Prospectus. Northern Offshore, Ltd. (an exempted company incorporated under the laws of Bermuda) (Registration number 28861)

Transcription

1 Prospectus Northern Offshore, Ltd. (an exempted company incorporated under the laws of Bermuda) (Registration number 28861) Listing of the Company s shares on Oslo Børs ASA This Prospectus does not constitute an offer to buy, subscribe or sell the securities described herein. This Prospectus serves as a listing Prospectus as required by applicable laws and no securities are being offered or sold pursuant to this Prospectus. Managed by 30 August 2007

2 Important information This Prospectus has been prepared in connection with the application for listing (the Listing ) of 141,944,278 of the shares of Northern Offshore, Ltd. (the Company or Northern Offshore ) on Oslo Børs. For the definitions of terms used throughout this Prospectus, see section 17 Definitions and Glossary of Terms of this Prospectus. The Company has furnished the information in this Prospectus. The Manager makes no representation or warranty, expressed or implied, as to the accuracy or completeness of such information, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by the Manager. This Prospectus has been prepared to comply with the Norwegian Securities Trading Act and related secondary legislation, including the EC Commission Regulation EC/809/2004. Oslo Børs has reviewed and approved this Prospectus in accordance with the Norwegian Securities Trading Act section 5-7. This Prospectus has been published in an English version only. All inquiries relating to this Prospectus should be directed to the Company or the Manager. No other person has been authorised to give any information about, or make any representation on behalf of, the Company in connection with the Listing and, if given or made, such other information or representation must not be relied upon as having been authorised by the Company or the Manager. The information contained herein is as of the date hereof and subject to change, completion or amendment without notice. There may have been changes affecting the Company or its subsidiaries subsequent to the date of this Prospectus. Any new material information and any material inaccuracy that might have an effect on the assessment of the Shares arising after the publication of this Prospectus and before the Shares are listed on Oslo Børs, will be published and announced promptly as a supplement to this Prospectus in accordance with section 5-15 of the Norwegian Securities Trading Act. Neither the delivery of this Prospectus nor the completion of the Listing at any time after the date hereof will, under any circumstances, create any implication that there has been no change in the Company s affairs since the date hereof or that the information set forth in this Prospectus is correct as of any time since its date. The distribution of this Prospectus may in certain jurisdictions be restricted by law. Persons in possession of this Prospectus are required to inform themselves about and to observe any such restrictions. The contents of this Prospectus are not to be construed as legal, business or tax advice. Each reader of this Prospectus should consult with its own legal, business or tax advisor as to legal, business or tax advice. If you are in any doubt about the contents of this Prospectus, you should consult your stockbroker, bank manager, lawyer, accountant or other professional adviser. In the ordinary course of their respective businesses, the Manager and certain of its affiliates have engaged, and may continue to engage, in investment and commercial banking transactions with the Company and its subsidiaries. Without limiting the manner in which the Company may choose to make any public announcements, and subject to the Company s obligations under applicable law, announcements relating to the matters described in this Prospectus will be considered to have been made once they have been received by Oslo Børs and distributed through its information system. Investing in the Company s Shares involves risks. See section 2 Risk Factors of this Prospectus.

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4 TABLE OF CONTENTS 1. SUMMARY RISK FACTORS RESPONSIBILITY FOR THE PROSPECTUS NOTICE REGARDING FORWARD-LOOKING STATEMENTS THE LISTING PRESENTATION OF THE COMPANY MARKET OVERVIEW CONSOLIDATED FINANCIAL INFORMATION OPERATING AND FINANCIAL REVIEW CAPITAL RESOURCES BOARD OF DIRECTORS, MANAGEMENT AND EMPLOYEES SHARE CAPITAL AND SHAREHOLDER MATTERS SECURITIES TRADING IN NORWAY TAXATION LEGAL MATTERS ADDITIONAL INFORMATION DEFINITIONS AND GLOSSARY OF TERMS...85 APPENDICES APPENDIX 1: MEMORANDUM OF ASSOCIATION... A 1 APPENDIX 2: BYE-LAWS... A 29 APPENDIX 3: CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2007 AND DECEMBER 31, 2006 AND FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2007 AND 2006 WITH AUDITORS STATEMENT... A 54 APPENDIX 4: UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2006 AND SIX-MONTH PERIOD ENDED JUNE 30, 2007 WITH AUDITORS STATEMENT... A 67 APPENDIX 5: ANNUAL REPORT FOR 2006 WITH AUDITORS STATEMENT... A 76 APPENDIX 6: ANNUAL REPORT FOR 2005 WITH AUDITORS STATEMENT... A 86 APPENDIX 7: ANNUAL REPORT FOR 2004 WITH AUDITORS STATEMENT... A 96 1

5 1. SUMMARY The following summary should be read in conjunction with, and is qualified in its entirety, by the more detailed information and the Appendices appearing elsewhere in this Prospectus. Any decision to invest in the Shares should be based on consideration of the Prospectus as a whole by the investor. In case a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation, have to bear the cost of translating the Prospectus before legal proceedings are initiated. Civil liability attaches to those persons who have tabled the summary including any translation thereof, and applied for its notification, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus. 1.1 DESCRIPTION OF NORTHERN OFFSHORE Introduction Northern Offshore, Ltd. is a Bermuda registered holding company engaged in the business of owning and operating offshore drilling rigs and other vessels to be used in the exploration, production and transportation of crude oil and natural gas. The Company owns and operates the floating production facility Northern Producer, the semi-submersible drilling rig Galaxy Driller and the drillship Energy Searcher. On June 15, 2007, the Company purchased three additional harsh environment jack-up rigs from A.P.Møller-Maersk A/S; the Maersk Exerter, the Maersk Endeavour and the Maersk Enhancer which have since been renamed Energy Exerter, Energy Endeavour and Energy Enhancer respectively. The Company s strategy is to be a leading supplier of drilling equipment and services to the offshore shallow to mid water exploration and development market segment. The Company s focus will be to provide well maintained and efficient drilling vessels operated by highly experienced and capable personnel. Geographically, the Company will focus on those areas where it has current operations, namely being SE Asia and the North Sea. Other areas of operation may be considered, depending on supply and demand market drivers. The Company has taken specific actions over the past two years to refurbish, modify and maintain its current fleet. Within the past year, four of the Company s six assets have undergone their 5 year Special Periodic Survey (SPS) and another one will undergo its five year SPS in October The Company focuses on high efficiency ratings and client satisfaction as part of its operating strategy. The Company seeks to identify, attract and retain highly qualified personnel necessary to achieve its operational objectives. Such steps include training up individuals who have the aptitude and desire to become a member of a functionally superior team. In addition, the Company has expanded its typical employee search base to include all areas in which petroleum and natural gas operations take place. The Company has put in place retention packages that include savings schemes and bonus plans. Finally, the Company continuously monitors worldwide pay packages and strives to be in the upper 25% quartile in its pay scheme. The Company will focus its growth strategy on the shallow to midwater market segment through asset acquisitions, company mergers and combinations. On the asset side, the Company expects a number of opportunites to materialize as larger drilling contractors rationalize their asset base and unload their older assets. Through the listing of its Shares, the Company expects to have an additional avenue of currency to entertain and pursue mergers and combinations. In addition, the Company expects to have better access to capital makets to fund such opportunities History The Company was incorporated on 17 July 2000 through the transfer of the offshore drilling and production assets and liabilities to the Company by Northern Offshore ASA, a Norwegian public limited company listed on Oslo Børs ASA. At that time, the assets transferred to the Company consisted of the semi-submersible floating production vessel Northern Producer, the semi-submersible drilling vessel Galaxy Driller, and the drillships Northern Explorer II and Northern Explorer III. The liabilities assumed by the Company included USD 340 million of US Senior Secured 10% notes due in

6 Northern Explorer II and Northern Explorer III. The liabilities assumed by the Company included USD 340 million of US Senior Secured 10% notes due in In September 2000, Northern Offshore s shares were distributed to the shareholders of Northern Offshore ASA, completing the relocation of the Company from Norway to Bermuda. The Company subsequently acquired the drillship Northern Discoverer I. In October 2000, the shares of Northern Offshore were listed on Oslo Børs. In June 2001, Northern Offshore acquired the drillship Energy Searcher along with the associated Singapore management company Jet Drilling (Singapore) Pte. Ltd ( Jet Drilling ). After the failure of Northern Offshore to service its bond debt, provisional liquidators were appointed over Northern Offshore in July 2004 and a scheme of arrangement was prepared for the restructuring of the Company (the Scheme of Arrangement ). Between July 2004 and March 2005, Northern Offshore sold the Northern Explorer II, the Northern Explorer III and the Northern Discoverer I. The Scheme of Arrangement became effective on 30 May The bondholders completed a debt for equity swap after which they held 98% of the Company s share capital. The existing shareholders retained ownership of 2% of the share capital. A newly elected Board of Directors was put in place and the Company continued operations. In January 2006, the Company reached an agreement with Seadrill Limited and Seadrill Management (S) Ltd. ( Seadrill ), with whom it had temporary informal arrangements for the sharing of staff and services, to transition two members of its operational and administrative staff to Seadrill and separate their operational functions and business relationships. Seadrill is affiliated with Tor Olav Trøim, a director of the Company. On 8 December 2006, the Company offered its shareholders the opportunity to swap their shares in certificated form for corresponding interests in VPS registered shares and to participate in the Norwegian market through registration on the OTC List with the Norwegian Securities Dealers Association. As a consequence of the offer and recent conversions, a total of 141,944,278 shares are currently registered in the Norwegian VPS, representing 92.7% of the Company s issued and outstanding shares. On 1 June 2007, the Company entered into an agreement with A.P. Møller-Maersk A/S to acquire three 300 harsh environment jack-up drilling units (the Maersk Acquisitions ); the Maersk Exerter, the Maersk Endeavour and the Maersk Enhancer. The gross purchase price was USD 455 million evenly allocated across the three rigs. The closing and delivery of the rigs took place on 15 June On 7 June 2007, the Company completed a directed share placement of 9.1 million shares at a subscription price of NOK 33 per share, with gross proceeds from the equity issue amounting to NOK 300 million, or approximately USD 50 million. The purpose of the share issue was to strengthen the Company s working capital in connection with the Maersk Acquisitions. On 12 June 2007, the Company raised USD 100 million through issuance of a 3-year senior secured bond loan (the Bond Loan ) with an interest rate of 3 month LIBOR rate p.a. plus an interest margin of 4.5% p.a. The Bond Loan was disbursed on 13 June 2007 and will mature on 14 June The proceeds of the Bond Loan were used by the Company to pay, in part, the USD 455,000,000 purchase price payable in connection with the Maersk Acquisitions. On 14 June 2007, the Company entered into a Secured Term Loan Facility Agreement (the Term Loan Agreement ) with certain financial institutions, as lenders, and DnB NOR Bank ASA, New York Branch, as agent. The Term Loan Agreement provides for a USD 300,000, month term loan facility (the Term Loan ) maturing on 14 March The interest rate applicable to the Term Loan Agreement is equal to the applicable 1, 3 or 6 months LIBOR rate p.a., in each case, plus an interest margin of 1.75% p.a. The proceeds from the Term Loan were used by the Company to pay, in part, the USD 455 million purchase price payable in connection with the Maersk Acquisitions. 3

7 1.1.3 Business and market description The Company is today an active and competitive drilling contractor which provides high quality and costefficient drilling and production services to the shallow and intermediate water depth market segment of the petroleum and natural gas industry. Currently, four of the Company s six vessels are on contract or are expected to be on contract in the near future, and operate in various markets, including the North Sea, the Middle East, the Indian Ocean and Southeast Asia. In the Company s view, the drilling market will show a sustained strong demand for several years ahead. This is mainly due to increasing difficulties with regards to oil recovery from existing wells and the relatively low level of new discoveries. As a consequence, the demand for drilling rigs will increase as oil companies will have strong incentives to make new discoveries. Also, oil prices are expected to remain at a high level going forward, and the incentives for oil companies to produce oil at a high level to maximize cash flow will continue. 1.2 PURPOSE AND BACKGROUND OF THE LISTING The contemplated Listing of the Shares on Oslo Børs is substantiated in the Company s desire to: Facilitate the use of more efficient and viable capital markets in order to raise further equity should this be required; Provide a higher acknowledged regulated marketplace for the trading of the Shares; and Facilitate a satisfactory liquidity in the Shares and thereby make the Shares more attractive as an investment object for existing and new shareholders. 1.3 THE LISTING/ADMISSION TO TRADING The Company applied for listing of the Shares on Oslo Børs on 22 May The board of directors of Oslo Børs resolved to admit the Shares for trading on Oslo Børs at its meeting held on 29 August The first day of trading will be on or about 3 September SUMMARY OF RISK FACTORS A number of risk factors may adversely affect the Company. Below is a summary of the most relevant risk factors described in section 2. Please note that the risks below are not the only risks that may affect the Company s business or the value of the Shares. Additional risks not presently known to the Board or considered immaterial may also impair its business operations and prospects Market risk The Company s business is subject to a number of market risks. This includes risks of a political and geopolitical nature (including the risk of war, armed conflicts and terrorist attacks), as well as risks associated with the demand and supply for its services. The Company s services are provided in an open market characterized by a large number of potential clients and a relatively small number of suppliers. The number of units to supply the market, and the number of companies supplying these units, is rising in response to a generally improved market and a positive outlook for further demand growth. There can be no assurance that the factors supporting this positive outlook will actually materialize. A less positive demand development may lead to an overcapacity of drilling vessels in the future, which may have a negative impact on rates and on the Company s future revenues Operational risk The Company s operations may be subject to a number of risks. This includes risks associated with the length and possible termination of charters, risks associated with the assumption of substantial responsibilities, and risks associated with the service life and technical operation of the Company s vessels. In the course of its activities, the Company may become a party to legal proceedings and disputes. Further, the timing and cost of repairs and maintenance on the Company s vessels may be substantial and difficult to predict. All of these factors could have a significant impact on the Company s financial position. 4

8 1.4.3 Environmental risks Vessels and cargoes are subject to perils particular to marine operations, including capsizing, grounding, collision and loss and damage from severe weather or storms. Such circumstances may result in severe losses and/or damage to property, the environment or persons Adequate insurance protection The Company s operations are subject to risks inherent in the oil and offshore industry. The Company maintains insurance in accordance with industry standards. Its insurance is intended to cover risks associated with the conduct of the business, as well as environmental damage and pollution coverage, but no assurance can be given that the Company will have sufficient insurance cover against all losses Financial risk and risks relating to the Company s shares The Company is exposed to financial risks which include risks for interest rate and currency fluctuations. In addition, its borrowings create leverage which will amplify the effects of rate, cost, and value movements. To the extent that income derived from assets financed with borrowed funds exceeds the interest and other expenses that the Company will have to pay, the Company s net income will be greater than if borrowings were not used. The trading price of the Shares could fluctuate significantly in response to quarterly variations in operating results, adverse business developments, interest rate, changes in financial estimates by securities analysts, matters announced in respect of major customers or competitors, or changes to the regulatory environment in which the Company operates. The market price of the Shares could decline due to sales of a large number of the Shares in the market or the perception that such sales could occur. 1.5 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Board of directors The Northern Offshore Board of directors currently consists of 4 members: Jim LaChance (Director and President), Tor Olav Trøim (director), Kurt Plumer (director) and Nick Vouloumanos (director). A fifth member, Mr. Stephen Knudtzon, has been appointed by the general meeting conditional upon the successful completion of the Listing. Further information is set out in section 11.1 of this Prospectus Management The Company s executive management consist of Richard F. Borghese (Chief Administrative Officer), Roger Goddard (Operations Manager), and Shereen Dawson A.C.A. (Financial Controller). Further information is set out in section 11.3 of this Prospectus Employees The Company currently has a total of 118 employees as the date hereof. The table below illustrates the development in number of employees over the last three financial years, as per the end of each calendar year Number of employees ADVISORS AND AUDITORS Manager The Manager for the Listing is Pareto Securities ASA, P.O. Box 1411 Vika, 0115 Oslo, Norway Legal counsels The Company s Norwegian legal counsel is Thommessen Krefting Greve Lund ( Thommessen ), its special Bermuda legal counsel is Conyers Dill & Pearman and its English and international legal counsel is Bingham McCutchen (London) LLP. 5

9 1.6.3 Independent auditor The Company s independent auditor is PricewaterhouseCoopers, 8 Cross Street #17-00, PWC Building, Singapore , who has acted as the Company s auditors since the financial year ended 31 December Further information is set out in section 8.6 in this Prospectus. 1.7 SUMMARY OF OPERATING AND FINANCIAL INFORMATION The selected financial information set forth in this Prospectus should be read in conjunction with the financial statements and the notes to those statements as set out in Appendices 3, 4, 5 and 6. The financial information set out below has been prepared in accordance with US GAAP Condensed and Consolidated income statement For the three-months period ended For the six-months period ended For the financial year ended USD ( 000) June 30, 2007 (unaudited) June 30, 2006 (unaudited) June 30, 2007 (unaudited) June 30, 2006 (unaudited) (audited) (audited) (audited) Operating revenue 42,452 19,549 84,329 41, ,678 73,863 56,844 Operating expenses (25,088) (17,402) (41,899) (30,965) (65,062) (52,795) (47,520) Operating Income 17,364 2,147 42,430 10,353 47,616 21,068 9,324 Total other (expense)/income, net (513) ,227 (5,682) (19,460) Income before tax 16,851 2,521 42,577 10,867 48,843 15,386 (10,136) Tax expense (291) - (676) (348) (1,268) (1,376) (849) Net Income 16,560 2,521 41,901 10,519 47,575 14,010 (10,985) Basic earnings per share Diluted earnings per share

10 1.7.2 Condensed and consolidated balance sheet USD ( 000) Cash and cash equivalents Restricted cash Trade receivables, net Other current assets Total current assets As of (unaudited) 41,447 42,000 36,988 20,167 As of (unaudited) 35, ,529 2,697 As of (audited) 63, ,381 2,106 As of (audited) 16, ,067 1,780 As of (audited) 12,633 1,350 11,610 8,069 33, ,602 53,412 85,490 35,287 Total non-current assets 586,407 91,105 92,190 97,024 91,551 Total assets 727, , , , ,213 Trade payables 12,702 10,753 4,634 8,317 5,150 Accruals & provisions 11,412 4,486 6,242 5,658 23,846 Amounts due to related party companies 50, Borrowings 67, ,664 Fair value of customer contracts 24, Total current liabilities 166,494 15,290 10,926 14, ,944 Fair value of customer contracts, net of current 19, Borrowings, net of current 332, Total non current liabilities 351, Total liabilities 518,124 15,290 10,926 14, ,944 Paid in capital 153, , , ,254 (21,871) Other reserves 55,631 (24,027) 13,500 (34,971) (48,860) Total shareholders equity 208, , , ,283 (70,731) Total shareholders equity and liabilities 727, , , , , Cash flow statements For the six-month period For the financial year ended ended USD ( 000) (unaudited) (unaudited) (audited) (audited) (audited) Net income 41,901 10,519 47,575 14,010 (10,985) Operating cash flow before working capital changes 51,553 17,360 61,657 25, Net cash provided by operating activities 76,223 19,492 54,678 28,022 14,847 Net cash used in investing activities (455,556) (922) (9,145) (10,183) 372 Net cash provided by/(used in) financing activities 357, (12,989) (11,323) Net increase in cash and cash equivalents (21,804) 18,909 45,872 4,850 3,896 Cash and cash equivalents beginning of period/year 63,003 16,101 16,101 12,633 6,033 Effects of exchange rate changes on cash and cash equivalents ,030 (1,382) 2,704 Cash and cash equivalents at end of year 41,447 35,186 63,003 16,101 12,633 Supplemental disclosure of cash flow information Cash paid during the year for income taxes 1, , ,087 Non-cash investing and financing activity: Conversion of the USD notes and the NOK notes and the related accrued interest into share capital and additional paid-in capital ,125-7

11 1.7.4 Significant changes to the Company s financial or trading position since 30 June 2007 There have been no material changes to the Company s financial or trading position since 30 June PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma condensed combined consolidated statements of income are based on the historical income statements of the Company including the three rigs acquired from Maersk. The unaudited pro forma combined income statements for the year ended 31 December 2006 and half year ended 30 June 2007, have been prepared to give effect to the transaction as if the acquisitions of the three rigs had occurred as of 1 January Both the combined income statements address a hypothetical situation and do not represent the actual consolidated financial statements for the Company for the full year 2006 and first half year There is a greater degree of uncertainty associated with pro forma figures than with actual reported results. The pro forma financial information is based on judgments and assumptions made by the management of the Company that may not necessarily have occurred had the acquisition described been made at an earlier point in time. The following unaudited pro forma condensed combined consolidated statements of income should be read in conjunction with Section

12 1.8.1 Unaudited pro forma condensed combined statement for the financial year ended 31 December 2006 Group (audited) Historical 3 jack-up drilling units (unaudited) Pro forma adjustments (unaudited) Note Pro forma combined (unaudited) Revenue 112,678 76, ,937 Operating expenses Drilling and production expenses (44,342) (35,013) - (79,355) Depreciation (13,979) (40,200) (3,000) 8.5.4(e) (57,179) General and administrative expenses (6,741) (7,825) (2,903) 8.5.4(f) (17,469) Amortisation of fair value of customer contracts , (g) 24,835 Total operating expenses (65,062) (83,038) 18,932 (129,168) Operating income 47,616 (6,779) 18,932 59,769 Other income/(expense), net Interest income 1,273-1, (h) 3,121 Interest expense - - (29,837) (i)(j) (29,837) Amortisation of deferred loan fees - - (1,586) (k) (1,586) Other financial items (46) - (92) (e) (138) Total other income/(expense), net 1,227 - (29,667) (28,440) Income/(loss) before income taxes 48,843 (6,779) (10,735) 31,329 Income tax expense (1,268) (2,288) - - (3,556) Net income/(loss) 47,575 (9,067) (10,735) 27,773 Earnings per share (US$) Basic Diluted Weighted average common shares used in per share calculation ( 000) Basic 144, ,100 Diluted 144, ,100 9

13 1.8.2 Unaudited pro forma condensed combined consolidated statements of income for the six-month period ended 30 June 2007 Group (unaudited) Historical 3 jack-up drilling units (unaudited) Pro forma adjustments (unaudited) Note Pro forma combined (unaudited) Revenue 84,329 49,010 (4,000) (b) 129,339 Operating expenses Drilling and production expenses (28,446) (26,722) 2, (c),(d) (52,652) Depreciation (9,180) (18,446) (1,375) (e) (29,001) General and administrative expenses (5,308) (3,869) 2, (f) (6,274) Amortisation of fair value of customer contracts 1,035-7, (g) 8,608 Total operating expenses (41,899) (49,037) 11,617 (79,319) Operating income 42,430 (27) 7,617 50,020 Other income/(expense), net Interest income 1, (h) 2,601 Interest expense (1,433) - (11,298) (i),(j) (12,731) Amortisation of deferred loan fees (74) - (719) (k) (793) Foreign exchange gain Other financial items (107) (e) (18) Total other income/(expense), net (11,081) (10,934) Income/(loss) before income taxes 42,577 (27) (3,464) 39,086 Income tax expense (676) (1,470) - (2,146) Net income/(loss) 41,901 (1,497) (3,464) 36,940 Earnings per share (US$) Basic Diluted Weighted average common shares used in per share calculation ( 000) Basic 144, ,100 Diluted 145, ,100 10

14 1.9 SUMMARY OF CAPITALISATION AND INDEBTEDNESS For further information, please refer to section 10.4 below. USD ( 000) Shareholders equity (A) 208,885 Total current debt 67,500 Total non-current debt 332,500 Total indebtedness (B) 400,000 Total capitalisation (A + B) 608,885 Liquidity (C) 41,447 Current financial receivable (D) - Current financial debt (E) 67,500 Non-current financial debt (F) 332,500 Net financial indebtedness (C+D-E-F) (358,553) 1.10 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS Major shareholders As of 30 August 2007, the Company had 1,825 shareholders in total registered in the VPS, of which 1,726 are identified as Norwegian and 99 are identified as non-norwegian. The shareholders recorded in VPS with a shareholding of 5% or more at the same date are shown in the table below: Shareholder No of shares Percentage 1 Goldman Sachs & Co. Equity Nontreaty Cust. 25,915, Morgan Stanley & Co. Inc. 23,867, Geveran Trading Co. Ltd. 20,115, JPMorgan Chase Bank S/A Escrow Account 12,413, Deutsche Bank AG London 9,235, Credit Suisse Securities (Europe) 7,195, Not all of the Company s total issued 153,099,980 shares are registered in the VPS. A total of 141,944,278 shares are registered in the VPS and trade on the OTC, representing 92.7% of the Company s total issued share capital. However, the Company expects that either prior to or subsequent to the Listing, the remaining shareholders will be offered the opportunity to exchange their current shares registered in Bermuda into corresponding interests in VPS-registered shares. The Company is not aware of any other shareholders or consolidated groups of shareholders owning more than 5% of the shares or being in position to take control over the Company Related party transactions In January 2006, Jet Drilling entered into an agreement with Seadrill Ltd. and Seadrill Management (S) Pte Ltd ( Seadrill ) whereby the then employees of Jet Drilling, Mr. Hans van Roijen and Ms. Lee Geok Hiang, resigned from Jet Drilling to work for Seadrill (the Seadrill Agreement ). Seadrill is a company affiliated with Tor Olav Trøim, a director of the Company Internal Bareboat Charters The Company has two internal bareboat charters between respectively Qualimar and Sea Production in respect of Northern Producer and Jet Holding and Jet Shipping in respect of Energy Searcher. Both agreements are 11

15 entered into on standard Bimco Barecon 89 forms. In 2006, the total yearly rate paid by Sea Production to Qualimar was approximately USD 20 million. The total yearly rate in 2006 paid by Jet Shipping to Jet Holding was approximately USD 2.6 million. Following the completion of the Maersk Acquisitions, each of the Energy Exterter Limited, Energy Endeavour Limited and Energy Enhancer Limited have entered into internal bareboat charters with Energy Offshore Limited, in respect of the Energy Exerter, the Energy Endeavour and the Energy Enhancer respectively ADDITIONAL INFORMATION Share capital and shareholder matters The Company was incorporated on 17 July 2000 with registration number and is a Bermuda exempted company organised in accordance with Companies Act 1981 of Bermuda. The Company s authorised share capital is USD 48,500,000, divided into 194 million shares of par value USD 0.25 each. The Company s issued share capital is USD 38,274,995 divided into 153,099,980 Shares with a nominal value of USD 0.25 each, issued in accordance with Bermuda law. All issued Shares in the Company are vested with equal shareholder rights in all respects. There is only one class of shares, and all Shares are freely transferable, save that the Board (i) shall refuse to register a transfer unless all applicable consents, authorisations and permissions of any governmental body or agency in Bermuda have been obtained, (ii) may refuse to register the transfer of Shares if the transfer would result in Norwegian Controlled Foreign Corporation (NOKUS) taxation of its Norwegian shareholders (i.e. that the Norwegian shareholders would be taxed directly for all profits achieved by the Company on a current basis, irrespective of their status as shareholders, ref. section 14.2 Taxation Norway below, and (iii) may refuse to register a transfer if the Board is of the opinion that such transfer might breach any law or requirement of any authority or any listing exchange. See section 12 Share Capital and Shareholder Matters for a further description of the Company s share capital. The majority of the shares are registered in the VPS through a depositary agreement with Nordea Bank Norge ASA with the ISIN code: BMG 6635W1029. Nordea Bank Norge ASA is registered in the Company s register of members in Bermuda as the holder of such shares and holds them as a depositary in order to maintain and register the Shares in the VPS system Memorandum of Association and Bye-laws The Company s Memorandum of Association and Bye-laws are included as Appendix 1 and 2 to this Prospectus. The Company s objects are set out in section 6 of the Company s Memorandum of Association and described in section Documents on display For the life of this Prospectus, the following documents may be inspected as indicated in the list below: The Memorandum of Association and Bye-Laws of the Company may be inspected at the Company s offices at 300 Beach Road, Singapore or Four Houston Center, 1221 Lamar, Suite 1130, Houston, Texas, USA or requested by telefax to or or The Company s Memorandum of Association and Bye-laws may be inspected in this Prospectus as Appendix 1 and 2 or on the Company s web-site The Company s second quarter report for 2007 may be inspected in Appendix 3 or on the Company s website The pro forma condensed combined consolidated statement of income for the year ended 31 December 2006 and for the six-month period ended 30 June 2007 may be inspected in Appendix 4 to this Prospectus. The Company s consolidated historical financial information for the twelve months ended 31 December 2006 and auditors report may be inspected in Appendix 5 to this Prospectus or on the Company s website 12

16 The consolidated historical financial information and auditors report for the financial years 2004 and 2005 for the Company and its subsidiaries may be inspected in Appendices 6 and 7 to this Prospectus or on the Company s website Third party statements Information contained in this Prospectus which has been sourced from third parties has been accurately reproduced and, as far as the Company is aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. 13

17 2. RISK FACTORS 2.1 GENERAL Investing in Northern Offshore involves inherent risks. Prospective investors should consider, among other things, the risk factors set out in the Prospectus before making an investment decision. The risks described below are not the only ones facing the Company. Additional risks not presently known to the Company or that the Company currently deems immaterial may also impair the Company s business operations and adversely affect the price of the Company s Shares. If any of the following risks actually occur, Northern Offshore s business, financial position and operating results could be materially and adversely affected. A prospective investor should consider carefully the factors set forth below, and elsewhere in the Prospectus, and should consult his or her own expert advisors as to the suitability of an investment in the Shares of the Company. An investment in the Shares is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of all or part of the investment. The information herein is presented as of the date hereof and is subject to change, completion or amendment without notice. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. Forward-looking statements will, however, be updated if required by applicable law or regulation. Investors are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and the actual results, performance or achievements of the Company may differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Factors that could cause or contribute to such differences include, but are not limited to, those described below and elsewhere in this Prospectus. 2.2 FINANCIAL RISK Interest rate and currency fluctuations The Northern Offshore Group will be exposed to risks due to fluctuations in interest and exchange rates. Northern Offshore will attempt to minimise these risks by implementing hedging arrangements as appropriate, but will not be able to avoid these risks. The value of non-usd currency denominated charter contracts will be affected by changes in currency exchange rates or exchange control regulations. Currency exchange rates are determined by forces of supply and demand on the currency exchange markets. These forces are affected by the international balance of payments, economic and financial conditions, government intervention, speculation and other factors. Changes in currency exchange rates relative to the USD will affect the USD value of the Northern Offshore Group s assets and thereby impact upon the Northern Offshore Group s total return on such assets. Currency fluctuations relative to the USD of an investor s currency of reference may adversely affect the value of an investor s investments Borrowing and leverage Borrowings create leverage. To the extent income derived from assets obtained with borrowed funds exceeds the interest and other expenses that the Northern Offshore Group will have to pay, the Northern Offshore Group s net income will be greater than if borrowings were not made. Conversely, if the income from the assets obtained with borrowed funds is not sufficient to cover the cost of such borrowings, the net income of the Northern Offshore Group will be less than if borrowings were not made. The Northern Offshore Group will borrow only when it is believed that such borrowings will benefit the Northern Offshore Group after taking into account considerations such as the costs of the borrowings and the likely returns on the assets purchased with the borrowed monies, but no assurances can be given that the Company will be successful in this respect Fluctuating value of the fleet The value of the rigs and vessels owned by the Northern Offshore Group may fluctuate with market conditions. Any downturn in the market could have a material adverse effect on the Northern Offshore Group s liquidity and may result in breaches of its financial obligations. In such a case, sales of the Northern Offshore Group s rigs and vessels could be forced at prices that represent a potential loss of value. 14

18 2.3 OPERATIONAL RISK Project risk It is customary in the business in which the Northern Offshore Group operates that all contracts are charter related, e.g. structured as timecharters or bareboat charters. The rationale for this is that oil service companies provide a service where the schedule and scope of work is controlled and ultimately directed by its customers. In some instances market participants may accept fixed prices for certain components of the overall contract workscope. Such instances include mobilisation and demobilisation of a unit to/from a worksite, and the conversion/upgrade of units to meet specific requirements as may be required for a specific project. The Northern Offshore Group s corporate policy is to mitigate project risk at all times by having a strict policy on termination risk, breakdown risk, off-hire situations, force majeure risk etc, and always to find the right balance and use the best practice available to ensure that project risk is reduced to a minimum. However, there can be made no assurance that the Company will be able to sufficiently mitigate these project risks Vessel operation The Northern Offshore Group s fleet will be exposed to operational risks associated with offshore operations, such as breakdown, bad weather, technical problems, force majeure situations (nation wide strikes etc), collisions and grounding, that may have a material adverse effect on the earnings and value of the Northern Offshore Group Political instability Many of the areas where the Northern Offshore Group has potential business partners and where its rigs or vessels may be located are characterised by political instability. The rigs and vessels may be located in the immediate proximity of platforms, floating production vessels and other offshore oilfield infrastructure which could be subject to terrorist attacks. This may represent a security risk exposure to the units. Even though the rigs and vessels have insurance cover against terrorist attacks, such an incident could result in a substantial loss of revenue and large policy claims to be handled, and no assurance can be given that the Northern Offshore Group will have sufficient insurance cover in place to cater for any such losses Insurances Operational risks can cause personal injury, the loss of a unit, operational disruption, off hire and termination of contract. In order to mitigate these risks, the Northern Offshore Group has instigated an insurance program in line with market practice, and additional insurance is always considered when a specific project is considered to be of a high risk nature. This can include loss of hire coverage notwithstanding that such insurance is costly, but no assurance can be given that the Company will have sufficient insurance cover against all such losses Laws and regulations Due to changing community expectations and the direct impact of various oil spill incidents around the world in recent years, regulation of uncontrolled discharges to the marine environment via international conventions and legislation has become increasingly stringent and thus potentially poses a material risk to the Northern Offshore Group. In addition to those laws and regulations which apply to the Northern Offshore Group in a country of operation, oil companies typically attempt to devolve increased risk and liability to the contractor and require indemnification for an increased range of pollution events which can impact negatively on insurance premiums and cause substantial losses to the Northern Offshore Group if such an indemnity were triggered. Laws and regulations also affect the construction and ongoing operational cost of the rigs and vessels of the Northern Offshore Group as health and safety requirements become progressively stringent over time. The Northern Offshore Group s rigs and vessels are outfitted with modern equipment that meets prevailing (as opposed to historical) standards and the cost to maintain compliance with these standards increases each year Accidents Offshore drilling rigs are working in harsh environments. There are several factors that can contribute to an accident including, but not limited to, human errors, weather conditions and faulty constructions. 15

19 2.4 COMMERCIAL RISK Northern Offshore may assume substantial responsibilities It should be emphasised that contracts in the offshore sector require high standards of safety, and it is important to note that all offshore contracts are associated with considerable risks and responsibilities. These include both technical, operational, commercial, financial and political risks. The Northern Offshore Group will obtain insurances deemed adequate for its business, but it is impossible to insure against all applicable risks and liabilities. For instance, under some contracts the relevant entity in the Northern Offshore Group may have unlimited liability for losses caused by its own gross negligence, whereas such liability in general will not be covered by insurance policies. The Northern Offshore Group may also incur liability for pollution and other environmental damage without being able to recover said liabilities through insurances Market risks The demand for rigs and vessels will always fluctuate pending global market drivers such as global oil and gas price levels, political climate, economical climate, operators willingness to invest etc. Fluctuations in the oil price have historically been shown to have a significant impact on the demand for services such as those the Northern Offshore Group will be providing. New entrants in the market could also have a negative effect on the contractual prices as well as market value of the Northern Offshore Group s fleet Political and regulatory risks Changes in the legislative and fiscal framework governing the activities of the oil companies could have a material impact on exploration and development activity in general or affect the Northern Offshore Group s operations directly. In particular, changes in political regimes will constitute a material risk factor for the Northern Offshore Group s operations in foreign countries. As many of the Northern Offshore Group s potential business partners and locations are located at highly sensitive areas from a political point of view, this is a risk factor that has to be taken into consideration Requisition or arrest of the vessels Rigs and vessels could be requisitioned by a government in the case of war or other emergencies or become subject to arrest. This could significantly and adversely affect the earnings of the relevant unit and the Company as well as the Company s liquidity forecast Oil prices Historically, demand for offshore exploration, development and production services have been volatile and closely linked to the price of hydrocarbons. Low oil prices typically lead to a reduction in exploration drilling as the oil companies scale down their investment budgets. The sharp reduction in production costs on new oil fields will reduce the strong historical correlation between dayrates and oil prices. Nevertheless, a decrease in the oil prices may have a material adverse impact on the financial position of the Northern Offshore Group Service life and technical risks The service life of a rig and/or vessel is generally assumed to be more than 30 years, but will ultimately depend on their efficiency. There can be no assurance that the Northern Offshore Group s rigs and vessels will be successfully deployed for such period of time. There will always be some exposure to technical risks, with unforeseen operational problems leading to unexpectedly high operating costs and/or lost earnings, which may have a material adverse effect on the financial position of Northern Offshore Credit risk of clients Lack of payments from customers/clients may significantly and adversely impair the Company s liquidity. Northern Offshore gives due consideration to the credit quality of its potential clients during contract negotiations to minimize the risk of payment delinquency, but no assurance can be given that the Northern Offshore Group will be able to avoid this risk Failing to obtain Contracts for the units Northern Offshore has established a capital and financing structure which it believes is optimal for the realisation of its corporate strategy given the operating assets acquired, the refurbishment programmes and the 16

20 prospects for contracts for the units. There are also certain contingency plans established in order to be able to handle unforeseen delays in expected contracts for the units. However, if a delay in obtaining a contract for one or more of the units extends beyond such contingency period, the Company may have to obtain additional financing. 2.5 RISK IN CONNECTION WITH THE SHARES Absence of prior public market There is currently no public market for the Shares. The Shares have been accepted for listing on Oslo Børs, but no assurances can be given that an active trading market for the Shares will develop, or if such a market develops, that it will be sustained Investment and trading risks in general Any investment in the Shares is associated with an element of risk. Northern Offshore operates in a market featuring open and fierce competition, and a number of factors outside Northern Offshore s control may affect its performance. The price of the Shares will also be subject to fluctuations in line with general movements in the capital markets and the liquidity in the secondary market. Historically, the earnings of offshore service companies and the value of the equipment used have seen major fluctuations Price volatility of publicly traded securities The trading price of the Shares could fluctuate significantly in response to, amongst other factors, quarterly variations in operating results, adverse business developments, interest rate, changes in financial estimates by securities analysts, matters announced in respect of major customers or competitors, or changes to the regulatory environment in which the Company operates. The market price of the Shares could decline due to sales of a large number of the Shares in the market or the perception that such sales could occur. Such sales could also make it more difficult for the Company to offer equity securities in the future at a time and at a price that are deemed appropriate. 17

21 3. RESPONSIBILITY FOR THE PROSPECTUS 3.1 The Board of Directors of Northern Offshore, Ltd. The Board of Directors of Northern Offshore, Ltd. accepts responsibility for the information contained in this Prospectus. The Directors hereby declare that, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import. Singapore, 30 August 2007 The Board of Directors of Northern Offshore, Ltd. Jim LaChance (President) Tor Olav Trøim (Director) Kurt Plumer (Director) Nick Vouloumanos (Director) 18

22 4. NOTICE REGARDING FORWARD-LOOKING STATEMENTS This Prospectus includes forward-looking statements, including, without limitation, projections and expectations regarding the Company s future financial position, business strategy, plans and objectives. When used in this document, the words anticipate, believe, estimate, expect, seek to and similar expressions, as they relate to the Company, its subsidiaries or its management, are intended to identify forwardlooking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company and its subsidiaries, or, as the case may be, the industry, to materially differ from any future results, performance or achievements 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 and its subsidiaries will operate. Factors that could cause the Company s actual results, performance or achievements to materially differ from those in the forward-looking statements include but are not limited to: the competitive nature of the markets in which the Company operates, global and regional economic conditions, government regulations, changes in political events, and force majeure events. Some important factors that could cause actual results to differ materially from those in the forward-looking statements are, in certain instances, included with such forward-looking statements and in the section entitled Risk Factors (section 2) in this Prospectus. 19

23 5. THE LISTING 5.1 REASONS FOR THE STOCK EXCHANGE LISTING The contemplated Listing of the Shares on Oslo Børs is based on the Company s desire to: Facilitate the use of more efficient and viable capital markets in order to raise further equity should this be required; Provide a higher acknowledged regulated marketplace for the trading of the Shares; and Facilitate a satisfactory liquidity in the Shares and thereby make the Shares more attractive as an investment object for existing and new shareholders. 5.2 THE SHARES The Shares and share capital The Company s authorised share capital is USD 48.5 million, divided into 194 million shares of par value USD 0.25 each. The Company s issued share capital prior to the Listing is USD 38,274,995 divided into 153,099,980 Shares with a nominal value of USD 0.25 per Share, fully paid and issued in accordance with the Companies Act 1981 of Bermuda. All issued Shares in the Company carry equal shareholder rights in all respects and no shares have different voting rights. There is only one class of Shares issued and all Shares are freely transferable, save that the Board (i) shall refuse to register a transfer unless all applicable consents, authorisations and permissions of any governmental body or agency in Bermuda have been obtained, (ii) may refuse to register the transfer of Shares if the transfer would result in Norwegian Controlled Foreign Corporation (NOKUS) taxation of its Norwegian shareholders (i.e. that the Norwegian shareholders would be taxed directly for all profits achieved by the Company on a current basis, irrespective of their status as shareholders, ref. section Norwegian Controlled Foreign Corporation Taxation (NOKUS taxation ) below, and (iii) may refuse to register a transfer if the Board is of the opinion that such transfer might breach any law or requirement of any authority or any listing exchange. The majority of the Shares are registered in the VPS through a depositary agreement with Nordea Bank Norge ASA, P.O.Box 1166 Sentrum, 0107 Oslo, Norway, with the ISIN code: BMG 6635W1029. Nordea Bank Norge ASA is registered in the Company s register of members in Bermuda as the holder of such shares and holds them as a depositary in order to maintain and register the shares in the VPS system Legislation and rights attached to the Shares Please refer to the review of legislation and rights attached to the Shares in section 12.7 of the Prospectus Mandatory offer bids As Northern Offshore is a Bermuda company, the Shares are currently not subject to the mandatory offer requirements of the Norwegian Securities Trading Act or any other mandatory offer requirements. The Norwegian Parliament has recently passed a new Norwegian Securities Trading Act of 29 June 2007 No 75 pursuant to which the provisions on mandatory offers will apply to companies with registered office outside Norway provided that their shares are listed on a regulated market in Norway, cf. Chapter 6 of the new Norwegian Securities Trading Act. The mandatory offer provision sets out to implement the EU Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids. Chapter 6 of the new act will enter into force on 1 January See also section 13.9 of the Prospectus for a more detailed description of the new mandatory offer requirements. The Company has not received any takeover bids during the last or current financial years Withholding tax Section of this Prospectus provides information concerning withholding tax for Norwegian shareholders. 20

24 5.3 LISTING ON OSLO BØRS Listing on Oslo Børs The Company s Shares were admitted to listing and trading on Oslo Børs at the meeting of the board of directors of Oslo Børs held on 29 August The first day of listing is expected to be on or about 3 September All Shares issued by the Company that are registered in the VPS will be listed and traded on Oslo Børs from the time of the Listing. Shares issued in future share issues will normally be automatically listed on Oslo Børs as soon as the new shares have been validly issued in accordance with Bermuda law and such shares have been entered into in the VPS system, and, as the case may be, when a required listing prospectus has been issued. In connection with the Listing, the trading facility for the Company s shares on the OTC market maintained by the Norwegian Securities Dealers Association will be discontinued. The Shares will not be trading in any other stock exchange or regulated market, and the Company does not currently have any intention to apply for listing or trading of its shares in other markets Stabilization and market-maker arrangements The Company has not entered into any arrangements to provide market stabilization or trading liquidity, or any other similar arrangements. 5.4 PUBLICATION OF INFORMATION RELATED TO THE LISTING Information related to the Company and the Listing will be published on Oslo Børs company information system, and on the Company s web site. 5.5 MANAGER The Listing is being managed by Pareto Securities ASA, Dronning Maudsgate 3, P.O.Box 1411 Vika, 0105 Oslo, Norway. In its capacity as manager, Pareto Securities ASA has, at the request of and in co-operation with the Board and management of the Company, assisted in the preparation of this Prospectus. While the Manager has endeavored to assist the Company in providing as accurate and complete a presentation of the Company as possible, the Manager has relied on information provided to it by the Company. Accordingly, the Manager is not in a position to assume any responsibility for the information provided herein. The Manager expressly disclaimes any legal or financial liability for the correctness or completeness of the information set out in the Prospectus. Pareto Securities ASA and its employees own in aggregate 336 shares in Northern Offshore as of this date. 5.6 EXPENSES Costs attributable to the Listing will be borne by the Company. The total costs are expected to amount to approximately USD 695,000 including due diligence review, underwriters fees, issuance of the prospectus document and legal fees associated with the listing process. 5.7 JURISDICTION AND CHOICE OF LAW This Prospectus is subject to Norwegian law. Any dispute arising in respect of this Prospectus is subject to the exclusive jurisdiction of Oslo District Court. 21

25 6. PRESENTATION OF THE COMPANY 6.1 INTRODUCTION The Company s legal and commercial name is Northern Offshore, Ltd. The Company is registered in Bermuda with registration number The Company is incorporated as an exempted company organized under the laws of Bermuda. The Company s registered office is at Clarendon House, Church Street, Hamilton HM 11, Bermuda. The Northern Offshore Group s marketing, operations and finance functions are placed with Jet Drilling, a subsidiary of the Company having its principal place of business in Singapore with registered address 300 Beach Road, The Concourse, #11-02/03/04, Singapore , telephone number and facsimile number The Company s web page is HISTORY AND DEVELOPMENT OF THE COMPANY The Company was incorporated on 17 July 2000 through the transfer of the offshore drilling and production assets and liabilities to the Company by Northern Offshore ASA. At that time, the assets transferred to the Company consisted of the semi-submersible floating production vessel Northern Producer, the semisubmersible drilling vessel Galaxy Driller, and the drillships Northern Explorer II and Northern Explorer III. The liabilities assumed by the Company included the USD 340 million of US Senior Secured 10% notes due in In September 2000, Northern Offshore s shares were distributed to the shareholders of Northern Offshore ASA, completing the relocation of the Company from Norway to Bermuda. The Company subsequently acquired the drillship Northern Discoverer I. In October 2000, the shares of Northern Offshore were listed on the Oslo Stock Exchange. In June 2001, Northern Offshore acquired the drillship Energy Searcher along with the associated Singapore management company Jet Drilling. After the failure of Northern Offshore to service its bond debt, Bermuda provisional liquidators were appointed over Northern Offshore in July 2004 and a scheme of arrangement was prepared for the restructuring of the Company (the Scheme of Arrangement ). Between July 2004 and March 2005, Northern Offshore sold the Northern Explorer II, the Northern Explorer III and the Northern Discoverer I. The Scheme of Arrangement became effective on 30 May The bondholders completed a debt for equity swap after which they held 98% of the Company s share capital. The existing shareholders retained ownership of 2% of the share capital. A newly elected Board of Directors was put in place and the Company continued operations. In January 2006, the Company reached an agreement with Seadrill, with whom it had temporary internal arrangements for the sharing of staff and services, to transition two members of its operational and administrative staff to SeaDrill and separate their operational functions and business releationships. Seadrill is affiliated with Tor Olav Trøim, a director in the Company. On 8 December 2006, the Company offered its shareholders the opportunity to swap their shares in certificated form for corresponding interests in VPS registered shares and to participate in the Norwegian market through registration on the OTC List with the Norwegian Securities Dealers Association. As a consequence of the offer and recent conversions, a total of 141,944,278 shares are currently registered in the Norwegian VPS, representing 92.7% of the Company s issued and outstanding shares. On 1 June 2007, the Company entered into an agreement with A.P. Møller-Maersk A/S to acquire three 300 harsh environment jack-up drilling units; the Maersk Exerter, the Maersk Endeavour and the Maersk Enhancer. The gross purchase price was USD 455 million evenly allocated across the three rigs. The delivery of the rigs took place on 15 June On 7 June 2007, the Company completed a directed share placement of 9.1 million shares at a subscription price of NOK 33 per share, with gross proceeds from the equity issue amounting to NOK 300 million, or 22

26 approximately USD 50 million. The purpose of the share issue was to strengthen the Company s working capital in connection with the Maersk Acquisitions. On 12 June 2007, the Company raised USD 100 million through issuance of a 3-year senior secured Bond Loan with an interest rate of 3 month LIBOR rate p.a. plus an interest rate margin of 4.5% p.a. The Bond Loan was disbursed on 13 June 2007 and will mature on 14 June The proceeds of the Bond Loan were used by the Company to pay, in part, the USD 455,000,000 purchase price payable in connection with the Maersk Acquisitions. On 14 June 2007, the Company entered into a Secured Term Loan Facility Agreement with certain financial institutions, as lenders, and DnB NOR Bank ASA, New York Branch, as agent. The Term Loan Agreement provides for a USD 300,000, month term loan facility maturing on 14 March The interest rate applicable to the Term Loan Agreement is equal to the applicable 1, 3 or 6 months LIBOR rate p.a., in each case, plus an interest rate margin of 1.75% p.a. The proceeds from the Term Loan were used by the Company to pay, in part, the USD 455 million purchase price payable in connection with the Maersk Acquisitions. Today, the Company s recently renovated fleet consist of one production unit (the Northern Producer, a semi submersible floating production facility), two drilling units (the Energy Searcher, a drill ship, a semisubmersible drilling rig the Galaxy Driller ), in addition to the three harsh environment jack-up rigs acquired through the Maersk Acquisitions. 6.3 LEGAL STRUCTURE OF NORTHERN OFFSHORE The Company is a group holding company for the subsidiaries set out below. The following chart depicts the Company s corporate structure and includes all companies in the group and their respective jurisdiction of incorporation. All subsidiaries are wholly owned by Northern Offshore Ltd. 23

27 6.4 DESCRIPTION OF THE COMPANIES IN THE GROUP Northern Offshore Ltd. Northern Offshore Ltd. is the holding company of the Northern Offshore Group and is incorporated in Bermuda. Northern Offshore was established as an exempted company in July The Company s main activities are to manage the strategic, legal, corporate and financial matters of the Northern Offshore Group. The Northern Offshore Group has all its assets and operations in 100% (directly and indirectly) owned subsidiary companies Sea Production Ltd. ( Sea Production ) Sea Production is a British Virgin Islands company that bareboat charters the Northern Producer from Qualimar. Sea Production also provide management services in respect of the Northern Producer Katzen International Corp. ( Katzen ) Katzen is a Liberian company. One of Katzen s functions was to hold repurchased bond notes in connection with the restructuring of the Northern Offshore Group. Katzen is effectively dormant and undertakes no operations. The Company will consider dissolving this company following the Listing Jet Drilling (S) Pte. Ltd. ( Jet Drilling ) Jet Drilling is a Singaporean company which is responsible for marketing, operations and finance functions for the Northern Offshore Group. Jet Drilling is the manager of the Energy Searcher and the Galaxy Driller. Certain members of the management team of the Northern Offshore Group are employed by Jet Drilling Splendour III Corp. ( Splendour ) Splendour is incorporated in Liberia and is the holding company of various subsidiaries of the Northern Offshore Group that own the Energy Searcher Qualimar Shipping Company Ltd. ( Qualimar ) Qualimar is a Cypriot company that owns the Northern Producer Merit Maritime Ltd. ( Merit ) Merit is a Liberian company which used to own the Northern Explorer III. Merit remains as a dormant company in the Northern Offshore Group. The Company will consider dissolving this company following the Listing Helm Maritime Corp. ( Helm ) Helm a Liberian company that owns the Galaxy Driller Monarch Sea Carriers Inc. ( Monarch ) Monarch is a Liberian company which used to own the Northern Explorer II. Monarch remains as a dormant company in the Northern Offshore Group. The Company will consider dissolving this company following the Listing Northern Discoverer Inc. ( Discoverer ) Discoverer is a Liberian company which used to own the Northern Discoverer I. Discoverer remains as a dormant company in the Northern Offshore Group. The Company will consider dissolving this company following the Listing. 24

28 Jet Shipping Ltd. ( Jet Shipping ) Jet Shipping is incorporated in St. Vincent and the Grenadines and is the holding company of Jet Holding Ltd, who own the Energy Searcher Northern Offshore Leasing Ltd. ( Northern Offshore Leasing ) Northern Offshore Leasing is a Malaysian management company set up to allow contracts for the Energy Searcher to be entered into Malaysia or countries who have a tax treaty with Malaysia. Northern Offshore Leasing is a wholly owned subsidiary of Jet Shipping Jet Holding Ltd ( Jet Holding ) Jet Holding is a St. Vincent and the Grenadines company that owns the Energy Searcher. Jet Holding is a wholly owned subsidiary of Jet Shipping Energy Enhancer Ltd ( Energy Enhancer ) Energy Enhancer is a British Virgin Islands company that owns the jack-up rig Energy Enhancer purchased from Maersk. Energy Enhancer is a wholly owned subsidiary of Northern Offshore Energy Endeavour Ltd ( Energy Endeavour ) Energy Endeavour is a British Virgin Islands company that owns the jack-up rig Energy Endeavour purchased from Maersk. Energy Endaevour is a wholly owned subsidiary of Northern Offshore Energy Exerter Ltd ( Energy Exerter ) Energy Exerter is a British Virgin Islands company that owns the jack-up rig Energy Exerter purchased from Maersk. Energy Exerter is a wholly owned subsidiary of Northern Offshore Energy Offshore Ltd ( EOL ) EOL is a British Virgin Islands company, wholly owned by Northern Offshore to act as a contractor with third parties in relation to the future operations of the three jack-up rigs acquired from Maersk. 6.5 BUSINESS OBJECTIVES AND STRATEGY Northern Offshore s strategy is to focus its efforts on providing high quality and cost-efficient mobile offshore drilling units (MODU) and floating production facilities (FPF) to the shallow and intermediate water depth market segment of the petroleum and natural gas industry. Through the implementation of this strategy, Northern Offshore seeks to generate superior returns on capital employed to its shareholders. Through Jet Drilling and Sea Production, Northern Offshore will build on its solid reputation in South East Asia and the North Sea as a client oriented service provider. The Company s goals shall be achieved through providing services, on budget and within time, based on proven up to date technology and integrated solutions to satisfy clients to secure repeat and new business. The Company seeks to identify, attract and retain highly qualified personnel necessary to achieve its operational objectives. Such steps include training up individuals who have the aptitude and desire to become a member of a functionally superior team. In addition, the Company has expanded its typical employee search base to include all areas in which petroleum and natural gas operations take place. The Company has put in place retention packages that include savings schemes and bonus plans. Finally, the Company continuously monitors worldwide pay packages and strives to be in the upper 25% quartile in its pay scheme. The Company will focus its growth strategy on the shallow to midwater market segment through asset acquisitions, company mergers and combinations. On the asset side, the Company expects a number of opportunites to materialize as larger drilling contractors rationalize their asset base and unload their older assets. Through the listing of its Shares, the Company expects to have an additional avenue of currency to entertain and pursue mergers and combinations. In addition, the Company expects to have better access to capital makets to fund such opportunities. The Board of Directors and the Management will continue to monitor and improve the Company strategy and wishes to maximise a high return on investment to shareholders. 25

29 6.6 OVERVIEW OF THE COMPANY S ASSETS The assets The Company, through its wholly owned single purpose limited companies, is the owner of the two semisubmersible drilling rigs Galaxy Driller and Energy Searcher. In addition, the Company has acquired the three jack-up drilling rigs Maersk Exerter, the Maersk Endeavour and the Maersk Enhancer. The following table sets forth general technical data for the Company s rigs: The Northern Producer Design: Semisubmersible floating production platform (FPF) of Aker H-3 design Built: 1977 at Trosvik Verft shipyard in Norway Upgraded: 1997 Flag: Cyprus Owner: Qualimar Shipping Ltd. Class: DnV Comment: From , the Northern Producer was converted into an FPF for the Emerald field and subsequently adapted to the Galley field in the UK sector in 1996 and It is able to handle oil production of 55,000 barrels per day, gas production of 60 million cubic feet per day, and water injection of 45,000 barrels per day. The Energy Searcher Design: Conventionally moored drilling vessel Built: 1959 at Eriksbergs Mekaniska Verkstads Upgraded: 1982/1997/2006 Flag: St. Vincent et Grenadines Owner: Jet Holding Ltd. Class: Lloyd s +100 A1 Drillship Comment: It is equipped with an 18-inch, 10,000-psi BOP stack, a Maritime Hydraulics 650 PTD top-drive and an eight-point chain mooring system. It has a deck load capacity of 9,157 tons and is able to accommodate 110 people. The rig was completely refurbished and upgraded between June and September 2006 in Singapore. It is currently operating offshore in Mozambique, Africa. The Galaxy Driller Design: Semi Submersible; non-self propelled Built: 1977 by Korean Shipbuilding and Engineering Corp Upgraded: 1991/1996 & 2006 Flag: Liberia Owner: Helm Maritime Corporation Class: ABS, +AL, M; Hull type barge Comment: Able to operate in water depths of up to 600 ft and drilling depth of up to 20,000 ft. Its deck load capacity is 1,800 metric tons and can accommodate 96 people. The rig is equipped with Varco TDS 4 top-drive, 10,000 PSI BOP 183/4 and two mud pumps. The rig can be upgraded to operate in water depths of 3,000 ft. The Energy Enhancer Design: CFEM T-2005-C self-elevating cantilever jack-up Built: 1982 by CFEM at Dunkerque, France Flag: Liberia Owner: Energy Enhancer Limited Class: DNV +1A1 Comment: Able to operate in water depths up to 300 ft and drilling depth of up to 25,000 ft. Its deck load capacity is 2,995 metric tons and can accommodate 86 people. The rig is equipped with a Varco TDS-4- HQ top drive. 26

30 The Energy Endeavour Design: Gusto independent 3-leg self-elevating cantilever jack-up Built: 1982 by RSV Gusto at Rotterdam, Netherlands Flag: Liberia Owner: Energy Endeavour Limited Class: Lloyd s + OU 100 A mobile drilling platform, self-elevating PC Comment: Able to operate in water depths up to 300 ft and drilling depth of up to 25,000 ft. Its deck load capacity is 2,973 metric tons and can accommodate 77 people. The rig is equipped with a Varco TDS-4H top drive. The Energy Exerter Design: CFEM T-2005-C self-elevating cantilever jack-up Built: 1982 by CFEM at Dunkerque, France Flag: Liberia Owner: Energy Exerter Limited Class: DNV +1A1 self-elevating unit HELDK Comment: Able to operate in water depths up to 300 ft and drilling depth of up to 25,000 ft. Its deck load capacity is 2,955 metric tons and can accommodate 76 people. The rig is equipped with a Varco TDS-4 top drive. In relation to the acquisition by the Company of the Energy Enhancer, the Energy Endeavour and the Energy Exerter (together the Energy Vessels ), the Company entered into a term loan of USD 300 million, a bond loan of USD 100 million and a bonding facility agreement, further details of which are set out in Sections to Section respectively. As part of these arrangements, the Company has granted the following security over the Energy Vessels, the Galaxy Driller and the Energy Searcher (together with the Energy Vessels, the Vessels ): In respect of the term loan described in Section ; (i) a first priority mortgage on the Vessels; and (ii) a first priority assignment of all charters, earnings and insurances in respect of the Vessels. In addition, the Northern Producer is subject to a negative pledge undertaking; and In respect of the bond loan described in Section , (i) a second priority mortgage on the Vessels; and (ii) a second priority assignment of all earnings and insurances in respect of the Vessels. 6.7 CONTRACT STATUS Currently all of the Company s vessels except the Northern Producer and the Galaxy Driller are on contract. The Company is actively marketing both of these two vessels for future contracts and remains confident that the market for mobile offshore drilling units and floating production facilities will remain buoyant for the foreseeable future Northern Producer The Northern Producer has until recently operated on the Talisman Energy (UK) Ltd. owned Galley field in UK block 15/23a on a bareboat contract of USD 33,000 day + Opex + Tariff (such contract having expired in July 2007). It has recently arrived into the shipyard where it will undergo minor repairs and maintenance work. The Company is reviewing several options for the Northern Producer including sale of the vessel or charter in the North Sea, West Africa and the Gulf of Mexico Energy Searcher The Energy Searcher is currently operating in Mozambique to drill one well for Petronas at a dayrate of USD 77,500 per day. It is anticipated that the Petronas contract will be completed and the Energy Searcher will be back in Singapore by the end of August Subsequently, the Energy Searcher will go to The Philippines on contract with Galoc Production Company at a dayrate of USD 175,000 per day. It is anticipated that the Galoc contract will be completed by the first week of December 2007 and the Energy Searcher will then mobilise to Indonesia for a two month contract with Total at a dayrate of USD 285,000 per day for approximately 60 days. 27

31 6.7.3 Galaxy Driller The Galaxy Driller has been operating offshore India under a contract with Gazprom at a dayrate of USD 225,000 which expired in August The Galaxy Driller arrived back in Singapore on 10 August 2007 where it will be subject to a minimum of a one month yard stay for routine repairs. The Company is currently in discussions for potential work for the Galaxy Driller in either South East Asia or South America The jack-ups from the Maersk Acquisition The drilling contracts for each of the Energy Enhancer, the Energy Endeavour and the Energy Exerter are scheduled to expire in August 2008, September 2009 and December 2009 respectively, provided that Maersk Oil may elect to terminate one of the contracts in relation to either the Energy Endeavour or the Energy Exerter from September 2007 onwards upon 6 months notice to Energy Offshore Limited. Each of the Energy Endeavour and the Energy Exerter currently operates under contracts providing for a dayrate of approximately USD 70,000, but in August 2007, these dayrates will increase to approximately USD 170,000. The energy Enhancer is currently operating under a drilling contract with a dayrate of approximately USD 120,000, but in April 2008, this dayrate will increase to approximately USD 170, ENVIRONMENTAL ISSUES The Company is not aware of any environmental issues that are likely to have a material negative effect on the utilization of its assets. 6.9 DEPENDENCE ON RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES In the opinion of the Company, its business is not materially dependent on any research and development, nor on particular patents or licences INFORMATION ON HOLDINGS The Company does not have holdings in undertakings other than its subsidiaries that may have any significant effect on the assessment of its assets and liabilities, financial position or profits and losses. 28

32 7. MARKET OVERVIEW 7.1 GENERAL OFFSHORE OIL AND GAS - INDUSTRY OVERVIEW The market for offshore drilling services is primarily driven by investments in the exploration, development and production of oil and gas. The investment level depends on oil companies cash flow and revenues, acreage available for exploration and development as well as on existing and forecasted oil & gas prices. These factors are in turn affected by various political and economic factors, such as global production levels, prices of competing sources of energy, government policies, the political stability in the oil producing countries, etc. The market for offshore drilling services is, to a degree, cyclical and volatile, ranging from the highly volatile exploration drilling market to the more stable production services market. As a consequence of a strong global economy and a strong increase in oil demand, the drilling markets showed a healthy development from 1995 until The financial crisis in Asia and the oil price collapse in 1998/99 led, however, to a weak market in the period The subsequent hike in energy prices contributed to an improvement during 2001, but the upturn was short as the weakening global economy influenced the market negatively at the end of that year. This continued through 2002 and However, from the end of 2004 to this day, there has been a significant increase in the demand for oil. 7.2 OIL AND GAS FUNDAMENTALS Production capacity The steady increase in crude oil and petroleum product prices over the last several years is expected to slow and even turn around, although dramatic reductions are not anticipated. Many of the same factors that drove world oil markets in 2006, such as low world spare oil production capacity and rapid world oil demand growth, will continue to affect markets in Other factors are less certain, such as the frequency and intensity of hurricanes, other extreme weather, and geopolitical instability. World oil demand growth is expected to increase from 85.4 million barrels per day (bbl/d) in 2006 to 87.4 million bbl/d in , largely because demand is expected to pick up due to economic growth in developing Asian countries and non-oecd nations Except for the period , demand for crude oil has grown every year since This, combined with only moderate growth in production capacity, has reduced the world s production buffer. On top of this, production in many fields in the OECD area are likely to peak in the next couple of years and start declining, although the impact of last year s price surge has made this more uncertain. Oil demand growth in recent years has exceeded the growth in non-opec supplies. As the call on OPEC production has increased, spare world oil production capacity has remained at low levels. The strong demand growth has kept OECD oil inventories, on a days of supply basis, in the lower half of historically observed ranges. However, projected high world oil prices and slower economic growth are expected to slow oil demand growth in from 2004 levels. Large new projects in 2007 are projected to lead to increases of 600,000 bbl/d in China, and 400,000 bbl/d in in other non-oecd countries. 1 Source : EIA 29

33 Overview of oil production capacity Excess oil production capacity (mbpd) World Oil Demand (mbpd) "Spare capacity" 30 % 25 % 20 % 15 % 10 % 5 % 40 Source: BP/Pareto Investments in Exploration and Development Despite strong oil prices from late 1999, oil companies have until recently been reluctant to increase exploration and production spending accordingly. Until mid 2003, the high prices were more a result of OPEC s success in controlling the supply side rather than growing demand. However, since then the situation has changed and oil demand has shown a strong growth. Since there is currently only about 1% excess production capacity worldwide, increased exploration and production activity is expected. Exploration and production spending worldwide is expected to grow some 34% in 2006 and is estimated to grow by 9% in 2007 (Lehman Brothers E&P Spending Survey December 2006). Worldwide E&P Expenditures % E&P (USD Billions) E& P Spending USDbn WTI Oil Price (USD/barrel) - right axis WTI Oil Price (USD per barrel) 0 Source: Salomon/Arthur Andersen, Lehman Brothers and Pareto Securities 30

34 This situation is aggravated through recently published information regarding the actual reserves held by the major oil companies (ref. Shell s downgrading of its reserves by 20%), and examinations of variations between when oil companies report discoveries and when they actually make the finds. As reporting of reserves includes upgrades of previously announced estimates, these reports can, over time, be expected to substantially surpass new commercial finds. 7.3 OVERVIEW OF MOBILE DRILLING RIGS The mobile drilling rigs market The worldwide fleet of mobile drilling rigs totals 566 units. Of these, 375 are jack-ups (most of which are capable of drilling in water depths between 150 and 300 feet), 156 are semi-submersible drilling rigs and 35 are drillships. 500 of these rigs are employed as of February 2007 (source: ODS-Petrodata). Overview of mobile drilling rigs Water depth: Shallow water Medium water Deep water Ultra-deep water ,000 5,000 8,000 Ft. (not linear scale) Rig type: Jack-up rigs Semi rigs (2nd generation) Inc. DP Semi rigs (3rd generation) Inc. DP Semi rigs (4th generation) Semi rigs (5fh generation) Semi rigs (6th generation) Drill ships Inc. DP Inc. DP Inc. DP Inc. DP Geographic area: US GoM, South America, North Atlantic, Middle East, Southern Asia Worldwide West Africa, Brazil, USA West Africa, Brazil, USA Jack-up Rigs Jack-ups are mobile bottom-supported self-elevating drilling platforms that stand on three legs on the seabed. When the rig is to move from one location to another, it will jack itself down on the water until it floats, and will be towed by a supply vessel or similar to its next location. A modern jack-up will normally have the ability to move its drill floor aft of its own hull (cantilever), so that multiple wells can be drilled at open water locations or over wellhead platforms without re-positioning the rig. Ultra premium jack-up rigs are rigs with enhanced operational capabilities which can work in water depths >300ft Semi-submersible Rigs Semi-submersible rigs are floating platforms and feature a ballasting system that can vary the draft of the partially submerged hull from a shallow transit draft, to a predetermined operational and/or survival draft (50-80 feet) when drilling operations are underway at a well location. This reduces the rig s exposure to ocean conditions (waves, winds and currents) and increases stability. Semi-submersible rigs maintain their position above the wellhead either by means of a conventional mooring system, consisting of anchors and chains and/or cables, or by a computerized dynamic positioning system. Propulsion capabilities of semi-submersible rigs range from having no propulsion capability or propulsion assistance (and thereby requiring the use of supply vessel or similar for transits between locations) through to self-propelled whereby the rig has the ability to relocate independently of a towing vessel Drillships Drillships are ships with on-board propulsion machinery, often constructed for drilling in deep water. They are based on conventional ship hulls, but have certain modifications. Drilling operations are conducted through 31

35 openings in the hull ( moon pools ). Drillships normally have a higher load capacity than semi-submersible rigs and are well suited to offshore drilling in remote areas due to their mobility and high load capacity. Like semisubmersible rigs, drillships can be equipped with conventional mooring systems or DP systems. 7.4 THE MARKET FOR FLOATERS According to ODS-Petrodata 1, the worldwide fleet of mobile drilling rigs totals 602 units. Of these, 400 are jack-ups of which 373 are capable of drilling in water depths below 150 feet, 166 are semi-submersible drilling rigs and 38 are drillships. With 494 of these rigs employed as of May 2007, the total fleet utilization is 81.8%. For the deepwater segment there is a utilization of 96.8 %. The largest regional markets for floaters are the North Sea, Latin America, North America and Asia Pacific. In addition, the market in Africa is relatively large, and is expected to grow significantly in the coming years. Historically, the market for floating production systems has grown by 12% annually since the end of 1990, and a total of 204 floaters are available or in operation at the end of May Historically, it has been difficult to accurately predict when a field starts production. This means that a field planned for start-up in 2007 could be a 2008 or 2009 start-up. The strong growth in demand for floaters is expected to continue well into the period from 2006 to Some of the most important market drivers for floaters are: Constantly moving towards deeper water Cost advantage vs. other type of concepts Can be removed and re-used Shorter field lifetime The more long-term view of this market is shown in the figure below. The figure shows that the estimated number of deepwater fields is increasing during the period from 2006 to Worldwide offshore fields in water depth > 200 meter by scheme WORLD-WIDE OFFSHORE FIELDS IN WATER DEPTH > 200 METER BY SCHEME No. of fields Not decided Hybrid Floating Subsea Fixed Source: Infield/Offshore Research Year on stream Source: Infield/Offshore Research 1 ODS-Petrodata (downloaded from the database 15 May 2007) 32

36 30 Floater fleet overview - age Source: Pareto Research Dayrate and contract development The market development in the semi-submersible segment has been very strong during the last year. Market observations indicate that the dayrate level has increased from USD 150,000 per day early 2004 to approximately USD 520,000 per day today for high end 6G semis. As illustrated in the figure below, the majority of the units operating in Norway are fixed on long-term contracts with an average contract length (including options) of 3-5 years. West Alpha Deepsea Trym Deepsea Delta West Navigator Transocean Winner Leiv Eiriksson Polar Pioneer Borgland Dolphin Bredford Dolphin Ocean Vanguard Stena Don Scarabeo 5 Bideford Dolphin WilInnovator Transocean Arctic Deepsea Bergen West Venture WilPioneer Transocean Searcher Transocean Leader Songa Dee WilPromoter West E-Drill Aker Semi Tbn2 Aker Semi Tbn1 Scarabeo 8 Deepsea Atlantic Contract coverage estimates Norwegian sector rig fleet Contract Option Yard Source: Pareto Research 33

37 Recent floaters fixtures Fixture Comp- Rate Prev. Dura- Startdate any Rig Rig type Operator Region $'/day $'/day tion up 16-Aug Odfjell DeepSea Delta 3GSS Pertra/Revus Norway Y Apr Aug Atwood Atwood Hunter 3GSS Burullus Egypt D Aug-07 2-Aug RIG Jack Bates 4GSS ENI SE Asia D Jul-08 2-Aug Seadrill West Alpha 4GSS Rig Mgmt NW Eur Y Mar-09 1-Aug RIG Falcon 100 2GSS Petrobras South A Y Dec Jul GSF Aleution Key 2GSS Sonangol West Afr Y Jul Jul RIG Sedco 601 2GSS TBA SE Asia NA 190 2Y Sep Jul Ensco Ensco GSS TBA USGoM 466 NA 2Y Jan Jul Diamond Ocean Rover 5GSS Murphy SE Asia Y Jan Jul IPC Muralla III 6GSS Pemex Mexico 520 NA 5Y Sep-10 Global rig demand is expected to continue to increase in the coming years. In addition to higher oil and gas price assumptions in oil companies exploration and production budgets, an increasing back-log of development drilling projects is positively influencing demand. 7.5 MARKET TRENDS Trends following the end of the last financial year The Company believes that the trends described in section 7.4 above adequately reflects the market trends since the end of the last financial year Known trends with a material impact on the Company s prospects The Company is not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material impact on the Company s prospects that are not described in section 7.4 above. 34

38 8. CONSOLIDATED FINANCIAL INFORMATION You should read the following discussion of the financial condition and results of operations in conjunction with the financial statements and notes to the financial statements included in this Prospectus. 8.1 BASIS OF PREPARATION Northern Offshore prepares its consolidated accounts in accordance with United States Generally Accepted Accounting Standards (US GAAP). The consolidated financial statements of Northern Offshore have been audited, except for the first quarter, second quarter and half year 2006 and 2007 financial figures. 8.2 SUMMARY OF ACCOUNTING POLICIES The accounting policies stated below have been derived from the Company s Interim Half Year report for 2007, included in Appendix 3 in this Prospectus Principles of consolidation The consolidated financial statements include the financial statements of Northern Offshore Ltd. and its subsidiaries under its effective control from their respective dates of acquisition and entities in which the Company has a variable interest and is the primary beneficiary, after elimination of transactions and balances between group companies. Subsidiaries acquired have been accounted for using the purchase method, in which the purchase price for the shares is allocated to the acquired subsidiaries assets and liabilities based on their estimated fair values at the date of purchase Use of Estimates The preparation of the consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Significant estimates made by management include: the useful lives of property, plant and equipment as well as future cash flows to be generated by those assets; among others. Actual results could differ from these estimates Revenue recognition Revenue comprises the fair value of the consideration received or receivable for day-rate based contracts for drilling and production operations, day-rate based or fixed price mobilisation and demobilisation fees, charter hire, supply of materials and consumables, services rendered and rental income from operating leases. Revenue is stated at net of commission and withholding tax, and after eliminating sales within the Group. Revenues from day-rate based compensation, day-rate based or fixed price mobilisation and demobilisation fees for drilling and vessel operations are recognised evenly over the contract period. Revenue from charter hire of drill ship is recognised on a time-apportioned basis over the term of the charter hire. Costs and expenditures for mobilisation, demobilisation, drilling and production, and charter hire contracts are recognised as incurred. Revenue from handling, agency and management services is recognised over the period in which the services are rendered. Rental income from operating lease is recognised on a straight-line basis over the lease term Foreign currency Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity ( the functional currency ). The consolidated financial statements are presented in United States dollars, which is the functional currency of the Company as the majority of the Company s monetary assets and liabilities are denominated in USD and the majority of the Company s revenues and a significant portion of operating costs are also denominated in USD. 35

39 Transactions in currencies other than the functional currency (hereinafter referred to as foreign currencies ) are recorded at rates approximate to the actual exchange rates at the dates of transactions. Assets and liabilities which are denominated in foreign currencies are translated to the functional currency at the exchange rates in effect at the balance sheet date. Gains and losses from foreign currency transactions are included in the consolidated statement of operations. All assets and liabilities of operations not reporting in USD are translated into USD using exchange rates in effect at the balance sheet date and income and expense items are translated at average exchange rates prevailing during each financial year. The resulting foreign currency translation adjustments are recorded as a component of other comprehensive income/(loss) within shareholders equity Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost of assets includes the interest cost capitalised for assets that have been upgraded or reactivated. Depreciation is calculated using a straight-line basis in accordance with the estimated useful lives of the assets, as follows: Computer system Furniture and equipment Production and drilling vessels Machinery Vessel operating equipment (included as additions under vessels ) - 1 year - 3 years - 15 years - 10 years - 5 years The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision of the residual values and useful lives are included in the income statement for the financial period/year in which the changes arise. Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset 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. Other subsequent expenditure is recognised as repair and maintenance expense in the income statement during the financial period/year in which it is incurred. On disposal of a property and equipment, the difference between the net disposal proceeds and its carrying amount is taken to the Statements of Income during the financial period/year when it is incurred Impairment of long-lived assets Assets including property, plant and equipment are reviewed for impairment whenever events or a change in circumstances indicate that the carrying amount may not be recoverable. Each impairment test is based on a comparison of the undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value on a discounted cash flow basis. Long-lived assets to be disposed of are reported at the lower of their carrying amount or their fair value less selling costs Assets held for sale Assets held for sale are stated at net realisable value and classified as current assets in the financial statements. No depreciation is provided on assets held for sale Periodic Survey and Maintenance The Group s production and drilling units is subject to a special periodic survey. A special periodic survey primarily represents periodic inspection and repairs and must be carried out to maintain the unit s certifications. Expenses in connection with a special periodic survey comprise periodic maintenance and repairs in addition to the inspection fees paid to the classification agency. Special periodic survey expenditure is charged to expense when incurred. 36

40 8.2.9 Fair Value of Customer Contracts Fair value of customer contracts relate principally to the acquisition of new vessels accounted for under the purchase method. Under this method, the purchase price has been allocated to the assets acquired, liabilities assumed and customer contracts based on their estimated fair market values at the dates of acquisition. Fair value of customer contracts is amortised on a straight line basis over the useful life of the drilling contracts, ranging from 1 to 3 years Trade receivables Trade receivables are stated at cost less allowance for doubtful receivables based on a review of outstanding amounts at the balance sheet date. An allowance for doubtful receivables is made when there is objective evidence that the Group will not be able to collect amounts due according to original terms of receivables Deferred Loan Fees Costs associated with obtaining loans are deferred and amortised over the respective terms of the loans. In the case of early repayment or repurchase, the remaining capitalised amount relating to the repaid loan is expensed and presented net, in gains from early extinguishments of debt. The costs of raising equity are recorded as an offset against proceeds received and included in shareholders equity Operating Leases Where Group Company is a lessee: Rental payments under operating leases are expenses on a straight-line basis over the periods of the respective leases. Where Group Company is a lessor: Rental income from operating leases (net of any incentives given to lessees) is recognised in the income statement on a straight-line basis over the lease term. Initial direct costs incurred by the Group in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense in the income statement over the lease term on the same basis as the lease income Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the period/year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income in the period that includes the enactment date Cash, cash equivalents and cash flow statement Cash and cash equivalents consist of cash and bank deposits with original maturities of three months or less Earnings per share Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Group by the weighted average number of ordinary shares outstanding during the financial period/year. Diluted earnings per share is computed using weighted average number of shares outstanding and any potentially dilutive shares and securities, if any, using the treasury stock method Recently Issued Accounting Pronouncements In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ( SFAS 157 ), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value 37

41 measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, Earlier adoption is permitted, provided the company has not yet issued financial statements, including for interim periods, for that fiscal year. The Company is currently evaluating the impact of SFAS 157, but does not expect the adoption of SFAS 157 to have a material impact on the Company s consolidated financial statements. 8.3 CONSOLIDATED FINANCIAL INFORMATION Consolidated income statements For the three-months period ended USD ( 000) June 30, June 30, (unaudited) (unaudited) For the six-months period ended June 30, 2007 (unaudited) June 30, 2006 (unaudited) For the financial year ended (audited) (audited) (audited) Revenue 42,452 19,549 84,329 41, ,678 73,863 56,844 Operating expenses Drilling and production and lay-up expenses (16,162) (13,112) (28,446) (22,779) (44,342) (31,399) (29,957) Depreciation (5,492) (3,423) (9,180) (6,841) (13,979) (11,460) (10,395) General and administrative expenses (4,469) (867) (5,308) (1,345) (6,741) (3,956) (3,291) Amortisation fair value of customer contracts 1,035-1, Debt restructuring expenses (5,980) (3,337) Total operating expenses (25,088) (17,402) (41,899) (30,965) (65,062) (52,795) (47,520) Operating income 17,364 2,147 42,430 10,353 47,616 21,068 9,324 Other income/(expense), net Interest income 1, , , Interest expense (1,433) - (1,433) - - (6,129) (16,529) Amortisation expense of Deferred Loan Fees (74) - (74) Foreign exchange gain/(loss) (13) (2,280) Other financial items (94) - (107) (15) (46) (70) (801) Total other income/(expense), net (513) ,227 (5,682) (19,460) Income before income taxes 16,851 2,521 42,577 10,867 48,843 15,386 (10,136) Income tax expense (291) - (676) (348) (1,268) (1,376) (849) Net income 16,560 2,521 41,901 10,519 47,575 14,010 (10,985) 38

42 8.3.2 Consolidated balance sheet As of (unaudited) As of (unaudited) As of (audited) As of (audited) As of (audited) USD ( 000) Cash and cash equivalents 41,447 35,186 63,003 16,101 12,633 Restricted cash 42, ,350 Trade receivables, net 36,988 15,529 20,381 17,067 11,610 Accrued Revenue Amounts due from related parties Prepaid expenses and other current assets 19,455 2,375 2,029 1, Assets held for sale ,750 Total current assets 140,602 53,412 85,490 35,287 33,662 Property, plant and equipment, net 583,566 91,105 92,190 97,024 91,551 Deferred Loan Fees, net of current 2, Total non-current assets 586,407 91,105 92,190 97,024 91,551 Total assets 727, , , , ,213 Current liabilities Trade payables 12,702 10,753 4,634 8,317 5,150 Accrued expenses 10,716 4,122 5,147 4,810 23,460 Income tax payable , Deferred income tax liabilities Amounts due to related parties 50, Borrowings 67, ,664 Fair value of customer contracts 24, Total current liabilities 166,494 15,290 10,926 14, ,944 Non Current liabilities Borrowings, net of current 332, Fair value of customer contracts, net of current 19, Total non current liabilities 351, Total liabilities 518,124 15,290 10,926 14, ,944 Shareholders equity Share capital 36,000 36,000 36,000 36,000 26,170 Additional paid-in capital 117, , , ,254 (48,041) Accumulated other comprehensive loss (6,229) (6,917) (6,459) (7,355) (7,234) Retained earnings/(accumulated losses) 61,860 (17,110) 19,959 (27,616) (41,626) Total shareholders equity 208, , , ,283 (70,731) Total liabilities and shareholders equity 727, , , , ,213 39

43 8.3.3 Cash flow statements For the six-month period For the financial year ended ended USD ( 000) (unaudited) (unaudited) (audited) (audited) (audited) Cash flow from operating activities Net income 41,901 10,519 47,575 14,010 (10,985) Adjustments to reconcile net income to net cash provided by operating activities Depreciation 9,180 6,841 13,979 11,460 10,935 Interest Expense 1, Amortisation of capitalised loan fees Amortisation of fair value of customer contracts (1,035) Loss on sale of property, plant and equipment Amortisation of deferred loan fees Allowance for doubtful receivables Operating cash flow before working capital changes 51,553 17,360 61,657 25, Changes in operating assets and working capital Trade and other receivables (36,913) 621 (3,743) (6,393) (6,059) Trade and other payables 62,000 1,746 (3,349) 7,729 20,410 Currency translation adjustment (18) 249 (134) Income taxes (399) (484) (238) Net cash provided by operating activities 76,223 19,492 54,678 28,022 14,847 Cash flows from investing activities Purchase of property, plant and equipment (455,556) (922) (9,145) (16,933) (1,799) Proceeds from sale of property, plant and equipment ,750 2,171 Net cash used in investing activities (455,556) (922) (9,145) (10,183) 372 Cash flows from financing activities Bank Term Loan 300, Bond Loan 100, Interest Paid (471) Repayment of borrowings (10,313) Payment to USD note holders pursuant to the Scheme of Arrangement (14,000) - Restricted cash (42,000) ,011 (1,010) Net cash provided by (used in) financing activities 357, (12,989) (11,323) Net increase in cash and cash equivalents (21,804) 18,909 45,872 4,850 3,896 Cash and cash equivalents beginning of period/year 63,003 16,101 16,101 12,633 6,033 Effects of exchange rate changes on cash and cash equivalents ,030 (1,382) 2,704 Cash and cash equivalents at end of year 41,447 35,186 63,003 16,101 12,633 Supplemental disclosure of cash flow information Cash paid during the year for income taxes 1, , ,087 Non-cash investing and financing activity: Conversion of the USD notes and the NOK notes and the related accrued interest into share capital and additional paid-in capital ,125-40

44 8.3.4 Consolidated statements of changes in shareholders equity As at 30 June 2007, the Group s total shareholder s equity was USD million compared with USD million as of 31 December 2006, and USD million as of 31 December The equity-to-assets ratio as of 30 June 2007 was 29% in comparison to 94% as of 31 December Common Share Additional Accumulated other Retained earnings/ shares capital paid-in comprehensive (accumulated ( 000) capital income/(loss)* losses) Total Balance at January 1, ,000 36, ,254 (6,459) 19, ,754 Net income ,901 41,901 Other comprehensive income Total comprehensive income ,901 42,131 Balance at June 30, ,000 36, ,254 (6,229) 61, ,885 Balance at January 1, ,000 36, ,254 (7,355) (27,616) 118,283 Net income ,575 47,575 Other comprehensive income Total comprehensive income ,575 48,471 Balance at December 31, ,000 36, ,254 (6,459) 19, ,754 Balance at January 1, ,680 26,170 (48,041) (7,234) (41,626) (70,731) Cancellation of existing shares (101,800) (25,450) 25, Issue of new shares 141,120 35, , ,125 Net income ,010 14,010 Other comprehensive loss (121) - (121) Total comprehensive income 144, (121) 14,010 13,889 Balance at December 31, ,000 36, ,254 (7,355) (27,616) 118,283 * Accumulated other comprehensive loss comprises foreign currency translation reserve. 8.4 INDUSTRY AND GEOGRAPHICAL SEGMENT INFORMATION From inception through 30 June 2007, the Company has been engaged in a single business segment: providing drilling and production services to the offshore oil industry. In the following table disclosing geographic segment information, revenues are disclosed based on the location of each production and drilling vessel at the time the revenue was earned and long-lived assets are allocated based on the location of each asset at the year-end: 41

45 For the three-month period ended June 30, June 30, For the six-month period ended June 30, June 30, Revenue segment India 20, , United Kingdom 9,660 10,652 19,510 22,537 Mozambique 5,751-5,751 - Denmark 4,082-4,082 - Yemen 2,613-6,275 - Indonesia - 4,639-9,794 Myanmar - 3,339 8,047 8,052 Other ,452 19,549 84,329 41,318 As of June 30, 2007 As of December 31, 2006 Long-lived assets Denmark 498,222 - United Kingdom 38,794 41,924 Mozambique 32,412 - India 14,081 16,022 Myanmar - 34,157 Other ,566 92, UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF INCOME General Northern Offshore Ltd (referred to collectively with its subsidiaries as the Group ) is a private limited company registered in Bermuda. The principal activities of the Group consist of providing drilling and production services to the offshore oil and gas industry. The unaudited pro forma condensed combined consolidated statements of income have been prepared for inclusion in the Prospectus to be issued in connection with the proposed listing of Northern Offshore Ltd on the Oslo Børs, to give effect to the acquisition of the three jack-up drilling units. The unaudited pro forma condensed combined consolidated statements of income with accompanying notes, is included in full in Appendix 4 to this Prospectus Acquisition of the three jack-up drilling units On June 1, 2007, the Group entered into an agreement with A.P. Møller-Maersk A/S ( contractor ) to acquire three harsh environment jack-up drilling units ( Maersk Acquisitions ). The gross purchase price was USD 455 million evenly allocated across the three rigs. The delivery of the rigs took place on June 15, In order to structure the Maersk Acquisitions, the Group incorporated three wholly-owned subsidiaries in the British Virgin Islands, namely, Energy Enhancer Ltd, Energy Endeavour Ltd and Energy Exerter Ltd. Each subsidiary acquired one of the rigs, which were re-flagged in Liberia and re-named the Energy Enhancer, the Energy Endeavour and the Energy Exerter, after the Maersk Acquisitions. The Group also incorporated another wholly-owned subsidiary in the British Virgin Islands, Energy Offshore Limited ( EOL ), to act as a contractor with third parties in relation to the future operations of the rigs. Prior to completion of the Maersk Acquisitions, the three rigs operated in the Danish sector of the North Sea under their respective drilling contracts between Maersk Contractors and Maersk Oil & Gas AS ( Maersk Oil ). 42

46 Upon completion of the Maersk Acquisitions, the drilling contracts for each rig were novated from Maersk Contractors to EOL pursuant to a separate novation agreement dated June 1, 2007 (effective June 15, 2007). The Energy Endeavour and the Energy Exerter are currently operating under drilling contracts with a day rate of approximately USD 70,000, but in August 2007, these day rates will increase to approximately USD 170,000. The Energy Enhancer is currently operating under a drilling contract with a day rate of approximately USD 120,000, but in April 2008, this day rate will increase to approximately USD 170,000. The underlying drilling contracts will expire in August 2008 (Energy Enhancer), September 2009 (Energy Endeavour) and December 2009 (Energy Exerter), respectively, unless Maersk Oil elects to terminate one of the contracts in relation to either the Energy Endeavour or the Energy Exerter from September 2007 onwards upon giving 6 months notice to EOL. Under the novation agreements, certain protections were put in place for the benefit of Maersk Oil in order to secure the performance of the drilling contracts, including a performance bond of USD 36 million which remains in place until the expiry of the last drilling contract. EOL entered into separate management agreements with Maersk Contractors, in respect of each rig, whereby Maersk Contractors will take responsibility for managing the rigs on behalf of EOL for the duration of the drilling contracts. Certain security was also put into place for the benefit of Maersk Contractors, namely irrevocable letters of credit amounting to USD 6 million. On June 7, 2007, the Group completed a direct share issue of 9.1 million shares at a subscription price of NOK33 per share, with gross proceeds from the equity issue amounting to NOK 300 million, or approximately USD 50 million. The purpose of the share issue was to strengthen the Group s working capital in connection with the Maersk Acquisitions. (i) (ii) (iii) (iv) As the Company did not have sufficient authorised share capital to issue the shares directly to investors at the time of completion of the equity issue, one of the Company s existing shareholders, Geveran Trading Co. Ltd. ( Geveran ), agreed that 9.1 million of the shares it owned in the Company could be placed with third parties by the managers of the issue, Fearnley Fonds ASA and Pareto Securities ASA, in return for the Company entering into a subscription agreement with Geveran, providing for Geveran to be issued 9,100,000 shares at the same price as its shares were placed in the market, subject to the necessary resolutions being passed by the Company s shareholders to increase the Company s authorised share capital. Geveran agreed to pre-pay the subscription amount of USD 50 million in return for a commission equivalent to an amount of interest it could have earned on those funds in the period between its pre-payment and the later issue to it of the shares for which it subscribed. In order to satisfy its obligations under the subscription agreement, the Company needed to provide for its authorised share capital to be increased through a resolution of its members in general meeting. This resolution was proposed and approved by the shareholders at the annual general meeting of the Company held on July 11, Following the approval of such resolution by the Company s shareholders, the Company issued 9,100,000 new common shares to Geveran, all fully paid. Following the approval of the resolution at the Company s annual general meeting and the issue of shares to Geveran contemplated above, the Company s authorised share capital was increased from USD 36,000,000 represented by 144,000,000 shares of USD 0.25 each to USD 48,500,000 represented by 194,000,000 shares of USD 0.25 each. Its issued share capital was increased from USD 35,999,995 represented by 143,999,980 shares of USD 0.25 each to USD 38,274,995 represented by 153,099,980 shares of USD 0.25 each. On June 12, 2007, the Group raised USD 100 million through issuance of a 3-year senior secured callable bond (the Bond Loan ) with an interest rate of 3 month LIBOR rate plus an interest rate margin of 4.5% per annum. The Bond Loan was disbursed on June 13, 2007 and will mature on June 14, The proceeds of the Bond Loan were used by the Group to pay, in part, the USD 455 million purchase price payable in connection with the Maersk Acquisitions. On June 14, 2007, the Group entered into a Secured Term Loan Facility Agreement (the Term Loan Agreement ) with certain financial institutions, as lenders, and DnB NOR Bank ASA, New York Branch, as agent. The Term Loan Agreement provides for a USD 300 million, 33-month term loan facility (the Term 43

47 Loan ) maturing on March 14, The interest rate applicable to the Term Loan Agreement is equal to the applicable 1, 3 or 6 months LIBOR rate in each case, plus an interest rate margin of 1.75% per annum. The proceeds from the Term Loan were used by the Group to pay, in part, the USD 455 million purchase price payable in connection with the Maersk acquisitions. The Company is required to repay the principal amount of the Term Loan in 9 quarterly instalment payments of USD 22,500,000 commencing 6 months after June 14, 2007, and a final balloon payment of USD 97,500,000 due on 14 March Basis of preparation The Unaudited Pro Forma Condensed Combined Consolidated Statements of Income of the Group have been prepared for illustrative purposes only and are based on certain assumptions after making certain adjustments to show what the financial results of the Group for the financial year ended 31 December 2006 and half year ending 30 June 2007 would have been if the acquisition made during the year ended 31 December 2007 had occurred on 1 January The Unaudited Pro Forma Consolidated Statements of Income of the Group, because of their nature, may not give a true picture of the Group s actual financial results and financial positions. These Statements are not necessarily indicative of results of the operations and related effects on the financial position that would have been attained had the acquisition actually occurred earlier. Hence the Unaudited Pro Forma Consolidated Statements of Income are for illustrative purposes only. The Unaudited Pro Forma Statements of Income for the year ended 31 December 2006 has been compiled based on the audited consolidated financial statements of the Group for the financial year ended 31 December 2006 which were prepared in accordance with accounting principles generally accepted in the United States of America ( US GAAP ) consistently applied for all periods. The auditor s report on the financial statements does not contain any qualification. The Unaudited Pro Forma Statement of Income for the half year ending 30 June 2007 has been compiled based on the unaudited consolidated financial statements of the Group for the half year ending 30 June 2007 which were prepared in accordance with accounting principles generally accepted in the United States of America ( US GAAP ) and reviewed in accordance with auditing standards generally accepted in United States of America ( US GAAS ). The unaudited pro forma condensed combined consolidated statements of income for the financial year ended December 31, 2006 and the six-month period ended June 30, 2007 were also compiled based on the unaudited actual results of operations obtained by the management from the previous owner of the three jack-up drilling units Basis of presentation and compilation of the unaudited pro forma condensed combined consolidated statements of income The following key adjustments and assumptions were made for the preparation of the Unaudited Pro Forma Condensed Combined Consolidated Statements of Income. (a) (b) (c) The Maersk acquisitions were assumed to have occurred on January 1, As part of the Maersk acquisitions, the Company was required to provide cash secured letters of credit and performance bond (as set out in Note 2) amounting to USD 42 million ( restricted cash ). The Maersk acquisitions, including the restricted cash, were funded mainly by the proceeds from a direct share issue of 9.1 million shares, issuance of the Bond Loan of USD 100 million, the Term Loan of USD 300 million and additional cash resources within the Group at the time of the actual acquisition, which were derived through operational proceeds during 2006 and This adjustment is made to reverse out the fifteen days of revenue generated from the three jack-up drilling units, which are currently being recorded by the Group and the three jack-up drilling units. This adjustment is made to reverse out the fifteen days of operating expenses incurred by the three jack-up drilling units, which are currently being recorded by the Group and the three jack-up drilling units. 44

48 (d) (e) (f) (g) (h) This adjustment is made to reverse out the fifteen days of management fee incurred by the three jackup drilling units, which are currently being recorded by the Group and the three jack-up drilling units. This adjustment is to record the additional depreciation expense arising from the purchase price allocation of the acquisition of the three jack-up drilling units. This adjustment reflects the other incidental costs such as legal fees and miscellaneous bank charges, incurred in the Maersk acquisitions amounted to USD 2.9 million which were assumed to have been recognised on January 1, Fair value of the customer contract arose from the acquisition of the vessels. This adjustment reflects the amortization of the drilling contracts over their duration, assuming the drilling contracts commenced on January 1, As discussed in Note 8.5.4(a), interest income generated from the restricted cash of USD 42 million for the period from June 15, 2007 to June 30, 2007 amounted to USD 78,000 is extrapolated for the period from January 1, 2006 to June 30, 2007, assuming that the interest is earned beginning January 1, This adjustment reflects interest earned during the period. (i) The Term Loan which was drawn on June 14, 2007 is assumed to be drawn down on January 1, The interest is based on 3 month LIBOR rate at 5.32% per annum plus an interest margin of 1.75% per annum. This adjustment is to record the interest expense payable every quarter in arrears. (j) (k) The Bond Loan which was disbursed on June 13, 2007 is assumed to be raised on January 1, The interest is based on 3 month LIBOR rate at 5.32% per annum plus an interest margin of 4.5% per annum. This adjustment is to record the interest rate payable every quarter in arrears. Direct costs relating to the issue of Bond Loan and Term Loan amounted to USD 1.7 million and USD 2.8 million respectively. These costs were capitalised and the adjustment reflects the amortisation of these costs over the contractual life of the respective agreements which were assumed to commence on January 1, Accounting policies The unaudited pro forma condensed combined consolidated statements of income are prepared in accordance with the basis set out in section 8.5 above, and are drawn up in accordance with US GAAP consistently applied for all periods. All dollar amounts included in the financial statements and in the notes herein are expressed in United States dollars ( USD ) unless designated otherwise. 45

49 8.5.6 Unaudited pro forma condensed combined consolidated statement of income for the year ended 31 December 2006 Group (audited) Historical 3 jack-up drilling units (unaudited) Pro forma adjustments (unaudited) Note Pro forma combined (unaudited) Revenue 112,678 76, ,937 Operating expenses Drilling and production expenses (44,342) (35,013) - (79,355) Depreciation (13,979) (40,200) (3,000) (e) (57,179) General and administrative expenses (6,741) (7,825) (2,903) 8.5.4(f) (17,469) Amortisation of fair value of customer contracts , (g) 24,835 Total operating expenses (65,062) (83,038) 18,932 (129,168) Operating income 47,616 (6,779) 18,932 59,769 Other income/(expense), net Interest income 1,273-1, (h) 3,121 Interest expense - - (29,837) (i)(j) (29,837) Amortisation of deferred loan fees - - (1,586) (k) (1,586) Other financial items (46) - (92) (e) (138) Total other income/(expense), net 1,227 - (29,667) (28,440) Income/(loss) before income taxes 48,843 (6,779) (10,735) 31,329 Income tax expense (1,268) (2,288) - (3,556) Net income/(loss) 47,575 (9,067) (10,735) 27,773 Earnings per share (US$) Basic Diluted Weighted average common shares used in per share calculation ( 000) Basic 144, ,100 Diluted 144, ,100 46

50 8.5.7 Unaudited pro forma condensed combined consolidated statement of income for the six-month period ended 30 June 2007 Group (unaudited) Historical 3 jack-up drilling units (unaudited) Pro forma adjustments (unaudited) Note Pro forma combined (unaudited) Revenue 84,329 49,010 (4,000) (b) 129,339 Operating expenses Drilling and production expenses (28,446) (26,722) 2, (c),(d) (52,652) Depreciation (9,180) (18,446) (1,375) (e) (29,001) General and administrative expenses (5,308) (3,869) 2, (f) (6,274) Amortisation of fair value of customer contracts 1,035-7, (g) 8,608 Total operating expenses (41,899) (49,037) 11,617 (79,319) Operating income 42,430 (27) 7,617 50,020 Other income/(expense), net Interest income 1, (h) 2,601 Interest expense (1,433) - (11,298) (i),(j) (12,731) Amortisation of deferred loan fees (74) - (719) (k) (793) Foreign exchange gain Other financial items (107) (e) (18) Total other income/(expense), net (11,081) (10,934) Income/(loss) before income taxes 42,577 (27) (3,464) 39,086 Income tax expense (676) (1,470) - (2,146) Net income/(loss) 41,901 (1,497) (3,464) 36,940 Earnings per share (US$) Basic Diluted Weighted average common shares used in per share calculation ( 000) Basic 144, ,100 Diluted 145, ,100 47

51 8.5.8 Report on examination of the unaudited pro forma condensed combined consolidated statements of income for the financial year ended 31 December 2006 and the six month period ended 30 June 2007 This Report has been prepared for inclusion in the prospectus (the Prospectus ) in connection with the application for listing of existing shares in the capital of Northern Offshore Limited (the Company ) on Oslo Bors. We report on the unaudited pro forma condensed combined consolidated statements of income of Northern Offshore Limited (referred to collectively with the subsidiaries as the Group ) set out on pages 3 to 16, which have been prepared, for illustrative purposes only, based on certain assumptions after making certain adjustments to show what the financial results of the Group for the financial year ended December 31, 2006 and for the period from January 1, 2007 to June 30, 2007 would have been if the acquisition of the three jack-up drilling units (as described in Note 2 to the unaudited pro forma condensed combined consolidated statements of income of the Group) had occurred on January 1, The unaudited pro forma condensed combined consolidated statements of income, because of their nature, may not give a true picture of the Group s actual financial results. The unaudited pro forma condensed combined consolidated statements of income are the responsibility of the directors of the Company. Our responsibility is to express an opinion on the unaudited pro forma condensed combined consolidated statements of income based on our work. Our work, which involved no independent examination of the underlying financial statements, consisted primarily of comparing the unaudited pro forma condensed combined consolidated statements of income to the financial statements of the Group (or where information is not available in the financial statements of the Group, to accounting records), considering the evidence supporting the adjustments and discussing the unaudited pro forma condensed combined consolidated statements of income with the directors of the Group. In our opinion: a) the unaudited pro forma condensed combined consolidated statements of income have been properly compiled in a manner consistent with both the format of the financial statements and the accounting policies of the Group set out in Note x * to the unaudited pro forma condensed combined consolidated statements of income of the Group; b) the unaudited pro forma condensed combined consolidated statements of income have been properly compiled on the basis set out in Note x * to the unaudited pro forma condensed combined consolidated statements of income of the Group; and c) each material adjustment made to the information used in the preparation of the unaudited pro forma condensed combined consolidated statements of income is appropriate for the purpose of preparing such unaudited pro forma condensed combined statements of income. Yours faithfully PricewaterhouseCoopers Certified Public Accountants Singapore * Specific references to Note x can be found in Appendix 3 of this Prospectus. 8.6 INDEPENDENT AUDITOR The consolidated financial statements of Northern Offshore Limited for the financial years ended 31 December 2006, 2005 and 2004, prepared in accordance with US GAAP, included in this prospectus, have been audited by the Company s auditor PricewaterhouseCoopers Singapore, as stated in their report appearing herein. With respect to the Consolidated Interim Financial Statements of Northern Offshore Limited for the three and six-month periods ended June 30, 2007 and 2006, included in this prospectus, PricewaterhouseCoopers 48

52 Singapore has conducted a review in accordance with the auditing standards generally accepted in the United States of America. A review is substantially less in scope than an audit conducted in accordance with the auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, they do not express such an opinion. With respect to the unaudited pro forma consolidated financial information of Northern Offshore Limited for the financial year ended 31 December 2006 and the six month period ended 30 June 2007, included in this prospectus, PricewaterhouseCoopers Singapore states that their work involved no independent examination of the underlying financial statements, consisted primarily of comparing the unaudited pro forma condensed combined consolidated statement of income to the financial statements of the Group, considering the evidence supporting adjustments and discussing it with the directors of the Group. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the procedures applied. PricewaterhouseCoopers Singapore has its registered address at 8 Cross Street, PWC Building, #17-00, Singapore and is member of the Institute of Certified Public Accountants of Singapore. 49

53 9. OPERATING AND FINANCIAL REVIEW You should read the following discussion of the financial condition and results of operations in conjunction with the financial statements and notes to the financial statements included in this Prospectus. 9.1 COMPARISON FOR THE THREE MONTH PERIODS ENDED 30 JUNE 2007 AND Operating revenue Revenue for Q at USD 42.5 million was more than double that of Q (USD 19.5 million). The major contributing factor was the operational day rate of USD 225,000 per day received for Galaxy Driller under contract in India during Q as compared to USD 59,000 per day under contract in Myanmar during 2Q There was also an additional USD 4.0 million of revenue in Q for 15 days of operations from the three Jack-ups acquired from Maersk on 15 June Operating expenses Operating expenses for Q of USD 25.0 million were approximately USD 7.6 million higher thanq This is due to the following factors: Drilling and production expenses at USD 16.1 million were USD 3.0 million higher than that of Q due mainly to the associated operational expenditure for the acquired Jack-ups from Maersk effective 15 June Depreciation expense for Q at USD 5.5 million was approximately USD 2.1 million higher than Q (of USD 3.4 million), due to additional depreciation expense of USD 1.8 million for the period from 15 June 2007 to 30 June 2007 on the three Jack-ups acquired from Maersk effective 15 June General and Administrative expenses in Q of USD 4.4 million exceeded Q by USD 3.7 million. This was due to legal and professional services fees incurred during Q associated with the listing process, acquisition of the three Jack-ups and set up of operations, including commissions paid to the relevant broker handling the Maersk rigs acquisition. The negative fair value of customer contracts novated through the Maersk acquisition was accounted for under the purchase method and hence is amortised on a straight line basis over the remaining life of the novated drilling contracts. An amount of approximately USD 1 million representing amortisation of the fair value of customer contracts was incurred in Q for the period 15 June 2007 to 30 June There was no amortisation expense in Q Operating margin The Operating Income of USD 17.3 million for Q significantly exceeded the Q result of USD 2.1 million. The operating margin therefore was 41% for the second quarter ended 30 June 2007 compared to 11% for the corresponding period in Total other income/expense The total other income/expense for the Q resulted in a net expense of USD 0.5 million as opposed to a net gain of USD 0.4 million for Q Whilst the interest income for Q of USD 1.1 million is significantly higher than Q (mainly due to higher cash balances during the period), the interest expense of USD 1.4 million associated with the bank loan of USD 300 million and bond loan of USD 100 million (both effected mid June 2007) was a negating factor. Furthermore, direct fees incurred for the issuance of the bank loan and bond loan were capitalised and amortised over the period of these instruments this resulted in amortisation expense of USD 0.1 million recognised for the seond half of June Profit before/after tax Q resulted in a profit before tax of USD 16.9 million and USD 16.6 million after taxes. This is significantly higher than the corresponding results of Q of USD 2.5 million before tax and the same after tax, (no tax provision was recognised for Q as it was assessed that the provision recognised in Q

54 for the operations of the Northern Producer was sufficient to cover the year to date position). Note: relevant withholding taxes were paid for the other vessels within their respective countries of operation and were net directly from the revenue line. 9.2 BALANCE SHEET COMPARISON BETWEEN 30 JUNE 2007 AND 31 DECEMBER Cash and cash equivalents Cash and cash equivalents as of 30 June 2007 were USD 41.4 million compared to USD 63.0 million as of 31 December Cash amounts were used during Q to fund the Maersk acquisition. As of 30 June 2007 there was also an amount of USD 42.0 million in restricted cash being cash collateral for irrevocable letters of credit required in association with the acquisition of the three Jack-ups from Maersk Total Assets Total assets as of 30 June 2007 of USD million were significantly higher than 31 December 2006 balance of USD million, due mainly to the acquisition and associated transactions for the purchase of the three Jack-ups from Maersk in June Prepaid expenses were higher as of 30 June 2007 by USD 17.1 million mainly due to the required prepaid operational expenditure budget to Maersk Contractors as per the terms of the Management Agreements. Also contributing to the higher level of Total Assets is the higher level of Trade Receivables as of 30 June 2007 (USD 36.9 million) as compared to USD 20.4 million as of 31 December 2006, generally due to the higher day rate associated with the Galaxy Driller in Total liabilities Total liabilities as of 30 June 2007 of USD million were significantly higher than USD 10.9 million as of 31 December This was mainly due to transactions associated with the acquisition of the three Jack-ups from Maersk being issuance of Bank Term Loan of USD 300 million, Bond Loan of USD 100 million, prepayment of equity issuance of approximately USD 50 million and recognition of the negative fair value of the novated contracts which amounted to USD 45.0 million Total shareholders equity At 30 June 2007, the Group s shareholders equity was USD million compared with USD million as at 31 December The equity-to-assets ratio was 29% at 30 June 2007 and 94% at 31 December Total liabilities and shareholders equity The Group had a total balance of USD million as of 30 June 2007 compared with USD million of 31 December COMPARISON FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2006 AND Operating revenue The Group s total revenue was USD million for the full year ended 31 December 2006, compared to USD 73.9 million for the full year ended The main driver of the higher revenues in 2006 was the Galaxy Driller which commenced operational day rate at USD 225,000 per day from 29 June 2006 into the following year. This is compared to the 2005 year where the vessel was laid up in total for approximately 9 months of the year which included the time waiting for approval from the bondholders to refurbish the vessel (which was granted in early April 2005), and approximately 5 months spent on the actual refurbishment works in Pan United Shipyards in Singapore. The vessel then commenced its first operational day rate for the year of USD 49,000 per day towards the end of August

55 9.3.2 Operating expenses The Group s operating expenses for the year ended 31 December 2006 was USD 65 million compared to USD 52.8 million for the corresponding period in The increase was primarily due to the Galaxy Driller being operational for the full year of 2006 (except for approximately 5 weeks undergoing upgrade and loadout in between contracts), as opposed to 2005 when the vessel was laid up without any works for approximately 4 months followed by refurbishment works for 5 months. Therefore there was a higher level of personnel costs and repair and maintenance costs during 2006 as compared to Note: the refurbishment works in 2005 (approximately USD 16.9 million) were fully capitalised (and depreciated) and hence did not contribute to operating expense during Depreciation expense was also higher in 2006 by USD 2.5 million mainly due to the depreciation expense on the capitalised refurbishment of the Galaxy Driller from September 2005 onwards. There was USD 6.0 million of debt restructing expenses incurred in Year 2005 related to the Scheme of Arrangement. There were no such expenses in 2006 as the Scheme of Arrangement became effective on 30 May 2005 and was officially terminated on 26 April Operating margin The operating income of USD 47.6 million for 2006 significantly exceeded the result of USD 21.1 million of the prior year. The operating margin therefore was 42% for the year ended 31 December 2006 compared to 28% for the year ended 31 December Total other income/expense The year ended 31 December 2006 resulted in total other income of USD 1.2 million (due to interest revenues earned on cash balances) compared to total other expense of USD 5.7 million for the year ended 31 December This was primarily due to interest expense of USD 6.1 million in 2005 on the outstanding USD notes and NOK notes up to 30 May 2005 when the Scheme of Arrangement was effected Profit before/after tax Profit before taxes amounted to USD 48.8 million for 2006 as compared to USD 15.4 million for The result after tax for the year ended 31 December 2006 was USD 47.6 million as compared to USD 14.0 million for the prior year ended 31 December Cash and cash equivalents Cash and cash equivalents as of 31 December 2006 were USD 63.0 million compared to USD 16.1 million as of 31 December This is reflective of the higher level of operations during Total Assets Total assets as at 31 December 2006 of USD million were higher than that of the prior year end of USD million, generally as a result of the higher levels of cash and cash equivalents Total Liabilities Total Liabilities as of 31 December 2006 of USD 10.9 million is lower than the prior year ending 31 December 2005 of USD 14.0 million, due to a higher level of trade payables as at 31 December 2005 (USD 8.3 million) as compared to 31 December 2006 (USD 4.6 million). The higher level as of 31 December 2005 was a reflection of the tail end of payables outstanding from the Galaxy Driller Refurbishment and also works performed on the Galaxy Driller between contracts in November (approximately 1 month of upgrade and loadout) including necessary build up of stores and spares for the next contract in Myanmar which commenced in December Total shareholders equity As of 31 December 2006, the Group s total shareholders equity was USD million compared with USD million at the year-end The equity-to-assets ratio was 94% as of 31 December 2006 as compared to 89% for the prior year. 52

56 Total liabilities and shareholders equity The Group had a total balance of USD million as of 31 December 2006 compared with USD million as of 31 December COMPARISON FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2005 AND Operating revenue For the year ended 31 December 2005, the Group s total revenue was USD 73.9 million, compared to USD 56.8 million for the year ended The main driver of the revenues in 2005 was the Northern Producer with revenues of USD 47.0 million for the year ended 31 December 2005 as compared to USD 39.4 million for the prior year. This was due to higher vessel operating rate by USD 6.7 million and 2005 saw a tariff production rate of USD 7.6 million as opposed to nil in The Galaxy Driller generated revenues of USD 6.7 million within 2005 as opposed to nil for the prior year Operating expenses For the year ended 31 December 2005, the Group s operating expenses were USD 52.8 million compared to USD 47.5 million for the year ended 31 December This increase in expenditure was mainly attributable to the Galaxy Driller s Drilling and production expenses during 2005 being USD 4.5 million higher than 2004 as the vessel operated for approximately 3 months during the 2005 year whereas it was laid up during 2004 with some small refurbishment works done. Furthermore debt restructing expenses at USD 6.0 million during 2005 were approximately USD 2.6 million higher than 2004 as the Scheme of Arrangement was effected on 30 May Operating margin The operating income at USD 21.1 million for 2005 exceeded the result of USD 9.3 million of the prior year. The operating margin therefore was 28% for the year ended 31 December 2005 compared to 16% for the year ended 31 December Total other income/expense Total other expenses were USD 5.7 million for the year ended 31 December 2005 compared to USD 19.4 million for the year ended 31 December The higher level of expenses in 2004 was primarily due to USD 16.5 million of interest expense on the outstanding USD Notes and NOK Notes for the full year as opposed USD 6.1 million during 2005 to the date that the Scheme was effected Profit before/after tax Profit before taxes amounted to USD 15.4 million for 2005 compared to a loss of USD 10.1 million for The result after tax for the year ended 31 December 2005 was a profit of USD 14.0 million compared to a loss of USD 10.9 million for the year ended 31 December Cash and cash equivalents Cash and cash equivalents as of 31 December 2005 was USD 16.1 million compared to USD 12.6 million as of 31 December Total Assets Total assets as of 31 December 2005 of USD million were higher than that as of the prior year-end of USD million. This was a result of the higher levels of cash and cash equivalents and higher level of trade receivables (due to the Galaxy Driller being operational at the end of 2005 as opposed to nil operations during 2004) Total Liabilities Total liabilities as of 31 December 2005 was USD 14.0 million as compared to USD million for the prior year ended 31 December

57 9.4.9 Total shareholders equity As of 31 December 2005 the Group s total shareholders equity was USD million compared with USD 70.7 million at the year-end The equity-to-assets ratio was 89% as of 31 December 2005 as compared to 56% as of 31 December SIGNIFICANT CHANGES IN THE COMPANY S FINANCIAL OR TRADING POSITION SINCE 30 JUNE 2007 There have been no material changes to the Company s financial or trading position since 30 June

58 10. CAPITAL RESOURCES 10.1 INFORMATION CONCERNING THE COMPANY S CAPITAL RESOURCES The Company has raised approximately USD 50 million through issuing new shares. These funds have financed the Company s commitments and liabilities. In addition, the Company has a total of USD 400 million in debt, whereof USD million is long-term debt. As of 30 June 2007, the Company had cash, cash equivalents and marketable securities of USD 41.4 million plus restricted cash of USD 42.0 million. The Company believes that its current capital resources will be sufficient to fulfil its commitments referred to under section The adequacy of available funds will depend on many factors, including the further growth of the business, capital expenditures, market development, competition and potential acquisitions. Accordingly, the Company may require additional funds and seek to raise such funds through issuing new equity or debt CASH FLOWS Northern Offshore will require capital to fund ongoing operations, the acquisitions of other machinery and equipment, debt service and potential acquisitions. Northern Offshore anticipates that by taking into account generally expected market conditions and internally generated cash flow, the funds will be sufficient to fund operations of the Company s fleet and to fulfil commitments referred to under section 10.6 Investments. The Company believes that funds from operations and future bank facilities will be sufficient to support the Company s growth strategy, which may, in addition to conversion projects and newbuildings, include the acquisition of existing vessels. The adequacy of available funds will depend on many factors, including the further growth of the business, capital expenditures, market development, competition and potential acquisitions. Accordingly, the Company may require additional funds and seek to raise such funds through issuing new equity and debt. The funding of the Company is described in detail in sections 10.4 Capitalisation and indebtedness and 10.5 Borrowings. The historical cash flow for the years and half year 2007 and 2006 are set out in section above. The cash flow from operating activities in 2006 amounted to USD 54.7 million compared to USD 28 million for the same period in For the six months period ended 30 June 2007 the cash flow from operating activities amounted to USD 76.2 million compared to USD19.5 million for the corresponding period in The cash flow used for investing activities in 2006 amounted to USD 9 million and used for investing activities in 2005 was USD 10 million. For the six months period ended 30 June 2007 the cash flow used for investing activities amounted to USD million compared to USD 0.9 million for the corresponding period in For further information regarding the Company s capital expenditures, see section 10.6 Investments. As of 31 December 2006, cash and cash equivalents amounted to USD 63.0 million, compared to USD 16.0 million at 31 December As of 30 June 2007, cash and cash equivalents amounted to USD 41.4 million as compared to USD 35.2 million as of 30 June WORKING CAPITAL STATEMENT The Company s working capital is sufficient to cover present requirements for at least the 12 coming months. The Company s primary resource is internally generated cashflow from operations, which is forecasted to meet existing financial obligations including scheduled capital expenditures (as dislosed per Section 10.6) and interest and principal repayment commitments of existing borrowings (as disclosed per Section 10.5). As of 30 June 2007 the Company held USD 67.5 million of current debt and USD million non-current debt, reflecting the issued Bank Loan of USD 300 million and Bond Loan of USD 100 million to fund the majority of the acquisition price of the three Jack-ups from Maersk. 55

59 Key Ratios: Actual Q Working Capital Ratio 0.84 (*) (Current Assets/Current Liabilities) Working Capital Ratio Reworked 1.21 (*) Debt to Equity Ratio 1.91 Interest Coverage Ratio (EBITDA to Interest) (*) As of 30 June 2007, the pre-payment of equity issuance of approximately USD 50 million was classified as Amounts due to Related Parties within Current Liabilities. However, during July 2007 with the physical share issuance this amount is reclassified on the balance sheet out of Current Liabilities to Issued Share Capital and Additional Paid-in capital. Therefore, if we assumed to make this reclassification as of 30 June 2007, the Working Capital Ratio would be

60 10.4 CAPITALISATION AND INDEBTEDNESS The Company s capitalization as of 30 June 2007 of USD 83 million consists of USD million in equity. The Company believes that its capitalization as of 30 June 2007 represents an adequate capital structure. ASSETS Paid in capital 153,254 Other equity 55,631 Shareholders equity (A) 208,885 Current debt - Guaranteed - Secured 67,500 Unsecured - Total current debt 67,500 Non-current debt Secured 332,500 Unsecured - Total non-current debt 332,500 Total indebtedness (B) 400,000 Total capitalisation (A + B) 608,885 Cash and cash equivalents 41,447 Trading securities 0 Liquidity (C) 41,447 Current financial receivable (D) - Current bank debt - Current portion of non-current debt 67,500 Other current financial debt - Current financial debt (E) 67,500 Non-current bank loans 332,500 Other non-current loans - Non-current financial debt (F) 332,500 Net financial indebtedness (C+D-E-F) 358, BORROWINGS As of the date of this Prospectus, the Company has a total of USD 400 million in debt, whereof USD millions is long-term debt Term Loan of USD 300 million On 14 June 2007, the Company entered into a Secured Term Loan Facility Agreement (the Term Loan Agreement ) with certain financial institutions, as lenders, and DnB NOR Bank ASA, New York Branch, as agent (the Agent ). The Term Loan Agreement provides for a USD 300,000, month term loan facility (the Term Loan ) which matures on 14 March The interest rate applicable to the Term Loan under the 57

61 Term Loan Agreement is equal to the applicable 1, 3 or 6 month LIBOR rate per annum, in each case, plus an interest rate of 1.75% per annum. The proceeds of the Term Loan were used by the Company to pay, in part, the USD 455,000,000 purchase price payable in connection with the acquisition by the Company of the Energy Vessels (as defined below) from Maersk Contractors. The Company is required to repay the principal amount of the term loan in nine (9) quarterly installment payments of USD 22,500,000 commencing six (6) months after 14 June 2007, and with a final balloon payment in the amount of USD 97,500,000 due on March 14, The Company must also repay the principal amount of the Term Loan in certain minimum amounts in the event of a sale or the total loss of any of the Vessels (as defined below) or the sale or total loss of the vessel known as the Northern Producer. The Term Loan Agreement requires that the Company comply with certain financial covenants, including maintaining a minimum cash and cash equivalent amount of not less than USD 25,000,000, and a minimum market value of the Vessels of not less than 150% of the Term Loan. In addition, the Term Loan Agreement contains certain indemnity, reimbursement and break cost provisions, representations and warranties, affirmative and negative covenants and events of default common for loan facilities of this type. The Term Loan Agreement is governed by Norwegian law. The obligations of the Company under the Term Loan Agreement are guaranteed by Helm Maritime Corp., Jet Holding Limited, Energy Endeavor Ltd, Energy Exerter Ltd, Energy Enhancer Ltd and Energy Offshore Ltd, each of which is a wholly-owned subsidiary of the Company (collectively, the Guarantors ). All amounts owing under or in respect of the Term Loan Agreement and the related loan documents are secured by (i) a firstpriority vessel mortgage on the jack-up rigs know as the Energy Endeavor, the Energy Exerter and the Energy Enhancer (collectively, the Energy Vessels ) and the vessels know as the Galaxy Driller and the Energy Searcher (collectively, together with the Energy Vessels, the Vessels ), (ii) a first-priority assignment of all charters, earnings and insurances in respect of the Vessels, (iii) a first-priority pledge of the shares of each of the Guarantors and (iv) a first priority pledge of the Company s and the Guarantors accounts. In addition, the vessel known as the Northern Producer is subject to a negative pledge undertaking. There is a co-ordination agreement among the Company, the Guarantors, the lenders under the Term Loan Agreement, the Agent and the Trustee Bond Loan of USD 100 million On 12 June 2007, the Company entered into a Loan Agreement (the Bond Loan Agreement ) with Norsk Tillitsmann ASA, as loan trustee (the Trustee ) on behalf of the bondholders under the USD 100,000,000 bond issue described as FRN Northern Offshore, Ltd. Senior Secured Callable Bond Issue 2007/2010, Registration Number (ISIN) NO (the Bond Loan ). The Bond Loan was disbursed on 13 June 2007 and matures on 14 June The interest rate applicable to the Bond Loan under the Bond Loan Agreement is equal to the 3 month LIBOR rate per annum, plus an interest rate of 4.50% per annum. Interest is payable quarterly in arrears with the first such payment due on 13 September The proceeds of the Bond Loan were used by the Company to pay, in part, the USD 455,000,000 purchase price payable in connection with the acquisition by the Company of the Energy Vessels from Maersk Contractors. The Company may make early redemptions of the principal amount of the Bond Loan, in whole or in part, at any time after the interest payment date in June 2008 in an amount equal to: (i) if occurring from the interest payment date in June 2008 to the interest payment date in June 2009, 104.5% of par plus accrued interest on the redeemed amount, or (ii) if occurring from and including the interest payment date in June 2009 to the maturity date for the Loan, 102.5% of par plus accrued interest on the redeemed amount. The Company may be required to make an early redemption of the principal amount of the Bond Loan in certain minimum amounts in the event of a sale or the total loss of any of the Vessels or in the event that the Company disposes of any of its ownership interest in any of the Vessel-owing entities in an amount equal to: (i) if occurring from and including the disbursement date to the interest payment date in June 2008, 105.5% of par plus accrued interest on the redeemed amount, (ii) if occurring from and including the interest payment date in June 2008 to the interest payment date in June 2009, 104.5% of par plus accrued interest on the redeemed amount and (iii) if occurring from and including the interest payment date in June 2009 to the maturity date for the Bond Loan, 102.5% of par plus accrued interest on the redeemed amount. The Bond Loan Agreement requires that the Company comply with a minimum cash and cash equivalent amount of not less than (x) from the disbursement date to the interest payment date in June 2008, USD 10,000,000 and (y) at all times thereafter, USD 20,000,000. In addition, the Bond Loan Agreement contains 58

62 certain indemnity, reimbursement and break cost provisions, representations and warranties, affirmative and negative covenants (including a limitation on dividends and distributions) and events of default common for bond loan facilities of this type. The Bond Loan ranks pari passu with all other senior indebtedness of the Company other than obligations which are mandatorily preferred by law and save with respect to the Term Loan referred to above, the Bond Loan ranks ahead of subordinated capital. All amounts owing under or in respect of the Bond Loan Agreement and the related loan documents (including the Bond Loan and interest thereon are secured by (i) a letter of guarantee by Helm Maritime Corp., Energy Endeavor Ltd, Energy Exerter Ltd and Energy Enhancer Ltd, each of which is a wholly-owned subsidiary of the Company, (ii) a second-priority vessel mortgage on the Vessels, (iii) a second-priority assignment of all earnings and insurances in respect of the Vessels, and (iv) a second priority pledge of the shares of each of the Vessel-owning entities (collectively, the Bond Security ). There is a co-ordination agreement among the Company, the Guarantors, the lenders under the Term Loan Agreement referred to above, the Agent referred to above and the Trustee Bonding Facility Agreement of USD 42 million On 14 June 2007, the Company entered into an Uncommitted Bonding Facility Agreement (the Bonding Facility Agreement ) with certain financial institutions, as lenders and issuers (the Bonding Lenders ), as lenders, certain mandate lead arrangers and DnB NOR Bank ASA, New York Branch, as agent (the Agent ). The Bonding Facility Agreement provides for the Bonding Lenders to issue bonds, guarantees, standby letters of credit, indemnities and other similar instruments (collectively, the Guarantees ) for the benefit of the Company or certain of its subsidiaries up to an uncommitted amount of USD 42,000,000 (the Bonding Facility ). The pricing under the Bonding Facility Agreement will be agreed in writing from time to time between the Company and the Bonding Lenders. The Bonding Facility Agreement contains certain indemnity, reimbursement and break cost provisions, representations and warranties, undertakings and events of default (including a cross default to events of default under the Term Loan Agreement referred to above) common for uncommitted bonding facilities of this type. The Bonding Facility Agreement is governed by Norwegian law. The obligations of the Borrower and its subsidiaries under the Bonding Facility Agreement are secured by cash collateral (or other cash equivalent collateral) in an amount not less than the corresponding Guarantees issued under the Bonding Facility Agreement and by a collateral pledge of the accounts in which such collateral is deposited INVESTMENTS The table below sets forth the historical and expected capital expenditure for the Company. 6 months ended 30 June 2007 Year ended 31 December 2006 Year ended 31 December 2005 Capital expenditures USD 456 million USD 9.1 million USD 16.9 million Year ended 31 December 2004 USD 1.73 million The investments above are related to: Capital expenditures GD-Major Refurbishment ES-Refurbishment New Control pod for BOP Energy Searcher Refurbished Riser for Energy Searcher Northern Producer Bracing Mods Purchase of Jack-ups 6 months ended 30 June 2007 Year ended 31 December 2006 USD 8 million USD 112,500 USD 112,500 USD 575,600 USD 381,000 USD 930,800 USD 455 million Year ended 31 December 2005 USD 16.9 million Year ended 31 December 2004 USD 1.73 million 59

63 Ongoing investments The Energy Searcher has remaining budget for modification to anchor winches (USD 500,000) and a new Derrick camera system (USD 180,000) which are expected to take place within the next few months. The Northern Producer has budgeted amount for repainting of approximately USD 4 million Principal future investments Apart from the ongoing investments shown above, the Company has not made any firm commitments on future capital expenditures as per this date. 60

64 11. BOARD OF DIRECTORS, MANAGEMENT AND EMPLOYEES 11.1 BOARD OF DIRECTORS In accordance with Bermuda law, the Board of Directors is responsible for administering the Company s affairs and for ensuring that the Company s operations are organized in a satisfactory manner. The Company s Bye-laws provide that the Company shall have no more than 5 directors. The general meeting of shareholders elects the directors and appoints the chairman of the Board among the directors. The Company s Board of Directors has currently four members (the appointment of a fifth director, Mr. Stephen Knudtzon, being conditional upon the successful Listing). All of the directors are independent from the Company s management and main business associates, and upon Listing, three of the five directors will be independent of the main shareholders, as required by the Norwegian Code of Practice for Corporate Governance dated 28 November Thus, the composition of the Board of Directors complies with the recommendation in the Norwegian Code of Practice for Corporate Governance. The following table sets forth the directors, their positions, and their terms of office. Each of the directors are appointed by the Company s general meeting and in accordance with the terms of the bye-laws holds office for such length of time as the shareholders determine or, failing that, until the Company s next general meeting. Name Position Member Since Shares owned Jim LaChance President February Tor Olav Trøim Board member July Kurt Plumer Board member June Nick Vouloumanos Board member December Stephen Knudtzon Board member Effective subsequent Listing The Company s business address serves as c/o address in relation to the directors of the Company. Jim LaChance (42), President Jim LaChance is a portfolio manager at Satellite Asset Management, L.P., a USD 6 billion AUM investment management fund in New York City. Prior to that, Mr LaChance was a Partner/Managing Director at Post Advisory Group LLC, a USD 8 billion AUM investment management fund in Los Angeles. He has also previously managed high-yield bond and distressed investment hedge funds for Liberty View Capital Management. Mr LaChance has previously been a restructuring and merchant banker with Chase Manhattan Bank. He earned his bachelor s degree in business administration at Northeastern University and his MBA at the Stern School of Business at New York University. Mr LaChance is a US citizen and resides in New York, USA. Tor Olav Trøim (44), Director Mr Trøim has been a member of the Board since Northern Offshore s incorporation. Mr. Trøim has been vicechairman and a director of Frontline since November He also serves on the board of Golar LNG Ltd., Golden Ocean Group Ltd., Seadrill Ltd., Marine Harvest Group ASA and serves as chairman of Ship Finance International Ltd. Mr. Trøim is a naval architect and graduated from the University of Trondheim in Mr. Trøim is a Norwegian citizen and resides in the UK. Kurt Plumer (39), Director Mr Plumer became a member of the Board in June He is a Partner and Senior Portfolio Manager for Highland Capital Management, L.P. in Dallas, Texas - a SEC-registered investment advisor which specialises in credit, structured product, and special situations investing, with over USD 31 billion in assets under management in a broad range of fund structures. Prior to joining Highland in 1999, Mr Plumer was a distressed high yield bond trader at Lehman Brothers in New York. Before that, he was a corporate finance banker at Bank 2 Jim LaChance does not own any shares directly. Satellite Asset Management L.P, where he is a portfolio manager own a total of 17,600,000 shares in Northern Offshore. 3 Mr. Trøim does not own any shares directly. Geveran Ltd., a company associated with Mr. Fredriksen, own 20,115,831 shares in Northern Offshore. 4 Mr. Plumer does not own any shares directly. He is a Partner and Senior Portfolio Manager for Highland Capital Management, L.P, who in turn own 6,717,301 shares in Northern Offshore. 5 Mr. Vouloumanos does not own any shares directly. He is a portfolio manager at Ramius Capital who own a total of 11,612,566 shares in Northern Offshore. 61

65 of America Capital Markets. Mr Plumer earned a BBA from Baylor University and an MBA from the Kellogg School at Northwestern University. He has earned the right to use the Chartered Financial Analyst designation. Mr Plumer is a US citizen and resides in Dallas, USA. Nick Vouloumanos (34), Director Mr Vouloumanos is a portfolio manager at Ramius Capital, having joined the firm in June Prior to joining Ramius Capital, he was employed by Donaldson Lufkin & Jenrette where he worked in the Leveraged Finance Department. Mr Vouloumanos has earned the right to use the Chartered Financial Analyst designation and holds an MBA in finance from the Stern School of Business at New York University. He graduated from the University of North Carolina at Chapel Hill with a BSc in biology and a minor in chemistry. Mr Vouloumanos is a US citizen and resides in the US. Stephen Knudtzon (55), Director. 6 Mr. Knudtzon is a partner in the Oslo office of the law firm, Thommessen Krefting Greve Lund AS Advokatfirma. Mr. Knudtzon was admitted to the Norwegian bar in 1979 and before the Supreme Court in He became a partner in Lund & Co ANS in 1986 which merged with Thommessen in He is a Board Member of the Norwegian Maritime Law Association and a member of the legal committee of the Norwegian Shipowners Association. Mr. Knudtzon is a Norwegian citizen and resides in Oslo, Norway AUDIT COMMITTEE AND REMUNERATION COMMITTEE The Company does not have an audit nor a remuneration committee MANAGEMENT AND EMPLOYEES The table below sets forth the Company s current executive management. Name Position Shares owned Richard F. Borghese CAO 0 Roger Goddard Operations Manager 0 Shereen Dawson Financial Controller 0 The Company s business address serves as c/o address in relation to the management s employment in the Company. Richard F. Borghese (41), Chief Administrative Officer Mr Borghese has served as Chief Administrative Officer for Northern Offshore since He manages the day to day operations of the Company from Houston, Texas, and reports directly to the Board of Directors. His responsibilities include corporate strategy, financial guidance, vessel marketing and staff administration. Mr Borghese is a petroleum engineer graduate from Marietta College with 16 years of experience in the petroleum and natural gas industry. He also serves on the Board of Managers of New XCL-China, LLC and has a wide spectrum of experience ranging from the petroleum and natural gas field to the board room. Mr. Borghese is a US citizen and resides in Houston, USA. He owns no shares in the Company. Roger Goddard (59), Operations Manager Mr Goddard has over 30 years of experience in the oil and gas exploration offshore drilling industry. His experience covers exploration drilling and well testing, together with associated surface and subsea completions. Some 25 years were spent with Drilling Contractors, working his way up to Drilling Superintendent and Rig Manager. He subsequently spent six years as a Drilling Consultant, prior to becoming Jet Drilling s Operations Manager. Mr Goddard s experience in Offshore Drilling Operations includes Deepwater D.P. Drillship Operations and major Drilling equipment. He has also garnered invaluable experience working on different types of drilling units such as semi-submersibles, dynamically positioned drillships, conventional drillships, slotted jack-ups and cantilever jack-ups. Mr. Goddard is a British citizen and resides in Singapore. Shereen Dawson (37), Financial Controller Ms Dawson became the Financial Controller of the Northern Offshore Group in February She has extensive industry experience, including five years as Asia Pacific Financial Controller with the Geoservices 6 Mr. Knudtzon was proposed for election to the Company s Board of Directors at the Company s Annual General Meeting held on 11 July 2007 and his appointment was approved by the Company s shareholders subject to and conditional upon the Listing. 62

66 Group (mainly incorporating China, Indonesia, Malaysia, Thailand, Brunei, Sakhalin, Myanmar, India, Vietnam, Singapore, Australia and New Zealand), Vice President Director and Financial Controller of P.T. Welltekindo Nusantara Indonesia for 18 months, and most recently, as consultant to Woodside Petroleum within the Africa Business Unit, Mauritanian Operations for a year. Ms Dawson also has four years of audit experience with Deloitte Touche Tohmatsu and was a Financial Consultant with the Zenith Financial Group. Ms Dawson holds a Bachelor of Arts Degree with a double major in Psychology from the University of Western Australia and a Bachelor of Business Degree with a sub-major in Public Accountancy from Edith Cowan University Western Australia. She completed her professional qualification as a Chartered Accountant in 1996 and has been a continuous Associate Member of the Institute of Chartered Accountants. Ms Dawson is an Australian citizen and resides in Singapore ADDITIONAL INFORMATION ABOUT DIRECTORS AND MANAGEMENT During the last five years preceding the date of this Prospectus, no member of the Board of Directors or the senior management has: any convictions in relation to indictable offences or convictions in relation to fraudulent offences; received any official public incrimination and/or sanctions by any statutory or regulatory authorities (including designated professional bodies) or ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company; or been declared bankrupt or been associated with any bankruptcy, receivership or liquidiation in his capacity as a founder, director or senior manager of a company. Mr. Trøim has been a director of the Company since July 2000, and was accordingly a director at the time of the appointment of provisional liquidators over the Company in July Each of the other directors was appointed following the Scheme of Arrangement of the Company becoming effective on 30 May Over the five years preceding the date of this document, the members of the Board and the senior management hold or have held the following directorships (apart from their directorships of the Company and its subsidiaries) and/or partnerships: Name Current directorships/partnerships Previous directorships/partnerships last 5 years Board of directors Jim LaChance Tor Olav Trøim Kurt Plumer Nick Vouloumanos Stephen Knudtzon Portfolio manager at Satellite Asset Management, L.P Director of Frontline, director ofmarine Harvest Group ASA, Golar LNG Ltd., Golden Ocean Group Ltd. and Seadrill Ltd. and serves as chairman of Ship Finance International Ltd. Partner and Senior Portfolio Manager for Highland Capital Management, L.P, Appointed to the member committee for Blackwell Energy. None Partner in Thommessen Krefting Greve Lund AS Advokatfirma, Board Member (past president) of the Norwegian Maritime Law Association. Chairman of Buksér og Berging AS and Neptun Heavy Lift AS. Alternate director Fred.Olsen Energy ASA. Board member of various single purpose shipping and real estate companies. Partner/Managing Director at Post Advisory Group L.P Director and vice-chairman of the board of Knightsbridge Tankers Ltd. and director of Aktiv Inkasso AS. 63

67 Management Current directorships/partnerships Previous directorships/partnerships Richard F. Borghese Board of Managers of New XCL-China, LLC Roger Goddard None Shereen Dawson None Vice President Director of PT Welltekindo Nusantara Indonesia (May 2003-October 2004) CONFLICTS OF INTEREST The Company is not aware of any potential conflicts of interest between any duties to the Company, of the persons referred to above and their private interest or other duties, except for the related party relations described in section below REMUNERATION AND BENEFITS The remuneration of the members of the board shall be determined by the Company in its general meeting. The directors may also be reimbursed for, inter alia, travelling, hotel and other expenses incurred by them in attending meetings of the directors or in connection with the business of the Company. For the financial year 2006, the directors received no payment for their services to the Company in their capacity as board members. The remuneration for the financial year 2007 will be determined by the annual general meeting in The CAO is employed by the Company on a consultancy basis, for which he receives a monthly fee of USD 16,000, as well as out-of-pocket expenses. Other benefits of the CAO include a bonus incentive program shared by Mr. Borghese and Mr. Ballantyne (an employee responsible for managing the Northern Producer), pursuant to which they shall be entitled to bonus payments corresponding to given percentages of the net present value of new employment contracts for the rigs. Mr. Ballantyne received a bonus of at the end of 2006 of USD 35,000 which has been provided for in the Company s books and did not reflect any commissions. The Company has an accrued amount of USD 500,000 in its books for the payment of directors and officers bonuses, including to Mr. Borghese. The final allocation of these bonuses has not been agreed as yet, including as to whether any element payable to Mr. Borghese reflects upon commissions from the value of the rig contracts. The Northern Offshore Group s Operations Manager (Roger Goddard), employed by Jet Drilling, has a monthly salary of USD 17,000 and USD 7,000 in living allowance, as well as out-of-pocket expenses. He shall receive a yearly bonus of one months pay. The employment agreement between Jet Drilling and Mr. Goddard states that Jet Drilling shall pay any taxes and social contributions imposed in relation to the payments made by Jet Drilling thereunder. The Company s Financial Controller (Shereen Dawson) has a monthly salary of USD 16,217 and USD 6,000 in living allowance per month, as well as out-of-pocket expenses. She is also entitled to a year end bonus of two months pay. The employment agreement between Jet Drilling and Ms. Dawson states that Jet Drilling shall pay any taxes and social contributions imposed in relation to the payments made by Jet Drilling thereunder. The Company has per this date no share incentive programs for its employees. The Company does have a Savings Scheme with Zurich for it s expatriate employees whereby those who elect to participate must contribute a minimum of 5% of their base salary to which the Company matches the base of 5% base salary contribution. There is a vesting scale in place which determines when employees can have access to the Company s contributions. No other members of the administrative, management or supervisory bodies or any of its subsidiaries hold any contracts with the Company providing for benefits upon termination of employment. 64

68 11.7 EMPLOYEES The Company currently has a total of 118 employees. The table below illustrates the development in number of employees over the last three financial years, as per the end of each calendar year Number of employees

69 12. SHARE CAPITAL AND SHAREHOLDER MATTERS The following description includes certain information concerning the Company s share capital, a brief description of certain provisions contained in the Company s Bye-laws as they are in effect at the date of this Prospectus and a brief description of certain aspects of Bermuda law, including the Companies Act 1981 of Bermuda. The summary does not purport to be complete and is qualified in its entirety by the Company s Byelaws and Bermuda law. Any change in the Bye-laws is subject to approval by a general meeting of shareholders SHARE CAPITAL AND SHARES The Company s authorised share capital is USD 48.5 million, divided into 194 million shares of par value USD 0.25 each. The Company s issued share capital as per the date of the most recent balance sheet and as at the date hereof is USD 38,274,995 divided into 153,099,980 Shares with a nominal value of USD 0.25 each, issued in accordance with Bermuda Law. All shares are fully paid. No Shares are held by the Company itself or by any of its subsidiaries. The Company s issued share capital as per the beginning of the year 2006 was USD 35,999,995 consisting of 143,999,980 shares of par vaue USD 0.25 each OUTSTANDING AUTHORISATIONS Authorisation to issue Shares Subject to the Bye-laws and to any resolution of the shareholders to the contrary, the Board has the power to issue any unissued shares of the Company on such terms and conditions as it may determine and any shares or class of shares may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital, or otherwise as the Company may by resolution of the shareholders prescribe Authorisation to repurchase Shares The Bye-laws provide that the Company may in accordance with the provisions of the Companies Act 1981 of Bermuda from time to time repurchase Shares on such terms as the Board may think fit RIGHTS TO ACQUIRE SHARES The Company has not issued any convertible securities, exchangeable securities or securities with warrants giving anyone the right to acquire Shares through utilisation of such rights TRANSFERABILITY OF THE SHARES Pursuant to the Bye-laws, the Board shall refuse to register a transfer of shares unless all applicable consents, authorisations and permissions of any governmental body or agency in Bermuda have been obtained. The Board shall also decline to register the transfer of any share, and shall direct the Registrar to decline to register the transfer of any interest in any share held through the VPS, to a person where the Board is of the opinion that such transfer might breach any law (including, without limitation, U.S. securities laws) or requirement of any authority or any Listing Exchange until it has received such evidence as it may require to satisfy itself that no such breach would occur. Furthermore, the Board may decline to register the transfer of any share, and may direct the Registrar to decline to register the transfer of any interest in any share held through the VPS, if the registration of such transfer would likely, in the opinion of the Board, result in 50% or more of the aggregate issued share capital of the Company or shares of the Company to which are attached 50% or more of the votes attached to all issued and outstanding shares of the Company being held or owned directly or indirectly, (including, without limitation, through the VPS) by a person or persons resident for tax purposes in Norway (or such other jurisdiction as the Board may determine from time to time). If 50% or more of the aggregate issued share capital of the Company or shares to which are attached 50% or more of the votes attached to all outstanding shares of the Company are found to be held or owned directly or indirectly (including, without limitation, through the VPS) by a person or persons resident for tax purposes in Norway, the Board shall make an announcement to such effect through Oslo Børs, and the Board and the Registrar shall thereafter be entitled and required to dispose of such number of shares of the Company or interests therein held or owned by such persons as will result in the percentage of the aggregate issued share capital of the Company held or owned as aforesaid being less than 50%, and, for these purposes, the Board and the Registrar shall in such case dispose of shares or interests therein owned by persons resident for tax purposes 66

70 in Norway on the basis that the shares or interests therein most recently acquired shall be the first to be disposed of (i.e. on the basis of last acquired first sold). Other than what is described above, the Shares are freely tradable HISTORICAL DEVELOPMENT IN SHARE CAPITAL AND NUMBER OF SHARES Historical development in share capital and number of Shares Year Type of change in share capital Change in issued share capital (USD) Change in number of shares Subscr. Price (USD) Par value (USD) Total issued share capital (USD) Total number of issued Shares following change July-00 Establishment 26,170,165 26,170,165 n.a ,170,165 26,170,165 June-05 Cancellation of shares -25,450,165-25,450,165 n.a , ,000 July-05 Directed issue 7 35,279, ,279,980 n.a ,999, ,999,980 June-07 Private Placement 2,275,000 9,100, ,274, ,099,980 As at 31 December 2006 and as at 31 December 2005, the Company had an issued share capital of USD 35,999,995 comprised by 143,999,980 shares with a par value of USD 0.25, each of all which were fully paid OWNERSHIP STRUCTURE Major Shareholders As of 30 August 2007 the Company had a total of 1,825 shareholders registered in the VPS divided into 1,726 Norwegian and 99 foreign owners. In addition, the Company has approximately 8 shareholders holding 11,155,702 shares not registered in the VPS as per this date. The table below shows the 20 largest registered shareholders in Northern Offshore as per 30 August 2007: Shareholder No of shares Percentage 1 Goldman Sachs & Co. Equity Nontreaty Cust. 25,915, Morgan Stanley & Co. Client Equity Account 23,867, Geveran Trading Co. Ltd. 20,115, JPMorgan Chase Bank S/A Escrow Account 12,413, Deutsche Bank AG London 9,235, Credit Suisse Securities (Europe) 7,195, Bank of New York, BR treat account 6,717, Bear Stearns Securities Corp. 5,771, Post Distressed Master Fund LP 4,782, Bear Stearns Securities Corp. 4,599, The Opportunity Fund LLC 2,696, DB Distressed Opportunities Master 2,356, JPMorgan Chase Bank 1,902, Post Total Return Master Fund LP 1,867, Morgan Stanley & Co. 1,454, Virginia Retirement System 1,038, LBPB Nominees Limited 909, HFR DS Opportunity Master Trust 846, MW Post Portfolio Fund Ltd. 836, UBS Securities LLC 707, Total 20 largest 135,228, Others 6,716, Total registered in the VPS 141,944, The shares issued in the directed share issue in July 2005, were issued as part of the debt for equity swap that occurred as part of the Company s restructuring effected through the Scheme of Arrangement 67

71 To the knowledge of the Company, the following shareholders each have holdings which are notifiable: Shareholder No of shares Percentage 1 Goldman Sachs & Co. Equity Nontreaty Cust. 25,915, Morgan Stanley & Co. Inc. 23,867, Geveran Trading Co. Ltd. 20,115, JPMorgan Chase Bank S/A Escrow Account 12,413, Deutsche Bank AG London 9,235, Credit Suisse Securities (Europe) 7,195, The Company is not aware of any shareholders who individually or as a group own or exercise direct or indirect control over its operations, nor is it aware of any arrangements which may at a later date lead to a change in control. All shares in the Company are equal in all respects and all outstanding shares carry one vote at the Company s general meeting. There is only one class of shares issued, and all Shares are freely transferable The Voting Agreement Background Bermuda provisional liquidators (KPMG, Bermuda and London) were appointed over the Company in July The provisional liquidators worked together with an ad hoc committee (the Committee ) comprised of certain of the larger bondholders to progress restructuring discussions. In particular, this involved several months of negotiations between the provisional liquidators, the Committee, the Company s directors and the Company s largest shareholder, Geveran Trading Co Ltd and World Shipholding Limited (the Fredriksen Companies ), and resulted in terms being agreed between them, with the support of a significant majority of bondholders, for a consensual restructuring of the Company to be effected through a Bermuda scheme of arrangement (the Restructuring ). The result of the Restructuring would be for the Company s bondholders to become the owners of 98% of the Company s shares. One of the terms also agreed was that the Company s post-restructuring board would have at least five members, comprised of at least four persons who would be nominated by, or be representatives of, the members of the Committee, subject to the Fredriksen Companies also being able to maintain one board seat. Some considerable thought was given at the time as to how the board composition agreed by the relevant stakeholders was best documented. There was a concern on the part of the bondholders, given the Company s recent history and the difficult negotiations between stakeholders, to ensure that certain protections were put in place to protect the interests of the Company s bondholders going forward, given that they were agreeing to convert their debt into equity. The initial approach was to put in place a shareholders agreement, as would commonly be the case in relation to a restructuring involving a debt-for-equity swap. However, it was decided that this would be complicated to negotiate and document given the number of shareholders in existence, and that a key element of protection for bondholders would be the composition of the post-restructuring board, which could in fact be legislated for, in the first instance, through an agreement between the five largest post- Restructuring shareholders, and then by an alteration to the Company s bye-laws. Accordingly, an agreement was entered into on 14 April 2005 between the Company, Post Advisory Group LLC and its affiliates ( Post ), Highland Capital Management LP and its affiliates ( Highland ), AHAB Capital Management Inc and its affiliates ( Ahab ), RCG Carpathia Master Fund Ltd and its affiliates ( Ramius ) and the Frediksen Companies (the Voting Agreement ). Terms of the Voting Agreement The principal terms of the Voting Agreement therefore involved the parties being entitled to designate one or more irectors to the Company s board, provided that their percentage shareholding of the Company s post- Restructuring share capital exceeded certain levels. The largest bondholder (Post) would be entitled to appoint two board representatives provided that it maintained 20% of the share capital, and one board representative if it maintained at least 10% of the share capital. The three other members of the Committee (Highland, Ahab and Ramius) were entitled to similar appointment rights as between them if they collectively maintained those same share levels. The Fredriksen Companies were initially entitled to one board representative for the first year, and thereafter provided that it then owned 20% of the Company s share capital. 2 2 The designation allocations were subsequently amended in September 2005, to reflect a purchase of shares by Satellite Management from, amongst others, Post when Mr LaChance, director and President of the Company, moved from Post to work at Satellite. The amendment led to Post s designation rights being shared with Satellite. 68

72 The Voting Agreement also provided for the parties to vote their shares in the Company to maintain the board composition provided by the Voting Agreement, and to procure a change to the Company s bye-laws so that they included the same board designation rights. The bye-laws were so amended in October 2005 (at which time certain interim restrictions on transfers of shares between the parties to the Voting Agreement ceased to apply). Practical Application and Current Relevance The initial post-restructuring composition of the Board, and the terms of the Voting Agreement, were disclosed in the scheme of arrangement, which required the approval of 75% in value of those bondholders present and voting at the relevant bondholder meeting and the Bermuda court, in order to become effective. Indeed, the Company (acting by the provisional liquidators) was a party to the Voting Agreement which only became effective if the scheme was approved. As a practical matter, the Voting Agreement has never had to be relied on or referred to since its inception, the issues it was created to address never having manifested themselves. Post has not taken up its right to have a board seat since Mr LaChance moved to work at Satellite, and the Fredriksen Companies representative (Mr Troim) has not been asked to step down notwithstanding that its shareholding is less than 20% of the Company s share capital. At the annual general meetings of the Company that have taken place since the Restructuring was completed, no resolutions have been proposed to amend the board s composition, or the Company s bye-laws, other than the proposal to appoint Mr. Stephen Knutzon as a director, conditional upon the successful Listing, approved by the Company s most recent annual general meeting. Further, the Voting Agreement will be terminated upon and conditional upon the Listing by mutual written agreement of all of the parties who still have rights under the Voting Agreement. Similarly, the bye-laws of the Company have also been amended, such amendment to take effect conditional upon the Listing in order to remove the board designation provisions and also to ensure general compliance, so far as practicable for a Bermuda company, with the Norwegian Code of Corporate Governance and the requirements of Oslo Børs THE MEMORANDUM OF ASSOCIATION, BYE-LAWS AND CERTAIN ASPECTS OF BERMUDA COMPANY LAW The Company and its operations are primarily governed by the Companies Act 1981 of Bermuda, the Memorandum of Association and the Bye-Laws. The constitutional documents of the Company consist of the Memorandum of Association and the Bye-Laws, which are significantly more extensive than the articles of association (Nw; vedtekter) of a Norwegian company. The Bye-Laws deal primarily with the Company s administration and the distribution of power between its shareholders and its board of directors. The Bye-Laws have detailed provisions regarding the transfer of shares in the Company, changes to the Company s share capital, general meetings and appointment and removal of directors and officers. The Bye-Laws also contain provisions on payment and distribution of dividends, allocation of sums to the reserves, capitalisation of profits, auditing, accounting, amendments to the Bye-laws and winding up of the Company The Company s Objects and Purpose The Company s objects, as determined by section 6 of the Company s Memorandum of Association are: insurance and re-insurance of all kinds; packaging of goods of all kinds; buying, selling and dealing in goods of all kinds; designing and manufacturing of goods of all kinds; mining and quarrying and exploration for metals, minerals, fossil fuels and precious stones of all kinds and their preparation for sale or use; exploring for, the drilling for, the moving, transporting and refining petroleum and hydro carbon products including oil and oil products; scientific research including the improvement, discovery and development of processes, inventions, patents and designs and the construction, maintenance and operation of laboratories and research centres; land, sea and air undertakings including the land, ship and air carriage of passengers, mails and goods of all kinds; ships and aircraft owners, managers, operators, agents, builders and repairers; 69

73 acquiring, owning, selling, chartering, repairing or dealing in ships and aircraft; travel agents, freight contractors and forwarding agents; dock owners, wharfingers, warehousemen; ship chandlers and dealing in rope, canvas oil and ship stores of all kinds; all forms of engineering; farmers, livestock breeders and keepers, graziers, butchers, tanners and processors of and dealers in all kinds of live and dead stock, wool, hides, tallow, grain, vegetables and other produce; acquiring by purchase or otherwise and holding as an investment inventions, patents, trade marks, tradenames, trade secrets, designs and the like; buying, selling, hiring, letting and dealing in conveyances of any sort; employing, providing, hiring out and acting as agent for artists, actors, entertainers of all sorts, authors, composers, producers, directors, engineers and experts or specialists of any kind; to acquire by purchase or otherwise and hold, sell, dispose of and deal in real property situated outside Bermuda and in personal property of all kinds wheresoever situated; and to enter into any guarantee, contract of indemnity or suretyship and to assure, support or secure with or without consideration or benefit the performance of any obligations of any person or persons and to guarantee the fidelity of individuals filling or about to fill situations of trust or confidence Shareholders Meeting The annual general meeting of the Company shall be held in each year at such time and place (which shall not be in Norway) as the President or the Chairman or the Board shall appoint. The President or the Chairman or the Board may convene a special general meeting of the Company (which shall not be held in Norway) whenever in their judgment such a meeting is necessary. In addition, the Board shall, on the requisition of shareholders holding at the date of the deposit of the requisition not less than one-twentieth of the paid-up share capital of the Company as at the date of the deposit carries the right to vote at general meetings of the Company, forthwith proceed to convene a special general meeting of the Company. At least fourteen days notice of a shareholders meeting shall be given to each shareholder entitled to attend and vote thereat, stating the date, time, place and the general nature of the business to be considered at the meeting. The Board may fix any date as the record date for determining the shareholders entitled to receive notice of and to vote at any general meeting of the Company. Shareholders may participate in any general meeting by telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting. At any general meeting of the Company one or more persons present in person at the start of the meeting and representing in person or by proxy at least one-third of the voting rights entitled to be exercised at such meeting shall form a quorum for the transaction of business. If within half an hour from the time appointed for the meeting a quorum is not present, then, in the case of a meeting convened on a requisition, the meeting shall be deemed cancelled and, in any other case, the meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Secretary may determine and if at such adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders entitled to vote present in person or by proxy or by representative, not being less than two, shall form a quorum. If the meeting shall be adjourned to the same day one week later or the Secretary shall determine that the meeting is adjourned to a specific date, time and place, it is not necessary to give notice of the adjourned meeting other than by announcement at the meeting being adjourned. If the Secretary shall determine that the meeting be adjourned to an unspecified date, time or place, fresh notice of the resumption of the meeting shall be given to each shareholder entitled to attend and vote thereat in accordance with the provisions of the Bye-laws. Subject to the provisions of the Companies Act 1981 of Bermuda and the Bye-laws, any question proposed for the consideration of the shareholders at any general meeting shall be decided by the affirmative votes of a 70

74 majority of the votes cast in accordance with the provisions of the Bye-laws and in the case of an equality of votes, the resolution shall fail The Board Pursuant to the Bye-laws, the business of the Company shall be managed and conducted by the Board. In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by statute or by the Bye-laws, required to be exercised by the Company in general meeting. The powers of the Board include, inter alia, power to: appoint, suspend, or remove any manager, secretary, clerk, agent or employee of the Company and fix remuneration and determine their duties; borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party; appoint one or more Directors to the office of managing director or chief executive officer of the Company, who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company; appoint a person to act as manager of the Company s day-to-day business and entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business; delegate any of its powers (including the power to sub-delegate) to a committee appointed by the Board which may consist partly or entirely of non-directors, provided that every such committee shall conform to such directions as the Board shall impose on them and provided further that the meetings and proceedings of any such committee shall be governed by the provisions of the Bye-laws regulating the meetings and proceedings of the Board, so far as the same are applicable and are not superceded by directions imposed by the Board; present any petition and make any application in connection with the liquidation or reorganisation of the Company; in connection with the issue of any share, pay such commission and brokerage as may be permitted by law; and authorise any company, firm, person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith execute any agreement, document or instrument on behalf of the Company. The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit, provided that no meeting of the Board shall be held in Norway or the United Kingdom. A resolution put to the vote at a meeting of the Board shall be carried by the affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail Representatives in Bermuda Every Bermuda exempted company, such as the Company, must comply with certain requirements for officers or representatives in Bermuda. In the case of the Company, these requirements are currently satisfied by it having a company secretary who is ordinarily resident in Bermuda and a resident representative. The provision of company secretary services are provided by Codan Services Ltd., a Bermuda company, while David Cooke, partner in the law firm of Conyers Dill & Pearman LLC acts as the Company s resident representative. The resident representative shall, inter alia: be entitled to attend, to be heard at, and to receive minutes of all proceedings of, all meetings of the directors and shareholders of the company or of any committee of such directors; upon giving notice to the company of an address for the purposes of receipt of notices, be entitled to receive notice of any meeting of the directors or shareholders, or any committee of such directors; but accidental omission to give such notice shall not invalidate any action taken at any such meetings; and act as agent for the service of process in Bermuda. 71

75 The Rights attaching to the Shares All the issued Shares in the Company rank pari passu, and the rights attached to those Shares are as follows: Dividend Rights The Shares carry rights to such dividend as the Board form time to time may declare. The Board may fix any date as the record date for determining the shareholders entitled to receive any dividend. Voting Rights At any general meeting, every holder of Shares who is present in person or by proxy, shall have one vote on a show of hands. On a poll, every such holder of Shares present in person or by proxy shall have one vote for every Share held. Pre-emption Rights in Offers The Company s shareholders have no pre-emption rights in offers of Shares conducted by the Company. Rights upon Liquidation In the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganisation or otherwise or upon any distribution of capital, the holder of the Shares have the right to receive a pro rata share of the surplus assets of the Company available for distribution to shareholders. Redemption The Shares do not carry a right of redemption by shareholders. Variation of Class Rights Any rights attached to a class of shares of the Company (of which there are none at present save as referred to herein) may be varied (unless otherwise provided by the terms of issue of the shares of that class) with the written consent of three-fourths of the holders of such shares or with the sanction of a resolution passed by a majority of three-fourths of the votes cast at a separate general meeting of the holders of that class (at which meeting the quorum shall be at least two persons holding one-third of the issued shares of that class). The rights attached to any class of shares (unless otherwise expressly provided by the conditions of issue of such shares) are deemed not to be varied by the creation, allotment or issue of shares ranking pari passu therewith SHAREHOLDER AND DIVIDEND POLICY Shareholder policy The Company will inform Oslo Børs, the Company s shareholders and the market in general on an ongoing basis of the Company s development, activities and special events, ensuring that as far as possible the pricing of the Company s Shares reflects the underlying values and expectations on future profits. Such information will, among other things, take the form of annual reports, quarterly reports, stock exchange bulletins, press releases and investor presentations when appropriate Dividend policy The Company will strive to follow a dividend policy favourable to shareholders. This will be achieved by sound business development and continuous growth. The Company aims to give shareholders a competitive return on capital relative to the underlying risk. The Company has not paid any dividends for the year 2006, 2005 nor SHAREHOLDER S AGREEMENTS ETC Lock-up agreements To the Company s knowledge, there are no lockup agreements or similar arrangements Shareholder s agreements As far as the Company is aware, there are no shareholders agreements related to the shares in the Company other than the Voting Agreement, which will be terminated prior to and conditional upon the Listing. 72

76 12.10 CORPORATE GOVERNANCE The Norwegian Corporate Governance Code of Practice will apply to Northern Offshore with a primary listing on Oslo Børs to the extent that the provisions of the Code do not conflict with the legislation of the Company s national jurisdiction. This code of practice is a comply or explain guideline, and the Company s corporate governance policy deviates from the recommended guidelines in the following respects: In accordance with Bermuda law and common practice for Bermuda companies, the Company s objects as stated in its Memorandum of Association are wider and more extensive than recommended in the Corporate Governance Code. In accordance with Bermuda law, the Board is authorised to repurchase treasury shares, and to issue any unissued shares within the limits of the authorised share capital. These authorities are neither limited to specific purposes nor to a specified period as recommended in the Corporate Governance Code. In order to avoid an unbeneficial tax treatment of the Company s Norwegian shareholders due to Norwegian Controlled Foreign Corporation (NOKUS) taxation, the Shares are subject to certain restrictions on transfer as further described in section 12.4 Transferability of the Shares above. The Company does not have a nomination committee for the election of directors RELATED PARTY TRANSACTIONS Seadrill Agreement In January 2006, Jet Drilling entered into an agreement with Seadrill Ltd. and Seadrill Management (S) Pte Ltd ( Seadrill ) whereby the then employees of Jet Drilling, Mr. Hans van Roijen and Ms. Lee Geok Hiang, resigned from Jet Drilling to work for Seadrill (the Seadrill Agreement ). Seadrill is a company affiliated with Tor Olav Trøim, a director of the Company. Mr. van Roijen and Ms. Lee had started working for Seadrill during the autumn of 2005, while still being under contract with Jet Drilling. Jet Drilling accepted their resignations, and the parties came to a compromise in the Seadrill Agreement, whereby Seadrill agreed to supply Jet Drilling certain marketing and operational services at no cost for a period of 12 months. The Seadrill Agreement is no longer in effect INTERCOMPANY AGREEMENTS Internal Bareboat Charters The Company has two internal bareboat charters between respectively Qualimar and Sea Production in respect of Northern Producer and Jet Holding and Jet Shipping in respect of Energy Searcher. Both agreements are entered into on standard Bimco Barecon 89 forms. In 2006, the total yearly rate paid by Sea Production to Qualimar was approximately USD 20 million. The total yearly rate in 2006 paid by Jet Shipping to Jet Holding was approximately USD 2.6 million. Following the completion of the Maersk Acquisitions, each of the Energy Exerter Limited, Energy Endeavour Limited and Energy Enhancer Limited have entered into a bareboat charter with Energy Offshore Limited in respect of the Energy Exerter, the Energy Endeavour and the Energy Enhancer respectively. 73

77 Intercompany Management Agreements Purchaser of Manager Date Rig Services Yearly rate services Sea Jet Drilling 1 January 2004 NA Administrative and SGD Production financial management of Sea Production Jet Shipping Jet Drilling 1 January 2002 Energy Searcher Commercial and SGD operational management Helm Maritime of the rig Jet Drilling 1 January 2002 Galaxy Driller Commercial and operational management of the rig SGD The Company also has an intercompany management fee payable between Northern Offshore and Sea Production Ltd. of GBP 15,000 per month, although this has not been formalized in a written agreement. The Company is also intending to put in place an intercompany management agreement between Jet Drilling and Energy Offshore Ltd. in relation to the vessels acquired as part of the Maersk Acquisitions, but these arrangements have not been put in place as at the date of this Prospectus. 74

78 13. SECURITIES TRADING IN NORWAY The Company has applied for the admission of all its Shares registered in the VPS as per this date to listing and trading on Oslo Børs. As a company listed on Oslo Børs, the Company is subject to certain duties to inform the market under the Stock Exchange Regulations, and the insider trading regulation of chapter 2 of the Securities Trading Act. Furthermore, the Company is subject to Norwegian securities regulations and supervision by the relevant Norwegian authorities. The Norwegian Parliament has recently passed a new Norwegian Stock Exchange Act of 29 June 2007 No 74 and a new Norwegian Securities Trading Act of 29 June 2007 No 75. The new Stock Exchange Act will enter into force on 1 November 2007 and the Securities Trading Act will enter into force partly on 1 November 2007 and partly on 1 January These new acts implement EEA legislation corresponding to (i) the EU Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments, (ii) the EU Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, and (iii) the EU Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids. The outline of securities trading in Norway provided in this section is, in general, based on the current legislation INTRODUCTION Oslo Børs was established in 1819 and is the principal market in which shares, bonds and other financial instruments traded in Norway. In 2000, Oslo Børs was transformed to a public limited company. As of 31 December 2006, the total capitalization of companies listed on Oslo Børs amounted to approximately NOK 1,915 billion. Oslo Børs is a part of the NOREX Alliance, whose other members are Stockholmsbörsen (thereunder Københavns Fondsbørs, Helsinki Stock Exchange, and various exchanges in the Baltic countries) and the Iceland Stock Exchange TRADING AND SETTLEMENT Trading on the NOREX exchanges is carried out in the electronic trading system SAXESS. OM Technology, a part of OM AB that owns Stockholmsbörsen, has developed SAXESS. This trading system is in use by all members of the NOREX Alliance, and allows brokers to operate on all such exchanges of which they are members through a single trading system. For the time being, clearing of all trades, however, takes place through different systems for trades affected on the different exchanges. Official trading on Oslo Børs takes place between 9:00 am and 4:30 pm each trading day. Orders may be placed in the system from 8:15 am. The settlement period for trading on Oslo Børs is three days (T+3). The ability of brokerage houses to trade for their own account is restricted to trading that occurs as an integral part of either investment services or general capital management. Trading by individual employees is also restricted. Investment services in Norway may only be provided by Norwegian brokerage houses holding a license under the Securities Trading Act, branches of brokerage houses from an EEA -state or brokerage houses from outside the EEA that have been licensed to operate in Norway. EEA-state brokerage houses may also conduct crossborder investment services in Norway. It is possible for brokerage houses to undertake market-making activities in shares listed in Norway if they have a license to do so under the Securities Trading Act, or in the case of EEA state brokerage houses, a license to carry out market making activities in their home jurisdiction. Such market-making activities will be governed by the regulations of the Securities Trading Act covering brokers trading for own account. Such market-making activity, however, does not as such require notification to the Financial Supervisory Authority of Norway (Kredittilsynet) ( FSAN ) or Oslo Børs except for the general obligation on brokerage houses that are members of Oslo Børs to report all trades in the listed securities. 75

79 13.3 INFORMATION, CONTROL AND SURVEILLANCE Under Norwegian law, Oslo Børs is required to perform a number of surveillance and control functions. The Surveillance and Corporate Control unit of Oslo Børs monitors all market activity on a continuous basis and is responsible for the dissemination of information from listed companies to the market. Market surveillance systems are largely automated, promptly warning department personnel of abnormal market developments. Oslo Børs controls the issuance of securities in both the equity and bond markets in Norway. Oslo Børs evaluates whether the issuance documentation contains the required information and whether it would otherwise be illegal to carry out the issuance. Each listed company must deliver to Oslo Børs copies of all reports and communications sent to its shareholders. Each company must also promptly, unless there are valid reasons for postponement, release to Oslo Børs any other precise information about the financial instruments, the company or other matters which are suited to influence the price of the financial instruments or related financial instruments noticeably, and which are not publicly available or commonly known in the market. Oslo Børs may levy fines on companies that violate such requirements. Companies with their primary listing on Oslo Børs are obligated to release quarterly financial reports within two months of the end of each quarter. Listed companies are also obligated to release the board approved suggested annual accounts within three months of the end of the financial year THE VPS AND TRANSFER OF SHARES To enable the Shares to be traded on Oslo Børs, the Shares must be registered in the Norwegian Central Securities Depository ( VPS ), which is Norway s paperless centralized securities registry. To achieve compatibility of the requirements of Bermuda company law as to the registration and transfer of shares with Norwegian requirements, the Shares are entered in the Company s register of members in Bermuda in the name of Nordea Bank Norge ASA, Verdipapirservice (the Registrar ), which will hold such shares as nominee on behalf of the beneficial owners. For the purpose of enabling trading in these shares on Oslo Børs, the Registrar as the Company s account operator registers the beneficial ownership interests in the VPS in book-entry form under the securities identification code (ISIN): BMG 6635W1029. In accordance with market practice in Norway and system requirements of the VPS and Oslo Børs, the investors are registered in the VPS as owners of the shares of the Company and the instruments listed and traded on Oslo Børs will be referred to as the Company s common shares. For the purpose of Bermuda law, the Registrar will, however, be regarded as the owner of the Shares registered in the VPS and investors registered as owners of the Shares in the VPS will have to exercise, indirectly through the Registrar as their nominee, all rights of ownership relating to the Shares. The investors registered as owners in the VPS must look solely to the Registrar for the exercise of voting rights attached to the Shares, and for all other rights arising in respect of the Shares. The registrar agreement provides that whenever the Registrar receives any notice, report, accounts, financial statements, circular or other similar document relating to the Company s affairs, including notice of a shareholders meeting, the registrar shall ensure that a copy of such document is promptly sent to the investors registered as owners in the VPS, along with any proxy card form or other relevant materials. In the VPS, shares are registered in the name of the owner of the shares. As a general rule, there are no arrangements for nominee registration. However, shares may be registered in the VPS by a fund manager (bank or other nominee) approved by the Norwegian Ministry of Finance, as the nominee of foreign shareholders. An approved and registered nominee has a duty to provide information on demand about beneficial shareholders to the issuer and to the Norwegian authorities. In the case of registration by nominees, registration with the VPS must show that the registered owner is a nominee. All transactions relating to securities registered with the VPS are made through computerized book entries. The VPS confirms each entry by sending a transcript to the registered shareholder irrespective of any beneficial ownership. To effect such entries, the individual shareholder must establish a share account with a Norwegian account agent. Norwegian banks, the Central Bank of Norway, authorized securities brokers in Norway and Norwegian branches of credit institutions established within the EEA are allowed to act as account agents. The entry of a transaction in the VPS is prima facie evidence in determining the legal rights of parties as against the issuing company or a third party claiming an interest in the given security. The VPS is strictly liable for any loss resulting from an error in connection with registering, altering or canceling a right, except in the event of contributory negligence, in which event compensation owed by the VPS may be reduced or eliminated. 76

80 A transferee or assignee of shares may not exercise the rights of a shareholder with respect to such shares unless such transferee or assignee has registered such shareholding or has reported and shown evidence of such share acquisition, and the acquisition of shares is not prevented by law, the Bye-laws or otherwise SHARE REGISTER Under Norwegian law, shares are registered in the name of the owner of the shares. As a general rule, there are no arrangements for nominee registration. However, shares may be registered in the VPS by a fund manager (bank or other nominee) approved by the Norwegian Ministry of Finance, as the nominee of foreign shareholders. An approved and registered nominee has a duty to provide information on demand about beneficial shareholders to the company and to the Norwegian authorities. In the case of registration by nominees, registration with the VPS must show that the registered owner is a nominee. A registered nominee has the right to receive dividends and other distributions but cannot vote at general meetings on behalf of the beneficial owners. Beneficial owners must register with the VPS or provide other sufficient proof of their ownership to the shares in order to vote at general meetings FOREIGN INVESTMENT IN SHARES TRADING ON OSLO BØRS Foreign investors may trade shares listed on Oslo Børs through any broker that is a member of Oslo Børs, whether Norwegian or foreign DISCLOSURE OBLIGATIONS A person, entity or group acting in concert that acquires shares, options for shares or other rights to shares resulting in its beneficial ownership, directly or indirectly, in the aggregate meeting or exceeding the respective thresholds of 1/20, 1/10, 1/5, 1/3, 1/2, 2/3 or 9/10 of the share capital or the voting rights in the Company has an obligation under Norwegian law to notify Oslo Børs immediately. The same applies to disposal of shares (but not options or other rights to shares) resulting in a beneficial ownership, directly or indirectly, in the aggregate meeting or falling below said thresholds. Pursuant to Chapter 4 of the new Securities Trading Act, which enters into force on 1 January 2008, the notification requirement applies also to the thresholds of 15% and 25% INSIDER TRADING According to Norwegian law subscription for, purchase, sale or exchange of shares which are quoted, or incitement to such dispositions, must not be undertaken by anyone who has precise information about the financial instruments, the company or other matters which are suited to influence the price of the financial instruments or related financial instruments noticeably, and which are not publicly available or commonly known in the market. The same applies to entry into, purchase, sale or exchange of options or futures/forward contracts or equivalent rights connected with such shares or incitement to such disposition MANDATORY OFFER REQUIREMENT As Northern Offshore is a Bermuda company, the shares issued by Northern Offshore are currently not subject to the mandatory offer requirements of the Norwegian Securities Trading Act or any other mandatory offer requirements. However, the Norwegian Parliament has recently passed a new Norwegian Securities Trading Act of 29 June 2007 No 75 pursuant to which the provisions on mandatory offers will apply to companies with registered office outside Norway provided that their shares are listed on a regulated market in Norway, cf. Chapter 6 of the new Norwegian Securities Trading Act. Chapter 6 of the new act will enter into force on 1 January With regard to mandatory offers, the new Norwegian Securities Trading Act sets out to implement EU Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids. The following rules will come into force in respect of the shares in the Company when listed on Oslo Børs, as from 1 January 2008: Any person that acquires more than 1/3 of the voting rights of a listed company is required to make an unconditional general offer for the purchase of the remaining shares in the company. The mandatory offer requirement may also be triggered by indirect acquisitions, through acquiring more than 50 % of the voting rights of a company whose activity is primarily to own shares in a listed company. Further, the shares of related 77

81 parties, such as close relatives of the shareholder and companies controlled by such persons, companies in the same group of companies as the shareholder, and persons with which the shareholder is bindingly acting in concert and companies controlled by such persons, are considered equal to the shareholder s own shares. A mandatory offer is also required when a shareholder holding more than 1/3 of the voting rights of a listed company acquires 40% or more of the voting rights of the company. Further, this obligation re-enters when 50 % or more of the voting rights are acquired, except if the shareholder in question owned more than 40% of the shares of the company upon listing and, subsequent to the listing, continuously has owned shares representing more than 40% of the voting rights in the company. A shareholder that subsequent to the entry into force of the new Securities Trading Act acquires shares representing more than 1/3, 40% or 50% of the votes in a listed company without being obliged to make an offer for the purchase of the remaining shares in the company in accordance with the provisions concerning mandatory offers (i.e. due to available exemptions), is obliged to make a mandatory offer in the case of each subsequent acquisition. Furthermore, there are certain transitional rules applicable to shareholders that own shares representing an ownership interest that would have triggered a mandatory offer under the new rules when the new Securities Trading Act enters into force, pursuant to which a mandatory offer obligation is triggered upon any subsequent acquisition. The offer must be made within four weeks after the threshold was passed and is subject to approval by Oslo Børs before submission to the shareholders. All shareholders must be treated equally. The offer price per share must be at least as high as the highest price paid or agreed by the bidder in the six-month period prior to the date when the obligation to make a mandatory offer occurred, but equal to the market price if the market price was higher at that time. In the event that the acquirer thereafter, but prior to the expiration of the bid period, acquires or agrees to acquire, additional shares at a higher price, the acquirer is obliged to restate its bid at that higher price. A mandatory offer must be in cash or contain a cash alternative at least equivalent to any other consideration offered. A shareholder who fails to make the required offer must within four weeks dispose of sufficient shares so that the obligation ceases to apply (i.e. reduce the ownership to a level below the relevant threshold). Otherwise, Oslo Børs may cause the shares exceeding the relevant threshold to be sold by public auction. Until the mandatory bid is given or the shares exceeding the threshold are sold, the shareholder may not vote for shares exceeding the relevant threshold, unless a majority of the remaining shareholders approve. The shareholder can, however, exercise the right to dividends and pre-emption rights in the event of a share capital increase. Oslo Børs may impose a daily fine upon a shareholder who fails to make the required offer or sell down below the relevant threshold. 78

82 14. TAXATION 14.1 TAXATION BERMUDA The following comments are based on advice received by the directors regarding current law and practice in Bermuda, and are subject to any changes in law occurring after the date of this Prospectus. Investors should appreciate that the taxation consequences for investors may be otherwise than as stated below. Investors should consult their professional advisers on the possible tax consequences of their subscribing for, purchasing, holding, selling or redeeming Shares under the laws of their countries of citizenship, residence, ordinary residence or domicile. At the date of this Prospectus, there is no Bermuda income, corporation, or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by the Company or its shareholders not ordinarily resident in Bermuda. The Company is not subject to Bermuda stamp duty on the issue, transfer or redemption of its Shares. The Company has received from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 an assurance that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital assets, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not until March 28, 2016 be applicable to the Company or to any of its operations, or to the shares, debentures or other obligations of the Company except in so far as such tax applies to persons ordinarily resident in Bermuda or any land owned by or leased or let to the Company. As an exempted company, the Company is liable to pay in Bermuda a registration fee at a rate presently ranging from USD 1,870 to USD 29,220 per annum TAXATION - NORWAY Set out below is a summary of certain Norwegian tax matters related to the purchase, holding and disposal of shares by holders that are residents of Norway for purposes of Norwegian taxation. International investors who are not residents of Norway for tax purposes will normally not be liable for any Norwegian tax unless their investment is linked to a permanent establishment or any business conducted in Norway. The summary is based on Norwegian laws, rules and regulations applicable as of the date of this isprospectus and does not address foreign tax laws. Norwegian laws, rules and regulations are subject to any changes in law occurring after such date. Such changes could possibly be made on a retroactive basis. The summary is of a general nature and does not purport to be a comprehensive description of all the Norwegian tax considerations that may be relevant for a decision to acquire, own or dispose of the shares. Shareholders who wish to clarify their own tax situation should consult with and rely upon their own tax advisers. Shareholders resident in jurisdictions other than Norway should consult with and rely upon local tax advisors with respect to the tax position in their country of residence. Please note that for the purpose of the summary below, a reference to a Norwegian or foreign shareholder refers to the tax residency rather than the nationality of the shareholder TAX CONSEQUENCES RELATED TO THE OWNERSHIP AND DISPOSAL OF SHARES NORWEGIAN SHAREHOLDERS This section summarizes Norwegian tax rules relevant to shareholders that are residents of Norway for Norwegian tax purposes ( Norwegian shareholders ) Taxation of dividends Norwegian Personal Shareholders Dividends received by shareholders who are individuals resident in Norway for tax purposes ( Norwegian Personal Shareholders ) from a foreign company are subject to tax in Norway as general income at a flat rate of 28%. Such shareholders may be entitled to deduct a calculated allowance when calculating their taxable dividend income. The allowance is calculated on a share-by-share basis, and the allowance for each share is equal to the cost price of the share, multiplied by a risk free interest rate. The allowance is calculated for each calendar year, and is allocated solely to Norwegian Personal Shareholders holding shares at the expiration of the relevant calendar year. Norwegian Personal Shareholders who transfer shares will thus not be entitled to deduct any calculated allowance related to the year of transfer. Any part of the calculated allowance one year exceeding the 79

83 dividend distributed on the share can be added to the cost price of the share and included in the basis for calculating the allowance the following years. If certain requirements are met, Norwegian Personal Shareholders are entitled to a tax credit in the Norwegian tax for any withholding tax imposed on the dividends distributed in the jurisdiction where the foreign company is resident for tax purposes. Norwegian Corporate Shareholders Dividends received by shareholders who are limited liability companies (and certain similar entities) resident in Norway for tax purposes ( Norwegian Corporate Shareholders ) from a foreign company resident in a low tax jurisdiction are subject to tax in Norway as general income at a flat rate of 28%. Bermuda is considered a low tax jurisdiction for Norwegian tax purposes. If certain requirements are met, a Norwegian Corporate Shareholder is entitled to a tax credit in the Norwegian tax on dividends received for any withholding tax imposed on such dividends in the jurisdiction where the foreign company is resident for tax purposes. Furthermore, if a Norwegian Corporate Shareholder holds at least 10 percent of the capital and the voting rights in a foreign company for a continuous period of at least two years, the Norwegian Corporate Shareholder may be entitled to a tax credit in the Norwegian tax for a proportionate part of any corporate tax paid by the foreign company in the jurisdiction where it is resident for tax purposes Taxation upon realisation of shares Norwegian Personal Shareholders Sale, redemption or other disposal of shares is considered a realization for Norwegian tax purposes. A capital gain or loss generated by a Norwegian personal shareholder through a disposal of shares is taxable or tax deductible in Norway. Such capital gain or loss is included in or deducted from the basis for computation of general income in the year of disposal. The general income is taxable at a rate of 28%. The gain is subject to tax and the loss is tax deductible irrespective of the duration of the ownership and the number of shares disposed of. The capital gain is calculated as the consideration received less the cost price of the share, including costs incurred in relation to the acquisition or realization of the share. From this capital gain, Norwegian Personal Shareholders may be entitled to deduct a calculated allowance when calculating their taxable income, provided that the allowance has not already been used to reduce taxable dividend income, cf. above. The allowance for each share will be equal to the cost price of the share multiplied by a determined risk free interest rate. The allowance is calculated pr each calendar year, and is allocated solely to Norwegian Personal Shareholders holding shares at the expiration of the relevant calendar year. Norwegian Personal Shareholders who transfer shares will thus not be entitled to deduct any calculated allowance related to the year of transfer. The allowance may only be deducted in order to reduce a taxable gain, and may not be deducted in order to increase or produce a deductible loss. If the shareholder owns shares acquired at different points in time, the shares that were acquired first will be regarded as the first to be disposed of, on a first-in first-out basis. Norwegian Personal Shareholders who move abroad and cease to be tax resident in Norway as a result of this, are deemed taxable in Norway for any potential gain related to the shares held at the time the tax residency ceased, as if the shares were realized for tax purposes at this time. Gains of NOK 500,000 or less are not taxable. Potential losses are as a main rule not deductible. If the person moves to a jurisdiction within the European Economic Area ( EEA ), potential losses related to shares held at the time tax residency ceases will be tax deducible when exceeding the NOK 500,000 threshold. The actual taxation (loss deduction) will occur at the time the shares are actually realized for tax purposes. If the shares are not realized for tax purposes within five years after the shareholder ceased to be resident in Norway for tax purposes, the tax liability calculated under these provisions will not apply. Norwegian Corporate Shareholders A capital gain or loss generated by a Norwegian Corporate Shareholder from a disposal of shares in a foreign company resident in a low tax jurisdiction is taxable or tax deductible in Norway. Bermuda is considered a low tax jurisdiction for Norwegian tax purposes. Such capital gain or loss is included in or deducted from the basis for computation of general income in the year of disposal. The general income is taxable at a rate of 28%. The gain is subject to tax and the loss is tax deductible irrespective of the duration of the ownership and the number of shares disposed of. If the shareholder owns shares acquired at different points in time, the shares that were acquired first will be regarded as the first to be disposed of, on a first-in first-out basis. 80

84 Net Wealth Tax The value of shares is included in the basis for the computation of wealth tax imposed on Norwegian Personal Shareholders. Currently, the marginal wealth tax rate is 1.1 percent of the value assessed. The value for assessment purposes for shares listed on Oslo Børs is currently 85% of the listed value as of January 1 in the year of assessment (i.e. the year following the fiscal year). Norwegian Corporate Shareholders are exempt from net wealth tax in Norway Norwegian Controlled Foreign Corporation Taxation (NOKUS taxation) Shareholders resident in Norway for tax purposes controlling a foreign company resident in a low tax jurisdiction may become subject to Norwegian Controlled Foreign Corporation-taxation (Norwegian: NOKUS taxation). Norwegian shareholders are considered to be in control of a foreign company if (i) Norwegian shareholders directly or indirectly own or control at least 50% of the shares or the capital of the foreign company on 1 January and 31 December in the relevant income year, (ii) the relevant company qualified as a NOKUScompany the preceding income year and Norwegian shareholders directly or indirectly owned or controlled at least 50% of the shares or the capital in the company on 1 January or 31 December in the relevant income year, or (iii) Norwegian shareholders directly or indirectly own or control at least 60% of the shares or the capital of the foreign company on 31 December in the relevant income year. NOKUS taxation will not occur if Norwegian shareholders directly or indirectly own or control less than 40% of the shares or capital of the foreign company on 31 December in the relevant income year. A company is considered to be resident in a low tax jurisdiction if the company is subject to taxation in the relevant jurisdiction at a level which is lower than 2/3 of the level it would have been taxed at in Norway. Bermuda is considered a low tax jurisdiction for Norwegian tax purposes. If the Norwegian shareholders become subject to CFC-taxation, they are taxed in Norway on a current basis for their proportionate share of the income generated by the foreign company, calculated according to Norwegian tax regulations. Losses generated by the foreign company may only be used by the Norwegian shareholders to set off future income calculated under the NOKUS regulations for the participation in the same foreign company. In the event that the Company becomes subject to corporate tax in Bermuda, Norwegian shareholders may obtain a tax credit for any such paid tax under certain prerequisites. Dividends distributed by a foreign company resident in a low tax jurisdiction will be exempt from Norwegian taxation for a Norwegian Corporate Shareholder, if the Norwegian Corporate Shareholder is subject to Norwegian NOKUS taxation for its share in the relevant company, but only to the extent that the amounts distributed have already been subject to such Norwegian NOKUS taxation. Dividends distributed by a foreign company resident in a low tax jurisdiction to a Norwegian Personal Shareholder will be subject to Norwegian taxation. The taxable dividend income will be set to 72% of the dividend received from the foreign company, after being increased with the Norwegian Personal Shareholders proportaional part of any prospective credit for underlying company tax. However, the Norwegian Personal Shareholders will be entitled to deduct a calculated allowance when calculating their taxable dividend income, see above. Upon realization of shares by a Norwegian Corporate Shareholder in a company where the requirements for Norwegian NOKUS taxation are met, the cost price of the shares will be increased or reduced in accordance with the changes in the company s taxed income during its holding period, when calculating the capital gain/capital loss. This rule does not apply to Norwegian Personal Shareholders. However, such shareholders will be entitled to deduct a calculated allowance when calculating their taxable capital gain, as described above TAX CONSEQUENCES RELATED TO THE OWNERSHIP AND DISPOSAL OF SHARES FOREIGN SHAREHOLDERS This section summarizes Norwegian tax rules relevant to shareholders that are not residents of Norway for Norwegian tax purposes ( Foreign Shareholders ). The potential tax liabilities for foreign shareholders in the jurisdiction where they are resident for tax purposes or other jurisdictions will depend on tax rules applicable in the relevant jurisdiction. 81

85 Taxation of dividends As a general rule, Foreign Shareholders are not taxable in Norway. However, if a Foreign Shareholder is carrying on business activities in Norway and the shares are effectively connected with such business activities, the Foreign Shareholder will be subject to the same dividend taxation as Norwegian shareholders, as described above Taxation upon the realisation of shares As a general rule, capital gains generated by Foreign Shareholders are not taxable in Norway. However, such gains may be subject to taxation for Foreign Shareholders who (i) holds the shares in connection with the conduct of a trade or business in Norway or (ii) are individuals who have been resident in Norway for tax purposes within the five calendar years preceding the year of the sale or other realization (and whose gains are not exempt pursuant to the provisions of an applicable income tax treaty) In the case of listed shares, the basis for the tax calculation is the market value of the shares. Shareholders resident in Norway for tax purposes controlling a foreign company resident in a low tax jurisdiction may become subject to Norwegian Controlled Foreign Corporation Taxation (NOKUS). As a general rule, a foreign company will be deemed as Norwegian controlled where Norwegian shareholders directly or indirectly own or control at least 50% of the shares or the capital of the foreign company at the commencement or end of the income year. If the Norwegian shareholders become subject to NOKUS taxation, they are taxed in Norway on a current basis for their proportionate share of the profits generated by the Company, calculated according to Norwegian tax regulations, irrespective of whether such profits are distributed to the shareholders or not INHERITANCE TAX When shares are transferred either through inheritance or as a gift, such transfer may give rise to inheritance or gift tax in Norway if the decedent, at the time of death, or the donor, at the time of the gift, is a resident or citizen of Norway, or if the shares are effectively connected with a business carried out through a permanent establishment in Norway. However, in the case of inheritance tax, if the decedent was a citizen but not a resident of Norway, Norwegian inheritance tax will not be levied if inheritance tax or a similar tax is levied by the decedent s country of residence. 82

86 15. LEGAL MATTERS 15.1 DISPUTES The Company and its subsidiaries are not involved in any governmental, legal or arbitration proceedings which may have, or have had in the recent past significant effects on the Company s or Group s financial position or profitability, the Company is not aware that any such proceedings are pending or threatened, nor has the Company or Group been involved in any such proceedings during the last 12 months MATERIAL CONTRACTS On 1 June 2007, the Company entered into definitive agreements with Maersk Contractors to purchase three 300 IC harsh environment jack-up drilling units, the Maersk Enhancer, the Maersk Endevour and Maersk Exerter. The purchase price for the rigs was USD 455 million (to be evenly allocated across the rigs), funded through the Company s existing cash resources and the financing arrangements referred to below. Completion of the agreement and delivery of the rigs took place on 15 June Immediately prior to completion of the Maersk Acquisitions, the rigs operated in the Danish sector of the North Sea under drilling contracts for each rig between Maersk Contractors and Maersk Oil & Gas AS ( Maersk Oil ). Upon completion of the Maersk Acquisitions, the drilling contracts for each rig were novated from Maersk Contractors to EOL pursuant to a separate novation agreement covering each rig. Each of the Energy Endeavour and the Energy Exerter currently operates under contracts providing for a dayrate of approximately USD 70,000, but in August 2007, these dayrates will increase to approximately USD 170,000. The Energy Enhancer is currently operating under a drilling contract with a dayrate of approximately USD 120,000, but in April 2008, this dayrate will increase to approximately USD 170,000. Under the novation agreements, certain protections were put in place for the benefit of Maersk Oil in order to secure the performance of the drilling contracts, including a performance bond of USD 36 million, to remain in place until the termination of the last to expire of the drilling contracts. EOL has chartered each of the rigs from the respective rig-owning companies and, as described above, has taken an assignment of the drilling contracts relating to each rig through the separate novation agreements entered into between EOL and Maersk Oil. The underlying drilling contracts are scheduled to expire in August 2008 (Energy Enhancer), September 2009 (Energy Endeavour) and December 2009 (Energy Exerter), respectively, provided that Maersk Oil may elect to terminate one of the contracts in relation to either the Energy Endeavour or the Energy Exerter from September 2007 onwards upon 6 months notice to EOL. EOL separately entered into management agreements in respect of each rig with Maersk Contractors whereby Maersk Contractors will take responsibility for managing the rigs on behalf of EOL for the duration of the drilling contracts. EOL has agreed to establish operating accounts under each of the management agreements, pursuant to which Maersk Contractors may use the operating accounts to pay operating costs for each of the rigs. The operating accounts established by EOL are funded two months in advance of the relevant operating month in accordance with a budget agreed between EOL and Maersk Contractors and if the balance in any operating account falls below USD 2 million, EOL must fund a minimum of USD 500,000 into the relevant operating account. EOL has also established a letter of credit in an amount of USD 2 million in respect of each management agreement that Maersk Oil may draw upon if EOL fails to meet any of its obligations to fund an operating account. The financing arrangements are further described in sections above in this Prospectus. 83

87 16. ADDITIONAL INFORMATION 16.1 DOCUMENTS ON DISPLAY For the life of this Prospectus the following documents may be inspected as indicated in the list below: The Memorandum of Association and Bye-Laws of the Company may be inspected at the Company s offices at 300 Beach Road, Singapore or Four Houston Center, 1221 Lamar, Suite 1130, Texas, USA or requested by telefax to or The Memorandum of Association and the Company s Bye-laws may be inspected in this Prospectus as Appendix 1 and 2 or on the Company s web-site The Company s second quarter report for 2007 may be inspected in Appendix 3 or on the Company s website The pro forma condensed combined consolidated statement of income for the year ended 31 December 2006 and for the six-month period ended 30 June 2007 may be inspected in Appendix 4 to this Prospectus. The Company s consolidated historical financial information for the twelve months ended 31 December 2006 and auditors report may be inspected in Appendix 5 to this Prospectus or on the Company s website The Company s consolidated historical financial information and auditors report for the financial years 2004 and 2005 may be inspected in Appendices 6 and 7 to this Prospectus or on the Company s website IDENTIFICATION OF PERSONS RESPONSIBLE The Prospectus has been prepared by the management of the Company under the instruction and supervision of the Company s Board of Directors. The Board of Directors has assumed the sole responsibility for the information given in the Prospectus and has signed the declaration set out in Section 2 of this Prospectus. In the preparation of the Prospectus, the management of the Company has relied on the services of third parties, including Pareto Securities ASA (Oslo, Norway) as Manager, PricewaterhouseCoopers Singapore as statutory auditors, Thommessen Krefting Greve Lund (Oslo, Norway) as Norwegian legal advisors, Conyers Dill & Pearman as special Bermuda legal avisors and Bingham McCutchen (London) LLP as English and international legal advisors. The mentioning of these parties acting as advisors shall not create any implication that these parties assume responsibility for the information contained in the Prospectus STATEMENT REGARDING SOURCES The Company confirms that when information in this Prospectus has been sourced from a third party it has been accurately reproduced and as far as the Company is aware and is able to ascertain from the information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading STATEMENT REGARDING EXPERT OPINIONS This Prospectus does not refer to any expert opinions. 84

88 17. DEFINITIONS AND GLOSSARY OF TERMS Bareboat charter... Rental or lease of a vessel where the lessee is responsible for the crew, stores, provisions and all technical operating costs Board or Board of Directors... The board of directors of Northern Offshore. as at the date of this Prospectus Charter contract... A contract between shipowner and charterer Charterer... A person or firm who hires a vessel for the transportation of goods or other purposes Company or Northern Offshore... Northern Offshore Ltd., with or without subsidiaries as the cas may be. Northern Offshore Group or Group... Northern Offshore Ltd. and subsidiaries, as required by the context. FPSO... Floating Production Storage and Offloading GBP... British pounds, the lawful currencly of Great Britain. IMO... International Maritime Organization IFRS... International Financial Reporting Standards ISIN... International Securities Identifying Number LIBOR London Inter-Bank Offer Rate. Listing... The listing of the Shares on Oslo Børs Maersk Acquisitions... The agreement with A.P. Møller-Maersk A/S to acquire three 300 harsh environment jack-up drilling units; the Maersk Exerter, the Maersk Endeavour and the Maersk Enhancer to a gross purchase price of USD 455 million, evenly allocated across the three rigs. The delivery of the rigs took place on 15 June Manager... Pareto Securities ASA NOK... Norwegian Kroner, the lawful currency of Norway Norwegian Code of Practice... The Norwegian Code of Practice of Corporate Governance Oslo Børs... Oslo Børs ASA (the Oslo Stock Exchange ) OTC... The over-the-counter market in Oslo, Norway, operated by the Norwegian Securities Dealers Association Prospectus... This Prospectus dated 30 August 2007, prepared in connection with the Listing of the Company s shares on Oslo Børs Securities Trading Act... The Norwegian Securities Trading Act of 19 June 1997 No.79 Shares... All of the shares in the Company, each with a nominal value of USD 0.25, Time charter... An arrangement whereby a ship owner places in a crewed ship at a charterer s disposal for a certain period. The charterer also pays for bunkers, port duties etc. The ship owner pays for the crew insurance, maintenance etc USD... United States Dollars, the lawful currency of the United States VPS... The Norwegian Central Securities Depository, who organizes the Norwegian paperless securities registration system ( Verdipapirsentralen or VPS ) 85

89 Appendix 1: Memorandum of Association for Northern Offshore A 1

90 A 2

91 A 3

92 A 4

93 A 5

94 A 6

95 A 7

96 A 8

97 A 9

98 A 10

99 A 11

100 A 12

101

102 A 14

103 A 15

104 A 16

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117 Appendix 2: Bye-laws Interpretation 1. Definitions BYE-LAWS OF NORTHERN OFFSHORE, LTD. Shares 2. Power to Issue Shares 3. Power of the Company to Purchase its Shares 4. Rights Attaching to Shares 5. Calls on Shares 6. Prohibition on Financial Assistance 7. Forfeiture of Shares and Lien 8. Share Certificates 9. Fractional Shares Registration of Shares 10. Register of Members 11. Registered Owner Absolute Owner 12. Transfer of Registered Shares 13. Transmission of Registered Shares 14. Disclosure of Material Interests/Beneficial Interests Alteration of Share Capital 15. Power to Alter Capital 16. Variation of Rights Attaching to Shares Dividends and Capitalisation 17. Dividends 18. Power to Set Aside Profits 19. Method of Payment 20. Capitalisation Meetings of Members 21. Annual General Meetings 22. Special General Meetings 23. Requisitioned General Meetings 24. Notice 25. Giving Notice and Access 26. Postponement of General Meeting Adopted on[ ] Chairman UKDOCS/ UKDOCS/ TABLE OF CONTENTS 27. Attendance and Security at General Meetings 28. Quorum at General Meetings 29. Chairman to Preside at General Meetings 30. Voting on Resolutions 31. Power to Demand Vote on Poll 32. Voting by Joint Holders of Shares 33. Instrument of Proxy 34. Representation of Corporate Member 35. Adjournment of General Meeting 36. Written Resolutions 37. Directors' Attendance at General Meetings Directors and Officers 38. Election of Directors 39. Alternate Directors 40. Removal of Directors 41. Vacancy in the Office of Director 42. Remuneration of Directors 43. Defect in Appointment 44. Directors to Manage Business 45. Powers of the Board of Directors 46. Register of Directors and Officers 47. Appointment of Officers 48. Appointment of Secretary 49. Duties of Officers 50. Remuneration of Officers 51. Conflicts of Interest 52. Indemnification and Exculpation of Directors and Officers Meetings of the Board of Directors 53. Board Meetings 54. Notice of Board Meetings 55. Electronic Participation in Meetings 56. Quorum at Board Meetings 57. Board to Continue in Event of Vacancy 58. Chairman to Preside 59. Written Resolutions 60. Validity of Prior Acts of the Board Corporate Records 61. Minutes 62. Place Where Corporate Records Kept 63. Form and Use of Seal Accounts 64. Books of Account 65. Financial Year End Audits 66. Annual Audit 67. Appointment of Auditors 68. Remuneration of Auditors 69. Duties of Auditors 70. Access to Records 71. Financial Statements 72. Distribution of Auditors Report 73. Vacancy in the Office of Auditor Transactions with Principal Members 74. Transactions with Principal Members Voluntary Winding-Up and Dissolution 75. Winding-Up. Changes to Constitution 76. Changes to Bye-laws 77. Discontinuance/ Amalgamation A 29

118 Northern Offshore, Ltd. Page 1 INTERPRETATION 1. Definitions 1.1 In these Bye-laws, the following words and expressions shall, where not inconsistent with the context, have the following meanings, respectively: Act the Companies Act 1981 as amended from time to time; Alternate Director an alternate director appointed in accordance with these Bye-laws; Associate (a) in respect of an individual, such individual s spouse, former spouse, sibling, aunt, uncle, nephew, niece or lineal ancestor or descendant, including any step-child and adopted child and their issue and step parents and adoptive parents and their issue or lineal ancestors; (b) in respect of an individual, such individual s partner and such partner s relatives (within the categories set out in (a) above); (c) in respect of an individual or body corporate, an employer or employee (including, in relation to a body corporate, any of its directors or officers); (d) in respect of a body corporate, any person who controls such body corporate, and any other body corporate if the same person has control of both or if a person has control of one and persons who are his Associates, or such person and persons who are his Associates, have control of the other, or if a group of two or more persons has control of each body corporate, and the groups either consist of the same persons or could be regarded as consisting of the UKDOCS/ Northern Offshore, Ltd. Page 2 same persons by treating (in one or more cases) a member of either group as replaced by a person of whom he is an Associate. For the purposes of this paragraph, a person has control of a body corporate if either (i) the directors of the body corporate or of any other body corporate which has control of it (or any of them) are accustomed to acting in accordance with his instructions or (ii) he is entitled to exercise, or control the exercise of, one-third or more of the votes attaching to all of the issued shares of the body corporate or of another body corporate which has control of it (provided that where two or more persons acting in concert satisfy either of the above conditions, they are each to be taken as having control of the body corporate); Auditor includes an individual or partnership; Board the board of directors appointed or elected pursuant to these Bye-laws and acting by resolution in accordance with the Act and these Bye-laws or the directors present at a meeting of directors at which there is a quorum; Business Day a day on which banks are open for the transaction of general banking business in each of Oslo, Norway, London, UK, New York, USA and Hamilton, Bermuda; Common Shares the common shares as set out in Bye-law 4.1; Company the company for which these Bye-laws are approved and confirmed; Director a director of the Company and shall include an Alternate Director; UKDOCS/ A 30

119 Northern Offshore, Ltd. Page 3 Listing Exchange any stock exchange or quotation system upon which any of the shares of the Company are listed from time to time; Member the person registered in the Register of Members as the holder of shares in the Company and, when two or more persons are so registered as joint holders of shares, means the person whose name stands first in the Register of Members as one of such joint holders or all of such persons, as the context so requires; Norway Norway and its dependent territories or any part thereof; notice written notice as further provided in these Bye-laws unless otherwise specifically stated; Officer any person appointed by the Board to hold an office in the Company; Oslo Stock Exchange the Oslo Stock Exchange; Register of Directors and Officers the register of directors and officers referred to in these Bye-laws; Register of Members the register of members referred to in these Bye-laws; Registrar Nordea Bank Norge ASA, Verdipapirservice, or such other person who may from time to time be appointed by the Board in place of Nordea Bank Norge ASA, Verdipapirservice, as branch registrar of the Company under these Bye-laws; Resident Representative any person appointed to act as resident representative and includes any deputy or assistant resident representative; Secretary the person appointed to perform any or all of the duties of secretary of the Company and includes any deputy or UKDOCS/ Northern Offshore, Ltd. Page 4 assistant secretary and any person appointed by the Board to perform any of the duties of the Secretary; Treasury Share a share of the Company that was or is treated as having been acquired and held by the Company and has been held continuously by the Company since it was so acquired and has not been cancelled; United Kingdom the United Kingdom, not including its dependent territories or any part thereof; and VPS the Verdipapirsentralen, the computerised central share registry maintained in Oslo, Norway, for bodies corporate whose shares are listed for trading on the Oslo Stock Exchange, and includes any successor registry. 1.2 In these Bye-laws, where not inconsistent with the context: (a) words denoting the plural number include the singular number and vice versa; (b) words denoting the masculine gender include the feminine and neuter genders; (c) words importing persons include companies, associations or bodies of persons whether corporate or not; (d) the words: (i) "may" shall be construed as permissive; and (ii) "shall" shall be construed as imperative; (e) the terms subsidiary and holding company shall include companies wherever incorporated; and 1.3 unless otherwise provided herein, words or expressions defined in the Act shall bear the same meaning in these Bye-laws.In these Bye-laws expressions referring to writing or its cognates UKDOCS/ A 31

120 Northern Offshore, Ltd. Page 5 shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words in visible form. 1.4 Headings used in these Bye-laws are for convenience only and are not to be used or relied upon in the construction hereof. SHARES 2. Power to Issue Shares 2.1 Subject to these Bye-laws and to any resolution of the Members to the contrary, and without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, the Board shall have the power to issue any unissued shares of the Company on such terms and conditions as it may determine, provided that no shares shall be issued until they are fully paid except as prescribed by a resolution of the Members and any shares or class of shares may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting, return of capital, or otherwise as the Company may by resolution of the Members prescribe. 2.2 Subject to the provisions of the Act, any preference shares may, with the sanction of a resolution of the Members passed by a majority of not less than two-thirds of the votes cast, be issued or converted into shares that (at a determinable date or at the option of the Company or the holder) are liable to be redeemed on such terms and in such manner as may be determined by the Members or by the Board if so authorised by the Members (before the issue or conversion). UKDOCS/ Northern Offshore, Ltd. Page 6 3. Power of the Company to Purchase its Shares 3.1 The Company may purchase its own shares for cancellation or acquire them as Treasury Shares in accordance with the provisions of the Act on such terms as the Board shall think fit subject to the rules, if applicable, of the Oslo Stock Exchange. 3.2 The Board may exercise all the powers of the Company to purchase or acquire all or any part of its own shares in accordance with the Act and subject to the rules, if applicable, of the Oslo Stock Exchange. 3.3 In the event the Company conducts a tender offer for its shares, any such offer which is made through the facilities of the Oslo Stock Exchange shall be expressed as being conditional upon no Members or persons resident for tax purposes in Norway (or such other jurisdiction as the Board may determine from time to time) owning or controlling fifty per cent or more of the aggregate issued share capital of the Company or shares of the Company to which are attached fifty per cent or more of the votes attaching to the issued and outstanding shares of the Company following such purchase. 4. Rights Attaching to Shares 4.1 Subject to any resolution of the Members to the contrary (and without prejudice to any special rights conferred thereby on the holders of any other shares or class of shares), the share capital of the Company shall be divided into shares of a single class (the Common Shares ) the holders of which shall, subject to the provisions of these Bye-laws: (a) be entitled to one vote per share; (b) be entitled to such dividends as the Board may from time to time declare; (c) in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganisation or otherwise or upon any distribution of capital, be entitled to the surplus assets of the Company; and UKDOCS/ A 32

121 Northern Offshore, Ltd. Page 7 (d) generally be entitled to enjoy all of the rights attaching to shares. 4.2 At the discretion of the Board, whether or not in connection with the issuance and sale of any shares or other securities of the Company, the Company may issue securities, contracts, warrants or other instruments evidencing any shares, option rights, securities having conversion or option rights, or obligations on such terms, conditions and other provisions as are fixed by the Board, including, without limiting the generality of this authority, conditions that preclude or limit any person or persons owning or offering to acquire a specified number or percentage of the issued Common Shares, other shares, option rights, securities having conversion or option rights, or obligations of the Company or transferee of the person or persons from exercising, converting, transferring or receiving the shares, option rights, securities having conversion or option rights, or obligations. 4.3 All the rights attaching to a Treasury Share shall be suspended and shall not be exercised by the Company while it holds such Treasury Share and, except where required by the Act, all Treasury Shares shall be excluded from the calculation of any percentage or fraction of the share capital, or shares, of the Company. 5. Calls on Shares 5.1 The Board may make such calls as it thinks fit upon the Members in respect of any monies (whether in respect of nominal value or premium) unpaid on the shares allotted to or held by such Members (and not made payable at fixed times by the terms and conditions of issue) and, if a call is not paid on or before the day appointed for payment thereof, the Member may at the discretion of the Board be liable to pay the Company interest on the amount of such call at such rate as the Board may determine, from the date when such call was payable up to the actual date of payment. The Board may differentiate between the holders as to the amount of calls to be paid and the times of payment of such calls. 5.2 Any sum which by the terms of allotment of a share becomes payable upon issue or at any fixed date, whether on account of the nominal value of the share or by way of premium, shall for all the purposes of these Bye-laws be deemed to be a call duly made and payable, on the date on which, by the terms of issue, the same becomes payable, and in case of non-payment all the relevant provisions of these Bye-laws as to payment of interest, costs, charges and expenses, UKDOCS/ Northern Offshore, Ltd. Page 8 forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. 5.3 The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 5.4 The Company may accept from any Member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up. 6. Prohibition on Financial Assistance The Company shall not give, whether directly or indirectly, whether by means of loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of the acquisition or proposed acquisition by any person of any shares in the Company, but nothing in this Bye-law shall prohibit transactions permitted under the Act. 7. Forfeiture of Shares and Lien 7.1 If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the Secretary to forward such Member a notice in writing in the form, or as near thereto as circumstances admit, of the following: Notice of Liability to Forfeiture for Non-Payment of Call Northern Offshore, Ltd. (the "Company") You have failed to pay the call of [amount of call] made on the [ ] day of [ ], 200[ ], in respect of the [number] share(s) [number in figures] standing in your name in the Register of Members of the Company, on the [ ] day of [ ], 200[ ], the day appointed for payment of such call. You are hereby notified that unless you pay such call together with interest thereon at the rate of [ ] per annum computed from the said [ ] day of [ ], 200[ ] at the registered office of the Company the share(s) will be liable to be forfeited. Dated this [ ] day of [ ], 200[ ] [Signature of Secretary] By Order of the Board UKDOCS/ A 33

122 Northern Offshore, Ltd. Page If the requirements of such notice are not complied with, any such share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect, and such share shall thereupon become the property of the Company and may be disposed of as the Board shall determine. 7.3 A Member whose share or shares have been forfeited as aforesaid shall, notwithstanding such forfeiture, be liable to pay to the Company all calls owing on such share or shares at the time of the forfeiture and all interest due thereon. 7.4 The Board may accept the surrender of any shares which it is in a position to forfeit on such terms and conditions as may be agreed. Subject to those terms and conditions, a surrendered share shall be treated as if it had been forfeited. 7.5 The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys, whether presently payable or not, called or payable, at a date fixed by or in accordance with the terms of issue of such share in respect of such share, and the Company shall also have a first and paramount lien on every share (other than a fully paid share) standing registered in the name of a Member, whether singly or jointly with any other person, for all the debts and liabilities of such Member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such Member, and whether the time for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such Member or his estate and any other person, whether a Member or not. The Company s lien on a share shall extend to all dividends payable thereon. The Board may at any time, either generally or in any particular case, waive any lien that has arisen or declare any share to be wholly or in part exempt from the provisions of this Bye-law. 7.6 The Company may sell, in such manner as the Board may think fit, any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen days after a notice in writing stating and demanding payment of the sum presently payable and giving notice of the intention to sell in default of such payment has been served on the holder for the time being of the share. UKDOCS/ Northern Offshore, Ltd. Page The net proceeds of sale by the Company of any shares on which it has a lien shall be applied in or towards payment or discharge of the debt or liability in respect of which the lien exists so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the holder of the share immediately before such sale. For giving effect to any such sale the Board may authorise some person to transfer the share sold to the purchaser thereof. The purchaser shall be registered as the holder of the share and he shall not be bound to see to the application of the purchase money nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the sale. 8. Share Certificates 8.1 Share certificates will not be issued by the Company, except in relation to share certificates issued by the Company to Members prior to the date of adoption of these Bye-Laws. Ownership of shares will be evidenced by entry on the Register of Members. 9. Fractional Shares The Company may issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of whole shares including (but without limiting the generality of the foregoing) the right to vote, to receive dividends and distributions and to participate in a winding-up. REGISTRATION OF SHARES 10. Register of Members 10.1 The Board shall cause to be kept in one or more books a Register of Members and shall enter therein the particulars required by the Act The Register of Members shall be open to inspection without charge at the registered office of the Company on every business day, subject to such reasonable restrictions as the Board may impose, so that not less than two hours in each business day be allowed for inspection. The UKDOCS/ A 34

123 Northern Offshore, Ltd. Page 11 Register of Members may, after notice has been given in accordance with the Act, be closed for any time or times not exceeding in the whole thirty days in each year. 11. Registered Holder Absolute Owner Except as expressly required in these Bye-laws, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable claim or other claim to, or interest in, such share on the part of any other person. 12. Transfer of Registered Shares 12.1 An instrument of transfer shall be in writing in the form of the following, or as near thereto as circumstances admit, or in such other form as the Board may accept: Transfer of a Share or Shares Northern Offshore, Ltd. (the "Company") FOR VALUE RECEIVED..[amount], I, [name of transferor] hereby sell, assign and transfer unto [transferee], [nationality] of [address], [number] of shares of the Company. The Transferee acknowledges that the shares of the Company that are the subject of this instrument of transfer have not been registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), or the securities laws of any U.S. state and are being transferred pursuant to a registration statement in effect with respect to such shares under the Securities Act or an available exemption from the registration requirements of the Securities Act and any applicable U.S. state securities laws. DATED this [ ] day of [ ], 200[ ] Signed by: In the presence of: Transferor Witness Transferee Witness 12.2 Such instrument of transfer shall be signed by or on behalf of the transferor and transferee, provided that, in the case of a fully paid share, the Board may accept the instrument signed by or UKDOCS/ Northern Offshore, Ltd. Page 12 on behalf of the transferor alone. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members The Board may refuse to recognise any instrument of transfer unless it is accompanied by the certificate (if any) in respect of the shares to which it relates and by such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer The joint holders of any share may transfer such share to one or more of such joint holders, and the surviving holder or holders of any share previously held by them jointly with a deceased Member may transfer any such share to the executors or administrators of such deceased Member The Board may in its absolute discretion and without assigning any reason therefor refuse to register the transfer of a share which is not fully paid. The Board shall refuse to register a transfer unless all applicable consents, authorisations and permissions of any governmental body or agency in Bermuda have been obtained. If the Board refuses to register a transfer of any share the Secretary shall, within three months after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal Shares may be transferred without a written instrument if transferred by an appointed agent or otherwise in accordance with the Act The Board shall decline to register the transfer of any share, and shall direct the Registrar to decline (and the Registrar shall decline) to register the transfer of any interest in any share held through the VPS, to a person where the Board is of the opinion that such transfer might breach any law (including, without limitation, U.S. securities laws) or requirement of any authority or any Listing Exchange until it has received such evidence as it may require to satisfy itself that no such breach would occur The Board may decline to register the transfer of any share, and may direct the Registrar to decline (and the Registrar shall decline if so requested) to register the transfer of any interest in any share held through the VPS, if the registration of such transfer would likely, in the opinion of the Board, result in fifty per cent or more of the aggregate issued share capital of the Company or shares of the Company to which are attached fifty per cent or more of the votes attached to all UKDOCS/ A 35

124 Northern Offshore, Ltd. Page 13 issued and outstanding shares of the Company being held or owned directly or indirectly, (including, without limitation, through the VPS) by a person or persons resident for tax purposes in Norway (or such other jurisdiction as the Board may determine from time to time), provided that this provision shall not apply to the registration of shares in the name of the Registrar as nominee of persons whose interest in such shares are reflected in the VPS, but shall apply, mutatis mutandis, to interests in shares of the Company held by persons through the VPS For the purposes of this Bye-law 12, each Member (other than the Registrar in respect of those shares registered in its name in the Register of Members as nominee of persons whose interests in such shares are reflected in the VPS) shall be deemed to be resident for tax purposes in the jurisdiction specified in the address shown in the Register of Members for such Member, and each person whose interests in shares are reflected in the VPS shall be deemed to be resident for tax purposes in the jurisdiction specified in the address shown in the VPS for such person. If such Member or person is not resident for tax purposes in such jurisdiction or if there is a subsequent change in his residence for tax purposes, such Member shall notify the Company immediately of his residence for tax purposes Where any Member or person whose interests in shares are reflected in the VPS fails to notify the Company in accordance with the foregoing, the Board and the Registrar may suspend sine die such Member s or person s entitlement to vote or otherwise exercise any rights attaching to the shares or interest therein and to receive payments of income or capital which become due or payable in respect of such shares or interests and the Company shall have no liability to such Member or person arising out of the late payment or non-payment of such sums and the Company may retain such sums for its own use and benefit. In addition to the foregoing the Board and the Registrar may dispose of the shares in the Company or interests therein of such Member or person at the best price reasonably obtainable in all the circumstances. Where a notice informing such Member or person of the proposed disposal of his shares or interests therein has been served, his shares or interest therein may not be transferred otherwise than in accordance with this Bye-law 12 and any other purported transfer of such shares or interests therein shall not be registered in the books of the Company or the VPS and shall be null and void. UKDOCS/ Northern Offshore, Ltd. Page The provision of these Bye-laws relating to the protection of a purchaser of shares sold under lien or upon forfeiture shall apply mutatis mutandis to a disposal of shares or interests therein by the Company or the Registrar in accordance with this Bye-law If fifty per cent or more of the aggregate issued share capital of the Company or shares to which are attached fifty per cent or more of the votes attached to all outstanding shares of the Company are found to be held or owned directly or indirectly (including, without limitation, through the VPS) by a person or persons resident for tax purposes in Norway (or such other jurisdiction as the Board may nominate from time to time), other than the Registrar in respect of those shares registered in its name in the Register of Members as nominee of persons whose interests in such shares are reflected in the VPS, the Board shall make an announcement to such effect through the Oslo Stock Exchange, and the Board and the Registrar shall thereafter be entitled and required to dispose of such number of shares of the Company or interests therein held or owned by such persons as will result in the percentage of the aggregate issued share capital of the Company held or owned as aforesaid being less than fifty per cent, and, for these purposes, the Board and the Registrar shall in such case dispose of shares or interests therein owned by persons resident for tax purposes in the relevant jurisdiction in question on the basis that the shares or interests therein most recently acquired shall be the first to be disposed of (i.e. on the basis of last acquired first sold) save where there is a breach of the obligation to notify tax residency pursuant to the foregoing, in which event the shares or interests therein of the person in breach thereof shall be sold first. Members shall not be entitled to raise any objection to the disposal of their shares, but the provisions of these Bye-laws relating to the protection of purchasers of shares sold under lien or upon forfeiture shall apply mutatis mutandis to any disposal of shares or interests therein made in accordance with this Bye-law Transmission of Registered Shares 13.1 In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member's interest in the shares. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by such deceased Member with other persons. Subject to the provisions of the Act, for the UKDOCS/ A 36

125 Northern Offshore, Ltd. Page 15 purpose of this Bye-law, legal personal representative means the executor or administrator of a deceased Member or such other person as the Board may, in its absolute discretion, decide as being properly authorised to deal with the shares of a deceased Member Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in writing in the form, or as near thereto as circumstances admit, of the following: Transfer by a Person Becoming Entitled on Death/Bankruptcy of a Member Northern Offshore, Ltd. (the "Company") I/We, having become entitled in consequence of the [death/bankruptcy] of [name and address of deceased/bankrupt Member] to [number] share(s) standing in the Register of Members of the Company in the name of the said [name of deceased/bankrupt Member] instead of being registered myself/ourselves, elect to have [name of transferee] (the "Transferee") registered as a transferee of such share(s) and I/we do hereby accordingly transfer the said share(s) to the Transferee to hold the same unto the Transferee, his or her executors, administrators and assigns, subject to the conditions on which the same were held at the time of the execution hereof; and the Transferee does hereby agree to take the said share(s) subject to the same conditions. DATED this [ ] day of [ ], 200[ ] Signed by: In the presence of: Transferor Witness Transferee Witness 13.3 On the presentation of the foregoing materials to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a UKDOCS/ Northern Offshore, Ltd. Page 16 Member. Notwithstanding the foregoing, the Board shall, in any case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member's death or bankruptcy, as the case may be Where two or more persons are registered as joint holders of a share or shares, then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders. 14. Disclosure of Material Interests/Beneficial Interests 14.1 At any time that shares of the Company are listed or quoted on the Oslo Stock Exchange, any person (other than the Registrar in respect of those shares registered in its name in the Register of Members as the nominee of persons whose interests in such shares are reflected in the VPS) who acquires or disposes of an interest in shares to the effect that the requirements of the Oslo Stock Exchange in effect from time to time concerning the duty to flag changes in a person s interest in shares require such changes to be notified shall notify the Registrar immediately of such acquisition or disposal and the resulting interest of that person in shares For the purposes of this Bye-law, a person shall be deemed to have an interest in shares: (a) owned by such person s spouse, minor child or cohabitant; (b) owned by any body corporate in which such person owns shares representing the majority of the votes attaching to all of the issued and outstanding shares of such body corporate or over which he has as owner of shares in such body corporate or by virtue of an agreement a determining influence and a substantial participation (as those terms are interpreted by the Norwegian courts from time to time) in the results of such body corporate s operations; (c) owned by any person with whom such person acts in concert (as such term is interpreted from time to time by the Oslo Stock Exchange), by virtue of any agreement or otherwise; UKDOCS/ A 37

126 Northern Offshore, Ltd. Page 17 (d) registered in the name of the Registrar in the Register of Members as nominee of such person or of any person referred to in clause (a), (b), or (c) in relation to such person; (e) which are issuable on the exercise of any options, convertible bonds, subscription rights or any other rights to acquire shares in which such person has an interest; (f) subject to a lien or other security interest in favour of such person; (g) which are issuable on the exercise of purchase rights, pre-emption rights, or other rights related thereto in which such person has an interest and which are activated by the acquisition, disposal or conversion of shares; (h) subject of any other agreed restriction on a Member s right to dispose of the same or to exercise such Member s rights as a Member, in favour of such person, except agreements to separate the dividend right from the ownership right of a share; (i) in connection with the acquisition of which there was given a guarantee of their purchase price by such person or such person otherwise undertook a risk with respect to the value thereof and which guarantee or risk remains outstanding The Registrar shall promptly report any such notification of interest to the Oslo Stock Exchange and the Company If a person fails to give notification of a change in his interest in shares in accordance with this Bye-law 14 and the Board believes that such person has acquired or disposed of an interest in shares in circumstances in which he would be subject to the notification requirements of this Bye-law 14, the Board shall require the Registrar to serve upon that person a notice: (a) requiring him to comply with the notification requirements in relation to the change in his interest in shares; and UKDOCS/ Northern Offshore, Ltd. Page 18 (b) informing him that, pending compliance with the notification requirements, the registered holder or holders of the shares in which that person is interested shall not be entitled to vote or otherwise exercise any rights attaching to the shares to which the notice relates nor shall such registered holder or holders be entitled to receive payments of income or capital which become due or payable in respect of such shares. The registered holder s or holders entitlement to such payments shall be suspended pending compliance with the notification requirements without any liability of the Company to such holder or holders arising for late payment or non payment and the Company may retain such sums for its own use and benefit during such period of suspension The provisions of these Bye-laws relating to the protection of purchasers of shares sold under a lien or upon forfeiture shall apply mutatis mutandis to disposals under this Bye-law The Board may serve notice on any Member requiring that Member to disclose to the Company the identity of any person (other than that Member) who has an interest (including, without limitation any indirect interest) in the shares, or some of the shares of the Company held by that Member and the nature of such interest. Any such notice shall require any information in response to such notice to be given within such reasonable time as the Board may determine If any Member is, in the opinion of the Board, in default in supplying to the Company the information required by the Company pursuant to Bye-law 14.6 within 28 days after service of the notice, or within 14 days after service of such notice if the shares concerned represent 0.25 per cent. (0.25%) or more in nominal value of the issued shares of the relevant class, the Board in its absolute discretion may serve a direction notice on the Member. The Board may direct in the direction notice that in respect of the shares in respect of which the default has occurred (the Default Shares ) and any other shares held by such Member as the Board may specify in the direction notice (the Additional Shares ), such Member shall not be entitled to vote in general meetings or class meetings. The Board may additionally direct in the direction notice that dividends on such Default Shares and Additional Shares (or such Default Shares and Additional Shares as the Board may specify in the direction notice) will be retained by the Company (without interest), and that no transfer of the Default Shares or Additional Shares (or such UKDOCS/ A 38

127 Northern Offshore, Ltd. Page 19 Default Shares and Additional Shares as the Board may specify in the direction notice) shall be registered until the default is rectified. ALTERATION OF SHARE CAPITAL 15. Power to Alter Capital 15.1 The Company may if authorised by resolution of the Members increase, divide, consolidate, subdivide, change the currency denomination of, diminish or otherwise alter or reduce its share capital in any manner permitted by the Act Where, on any alteration or reduction of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit. 16. Variation of Rights Attaching to Shares If, at any time, the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of a resolution passed by a majority of three-fourths of the votes cast at a separate general meeting of the holders of the shares of the class at which meeting the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class, and at which meeting any holder of shares of that class present in person or by proxy may demand a poll. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. UKDOCS/ Northern Offshore, Ltd. Page 20 DIVIDENDS AND CAPITALISATION 17. Dividends 17.1 The Board may, subject to these Bye-laws and in accordance with the Act, declare a dividend to be paid to the Members, in proportion to the number of shares held by them, and such dividend may be paid in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any assets. No unpaid dividend shall bear interest as against the Company The Board may fix any date as the record date for determining the Members entitled to receive any dividend, provided that such record date may be on, or not more than 30 days before or after, any date on which such dividend or distribution is declared 17.3 The Company may pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others The Board may declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of the assets of the Company. No unpaid distribution shall bear interest as against the Company. 18. Power to Set Aside Profits The Board may, before declaring a dividend, set aside out of the surplus or profits of the Company, such sum as it thinks proper as a reserve to be used to meet contingencies or for equalising dividends or for any other purpose. 19. Method of Payment 19.1 Any dividend or other monies payable in respect of a share may be paid by cheque or warrant sent through the post directed to the address of the Member in the Register of Members (in the case of joint Members, the senior joint holder, seniority being determined by the order in which the names stand in the Register of Members), or by direct transfer to such bank account as such Member may direct. Every such cheque shall be made payable to the order of the person to whom it is sent or to such persons as the Member may direct, and payment of the cheque or UKDOCS/ A 39

128 Northern Offshore, Ltd. Page 21 warrant shall be a good discharge to the Company. Every such cheque or warrant shall be sent at the risk of the person entitled to the money represented thereby. If two or more persons are registered as joint holders of any shares any one can give an effectual receipt for any dividend paid in respect of such shares The Board may deduct from the dividends or distributions payable to any Member all monies due from such Member to the Company on account of calls or otherwise Any dividend and or other monies payable in respect of a share which has remained unclaimed for 6 years from the date when it became due for payment shall, if the Board so resolves, be forfeited and cease to remain owing by the Company. The payment of any unclaimed dividend or other moneys payable in respect of a share may (but need not) be paid by the Company into an account separate from the Company's own account. Such payment shall not constitute the Company a trustee in respect thereof. 20. Capitalisation 20.1 The Board may resolve to capitalise any sum for the time being standing to the credit of any of the Company's share premium or other reserve accounts or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro-rata (except in connection with the conversion of shares of one class to shares of another class) to the Members The Board may resolve to capitalise any sum for the time being standing to the credit of a reserve account or sums otherwise available for dividend or distribution by applying such amounts in paying up in full partly paid or nil paid shares of those Members who would have been entitled to such sums if they were distributed by way of dividend or distribution. UKDOCS/ Northern Offshore, Ltd. Page 22 MEETINGS OF MEMBERS 21. Annual General Meetings The annual general meeting of the Company shall be held in each year (other than the year of incorporation) at such time and place (which shall not be in Norway) as the President or the Chairman (if any) or any two Directors or any Director and the Secretary or the Board shall appoint. 22. Special General Meetings The President or the Chairman (if any) or any two Directors or any Director and the Secretary or the Board may convene a special general meeting of the Company (which shall not be held in Norway) whenever in their judgment such a meeting is necessary. 23. Requisitioned General Meetings The Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than one-twentieth of such of the paid-up share capital of the Company as at the date of the deposit carries the right to vote at general meetings of the Company, forthwith proceed to convene a special general meeting of the Company and the provisions of the Act shall apply. 24. Notice 24.1 At least 14 days' notice of an annual general meeting shall be given to each Member entitled to attend and vote thereat, stating the date, time and place (which shall not be in Norway) at which the meeting is to be held, that the election of Directors will take place thereat (if applicable), and as far as practicable, the other business to be conducted at the meeting At least 14 days' notice of a special general meeting shall be given to each Member entitled to attend and vote thereat, stating the date, time, place (which shall not be in Norway) and the general nature of the business to be considered at the meeting The Board may fix any date as the record date for determining the Members entitled to receive notice of and to vote at any general meeting of the Company. UKDOCS/ A 40

129 Northern Offshore, Ltd. Page A general meeting of the Company shall, notwithstanding that it is called on shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving a right to attend and vote thereat in the case of a special general meeting, provided that notwithstanding any provision of these Bye-laws, no Member shall be entitled to attend any general meeting unless notice in writing of the intention to attend and vote in person or by proxy signed by or on behalf of the Member (together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof) addressed to the Secretary is deposited (by post, courier, facsimile transmission or other electronic means) at the registered office at least 48 hours before the time appointed for holding the general meeting or adjournment thereof The accidental omission to give notice of a general meeting to, or the non-receipt of a notice of a general meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting. 25. Giving Notice and Access 25.1 A notice may be given by the Company to a Member: (a) by delivering it to such Member in person; or (b) by sending it by letter mail or courier to such Member's address in the Register of Members; or (c) by transmitting it by electronic means (including facsimile and electronic mail, but not telephone) in accordance with such directions as may be given by such Member to the Company for such purpose; or (d) in accordance with Bye-law Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares. UKDOCS/ Northern Offshore, Ltd. Page Any notice (save for one delivered in accordance with Bye-law 25.4) shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, at the time when it was posted, delivered to the courier or transmitted by electronic means Where a Member indicates his consent (in a form and manner satisfactory to the Board) to receive information or documents by accessing them on a website rather than by other means, the Board may deliver such information or documents by notifying the Member of their availability and including therein the address of the website, the place on the website where the information or document may be found, and instructions as to how the information or document may be accessed on the website In the case of information or documents delivered in accordance with Bye-law 25.4, service shall be deemed to have occurred when (i) the Member is notified in accordance with that Bye-law; and (ii) the information or document is published on the website Mail notice shall be deemed to have been served two Business Days after the date on which it is deposited, with postage prepaid, in the mail of any member state of the European Union, the United States, or Bermuda The Company shall be under no obligation to send a notice or other document to the address shown for any particular Member in the Register of Members if the Board considers that the legal or practical problems under the laws of, or the requirements of any regulatory body or stock exchange in, the territory in which that address is situated are such that it is necessary or expedient not to send the notice or document concerned to such Member at such address and may require a Member with such an address to provide the Company with an alternative acceptable address for delivery of notices by the Company. 26. Postponement of General Meeting The Chairman or the President (if any) may, and the Secretary on instruction from the Chairman or the President (if any) or any two Directors shall, postpone any general meeting called in accordance with the provisions of these Bye-laws (other than a meeting requisitioned under these Bye-laws) provided UKDOCS/ A 41

130 Northern Offshore, Ltd. Page 25 that notice of postponement is given to each Member before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to the Members in accordance with the provisions of these Bye-laws. 27. Attendance and Security at General Meetings 27.1 Members may participate in any general meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting The Board may, and at any general meeting, the chairman of such meeting may make any arrangement and impose any requirement or restriction it or he considers appropriate to ensure the security of a general meeting including, without limitation, requirements for evidence of identity to be produced by those attending the meeting, the searching of their personal property and the restriction of items that may be taken into the meeting place. The Board and, at any general meeting, the chairman of such meeting are entitled to refuse entry to a person who refuses to comply with any such arrangements, requirements or restrictions. 28. Quorum at General Meetings 28.1 At any general meeting of the Company one or more persons present in person at the start of the meeting and representing in person or by proxy at least one-third of the voting rights entitled to be exercised at such meeting shall form a quorum for the transaction of business If within half an hour from the time appointed for the meeting a quorum is not present, then, in the case of a meeting convened on a requisition, the meeting shall be deemed cancelled and, in any other case, the meeting shall stand adjourned to the same day one week later, at the same time and place (which shall not be in Norway) or to such other day, time or place (which shall not be in Norway) as the Secretary may determine. If the meeting shall be adjourned to the same day one week later or the Secretary shall determine that the meeting is adjourned to a specific date, time and place (which shall not be in Norway), it is not necessary to give notice of the adjourned meeting other than by announcement at the meeting being adjourned. If the Secretary shall determine that the meeting be adjourned to an unspecified date, time or place, fresh notice UKDOCS/ Northern Offshore, Ltd. Page 26 of the resumption of the meeting shall be given to each Member entitled to attend and vote thereat in accordance with the provisions of these Bye-laws. 29. Chairman to Preside at General Meetings Unless otherwise agreed by a majority of those attending and entitled to vote thereat, the Chairman, if there be one, and if not the President, if there be one, shall act as chairman at all meetings of the Members at which such person is present. In their absence, a chairman shall be appointed or elected by those present at the meeting and entitled to vote. 30. Voting on Resolutions 30.1 Subject to the provisions of the Act and these Bye-laws, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the provisions of these Bye-laws and in the case of an equality of votes the resolution shall fail No Member shall be entitled to vote at a general meeting unless such Member has paid all the calls on all shares held by such Member At any general meeting a resolution put to the vote of the meeting shall, in the first instance, be voted upon by a show of hands and, subject to any rights or restrictions for the time being lawfully attached to any class of shares and subject to the provisions of these Bye-laws, every Member present in person and every person holding a valid proxy at such meeting shall be entitled to one vote and shall cast such vote by raising his hand In the event that a Member participates in a general meeting by telephone or electronic means, the chairman of the meeting shall direct the manner in which such Member may cast his vote on a show of hands At any general meeting if an amendment shall be proposed to any resolution under consideration and the chairman of the meeting shall rule on whether the proposed amendment is out of order, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling. UKDOCS/ A 42

131 Northern Offshore, Ltd. Page At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in a book containing the minutes of the proceedings of the Company shall, subject to the provisions of these Bye-laws, be conclusive evidence of that fact If (i) any objection shall be raised to the qualification of any voter or (ii) any votes have been counted which ought not to have been counted or which might have been rejected or (iii) any votes are not counted which ought to have been counted, the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless the same is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the chairman decides that the same may have affected the decision of the meeting. The decision of the chairman on such matters shall be final and conclusive. 31. Power to Demand a Vote on a Poll 31.1 Notwithstanding the foregoing, a poll may be demanded by any of the following persons: (a) the chairman of such meeting; or (b) at least three Members present in person or represented by proxy; or (c) any Member or Members present in person or represented by proxy and holding between them not less than one-tenth of the total voting rights of all the Members having the right to vote at such meeting; or (d) any Member or Members present in person or represented by proxy holding shares in the Company conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all such shares conferring such right Where a poll is demanded, subject to any rights or restrictions for the time being lawfully attached to any class of shares, every person present at such meeting shall have one vote for each UKDOCS/ Northern Offshore, Ltd. Page 28 share of which such person is the holder or for which such person holds a proxy and such vote shall be counted by ballot as described herein, or in the case of a general meeting at which one or more Members are present by telephone or electronic means, in such manner as the chairman of the meeting may direct and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded and shall replace any previous resolution upon the same matter which has been the subject of a show of hands. A person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way A poll demanded for the purpose of electing a chairman of the meeting or on a question of adjournment shall be taken forthwith and a poll demanded on any other question shall be taken in such manner and at such time and place at such meeting as the chairman (or acting chairman) of the meeting may direct and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll Where a vote is taken by poll, each person physically present and entitled to vote shall be furnished with a ballot paper on which such person shall record his vote in such manner as shall be determined at the meeting having regard to the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify the voter and the registered holder in the case of a proxy. Each person present by telephone or electronic means shall cast his vote in such manner as the chairman shall direct. At the conclusion of the poll, the ballot papers and votes cast in accordance with such directions shall be examined and counted by a committee of not less than two Members or proxy holders appointed by the chairman for the purpose and the result of the poll shall be declared by the chairman. 32. Voting by Joint Holders of Shares In the case of joint holders, the vote of the senior who tenders a vote (whether in person or by proxy) shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members. UKDOCS/ A 43

132 Northern Offshore, Ltd. Page Instrument of Proxy 33.1 A Member may appoint a proxy by (a) an instrument appointing a proxy in writing in substantially the following form or such other form as the chairman of the meeting shall accept: Proxy Northern Offshore, Ltd. (the "Company") I/We, [insert names here], being a Member of the Company with [number] shares, HEREBY APPOINT [name] of [address] or failing him, [name] of [address] to be my/our proxy to vote for me/us at the meeting of the Members to be held on the [ ] day of [ ], 200[ ] and at any adjournment thereof. (Any restrictions on voting to be inserted here.) Signed this [ ] day of [ ], 200[ ] Member(s) or (b) such telephonic, electronic or other means as may be approved by the Board from time to time The appointment of a proxy must be received by the Company at the registered office or at such other place or in such manner as is specified in the notice convening the meeting or in any instrument of proxy sent out by the Company in relation to the meeting at which the person named in the appointment proposes to vote, and an appointment of proxy which is not received in the manner so prescribed shall be invalid A Member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf in respect of different shares The decision of the chairman of any general meeting as to the validity of any appointment of a proxy shall be final. 34. Representation of Corporate Member 34.1 A corporation which is a Member may, by written instrument, authorise such person or persons as it thinks fit to act as its representative at any meeting and any person so authorised shall be UKDOCS/ Northern Offshore, Ltd. Page 30 entitled to exercise the same powers on behalf of the corporation which such person represents as that corporation could exercise if it were an individual Member, and that Member shall be deemed to be present in person at any such meeting attended by its authorised representative or representatives Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he thinks fit as to the right of any person to attend and vote at general meetings on behalf of a corporation which is a Member. 35. Adjournment of General Meeting 35.1 The chairman of any general meeting at which a quorum is present may with the consent of Members holding a majority of the voting rights of those Members present in person or by proxy and shall if so directed by the meeting, adjourn the meeting In addition, the chairman may adjourn the meeting to another time and place (which shall not be in Norway) without such consent or direction if it appears to him that: (a) it is likely to be impracticable to hold or continue that meeting because of the number of Members wishing to attend who are not present; or (b) the unruly conduct of persons attending the meeting prevents, or is likely to prevent, the orderly continuation of the business of the meeting; or (c) an adjournment is otherwise necessary so that the business of the meeting may be properly conducted Unless the meeting is adjourned to a specific date, place and time announced at the meeting being adjourned, fresh notice of the date, place and time for the resumption of the adjourned meeting shall be given to each Member entitled to attend and vote thereat in accordance with the provisions of these Bye-laws. UKDOCS/ A 44

133 Northern Offshore, Ltd. Page Written Resolutions 36.1 Subject to these Bye-laws, anything which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members may, without a meeting be done by written resolution in accordance with this Bye-law Notice of a written resolution shall be given, and a copy of the resolution shall be circulated to all Members who would be entitled to attend a meeting and vote thereon. The accidental omission to give notice to, or the non-receipt of a notice by, any Member does not invalidate the passing of a resolution A written resolution is passed when it is signed by, or in the case of a Member that is a corporation, on behalf of, the Members who at the date that notice is given represent such majority of votes as would be required if the resolution was voted on at a meeting of Members at which all Members entitled to attend and vote thereat were present and voting A resolution in writing may be signed in any number of counterparts A resolution in writing made in accordance with this Bye-law is as valid as if it had been passed by the Company in general meeting or by a meeting of the relevant class of Members, as the case may be, and any reference in any Bye-law to a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of the Act This Bye-law shall not apply to: (a) a resolution passed to remove an auditor from office before the expiration of his term of office; or (b) a resolution passed for the purpose of removing a Director before the expiration of his term of office For the purposes of this Bye-law, the effective date of the resolution is the date when the resolution is signed by, or in the case of a Member that is a corporation whether or not a UKDOCS/ Northern Offshore, Ltd. Page 32 company within the meaning of the Act, on behalf of, the last Member whose signature results in the necessary voting majority being achieved and any reference in any Bye-law to the date of passing of a resolution is, in relation to a resolution made in accordance with this Bye-law, a reference to such date. 37. Directors Attendance at General Meetings The Directors of the Company shall be entitled to receive notice of, attend and be heard at any general meeting. DIRECTORS AND OFFICERS 38. Election of Directors 38.1 The number of Directors shall be not less than two or such number in excess thereof as the Members may determine The Board of Directors shall be elected or appointed in the first place at the statutory meeting of the Company and thereafter, except in the case of a casual vacancy, at the annual general meeting or at any special general meeting called for that purpose At any general meeting the Members may authorise the Board to fill any vacancy in their number left unfilled at a general meeting The Directors shall hold office for such term as the Members may determine or, in the absence of such determination, until the next annual general meeting or until their successors are elected or appointed or their office is otherwise vacated Notwithstanding anything to the contrary set forth in this Bye-Law 38, the majority of the Directors shall be resident outside Norway No Director shall be appointed or removed otherwise than as provided in these Bye-laws. 39. Alternate Directors 39.1 At any general meeting of the Company, the Members may elect a person or persons to act as a Director in the alternative to any one or more Directors of the Company or may authorise the Board to appoint such Alternate Directors. UKDOCS/ A 45

134 Northern Offshore, Ltd. Page Unless the Members otherwise resolve, any Director may appoint a person or persons to act as a Director in the alternative to himself by notice in writing deposited with the Secretary. Any person so elected or appointed shall have all the rights and powers of the Director or Directors for whom such person is appointed in the alternative provided that such person shall not be counted more than once in determining whether or not a quorum is present An Alternate Director shall be entitled to receive notice of all meetings of the Board and to attend and vote at any such meeting at which a Director for whom such Alternate Director was appointed in the alternative is not personally present and generally to perform at such meeting all the functions of such Director for whom such Alternate Director was appointed An Alternate Director shall cease to be such if the Director for whom such Alternate Director was appointed ceases for any reason to be a Director but may be re-appointed by the Board as an alternate to the person appointed to fill the vacancy in accordance with these Bye-laws An Alternate Director that is resident in Norway may only be the alternate for a Director resident in Norway (if any). 40. Removal of Directors 40.1 Subject to any provision to the contrary in these Bye-laws, the Members may, at any special general meeting convened and held in accordance with these Bye-laws, remove a Director provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director not less than 14 days before the meeting and at such meeting the Director shall be entitled to be heard on the motion for such Director's removal If a Director is removed from the Board under the provisions of this Bye-law the Members may fill the vacancy at the meeting at which such Director is removed. In the absence of such election or appointment, the Board may fill the vacancy. UKDOCS/ Northern Offshore, Ltd. Page Vacancy in the Office of Director 41.1 The office of Director shall be vacated if the Director: (a) is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law; (b) is or becomes bankrupt, or makes any arrangement or composition with his creditors generally; (c) is or becomes of unsound mind or dies; or (d) resigns his office by notice in writing to the Company The Members in general meeting or the Board shall have the power to appoint any person as a Director to fill a vacancy on the Board occurring as a result of the death, disability, disqualification or resignation of any Director or as a result of an increase in the size of the Board and to appoint an Alternate Director to any Director so appointed. 42. Remuneration of Directors The remuneration (if any) of the Directors shall be determined by the Company in general meeting and shall be deemed to accrue from day to day. The Directors may also be paid all reasonable travel, hotel and other expenses properly incurred by them in attending and returning from the meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors generally. 43. Defect in Appointment All acts done in good faith by the Board or by a committee appointed by the Board or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director or act in the relevant capacity. UKDOCS/ A 46

135 Northern Offshore, Ltd. Page Directors to Manage Business 44.1 The business of the Company shall be managed and conducted by the Board. In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by the Act or by these Bye-laws, required to be exercised by the Company in general meeting Subject to these Bye-laws (including, without limitation, Bye-law 74), the Board may delegate to any company, firm, person, or body of persons any power of the Board (including the power to sub-delegate). 45. Powers of the Board of Directors Subject to Bye-law 74, the Board may: (a) appoint, suspend, or remove any manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties; (b) exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party; (c) appoint one or more Directors to the office of managing director or chief executive officer of the Company, who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company; (d) appoint a person to act as manager of the Company's day-to-day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business; (e) by power of attorney, appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board) and for such period and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection UKDOCS/ Northern Offshore, Ltd. Page 36 and convenience of persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney; (f) procure that the Company pays all expenses incurred in promoting and incorporating the Company; (g) delegate any of its powers (including the power to sub-delegate) to a committee appointed by the Board which may consist partly or entirely of non-directors, provided that every such committee shall conform to such directions as the Board shall impose on them and provided further that the meetings and proceedings of any such committee shall be governed by the provisions of these Bye-laws regulating the meetings and proceedings of the Board, so far as the same are applicable and are not superceded by directions imposed by the Board; (h) present any petition and make any application in connection with the liquidation or reorganisation of the Company; (i) in connection with the issue of any share, pay such commission and brokerage as may be permitted by law; and (j) authorise any company, firm, person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any deed, agreement, document or instrument on behalf of the Company. (k) The Board on behalf of the Company may provide benefits, whether by the payment of gratuities or pensions or otherwise, for any person including any Director or former Director who has held any executive office or employment with the Company or with any body corporate which is or has been a subsidiary or affiliate of the Company or a predecessor in the business of the Company or of any such subsidiary or affiliate, and to any member of his family or any person who is or was dependent on him, and may contribute to any fund and pay premiums for the purchase or provision of any such gratuity, pension or other benefit, or for the insurance of any such person in connection with the provision of pensions. The Board may also establish and maintain any UKDOCS/ A 47

136 Northern Offshore, Ltd. Page 37 employees share scheme, share option or share incentive scheme approved by a resolution of the Members whereby selected employees of the Company or of any company which is a subsidiary of the Company are given the opportunity of acquiring shares in the capital of the Company on the terms and subject to the conditions set out in such scheme and establish and (if any such scheme so provides) contribute to any scheme for the purchase by or transfer, allotment or issue to trustees of shares in the Company to be held for the benefit of employees (including Directors and officers) of the Company and subject to the Act lend money to such trustees or employees to enable the purchase of such shares. 46. Register of Directors and Officers The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers and shall enter therein the particulars required by the Act. 47. Appointment of Officers The Board may elect a Chairman among the Directors. The Board may appoint such other officers (who may or may not be Directors) as the Board may determine. 48. Appointment of Secretary The Secretary shall be appointed by the Board from time to time. 49. Duties of Officers The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time. 50. Remuneration of Officers The Officers shall receive such remuneration as the Board may determine. 51. Conflicts of Interest 51.1 Any Director, or any Director's firm, partner or any company with whom any Director is associated, may act in any capacity for, be employed by or render services to the Company and UKDOCS/ Northern Offshore, Ltd. Page 38 such Director or such Director's firm, partner or company shall be entitled to remuneration as if such Director were not a Director. Nothing herein contained shall authorise a Director or Director's firm, partner or company to act as Auditor to the Company A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of such interest as required by the Act Following a declaration being made pursuant to this Bye-law, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such Director is interested and may be counted in the quorum for such meeting. 52. Indemnification and Exculpation of Directors and Officers 52.1 The Directors, Secretary and other Officers (such term to include any person appointed to any committee by the Board) for the time being acting in relation to any of the affairs of the Company, and the liquidator or trustees (if any) for the time being acting in relation to any of the affairs of the Company the directors and officers of any subsidiary of the Company and every one of them, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or other persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, PROVIDED THAT this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of the said persons. Each Member agrees to waive any claim or right of action such Member might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or UKDOCS/ A 48

137 Northern Offshore, Ltd. Page 39 Officer, or the failure of such Director or Officer to take any action in the performance of his duties with or for the Company, PROVIDED THAT such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such Director or Officer The Company may purchase and maintain insurance for the benefit of any Director or Officer of the Company against any liability incurred by him under the Act in his capacity as a Director or Officer of the Company or indemnifying such Director or Officer in respect of any loss arising or liability attaching to him by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the Director or Officer may be guilty in relation to the Company or any subsidiary thereof The Company may advance moneys to a Director or Officer for the costs, charges and expenses incurred by the Director or Officer in defending any civil or criminal proceedings against him, on condition that the Director or Officer shall repay the advance if any allegation of fraud or dishonesty is proved against him. MEETINGS OF THE BOARD OF DIRECTORS 53. Board Meetings The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit, provided that no meeting of the Board shall be held in Norway or the United Kingdom. Subject to the provisions of these Bye-laws, a resolution put to the vote at a meeting of the Board shall be carried by the affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail. 54. Notice of Board Meetings A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Board. Notice of a meeting of the Board shall be deemed to be duly given to a Director if it is given to such Director verbally (in person or by telephone) or otherwise communicated or sent to such Director by post, electronic means or other mode of representing words in a visible form at such Director's last known address or in accordance with any other instructions given by such Director to the Company for this purpose. UKDOCS/ Northern Offshore, Ltd. Page Electronic Participation in Meetings Directors may participate in any meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting. A meeting of the Board or committee appointed by the Board held in the foregoing manner shall be deemed to take place at the place where the largest group of participating Directors or committee members has assembled or, if no such group exists, at the place where the chairman of the meeting participates. The Board or relevant committee shall use its best endeavours to ensure that any such meeting is not deemed to have been held in Norway or the United Kingdom, and the fact that one or more Directors may be present at such teleconference by virtue of his being physically in Norway or the United Kingdom shall not deem such meeting to have taken place in Norway or the United Kingdom. 56. Quorum at Board Meetings The quorum necessary for the transaction of business at a meeting of the Board may be fixed by the Board at any number of Directors equal to two or more and, unless so fixed at any other number, shall be Directors constituting a majority of the Board, provided that in all cases a quorum shall not be present unless a majority of the Directors present are not resident in Norway. 57. Board to Continue in the Event of Vacancy The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of business at meetings of the Board, the continuing Directors or Director may act for the purpose of (i) summoning a general meeting of the Company; or (ii) preserving the assets of the Company. 58. Chairman to Preside Unless otherwise agreed by a majority of the Directors attending, the Chairman, if there be one, and if not, the President, if there be one, shall act as chairman at all meetings of the Board at which such person is present. In their absence a chairman shall be appointed or elected by the Directors present at the meeting. UKDOCS/ A 49

138 Northern Offshore, Ltd. Page Written Resolutions A resolution signed by all the Directors, which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such resolution to be effective on the date on which the last Director signs the resolution. For the purposes of this Bye-law only, "the Directors" shall not include an Alternate Director. 60. Validity of Prior Acts of the Board No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made. CORPORATE RECORDS 61. Minutes The Board shall cause minutes to be duly entered in books provided for the purpose: (a) of all elections and appointments of Officers; (b) of the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and (c) of all resolutions and proceedings of general meetings of the Members, meetings of the Board, and meetings of committees appointed by the Board. 62. Place Where Corporate Records Kept Minutes prepared in accordance with the Act and these Bye-laws shall be kept by the Secretary at the registered office of the Company. 63. Form and Use of Seal 63.1 The Company may adopt a seal in such form as the Board may determine. The Board may adopt one or more duplicate seals for use in or outside Bermuda. UKDOCS/ Northern Offshore, Ltd. Page A seal may, but need not, be affixed to any deed, instrument, share certificate or document and, if the seal is to be affixed thereto, it shall be attested by the signature of (i) any Director, or (ii) any Officer, or (iii) the Secretary, or (iv) any person authorised by the Board for that purpose A Resident Representative may, but need not, affix the seal of the Company to certify the authenticity of any copies of documents. ACCOUNTS 64. Books of Account 64.1 The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to: (a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates; (b) all sales and purchases of goods by the Company; and (c) all assets and liabilities of the Company Such records of account shall be kept at the registered office of the Company, or subject to the provisions of the Act, at such other place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours. No Member (other than a Member that is an Officer entitled to carry out such inspection in his capacity as such Officer shall have any right to inspect any accounting record or book or document of the Company except as required by any Listing Exchange, by law, by regulations or as authorised by the Board or by resolution of the Members. 65. Financial Year End The financial year end of the Company may be determined by resolution of the Board and failing such resolution shall be 31 st December in each year. UKDOCS/ A 50

139 Northern Offshore, Ltd. Page 43 AUDITS 66. Annual Audit Subject to any rights to waive laying of accounts or appointment of an Auditor pursuant to the Act, the accounts of the Company shall be audited at least once in every year. 67. Appointment of Auditors 67.1 Subject to the provisions of the Act, at the annual general meeting or at a subsequent special general meeting in each year, an independent representative of the Members shall be appointed by them as Auditor of the accounts of the Company The Auditor may be a Member but no Director, Officer or employee of the Company shall, during his continuance in office, be eligible to act as an Auditor of the Company. 68. Remuneration of Auditors The remuneration of the Auditor shall be fixed by the Company in general meeting or in such manner as the Members may determine. 69. Duties of Auditors 69.1 The financial statements provided for by these Bye-laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards The generally accepted auditing standards referred to in this Bye-law may be those of a country or jurisdiction other than Bermuda or such other generally accepted auditing standards as may be provided for in the Act. If so, the financial statements and the report of the Auditor shall identify the generally accepted auditing standards used. 70. Access to Records The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of the Company for any information in their possession relating to the books or affairs of the Company. UKDOCS/ Northern Offshore, Ltd. Page Financial Statements Subject to any rights to waive laying of accounts pursuant to the provisions of the Act, financial statements as required by the Act shall be laid before the Members in general meeting. A resolution in writing made in accordance with Bye-law 36 receiving, accepting, adopting, approving or otherwise acknowledging financial statements shall be deemed to be the laying of such statements before the Members in general meeting. 72. Distribution of Auditors report The report of the Auditor shall be submitted to the Members in general meeting. 73. Vacancy in the Office of Auditor If the office of Auditor becomes vacant by the resignation or death or the Auditor, or by the Auditor becoming incapable of acting by reason of illness or other disability at a time when the Auditor's services are required, the vacancy thereby created shall be filled in accordance with the Act. TRANSACTIONS WITH PRINCIPAL MEMBERS 74. Transactions with Principal Members 74.1 Subject to Bye-law 74.5 below, where any transaction with a Principal Member is proposed, a circular must be sent to each Member For the purposes of this Bye-law: (a) transaction with a Principal Member means a transaction (other than a transaction of a revenue nature in the ordinary course of business) between the Company, or any of its subsidiaries, and a Principal Member or an Associate of a Principal Member; and (b) Principal Member means any person (excluding the Registrar in respect of those shares registered in its name in the Register of Members as nominee of UKDOCS/ A 51

140 Northern Offshore, Ltd. Page 45 persons whose interests in such shares are reflected in the VPS and any bare trustee) who is, or was within twelve months preceding the date of the transaction, entitled to exercise, or to control the exercise of, whether directly or indirectly (including through interests in shares registered in the name of the Registrar in the Register of Members as nominee of such person whose interests in such shares are reflected in the VPS), twenty per cent or more of the votes attaching to all of the issued and outstanding shares Any circular sent to Members in accordance with Bye-law 74.1 above shall provide sufficient information to enable each Member to evaluate the effects of the transaction on the Company or the relevant subsidiary The provisions of Bye-law 74.1 of this Bye-law shall apply mutatis mutandis to any variation or novation of an existing agreement between the Company (or any of its subsidiaries) and a Principal Member (or Associate of a Principal Member) whether or not at the time that the original agreement was entered into the latter party was a Principal Member (or Associate of a Principal Member) Notwithstanding the foregoing, the provisions of this Bye-law shall not apply to any of the following transactions: (a) an issue of new shares for cash by the Company (or any of its subsidiaries); or (b) the issue of shares in the Company (or any of its subsidiaries) pursuant to an employee share scheme of the Company (or such subsidiary); or (c) an underwriting of all or part of an issue of shares by the Company (or any of its subsidiaries) where the consideration paid by the Company (or such subsidiary) in respect of such underwriting is no more than the usual commercial underwriting consideration and is determined on the same basis as the consideration to be paid to the other underwriters (if any); or UKDOCS/ Northern Offshore, Ltd. Page 46 (d) a transaction that is not material, provided that for the purposes of this Bye-law a transaction shall be material where the market value of the assets which are the subject of the transaction (ignoring for these purposes any related indebtedness) is greater than five percent of the net assets of the Company as set out in the latest audited accounts of the Company then available (or, if there are none, in the latest consolidated balance sheet reported on by the auditors of the Company) or, if less, U.S.$20,000,000; or (e) a transaction in which a Principal Member participates solely by virtue of his shareholding in, or interests in shares of, the Company and on a pro rata basis with the other holders of shares or interests in shares of the relevant class of the Company, including, without limitation, the declaration of a dividend by the Company or other distribution of assets of the Company. VOLUNTARY WINDING-UP AND DISSOLUTION 75. Winding-Up If the Company shall be wound up the liquidator may, with the sanction of a resolution of the Members passed by a majority of not less than 66 of the votes cast at a general meeting of the Members, divide amongst the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in the trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability. UKDOCS/ A 52

141 Northern Offshore, Ltd. Page 47 CHANGES TO CONSTITUTION 76. Changes to Bye-laws 76.1 Subject to Bye-law 76.2, no Bye-law shall be rescinded, altered or amended and no new Bye-law shall be made until the same has been approved by a resolution of the Board and by a resolution of the Members Bye-laws 75 and 76 shall not be rescinded, altered or amended and no new Bye-law shall be made which would have the effect of rescinding, altering or amending the provisions of such Bye-laws, until the same has been approved by a resolution of the Board including the affirmative vote of not less than two-thirds of the Directors then in office and by a resolution of the Members including the affirmative vote of not less than two-thirds of the votes attaching to all issued and outstanding Common Shares. 77. Discontinuance/Amalgamation 77.1 The Board may exercise all the powers of the Company to discontinue the Company to a jurisdiction outside Bermuda pursuant to the Act In respect of any amalgamation which the Act requires to be approved by the Members, the necessary general meeting quorum and Members approval shall be as set out in Bye-laws 28 and 30, respectively. UKDOCS/ A 53

142 Appendix 3: Consolidated Financial Statements as of June 30, 2007 and December 31, 2006 and for the three-month and six-month periods ended June 30, 2007 and 2006 with auditors statement A 54

143 A 55

144 A 56

145 A 57

146 A 58

147 A 59

148 A 60

149 A 61

150 A 62

151 A 63

152 A 64

153 A 65

154 A 66

155 Appendix 4: Unaudited Pro Forma Condensed Combined Consolidated Statements of Income for the financial year ended December 31, 2006 and six-month period ended June 30, 2007 with auditors statement A 67

156 A 68

157 A 69

158 A 70

159 A 71

160 A 72

161 A 73

162 A 74

163 A 75

164 Appendix 5: Annual Report for 2006 A 76

165 A 77

166 A 78

167 A 79

168 A 80

169 A 81

170 A 82