofcompletion method requires the Group to estimate the services performed to date as a proportion of the total services to be performed. This accounting methodology relies on estimates of progress, total cost, and final revenues from each contract. Commitments The Group uses estimates regarding assessment of remaining commitments. Warranties The Group uses estimates in calculating the provision for warranties to customers. Option periods for charter contracts Some charter contracts include options for the client to extend the contractual period at predefined terms. Option periods are taken into consideration when assessing value-in-use for each asset. Option periods are not included in the order back-log in note 29. Depreciation of units in operation The Group uses estimates when assessing a Sevan capital asset s useful life and residual value to determine the depreciation plan for each unit in operation. 4.2 Critical Judgments in Applying the Group s Policies Assumptions applied for the purpose of impairment testing of Sevan Capital Assets include estimated WACC and expected future cash flows. Due to the inverse relationship between discount rate and net present value, a decrease in WACC will increase the net present value and an increase in WACC will decrease the net present value. An increase in estimated future cash flows will increase the net present value and a decrease in estimate expected future cash flows will decrease the net present value. Estimation of WACC is based on determination of an average WACC for the Group which is differentiated for specific assets if the underlying asset risk is viewed as being different to that of an average Sevan Capital Asset. Estimation of future cash flows is based on several assumptions, including forecasted operational expense, utilization and day rates which are based on actual contracts as well as forecasts beyond the contracted periods. For impairment testing purpose, the Group is particularly exposed to changes to the estimated WACC as well as to achieving the planned improvement in financial performance on FPSO Sevan Piranema. If actual future performance and achievements are different to the estimates applied or if market conditions change, impairments on Sevan Capital Assets may be required in the future. Share-based payment The Group uses estimates when calculating the cost of share-based payment through options. The main assumptions subject to estimates include the duration of the option and the volatility of the share price. The estimated market values are an imputed cost without any cash effect, and the offsetting entry being an increase in equity.

34 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 34 NOTE 5 SEGMENT INFORMATION Operating segments considered from a business perspective The Group is organized in four business areas, Floating Production, Drilling, Topside and Process Technology, and Corporate. Determination of the operating segments based on the same grouping of activities as applied in the financial reports to Senior Management and Board of Directors, who are responsible for making the strategic decisions in the Group. Revenue in the Floating Production segment first started when FPSO Sevan Piranema went on standby rate in March The unit produced first oil in October FPSO Sevan Hummingbird produced first oil in September 2008 and FPSO Sevan Voyageur commenced oil production in August The hulls for FPSO Sevan 300 no. 4 and 5 are currently available for potential clients. The Topside and Process Technology segment consists of the activities of KANFA AS, KANFA Aragon AS, Mator AS and KANFA-TEC AS whose primary business activities relate to the provision of services and equipment to the processing plants of the Sevan FPSOs and external clients. The main activities in the Drilling segment during 2009 relate to the construction and preparation for operations of the Sevan Driller, which is expected to start generate revenues in May Construction of the second Sevan drilling unit, the Sevan Driller II, commenced in Sevan Driller II is contracted to Petrobras S.A. for a six year fixed term contract scheduled for delivery by mid Sevan Driller III is contracted to ONGC for a tree year fixed term contract. Segment results: Topside Floating and Process Year ended December 31, 2009 Production Technology Corporate Drilling Eliminations Group Income 177,829 14,272 2, ,824 Intragroup income 1,343 1,431 23, ,741 0 Total operating income 179,172 15,703 26, , ,824 EBITDA 28, ,958-30,447-2,253-18,368 Operating profit/(loss) -28, ,045-32,545-4,281-83,065 Net financial profit/(loss) -97,668 Share of profit/(loss) from associates 389 Profit/(loss) before tax -180,345 Tax income/(expense) 36,931 Annual net profit/(loss) -143,414 Topside Floating and Process Year ended December 31, 2008 Production Technology Corporate Drilling Eliminations Group Income 64,511 40,949 14, ,455 Intragroup income ,211 37, ,492 0 Total operating income 65,088 55,161 52, , ,455 EBITDA -76,382 12,547-11,126-19,319-4,219-98,498 Operating profit/(loss) -100,399 12,245-13,954-23,415-4, ,069 Net financial profit/(loss) 16,129 Share of profit/(loss) from associates 824 Profit/(loss) before tax -113,116 Tax income/(expense) 5,192 Annual net profit/(loss) -107,923

35 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 35 Specification of certain segment items included in the income statement: Topside Floating and Process Year ended December 31, 2009 Production Technology Corporate Drilling Eliminations Group Depreciation 52, ,028 55,587 Amortization 0 0 2, ,461 Impairment charge 4, , ,649 Total 57, ,086 2,098 2,028 64,697 Topside Floating and Process Year ended December 31, 2008 Production Technology Corporate Drilling Eliminations Group Depreciation 23, ,776 Amortization , ,213 Impairment charge , ,582 Total 23, ,828 4, ,571 Segment assets and liabilities, and yearly capital expenditure are as follows: Topside Floating and Process December 31, 2009 Production Technology Corporate Drilling Eliminations Group Assets 1,333,457 28,108 1,936, ,838-1,863,687 2,347,386 Investment in associates 0 1, ,406 Total assets 1,333,457 29,513 1,936, ,838-1,863,687 2,348,792 Liabilities 808,957 5, , , ,499 1,336,277 Capital expenditures 39, , ,597 15, ,370 Topside Floating and Process December 31, 2008 Production Technology Corporate Drilling Eliminations Group Assets 1,303,894 34,929 1,508, ,882-1,483,934 1,925,431 Investment in associates 0 1, ,290 Total assets 1,303,894 36,218 1,508, ,882-1,483,934 1,926,721 Liabilities 800,045 12, , , ,073 1,187,638 Capital expenditures 347,760 1,537 3, ,760 50, ,688 Segment assets consist primarily of property, plant and equipment, intangible assets (including goodwill and software) and cash and cash equivalents. Intercompany balances are not included. Segment liabilities comprise operating liabilities and non-current liabilities and exclude intercompany balances. Capital expenditures comprise additions to property, plant and equipment and intangible assets. Operating segments considered form a geographic perspective The Group s business segments operate in the global offshore market and have common marketing and Senior Management functions. Currently, the Group does not divide its operations into geographical segments. Accounting principles applied for segmentation are outlined in Note 2.

36 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 36 NOTE 6 PROPERTY, PLANT AND EQUIPMENT Sevan Total Construction in Capital Machinery/ Fixed Progress (CIP) FPSO Assets Fixtures Assets Year ended December 31, 2009 Book value January 1 658,290 1,034,668 1,692,958 38,686 1,731,643 Asset reclassified from CIP to FPSO Additions 241,964 26, ,675 15, ,791 Disposals Impairment -6, , ,649 Depreciation 0-51,171-51,171-4,416-55,587 Book value December ,073 1,010,209 1,904,282 48,918 1,953,200 At December 31, 2009 Cost or valuation 900,253 1,094,456 1,994,710 62,710 2,057,420 Accumulated depreciation and impairment -6,181-84,248-90,428-13, ,221 Book value December ,073 1,010,209 1,904,282 48,918 1,953,200 Sevan Total Construction in Capital Machinery/ Fixed Progress (CIP) FPSO Assets Fixtures Assets Year ended December 31, 2008 Book value January 1 803, ,009 1,079,183 36,142 1,115,324 Asset reclassified from CIP to FPSO -752, , Additions 607,676 28, ,129 9, ,856 Disposals Impairment ,582-3,582 Depreciation 0-22,354-22,354-3,422-25,776 Book value December ,290 1,034,668 1,692,958 38,686 1,731,643 At December 31, 2008 Cost or valuation 658,290 1,067,745 1,726,035 47,595 1,773,630 Accumulated depreciation and impairment 0-33,077-33,077-8,909-41,986 Book value December ,290 1,034,668 1,692,958 38,686 1,731,643 The impairment charge for Construction in Progress (CIP) of 6,181 for the year relate to the decision not to build the Sevan FPSO 650 (4,624) as well as the cancellation of a vendor contract (1,557). The impairment charge for machinery/fixtures of 468 for the year relate to an asset which subsequently has been scrapped. The impairment charge for machinery/fixtures of 3,582 in 2008 relate to the asset which was further impaired in 2009 and subsequently has been scrapped. The impaired value of the asset at balance sheet date in 2008 was estimated at fair value less cost of selling the asset. Security arrangements relating to construction in progress assets are described in Note 26. Capitalized interest is described in Note 21, and commitments relating to capital expenditure are described in Note 27.

37 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 37 NOTE 7 INTANGIBLE ASSETS Goodwill Software Development Total Year ended December 31, 2009 Book value January 1 11,140 3,212 2,245 16,597 Currency translation adjustments Additions Impairment Amortization 0-1, ,461 Book value December 31 11,119 1,657 1,915 14,691 At December 31, 2009 Cost or valuation 11,119 6,904 2,861 20,884 Accumulated amortization and impairment 0-5, ,193 Book value December 31 11,119 1,657 1,915 14,691 Goodwill Software Development Total Year ended December 31, 2008 Book value January 1 11,315 3, ,978 Currency translation adjustments Additions 0 1,401 2,606 4,007 Impairment Amortization 0-1, ,213 Book value December 31 11,140 3,212 2,245 16,597 At December 31, 2008 Cost or valuation 11,140 6,583 2,606 20,329 Accumulated amortization and impairment 0-3, ,732 Book value December 31 11,140 3,212 2,245 16,597 Expensed research and development Amount of expensed research and development (R&D) for the year amounted to 302 (2008: 548). Accounting principles regarding treatment of R&D are described in Note 2.8. Impairment tests for goodwill Goodwill is allocated to the Group s cash-generating units (CGUs) identified according to geographical region of operation and business segment.

38 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 38 Segment-level summary of goodwill allocations: Topside & Floating Process Year ended December 31, 2009 Production Drilling Technology Corporate Group Europe , ,119 South America Asia Total goodwill , ,119 Topside & Floating Process Year ended December 31, 2008 Production Drilling Technology Corporate Group Europe , ,140 South America Asia Total goodwill , ,140 The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets. Key assumptions for value-in-use calculations: Europe Profit before tax* 5,447 Growth rate ** 5% Discount rate *** 10% * Budgeted result before tax for year 1 (2010) ** Weighted average growth rate used for extrapolating cash flows in the five-year budget period. For the purpose of impairment testing, zero growth was assumed beyond the budget period *** Pre-tax discount rate applied to the cash flow projections The key assumptions are applied for the analysis of CGU within each operating segment. Budgeted results are based on past performance and expectations for future developments. The discount rate applied is pre-tax and reflects the specific risks of each operating segment.

39 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 39 NOTE 8 INVESTMENT IN ASSOCIATES Book value January 1 1,290 1,838 Share of profit/(loss) from associates Currency translation adjustments Dividend paid Book value December 31 1,406 1,290 Book values relate to investment in KANFA-TEC AS, which is the Group s only associate company. Gross balance sheet, gross income statement and the Group s share of ownership in associates: Country of Assets Liabilities Revenue Profit/(loss) % interest Name Year incorporation 100% 100% 100% 100% held KANFA-TEC AS 2009 Norway 4,818 2,308 7, % KANFA-TEC AS 2008 Norway 7,350 4,939 11,680 1, % NOTE 9 DERIVATIVE FINANCIAL INSTRUMENTS Current portion Assets Liabilities Assets Liabilities Forward foreign exchange contracts Total current portion Non-current portion Floating-to-fixed interest rate swaps ,881 Total non-current portion ,881 Forward foreign exchange contracts The notional principal amount of the outstanding forward foreign exchange contracts at balance sheet date are USD 3.2 million. There was no outstanding forward foreign exchange contracts at balance sheet date in Floating-to-fixed interest rate swaps There are no outstanding interest rate swaps at balance sheet date. The notional principal amount of interest swap positions at balance sheet date 2008, was USD 341 million. Embedded call options In December 2006, Sevan Drilling AS, a wholly-owned subsidiary of the Company, carried out a bond issue of NOK 1 billion, at an interest rate of Nibor +5%. The bond has a term of 6 years with a call option window of 6-12 months following acceptance of Sevan Driller at 104%. The fair value of the option is estimated at nil at balance sheet date (2008: USD 6.7 million). In December 2006, the Company carried out a bond issue of USD 140 million, at a fixed interest of 9.25%. The bond has a term of 5 years, with one remaining call option in December 2010 at 102%. The fair value of the option is estimated at USD 0.8 million at balance sheet date (2008: USD 2.3 million). In May 2007, the Company carried out a bond issue of USD 270 million, at an interest rate of Libor+3%. The bond has a term of 6 years, with two embedded call options at 103.5% and 102.5% which can be exercised in May 2010 and in May 2011 respectively. The fair value of the options is estimated at USD 1.3 million at balance sheet date (2008: USD 2.1 million). In October 2007, the Company carried out a bond issue of NOK 870 million, at an interest rate of Nibor+5.5%. The bond has a term of 5 years, with three embedded call options at 105%, 104% and % which can be exercised 6-12 months following completion of FPSO Sevan Voyageur, in October 2010 and in October 2011 respectively. Fair value of the options is estimated at USD 2.1 million at balance sheet date (2008: USD 6.4 million). Impact on the income statement for changes in the estimated fair value of embedded call options are described in Note 21.

40 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 40 9A FINANCIAL INSTRUMENTS BY CATEGORY Accounting principles for financial instruments have been applied to the line items below as indicated: Assets at fair Derivatives Loans and value through used for Available December 31, 2009 receivables profit and loss hedging for sale Total Financial assets Derivative financial instruments Trade and other receivables 54, ,228 Cash and cash equivalents 163, ,019 Total financial assets 217, ,303 Assets at fair Derivatives Loans and value through used for Available December 31, 2008 receivables profit and loss hedging for sale Total Financial assets Derivative financial instruments Trade and other receivables 36, ,156 Cash and cash equivalents 50, ,268 Total financial assets 86, ,424 Liabilities at fair Derivatives Other financial value through the used for Available December 31, 2009 liabilities the profit and loss hedging for sale Total Financial liabilities Interest-bearing debt 1,188, ,188,873 Trade payables 100, ,345 Derivative financial instruments Total financial liabilities 1,289, ,289,218 Liabilities at fair Derivatives Other financial value through the used for Available December 31, 2008 liabilities profit and loss hedging for sale Total Financial liabilities Interest-bearing debt 966, ,554 Trade payables 177, ,143 Derivative financial instruments 0 14, ,881 Total financial liabilities 1,143,697 14, ,158,578

41 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 41 9B CREDIT QUALITY OF FINANCIAL ASSETS The credit quality of financial assets that are neither past due nor impaired have been assessed by reference to external credit ratings (where available) and by analysis of historical information about counterparty default rates: Trade receivables - Counterparty with external credit rating AA 3,843 7,189 A 0 19 BBB 2,726 3,196 BB Total 6,569 10,791 Trade receivables - Counterparty without external credit rating Group 1 1, Group 2 12,467 4,716 Group Total 13,747 5,249 Total trade receivables 20,316 16,040 Group 1 - New customers (less than 6 mths) Group 2 - Existing customers (more than 6 mths) with no defaults in the past Group 3 - Existing customers (more than 6 mths) with some defaults in the past Cash at bank and short-term bank deposits AA 77,567 36,159 AA- 7,020 0 A A 3,161 0 BBB No rating available 74,356 14,109 Total cash and cash equivalents 163,019 50,268 Derivative financial assets AA Total derivative financial assets 56 0

42 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 42 NOTE 10 TRADE AND OTHER RECEIVABLES Trade receivables * 28,996 20,340 Provision for impairment of receivables -8,680-4,300 Trade receivables - net 20,316 16,040 Prepayments 7,623 9,262 Other receivables 2,177 4,330 Accrued income 24,112 6,524 Trade and other receivables 54,228 36,156 * Trade receivables includes receivables from related parties (KANFA-TEC AS) amounting to 493 (2008: 433) of which 490 (2008: 428) relates to dividend receivable During 2009, the Group has made a provision of 4,380 (2008: 4,300) relating to receivables from Oilexco North Sea Ltd. At balance sheet date the total provision relating to receivables from Oilexco North Sea Ltd. amounted to 8,680 (2008: 4,300). The Group has not made any actual losses on receivables during 2009 or Fair value of trade and other receivables are as follows: Trade receivables 20,316 16,040 Prepayments 7,623 9,262 Other receivables 2,177 4,330 Accrued income 24,112 6,524 Total trade and other receivables 54,228 36,156 Trade receivables that are less than three months past due are generally not considered for impairment. At balace sheet date trade receivables of 4,765 (2008: 11,323) were past due but not impaired. These overdue receivables relate to several independent customers with whom the Group has no history of default. Ageing of trade receivables is as follows: Before due date 15,551 4,717 Up to 3 months after due date 4,581 10,788 Between 3 and 6 months after due date More than 6 months after due date Total trade receivables - net 20,316 16,040 Carrying amounts of trade receivables are denominated in the following currencies: USD 8,792 3,933 GBP 5,369 1,086 NOK 5,632 10,552 Other currencies Total trade receivables - net 20,316 16,040

43 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 43 NOTE 11 CASH AND CASH EQUIVALENTS Cash and cash equivalents include the following: Cash at bank and in hand 144,266 16,069 Restricted employees tax deduction fund 1,737 1,445 Restricted short-term bank deposits 17,016 32,754 Total cash and cash equivalents 163,019 50,268 Included in cash and cash equivalents are restricted cash relating to taxes withheld from employees of 1,737 (2008: 1,445). At balance sheet date 1,000 (2008: 1,000) was collateralized in relation to a guarantee made on behalf of Sevan Drilling Pte Ltd, and 15,904 (2008: 15,904) was collateralized in relation to a guarantee made on behalf of Sevan Drilling Rig Pte Ltd. At December 31, 2009, 112 (2008: 25) of the restricted bank deposits relate to deposit for rental of offices. At balance sheet date the Group has an unused bank overdraft facility of USD 3.5 million. NOTE 12 SHARE CAPITAL The total authorized number of ordinary shares was million (2008: million) with a par value of NOK 0.20 per share. All issued shares were fully settled at balance sheet date. Number of shares Share capital Share premium Total January 1, ,128,448 6, , ,589 Proceeds from shares issued 329,941,534 10, , ,859 Cost of share issues, net of tax -15,682-15,682 December 31, ,069,982 16, , ,766 Number of shares Share capital Share premium Total January 1, ,424,681 5, , ,426 Proceeds from shares issued 18,703, , ,462 Cost of share issues, net of tax -6,299-6,299 December 31, ,128,448 6, , ,589 At December 31, 2009, The Company had 10,941 shareholders (2008: 6,740 shareholders). 57% of the share capital was owned by shareholders residing outside of Norway (2008: 63%). 20 largest shareholders at December 31, 2009: Number of Ownership- Name shares share (%) BANK OF NEW YORK MELLON S/A 21,281, % JPMORGAN CHASE BANK 16,812, % STATE STREET BANK AND TRUST CO 15,021, % JPMORGAN CHASE BANK 13,828, % FIDELITY FUNDS-EUROPEAN AGGRESSIVE FUND 9,989, % SKAGEN VEKST 8,900, % JPMORGAN CHASE BANK 8,828, % STATE STREET BANK AND TRUST CO. A/C 8,416, % DNB NOR BANK ASA EGENHANDELSKONTO 8,209, % MORGAN STANLEY & CO 8,052, % FIDELITY FUNDS 7,462, % HOLBERG NORGE 7,258, % BANK OF NEW YORK MELLON SA/NV 6,384, % BANK OF NEW YORK MELLON S/A 6,333, % GOLDMAN SACHS & CO 5,925, % BNP PARIBAS SECS SERVICES PARIS 5,599, % FID. FUNDS-EU. BLUE 5,588, % STATE STREET BANK & TRUST CO. A/C 5,537, % CITIBANK N.A. (LONDON) 5,450, % BANK OF NEW YORK MELLON SA/NV 5,205, % 20 largest shareholders 180,085, % Remaining shareholders 345,984, % Total shareholders 526,069, %

44 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 44 NOTE 13 SHARE-BASED PAYMENTS Exercise prices of share options awarded to employees equal the market price of the share at the time of the award. 3.8 million of the remaining options may be exercised with 1/3 each year, first time one year following the award and expire five years following the award. 2.4 million of the remaining options may be exercised provided fulfillment of certain criteria and expire five years following the award. The Group has no legal or constructive obligation to repurchase or settle the options in cash. Remaining share options and weighted average exercise prices are as follows: Average Average exercise price No. of exercise price No. of (NOK per share) options (NOK per share) options January ,654, ,470,211 Granted ,000 Exercised ,767 Lapsed/forfeited , ,167 December ,239, ,654,277 Of the 6.2 million remaining options (2008: 6.7 million), 3.2 million options are exercisable (2008: 2.4 million). No options were exercised during Options exercised during 2008 resulted in 0.9 million shares being issued at an average of NOK The weighted average market price at the time of exercise was NOK per share. There was no associated transaction cost for the Group. Remaining share options have the following expiration dates and average exercise prices: Share options Exercise price remaining at end of year Year of expiration (NOK per share) , ,667 16, ,335 20, ,667 20, , , , , , , , , , , , , , , ,334 33, , , ,667 63, ,500 55, ,350,000 3,500, ,800 65, ,000 8, , , ,000 25,000 Total 6,239,156 6,654,277 No options were awarded during The average fair value of options awarded during 2008, determined using the Black-Scholes optionpricing model, was NOK The significant inputs into the model were share price at the award dates, exercise prices as shown above, standard deviation of expected share price returns of 30%, dividend yield of 0%, estimated option life, and annual risk-free interest rate of 4.5%. As of December 31, 2009, none of the remaining share options are in-the-money.

45 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 45 NOTE 14 CURRENT LIABILITIES Trade payables * 89, ,781 Accrued expense relating to trade payables 10,913 12,362 Total trade payables 100, ,143 Interest-bearing debt, current portion ** 1,103,005 13,965 Income tax payable 2, Employer s contribution tax and other taxes 3,620 10,187 Other payables 25,009 18,350 Provisions 11, Total current liabilities 1,246, ,613 * Trade payables include payables to related parties (KANFA-TEC AS) amounting to 16 (2008: 4) ** As described in further detail in Note 15 and in the Board of Directors Report, the Board of Directors is of the firm opinion that the debt in reality is non-current in nature. However, the accounting regulations require that amounts which formally could be held to be mandatorily repayable as at the balance sheet date be classified as current irrespective of whether such repayment was required by the lenders or the basis therefore has subsequently been eliminated. Accordingly, relevant liabilities have been classified as current in the financial statements as per December 31, However, as all necessary actions have been resolved by the date of this financial report, the debt will be classified back to non-current for future reporting periods. NOTE 15 INTEREST-BEARING DEBT Reference is made to Note 2.15 for description of accounting principles applied for interest-bearing debt. As described in further detail in the Board of Director s report, while the Board of Directors is of the firm opinion that the debt in reality is non-current in nature, the accounting regulations require that amounts which formally could be held to be mandatorily repayable as at the balance sheet date be classified as current irrespective of whether such repayment was required by the lenders or the basis therefore has subsequently been eliminated. Accordingly, relevant liabilities have been classified as current in the financial statements as per December 31, However, as all necessary actions have been resolved by the date of this financial report, the debt will be classified back to non-current for future reporting periods. Nominal Amortized Fair Nominal Amortized Fair value value value value value value Bank debt , , ,505 Vendor credit 51,890 51,890 51, Convertible bond 48,000 33,978 52, Bond , , ,777 Value of embedded call options ,060-17,507-17,507 Interest-bearing debt, non current 99,890 85, , , , ,775 Bank debt 357, , ,375 9,495 9,115 9,495 Vendor credit 25,945 25,945 25, Bond 761, , ,844 5,000 4,850 2,700 Value of embedded call options -35,891-4,214-4, Interest-bearing debt, current 1,109,134 1,103,005 1,006,950 14,495 13,965 12,195 Total interest-bearing debt 1,209,024 1,188,873 1,111, , , ,970

46 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 46 Repayment schedule based on classification as per December 31, 2009: Nominal 2015 and value onwards Bond loan (USD 140 million) -132, , Bond loan (USD 270 million) -270, , Bond loan (NOK 870 million) -150, , Bond loan (NOK million) -173, , Convertible bond (USD 48 million) * -48, , Bank debt (USD 150 million) -150, , Bank debt (USD 250 million) -207, , Vendor credit -77,835-25,945-51, Total nominal value -1,209,024-1,109,134-51, , Estimated interest payments ** -10,507-8,556-7,200-3, * Convertible bond repayment may be settled by issue of shares ** Based on LIBOR and NIBOR spot rates at December 31, 2009 Repayment schedule based on current status: Nominal 2015 and value onwards Bond loan (USD 140 million) -132,100-7, , Bond loan (USD 270 million) -270,000-20,000-22,500-25, , Bond loan (NOK 870 million) -150,605-22,504-22, , Bond loan (NOK million) -173, , Convertible bond (USD 48 million) * -48, , Bank debt (USD 105 million) ** -105,000-2,758-2,212-2,212-12,642-12,642-72,534 Bond loan (USD 45 million) ** -45,000-1, ,922 0 Bank debt (USD 250 million) -207,375-6,920-27,957-29,714-31,943-34,339-76,502 Vendor credit -77,835-25,945-51, Total nominal value -1,209,024-86, , , ,085-88, ,036 Estimated interest payments *** -76,354-70,263-51,226-22,330-11,600-11,800 * Convertible bond repayment may be settled by issue of shares ** By contractual arrangements agreed in March 2010, the bank facility relating to FPSO Sevan Voyageur was amended to reflect and permit current progress plan for the project, including an option to adjust installment payments until a new employment contract has been secured within 24 months- following expiry of the current contract. Under the arrangements, the USD 150 million bank facility was reduced to USD 105 million, and a new USD 45 million secured bond with a fixed coupon of 11% p.a. was issued. *** Based on LIBOR and NIBOR spot rates at December 31, 2009 Interest-bearing debt is nominated in the following currencies (nominal values): Bank debt, USD nominated 357, ,000 Vendor credit, USD nominated 77,835 0 Convertible bond, USD nominated 48,000 0 Bond, USD nominated 402, ,000 Bond, NOK nominated 323, ,724 Total interest-bearing debt 1,209, ,724 Fair value of bank loans is estimated by discounting the contractual cash flows at a rate reflecting the underlying risk. Fair value of bond loans is based on market rates of the bonds at balance sheet date. The Group is exposed to changes in interest rates for a NOK 870 million bond loan (3-month Nibor + margin), a NOK 1,000 million bond loan (6-month Nibor + margin), a USD 270 million bond loan (6-month Libor + margin) and bank debt for a total nominal amount of USD million (3-month Libor + margin). The Group is exposed to fair value interest rate risk for a USD 140 million bond loan, a USD 48 million convertible bond loan and a USD 77.8 million vendor credit at fixed interest rates.

47 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 47 Effective interest rates at balance sheet date: NOK USD NOK USD Bank debt (FPSO Sevan Voyageur) 8.06% 4.60% Bank debt (Sevan Driller) 9.07% 5.29% Vendor credit 4,50% Convertible bond * 25.55% Bond (NOK 1,000 million) ** 9.77% 9.75% Bond (USD 140 million) 9.68% 9.68% Bond (NOK 870 million) 10.97% 10.55% Bond (USD 270 million) ** 6.92% 6.54% * Effective from April 22, 2009 ** Effect of interest-rate swap is included in the calculation The Group has the following undrawn debt facilities: Floating rate - Expiring within one year 46,087 94,000 - Expiring beyond one year 0 0 Fixed rate - Expiring within one year Expiring beyond one year 80,000 0 Total undrawn debt facilities 126,087 94,000 * Undrawn debt facilities are converted into USD using prevailing exchange rates at balance sheet date Convertible bond In April, May and June 2009 the Company issued convertible bonds in aggregate nominal value of USD 48 million. The convertible bonds have a term of four years and a fixed coupon of 15% p.a. of parity value to conversion price. The interest may, as Sevan Marine s option, be paid in cash or by issuance of additional bonds. The bondholders may exercise a put option in April 2011 for a repayment at par plus accrued interest. The bonds are convertible at a rate of the NOK equivalent of USD 0.97 per share. The Company may require the bonds to be converted if the closing price of the Company s shares for 20 trading days within a period of 30 trading days equals or exceeds 200% the conversion price. The values of the liability component and the equity conversion component were determined at issuance of the bond. Fair value of the liability component at issue date, classified as interest-bearing debt, was calculated using a market interest rate for an equivalent non-convertible bond. The market interest rate used was based on third party valuations. The residual amount, representing the value of the equity conversion option, classified as shareholders equity in other equity net of income taxes. Convertible bond recognized in the balance sheet is calculated as follows: Face value of convertible bond 48,000 0 Issue cost -1,476 0 Equity component -14,058 0 Liability component on initial recognition 32,466 0 Financial expense 6,312 0 Coupon interest incurred -4,800 0 Liability component at December 31 33,978 0 Fair value of the liability component of the convertible bond amounted to USD 52.3 million at balance sheet date. Fair value is calculated using cash flows discounted at an assumed marked interest rate for an equivalent non-convertible bond. The assumed market interest rate is based on third party valuations.

48 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 48 Covenants In addition to the bond loans issued by Sevan Marine as more particularly described in Note 20 to the Company s financial statement, its wholly-owned subsidiaries Sevan 300 Pte Ltd and Sevan Drilling Pte Ltd have taken up bank loans of USD 150 million (as at reporting date, subsequently reduced to USD 105 million) and USD 250 million, respectively. Such bank loans have been structured on a project finance basis, partly guaranteed by Sevan Marine. In addition to extensive security arrangements, the agreements reflect that the borrowers are single purpose companies with resulting limitations and obligations as regards actions and operations. Accordingly, neither borrower may (i) cease to carry on its business, (ii) make disposals, sales or restructurings which may adversely affect its ability to perform its obligations under the relevant agreement, (iii) dispose over assets granted as security in favor of the lenders to the detriment of the interests of such lenders, (iv) enter into or amend contract except as approved by the lenders, (v) take up or extend further loans, or (v) otherwise enter into arrangements which may adversely affect its ability to fulfill its obligation towards the lenders, including by way of making payments or distributions except as permitted by the banks. Obligations pertaining to ownership, insurance, operations and maintenance of FPSO Sevan Voyageur and Sevan Driller, respectively are provided for in the relevant agreements. The Sevan Driller facility requires a Debt Service Coverage Ratio of no less than 1.1. Sevan Marine must remain the sole shareholder. The Sevan Driller facility contained milestone requirements as to commencement date under employment contract which were not complied with at year end. As described in further detail in Note 30, such requirements have subsequently been adjusted. The wholly-owned subsidiary Sevan Drilling AS has issued a bond loan, which is basically subject to the same main covenants referred to in Note 20 to Sevan Marine ASA s financial statement, provided, however, that dividend distributions etc is subject to equity to total assets (as defined therein) exceeding :Preparing for offloading from FPSO Sevan Piranema

49 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 49 NOTE 16 DEFERRED INCOME TAX Deferred income tax assets and liabilities are offset when a legally enforceable right to offset current tax assets against current tax liabilities exists. Offsetting amounts are as follows: Deferred tax assets - Deferred tax asset to be recovered after more than 12 months 141,327 95,112 - Deferred tax asset to be recovered within 12 months Total deferred tax assets 141,738 95,361 Deferred tax liabilities - Deferred tax liability to be recovered after more than 12 months -35,216-30,780 Total deferred tax liabilities -35,216-30,780 Net deferred tax assets/(liabilities) - Deferred tax asset to be recovered after more than 12 months 106,111 64,332 - Deferred tax asset to be recovered within 12 months Net deferred tax assets/(liabilities) 106,522 64,581 Gross movement on the deferred income tax account: Book value January 1 64,581 55,328 Exchange differences Income statement charge 38,904 7,140 Tax charged to equity 2,163 2,449 Book value December ,522 64,581 Specification of deferred tax assets/deferred tax liabilities: Unrealized currency gain/(loss) -12,315 0 Convertible bond -3,958 0 Fixed assets -18,401-29,539 Establishment fee bond loans ,241 Total deferred tax liabilities -35,216-30,780 Pension liabilities Accounting provisions Losses carry forward 141,063 94,970 Losses carry forward relating to Sevan Marine do Brasil Ltda 7,426 5,280 Valuation allowance -7,426-5,280 Total deferred tax assets 141,738 95,361 The Group did not recognize deferred income tax assets of 7,426 (2008: 5,280) in respect of losses in Sevan Marine do Brasil Ltda. Group entities incorporated in Singapore have been accepted under the local tax exemption regime. As a consequence, no deferred tax asset resulting from losses carried forward from entities incorporated in Singapore are recognized in the financial statements. Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the tax benefit through the future taxable profits is probable. At balance sheet date, the Group has entered into a total of 6 contracts for chartering of units and one license contract that will generate taxable profits in the future, against which the deferred tax assets may be offset.

50 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 50 NOTE 17 RETIREMENT BENEFIT OBLIGATIONS Companies in the Group operate both defined benefit and defined contribution plans. Defined benefit plan: Amounts recognized in the balance sheet are determined as follows: Present value of funded obligations 5,559 2,170 Fair value of plan assets -3,542-1,273 Present value of unfunded obligations 2, Unrecognized actuarial losses Employer s contribution tax relating to pension liabilities Liability in the balance sheet 1, Movements in the liability recognized in the balance sheet: January Exchange differences Implementation actuarial calculation group company Expense charged to the income statement 1,391 1,082 Contributions paid, including employer s contribution tax ,103 December 31 1, Principal actuarial assumptions: Discount rate 4.40% 4.30% Expected return on plan assets 5.60% 6.30% Future salary increase 4.25% 4.50% Expected G-regulation 4.00% 4.25% Future pension increases 2.10% 2.75% Future turnover 10.00% 10.00% Employer s contribution tax 14.10% 14.10% Actual return on pension assets for 2009 is not yet known. Actual return on pension assets for 2008 was 0.29%. The actuarial calculations for the Company s defined benefit plans were carried out by an independent actuary. Calculated pension obligation is based on mortality table K2005 and disability table K1963 adjusted for observed developments. Average life expectancy for a person retiring at 67 years of age: Male Female

51 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 51 Amounts recognized in the income statement are as follows: Net present value of current year s pension earned 1, Interest cost on pension liabilities Expected return on pension assets Estimate changes Implementation actuarial calculation group company Administration cost Pension cost, defined benefit plan 1, Employer s contribution tax relating to implementation 31 0 Employer s contribution tax relating to pension liabilities Pension cost, including employer s contribution tax 1,645 1,082 No. of employees included Expected pension cost for 2010 for the defined benefit plan is estimated to 1,151. Major categories of plan assets as a percentage of fair value of total plan assets: Equities 7% 6% Property 21% 23% Fixed bonds 45% 48% Liquid bonds 26% 22% Other 1% 1% Total plan assets 100% 100% Defined contribution plan: Pension costs, defined contribution plan 1, Employer s contribution tax relating to contributions paid Pension cost, including employer s contribution tax 1,423 1,101 No. of employees included Total pension cost: Pension cost, defined benefit plan 1, Pension cost, defined contribution plan 1, Total pension cost 2,705 1,879 The Group s pension schemes satisfy the requirements in the Norwegian legislation regarding mandatory occupational pension.

52 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 52 NOTE 18 PROVISIONS Decommissioning Warranties Bonus cost Total January 1, Currency translation adjustments Arising during the year ,260 11,260 Used during year December 31, ,260 11,818 Decommissioning Warranties Bonus cost Total January 1, , ,059 Currency translation adjustments Arising during the year Used during year 0-3, ,468 December 31, Analysis of total provisions: Current 11, Total provisions 11, Warranties Provisions for warranties are based on historical experience. Decommissioning cost The provision for decommissioning cost relates to estimated cost of decommissioning FPSO Sevan Voyageur from the Shelley field. Future day rates for leasing of supply vessels is a major variable to this estimate. Day rates for supply vessels are spot based and highly volatile by nature. The day rates applied in estimating the decommissioning cost are based on internal competence as well as third party expert opinion. NOTE 19 CONSTRUCTION CONTRACTS Contract revenue 27,725 48,393 Contract cost -20,811-39,011 Net profit on construction contracts 6,914 9,382 Recognized, not yet invoiced for ongoing projects Incurred cost on ongoing projects included in current liabilities 1,025 2,950 Activities defined as construction contracts mainly relate to projects within the Topside and Process Technology segment, as well as to Joint Industry Projects, feasibility studies and FEEDS; hereunder the FEEDs relating to the Goliat project. Under the study contracts, the Company is able to recover certain expenses relating to further development and testing of the Sevan technology. Contract revenue and contract cost do not include deliveries within the Group.

53 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 53 NOTE 20 EMPLOYEE BENEFIT EXPENSE Wages and salaries 52,518 46,080 Employer s contribution tax 7,554 6,898 Expensed portion of value of share options 1,170 2,858 Employer s contribution tax relating to share options 0-3,265 Pension cost 2,705 1,879 Other employee benefit expense 3,896 3,734 Total employee benefit expense 67,842 58,184 Allocated to construction in progress -11,838-25,670 Net employee benefit expense 56,004 32,514 No. of man-years Remuneration of Senior Management, as paid: 2009 Retirement Other Salaries benefits benefits Jan Erik Tveteraas CEO Oskar Mykland * CFO Birte Norheim Vice President Finance Fredrik Major Vice President Business Development/R&D Helle Hundseid Vice President Projects Erling Andreas Ronglan Vice President Operations Hanna Moland Vice President HR & Administration Morten Martens Breivik Vice President QHSE Jon Helge Willmann ** Vice President Drilling Gerson Peccioli President Sevan Brasil Aslak Hjelde Managing Director KANFA AS Total remuneration paid 3, Remuneration of Senior Management, as paid: 2008 Retirement Other Salaries benefits benefits Jan Erik Tveteraas CEO Oskar Mykland * CFO Birte Norheim Vice President Finance Fredrik Major Vice President Business Development/R&D Helle Hundseid Vice President Projects Erling Andreas Ronglan Vice President Operations Hanna Moland Vice President HR & Administration Morten Martens Breivik Vice President QHSE Jon Helge Willmann ** Vice President Drilling Gerson Peccioli President Sevan Brasil Aslak Hjelde Managing Director KANFA AS Total remuneration paid 3, * First day of employment was January 1, 2009 ** First day of employment was August 1, 2009 Salaries and other benefits included above are based on actual period of employment and translated at average exchange rates.

54 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 54 Senior Management is included in the Group s collective retirement benefit plans. During 2009, the Chairman of the Board of Directors and the CEO received bonus of USD 173 each. As at end of 2009, an advance salary payment of USD 173 was owed by the Company s CEO. At balance sheet date, this was classified as a loan. Since acceptable security was provided, but not registered at balance sheet date, the loan was not in compliance with 8-7 of the Norwegian Public Limited Liability Act. By the date of these financial statements, such compliance has been achieved. No other loans were granted to Senior Management or any member of the Board of Directors in 2009 or The CEO will receive 6-24 months salary upon termination of employment, dependant on fulfillment of certain conditions. In addition, Senior Management has been awarded the following stock options: Remaining no. of options at balance No. of options Year of award Strike/NOK sheet date Birte Norheim 50, ,668 Birte Norheim 50, ,000 Fredrik Major 50, ,667 Fredrik Major 300, * ,000 Helle Hundseid 25, ,668 Helle Hundseid 300, * ,000 Erling Andreas Ronglan 50, ,667 Erling Andreas Ronglan 300, * ,000 Hanna Moland 50, ,667 Hanna Moland 50, ,000 Morten Martens Breivik 10, ,000 Gerson Peccioli 50, ,000 Gerson Peccioli 300, * ,000 Aslak Hjelde 50, ,000 Total options/average exercise price 1,635, ,493,337 * Can be exercised provided the fulfillment of certain criteria Remuneration of the Board of Directors, as paid: Arne Smedal, Chairman Vibeke Strømme, Deputy Chairman** Kåre Syvertsen Hilde Drønen Stephan M. Zeppelin Kristin Urdahl, Employee representative * Kjetil Soma, Employee representative * Jorunn Haugen, Employee representative * 0 0 Jørgen Skotnes, Employee representative * 0 0 Total remuneration paid Remuneration of the Board of Directors is paid the year following board duties rendered. Salaries and other benefits paid to Directors as employees: Retirement Other Retirement Other Salaries benefits benefits Salaries benefits benefits Arne Smedal, Chairman Kåre Syvertsen Jorunn Haugen * Jørgen Skotnes * Kristin Urdahl * Kjetil Soma * * On May 25, 2009, Jorunn Haugen and Jørgen Skotnes entered the Board of Directors and replaced Kristin Urdahl and Kjetil Soma as Employee representatives ** On December 18, 2009, Vibeke Strømme resigned from the Board of Directors

55 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 55 Shares and options owned or controlled by the Board of Directors and Senior Management As of December 31, 2009, the following Board members and Senior Management owned or controlled shares in the Company: Board of Directors Arne Smedal, Chairman of the Board, owns 3,698,703 shares directly, 3,060,036 shares through his wholly owned company Aasen AS, and 203,261 shares through Elvheim AS, where he holds a controlling ownership interest. Kåre Syvertsen, Board member and Group Manager Technology, owns 428,704 shares directly, and 2,877,296 shares through his wholly owned company Hallingen AS. Hilde Drønen, Board member, owns 2,800 shares directly and 44,200 shares through her wholly owned company Djupedalen AS. Stephan M. Zeppelin, Board member, owns 55,000 shares. Jørgen Skotnes, Employee representative on the Board and Senior Structural Engineer owns 5,100 shares and holds 10,000 share options with a strike price of NOK Senior Management Jan Erik Tveteraas, CEO, owns 57,556 shares directly and 2,993,444 shares through his wholly owned company Supernova AS. Oskar Mykland, CFO, owns 100,000 shares. Birte Norheim, Vice President Finance, owns 25,000 shares and holds 16,668 options with a strike price of NOK and 50,000 share options with a strike price of NOK Fredrik Major, Vice President Business Development/R&D, owns 47,332 shares and holds 16,667 share options with a strike price of NOK and 300,000 share options with a strike price of NOK Helle Hundseid, Vice President Projects, owns 30,000 shares and holds 16,668 options with a strike price of NOK and 300,000 share options with a strike price of NOK Erling Andreas Ronglan, Vice President Operations, owns 30,000 shares and holds 16,667 share options with a strike price of NOK and 300,000 share options with a strike price of Hanna Moland, Vice President HR and Administration, owns 13,667 shares and holds 16,667 share options with a strike price of NOK and 50,000 share options with a strike price of NOK Morten Martens Breivik, Vice President QHSE, owns 2,000 shares and holds 10,000 share options with a strike price of NOK Gerson Peccioli, President Sevan Brasil, holds 50,000 share options with a strike price of NOK and share options with a strike price of NOK Aslak Hjelde, Managing Director KANFA AS, owns 228,246 shares directly and 68,077 shares through his wholly owned company Fekja Invest AS. Mr. Hjelde also holds 50,000 share options with a strike price of NOK Reference is made to the Statement regarding establishment of salary and other benefits for Senior Management for further details of remuneration of Senior Management.

56 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 56 NOTE 21 FINANCIAL INCOME AND FINANCIAL EXPENSE Currency gains and losses relating to operational activities are classified as operational expense and are not included in the tables below. Net project specific borrowing cost incurred for construction of any qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing cost is expensed as incurred. Borrowing cost of 34,366 (2008: 43,410) arising from financing specifically for the construction of the Sevan Capital Assets was capitalized during the year and is included in Additions in property plant and equipment. The capitalization represents the net borrowing cost for financing of each project during the construction period. Reference is made to Note 6 for further details on construction in progress. Financial income: Interest income 1,633 2,852 Amortization of embedded call options 4,499 2,984 Currency gain 64, ,748 Interest swap 2,660 8,300 Other financial income 246 4,726 Total financial income 73, ,610 Financial expense: Interest expense 57,072 30,318 Currency loss 100,805 64,854 Value of call options embedded in bonds 7,311 8,612 Interest swap 0 14,562 Amortization of fee relating to interest-bearing debt 5,605 2,103 Other financial expense 674 2,032 Total financial expense 171, ,481 NOTE 22 INCOME TAX EXPENSE Current tax -1,973-1,948 Deferred tax 38,904 7,140 Net tax income/(expense) 36,931 5,192 Tax on the Group s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated Group as follows: Profit before tax -180, ,116 Tax calculated at domestic tax rates applicable to profits in each respective country 38,033 21,356 Income not subject to tax Currency transalation adjustment 15,637-11,648 Expense not deductible due to tax regime in Singapore -9,171-2,568 Tax losses for which no deferred income tax asset was recognized -3,623 0 Tax income/(expense) 41,029 7,140 Gross revenue tax -1,027-1,105 Tax charge relating to ,021 0 Tax permanent establishment Withholding tax -1, Net tax income/(expense) 36,931 5,192 The weighted average applicable tax rate is 21.1% (2008: 18.9%).

57 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 57 NOTE 23 EARNINGS PER SHARE Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares. Profit attributable to equity holders of the Company (1,000 USD) -142,793-94,482 Weighted average number of ordinary shares on issue (thousands) 455, ,438 Basic earnings per share (USD per share) Diluted earnings per share Due to net losses for the periods reported, and according to the principle of no negative dilution (positive effects on earnings per share resulting from an increase in number of shares issued, are not to be included), diluted earnings per share are calculated as earnings per share for these periods. Profit attributable to equity holders of the Company (1,000 USD) -142,793-94,482 Profit used to determine diluted earnings per share (1,000 USD) -142,793-94,482 Weighted average number of ordinary shares on issue (thousands) 455, ,438 Total remaining share options at balance date (thousands) 6,239 6,654 Weighted average number of shares for diluted earnings per share (thousands) 455, ,919 Diluted earnings per share (USD per share) NOTE 24 DIVIDEND PER SHARE No dividend was paid in 2009 or No dividend is to be proposed at the Annual General Meeting on May 12, NOTE 25 CASH GENERATED FROM OPERATIONS Profit/(loss) before tax -180, ,116 Adjustments for: - Depreciation 62,236 29,358 - Amortisation of intangible assets 2,461 2,213 - Interest expense 57,072 30,318 - Unrealized forex loss/(gain) relating to NOK nominated bonds 56,991-78,869 - Other financial assets at fair value through profit and loss -14,937 7,314 - Expensed portion of value of options at the time of the award 1,170 2,858 Changes in working capital: - Inventory -9,219-5,828 - Trade and other receivables -18,072-7,517 - Trade payables -16,510-16,677 - Other current liabilities, provisions and charges 26,921 30,097 Cash generated from operations -32, ,849

58 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 58 NOTE 26 CONTINGENCIES The Group has contingent liabilities in respect of bank and other guarantees as well as other matters arisen in the ordinary course of business. The Group has made a provision for guarantees amounting to 558 at balance sheet date (2008: 697) relating to external deliveries from KANFA AS. The Group has entered into the following security arrangements: Security arrangements relating to financing: FPSO Sevan Piranema: The Company has issued a bond loan, secured by 1st priority securities pursuant to the terms of the USD 270 million bond loan agreement described in Note 15. FPSO Sevan Hummingbird: The Company has issued a bond loan, secured by 1st priority securities pursuant to the terms of the USD 140 million bond loan agreement described in Note 15. FPSO Sevan Voyageur: The Company has issued a bond loan, secured by 2nd priority securities pursuant to the terms of the NOK 870 million bond loan agreement and provided certain securities on 1st priority in accordance with terms of the USD 150 million bank financing facility to Sevan 300 Pte Ltd. described in Note 15. FPSO Sevan 300 no. 4 and 5: The Company has issued a convertible bond, secured by 1st priority securities pursuant to the terms of the USD 48 million convertible bond loan agreement described in Note 15. Sevan Driller: The Company has provided certain securities on 1st priority in accordance with terms of the USD 250/400 million bank financing facility to Sevan Drilling Pte Ltd and provided a guarantee on 2nd priority in accordance with terms of the NOK 1,000 million bond loan agreement to Sevan Drilling AS as described in Note 15. In addition, the Company has provided a guarantee in accordance with terms of a vendor credit facility of USD 78 million as described in Note 15. Security arrangements relating to equipment supplies and services: Sevan Driller: The Company has issued guarantees for the subsidiary s correct fulfillment of its contractual commitments as purchaser towards vendors. contracts with vendors are not realized is estimated at approximately USD 4 million. KANFA AS: The Company has issued a performance guarantee for KANFA AS delivery of a process plant and compression packages to a client. KANFA Aragon AS: The Company has issued a performance guarantee for KANFA Aragon AS delivery of a processing facility for LNG to a client. Security arrangements relating to operations: FPSO Sevan Piranema: The Company has granted a performance guarantee to the technical manager. FPSO Sevan Hummingbird: The Company has guaranteed for correct fulfillment of the contract with the end-charterer and granted a performance guarantee to the technical manager. FPSO Sevan Voyageur: The Company has guaranteed for correct fulfillment of the contract with the end-charterer and granted a performance guarantee to the technical manager. Sevan Driller II: The Company has guaranteed for correct fulfillment of the contract with the end-charterer. Sevan Driller III: The Company has guaranteed for correct fulfillment of the contract with the end-charterer. As of balance sheet date, it is uncertain whether the third drilling charter contract will be pursued. Discussions with the client are ongoing. The maximum exposure for the Group towards the end-charterer is estimated at approximately USD 10 million in a scenario where the contract is not pursued. Balance sheet contingencies: Sevan Driller III: If the third drilling charter contract is not pursued, balance sheet values of up to USD 6.0 million may require expensing. If the third drilling unit is not realized, additional balance sheet values of up to USD 2.4 million may require expensing. Sevan Driller II: The Company has issued guarantees for the subsidiary s correct fulfillment of its contractual commitments as purchaser towards vendors. Sevan Driller III: The Company has issued guarantees for the subsidiary s correct fulfillment of its contractual commitments as purchaser towards vendors. As of balance sheet date it is uncertain whether the third drilling unit will be realized. The maximum exposure for the Group towards vendors for cancellation fees in a scenario where the

59 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 59 NOTE 27 COMMITMENTS Capital expenditure contracted for at balance sheet date but not yet incurred are as follows: Property, plant and equipment 218, ,400 Intangible assets 0 0 Total capital commitments 218, ,400 Of the total capital commitments of USD 218,258, USD 151,562 fall due in The remaining capital commitments fall due in 2011 or later. Capital commitments include unconditional commitments that the Group has entered into by balance sheet date which are not yet reflected in the financial statements. NOTE 28 RELATED PARTY TRANSACTIONS The Group is widely held (reference is made to Note 12). Related-party transactions are made on an arm s-length basis, and include the following: Sales of goods and services to associates KANFA-TEC AS Purchases from associates KANFA-TEC AS 95 1,174 Year-end balances arising from sales/purchases of goods/services: Receivable from associate parties KANFA-TEC AS 3 5 Payable to associate parties KANFA-TEC AS 16 4 NOTE 29 OPERATING LEASES Operating leases: Group company as lessee The Group has entered into several lease- and rental-agreements for rental of offices, software, ASP solutions, and cars. The agreements are entered into on ordinary operational terms. The Group s lease expense for rental of offices, software, ASP solutions and cars amounted to 2,658 for the year (2008: 3,081). At balance sheet date, the Group has entered into lease- and rental-obligations as follows: Lease- and rental obligations No later than 1 year 2, Between 1-5 years 8,518 6,556 Later than 5 years 25,057 18,025 Total lease- and rental-obligations 35,729 25,336

60 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 60 Operating leases-group company is lessor The Group charters out units under various agreements with fixed terms that end at different times during None of the arrangements include any form of option to buy the units following end of contractual period. Future minimum lease payments receivable under charter contracts: No later than 1 year 249, ,396 Between 1-5 years 2,217,854 2,288,337 Later than 5 years 555, ,977 Total minimum future charter revenues 3,022,519 3,307,710 The overview includes charter revenue for the fixed lease periods for the six units on charter-hire. License revenue and potential charter revenue for option periods is not included. Charter revenue relating to FPSO Sevan Voyageur consists of forecasted revenue until decommissioning of the Shelley field. At balance sheet date, book value of assets generating charter revenue was USD 1,010 million (2008: USD 1,035 million). Order back-log for charter revenue: Fixed term Option periods Unit Client (years) (years) Commencement FPSO Sevan Piranema Petrobras S.A. 11 6x1 Q FPSO Sevan Hummingbird Centrica Energy Upstream 2.5 4x x1 + 2x1 Q FPSO Sevan Voyageur Premier Oil and Gas Services Ltd Life of field N/A Q Sevan Driller Petrobras S.A. 6 N/A EQ Sevan Driller II Petrobras S.A. 6 N/A EQ Sevan Driller III Oil and Natural Gas Corporation Ltd (ONGC) 3 N/A TBD NOTE 30 EVENTS AFTER BALANCE SHEET DATE In January 2010, Eni Norge AS and Sevan Marine ASA entered into a Project Service Contract for the Goliat FPSO project. Under the contract, Sevan Marine will provide project and engineering management and early operation preparation services. The services will include personnel to be integrated as a part of the Eni project follow up organization. Sevan Marine will also execute and assist Eni in several specific key engineering and construction activities related to proprietary technology areas for the Sevan Marine FPSO concept. In January 2010, Sevan Marine ASA was awarded a pre-feed/feed study contract by Det norske oljeselskap ASA for the potential application of a Sevan FPSO for the Froy field development in the Norwegian North Sea. In February 2010, Sevan Marine ASA was awarded a study by Lundin Norway AS of the potential application of a Sevan production unit for the Luno field development in the Norwegian North Sea. By contractual arrangements agreed in March 2010, the bank facilities relating to FPSO Sevan Voyageur and Sevan Driller were amended to reflect and permit current progress plans for the respective projects. Also, Sevan secured required flexibility by way of option to adjust installment payments until a new employment contract for FPSO Sevan Voyageur has been secured within 24 months- following expiry of the current contract. Under the arrangements, the USD 150 million bank facility was reduced to USD 105 million, and a new USD 45 million secured bond was issued yielding 11% per annum. At the date of these financial statement the Group is in compliance with all covenants of its credit facilities.

61 Sevan Marine Group Notes to the Consolidated Financial Statements 09 SEVAN MARINE 61 NOTE 31 OTHER OPERATING EXPENSE Other operating expense Pre-operational expense 12,701 46,871 Cost of hired personell 962 1,580 Office cost (IT, rental etc) 6,348 7,386 Consultancy (audit, tax and legal) 4,221 8,149 Marketing 991 1,954 Other 8,297 10,300 Total other operating expense 33,520 76,240 NOTE 32 INVENTORY Inventory consists of spare parts for FPSO Sevan Piranema and Sevan Driller. Inventory for FPSO Sevan Hummingbird and FPSO Sevan Voyageur is owned and maintaned by the technical manager. The cost of usage of inventory is classified as operating expense in the income statement. Write-down of inventories during the year, resulted in an increase in operating expense of USD 1,103 (2008: 103). Inventory Materials and spare parts for use during operation 21,306 12,087 NOTE 33 OTHER NON-CURRENT ASSETS Mobilization expense 26,832 11,534 Other 4,969 1,711 Total other non-current assets 31,801 13,245 Mobilization expense includes net capitalized mobilization expense for FPSO Sevan Piranema and mobilization expense incurred for Sevan Driller by balance sheet date. Upon acceptance of Sevan Driller by the client, a mobilization revenue becomes payable and will be netted against the capitalized mobilization expense. Net capitalized mobilization expense is amortized over the fixed contract period.

62 09 62 SEVAN MARINE :FPSO Sevan Voyageur operating at the Shelley field

63 SEVAN MARINE ASA BALANCE SHEET 09 SEVAN MARINE 63 Figures in USD 1,000 Note ASSETS Non-current assets Tangible assets 3 1,288 1,629 Intangible assets 3 6,859 9,733 Investment in subsidiaries 4 1,054, ,717 Deferred tax assets 2 30,457 2,968 Receivables from companies within the Group 4 440,291 0 Other non-current assets Total non-current assets 1,533, ,184 Current assets Trade and other receivables 6,788 6,513 Receivables from companies within the Group 4 381, ,338 Inventory Cash and cash equivalents 6 55,401 34,242 Total current assets 443, ,196 Total assets 1,977,438 1,517,380 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 1,8 16,633 6,187 Share premium reserve 1 954, ,401 Other equity 1 340, ,186 Total equity 1,310, ,774 LIABILITIES Non-current liabilities Interest-bearing debt * 20 33, ,091 Derivative financial instruments ,420 Retirement benefit obligations Total non-current liabilities 34, ,910 Current liabilities Interest-bearing debt * ,102 4,850 Trade payables 1,936 4,944 Payables to companies within the Group 4 56,843 32,977 Other current liabilities 16,704 14,925 Total current liabilities 631,585 57,696 Total liabilities 666, ,606 Total equity and liabilities 1,977,438 1,517,380 * As described in further detail in Note 15 and in the Board of Directors Report, the Board of Directors is of the firm opinion that the debt in reality is non-current in nature. However, the accounting regulations require that amounts which formally could be held to be mandatorily repayable as at the balance sheet date be classified as current irrespective of whether such repayment was required by the lenders or the basis therefore has subsequently been eliminated. Accordingly, relevant liabilities have been classified as current in the financial statements as per December 31, However, as all necessary actions have been resolved by the date of this financial report, the debt will be classified back to non-current for future reporting periods.

64 SEVAN MARINE ASA INCOME STATEMENT 09 SEVAN MARINE 64 Figures in USD 1,000 Note Operating income 16,14 53,811 52,760 Operating expense 12,218 18,879 Depreciation, amortization and impairment 3 3,944 3,878 Employee benefit expense 9 31,398 28,789 Other operating expense 11 9,838 14,951 Net operational currency gain/(loss) 4, Total operating expense 61,475 65,549 Operating profit/(loss) -7,664-12,789 Financial income 22 75, ,708 Financial expense ,379-95,413 Net financial profit/(loss) -36,033 11,295 Profit/(loss) before tax -43,697-1,494 Tax income/(expense) 2 23,611-11,980 Annual net profit/(loss) -20,085-13,474 Attributable to: Equity holders of the Company -20,085-13,474 Earnings per share for profit/(loss) attributable to the equity holders of the Company during the year (USD per share): - Basic Diluted Arendal, April 30, 2010 The Board of Directors of Sevan Marine ASA Arne Smedal Kåre Syvertsen Hilde Drønen Chairman Board member Board member Stephan M. Zeppelin Jorunn Haugen Jørgen Skotnes Jan Erik Tveteraas Board member Employee representative Emloyee representative CEO

65 SEVAN MARINE ASA CASH FLOW STATEMENT 09 SEVAN MARINE 65 Figures in USD 1,000 Note Cash flows from operating activities Profit/(loss) before tax -43,697-1,494 Adjustment for: Depreciation/amortization 3 3,944 3,878 Write-down of investment in subsidiaries 3 4,089 0 Interest expense 22 48,624 53,750 Unrealized forex loss/(gain) relating to NOK nominated bonds 26,158-37,204 Expensed portion of value of share options ,561 Change in working capital: Inventory Receivable and payables relating to companies within the Group 4-201,672-16,985 Trade and other receivable Trade payables -3,008 3,670 Other accruals -6,167 1,675 Cash generated from operations -170,945 9,535 Cash flows from operating activities Cash from operations -170,945 9,535 Tax paid during the period Interest paid -48,798-53,788 Net cash flow from operating activities -220,458-44,945 Cash flows from investment activities Investment in subsidiaries 4-192, ,942 Purchases of intangible assets ,301 Purchases of tangible assets Net cash flow from investment activities -193, ,045 Cash flows from financing activities Net proceeds from share issues 1 396, ,163 Net proceeds from interest-bearing debt 20 46,970 0 Repayment of interest-bearing debt 20-5,000 0 Repurchase of bond loan 20-2,900 0 Net cash flow from financing activities 435, ,163 Net cash flows for the period 21,159-31,827 Cash and cash equivalents at the beginning of the year 6 34,242 66,069 Cash and cash equivalents at the end of the year 55,401 34,242

66 SEVAN MARINE ASA NOTES TO THE FINANCIAL STATEMENTS 09 SEVAN MARINE 66 ACCOUNTING POLICIES Sevan Marine ASA s ( the Company ) financial statements have been prepared in accordance with the Accounting Act and generally accepted accounting principles in Norway. Sevan Marine ASA is the parent company of the Sevan Marine Group ( the Group ). The Company`s functional currency is US dollar (USD). All numbers in the financial statements are in USD 1,000 unless otherwise stated. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to use estimates and assumptions that impact the value of assets and liabilities as well as disclosure notes. Such estimates and assumptions may have significant impact on reported revenue and cost for a specific reporting period. Actual amounts may therefore deviate from the estimates. Contingent losses, which are likely to occur and quantifiable, are expensed when incurred. Principal Rule for Evaluation and Classification of Assets and Liabilities Assets intended for long term ownership or use, are classified as fixed assets. Assets relating to the operating cycle are classified as current assets. Receivables are classified as current assets if they are to be repaid within one year after balance sheet date. Equivalent criteria apply to liabilities. Current assets are valued at the lower of purchase cost and net realizable value. Short-term liabilities are reflected in the balance sheet at nominal value at establishment date. Fixed assets are valued at purchase cost. Fixed assets whose value will decline are depreciated on a straight-line basis over the asset s estimated useful life. Fixed assets are written down to net realizable value if a value reduction occurs that is expected to be permanent. Long-term liabilities are reflected in the balance sheet at nominal value on establishment date. Trade Receivables and Other Receivables Trade receivables and other receivables are reflected in the balance sheet at nominal value less provision for estimated losses. Estimated losses are provided for on the basis of an individual assessment of each debtor. Tangible Fixed Assets Fixed assets are reflected in the balance sheet and depreciated over the asset s expected useful life on a straight-line basis. Direct maintenance of an asset is expensed as incurred. Additions or improvements are added to the asset s cost price and depreciated with the asset. When changes in circumstances indicate that the carrying value of an asset may not be recoverable, an impairment charge is recognized and the asset is written down to recoverable amount (being the highest of net sales value and value in use). Value in use is the net present value of the expected future cash flows generated from the asset. Intangible Assets - Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Company s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investment in associates. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Separately recognized goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Shares in Subsidiaries and Associated Companies In the parent company s accounts, investments in subsidiaries and associated companies are recorded under the cost method. Investments are written down to fair value when a reduction in value is expected to be permanent. Dividend is recognized as income in the year the provision is made in the subsidiary. If the dividend exceed retained earnings, the excess represents repayment of invested capital, and dividend is deducted from the book value of the investment in the balance sheet. Research and Development Cost associated with research activities are expensed as incurred. Qualifying expense associated with development activities are capitalized and depreciated over expected useful life. Cost of man-hours directly attributable to the construction of the Sevan units is capitalized as construction in progress. Cash and Bank Deposits Cash and bank deposits include cash in hand, bank deposits and other short-term highly liquid investments with original maturities of three months or less. Currency Cash and bank deposits, current assets, and short-term liabilities nominated in foreign currencies are converted to exchange rates prevailing on balance sheet date. Realized and unrealized exchange gains and losses on assets and liabilities in foreign currencies are included as financial or operational items in the income statement depending on the characteristics of the underlying asset or liability. Pension Plans The Company operates both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Cost associated with the defined contribution plans are expensed as incurred. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefits plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and

67 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 67 compensation. The pension expense and pension commitments are calculated on a straight-line earning profile basis, based on assumptions relating to discount rates, projected salaries, the amount of benefits from the National Insurance Scheme, future return on pension assets, and actuarial calculations relating to mortality rate, voluntary retirement, etc. Pension funds are valued at net realizable value and deducted from the net pension obligation in the balance sheet. Taxes Deferred income taxes is provided using the liability method on temporary difference at balance sheet date between the tax basis of assets and liabilities and their carrying amounts for financial reporting purpose. Tax-reducing temporary differences and losses carry forward are offset against tax-increasing temporary differences that are reversed in the same time intervals. Taxes consist of taxes payable (taxes on current year taxable income) and change in net deferred taxes. Tax base included in the calculation of deferred income tax is calculated in local currency and translated to USD at currency rates at December 31. Earnings per Share Earnings per share are calculated by dividing net income/loss by the weighted average of number of outstanding shares. Shares issued during the year are weighted in relation to the period they have been outstanding. Share Based Incentive Plans The Company operates a share-based compensation plan. In line with generally accepted accounting principles in Norway, the cost represented by the fair value at grant date is expensed over the vesting period. The fair value at grant date is confirmed by a third party calculation using the Black & Scholes option-pricing model. Cost represented by employer s contribution tax of the excess of fair value of the share relative to the strike prices (intrinsic value) is expensed over the vesting period in line with the changing market price of the stock. Cash Flow Statement The cash flow statement is prepared in accordance with the indirect method. Interest-Bearing Debt Interest-bearing debt is initially recognized at fair value, net of transaction cost incurred and including the value of any embedded call options inherent in bonds. Interest-bearing debt is subsequently stated at amortized cost; any difference between the proceeds (net of transaction cost and embedded value of call options) and the nominal value is recognized in the income statement over the period of the interest-bearing debt using the effective interest method. The value of call options embedded in bond loans are treated as separate financial assets and are initially recognized at fair value and subsequently remeasured at fair value each balance sheet date. Gains and losses on fair value of call options are recognized in the income statement immediately. Interest-bearing debt is presented net of the separated financial asset and is classified as current liabilities unless the Company has an unconditional right to defer settlement for more than 12 months after the balance sheet date. Compound financial instruments issued by the Company comprise convertible bonds that can be converted to share capital at the option of the holder, where the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability that does not have en equity conversion option. The equity component is recognized initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction cost is allocated to the liability and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition except on conversion or expiry. Segment Reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The accounting figures of the Company are consolidated as part of the Corporate segment with exception of revenue and expense relating to the Goliat project which are consolidated as part of the Floating Production segment. Revenue Recognition Revenue comprises the fair value of the consideration receivable for the sale of goods and services in the ordinary course of business. Revenue is shown net of value-added tax and discounts. The Company recognizes revenue when the amount of revenue can be reliably measured and in accordance with the underlying contracts. a) Design fee/license revenue Design fee/license revenue is recognized on an accrual basis in accordance with the underlying contracts. b) Interest income Interest income is recognized on a time-proportion basis using the effective interest method. c) Sales of services Sale of services is recognized in accordance with the underlying contracts under the percentage of completion (POC) method. Under the POC method, revenue is generally recognized based on the services performed to date as percentage of the total services to be performed. Leases Leases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. All lease agreements entered into by the Company by balance sheet date are considered to be operational leases. Inventory Inventory is stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Cost is determined using the average cost method. The cost of finished

68 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 68 goods and work in progress comprises design cost, raw materials, direct labor, other direct cost. Construction Contracts Contract cost is recognized when incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent that contract cost incurred is likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognized over the period of the contract. When it is probable that total contract cost will exceed total contract revenue, the expected loss is recognized as an expense immediately. progress of completion of subcomponents of identified milestone deliverables in each contract up to the balance sheet date as a percentage of total identified contract milestone deliverables. The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which cost incurred plus recognized profits (less recognized losses) exceed progress billings. Progress billings not yet paid by customers and retention are included as trade and other receivables. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed cost incurred plus recognized profits (less recognized losses). The Group uses the percentage of completion method to determine the appropriate amount to recognize in a given period. The stage of completion is estimated, using judgmental assessment, of the NOTE 1 EQUITY Share Share Other Total capital premium equity equity January 1, , , , ,774 Capital increase - June 4, , ,348 Capital increase - July 5, , ,744 Capital increase - August , ,769 Share issue cost 0-21, ,781 Tax effect of share issue costs 0 6, ,099 Expensed portion of value of share options Convertible bond, equity portion ,121 10,121 Annual net profit/(loss) ,085-20,085 December 31, , , ,178 1,310,943 Share Share Other Total capital premium equity equity January 1, , , , ,524 Capital increase - February Capital increase - May 14 1, ,967 Capital increase - June , ,595 Capital increase - August Share issue cost 0-8, ,749 Tax effect of share issue costs 0 2, ,450 Expensed portion of value of share options 0 0 2,561 2,561 Annual net profit/(loss) ,474-13,474 December 31, , , , ,774

69 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 69 NOTE 2 TAXES Profit before tax -43,697-1,494 Permanent differences -18,414-4,350 Permanent currency differences -36,972 18,860 Changes in temporary differences 9,220 38,852 Tax basis -89,862 51,868 Loss to be brought forward 89,862-51,868 Basis for taxes payable 0 0 Taxes payable (PE tax) Withholding tax payable -1, Change in deferred tax assets from income statement 25,327-11,220 Tax income/(expense) 23,611-11,980 Temporary differences: Fixed assets 510 1,729 Goodwill Inventory Pension liabilities Provisions Convertible bond 14,136 0 Call options embedded in bond -21,547-10,982 Establishment fees relating to borrowings 17,803 13,010 Net temporary differences 10,390 3,939 Losses carry forward relating to income statement -56,857 0 Basis for deferred tax assets from the income statement -46,467 3,939 Losses carry forward relating to items posted directly in the balance sheet -62,308-14,538 Basis for deferred tax assets -108,775-10,599 Deferred tax assets 30,457 2,968 Deferred tax assets are recognized at nominal value based on expectations of future taxable profits. Reconciliation between expected tax charge based on the nominal Norwegian statutory tax rate of 28% and actual tax charge: Profit before tax -43,697-1,494 Expected tax charge 12, Tax charge in the income statement 23,611-11,980 Difference -11,376 12,398 Tax effect of expensed portion of value of share options Adjustment from prior years Tax effect of other permanent differences -1, Permanent currency difference 14,545-11,632 Withholding tax -1, Explained difference 11,376-12,398

70 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 70 NOTE 3 TANGIBLE AND INTANGIBLE ASSETS Machinery, fixtures Year ended December 31, 2009 Book value January 1 1,629 Additions 334 Depreciation -675 Book value December 31 1,288 At December 31, 2009 Cost or valuation 3,694 Accumulated depreciation and impairment -2,406 Book value December 31 1,288 Machinery, fixtures Year ended December 31, 2008 Book value January 1 1,582 Additions 802 Depreciation -755 Book value December 31 1,629 At December 31, 2008 Cost or valuation 3,360 Accumulated depreciation and impairment -1,731 Book value December 31 1,629 Economic life 3-5 years Goodwill Software Development Total Year ended December 31, 2009 Book value January 1 4,541 2,947 2,245 9,733 Additions Amortization charge , ,269 Book value December 31 3,568 1,417 1,874 6,859 At December 31, 2009 Cost or valuation 5,635 6,271 2,814 14,720 Accumulated amortization and impairment -2,067-4, ,861 Book value December 31 3,568 1,417 1,874 6,859 Goodwill Software Development Total Year ended December 31, 2008 Book value January 1 7,140 3, ,555 Additions 0 1,200 2,606 3,805 Disposals -1, ,504 Amortization charge -1,094-1, ,123 Book value December 31 4,541 2,947 2,245 9,733 At December 31, 2008 Cost or valuation 5,635 6,083 2,606 14,324 Accumulated amortization and impairment -1,094-3, ,591 Book value December 31 4,541 2,947 2,245 9,733 Economic life 5 years 3 years 5 years Capitalization of development expense mainly relate to cost of developing the Sevan technology for production, storage and offloading of LNG. Expensed research and development cost of purchases from third parties amounted to 132 for the year (2008: 548). Goodwill relates to the acquisition of KANFA AS.

71 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 71 NOTE 4 INVESTMENT IN SUBSIDIARIES AND RECEIVABLES AND LIABILITIES TO COMPANIES WITHIN THE GROUP Figures in the tables below are prepared in local GAAP and presented in USD 1,000 with exception of number of shares Office Cost No of Book Profit/ Ownership- Company name location price shares Equity value (loss) share KANFA AS Norway 14,287 2,500 23,087 14, % Sevan Production AS Norway 178, ,000 51, ,007-3, % Sevan Marine do Brasil Ltda Brazil 14,336 32,199, ,336-4, % Sevan 300 Pte Ltd Singapore 267, ,325, , ,325-43, % Sevan Invest AS Norway 262, , , % Sevan Drilling AS Norway 259, , ,620-43, % Sevan Drilling ASA Norway 494 3,000,000 4, , % Sevan Holding I AS Norway 48, ,222 48, % Sevan Holding II AS * Norway 12, ,100 8,113-4, % Sevan Holding III AS Norway % Sevan Holding IV AS Norway % Sevan Services AS Norway % Total book value 1,058,521 1,054,432 * The Company recognized a write-down of 4,089 regarding its investment in Sevan Holding II AS during the year 2008 Office Cost No of Book Profit/ Ownership- Company name location price shares Equity value (loss) share KANFA AS Norway 14,287 2,500 19,578 14,287 4, % Sevan Production AS Norway 178, ,000 55, ,007-34, % Sevan Marine do Brasil Ltda Brazil 10,286 32,199, ,286-2, % Sevan 300 Pte Ltd Singapore 205, ,308, , ,308-1, % Sevan Invest AS Norway 252, , , % Sevan Drilling AS Norway 150, , ,018 18, % Sevan Drilling ASA Norway 494 3,000, % Sevan Holding I AS Norway 42, ,532 42, % Sevan Holding II AS Norway 12, ,192 12, % Sevan Holding III AS Norway % Sevan Holding IV AS Norway % Sevan Services AS Norway % Total book value 865, ,717

72 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 72 Non-current receivables from companies within the Group: Sevan Production AS 337,219 0 Sevan Drilling ASA 103,072 0 Total non-current receivables from companies within the Group 440,291 0 Current receivables from companies within the Group: Sevan Production AS 1, ,089 Sevan Production General Partnership 12,506 3,435 KANFA AS Sevan Production Services Limited 78,502 85,185 Sevan Drilling AS 60,085 2,660 Sevan Drilling Pte Ltd 6,571 4,668 Sevan Drilling Rig II Pte Ltd 64,893 2,748 Sevan Drilling Rig Pte Ltd 9,197 20,373 Sevan Pte Ltd 83 4,961 Sevan Drilling ASA Sevan Invest AS Sevan Holding I Pte Ltd Sevan Holding I AS Sevan 300 Pte Ltd 440 9,461 KANFA Aragon AS Mator AS Sevan Production UK Limited 2,563 2,188 Sevan Piranema Servicios De Petroleo Ltd Sevan Marine do Brasil Ltda Sevan Production Pte Ltd 143, ,128 Sevan Drilling Rig AS 23 0 Sevan Drilling Rig II AS 96 0 Other companies within the Group 47 2 Total current receivables from companies within the Group 381, ,338 Current payables to companies within the Group: Sevan 300 Pte Ltd 286 1,157 Sevan Drilling Pte Ltd 0 1,246 Sevan Pte Ltd Sevan Holding I AS 0 31 Sevan Production General Partnership Sevan Production Pte Ltd 6 72 Sevan Drilling AS 15,423 16,346 Sevan Drilling ASA 26,083 0 KANFA AS 13,981 8,010 Sevan Holding II Pte Ltd 0 3,713 Sevan Production AS 510 2,026 Sevan Holding I Pte Ltd Sevan Marine do Brasil Ltda 0 11 KANFA Aragon AS Other companies within the Group 6 0 Total current payables to companies within the Group 56,843 32,977

73 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 73 NOTE 5 OTHER NON-CURRENT ASSETS Deposit Loans to employees Other prepaids Total other non-current assets NOTE 6 CASH AND CASH EQUIVALENTS Cash at bank and in hand 36,907 1,615 Restricted employees tax deduction fund 1,493 1,218 Restricted bank deposits 17,001 31,409 Total cash and cash equivalents 55,401 34,242 At balance sheet date no cash was collateralized in relation to derivative instruments (2008: 14,480). 1,000 (2008: 1,000) was collateralized in relation to a guarantee made on behalf of Sevan Drilling Pte Ltd and 15,904 (2008: 15,904) was collateralized in relation to a guarantee made on behalf of Sevan Drilling Rig Pte Ltd. 97 (2008: 25) of the restricted bank deposits relate to deposit for rental of offices. NOTE 7 SHARES AND SHARE OPTIONS OWNED OR CONTROLLED BY THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT As of December 31, 2009, the following Directors and Senior Management owned or controlled shares in the Company: Board of Directors Arne Smedal, Chairman of the Board, owns 3,698,703 shares directly, 3,060,036 shares through his wholly owned company Aasen AS, and 203,261 shares through Elvheim AS, where he holds a controlling ownership interest. Kåre Syvertsen, Board member and Vice President Technology owns 428,704 shares directly, and 2,877,296 shares through his wholly owned company Hallingen AS. Hilde Drønen, Board member, owns 2,800 shares directly and 44,200 shares through her wholly owned company Djupedalen AS. Stephan M. Zeppelin, Board member, owns 55,000 shares. Jørgen Skotnes, Employee representative of the Board and Senior Structural Engineer owns 5,100 shares and holds 10,000 share options with a strike price of NOK Senior Management Jan Erik Tveteraas, CEO, owns 57,556 shares directly and 2,993,444 shares through his wholly owned company Supernova AS. Oskar Mykland, CFO, owns 100,000 shares. Birte Norheim, Vice President Finance, owns 25,000 shares and holds 16,668 options with a strike price of NOK and 50,000 share options with a strike price of NOK Fredrik Major, Vice President Business Development/R&D, owns 47,332 shares and holds 16,667 share options with a strike price of NOK and 300,000 share options with a strike price of NOK Helle Hundseid, Vice President Projects, holds 30,000 shares and holds 16,668 share options with a strike price of NOK and 300,000 share options with a strike price of NOK Erling Andreas Ronglan, Vice President Operations, owns 30,000 shares and holds 16,667 share options with a strike price of NOK and 300,000 share options with a strike price of NOK Hanna Moland, Vice President HR & Administration, owns 13,667 shares and holds 16,667 share options with a strike price of NOK and 50,000 share options with a strike price of NOK Morten Martens Breivik, Vice President QHSE, owns 2,000 shares and holds 10,000 share options with a strike price of NOK

74 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 74 NOTE 8 SHAREHOLDER INFORMATION At December 31, 2009, the Company had 10,941 shareholders (2008: 6,740 shareholders). 57% of the share capital was owned by shareholders residing outside of Norway (2008: 63%). 20 largest shareholders at December 31, 2009: Number of Ownership- Name shares share (%) BANK OF NEW YORK MELLON S/A 21,281, % JPMORGAN CHASE BANK 16,812, % STATE STREET BANK AND TRUST CO 15,021, % JPMORGAN CHASE BANK 13,828, % FIDELITY FUNDS-EUROPEAN AGGRESSIVE FUND 9,989, % SKAGEN VEKST 8,900, % JPMORGAN CHASE BANK 8,828, % STATE STREET BANK AND TRUST CO. A/C 8,416, % DNB NOR BANK ASA EGENHANDELSKONTO 8,209, % MORGAN STANLEY & CO 8,052, % FIDELITY FUNDS 7,462, % HOLBERG NORGE 7,258, % BANK OF NEW YORK MELLON SA/NV 6,384, % BANK OF NEW YORK MELLON S/A 6,333, % GOLDMAN SACHS & CO 5,925, % BNP PARIBAS SECS SERVICES PARIS 5,599, % FID. FUNDS-EU. BLUE 5,588, % STATE STREET BANK & TRUST CO. A/C 5,537, % CITIBANK N.A. (LONDON) 5,450, % BANK OF NEW YORK MELLON SA/NV 5,205, % 20 largest shareholders 180,085, % Remaining shareholders 345,984, % Total shareholders 526,069, % :3D illustration of Sevan the FLNG concept

75 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 75 NOTE 9 EMPLOYEE BENEFIT EXPENSE Salaries and vacation pay 24,185 23,128 Employer s contribution tax 3,762 3,746 Employer s contribution tax relating to share options 0-2,977 Pension costs 1,762 1,476 Expensed portion of value of share options 956 2,561 Other employee benefit expense Total employee benefit expense 31,398 28,789 Number of man-years Remuneration of Senior Management, as paid: Retirement Other Retirement Other Salaries benefits benefits Salaries benefits benefits Jan Erik Tveteraas, CEO Oskar Mykland, CFO * Birte Norheim, Vice President Finance Erling Andreas Ronglan, Vice President Operations Fredrik Major, Vice President Business Development/R&D Helle Hundseid, Vice President Projects Hanna Moland, Vice President HR & Administration Morten Martens Breivik, Vice President QHSE Jon Helge Willmann, Vice President Drilling** Total remuneration paid 2, , * First day of employment was January 1, 2009 ** First day of employment was August 1, 2009 Salaries and other benefits included above are based on actual period of employment and translated at average exchange rates. Senior Management is included in the Group s collective retirement benefit plans. During 2009, the Chairman of the Board of Directors and the CEO received bonus of USD 173 each. As at end of 2009, an advance salary payment of USD 173 was owed by the Company s CEO. At balance sheet date, this was classified as a loan. Since acceptable security was provided, but not registered at balance sheet date, the loan was not in compliance with 8-7 of the Norwegian Public Limited Liability Act. By the date of these financial statements, such compliance has been achieved. No other loans were granted to Senior Management or any member of the Board of Directors in 2009 or The CEO will receive 6-24 months salary upon termination of employment, dependant on fulfillment of certain conditions. Reference is made to the Statement regarding establishment of salary and other benefits for Senior Management for further details of remuneration of Senior Management.

76 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 76 Remuneration of the Board of Directors, as paid: Arne Smedal, Chairman Vibeke Strømme, Deputy Chairman ** Kåre Syvertsen Hilde Drønen Stephan M. Zeppelin Jorunn Haugen, Employee representative * 0 0 Jørgen Skotnes, Employee representative * 0 0 Kristin Urdahl, Employee representative * Kjetil Soma, Employee representative * Total remuneration paid Remuneration of the Board of Directors is paid the year following duties rendered. Salaries and other benefits paid to Directors as employees: Retirement Other Retirement Other Salaries benefits benefits Salaries benefits benefits Arne Smedal, Chairman Kåre Syvertsen Jorunn Haugen * Jørgen Skotnes * Kristin Urdahl * Kjetil Soma * * On May 25, 2009, Jorunn Haugen and Jørgen Skotnes entered the Board of Directors and replaced Kristin Urdahl and Kjetil Soma as Employee representatives ** On December 18, 2009, Vibeke Strømme resigned from the Board of Directors Reference is made to Note 7 for further information about options and shares owned or controlled by the Board of Directors and Senior Management. Specification of auditor s fees: Audit fee Other attestation services 0 2 Tax consultancy 6 9 Other services Fees charged directly to equity 12-4 Total auditor s fees

77 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 77 NOTE 10 RETIREMENT BENEFIT OBLIGATIONS The Company operates both defined benefit and defined contribution plans that together include all employees. Defined benefit plan: Amounts recognized in the balance sheet are determined as follows: Present value of funded obligations 3,806 1,860 Fair value of plan assets -2,487-1,090 Present value of unfunded obligations 1, Unrecognized actuarial losses Employer s contribution tax relating to pension liabilities Liability in the balance sheet Movements in the liability recognized in the balance sheet are as follows: January Exchange differences Expense charged to the income statement Contributions paid, including employer s contribution tax December Principal actuarial assumptions are as follows: Discount rate 4.40% 4.30% Expected return on plan assets 5.60% 6.30% Future salary increase 4.25% 4.50% Expected G-regulation 4.00% 4.25% Future pension increases 2.10% 2.75% Future turnover 10.00% 10.00% Employer s contribution tax 14.10% 14.10% Actual return on pension assets for 2009 is not yet known. Actual return on pension assets for 2008 was 0.29%. The actuarial calculations for the Company s defined benefit plans were carried out by an independent actuary. Calculated pension obligation is based on mortality table K2005 and disability table K1963 adjusted for observed developments. Average life expectancy for a person retiring at 67 years of age: Male Female

78 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 78 Amounts recognized in the income statement are as follows: Net present value of current year s pension earned Interest cost on pension liabilities Expected return on pension assets Estimate changes Administration cost Pension cost, defined benefit plan Employer s contribution tax relating to pension liabilities Pension cost, including employer s contribution tax No. of employees included Expected pension cost for 2010 for the defined benefit plan is estimated to 774. Major categories of plan assets as a percentage of the fair value of total plan assets are as follows: Equities 7% 6% Property 21% 23% Fixed bonds 45% 48% Liquid bonds 26% 22% Other 1% 1% Total plan assets 100% 100% Defined contribution plan: Pension costs, defined contribution plan Employer s contribution relating to contributions paid Pension cost, including employer s contribution 1,106 1,101 No. of employees included Total pension cost: Pension cost, defined benefit plan Pension cost, defined contribution plan Total pension cost 1,762 1,476 The Company s pension schemes satisfy the requirements in the Norwegian legislation regarding mandatory occupational pension.

79 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 79 NOTE 11 OTHER OPERATING EXPENSE Cost of hired personnel 801 1,455 Office cost (IT, rental etc) 4,363 5,374 Consultancy (audit, tax and legal) 1,816 4,003 Marketing Other 2,682 3,490 Total other operating expense 9,838 14,951 NOTE 12 RENTAL AND LEASE AGREEMENTS The Company has entered into several agreements for rental for offices. Rental expense for offices amounted to 1,038 for the year (2008: 1,301). The Company has entered into a lease agreement for rental of offices in Arendal of 10 years duration and commencement in The Company has entered into lease- and rental-agreements for various software, ASP solutions and cars for which the expense for the year amounted to 358 (2008: 554). All lease- and rental-agreements entered into by balance sheet date are on ordinary operational terms. At balance sheet date the Company has entered into the following lease- and rental-obligations: No later than 1 year 1, Between 1-5 years 7,239 6,458 Later than 5 years 25,037 18,025 Total lease and rental obligations 33,630 25,135 NOTE 13 EARNINGS PER SHARE Net profit/(loss) (USD 1,000) -20,085-13,474 Earnings per share (USD) Earnings per share diluted (USD) Average no. of outstanding shares (thousands) 455, ,438 Weighted avg. no. of ordinary shares for diluted earnings per share (thousands) 455, ,919 Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares. Diluted earnings per share Due to net losses for the periods reported, and according to the principle of no negative dilution (positive effects on earnings per share resulting from an increase in number of shares issued, are not to be included), diluted earnings per share are calculated as earnings per share for these periods. NOTE 14 CONSTRUCTION CONTRACTS Contract revenue 27,725 11,959 Contract cost -21,517-13,305 Net profit/(loss) 6,208-1,346 Recognized, not yet invoiced 57 0 Incurred cost on ongoing projects, included in current liabilities 1,025 1,779 Activities defined as construction contracts mainly relate to Joint Industry Projects, feasibility studies and FEEDS; hereunder FEEDs relating to the Goliat project. Under the study contracts, the Company is able to recover certain expenses relating to further development and testing of the Sevan technology.

80 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 80 NOTE 15 SHARE-BASED INCENTIVE PLANS The Company has various share option plans that are treated in line with the Norwegian accounting act 7-11a. The estimated market values of options at the time of the award are expensed as employee benefit expense over the vesting periods. The estimated market value is an imputed cost without any cash effect, with the offsetting entry being an increase in equity. Expensed portion of value of options is 956 for the year (2008: 2,561). Exercise prices of share options awarded to employees equal the market price of the share at the time of the award. 3.3 million of the remaining options may be exercised with 1/3 each year, first time one year following the award and expire five years following the award. 2.1 million of the remaining options may be exercised provided fulfillment of certain criteria and expire five years following the award. The Company has no legal or constructive obligation to repurchase or settle the options in cash. Movements in the number of share options remaining and weighted average exercise prices: Average Average exercise price No. of exercise price No. of (NOK per share) options (NOK per share) options January ,679, ,495,709 Granted ,500 Exercised ,351 Lapsed/forfeited , ,167 December ,384, ,679,691 Remaining share options and exercise prices follows: Year of Exercise price Share options remaining expiration in NOK per share at end of year ,667 16, ,668 16, ,667 20, , , , , , , , , , , , , ,334 58, ,667 16, , , ,667 63, ,500 50, ,000,000 3,100, ,000 10, , , ,000 25,000 Total 5,384,521 5,679,691 Of the 5.4 million remaining options (2008: 5.7 million), 1.9 million options are exercisable (2008: 1.1 million). No options were exercised during Options exercised during 2008 resulted in 0.8 million shares being issued (at an average exercise price of NOK 24.72). The weighted average market price at the time of exercise was NOK per share. There was no related transaction cost for the Company. No options were awarded during The average fair value of options awarded during 2008, determined using the Black-Scholes optionpricing model, was NOK The significant inputs into the model were share price at the award dates, exercise prices as shown above, standard deviation of expected share price returns of 30%, dividend yield of 0%, estimated option life, and annual risk-free interest rate of 4.5%. As of December 31, 2009, none of the outstanding share options are in-the-money.

81 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 81 NOTE 16 RELATED PARTY TRANSACTIONS 2009 Total operating income of 53,811 includes income from Group companies amounting to 24,003. The Company charged companies within the Group 1,500 for design fee/license revenue during The Company charged companies within the Group 20,433 for services relating to management, engineering and site supervision, and 2,070 for management fees. The Company charged companies within the Group 32,622 for interest relating to loans during 2009, and was charged 1,139 for interest relating to borrowings from companies within the Group during the year. The Company charged companies within the Group 4,181 relating to guarantees during the year, and was charged 3,527 relating to guarantees from companies within the Group. The Company received Group contribution of 510 during Total operating income 52,760 includes income from Group companies amounting to 37,765. The Company charged companies within the Group 2,200 for design fee/license revenue during The Company charged companies within the Group 32,998 for services relating to management, engineering and site supervision, and 2,568 for management fees. The Company charged companies within the Group 39,407 for interest relating to loans during 2008, and was charged 2,866 for interest relating to borrowings from companies within the Group during the year. The Company charged companies within the Group for 3,399 relating to guarantees during the year, and was charged 3,182 relating to guarantees from companies within the Group. The Company received Group contribution of 3,075 during NOTE 17 FINANCIAL RISK MANAGEMENT Financial riskfactors The Company s activities expose it to a variety of financial risks; market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company s financial performance. Risk management is carried out by Treasury under policies approved by the Board of Directors. Treasury identifies, evaluates and hedges financial risks in close co-operation with its operating units. The Board approves the principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and investment of excess liquidity. Market risk Foreign exchange risk The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to NOK, EURO and GBP. Foreign exchange risk arises from future commercial transactions, recognized assets or liabilities, and net investments in foreign operations. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity s functional currency. To manage foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, the Company uses forward contracts and similar instruments. Hedging of foreign exchange exposures are executed on a gross basis and foreign exchange contracts with third parties generally designated at Group level. The Group s risk management policy is to hedge anticipated transactions in each major currency. The Company has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Price risk The Company is exposed to commodity price risk at two main levels: The demand for Sevan units is sensitive to oil price developments, fluctuations in production levels, exploration results and general activity within the oil industry. The cost of construction price of future units is sensitive to changes in market price of the input factors. Cash flow and fair value interest rate risk The Company s interest rate risk arises from non-current debt. Debt subject to floating interest rates expose the Company to cash flow interest rate risk. Debt subject to fixed interest rates expose the Company to fair value interest rate risk. The Company s policy is to maintain part of its debt at fixed rate. The Company simulates various scenarios taking into consideration, refinancing, renewal of current positions, alternative financing and hedging. Based on the different scenarios, the Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Under the interest rate swaps, the Company agrees with other parties to exchange, at specified intervals the difference between fixed contract interest rates and floating-rate interest amounts calculated by reference to the agreed notional amounts. The Company s policy is to maintain liquidity through placement of excess cash as bank-deposits and/or short-term, marketable investments at limited risk. Credit risk Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers. The Company has no significant concentration of credit risk towards single financial institutions and has policies that limit the amount of credit exposure to any single financial institution.

82 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 82 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities, and the ability to close out market positions. The Company aims to maintain flexibility in its liquidity by keeping committed credit lines available. NOTE 18 CONTINGENT LIABILITIES, LOANS, GUARANTEES, SECURITIES AND COLLATERAL The Company has entered into the following security arrangements: Security arrangements relating to financing: Sevan Driller: The Company has provided certain securities on 1st priority in accordance with terms of the USD 250/400 million bank financing facility to Sevan Drilling Pte Ltd and provided a guarantee on 2nd priority in accordance with terms of the NOK 1,000 million bond loan agreement to Sevan Drilling AS. In addition, the Company has provided a guarantee in accordance with terms of a vendor credit facility of USD 78 million. Security arrangements relating to equipment supplies and services: KANFA AS: The Company has issued a performance guarantee for KANFA AS delivery of a process plant and compression packages to a client. KANFA Aragon AS: The Company has issued a performance guarantee for KANFA Aragon AS delivery of a process facility for LNG to a client. Sevan Driller: The Company has issued guarantees for the subsidiary s correct fulfillment of its contractual commitments as purchaser towards vendors. Sevan Driller II: The Company has issued a guarantee for the subsidiary s correct fulfillment of its contractual commitments as purchaser towards vendors. FPSO Sevan Voyageur: The Company has guaranteed for correct fulfillment of the contract with the end-charterer and granted a performance guarantee to the technical manager. Sevan Driller II: The Company has guaranteed for correct fulfillment of the contract with the end-charterer. Sevan Driller III: The Company has guaranteed for correct fulfillment of the contract with the end-charterer. As of balance sheet date, it is uncertain whether the third drilling charter contract will be pursued. Discussions with the client are ongoing. The maximum exposure for the Group towards the end-charterer is estimated at approximately USD 10 million in a scenario where the contract is not pursued. NOTE 19 EVENTS AFTER BALANCE SHEET DATE In January 2010, Eni Norge AS and Sevan Marine ASA entered into a Project Service Contract for the Goliat FPSO project. Under the contract, Sevan Marine will provide project and engineering management and early operation preparation services. The services will include personnel to be integrated as a part of the Eni project follow up organization. Sevan Marine will also execute and assist Eni in several specific key engineering and construction activities related to proprietary technology areas for the Sevan Marine FPSO concept. In January 2010, Sevan Marine ASA was awarded a pre-feed/ FEED study contract by Det norske oljeselskap ASA for the potential application of a Sevan FPSO for the Froy field development in the Norwegian North Sea. In February 2010, Sevan Marine ASA was awarded a study by Lundin Norway AS of the potential application of a Sevan production unit for the Luno field development in the Norwegian North Sea. As per date of this Report and following the adjustments described in Note 30 of the consolidated financial statements, the Company complies with all covenants in its credit facilities. Sevan Driller III: The Company has issued guarantees for the subsidiary s correct fulfillment of its contractual commitments as purchaser towards vendors. As of balance sheet date it is uncertain whether the third drilling unit will be realized. The maximum exposure towards vendors for cancellation fees in a scenario where the contracts with vendors are not realized is estimated at approximately USD 4 million. Security arrangements relating to operations: FPSO Sevan Piranema: The Company has granted a performance guarantee to the technical manager. FPSO Sevan Hummingbird: The Company has guaranteed for correct fulfillment of the contract with the end-charterer and granted a performance guarantee to the technical manager.

83 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 83 NOTE 20 INTEREST-BEARING DEBT Policies applied for interest-bearing debt are described in a separate section of Accounting Policies. As described in further detail in the Board of Director s report, while the Board of Directors is of the firm opinion that the debt in reality is non-current in nature, the accounting regulations require that amounts which formally could be held to be mandatorily repayable as at the balance sheet date be classified as current irrespective of whether such repayment was required by the lenders or the basis therefore has subsequently been eliminated. Accordingly, relevant liabilities have been classified as current in the financial statements as per December 31, However, as all necessary actions have been resolved by the date of this financial report, the debt will be classified back to non-current for future reporting periods. Nominal Amortized Fair Nominal Amortized Fair value value value value value value Bond loan (USD 140 million) , ,851 75,182 Bond loan (USD 270 million) , , ,114 Bond loan (NOK 870 million) , ,800 87,102 Convertible bond (USD 48 million) 48,000 33,978 52, Value of embedded call options ,424-10,839-10,839 Interest-bearing debt, non current 48,000 33,978 52, , , ,559 Bond 578, , ,507 5,000 4,850 2,700 Value of embedded call options -25,410-4,214-4, Interest-bearing debt, current 552, , ,293 5,000 4,850 2,700 Total interest-bearing debt 600, , , , , ,259 Repayment schedule based on classification as per December 31, 2009: Nominal value Bond loan (USD 140 million) -132, , Bond loan (USD 270 million) -270, , Bond loan (NOK 870 million) -150, , Convertible bond (USD 48 million) * -48, ,000 Total nominal value -600, , ,000 Estimated interest payments ** -7,200-7,200-7,200-3,600 * Convertible bond repayment may be settled by issue of shares ** Based on LIBOR and NIBOR spot rates at December 31, 2009 Repayment schedule based on current status: Nominal value Bond loan (USD 140 million) -132,100-7, , Bond loan (USD 270 million) -270,000-20,000-22,500-25, ,500 Bond loan (NOK 870 million) -150,605-22,504-22, ,597 0 Convertible bond (USD 48 million) * -48, ,000 Total nominal value -600,705-50, , , ,500 Estimated interest payments ** -41,339-40,020-26,800-6,150 * Convertible bond repayment may be settled by issue of shares ** Based on LIBOR and NIBOR spot rates at December 31, 2009

84 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 84 Interest-bearing debt are nominated in the following currencies (nominal values): NOK 450, ,091 USD 150, ,000 Total interest-bearing debt 600, ,091 Effective interest rates at balance sheet date: NOK USD NOK USD Bond (USD 140 million) 9.68% 9.68% Bond (NOK 870 million) 10.97% 10.55% Bond (USD 270 million) ** 6.92% 6.54% Convertible loan (USD 48 million)* 25.55% * Effective from April 22, 2009 ** Effect of interest-rate swap is included in the calculation The Company is exposed to changes in interest rates for a NOK 870 million bond loan (3-month Nibor + margin) and a USD 270 million bond loan (6-month Libor + margin). The Company is exposed to fair value interest rate risk for a USD 140 million bond loan and a USD 48 million convertible bond loan at fixed interest rates. Bond loan Fair value of bond loans is based on market rates of the bonds at balance sheet date. In December 2006, the Company carried out a bond issue of USD 140 million, at a fixed interest rate of 9.25%. The bond has a term of 5 years, with one remaining call option in December 2010 at 102%. Fair value of the option is estimated at USD 0.8 million (2008: USD 2.3 million) at balance sheet date. In May 2007, the Company carried out a bond issue of USD 270 million, at an interest rate of Libor +3.0%. The bond has a term of 6 years, with two embedded call options at 103.5% and 102.5% which can be exercised in May 2010 and in May 2011 respectively. Fair value of the options is estimated at USD 1.3 million (2008: USD 2.1 million) at balance sheet date. In October 2007, the Company carried out a bond issue of NOK 870 million, at an interest rate of Nibor+5.5%. The bond has a term of 5 years, with three embedded call options at 105%, 104% and % which can be exercised 6-12 months following completion of FPSO Sevan Voyageur, in October 2010 and in October 2011 respectively. Fair value of the options is estimated at USD 2.1 million (2008: USD 6.4 million) at balance sheet date. Convertible bond In April, May and June 2009 the Company issued convertible bonds in aggregate nominal value of USD 48 million. The convertible bonds have a term of four years and a fixed coupon of 15% p.a. of parity value to conversion price. The interest may, as Sevan Marine s option, be paid in cash or by issuance of additional bonds. The bondholders may exercise a put option in April 2011 for a repayment at par plus accrued interest. The bonds are convertible at a rate of the NOK equivalent of USD 0.97 per share. The Company may require the bonds to be converted if the closing price of the Company s shares for 20 trading days within a period of 30 trading days equals or exceeds 200% the conversion price. The values of the liability component and the equity conversion component were determined at issuance of the bond. Fair value of the liability component at issue date, classified as interest-bearing debt, was calculated using a market interest rate for an equivalent non-convertible bond. The market interest rate used was based on third party valuations. The residual amount, representing the value of the equity conversion option, classified as shareholders equity in other equity net of income taxes.

85 Sevan Marine ASA Notes to the Financial Statements 09 SEVAN MARINE 85 Convertible bond recognized in the balance sheet is calculated as follows: Face value of convertible bond 48,000 0 Issue costs -1,476 0 Equity component -14,058 0 Liability component on initial recognition 32,466 0 Financial expense 6,312 0 Coupon interest incurred -4,800 0 Liability component at December 31 33,978 0 Fair value of the liability component of the convertible bond amounted to USD 52.3 million at balance sheet date. Fair value is calculated using cash flows discounted at an assumed marked interest rate for an equivalent non-convertible bond. The assumed market interest rate is based on third party valuations. Covenants The Company has issued three ordinary and one convertible bond loans, copies of which are publicly available and posted, inter alia, on the corporate website; The agreements contains customary covenants, including undertakings that the Company may not (i) cease to carry on its business, (ii) make disposals, sales or restructurings which may adversely affect its ability to perform its obligations under the relevant agreements, (iii) reduce the ownership interest in subsidiaries which may have granted security in relation to the relevant loan, (iv) dispose over assets granted as security in favor of Norsk Tillitsmann on behalf of the bondholders to the detriment of the interests of such bondholders, or, if applicable, within certain specified limits only, (v) enter into agreements which are not on commercial terms, and (vi) make dividends or other distributions to shareholders or acquire treasury stock in amounts in excess of 50% of net profits after tax. Certain agreements also provide for mandatory prepayment in case of a change of control event as therein described. NOTE 21 DERIVATIVE FINANCIAL INSTRUMENTS Floating-to-fixed interest rate swaps There was no outstanding interest swap agreements at balance sheet date (2008: the notional principal amount of outstanding interest swap agreements was USD 270 million). At balance sheet date there was no liabilities relating to fixed interest rate swaps (2008: 13,420). All positions in foreign currency are valued at prevailing market exchange rates at balance sheet date. NOTE 22 FINANCIAL INCOME AND FINANCIAL EXPENSE Financial income Interest income 743 1,818 Amortization of embedded call options 4,499 2,087 Currency gain 27,335 56,922 Value of call options embedded in bonds 2,556 0 Interest swap 2,660 0 Other financial income Received group contribution 510 3,075 Financial income from companies within the Group 36,803 42,806 Total financial income 75, ,708 Financial expense Interest expense 48,624 53,750 Currency loss 40,436 22,419 Value of call options embedded in bonds 9,867 5,975 Financial investment 0 1,961 Interest swap 0 5,238 Amortization of fee relating to interest-bearing debt 3,603 0 Write-down investment in subsidiary 4,089 0 Other financial expense Financial expense from companies within the Group 4,666 6,048 Total financial expense 111,379 95,413

86 AUDITOR S REPORT 09 SEVAN MARINE 86 PricewaterhouseCoopers AS Forus Atrium Postboks 8017 NO-4068 Stavanger Telephone Telefax To the Annual Shareholders' Meeting of Sevan Marine ASA Auditor s report for 2009 We have audited the annual financial statements of Sevan Marine ASA as of 31 December 2009, showing a loss of USD for the parent company and a loss of USD for the group. We have also audited the information in the Board of Directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss. The annual financial statements comprise the financial statements of the parent company and the group. The financial statements of the parent company comprise the balance sheet, the statements of income and cash flows and the accompanying notes. The financial statements of the group comprise the balance sheet, the statements of income, comprehensive income, cash flows, changes in equity and the accompanying notes. The regulations of the Norwegian accounting act and accounting standards, principles and practices generally accepted in Norway have been applied in the preparation of the financial statements of the parent company. International Financial Reporting Standards as adopted by the EU have been applied in the preparation of the financial statements of the group. These financial statements are the responsibility of the Company s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors. We conducted our audit in accordance with laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by The Norwegian Institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and auditing standards an audit also comprises a review of the management of the Company's financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the parent company have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the company as of 31 December 2009 and the results of its operations and its cash flows for the year then ended, in accordance with accounting standards, principles and practices generally accepted in Norway the financial statements of the group have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the group as of 31 December 2009, and the results of its operations and its cash flows and the changes in equity for the year then ended, in accordance with International Financial Reporting Standards as adopted by the EU the company's management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway the information in the Board of Directors' report concerning the financial statements, the going concern assumption, and the proposal for the coverage of the loss are consistent with the financial statements and comply with the law and regulations. Stavanger, 30 April 2010 PricewaterhouseCoopers AS Torbjørn Larsen State Authorised Public Accountant (Norway) Note: This translation from Norwegian has been prepared for information purposes only. Alta Arendal Bergen Bodø Drammen Egersund Florø Fredrikstad Førde Gardermoen Gol Hamar Hardanger Harstad Haugesund Kongsberg Kongsvinger Kristiansand Kristiansund Lyngseidet Mandal Mo i Rana Molde Mosjøen Måløy Namsos Oslo Sandefjord Sogndal Stavanger Stryn Tromsø Trondheim Tønsberg Ulsteinvik Ålesund PricewaterhouseCoopers navnet refererer til individuelle medlemsfirmaer tilknyttet den verdensomspennende PricewaterhouseCoopers organisasjonen Medlemmer av Den norske Revisorforening Foretaksregisteret: NO

87 09 SEVAN MARINE 87 RESPONSIBILITY STATEMENT We confirm, to the best of our knowledge, that the financial statements for the period January 1 to December 31, 2009, have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit and loss of Sevan Marine ASA as well as the consolidated group. We also confirm that the Board of Directors Report includes a true and fair review of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncer tainties facing the Company and the Group. Arendal, April 30, 2010 The Board of Directors of Sevan Marine ASA Arne Smedal Kåre Syvertsen Hilde Drønen Chairman Board member Board member Stephan M. Zeppelin Jorunn Haugen Jørgen Skotnes Jan Erik Tveteraas Board member Employee representative Emloyee representative CEO

88 09 SEVAN MARINE 88 NORWAY Sevan Marine ASA-Arendal Kittelsbuktveien Arendal Norway Phone: Fax: Sevan Marine ASA-Bergen Fantoftvegen Bergen Norway Phone: Fax: Mator AS 1395 Hvalstad Norway Phone: Fax: Tormod Gjestlandsvei Porsgrunn Norway Phone: Fax: Sevan Marine ASA-Trondheim KANFA AS KANFA Aragon AS Postboks 1218 Pirsenteret 7462 Trondheim Norway Phone: Nye Vakås vei Hvalstad Norway Phone: Fax: Fantoftvegen Bergen Norway Phone: SINGAPORE BRAZIL SITE OFFICES CHINA Sevan Marine-Singapore Sevan Marine-Rio de Janeiro Cosco Qidong 72 Anson Road Anson House no Singapore Palácio Austregésilo de Athayde building Avenida Presidente Wilson 231/1003, CEP Rio de Janeiro-RJ Brasil Phone: Fax: Sevan Marine site Cosco, Cosco (Qidong) Offshore Shipyard, Yinyang Town, Qidong Republic of China Phone: Fax: UNITED KINGDOM Sevan Marine-UK Photo: SOMAFOTO Sevan Marine ASA-Oslo Nye Vakås vei 80 C/O Wood Group Engineering (North Sea) Ltd Trafalgar House, Hareness Road, Altens Aberdeen AB12 3LE Scotland UK Phone: Fax: Sevan Marine-Piranema operations Av. Pedro Paes de Azevedo 34, Salgado Filho-Aracaju-Sergipe (SE) Brasil Phone: