TULIP OIL NETHERLANDS OFFSHORE B.V.

Transcription

1 H UNAUDITED HALF YEARLY REPORT FOR TULIP OIL NETHERLANDS OFFSHORE B.V. The Hague, 30 August All Statements contained in this document are subject to legal disclaimer and risk factors detailed in Appendix 1. Forward-looking statements in this report reflect current views about future events and are, by their nature, subject to significant risks as detailed and uncertainties because they relate to events and depend on circumstances that will occur in the future.

2 Important information and disclaimer THIS REPORT (THE REPORT ) CONTAINS FINANCIAL INFORMATION (THE FINANCIAL INFORMATION ), OPERATIONAL, LEGAL AND OTHER INFORMATION CONCERNING TULIP OIL NETHERLANDS B.V. (THE COMPANY ) AND ITS BUSINESS. THE REPORT HAS BEEN PREPARED BY OR AT THE DIRECTION OF THE COMPANY FOR INFORMATION PURPOSES ONLY. THE INFORMATION CONTAINED IN THIS REPORT MAY INCLUDE RESULTS OF ANALYSES FROM A QUANTITATIVE MODEL THAT MAY REPRESENT POTENTIAL FUTURE EVENTS THAT MAY OR MAY NOT BE REALIZED, AND IS NOT A COMPLETE ANALYSIS OF EVERY MATERIAL FACT RELATING TO THE COMPANY OR ITS BUSINESS. THIS REPORT CONTAINS PROJECTIONS AND FORWARD LOOKING STATEMENTS. THE WORDS BELIEVE, EXPECT, COULD, MAY, ANTICIPATE, INTEND AND PLAN AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THE REPORT, INCLUDING, WITHOUT LIMITATION, THOSE REGARDING THE FINANCIAL INFORMATION, THE COMPANY S FINANCIAL POSITION, POTENTIAL BUSINESS STRATEGY, POTENTIAL PLANS AND POTENTIAL OBJECTIVES, ARE FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE COMPANY S ACTUAL RESULTS, PERFORMANCE, ACHIEVEMENTS AND VALUE TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, ACHIEVEMENTS OR VALUES EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE IN THE FUTURE. NO WARRANTY OR REPRESENTATION IS GIVEN BY THE COMPANY OR ANY OF ITS REPRESENTATIVES AS TO THE REASONABLENESS OF THESE ASSUMPTIONS. FURTHER, CERTAIN FORWARD-LOOKING STATEMENTS ARE BASED UPON ASSUMPTIONS OF FUTURE EVENTS THAT MAY NOT PROVE TO BE ACCURATE. THE FORWARD-LOOKING STATEMENTS IN THE FINANCIAL INFORMATION SPEAK ONLY AS AT THE DATE OF THE FINANCIAL INFORMATION AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE OR PROVIDE ANY ADDITIONAL INFORMATION IN RELATION TO SUCH FORWARD-LOOKING STATEMENTS. NOTHING IN THIS REPORT IS, OR SHOULD BE CONSTRUED AS, A PROFIT FORECAST. BY ATTENDING OR RECEIVING THIS REPORT, YOU ACKNOWLEDGE THAT YOU WILL BE SOLELY RESPONSIBLE FOR FORMING YOUR OWN VIEW OF THE POTENTIAL FUTURE PERFORMANCE OF THE COMPANY. 2

3 HIGHLIGHTS IN H CONTENTS Q10A Project on track Key events in H Summary of financial results 5 Summary of the first half year 6 Financial review 8 61mln in available cash and cash equivalents Financial statements with notes 10 Income statement 11 Statement of financial position 12,13 Statement of changes in equity 14 Statement of cash flow 15 Notes to the financial statements 16 Appendix 1 Risk Factors mln drawn down from the bond 49mln Available fiscal losses ( 13mln in CIT and 36mln in SPS end 2017) 3D model view of Q10A Tulip platform All figures are presented in unless otherwise stated, and figures in brackets apply to the first half year period in 2017 (H1 2017). 3

4 KEY EVENTS IN H January April 2018 Q10A Final Investment Decision First Steel has been cut for the Q10A unmanned offshore platform April 2018 Line Pipe produced and delivered May 2018 Dredging and rock removal for the pipelay completed on seabed 5 June 2018 Rig contract signed with Borr (Prospector 1) 28 June 2018 Pipelay operation using Allseas Lorelay vessel completed in record time. Q Project engineering design work finalised All long leads ordered for platform and pipeline which are being delivered as per plan. Construction work for the platform and jacket on schedule. KEY EVENTS - OUTLOOK Q Listing of Bond on the Oslo Bors - August 2nd Trenching of pipeline Installation of the spool pieces near P15-D Closing weather deck and start assembling and hook-up equipment Q Commencement of Installation of jacket and topside operation 4

5 SUMMARY OF FINANCIAL RESULTS 2017 Audited FY 2016 Audited FY ( 1000) H H Operating profit/(loss) (936.9) (567.9) (1,944.8) (7,098.6) EBITDA (900.5) (506.2) (1,883.1) (1,337.0) Net profit/(loss) for the period (658.1) (997.8) (3,348.2) (4,032.0) Cash flow from operations (4,342.4) (2,340.0) (4,183.1) (2,338.0) Cash flow from investments (14,357.8) (97.2) (455.4) (6,461.6) Total assets 116, , , ,085.6 Net interest-bearing debt 93, , , ,651.6 Cash and cash equivalents 60, ,

6 SUMMARY OF THE FIRST HALF YEAR 2018 On 11 January 2018, the Board of Tulip Oil Holding B.V. approved to take final investment decision ( FID ) on the Q10A project within Tulip Oil Netherlands Offshore B.V. ( the company or TONO ). This marked the successful conclusion to many successful steps throughout 2017 to allow Tulips Partner EBN and the board of Tulip to approve the commencement of the Q10A Project for Development. The company has proceeded expeditiously to build the offshore platform, lay the pipeline and make the connections with the P15D TAQA platform. During the first half of the year, significant progress has been achieved and to date more than 50% of the pre drilling project scope has been completed. The notable events have been the finalisation of the project engineering design work, the ordering of all key long leads for the platform and the pipeline which are being delivered as per plan. The construction work for the platform deck and jacket is progressing and on schedule. The pipelay operation using the Allseas Lorelay vessel has been completed in record time. The company expects to install the jacket and the topside before the end of this year, following which the company will re-connect the existing exploration well and drill four new production wells. In June 2018, the company has contracted the Borr Prospector 1 offshore rig to be used for the drilling programme in EBITDA for H (H1 2017) amounted to a loss of (loss of 506.2) thousand and EBIT was a loss of (loss of 567.9) thousand. Net loss for the period was a loss of (loss of 997.8) thousand. Interest bearing debt amounted to 93,494.8 ( 29,726.6) thousand at 31 December 2017 comprising of both the bond and the intercompany loan from Tulip Oil Netherlands BV. Fiscal corporate tax losses at 31 December 2017 amounted to 13 million and fiscal state profit share losses amounted to 36 million. On the 2 August 2018, Tulip Oil Netherlands Offshore B.V. FRN 8.50% Senior Secured 87 million Callable Bond Issue 2017/2022 ISIN was listed on the Oslo Bors. Allseas Lorelay pipelaying vessel & Fortitude arriving at P15D 6

7 Pipeline on rail cars First steel cutting Concrete mattresses for for pipeline crossings Welding the platform cellar deck Rock removal from seabed Pipeline Laydown heads (removed with spool piece) First Factory Acceptance Testing on Wellhead control panel Pipeline installation PIPELINE PLATFORM 7

8 FINANCIAL REVIEW INCOME STATEMENT ( 1000) H H Total income - - EBITDA (900.5) (506.2) EBIT (936.9) (567.9) Net financial items (2,142.7) (1,202.4) Profit/(loss) before (3,079.6) (1,770.3) taxes Taxes 2, Net profit/(loss) for the period (658.1) (997.8) STATEMENT OF FINANCIAL POSITION ( 1000) H H Deferred tax assets 12, ,689.4 PPE 35, ,765.1 Cash and cash 60, equivalents Net working capital (6,872.0) 77.8 Total assets 116, ,645.9 Equity 10,208.3 (7,299.8) Interest bearing debt 93, ,726.6 Production costs for the period are higher at thousand ( thousand) in line with expectations. These higher costs are due to insurance costs related to the Q10A development project and higher surface rights cost following the granting of a production licence. Other operating expenses are similar to the comparative previous period. There is no depreciation or impairment on tangible fixed assets in the period. The Q10A platform is under construction and depreciation will commence after first gas production. TONO commenced capitalization of interest from the date of Final Investment Decision. This has resulted in some of the interest expenses being transferred to capital expenditure. The net loss for the period was lower at (658.1) ( (997.8)) thousand mainly as a result of a large tax credit of 2,421.5 ( 772.5) thousand arising from project expenditure offset by higher net financial items of (2,142.7) ( (1,202.4)) thousand. Interest is being regularly accrued on the bond payable in Quarterly instalment payments in January and April 2018 have been duly made. July 2018 payments have also been made. Deferred tax assets increased to 12,633.6 ( 8,689.4) thousand with the operating loss incurred in the half year period. Total available fiscal corporate tax losses at 31 December 2017 amounted to 13 million and fiscal state profit share losses amounted to 36 million. Management expects to fully utilize these losses once first gas production starts in At 30 June 2018, the project, excluding drilling scope, has progressed significantly with some 50% of the work complete. This translates into the increase in property, plant and equipment to 35,337.4 ( 13,765.1) thousand. Cash and cash equivalents continue to remain strong with balances of 60,661.5 ( 45.2) thousand as of 30 June 2018 which is forecast to suffice for the completion of the ongoing Q10A development project. Equity amounted to 10,208.3 ( -7,299.8) thousand at the half year, corresponding to an equity ratio of 8.8% (-32.2%) percent. The improvement is resulting from the capitalisation of intercompany loans. 8

9 CASHFLOW STATEMENT ( 1000) H H Cash flow from operations Cash flow from investing Cash flow from financing Net change in cash and cash eq. Cash and cash eq. end of period (4,342.4) (2,340.0) (14,357.8) (97.2) (24.6) 2,075.0 (18,724.8) (362.2) 60, An outflow of cash from operating activities of 4,342.4 ( 2,340.0) thousand is mainly driven from operating expenses and interest payable on the bond and intercompany loans. The cash outflow on investing activities of 14,357.8 ( 97.2) thousand comprises milestone payments for the Q10A development to key suppliers and project interest paid during the period. Funding At the end of H1 2018, the company had total available liquidity of 60,661.5 ( 45.2) thousand, comprising of cash and cash equivalents of 51,307.6 ( 45.2) thousand and restricted cash and cash equivalents of 9,353.9 ( nil) thousand. The restricted cash mainly relates to the minimum cash balance that needs to be held and the amounts held exclusively for interest payments on the bond. In October 2017, the company priced senior secured notes offering of 87 million aggregate principal amount due in 2022 at par in a bullet manner. The coupon rate on the bond amounts to 3 month EURIBOR + 8.5% p.a. with interest payable quarterly. The offering was closed on 25 October The bond has been listed on the Oslo Bors on 2 August

10 FINANCIAL STATEMENTS WITH NOTES 10

11 INCOME STATEMENT H1 H ( 1000) Note Petroleum revenues Total Income Exploration expenses 2 (3.7) (0.7) (0.7) Production costs (550.1) (147.4) (158.9) Depreciation 6,7 (36.4) - - Impairments 3,7 - (61.7) (61.7) Other operating expenses 4 (346.7) (358.1) (1,723.5) Total operating expenses (936.9) (567.9) (1,944.8) Operating profit/(loss) (936.9) (567.9) (1,944.8) Interest income Other financial income Interest expenses (1,719.6) (1,197.9) (3,537.4) Other financial expenses (423.3) (4.5) (161.3) Net financial items 5 (2,142.7) (1,202.4) (3,698.6) Profit/(loss) before taxes (3,079.6) (1,770.3) (5,643.4) Tax (charge)/credit 6 2, ,295.2 Net profit/(loss) for the period (658.1) (997.8) (3,348.2) Net profit/(loss) for the period is attributable to: Tulip Oil Netherlands Offshore B.V. (658.1) (997.8) (3,348.2) STATEMENT OF COMPREHENSIVE INCOME H1 H ( 1000) Net profit/(loss) for the period (658.1) (997.8) (3,348.2) Total comprehensive income in period (658.1) (997.8) (3,348.2) 11

12 STATEMENT OF FINANCIAL POSITION H1 H1 (restated see note 1) H2 (restated see note 1) ( 1000) Note ASSETS Intangible assets Other intangible assets 7 1, ,803.2 Tangible fixed assets Property, plant and equipment 8 35, , ,037.0 Financial assets Deferred tax assets 6 12, , ,212.1 Total non-current assets 49, , ,052.3 Inventories Inventories Receivables Accounts receivable 3, Other short-term receivables 9 2, Cash and cash equivalents Cash and cash equivalents * 9 60, ,386.3 Total current assets 66, ,901.6 TOTAL ASSETS 116, , ,953.9 *including restricted cash and cash equivalents 12

13 STATEMENT OF FINANCIAL POSITION H1 H1 (restated see note 1) H2 (restated see note 1) ( 1000) Note EQUITY AND LIABILITIES Equity Share capital Share premium 20, ,516.6 Retained earnings (10,308.3) (7,299.8) (9,650.2) Total equity 10,208.3 (7,299.8) 10,866.4 Non-current liabilities Deferred taxes Long-term abandonment provision Long-term bonds 12 83, ,904.6 Interest-bearing loans from affiliates 13 8, , ,000.0 Other non-current liabilities 1, ,803.2 Current liabilities Trade creditors 7, Accrued expenses 3, Liabilities against affiliates Other current financial liabilities 14 1, ,335.2 Total liabilities 106, , ,087.5 TOTAL EQUITY AND LIABILITIES 116, , ,

14 STATEMENT OF CHANGES IN EQUITY (Unaudited) ( 1000) Share capital Share premium Retained earnings Total equity Equity as of (restated) - - (6,302.0) (6,302.0) Share premium injection Net profit/(loss) for the period - - (997.8) (997.8) Equity as of (7,299.8) (7,299.8) Share premium injection - 20, ,516.6 Net profit/(loss) for the period - - (2,350.4) (2,350.4) Equity as of ,516.6 (9,650.2) 10,866.4 Share premium injection Net profit/(loss) for the period - - (658.1) (658.1) Equity as of ,516.6 (10,308.3) 10,

15 STATEMENT OF CASH FLOW Note H1 H ( 1000) CASH FLOW FROM OPERATING ACTIVITIES Profit/(loss) before taxes (3,079.6) (1,770.3) (5,643.4) Net financial items 5 2, , ,698.6 Taxes paid during the period Depreciation Impairment losses Interest paid: Interest expenses 5 (2,142.7) (1,202.4) (3,698.6) Accretion expenses 5 (1.6) Unwinding of bond discount Change in other current financial liabilities (796.8) - 1,335.2 Amortisation of legal bond costs Decrease/(increase) in trade and other receivables Decrease/(increase) in trade, other payables and provisions NET CASH FLOW FROM OPERATING ACTIVITIES (3,798.9) ,873.2 (1,521.4) (614.1) (4,342.4) (2,340.0) (4,183.1) CASH FLOW FROM INVESTMENT ACTIVITIES Payments to acquire tangible fixed assets (12,825.1) (97.2) (455.4) Interest paid for project capital expenditure (1,532.7) - - NET CASH FLOW FROM INVESTMENT ACTIVITIES (14,357.8) (97.2) (455.4) CASH FLOW FROM FINANCING ACTIVITIES Loans received from affiliates 13-2, ,865.0 Loans repaid to affiliate (2,000.0) Bond setup costs paid (24.6) - (2,507.6) Net proceeds from issuance of bond ,260.0 NET CASH FLOW FROM FINANCING ACTIVITIES (24.6) 2, ,617.4 Net change in cash and cash equivalents (18,724.8) (362.2) 78,978.9 Cash and cash equivalents at start of period 79, CASH AND CASH EQUIVALENTS AT END OF PERIOD 10 60, ,

16 NOTES TO THE FINANCIAL STATEMENTS (Unaudited) (All figures in 1000 unless otherwise stated) These interim financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU ("IFRS") IAS 34 "Interim Financial Reporting". Thus the interim financial statements do not include all information required by IFRS and should be read in conjunction with the company s annual financial statements as at 31 December The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the dates and interim periods presented. Interim period results are not necessarily indicative of results of operations or cash flows for an annual period. These interim financial statements have not been subject to review or audit by independent auditors. These interim financial statements were authorized for issue by Tulip Oil Holding B.V s Board of Directors on 29 August Note 1 Accounting principles The accounting principles used for this interim report are consistent with the principles used in the Company s (Tulip Oil Netherlands Offshore B.V.) annual financial statements as at 31 December There are no new standards effective from 1 January In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Company s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual financial statements as at 31 December The prior year financial statements have been restated for an overstatement in the deferred tax asset balance arising from the non recognition of some temporary differences. This restatement results in an adjustment to the opening retained earnings at of 3,254.9 thousand. For full details see the financial statements for the year ended 31 December Note 2 Exploration expenses H1 H ( 1000) Other exploration expenses Total exploration expenses Note 3 Impairments Impairment tests of individual cash-generating units are performed when impairment triggers are identified. No triggers have been identified during the first half of The Q10A development took Final Investment Decision on 11 January

17 Note 4 Other operating expenses H1 H ( 1000) Salary and contractors Travel and travel related costs IT and communication Professional services 84.2 (6.0) Cost recharges 1, ,672.4 Other (including recovery of cost) (1,479.1) (120.4) (442.7) Total other operating expenses ,723.5 There are no employees of the company in the first half of 2018 (H1 2017: Nil). The directors of Tulip Oil Netherlands Offshore B.V. received no compensation for their services. All fees related to the duties of the directors is disclosed in the consolidated financial statements of the parent, Tulip Oil Holding B.V. Note 5 Financial items H1 H ( 1000) Other financial income (0.2) - (0.1) Total interest income (0.2) - (0.1) Interest expenses 3, ,335.2 Interest on loans from affiliates , ,202.2 Capitalized interest cost, development projects (2,349.5) - - Total interest expenses 1, , ,537.4 Bond discount unwinding Accretion expenses (1.6) Amortised loan costs Total other financial expenses Net financial items 2, , ,

18 Note 6 Taxes H1 H1 (restated see note 1) (restated see note 1) Taxes for the period ( 1000) Calculated current year tax Change in deferred taxes 2, ,295.2 Tax (charge)/credit 2, ,295.2 The income tax credit for the year can be reconciled to the accounting profit as follows: H1 H1 (restated see note 1) (restated see note 1) Profit/(loss) before taxes (3,079.6) (1,770.3) (5,643.4) Combined tax rate of corporate income tax and State 1, ,821.7 Profit Share of 50% Fluctuations from statutory rate: Tax deduction not expensed 2, Settlement of losses with no cash settlement (387.6) (177.0) (400.1) Other movements (1,204.0) 27.0 (640.2) Tax (charge)/credit 2, ,295.2 Deferred taxes for the period ( 1000) Unaudited Tax losses Provisions Other Total At 31 December restated 10, (2,208.2) 7,916.9 (Charged)/credited to: Profit and loss account At 30 June , (2,170.6) 8,689.4 (Charged)/credited to: Profit and loss account 2,543.2 (39.3) (981.2) 1,522.7 At 31 December , (3,151.8) 10,212.1 (Charged)/credited to: Profit and loss account 2, (41.1) 2,421.5 At 30 June , (3,192.9) 12,633.6 The significant deferred tax assets at the end of the year relate primarily to the corporate income tax losses that can be carried for a period of nine years from the originating year and State Profit Share losses that can be carried forward indefinitely. Management expects to recover these losses against future profits. 18

19 Note 7 Intangible assets Unaudited ( 1000) Licenses* Acquisition cost Additions - Disposals - Reclassification - Acquisition cost Accumulated depreciation and impairments Depreciation - Impairment - Accumulated depreciation and impairments Book value Acquisition cost Additions* 1,803.2 Disposals - Reclassification - Acquisition cost ,803.2 Accumulated depreciation and impairments Depreciation - Impairment - Accumulated depreciation and impairments Book value ,803.2 Acquisition cost Additions* 1,803.2 Disposals - Reclassification - Acquisition cost ,803.2 Accumulated depreciation and impairments Depreciation (36.4) Impairment - Accumulated depreciation and impairments (36.4) Book value ,766.8 *see note 14 Licences are depreciated over the licence period of 24 years. 19

20 Note 8 Tangible fixed assets ( 1000) Unaudited Unaudited Unaudited Unaudited Production Fixtures facilities and fittings, Assets under including office construction wells equipment Total Acquisition cost , ,491.2 Additions Other movements Reclassification Acquisition cost , ,588.4 Accumulated depreciation and (5,761.6) - - (5,761.6) impairments Depreciation Impairment (61.7) - - (61.7) Accumulated depreciation and impairments (5,823.3) - - (5,823.3) Book value , ,765.1 Acquisition cost , ,588.4 Additions Other movements (86.2) - - (86.2) Reclassification Acquisition cost , ,860.3 Accumulated depreciation and (5,823.3) - - (5,823.3) impairments Depreciation Impairment Accumulated depreciation and impairments (5,823.3) - - (5,823.3) Book value , ,037.0 Acquisition cost , ,860.3 Additions 21, ,157.0 Other movements Reclassification Acquisition cost , ,160.7 Accumulated depreciation and (5,823.3) - - (5,823.3) impairments Depreciation Impairment Accumulated depreciation and impairments (5,823.3) - - (5,823.3) Book value , ,

21 Note 8 Tangible fixed assets (cont d) H1 H Depreciation in the Income statement ( 1000) Depreciation of tangible fixed assets Depreciation of intangible assets Total depreciation in the Income statement Impairment in the Income statement ( 1000) Impairment/(reversal) of tangible fixed assets Total impairment in the Income statement Note 9 Other short-term receivables ( 1000) Project invoices in advance of work done 2, VAT receivable Total other short-term receivables 2,

22 Note 10 Cash and cash equivalents The item 'Cash and cash equivalents' consists of bank accounts and bond related restricted cash balances. The restricted funds relate to four quarters of interest payments on the bond and the remaining amount relates to funds available in specified tranches after final investment decision. Final investment decision of the project was taken on 11 January ( 1000) Cash in hand Bank accounts 51, ,529.2 Restricted funds 9, ,857.1 Cash and cash equivalents 60, ,386.3 Note 11 Provision for abandonment liabilities ( 1000) Provisions as of beginning of the period Accretion expense present value calculation (1.6) Change in estimates (86.3) Total provision for abandonment liabilities Break down of the provision to short-term and longterm liabilities Short-term Long-term Total provision for abandonment liabilities During 2018, the discount rate on the abandonment liabilities has been changed to 5.3% (2017: 8.5%) which allows for a net discount of 3% (2017: net 6.2%), after inflation 2.3% (2017: 2.3%). This has resulted in an increase in the abandonment provision shown under change in estimates. The underlying cost of abandonment in real terms has not changed since 31 December Note 12 Bonds ( 1000) TULIP Senior secured bond ** 85, ,322.2 Bond setup costs (2,189.8) - (2,417.6) Long-term bonds 83, ,904.6 ** The loan of 87 million (face value) is denominated in and runs from October 2017 to September 2022 and carries an interest rate of 3 month EURIBOR + 8.5%. The principal falls due on September 2022 and interest is paid on a quarterly basis. Tulip Oil Netherlands Offshore B.V. is the issuer of the Bond and Tulip Oil Netherlands B.V. and Tulip Oil Holding B.V. are Guarantors. 22

23 Note 12 Bonds (cont d) ln respect of the bond the following pledges are required: Tulip Oil Holding B.V. lntra-group Loan Pledge over all intra-group loans made by the Ultimate Parent to the Parent, granted by the Ultimate Parent in favour of the Bond Trustee on first priority, as security for the obligations and liabilities; Tulip Oil Netherlands B.V. Share Pledge over all of the shares in the Parent, granted by the Ultimate Parent in favour of the Bond Trustee on first priority, as security for the obligations and liabilities; Tulip Oil Netherlands B.V. Subordinated Loans Pledge over all Subordinated Loans made by the Parent to the lssuer, granted by the Parent in favour of the Bond Trustee on first priority, as security for the obligations and liabilities; A Dutch law governed omnibus pledge granted by Tulip Oil Netherlands Offshore B.V. in favour of the bond holders on first priority, as security for the obligations and liabilities comprising: (a) a receivables pledge of all of Tulip Oil Netherlands Offshore B.V.'s monetary claims under or with respect to any insurances required to be taken out; (b) a receivables pledge over each of Tulip Oil Netherlands Offshore B.V.'s existing bank accounts held with Dutch banks (except for the Escrow Account and the Debt Service Retention Account related to the bond); (c) a receivables pledge over the earnings from the sale of hydrocarbons; and (d) a receivables pledge over monetary claims under or with respect to any loans granted by the Tulip Oil Netherlands Offshore B.V. to another Group Company. A voluntary repayment option exists to redeem the outstanding bonds at set prices at specified periods upto April Note 13 Interest bearing loans from affiliates ( 1000) Balance at the beginning of the year 8, , ,651.6 Movements during the year: Additions - 2, ,865.0 Repayments - - (2,000.0) Conversion from loan to equity - - (20,516.6) Balance at the end of the year 8, , ,000.0 Tulip Oil Netherlands Offshore B.V. has entered into a loan agreement with Tulip Oil Netherlands B.V. to finance the purchase of the licence interest in Q7 and Q10A. The loan is unsecured, bears an interest rate of 8.4% per annum and is repayable by 1 January During 2017 a loan to equity swap of 20,516.6 thousand was effected to increase share premium and reduce the loan amount. Note 14 Other current financial liabilities ( 1000) Interest due on TULIP bond 1, ,335.2 Total other current financial liabilities 1, ,

24 Note 15 Contingent liabilities ln January 2015 TON purchased 30% of the license of Q7-Q10A from PA Resources Ltd. ln this contract there is a contingent liability to pay PA Resources GBP 1,600,000 following and provided that TON shall have fully recovered all of its Qualifying Cost and Expenses up to the Point of Break Even, in respect of that development. On 17 July 2015 Tulip Oil Netherlands B.V. entered into a sale and purchase agreement with Tulip Oil Netherlands Offshore B.V. to transfer the license of Q7-Q10A. This transaction was completed on 13 August 2015 and hence this contingent liability has been transferred to Tulip Oil Netherlands Offshore B.V. ln 2017 this amount has been recorded within other non-current liabilities given approval of the Q10A project in January Note 16 Guarantees On 25 October 2017 Tulip Oil Netherlands Offshore B.V. has entered into a Senior Secured Callable Bond Issue (hereafter Bond ) agreement for the amount of 87 million. Tulip Oil Netherlands Offshore B.V. is the issuer of the Bond and Tulip Oil Netherlands B.V. is a Guarantor. For the first Escrow Account Release the following securities are given by Tulip Oil Netherlands B.V.: - A Dutch law pledge over the entire share capital of Tulip Oil Netherlands Offshore B.V. (which, i.a., will contain an undertaking to pledge future shares); - A Dutch law receivables pledge over all Subordinated Loans to Tulip Oil Netherlands Offshore B.V. (which, i.a., will contain an undertaking to pledge future Subordinated Loans); - A Norwegian law personal guarantee. 24

25 Appendix 1 Risk Factors The Company's activities expose it to a variety of operational and financial risks, including without limitation, general oil and gas industry risks, specific risks related to the business, credit risk, currency risk, interest risk and liquidity risk. The half year financial do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Company s audited annual financial statements as at 31 December There have been no significant changes in any risk management policies since year end. 25