Songa Offshore SE. (a European public company limited by shares organised under the laws of the Republic of Cyprus)

Transcription

1 Songa Offshore SE (a European public company limited by shares organised under the laws of the Republic of Cyprus) Listing of 8,466,839,157 new Shares issued in the Refinancing, a Subsequent Offering and listing of up to 1,418,100,000 Offer Shares at a Subscription Price of NOK 0.15 per Offer Share with Subscription Rights for Eligible Shareholders and listing of New Convertible Bonds This prospectus (the Prospectus ) relates to, and has been prepared in connection with (i) the listing on Oslo Børs of 1,119,159,875 new Shares, each with a nominal value of EUR 0.001, in Songa Offshore SE ( Songa Offshore or the Company, and together with its consolidated subsidiaries, the Group ) issued as payment to the holders of SONG04, SONG05 and the Perestroika Shareholder Loan (the Equity Compensation Shares ), (ii) listing of 7,347,678,915 new Shares issued in connection with the equitasation and conversion of SONG06 (the "Bond Conversion Shares"), (iii) a subsequent offering (the Subsequent Offering ) and listing on Oslo Børs of up to 1,418,100,000 offer shares, each with a nominal value of EUR in the Company (the Offer Shares ) at a subscription price of NOK 0.15 per Offer Share (the Subscription Price ) and (iv) the listing on Oslo Børs of a new convertible bond loan as described in section 5 (the "New Convertible Bonds"). The Subsequent Offering consists of an offer to (i) the public in Norway, (ii) professional and institutional investors outside Norway and the United States, subject to applicable exemptions from prospectus requirements (including in reliance on Regulation S under the U.S Securities Act) and (iii) investors in the United States who are "qualified institutional buyers" ("QIB") as defined in Rule 144a ("Rule 144A") under the U.S. Securities Act of The Company's shareholders as of 13 April 2016, as documented by the shareholder register in the Norwegian Central Securities Depository (the VPS ) as of 15 April 2016 (T+2) (the "Record Date"), and who are not resident in a jurisdiction where such offering would be unlawful, or would (in jurisdictions other than Norway) require any prospectus filing, registration or similar action, will receive non-transferable subscription rights (the "Subscription Rights") based on their shareholding as of that date ("Eligible Shareholders"). Over-subscription and subscription without subscription rights will be allowed. Each Eligible Shareholder will be granted Subscription Rights for each Share registered as held by such Eligible Shareholder as of the Record Date rounded down to the nearest whole Subscription Right. Each Subscription Right will, subject to applicable securities laws, give the right to subscribe for and be allocated one (1) Offer Share. The subscription period for the Subsequent Offering commences on 30 May 2016 and expires at 16:30 hours, Oslo time, on 13 June 2016 (the Subscription Period ). The Subscription Rights are non-transferable. Subscription Rights not used to subscribe for Offer Shares before the expiry of the Subscription Period will have no value and will lapse without compensation to the holder. The Company's ordinary shares (the "Ordinary Shares") are listed on Oslo Børs under the ticker code SONG. The Equity Compensation Shares and Bond Conversion Shares were issued in a separate share class ("Class A Shares") on an interim basis and delivered on 20 April 2016 and will be listed and tradable on Oslo Børs following a conversion to Ordinary Shares and the publication of the Company's Q financial statement. The Offer Shares are also expected to be delivered to the subscribers in the Subsequent Offering in a separate share class ("Class B Shares") on an interim basis on or about 23 June 2016 and will following the Capital Reduction (as defined below) be converted into Ordinary Shares and listed and tradable as Ordinary Shares on Oslo Børs, such conversion and listing estimated to take place mid-july Prior to the Capital Reduction and subsequent conversion, the Class B Shares will be sought listed and traded separately on Oslo Børs. All shares of the Company, including the Ordinary Shares, the Class A Shares and Class B Shares, are referred to in this Prospectus as the "Shares". The distribution of this Prospectus and the Subsequent Offering and the sale of the Offer Shares and the issue of Subscription Rights may in certain jurisdictions be restricted by law. Accordingly, this Prospectus may not be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. The Company and the Managers (as defined below) require persons in possession of this Prospectus, in possession of Subscription Rights and/or considering to subscribe for Offer Shares to inform themselves about, and to observe, any such restrictions Investing in the Company and the securities covered by the Prospectus (including but not limited to the Offer Shares) involves material risks and uncertainties. See section 2 Risk Factors and section 4 Cautionary Note Regarding Forward-Looking Statements. Joint Lead Managers and Joint Bookrunners ABG Sundal Collier Swedbank This Prospectus is dated 26 May 2016

2 Important information Please refer to section 17 Definitions and glossary of terms for definitions of terms used throughout this Prospectus, which also apply to the preceding pages. This Prospectus has been prepared in order to provide information about Songa Offshore and its business in relation to the listing of the New Convertible Bonds, the Bond Conversion Shares, the Equity Compensation Shares and the offering and listing of Offer Shares in the Subsequent Offering (in the following referred to as "the securities covered by the Prospectus"), and to comply with the Norwegian Securities Trading Act of June 29, 2007 no. 75 (the Norwegian Securities Trading Act ) and related secondary legislation, including EC Commission Regulation (EC) no. 809/2004 implementing Directive 2003/71/EC (and amendments thereto) regarding information contained in prospectuses (the Prospectus Directive ). This Prospectus has been prepared solely in the English language. The Company has furnished the information in this Prospectus. The Company has engaged ABG Sundal Collier ASA and Swedbank Norway, a branch of Swedbank AB (publ.) as joint lead managers and joint bookrunners (the "Managers") for the securities covered by the Prospectus. Neither the Company nor any of the Managers have authorised any other person to provide investors with any other information related to the securities covered by the Prospectus and neither the Company nor any of the Managers will assume any responsibility for any information other persons may provide. Unless otherwise indicated, the information contained herein is current as of the date hereof and the information is subject to change, completion and amendment without notice. In accordance with section 7-15 of the Norwegian Securities Trading Act, every significant new factor, material mistake or inaccuracy that is capable of affecting the assessment of the securities covered by the Prospectus arising after the time of approval of this Prospectus and before the respective dates of listing of the securities covered by the Prospectus on Oslo Børs will be published and announced promptly as a supplement to this Prospectus. Neither the publication nor distribution of this Prospectus shall under any circumstances create any implication that there has been no change in the Group s affairs since the date hereof or that the information herein is correct as of any time since its date. An investment in the Company involves inherent risks. Potential investors should carefully consider the risk factors set out in section 2 Risk factors in addition to the other information contained herein before making an investment decision. An investment in the Company is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of their entire investment. Investors should be aware that they may be required to bear the financial risks of an investment in the Securities (as defined below) for an indefinite period of time. The contents of this Prospectus are not to be construed as legal, business or tax advice. Each prospective investor should consult with its own legal adviser, business adviser and tax adviser as to legal, business and tax advice. In the ordinary course of their respective businesses, the Managers and certain of their respective affiliates have engaged, and will continue to engage, in investment and commercial banking transactions with the Group. The securities covered by this Prospectus are subject to restrictions on transferability and resale under applicable securities legislation of certain jurisdictions and may not be transferred or resold except as permitted under applicable securities laws and regulations. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. 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. The distribution of this Prospectus and the offer and sale of the Offer Shares in certain jurisdictions may be restricted by law. The Company and the Managers require persons in possession of this Prospectus, in possession of Subscription Rights or considering to subscribe for Offer Shares to inform themselves about, and to observe, any such restrictions. This Prospectus does not constitute an offer of, or an invitation to subscribe or purchase, any of the Offer Shares in any jurisdiction in which such offer or subscription or purchase would be unlawful. No one has taken any action that would permit a public offering of the Shares, the Subscription Rights or the Offer Shares to occur outside of Norway. Furthermore, the restrictions and limitations listed and described herein are not exhaustive, and other restrictions and limitations in relation to the Listing, the Subsequent Offering and/or the Prospectus that are not known or identified by the Company and the Managers at the date of this Prospectus may apply in various jurisdictions as they relate to the Prospectus. For other selling and transfer restrictions, see section 14 Restrictions on sale and transfer of this Prospectus. This Prospectus and the securities covered by the Prospectus shall be governed by, and construed in accordance with, Norwegian law. The courts of Norway, with Oslo City Court as legal venue, shall have exclusive jurisdiction to settle any dispute which may arise out of, or in connection with, this Prospectus or the securities covered by the Prospectus. iii

3 TABLE OF CONTENTS 1 SUMMARY RISK FACTORS Risks relating to the industry in which the Group operates Risks factors relating to the Group and its business Risks relating to the Group s financial situation Risks relating to the Securities RESPONSIBILITY FOR THE PROSPECTUS GENERAL INFORMATION Important investor information Presentation of financial and other information Industry and market data Cautionary note regarding forward-looking statements THE REFINANCING Background and announcement of the Refinancing Components of the Refinancing Resolutions Proceeds, expenses, and use of proceeds Advisors Interests of natural and legal persons involved Dilution THE SUBSEQUENT OFFERING Background and overview Proceeds, expenses, and use of proceeds Key dates Resolution regarding the Subsequent Offering Subscription Rights and Offer shares Subscription Period Subscription Price Subscription procedures and subscription offices Allocation Payment for the Offer Shares Financial Intermediaries Publication of information relating to the Subsequent Offering VPS registration Delivery and listing of the Offer Shares Share capital following the Subsequent Offering Transferability of the Offer Shares Dilution Shareholders rights attached to the Offer Shares MARKET OVERVIEW Introduction General industry drivers Contract drilling and rig classification Global floater fleet evolution Floater fleet by company Midwater rig supply and key market players Global midwater utilization/demand Global midwater dayrates BUSINESS AND GROUP OVERVIEW Overview Songa Offshore s object and business strategy iv

4 8.3 Business overview Corporate information History and development Legal structure of the Group QSMS HSE ( Quality, Safety Management System, Health, Safety and Environment ) policy Property, plant and equipment Research and development and patents Environmental issues Dependence on contracts and licences Material contracts Trend information and other factors that may affect the operations of Songa Offshore New products and/or services Basis for statements regarding competitive position Significant external factors BOARD OF DIRECTORS, MANAGEMENT AND EMPLOYEES Board of Directors Senior Management Loans and guarantees Conflicts of interests and other disclosures Corporate governance Employees SELECTED FINANCIAL INFORMATION General Selected condensed financial information Segment information Statutory auditors OPERATIONAL AND FINANCIAL REVIEW Comments to the financial statements Investments Working capital Significant changes in the Group s financial or trading position since 31 December Capitalization and indebtedness Capital resources Cash flows Borrowings Restrictions on use of capital Non-current assets SHARES, SHARE CAPITAL AND SHAREHOLDERS MATTERS Description of the Shares and share capital Stock exchange listing Historical development in share capital and number of Shares Major shareholders Outstanding authorisations Shareholders rights Additional rights of shareholders Limitations on the right to own and transfer Shares Dividend policy and payment of dividends General Meetings Alteration of capital Purchase of own Shares and redemption Voting rights Pre-emption rights Regulation of dividends Liability of directors v

5 12.17 Distribution of assets on liquidation Summary of certain provisions of the Company s constitutional documents Cyprus law disclosure obligations Applicable takeover bid regulations Applicable squeeze out and sell out regulations SECURITIES TRADING IN NORWAY Trading of equities and bonds Settlement Information, control and surveillance Shareholder register, the VPS and transfer of Shares Foreign investment in Norwegian shares Disclosure obligations Insider trading Takeover bids Squeeze out and sell out RESTRICTIONS ON SALE AND TRANSFER General Notices in respect of specific jurisdictions TAXATION Cyprus taxation Redomiciliation to Cyprus in 2009 Exit tax Norwegian taxation; overview ADDITIONAL INFORMATION Related party transactions Disputes Incorporation by reference Documents on display Confirmation regarding sources Statements regarding expert opinions DEFINITIONS AND GLOSSARY OF TERMS APPENDICES Appendix 1: Subscription form for the Subsequent Offering... Appendix 2: Convertible Bond Agreement... vi

6 1 SUMMARY Summaries are made up of disclosure requirements known as Elements. These Elements are numbered in sections A E (A.1 E.7). This summary contains all the Elements required to be included in a summary for this type of securities and Issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of not applicable. Section A Introduction and warnings A.1 Warning to prospective investors Prospective investors should be warned that: this summary should be read as introduction to the prospectus; any decision to invest in the securities should be based on consideration of the prospectus as a whole by the investor; where a claim relating to the information contained in the prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the prospectus before the legal proceedings are initiated; and civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus or it does not provide, when read together with the other parts of the prospectus, key information in order to aid investors when considering whether to invest in such securities. A.2 Consent to use of prospectus by financial intermediaries Not applicable. The Prospectus will not be used for subsequent resale or final placement by financial intermediaries. Section B Issuer B.1 Legal and commercial name Songa Offshore SE, being the group parent company for the companies referred to as Songa Offshore. B.2 Domicile, legal form, etc. Songa Offshore SE is a European public company limited by shares organised under the laws of the Republic of Cyprus, with registration number SE 9. 1

7 B.3 Nature of operations and activities Songa Offshore is a group of companies whose principal business is to construct, own and operate offshore drilling rigs to be used in the exploration and production of hydrocarbons. Songa Offshore owns seven semisubmersible drilling rigs whereof one, Songa Enabler, is in transit from the yard in Korea and is scheduled to arrive in Norway in July Upon arrival in Norway, Songa Enabler will carry out the same acceptance tests as Songa Equinox, Songa Endurance, and Songa Encourage and it is expected to commence drilling operation in August Songa Dee and Songa Delta are contracted with Statoil to September and November 2016 respectively for work on the Norwegian Continental Shelf, while Songa Equinox, Songa Endurance, Songa Encourage and Songa Enabler are each contracted on long term drilling contracts with Statoil, also on the Norwegian Continental Shelf. The operating rigs have as per 31 December 2015 an aggregate contract backlog of approximately USD 5.4 billion, with options corresponding to approximately USD 7.6 billion. Songa Trym is stacked closed to Bergen, Norway. B.4a Trends Growth and demand within the offshore oil and gas services industry are affected by the following key factors: i. Oil and gas prices and demand: Oil and gas E&P spending is the key driver of demand in the oil and gas services industry. E&P spending is directly linked to the earnings of oil and gas companies which are, in turn, dependent on average oil and gas prices. Volatility in oil prices can therefore reduce the ability of oil and gas companies to budget for increased E&P spending. ii. Reserve replacements: The future production capacity of the oil and gas industry depends on the ability of oil and gas companies to maintain a sustainable reserve replacement ratio through the discovery and development of new reservoirs or improvements in oil recovery techniques. iii. Emphasis on E&P spending: Cumulative world energy sector capital investments are predicted to be USD 68 trillion from 2015 to 2040, and 37% of this is predicted to come in oil and gas supply. Average annual investments for all sectors are 6% lower than estimated by IEA at the end of 2014, and this is largely driven by the drop in investment costs in the oil and gas sector. IEA s Upstream Investment Cost Index has fallen by 13% in 2015 compared to 2014, but investment cuts will take some time to show up as lower production. IEA also predicts that there will be a clear shift towards reliance on OPEC countries to fuel oil production growth 2

8 the next years. About 75% of total investments in oil and natural gas will be in the upstream sector, and more than 80% of this is required to compensate for declining output from fields that are currently producing (IEA, World Energy Outlook 2015, November 2015). iv. Drilling technology and innovation: Recent advances in offshore technology have improved the ability of oil and gas companies to develop reservoirs in deeper waters, and in harsh and more remote locations. v. General political and economic environment: Changes in the political, economic and regulatory environment across regions affect global demand for oil services. The political and regulatory regimes of a country also have a significant impact on the level of oil and gas extraction activity within its territory. Changes in tax rules could also alter the profitability of certain projects and accordingly, E&P spending. vi. Increased focus on QHSE: Due to the potentially serious consequences of an accident within the offshore oil and gas industry, the industry has developed high standards to mitigate risks associated with QHSE. The midwater segment has had stable utilization at around 90% the last 10 years, before falling below to 90 % in April 2015 and to 70% in March In historical down-cycles, utilization rates decreased to approximately 75%, falling as low as 60% in the 1980s due to the increase in the supply of drilling units in the previous years. The current order book for newbuild midwater floaters consists of four units, compared to 52 midwater rigs delivered in the years 1980 to It is estimated that four midwater rigs are currently cold-stacked while five are hot or warm-stacked, further reducing the marketable supply of the midwater rigs. Many midwater rigs that are currently in operation were built in the 1980s building cycle. These rigs will likely require extensive yard stays for repairs and upgrades to continue drilling in increasingly regulated markets going forward. According to Norwegian Petroleum, cooperation between Ministry of Petroleum and Energy and the Norwegian Petroleum Directorate, new commercially viable discoveries will be necessary to ensure the continuation of regular activities in the time ahead. This means maintain exploration activities at high level. However, utilization rates are expected to remain under pressure in the near to medium term, but the combination of fleet reduction as an increasing number of rigs are cold stacked and operators cost cutting having resulted in a significant portfolio of potential field 3

9 development projects with break-even oil prices in the low 30s to high 40s USD per barrel band should eventually lead to improved utilization. According to the CEO of Petoro, manager of the Norwegian Government s oil and gas licenses on the NCS, they are aware that the most significant part of the cost improvement on the NCS comes from lowered margins form suppliers. In their portfolio of 34 fields, they have identified a number of measures that can improve extraction and thereby increase the reserves in these fields, including long-term field development solutions, drilling more wells per year and more efficient drilling (Petoro Annual Report 2015). The North Sea region is still the largest offshore market in the world and activity will increase going forward. The Norwegian parliament has opened most of the North Sea, the Norwegian Sea and the Barents Sea South and Southeast for petroleum activities. Including the anticipation of opening previously closed areas for exploration (e.g. Arctic Ocean and Northern Norwegian Sea); high utilization rates are expected in the longer-term. B.5 Group description Songa Offshore SE is the group parent company for the companies referred to as Songa Offshore. The Group has active subsidiaries incorporated in Cyprus, Norway, the United Kingdom, Singapore, and Malaysia, as well as branches in Bermuda and Norway. The Group is headquartered in Limassol, Cyprus. The rig operations are managed from the Group s office in Stavanger, Stjørdal and Bergen, Norway. The Group, currently, has also presence in Bermuda, Okpo, Oslo, Singapore and Aberdeen. The Company is in the process of centralizing its support functions out of Norway and hence will close the offices in Korea and Aberdeen by the end of B.6 Persons with notifiable interest As of the date of this Prospectus, Songa Offshore has been notified of the following persons with notifiable interest: Perestroika AS, a company controlled by Mr. Frederik W. Mohn, which holds (together with related parties) a total of 438,801,222 Ordinary Shares and 4,012,351,103 Class A Shares, which corresponds to an ownership of 47.7%. In addition, Perestroika AS holds right to acquire 3,702,900,039 Shares in the Company through the New Convertible Bonds and Warrants, as latest notified on 21 April 2016; ARCM Master Fund II Ltd. holds 19,583,185 Ordinary Shares and 1,917,237,264 Class A Shares in the 4

10 Company, which will represent 18.00% of the total number of Shares and votes outstanding after completion of the Subsequent Offering. ARCM Distressed Energy Opportunities Master Fund Ltd. holds 140,970,312 Class A Shares in the Company, which will represent 1.31% of the total number of Shares and votes outstanding. In aggregate, ARCM Master Fund II Ltd. and ARCM Distressed Energy Opportunities Master Fund Ltd. hold 19,583,185 Ordinary Shares and 2,058,207,576 Class A Shares in the Company, which will represent 19.31% of the total number of Shares and votes outstanding after the Subsequent Offering (The percentages have been calculated on the basis of there being a total of 873,912,544 Ordinary Shares and 8,466,839,157 Class A Shares currently outstanding in the Company and that the Subsequent Offering will be fully subscribed); Upon completion of the Refinancing, York Credit Opportunities Master Fund, L.P. York Credit Opportunities Fund, L.P. and the York European Opportunities Investments Master Fund, L.P., all funds being managed by York Capital Management Global Advisors, LLC, received in aggregate 676,982,592 new Class A Shares in the Company, corresponding to 7.25% of the outstanding Shares and votes in the Company after the Refinancing. None of the funds holds individually 5% or more of the Shares or votes in the Company (the percentages have been calculated on the basis of a total of 873,912,544 Ordinary Shares and 8,466,839,157 Class A Shares being outstanding in the Company after completion of the refinancing). B.7 Selected historical key financial information The following financial information has been extracted from the audited consolidated financial statements as at and for the years ended 31 December 2015, 2014 and 2013, incorporated by reference to the Prospectus. The selected financial information presented below should be read in conjunction with the financial statements incorporated by reference to the Prospectus. (in USD millions) 2015 Year ended 31 December (audited) (audited) (audited) Statement of comprehensive income Total revenues EBITDA

11 EBIT (366) 17 (19) Profit / loss for the period (470) (57) (159) Statement of financial position Total non-current assets 2,955 1,974 1,695 Total current assets Total assets 3,250 2,306 2,439 Total equity 573 1,036 1,081 Non-current liabilities 2, Current liabilities Total equity and liabilities 3,250 2,306 2,439 Statement of cash flows Operating activities, net Investing activities, net (1,649) (126) 367 Financing activities, net 1,374 (113) (19) Net change in cash and equivalents (131) (197) 394 Cash and equivalents at period end, excluding restricted cash Significant subsequent Since 31 December 2015, Songa Offshore has completed a changes comprehensive refinancing under which it has raised USD 125 million through the New Convertible Bond and also intends to raise up to USD 25 million at NOK 0.15 per share through the Subsequent Offering. The New Convertible Bond was partly underwritten by way of a USD 91.5 million bridge financing subscribed for in full by the largest stakeholders in the Company. The refinancing further includes a full conversion to equity of SONG06 in an amount of USD 150 million at NOK per share, significant interest reductions, maturity extensions and other amendments to SONG 04, SONG 05 and the Perestroika Shareholder Loan, as well as amendments to the Company s secured debt facilities. Covenants have been partially suspended and amended, providing the Company with increased financial headroom in the years ahead. Events under the ordinary course of business have not given significant changes to Songa Offshore s financial condition and operating result since the end of the last reporting period. B.8 B.9 Pro forma financial information Profit forecasts Not applicable, the Prospectus does not contain pro forma financial information. Not applicable, the Prospectus does not contain profit forecasts or estimates. 6

12 B.10 Auditor qualifications No qualifications were expressed by auditors in respect of the accounts for 2015, 2014, or B.11 Working capital statement The Company is of the opinion that the working capital of the Company is sufficient for the Group's present requirements in a twelve months perspective as from the date of this Prospectus B.17 Credit ratings Not applicable. There have not been any credit ratings assigned to the Company or its debt securities at the request or with cooperation of the Company. Section C Securities C.1 Type and class of securities offered and admitted to trading Ordinary Shares of the Company with ISIN CY , Class B Shares with ISIN CY and New Convertible Bonds with ISIN NO Please see element C.3 for information on the interim separate share classes of the Company. C.2 Currency of the securities issue The currency for the Offer Shares is Norwegian Kroner (NOK). The currency for the New Convertible Bonds is United States Dollars (USD). The Shares are denominated in EUR. C.3 Number of shares and par value The Company's issued share capital consists of 9,340,751,701 Shares, of which 873,912,544 are Ordinary Shares of nominal value EUR 0.11 and 8,466,839,157 are Class A Shares of nominal value EUR The Class B Shares which are expected to be issued on an interim basis in connection with the Subsequent Offering will have a nominal value of EUR As resolved by the extraordinary general meeting on 13 April 2016, the Company is in the process of carrying out a share capital reduction, whereby the nominal value of the Ordinary Shares will be reduced to EUR and the Class A Shares and Class B Shares be converted to Ordinary Shares. C.4 Rights attached to the Shares The Shares carry voting rights and the right to receipt of dividends when such are declared. The holders of the Shares also have a right to share in any surplus assets available for distribution in a winding up of the Company. Besides being subject to automatic conversion to Ordinary Shares, the Class A Shares and Class B Shares there are no differences in the rights of the Shares. 7

13 C.5 Restrictions on free transferability C.6 Application for other listing The Shares and the New Convertible Bonds are freely transferable. No application has been made for the listing of any of the Company s Securities on other regulated markets than Oslo Børs. C.7 Dividend policy The Company has not paid dividends in respect of any of the three last years. The Company s current ability to pay dividends is restricted by its significant capital requirements for investment, as well as by contractual arrangements including restrictions under its different loan agreements. Over time, when and as the Company has adequate financial resources, dividends will be considered by the Board of Directors. C.8 Rights attached to the New Convertible Bonds New Convertible Bonds The New Convertible Bonds (including any interest accrued thereon) constitute subordinated unsecured obligations of Songa Offshore. The New Convertible Bonds and accrued interest shall be subordinated to the senior debt of Songa Offshore, however the New Convertible Bonds and accrued interest rank pari passu with any other subordinated debt of Songa Offshore (save for such claims which are preferred by bankruptcy, insolvency, liquidation or other similar laws of general application), and ahead of all amounts payable in respect of the Company's share capital. The New Convertible Bonds are unsecured. Each Bondholder shall be entitled to convert any or all of their New Convertible Bonds into Class B Shares, and following completion of the Capital Reduction to Ordinary Shares, at the Conversion Price at any time during the period commencing on the 40th banking day following the Settlement Date and ending on the later of (i) the tenth (10th) Banking Day prior to the 6 th anniversary of the resolution by the Company's general meeting or board meeting (as applicable) to issue the New Convertible Bonds, and (ii) if a subsequent general meeting of the Company has extended or authorised such extensions, until the tenth (10) Banking Day prior to the Maturity Date (the Conversion Prolongation ). C.9 Terms of the New Convertible Bonds Please see Element C.8 for rights attached to the New Convertible Bonds. Coupon rate: 2.00% p.a. payable in cash semi-annually in arrears. Settlement date: 20 April

14 Maturity date: 20 April 2022 (6 years after the Settlement Date). Amortisation: The Bonds shall be repaid in full at the Maturity Date at 100% of par value (plus accrued and unpaid interests on the redeemed amount), if not previously converted, redeemed or purchased and cancelled. First interest payment date: 20 September 2016 (6 months after the Settlement Date). Last interest payment date: 20 April 2022 (6 years after the Settlement Date). Yield: The current yield/coupon rate is 2.00% p.a. Bondholders representatives: Nordic Trustee ASA. C.10 Derivative component related to the New Convertible Bonds C.11 Admission to trading of the New Convertible Bonds Not applicable, the New Convertible Bonds does not have a derivative component in the interest payment. The Company will apply for the New Convertible Bonds to be admitted to trading on the Oslo Stock Exchange. Section D Risks D.1 Key risks specific to the issuer or its industry Prospective investors should consider, among other factors, the following risks relating to the market in which Songa Offshore operates: Potential volatility in oil and gas prices; Potential oversupply of drilling rigs in the industry or in any specific market; Reliance on a limited number of customers and third parties; Regulations that govern the operations of drilling contractors, and changes in such regulations; Market volatility. Prospective investors should consider, among other factors, the following risks related to Songa Offshore and its business: Project risk, including cost overrun risks and margin risks on contract; Insurance and uninsured risk; 9

15 Vessel operation and dependency on few core assets; Charter risks and ability to secure new profitable contracts; Mobilisation risks; Risk of accidents; Service life and technical risks, including risks of unexpected repair costs; Dependency on key personnel for operations and profitability; Risks relating to Songa Offshore s financial situation, including the significant amount of third party indebtedness, exposure for financial covenants, availability of long term funding, and risks caused by high leverage; Potential fluctuation in value of drilling rigs and in market rates; Redomiciliation to Cyprus in 2009, and risk of being charged with exit tax in Norway; Risk related to the unsuccessful possible outcome of the DSME litigation. D.3 Key risks specific to the securities Prospective investors should consider, among other factors, the following risks related to the Securities described herein: The market price of the Securities of Songa Offshore may fluctuate significantly in response to a number of factors; Future sales of Securities by Songa Offshore s major shareholders or by any of the primary insiders may depress the price of the Securities; Risks of potential conflicts of interest between Songa Offshore and Perestroika as its largest shareholder; Large holding by Perestroika may have negative impact on trading liquidity for other holders; Holders registered under nominee may not be able to exercise all of their shareholder rights, including voting rights; Shareholders not participating in the Subsequent Offering and other potential future issues may be diluted; There may be limitations on the ability for investors to 10

16 make claim against Songa Offshore; Investors outside Norway bear an additional currency exchange risk on the Shares; Holders of the New Convertible Bonds bear an additional risk of fluctuation in the price of Songa Offshore s Shares; The New Convertible Bonds are subordinated to all senior indebtedness of Songa Offshore. Section E Offer E.1 Proceeds and expenses The offer being made by means of this Prospectus, referred to as the Subsequent Offering, will, if fully subscribed, give gross proceeds of NOK (USD 25 million). The fees and expenses related to the Subsequent Offering are expected to be approximately NOK 8.5 million (USD 1 million) which will be borne by the Company, thereby giving net proceeds of approximately NOK million (USD 24 million). E.2a Reasons for the offer and use of proceeds On 15 March 2016, the Company announced its plans for the Refinancing by way of raising the New Convertible Bond and a Subsequent Offering of up to USD 25 million, together with amendments in the Company's bank and bond agreements. The Refinancing, the New Convertible Bond and the Subsequent Offering were inter alia conditional and subject to resolutions by an extraordinary general meeting of the Company which was held on 13 April The proceeds from the Subsequent Offering will, together with the proceeds from the Convertible Bond, be used to strengthen the Company s liquidity position. E.2b Reason for the offer and use of proceeds Please see Element E.2a. E.3 Terms and conditions The following key terms and conditions apply to the Subsequent Offering, being the share offer being made by means of this Prospectus: Offer Shares: Up to 1,418,000,000 new Class B Shares (to be converted to Ordinary Shares) of Songa Offshore SE Subscription Price: NOK 0.15 per Offer Shares Subscription period: 30 May June 2016, both dates inclusive. Eligible subscribers: The existing shareholders of the Company on 13 April 2016, as registered in the Norwegian 11

17 Central Securities Depository (the VPS ) on 15 April 2016 (the Record Date ), and who are not resident in a jurisdiction where such offering would be unlawful, or would (in jurisdictions other than Norway) require any prospectus filing, registration or similar action, are being granted nontransferable subscription rights that, subject to applicable law, provide the right to subscribe for and be allocated Offer Shares at the Subscription Price. Payment and delivery: Expected to take place on or about 17 June and 23 June The subscribed Offer Shares are expected to be issued as Class B Shares on an interim basis and will following the Capital Reduction be converted into Ordinary Shares and become tradeable on Oslo Børs under the trading symbol SONG. The Class B Shares will be sought listed separately on Oslo Børs pending conversion. The Subsequent Offering is conditional upon the Offer Shares being listed (either as Ordinary Shares or Class B Shares) upon or immediately after the Delivery Date. E.4 Material interests and conflict The Managers and their affiliates may have interests in the Refinancing as they have provided from time to time, and may in the future provide, investment and commercial services to the Company and its affiliates in the ordinary course of their respective businesses, for which they may have received and may continue to receive customary fees and commissions. The Managers, their employees and any affiliate may currently own existing Shares and Convertible Bonds in the Company. The Managers received a commission in connection with the Refinancing and, as such, have an interest in the Refinancing. E.5 Selling shareholders and lock-up Not applicable. There are no selling shareholders or lock-up arrangements in connection with the Subsequent Offering. E.6 Dilution effects As a consequence of the issuance of the Equity Compensation Shares and Bond Conversion Shares, the Shareholders who did not receive such Class A Shares were diluted 90.6% (does not take into account any received Warrants). Shareholders who do not participate in the Subsequent Offering will be subject to a direct dilution of their ownership by approximately 13.2%. E.7 Expenses charged to the investor No expenses will be charged to the investor by Songa Offshore in connection with the Subsequent Offering. 12

18 2 RISK FACTORS Investing in the Shares, including the Offer Shares, the Bond Conversion Shares and Equity Compensation Shares, the New Convertible Bonds, or other financial instruments issued by the Company (together, the Securities ) involves inherent risks. Before deciding whether or not to invest in the Securities, a prospective investor should consider carefully all of the information set forth in this Prospectus, and in particular, the specific risk factors set out below. An investment in the Securities 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, without notice. If any of the risks described below materialize, individually or together with other circumstances, they may have a material adverse effect on the Group s business, revenues, financial condition, results of operations and/or cash flow, which may cause a decline in the value and trading price of the Securities as well as impairing the Company's ability to meet its obligations (including the payment of principal and interest) under the Convertible Bonds and other financial indebtedness of the Company and which could result in a loss of all or part of any investment in the Securities. The order in which the risks are presented below is not intended to provide an indication of the likelihood of their occurrence nor of their severity or significance. 2.1 Risks relating to the industry in which the Group operates Oil and gas prices The profitability and cash flow of the Group s operations depends upon the reaction of the Group's clients to the market price of oil and gas, which in turn is affected by numerous factors beyond the Group s control, including, but not limited to, worldwide economic and political conditions, levels of supply and demand, the policies of OPEC (the Organization of Petroleum Exporting Countries), advances in exploration and development technology, and the availability and exploitation of alternate fuel sources. A substantial or prolonged decrease in oil prices could cause a delay or depress exploration, development and production activity, which could lead to a lower utilization of rigs. Each of these factors could have a material adverse effect on the Group s results of operations and profitability Oversupply of drilling units in the industry The supply of drilling units in the industry is affected by, inter alia, assessments of the demand for these units by oil and gas clients and drilling contracting companies. Any over-estimation of demand for drilling units may result in an excess supply of new drilling units. During prior periods of high utilization and day rates, industry participants have increased the supply of rigs by ordering the construction of new units on speculation, i.e. without contracts. This has, from time to time, created an oversupply of rigs and has caused a decline in utilization and day rates when the rigs enter the market, sometimes for extended periods of time as rigs have been absorbed into the active fleet. The offshore drilling industry is highly competitive with numerous industry participants. Drilling contracts are traditionally awarded on a competitive bid basis, where intense price competition is one of the primary factors, together with the quality and technical capability of service and equipment. The entry into service of newly constructed, upgraded or reactivated units will increase marketed supply and could reduce, or curtail a strengthening of, day rates in the affected markets. In addition, the new construction of high specification rigs, as well as changes in the drilling rig fleets of the Group s competitors, could require the Group to make material additional capital investments to keep its rig fleet competitive. Excess supply could result, when existing contracts 13

19 expire or are otherwise terminated, in lower contract rates, which could have a material adverse effect on the business and results of operations of the Group Reliance on customers and third parties The Group has a strong dependency on Statoil. Statoil currently accounts for all the consolidated operating revenues of the Group, and also represents all current contract revenue backlog of the Group. While it is expected that Statoil will continue to be a significant customer going forward, there can be no assurance that this will be the case, and a discontinuation of the cooperation with the major customer could have a material adverse effect on the Group s financial position and future prospects. The Group relies on third parties to perform certain services for the operation of the drilling units, including maintenance and catering services and has significant agreements in place in that respect. A failure by one or more of these third parties to satisfactorily provide, on a timely basis, the agreed upon services may have an adverse impact on the Group s ability to perform its obligations under drilling contracts Market volatility The world s principal financial markets have experienced extreme volatility and disruption for several years, due in large part to the turmoil affecting the liquidity of the banking system and the market reaction thereto. These adverse market conditions have led to, and could lead to further, significant trading losses and write-downs by banks and other financial institutions. It is unclear whether the severity of the downturn in the global financial markets and/or economic conditions will continue to worsen, or when conditions might improve. It is difficult for the Group to predict what the impact of continued market turbulence will be on the Group from a general business perspective or from a capital or liquidity perspective. The credit crisis adversely affected lenders globally. Any future credit crisis or deterioration of the credit markets could affect lenders participating in the Group s credit facilities, making them unable to fulfill their commitments and obligations to the Group. Any reductions in drilling activity owing to such conditions or failure by the Group s customers, suppliers or lenders to meet their contractual obligations to the Group could adversely affect its financial position, results of operations and/or cash flows. 2.2 Risks factors relating to the Group and its business Project risk It is customary in the drilling industry where the Group operates that all contracts are charter related, e.g. structured as time charters 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 work scope. Such instances include mobilization and demobilization 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 Group s corporate policy is to seek to mitigate project risk at all times by having a strict policy on termination risk, breakdown risk, off-hire situations, force majeure risk etc. However, there can be made no assurance that the Group will be able to sufficiently mitigate these project risks and any such risk could negatively affect the financial position and results of operations of the Group. 14

20 2.2.2 Insurance and uninsured risk Operational risks can inter alia cause personal injury, the loss of a unit, operational disruption, off hire and termination of contract. In order to mitigate these risks, the 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. In 2014, the Group decided to extend its insurance program with loss off hire insurance, as part of a reduction of the overall risk profile of the Company. Insurance policies and contractual rights to indemnity may not adequately cover losses, and the Group does not have insurance coverage or rights to indemnity for all risks that could result from drilling operations. The Group coverage includes annual aggregate policy limits. If a significant accident or other event occurs that is not fully covered by the insurance or an enforceable or recoverable indemnity from a client, the occurrence could adversely affect the Group s financial position, results of operations or cash flows. Pollution and environmental risks generally are not fully insurable. The Group s insurance policies and contractual rights to indemnity may not adequately cover the Group s losses, or may have exclusions of coverage for some losses. The Group does not have insurance coverage or rights to indemnity for all risks, including, among other things, liability risk for certain amounts of excess coverage and certain physical damage risk. If a significant accident or other event occurs which is not fully covered by insurance or contractual indemnity, it could adversely affect the financial position, results of operations and cash flows of the Group Rig operation The Group has a limited number of rigs and is vulnerable in the event of a loss of revenue from any of these rigs. The Group s fleet is exposed to operational risks associated with offshore operations such as breakdown, bad weather, technical problems, force majeure situations (e.g. nationwide strikes), collisions, grounding and similar events, which may have a material adverse effect on the earnings and value of the Group. The drilling fleet of the Group is heavily concentrated in the semi-submersible rig market. If demand for semi-submersible rigs were to decline relative to demand for other drilling rig types, the operating results of the Group could be adversely affected. Moreover, as the Group s fleet is configured to operate in the midwater segment, a reduction in demand for mid-water drilling would have an adverse effect on the Group. It would also be adversely affected by a reduction in demand for deepwater drilling, as some rigs configured for the deep-water segment (typically those equipped with mooring systems) can also operate in the midwater segment, thereby increasing the number of rigs operating in the midwater segment. Without considering the Cat D rigs, which are high specifications semi-submersible, some of the Group s competitors have semi-submersible rigs with generally higher specifications than those in the current legacy fleet of the Group. While the Group does not believe that all higher specification rigs are suited to the midwater segment of the drilling industry, particularly during market downturns when there is decreased rig demand, some higher specification rigs may be more likely to compete with the Group s legacy fleet rigs in obtaining drilling contracts in the segment in which the Group operates. In addition, higher specification rigs may be more adaptable to different operating conditions and have greater flexibility to move to areas of demand in response to changes in market conditions. Furthermore, in recent years, an increasing amount of exploration and production expenditures have been concentrated in deeper water drilling programs and deeper formations, thereby requiring higher specification rigs. This trend is expected to continue and could result in a material decline in demand for the lower specification rigs in the Group s fleet. 15

21 2.2.4 Charter risks The Group provides its services on the basis of drilling contracts that are awarded through competitive bidding or to a lesser extent through direct negotiations with oil companies. The Group s financial condition, operating results and cash flows could be adversely affected by early termination of contracts, contract renegotiations or cessation of day rates under any of the foregoing circumstances. The drilling contracts for each of the Company's Cat D rigs stipulate that Statoil as client is entitled to shorten the duration of the drilling contracts by the same amount of time that the rigs have been delayed, relative to a pre-agreed delivery window. In this respect, as reported on 15 March 2016, Songa Offshore has received notice that Statoil has exercised its contractual rights to reduce the contract lengths on the Songa Equinox by 347 days and on the Songa Endurance by 184 days. Songa Encourage and Songa Enabler are scheduled to commence their drilling contracts in April 2016 and August 2016, each approximately four months after their respective pre-agreed delivery windows. The aggregate contract backlog for the four Cat D rigs, adjusted for the received notice described above, is estimated to be in excess of 30.5 rig years or USD 5.1 billion as of 31 March2016, excluding options. The Group s rigs are contracted to one customer, and a discontinued cooperation between the Group and the customer could lead to a termination of most, or all, charter agreements. The ability of the Group to renew contracts or obtain new contracts and the terms of any such contracts will depend, among other things, on market conditions, the specifications, suitability and deployment potential of its rigs, and the contractual terms, including dayrates, that the Group agrees to operate under. The Group may be unable to renew expiring contracts or obtain new contracts for its rigs once such contracts have expired or been terminated, and the dayrates under any new contracts may be substantially below existing dayrates, which could materially reduce the revenues and profitability of the Group. The Company can provide no assurance that the Group will be able to perform under its contracts due to events beyond its control or that the Group will be able to ultimately execute a definitive agreement in cases where one does not currently exist. In addition, the Group can provide no assurance that its customers will be able to or willing to fulfill their contractual commitments to the Group. The Group can provide no assurance that the contracts included in the contract revenue backlog will generate the specified revenues or that the specified revenues will in fact be generated during the periods indicated. The Group s financial condition, operating results and cash flows could be materially adversely affected by early termination of contracts, contract renegotiations or cessation of dayrates under any of the foregoing circumstances DSME litigation The Group was awarded four marine drilling contracts with Statoil for the Cat D rigs, which were constructed by Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME) in Korea. The construction contracts were entered into on a turnkey basis where DSME accepted full design responsibility, and on a back-to-back basis with respect to the specifications outlined by Statoil. As previously reported, DSME has experienced significant delays and cost overruns during the Cat D project and has initiated arbitration in respect of the construction contracts for the Cat D rigs. DSME has delivered claim submissions related to Songa Equinox and Songa Endurance, the two first Cat D rigs, in which DSME asserts aggregate claims of USD 373 million, including liquidated damages of USD 44 million. The claim asserted relates to alleged cost overruns and additional work in relation to Songa Equinox and Songa Endurance due to what DSME alleges were inherent errors and omissions in the design documents (as often referred to as the FEED package). On 18 March 2016 Songa Offshore submitted its defence in the arbitrations. Along with its defence, Songa 16

22 Offshore submitted counterclaims in respect of the two rigs for the aggregate amount of USD 65.8 million, by means of which Songa Offshore intends to recover damages caused by the default of DSME. The Company remains confident of its position and is of the view that any attempt to recover cost overruns is of no merit due to the "turn-key" nature of the construction contract. However, there can be no assurance as to the ultimate outcome of the litigation, which if adversely determined - could have a material adverse impact on the financial position and/or results of operations of the Group Mobilization risk Mobilization of rigs involves a number of risks which can cause damage to the rigs and/or result in delays in start-up. The Company's rigs could be subject to capsizing, sinking, grounding, collision, damage from severe weather and marine life infestations. In addition regulatory approval in Norway and acceptance testing could result in delays. The Company will also be relying on third party equipment in connection with mobilization, and the quality and timeliness of such third party deliveries will often be outside the Company's control. Although at the date of this Prospectus, 3 out of 4 of the Company s new builds have completed their mobilization, there can be no assurances in respect of the risks referred above, which if occur could have a material adverse impact on the financial position and/or results of operations of the Group Risk of accidents Offshore drilling units may work in harsh environments. The Group s operations are subject to the usual hazards inherent in drilling for oil offshore, such as breakdowns of vessels, blowouts, reservoir damage, loss of production, loss of well control, punch-throughs, craterings, groundings, collisions, fires, adverse weather conditions and natural disasters such as cyclones, storms and hurricanes. The Group s operations are also subject to accidents, which could be caused by various factors, including human error, adverse weather conditions or faulty construction. The occurrence of any of these events could result in the suspension of drilling operations, damage to or destruction of the equipment involved and injury or death to rig personnel, damage to producing or potentially productive oil formations and environmental damage. Operations also may be suspended because of machinery breakdowns, abnormal drilling conditions, failure of subcontractors to perform or supply goods or services or personnel shortages. In addition, offshore drilling operators are subject to perils peculiar to marine operations, including capsizing, grounding, collision and loss or damage from severe weather. Damage to the environment could also result from its operations, particularly through oil spillage, extensive uncontrolled fires or a spill, leak or accident involving other hazardous substances that are stored on a rig. The Group may also be subject to damage claims by oil and gas companies or other parties. An accident can have a material adverse effect on the Group s financial condition, and there can be no assurance that the Group will have sufficient insurance against such losses and/or expenses. Vessel operations are further subject to potential environmental liabilities which could be substantial. Such liabilities are difficult to estimate as the scope and amount of liability would, inter alia, depend on where the vessels are operated at the time when environmental damages occur Service life and technical risk The service life of a rig and/or vessel is generally assumed to be more than 25 years, but will ultimately depend on its efficiency. There can be no assurance that the Group s drilling units will be successfully deployed for such period of time. Although the Group has four high specification midwater semi-submersible rigs, the remaining three rigs were all built in the 1970s and 1980s. The capital associated with the repair and maintenance of each rig increases with age. In addition, there may be technical and environmental risks associated with ageing rigs, including operational 17

23 problems and regulatory requirements leading to unexpectedly high operating/maintenance costs and/or lost earnings, and which may have a material adverse effect on the financial position of the Group Unexpected repair costs The timing and costs of repairs on the Group s drilling units are difficult to predict with certainty and may be substantial. Many of these expenses, such as special survey and certain repairs for normal wear and tear, are typically not covered by insurance. Large repair expenses could decrease the Group s profits. In addition, repair time may imply a loss of revenue for the Group Key personnel for operations and profitability The Group s ability to continue to attract, retain and motivate key personnel, and other senior members of the management team and experienced personnel will have an impact on the Company s operations. The competition for such employees is intense, and the loss of the services of one or more of these individuals without adequate replacements or the inability to attract new qualified personnel at a reasonable cost could have a material adverse effect. If increased competition for qualified personnel were to intensify in the future, the Group may experience increases in costs or limits on operations. 2.3 Risks relating to the Group s financial situation General financial risk The Group monitors and manages the financial risks related to the operations of the Group through internal reports and analysis. However, the Group is exposed to various risks such as market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk, and no assurances can be given that the monitoring of such risks will be adequate or sufficient The Group continues to have a significant amount of third party indebtedness As reported on 20 April 2016, the Group has completed a comprehensive refinancing as further described herein. Even though the refinancing is completed, the Group will continue to have a significant amount of third party indebtedness and there can be no assurances that the Group in the future may not become in default of the terms of such. A breach of the terms of the Group s loan agreements may cause the lenders to require repayment of the financing immediately and to enforce the security granted over substantially all of the Group s assets, including its rigs. If the Group s operating cash flows are not sufficient to meet its operating expenses and the debt payment obligations of the Group, the Group may be forced to do one or more of the following: (i) delay or reduce capital expenditures; (ii) sell certain of its assets; (iii) forego business opportunities, including acquisitions and joint ventures, and/or (iv) obtain new capital, which may be dilutive to current stakeholders The Group has exposure for financial covenants The Group s credit and borrowing facilities contain financial and other covenants. There can be no assurance that the Group will be able to meet all such covenants relating to current or future indebtedness contained in its funding agreements or that its lenders will extend waivers or amend terms to avoid any actual or anticipated breaches of such covenants. Failure to comply with its financial and other covenants may have an adverse effect on the Group s financial condition, and also potential increased financial costs, requirements for additional security or cancellation of loans. 18

24 2.3.4 Market risk and foreign currency risk USD is the functional currency of the Company and all its subsidiaries. The Group is exposed to foreign currency risks related to its operations. The Group s expenses are primarily in USD and NOK. As such, the Group s earnings are exposed to fluctuations in the foreign currency market for NOK in relation to USD. In addition, the Group is to a lesser extent exposed to the currencies of the United Kingdom (GBP) and the European currency (EUR). Major fluctuations in the foreign currency market for NOK in relation to USD, GBP or EUR could have a negative impact on the Company Interest rate risk The Group is exposed to fluctuations in interest rates for USD. The Group s interest costs on its bank loans and credit facility are subject to floating interest rate (LIBOR) plus a margin. Consequently, the Group is exposed to fluctuation in interest rates. Major fluctuations in the interest rates could have a negative impact on the Company Credit risk Due to the nature of the Group s operations, revenues and related receivables are typically concentrated amongst a relatively small customer base of international oil and gas companies. Statoil currently accounts for all the consolidated operating revenues of the Group and the Group is as such subject to credit risk related to Statoil Availability of funding The Group is dependent upon having access to long term funding. There can be no assurance that the Group may not experience net cash flow shortfalls exceeding the Group s available funding sources nor can there be any assurance that the Group will be able to raise new equity, or arrange new borrowing facilities, on favourable terms and in amounts necessary to conduct its ongoing and future operations, should this be required Borrowing and leverage To the extent income derived from assets obtained with borrowed funds exceeds the interest and other expenses that the Group will have to pay, the 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 insufficient to cover the cost of such borrowings, the net income of the Group will be less than if borrowings were not made. The Group will borrow only when it is believed that such borrowings will benefit the Group after taking into account considerations such as the costs of the borrowing and the likely returns on the assets purchased with the borrowed monies, but no assurances can be given that the Group will be successful in this respect Value of the drilling units and market rates The value of the drilling units owned by the Group may fluctuate with market conditions. A downturn in the market could have a material adverse effect on the Group s liquidity and may result in breaches of the financial covenants in its loan agreements. In such a case, sales of the Group s drilling units could be forced at prices that represent a potential loss of value Redomiciliation to Cyprus in 2009 Exit tax The Company re-domiciled from Norway to Cyprus in May 2009 and is currently involved in a dispute with the Norwegian Tax Authorities regarding exit tax as further described in section The case is expected to be heard before Oslo municipal court towards the end of Should the Company lose the case, it will be subject to a significant tax payment, that probably only partially can be offset against loss carry forwards, and such potential outcome of the case may have a material negative effect on the Company's financial position, cash flow and results. 19

25 2.4 Risks relating to the Securities The market price of the Shares may fluctuate significantly in response to a number of factors The share price of publicly traded companies can be highly volatile, and the Shares of the Company have been subject to substantial volatility. The price at which the Shares may be quoted and the price which shareholders may realise for their Shares will be influenced by a large number of factors, some specific to the Group and its operations and some which may affect the industry as a whole or stock exchange listed companies generally. These factors include those referred to in this section 2 Risk factors, as well as the Group s financial performance, stock market fluctuations and general economic conditions. Share price volatility arising from such factors may adversely affect the value of an investment in the Shares. The market price of the Shares may not reflect the underlying value of the Group s net assets. The trading price of the Shares could fluctuate significantly in response to a number of factors beyond the Group s control, including, but not limited to, quarterly variations in operating results, adverse business developments, changes in financial estimates and investment recommendations or ratings by securities analysts, or any other risk discussed herein materializing or the anticipation of such risk materializing. In recent years, the global stock markets have experienced extreme price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including in particular those with operations and results affected by the declining oil and gas prices. Those changes may occur without regard to the operating performance of these companies. The price of the Company s Shares may therefore fluctuate based upon factors that have little or nothing to do with the Group, and these fluctuations may materially affect the price of its Shares Future sales of Shares by the Company s major shareholder or any of its primary insiders may depress the price of the Shares The market price of the Shares could decline as a result of sales of a large number of Shares in the market or the perception that such sales could occur, or any sale of Shares by any of the Company s major shareholders or primary insiders from time to time. Such sales, or the possibility that such sales may occur, might also make it more difficult for the Company to issue or sell equity Securities in the future at a time and at a price it deems appropriate The Company has one major shareholder Perestroika AS will following the Refinancing, due to its shareholding in the Company, continue to be able to exercise a certain level of control over the Company and its affairs through its representation at Board level. As a shareholder controlling almost 50% of the outstanding Shares, Perestroika AS has the ability to significantly influence the outcome of matters to be resolved at the Company's general meetings, including election of members of the Board of Directors Liquidity of the Shares and the New Convertible Bonds Following the announced refinancing, Perestroika AS will continue to control a large part of the Company's share capital. Furthermore, the new Shares issued as part of the Refinancing, including the Shares into which the New Convertible Bond may be converted, will for certain periods of time as further set out in the terms of the Refinancing be Shares of new separate share classes (Class A Shares and Class B Shares). Pending conversion to Ordinary Shares, the Class A Shares will not be listed on any regulated market, the Class B Shares will be sought listed separately on Oslo Børs 20

26 pending conversion. This may limit the Shares liquidity in the trading market, which could have an adverse effect on the then prevailing market price for the Shares and the New Convertible Bonds. No liquid market currently exists for trading of the New Convertible Bonds and it is not possible to predict whether, if the New Convertible Bonds are listed on Oslo Børs, this may provide increased liquidity Shareholders may not be able to exercise their voting rights for Shares registered in a nominee account Beneficial owners of the Shares that are registered in a nominee account or otherwise through a nominee arrangement (such as through brokers, dealers or other third parties) may not be able to exercise voting rights and other shareholder rights as readily as shareholders whose Shares are registered in their own names with the VPS prior to the Company s General Meetings. The Company cannot guarantee that beneficial owners of the Shares will receive the notice for a general meeting in time to instruct their nominees to either effect a re-registration of their Shares or otherwise vote their Shares in the manner desired by such beneficial owners. Any persons that hold their Shares through a nominee arrangement, should consult with the nominee to ensure that any Shares beneficially held are voted in the manner desired by such beneficial owner Dilution Shareholders not participating in future share issues may be diluted. Should the Company decide on an issue of Securities with preferential rights for existing shareholders, such rights may not be available for shareholders in the U.S. and in any other jurisdictions where delivery of such rights may be restricted or be subject to registration filings or similar. Should such rights not be available for shareholders, these shareholders will not be able to realize any potential profits on subscription rights or preferential allocation rights, and these shareholders may be diluted as a result. The Company may in the future issue warrants and/or options to subscribe for Shares, including (without limitation) to certain advisers, employees, directors, senior management and consultants. The exercise of such warrants and/or options would result in dilution of the shareholdings of other investors. The Board of Directors has an authorisation valid until 2021 to issue and allot Shares out of the unissued authorised share capital of the Company, and the Board of Directors has been provided a general waiver of the existing shareholders' right to pre-emption in connection with such issuances Limitations on the ability to make claims against the Company The Company is a European public company limited by shares organised under the laws of the Republic of Cyprus. The Company s directors and executive officers are residents of Cyprus, Norway, France and the United Kingdom, and a substantial portion of the Group s assets are located in Cyprus and Bermuda. As a result, it may be difficult for investors in other jurisdictions to effect service of process upon the Company, its affiliates or its directors and executive officers in such other jurisdictions or to enforce judgments obtained in other jurisdictions against the Company, its affiliates or its directors and executive officers The Company s investors outside of Norway are subject to exchange rate risk The Shares are traded in NOK and any investor outside of Norway who wishes to invest in the Shares, or to sell Shares, will be subject to an exchange rate risk which may cause additional costs to the investor. 21

27 2.4.9 Bondholders will bear the risk of fluctuation in the price of the Company's Shares The market price of the New Convertible Bonds is expected to be affected by fluctuations in the market price of the Company s Shares and it is impossible to predict whether the price of the Shares will rise or fall. Any decline in the price of the Shares may have an adverse effect on the market price of the New Convertible Bonds Risk related to subordination of the New Convertible Bond The New Convertible Bonds and accrued interest thereon is subordinated to all senior indebtedness of the Company. Rights to receive payment on the New Convertible Bonds in a default situation will therefore be subject to all senior lenders first receiving due payment Market risks related to the New Convertible Bonds The New Convertible Bonds are subject to risks related to interest rates and the credit markets in general. The New Convertible Bonds carry a fixed rate. Should interest rates in similar securities in the future increase, this could result in the New Convertible Bonds being less attractive as an investment which could affect the prices of the New Convertible Bonds negatively Conversions of Class A Shares and Class B Shares The Class A Shares and Class B Shares are intended to be temporary, with the expectation that they, as further described in section 5.2.4, will be converted to Ordinary Shares following the completion of the Capital Reduction and (in the case of the Class A Shares) release of the Company's Q financial statements. As the Capital Reduction is ultimately subject to approval by Cypriot courts, there can be no assurances however that there will not be delays in the conversions or that the Capital Reduction and conversions will happen at all. Should these risks materialize, this will directly affect the ability to trade Shares on Oslo Børs for the holders of Class A Shares and Class B Shares. In the event that the Capital Reduction is not completed, the Company will seek to merge the Class B Shares (if any) with the Class A Shares, and apply for listing of the Class A Shares as a separate share class on Oslo Børs. 22

28 3 RESPONSIBILITY FOR THE PROSPECTUS The Board of Directors of Songa Offshore SE accepts responsibility for the information contained in this Prospectus. The members of the Board of Directors confirm that, after having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of their knowledge, in accordance with the facts and contains no omission likely to affect its import. Limassol, 26 May 2016 The Board of Directors of Songa Offshore SE Frederik W. Mohn (Chairperson of the Board) Johan Kr Mikkelsen (Board member) Arnaud Bobillier (Board member) Christina Ioannidou (Board member) Michael Mannering (Board member) Ronald Blakely (Board member) 23

29 4 GENERAL INFORMATION 4.1 Important investor information In making an investment decision, each investor must rely on its own examination, and analysis of, and enquiry into the Group, including the merits and risks involved. None of the Company or the Managers, or any of their respective affiliates, representatives or advisors, is making any representation to any subscriber or purchaser of Securities regarding the legality of an investment in the Securities by such subscriber or purchaser under the laws applicable to such subscriber or purchaser. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of the Securities. The information contained herein is current as of the date hereof and subject to change, completion and amendment without notice. In accordance with section 7-15 of the Norwegian Securities Trading Act, any significant new factors, material mistakes or inaccuracies relating to the information included in this Prospectus, which are capable of affecting the assessment of the securities covered by the Prospectus between the time when this Prospectus is approved and the respective listing dates of the securities covered by the Prospectus on Oslo Børs, will be included in a supplement to this Prospectus. Neither the publication nor distribution of this Prospectus, shall under any circumstances create any implication that there has been no change in the Group s affairs or that the information herein is correct as of any date subsequent to the date of this Prospectus. Unless indicated otherwise, the source of information included in this Prospectus is the Company. The contents of this Prospectus shall not be construed as legal, business or tax advice. Each reader of this Prospectus should consult its own legal, business or tax advisor as to legal, business or tax advice. If the reader is in any doubt about the contents of this Prospectus, a stockbroker, bank manager, lawyer, accountant or other professional advisor should be consulted. The Company has furnished the information in this Prospectus. The Managers make no representation or warranty, express 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 Managers. The Managers disclaim, to the fullest extent permissible by applicable law, any and all liability, whether arising in tort or contract or otherwise, which they might otherwise have in respect of this Prospectus or any such statement. In the ordinary course of their respective businesses, the Managers and certain of their respective affiliates have engaged, and may continue to engage, in investment and commercial banking transactions with the Company. 4.2 Presentation of financial and other information In this Prospectus, all references to NOK are to the lawful currency of Norway; all references to USD, are to the lawful currency of the United States of America; and all references to EUR are to the lawful currency of the members states of the European Union (the EU ) who have adopted the EUR as their sole national currency. Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly. The Group s consolidated audited financial statements as of and for the years ended 31 December 2015, 2014 and 2013 have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) and the Cyprus Companies Law, Chapter

30 The financial statements for the years ended 31 December 2015, 2014 and 2013 have been audited by PricewaterhouseCoopers Limited. The Company prepares its financial statements in USD (presentation currency). 4.3 Industry and market data In this Prospectus, the Company has used industry and market data obtained from independent industry publications, market research, and other publicly available information. While the Company has compiled, extracted and reproduced industry and market data from external sources, the Company has not independently verified the correctness of such data. Thus, the Company takes no responsibility for the correctness of such data. The Company cautions prospective investors not to place undue reliance on the above mentioned data. The Company confirms that where information has been sourced from a third party, such information has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where information sourced from third parties has been presented, the source of such information has been identified. 4.4 Cautionary note regarding forward-looking statements This Prospectus includes forward-looking statements that reflect the Company s current views with respect to future events and financial and operational performance. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms anticipates, assumes, believes, can, could, estimates, expects, forecasts, intends, may, might, plans, projects, should, will, would or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements are not historic facts. They appear in a number of places throughout this Prospectus, including sections 7, 8, 10, 11, 15 and 16, and include, among other things, statements regarding the Company s intentions, beliefs or current expectations concerning financial position, operating results, liquidity, prospects, growth, strategies and the industry in which the Group operates. Prospective investors in the Securities are cautioned that forward-looking statements are not guarantees of future performance and that the Group s actual financial position, operating results and liquidity, and the development of the industry in which the Group operates, may differ materially from those made in or suggested by the forward-looking statements contained in this Prospectus. The Company cannot guarantee that the intentions, beliefs or current expectations upon which its forward-looking statements are based will occur. By their nature, forward-looking statements involve and are subject to known and unknown risks, uncertainties and assumptions as they relate to events and depend on circumstances that may or may not occur in the future. Because of these known and unknown risks, uncertainties and assumptions, the outcome may differ materially from those set out in the forward-looking statements. Important factors that could cause those differences include, but are not limited to: the competitive nature of the business the Group operates in and the competitive pressure and changes to the competitive environment in general; earnings, cash flow, dividends and other expected financial results and conditions; the price volatility of oil and gas products; technological changes and new products and services introduced into the Group s market and industry; fluctuations of exchange rates; 25

31 changes in general economic and industry conditions; political, governmental, social, legal and regulatory changes; dependence on and changes in management and failure to retain and attract a sufficient number of skilled personnel; access to funding; legal proceedings; operating costs and other expenses; environmental and climatological conditions; consequences of mergers and acquisitions in the industry in which the Company operates, resulting in fewer but much larger and stronger competitors; acquisitions and integration of acquired businesses; and other factors described in section 2 Risk factors. Please also see section 2 Risk factors for specific risks that could affect the Group s future results and could cause results to differ materially from those expressed in the forward-looking statements. The information contained in this Prospectus, including the information set out under section 2 Risk factors, identifies additional factors that could affect the Group s financial position, operating results, liquidity and performance. Prospective investors in the Securities are urged to read all sections of this Prospectus and, in particular, section 2 Risk factors for a more complete discussion of the factors that could affect the Group s future performance and the industry in which the Group operates when considering an investment in the Company. These forward-looking statements speak only as of the date on which they are made. Save as required according to section 7-15 of the Norwegian Securities Trading Act, the Company undertakes no obligation to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or to persons acting on the Company s behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Prospectus. 26

32 5 THE REFINANCING 5.1 Background and announcement of the Refinancing On 15 March 2016, Songa Offshore announced its plans for a comprehensive refinancing (the Refinancing ) by way of raising the New Convertible Bond and the Subsequent Offering. The Refinancing further included a full conversion to equity of SONG06 (the "Existing Convertible Bond") in an amount of USD 150 million at NOK per share, significant interest reductions, maturity extensions and other amendments to SONG04, SONG05 and the Perestroika Shareholder Loan, as well as amendments to the Company's secured debt facilities. The New Convertible Bond was partly underwritten by way of a USD 91.5m bridge financing (the "Bridge Bond"), which was subscribed for in full by certain of the largest stakeholders in the Company. The Refinancing was supported by the Company's main shareholder Perestroika AS as well as qualified majorities across all three bond series at the Company's bondholder meetings on 11 April 2016 and approved by the shareholders in a general meeting on 13 April The Refinancing was mainly triggered by, a liquidity shortfall that had arisen mainly due to the negative impact of the lower than anticipated initial utilisation of Songa Equinox and Songa Endurance due to BOP (Blow-Out-Preventor) equipment failure during tests, causing revenue shortfalls in the range of USD million, generally delayed Cat D rig deliveries and consequently later cash-flow, as well as unplanned cash deposit requirements related to the drawdown on the bank financing for Songa Encourage and Songa Enabler due to fallen rig valuations in the amount of USD 41 million. A decrease in the free and available cash position to USD 96.0 million reduced the Company s ability to complete the construction and mobilization of the Cat D rigs without further injection of capital beyond the secured financing already agreed for draw-down at Songa Enabler delivery. The Bridge Bond and the Refinancing added needed liquidity and safeguarded the operations of the Company and the delivery of Songa Enabler. On 20 April 2016, the Company announced that the conditions for the Refinancing had been fulfilled and by that the various financing agreements had been amended as contemplated by the Refinancing and the Company had issued: - the New Convertible Bond by an amendment and increase of the Bridge Bond to USD million; - in total 8,466,839,157 new Class A Shares, each of nominal value EUR 0.001, of which (i) 7,347,678,915 Shares as part of a full conversion of the Existing Convertible Bond; (ii) 608,399,269 Shares, 325,889,248 Shares and 184,871,725 Shares as equity compensation for conversion of accrued interest under SONG04, SONG05 and the Perestroika Shareholder Loan, respectively; and - in total 2,141,427,856 warrants (the "Warrants") to the subscribers of the New Convertible Bonds. 5.2 Components of the Refinancing Waivers and amendment agreements with bondholders and the Perestroika Shareholder Loan 27

33 The maturity dates of SONG 04, SONG05 and the Perestroika Shareholder Loan have been amended, so that 1/3 of the current outstanding amount will mature in May 2018, December 2018 and June 2018, respectively (the "First Maturities"), with the remaining outstanding amounts to be repaid 30 months thereafter. Coupon payments are reduced to (i) 0% in the period to and including September 2016, (ii) approx. 2.5% on average in the period from and including October 2016, and (iii) 1.5% below the currently prevailing coupon rate from the respective First Maturities and until the respective final maturities. Interest accrued up to the effective date of the Refinancing was paid to holders of SONG04, SONG05 and the Perestroika Shareholder Loan in the form of 1,119,160,242 Class A Shares in the Company (the "Equity Compensation"), equivalent to approx. 6% of the pro forma fully diluted share capital. Covenants have been partially suspended and amended, providing the Company with increased headroom in the years ahead Amendment agreements with lending banks In connection with the Refinancing, covenants and other undertakings have been amended across all bank facilities, including extensions of cross currency swaps related to SONG04 and SONG05. Please refer to section 11.8 for a further description of applicable terms Conversion of the Existing Convertible Bond All outstanding amounts under the Existing Convertible Bonds have been converted into 7,347,678,915 new Class A Shares of the Company at NOK (equivalent to a conversion of 85% of par value at a price of NOK 0.15 per share) (the "Bond Conversion"). As a result of the Bond Conversion, the holders of the Existing Convertible Bonds received an equity interest in the Company post-bond Conversion, but prior to any Equity Compensation Shares, Offer Shares, exercise of Warrants or conversion of the New Convertible Bond, of approx. 89.2% Subsequent Offering The Company will conduct an equity offering of up to USD 25 million in a Subsequent Offering for the purpose of giving existing shareholders the opportunity to subscribe for new Shares of the Company. New investors are allowed to subscribe in the Subsequent Offering, but existing shareholders have preferred allocation rights. The subscription price in the Subsequent Offering is NOK The terms of the Subsequent Offering are set out in section 6 The Subsequent Offering The New Convertible Bond and Warrants General The New Convertible Bond has been issued by the Company as subordinated unsecured debt. The New Convertible Bond is denominated in USD and has a strike price of 15% above the reference price of NOK In addition, investors allocated New Convertible Bonds in the New Convertible Bond received in total 2,141,427,856 Warrants. The New Convertible Bond has a semi-annual coupon payments of 2% p.a. The Company will apply for the New Convertible Bonds to become listed and tradeable on Oslo Børs following the publication of this Prospectus. The Warrants will not be sought listed on Oslo Børs or any other regulated market. 28

34 Main terms The following overview provides a summary of the main terms applicable to the New Convertible Bonds. The full terms in respect of the New Convertible Bonds are given in the amended and restated convertible bond agreement dated 19 April 2016 (the "Bond Agreement") which is attached hereto as Appendix 2. Any terms in the below overview which is not defined herein shall have the same meaning as the definition in the Bond Agreement. Name Songa Offshore Subordinated Convertible Bonds 2016/2022 Governing law and jurisdiction Norwegian law and Norwegian courts (at the competent legal venue of Nordic Trustee ASA) Registration and registrar... The New Convertible Bonds have ISIN NO and are registered in the Norwegian Central Securities Depository (Norwegian.: Verdipapirsentralen, VPS) with Nordea Bank Norge ASA, Middelthunsgt 17, N-0368 Oslo, Norway as the registrar. Currency... The currency of the Convertible Bonds is USD. Ranking... The New Convertible Bonds (including any interest accrued thereon) constitute subordinated unsecured obligations of Songa Offshore. The New Convertible Bonds and accrued interest is subordinated to the senior debt of Songa Offshore SE, however shall rank pari passu with any other subordinated debt of Songa Offshore (save for such claims which are preferred by bankruptcy, insolvency, liquidation or other similar laws of general application), and shall rank ahead of all amounts payable in respect of the share capital of the Songa Offshore. The New Convertible Bonds are unsecured. Bondholders meetings... The bondholders meeting represents the supreme authority of the bondholders community in all matters relating to the New Convertible Bonds, and has the power to make all decisions altering the terms and conditions of the New Convertible Bonds, including, but not limited to, any reduction of principal or interest and any conversion of the Convertible Bonds into other capital classes. The authority, procedures and resolutions applicable to the bondholders meeting are further set out in clause 20 of the Bond Agreement. Right to convert into Shares... Each Bondholder is entitled to convert any or all of its Bonds into (i) Class B Shares pending completion of the Capital Reduction and (ii) Ordinary Shares following completion of the Capital Reduction, at the Conversion Price at any time during the period commencing on the 40th banking day following the Settlement Date and ending on the later of (i) the tenth (10th) Banking Day prior to the 6 th anniversary of the resolution by the Company's general meeting or board meeting (as applicable) to issue the Bonds, and (ii) if a subsequent general meeting of the Company has extended or authorised such extensions, until the tenth (10) Banking Day prior to the Maturity Date. Conversion price. USD Coupon rate 2.00% p.a. payable in cash semi-annually in arrears. Settlement date 20 April

35 Maturity date... Amortisation... Interest Payments April 2022 (6 years after the Settlement Date). The New Convertible Bonds shall be repaid in full at the Maturity Date at 100% of par value (plus accrued and unpaid interests on the redeemed amount), if not previously converted, redeemed or purchased and cancelled Interest on the New Convertible Bonds will commence to accrue on and from the Settlement Date and shall be payable in cash semi-annually in arrears on the Interest Payment Date in April and September each year. Daycount fraction for the coupon is 30/360, business day convention is unadjusted and business day is Oslo and New York. The time limit on the validity of claims to interest and repayment of principal in respect of the New Convertible Bonds is in accordance with the Norwegian Limitation Act 10 years. First interest payment date Last interest payment date 20 September 2016 (6 months after the Settlement Date). 20 April 2022 (6 years after the Settlement Date). Company's call option... The Company may, on or after the date falling two (2) years and (20) trading days after the Settlement Date, with a twenty (20) Banking Days notice period, call the remaining part of the New Convertible Bond at its par value plus accrued interest, provided that the Parity Value on each of at least twenty (20) trading days within a period of thirty (30) consecutive trading days has exceeded USD Each Bondholder may, within the exercise period, elect to exercise its Conversion Right. Yield... Bondholders representatives.. Transferability... The yield at par is 2%. The yield to maturity is the internal rate of return on the New Convertible Bonds' cash flows: the purchase price, the coupons received and the principal at maturity. Nordic Trustee ASA. The Trustee shall monitor the compliance by the Company of its obligations under the Bond Agreement and applicable laws and regulations which are relevant to the terms of the Bond Agreement, including supervision of timely and correct payment of principal or interest, arrange Bondholders' Meetings, and make the decisions and implement the measures resolved pursuant to the Bond Agreement. The New Convertible Bonds are freely transferable. Business Day Convention... Business Day Convention means that no adjustment will be made, notwithstanding the Payment Date occurs on a day that is not a Business Day, and if such date is not a Business Day, payments of interest and/or principal (as the case may be) will be made on the first following day that is a Business Day (No Adjustments of Business Day). Change of control... Upon the occurrence of a Change of Control Event, each Bondholder shall at any time during the Change of Control Exercise Period have the right, at each Bondholder's discretion to (i) require that the Company redeems all of its Bonds (a "Put Option") at a price of one hundred per cent. (100%) of Face Value plus accrued unpaid interest, or (ii) convert its Bonds Warrants The following main terms are applicable to the Warrants. 30

36 Type and class of securities... Relation to underlying securities... Legislation... Currency... Rights and procedures... Resolutions... Transferable warrants. The Warrants are registered in VPS with ISIN NO NO Each Warrant entitles the holder to, in bundles of ten (10) to subscribe and receive one (1) new Share of the Company, such Shares to be Class B Shares pending completion of the Capital Reduction and Ordinary Shares following completion of the Capital Reduction. For every bundle of ten (10) Warrants exercised, the Company shall issue ten (10) new Shares. The value of the Warrants lies in the positive difference, if any, between the market price of the Shares and the exercise price of the Warrants, or in such expected future difference. The Warrants have no value if exercised at a time when the market price of the Shares are lower than the exercise price of the Warrants, as Shares could then be acquired at a lower price in the market. Companies Law (Chapter 113 of the statutes of the Republic of Cyprus). EUR. A Warrant may, at any time during the exercise period, be exercised in whole (but not in part) and in bundles (but not any Warrant separately from a bundle), by notice to the Company served and actually received at the registered office of the Company. The notice shall be in writing signed by, or on behalf of, the holder of the Warrants in a bundle and accompanied by: a payment of, or remittance for, the aggregate exercise price in respect of all (but not less than all) of the Warrant shares to which the bundle relates (the payable sum); or an undertaking by the holder that the payable sum shall be paid or remitted within ten (10) Days of actual receipt of the notice. Shares issued upon exercise of the Warrants shall give rights in the Company as of the registration in the Company s shareholder register. The Warrants have been issued by the Board of Directors, pursuant to an authorisation granted by the general meeting of the Company on 13 April Issue date April Transferability... The Warrants are freely tradable and transferable. Expiration April Settlement procedures... Return on warrants... Withholding tax... Exercise price... Information about underlying security... The Warrants may be exercised by the holder in the period commencing on 20 April 2017 and ending on 20 April n/a. n/a. Nominal value of the Shares. Songa Offshore Ordinary Shares (ISIN CY ) or Class B Shares (ISIN CY ). Adjustment rules... In the event that the Company shall at any time prior to the Expiration, amalgamate, consolidate with or merge into another corporation, each holder shall thereafter receive, upon the exercise of its rights, the securities or property to which a holder would have been entitled upon such amalgamation, consolidation or merger had it exercised the Warrants immediately before such amalgamation, consolidation or merger and the Company will take steps in connection with such amalgamation, 31

37 consolidation or merger as may be necessary to ensure that the provisions hereof shall thereafter be applicable, as near as reasonably possible in relation to any securities or properties thereafter delivered upon the exercise of the rights hereby granted. A sale of all or substantially all of the assets of the Company for a consideration (apart from the assumption of obligations) consisting primarily of securities, shall be deemed an amalgamation, consolidation or merger for the foregoing purposes. Whilst any Warrants are outstanding, if, as a result of one or more events relating to the capital structure of the Company or any of its direct or indirect subsidiaries, the Company determines (acting reasonably) that an adjustment should be made to the Warrants so as to preserve their value, the Company shall as soon as practicable either (i) itself determine, or (ii), at its own expense, appoint an independent adviser, to determine what (if any) adjustment to the Warrants is fair and reasonable to take account thereof and the date on which such adjustment should take effect and, upon that determination, the adjustment (if any) shall be made and shall take effect in accordance with that determination. Registrar Admission to trading Nordea Bank Norge ASA, Middelthunsgt 17, N-0368 Oslo. The Warrants will not be sought listed on Oslo Børs or any other regulated market Other elements related to the Refinancing Share capital reduction and listing of the Bond Conversion Shares and Equity Compensation Shares The current nominal value of the Company's Ordinary Shares is EUR As the Existing Convertible Bond has been converted, and the New Convertible Bond and the Offer Shares was and are offered, at a conversion/subscription price of less than the current nominal value of the Company's Ordinary Shares, the Company has resolved to carry out a reduction of the nominal value of the Ordinary Shares. This reduction will be carried out as a reduction of share capital without distribution. The extraordinary general meeting on 13 April 2016 resolved that the new nominal value for the Ordinary Shares shall be EUR (the "Capital Reduction"). The process of the share capital reduction requires the approval and sanction of the District Court of Limassol and process is completed on the registration of the court order and share capital reduction by the Cyprus Registrar of Companies. Due to the required Capital Reduction and pending its completion, certain new Shares issued as part of the Refinancing (i.e. the Bond Conversion Shares and Equity Compensation Shares) were issued in a new separate share class (Class A Shares) on an interim basis, pending completion of the Capital Reduction and a subsequent conversion of all Class A Shares to Ordinary Shares of new nominal value EUR The extraordinary general meeting on 13 April 2016 also authorised issuance of Class B Shares to support exercise and conversion of the Warrants and the New Convertible Bonds. As further described in section 6.13, the Offer Shares will also be issued as Class B Shares with a nominal value of EUR on an interim basis. The Class A Shares and Class B Shares have equal rights as the Ordinary Shares (and each other). The Class A Shares are not, and will not be listed or admitted to trade on Oslo Børs or any other regulated market before conversion to Ordinary Shares. The Class B Shares will be sought listed separately on Oslo Børs pending conversion. 32

38 The Bond Conversion Shares and Equity Compensation Shares were delivered as Class A Shares to the shareholders on 20 April 2016 and will remain unlisted as a separate class of Shares until Songa Offshore has published its Q3 figures. 5.3 Resolutions The extraordinary general meeting on 13 April 2016 passed a number of resolutions to facilitate and enable the implementation of the transactions under the Refinancing. Amongst other, the general meeting approved the following: Increase of the authorised share capital: "the authorised share capital of the Company be and is hereby increased from EUR 154,093, to EUR 177,315, by the creation of 23,222,028,631 new undesignated shares, each with a nominal value of EUR 0.001, so that following the increase, the authorised share capital of the Company will be EUR 177,315, divided into (i) 1,400,845,762 ordinary shares of nominal value Euro 0.11 each, (ii) 23,222,028,631 undesignated shares of nominal value Euro each." Disapplication of pre-emption rights and approval to issue: consent is hereby given to the issue or agreement to issue of 23,222,028,631 shares, the issue of the New Convertible Bonds and issue of the Warrants of the Company, as in each case, the directors deem fit and further any pre-emption rights under Regulation 6 of the articles of association of the Company and Section 60B of the Companies Law, Cap 113, as well as any other pre-emption rights or rights of first refusal, howsoever arising, be and are hereby waived and dis-applied, for a period of 5 years from the date of this extraordinary general meeting, up to and including 13 April Power and authority to the Board of Directors of the Company to allot and issue Shares from the unissued authorized share capital until 13 April Authority to the Board of Directors of the Company to issue not more than 8,500,000,000 Shares and designate them as Class A Shares and to issue not more than 10,706,038,435 Shares and designate them as Class B Shares. Approval of a reduction of share capital: (i) the share capital of the Company be reduced by cancelling paid up nominal capital (in lieu and without cancelling any shares per se) to the extent of Euro per share on each of the 873,912,544 ordinary shares that have been issued and are fully paid up and reducing the nominal value of all such ordinary shares from Euro 0.11 each to Euro each with the corresponding effect on the authorized share capital; (ii) the entire amount of Euro 95,256, corresponding to the amount cancelled from the Company's paid up share capital (through the reduction of the nominal value of each ordinary share as aforesaid) shall be transferred and credited into the capital reduction reserve fund pursuant to section 64(1)(e) of the Companies Law, Cap Proceeds, expenses, and use of proceeds The gross proceeds of the placement of the New Convertible Bond Issue amounted to USD 125 million. Fees and expenses related to the issue of the New Convertible Bond amounts to approximately USD 2.6million which relates to fees to the Managers, whereas fees in relation to the refinancing as a whole amounts to USD 3.0 million, giving net proceeds of approximately USD million. 33

39 The net proceeds will be used to strengthen the Company s liquidity position. 5.5 Advisors ABG Sundal Collier and Swedbank were managers for the Company in connection with the Convertible Bond Issue and acted as financial advisor to the Company in the Refinancing. Advokatfirmaet Schjødt AS (Norwegian law) and Harneys Aristodemou Loizides Yiolitis LLC (Cyprus law) acted as legal advisors to the Company. Clarksons Platou Securities AS acted as an independent financial advisor to the Company and its Board of Directors. 5.6 Interests of natural and legal persons involved The Managers and their affiliates may have interests in the Refinancing as they have provided from time to time, and may in the future provide, investment and commercial services to the Company and its affiliates in the ordinary course of their respective businesses, for which they may have received and may continue to receive customary fees and commissions. The Managers, their employees and any affiliate may currently own existing Shares and New Convertible Bonds in the Company. The Managers received a commission in connection with the Refinancing and, as such, have an interest in the Refinancing. 5.7 Dilution As a consequence of the issuance of the Equity Compensation Shares and Bond Conversion Shares, the Shareholders who did not receive such Shares were diluted 90.6%. 34

40 6 THE SUBSEQUENT OFFERING 6.1 Background and overview The Company has resolved to conduct a Subsequent Offering of up to 1,418,100,000 Offer Shares at a subscription price of NOK 0.15 per Offer Share, with gross proceeds of up to NOK 212,715,000 (USD 25 million* 1 ). The intention of the Subsequent Offering is to allow all shareholders in the Company the opportunity to participate, in the equity portion of the Refinancing of the Company, as further described in section 5. The Subsequent Offering is made as a public offering of new Shares to investors in Norway with nontradable subscription rights being granted to Eligible Shareholders, being existing shareholders of the Company, as registered in VPS on the Record Date (15 April 2016), and who are not resident in a jurisdiction where such offering would be unlawful, or would (in jurisdictions other than Norway) require any prospectus filing, registration or similar action. The Subsequent Offering consists of an offer to (i) the public in Norway, (ii) professional and institutional investors outside Norway and the United States, subject to applicable exemptions from prospectus requirements (including in reliance on Regulation S under the U.S Securities Act) and (iii) investors in the United States who are "qualified institutional buyers" ("QIB") as defined in Rule 144a ("Rule 144A") under the U.S. Securities Act of The number of Subscription Rights issued to each shareholder will be rounded down to the nearest whole number of Subscription Rights. Each Subscription Right will grant the holder the right to subscribe for and be allocated one (1) Offer Share in the Subsequent Offering. Over-subscription and subscription without Subscription Rights is permitted. The Subscription Rights are non-transferable. Subscription Rights that are not used to subscribe for Offer Shares will have no value and will lapse without compensation to the holder. Completion of the Subsequent Offering is conditional upon the Offer Shares being listed on Oslo Børs upon or immediately after the Delivery Date of the Offer Shares as described in section Proceeds, expenses, and use of proceeds The gross proceeds from the Subsequent Offering will be a maximum of NOK million, (USD 25 million*). Fees and expenses related to the Subsequent Offering are expected to amount to approximately NOK 8.5 million (USD 1 million*), giving net proceeds of approximately NOK million (USD 24 million*). The Managers will receive a variable commission of maximum NOK 7.5 million (USD 0.9 million*) if all the Offer Shares are subscribed for which is included in the abovementioned NOK 8.5 million estimate. The net proceeds will be used to strengthen the Company s liquidity position. 6.3 Key dates The below timetable sets out certain key dates for the Subsequent Offering: 1 * Based on USD/NOK exchange rate of

41 Last day of trading in the Shares incl. Subscription Rights 13 April 2016 First day of trading in the Shares excl. Subscription Rights 14 April 2016 Record Date 15 April 2016 Start of Subscription Period 30 May 2016 End of Subscription Period 13 June 2016 Allocation of Offer Shares 14 June 2016 Allocation letters distributed On or about 14 June 2016 Payment Date for the Offer Shares On or about 17 June 2016 Issuance, registration in the VPS and delivery of Offer Shares On or about 23 June 2016 The above dates are indicative and subject to change. In the event that the Company has not received final approval from Oslo Børs for the listing of Class B Shares by the end of the Subscription Period, the Company reserves the right to extend the Subscription Period, however such extension will in no event exceed two weeks. In the event of an extension of the Subscription Period, other relevant dates such as the Payment Date and Delivery Date will be extended correspondingly. No action will be taken to permit a public offering of the Subscription Rights and the Offer Shares in any jurisdiction outside Norway. 6.4 Resolution regarding the Subsequent Offering The Offer Shares will be issued by the Board of Directors on the basis of the increase of authorised share capital and other authorities resolved by the extraordinary general meeting of the Company on 13 April 2016 and as further described at section 5.3 of this Prospectus. 6.5 Subscription Rights and Offer shares The Company will issue subscription rights to the Eligible Shareholders. Eligible Shareholders will receive non-transferable Subscription Rights equal to their pro rate shareholding as of the Record Date. The Company will issue non-tradable Subscription Rights per 1 (one) Ordinary Share held in the Company on the Record Date. One subscription right will grant the right to subscribe for one (1) Offer Share. The Subscription Rights will be distributed free of charge, and the recipient of Subscription Rights will not be debited any cost. The Subscription Rights will be registered in each Eligible Shareholders VPS account on or about 27 May The Subscription Price for one Offer Share is NOK No fractional Offer Shares will be issued. Fractions will not be compensated, and all fractions will be rounded down to the nearest integer that provides issue of whole numbers of said securities to each participant. The Subscription Rights will be non-transferable and hence not listed on Oslo Børs during the Subscription Period. Over-subscription and subscription without Subscription Rights is allowed. After the expiry of the Subscription Period, the Subscription Rights will be of no value and automatically lapse. Eligible Shareholders not subscribing for entitled Offer Shares will entail no rights after expiry of the Subscription Period. Subscription Rights of shareholders resident in jurisdictions where the Prospectus may not be distributed and/or with legislation that, according to the Company's assessment, prohibits or 36

42 otherwise restricts subscription for Offer Shares ( Ineligible Jurisdiction ) will initially be credited to such persons' ( Ineligible Shareholders ) VPS accounts. Such credit specifically does not constitute an offer to Ineligible Shareholders. The Company will instruct the Managers, as far as possible, to withdraw the Subscription Rights from such Ineligible Shareholder's VPS accounts. If the relevant Ineligible Shareholder by 16:30 Oslo time on 13 June 2016 documents to the Company a right to receiving the Subscription Rights withdrawn from its VPS account, the Managers will re-credit the withdrawn Subscription Rights to the VPS account of the relevant Ineligible Shareholder. 6.6 Subscription Period The Subscription Period in the Subsequent Offering will commence on 30 May 2016 and expire on 13 June 2016 at 16:30 Oslo time. The Subscription Period may only be extended as described in section 6.3, but not shortened. 6.7 Subscription Price The subscription price for one (1) Offer Share is NOK 0.15 (the Subscription Price ). The Subscribers will not incur any costs related to the subscription for, or allotment of, the Offer Shares. 6.8 Subscription procedures and subscription offices Subscriptions for Offer Shares must be made on a subscription form attached as Appendix 1 hereto (the "Subscription Form"). Subscribers who are Norwegian citizens may also subscribe for Offer Shares by following the links on and which will redirect the subscriber to the VPS online subscription system. In order to use the online subscription system, the subscriber must have, or obtain, a VPS account number. All online subscribers must verify that they are Norwegian citizens by entering their national identity number (Norwegian: personnummer ). Online subscriptions must be submitted, and accurately completed Subscription Forms must be received by the Managers by 16:30 Oslo time on 13 June Neither the Company nor the Managers may be held responsible for postal delays, unavailable fax lines, internet lines or servers or other logistical or technical problems that may result in subscriptions not being received in time or at all by the Managers. Subscription Forms received after the end of the Subscription Period and/or incomplete or incorrect Subscription Forms and any subscription that may be unlawful may be disregarded at the sole discretion of the Company and/or the Managers without notice to the subscriber. Properly completed and signed Subscription Forms may be faxed, mailed or delivered to the Managers at the address set out below (each a "Subscription Office"): ABG Sundal Collier ASA Munkedamsveien 45e, 7th floor, 0250 Oslo, Norway Mail: subscription@abgsc.no Fax: Swedbank Norge 37

43 Att: Oppgjør Aksjer Filipstad brygge 1, Pb Vika, 0115 Oslo Mail: Fax Subscriptions are binding and irrevocable, and cannot be withdrawn, cancelled or modified by the subscriber after having been received by the Managers. The subscriber is responsible for the correctness of the information filled into the Subscription Form. By signing and submitting a Subscription Form, the subscribers confirm and warrant that they have read this Prospectus and are eligible to subscribe for Offer Shares under the terms set forth herein. Except as required by applicable Prospectus requirements outside of Norway, there is no minimum subscription amount for which subscriptions in the Subsequent Offering must be made. Oversubscription (i.e. subscription for more Offer Shares than the number of Subscription Rights held by the subscriber entitles the subscriber to be allocated) and subscription without Subscription Rights is permitted. Multiple subscriptions (i.e. subscriptions on more than one Subscription Form) are allowed. Please note, however, that two separate Subscription Forms submitted by the same subscriber with the same number of Offer Shares subscribed for on both Subscription Forms will only be counted once unless otherwise explicitly stated in one of the Subscription Forms. In the case of multiple subscriptions through the VPS online subscription system or subscriptions made both on a Subscription Form and through the VPS online subscription system, all subscriptions will be counted. Subscriptions will not be treated differently based on which Subscription Office they are placed with. The Company is not aware of whether any members of the Company s Management or Board of Directors intend to subscribe for Offer Shares in the Subsequent Offering, or whether any person intends to subscribe for more than 5% of the Offer Shares, however such persons will be granted Subscription Rights in the event that they are shareholders. 6.9 Allocation Allotment of the Offer Shares is expected to take place on or about 14 June The following allocation criteria will be used for allotment of Offer Shares in the Subsequent Offering: 1. subscription made on the basis of Subscription Rights; 2. over-subscription by subscribers with Subscription Rights or subscription by subscribers without Subscription Rights, in each case at the Board of Director's discretion. The Board of Directors may focus on criteria such as (but not limited to) current ownership in the Company, timeliness of subscription, relative order size, sector knowledge, perceived investor quality and investment horizon. General information regarding the result of the Subsequent Offering is expected to be published on or about 13 June 2016 in the form of a stock exchange release through 38

44 All Subscribers being allotted Offer Shares will receive a letter from the Managers confirming the number of Offer Shares allotted to the Subscriber and the corresponding amount which will be debited the Subscriber s account. This letter is expected to be mailed on or about 14 June Investors with access to VPS Investor Services will also be able to see their allocated Offer Shares through such service Payment for the Offer Shares Overview The payment for Offer Shares allocated to a subscriber falls due on 17 June 2016 (the Payment Date ). Payment must be made in accordance with the requirements set out below Subscribers who have a Norwegian bank account Subscribers who have a Norwegian bank account must, and will by signing the Subscription Form, provide the Managers with a one-time irrevocable authorisation to debit a specified bank account with a Norwegian bank for the amount payable for the Offer Shares which are allocated to the subscriber. The specified bank account is expected to be debited on or after the Payment Date. The Managers are only authorised to debit such account once, but reserves the right to make up to three debit attempts, and the authorisation will be valid for up to seven working days after the Payment Date. The subscriber furthermore authorises the Managers to obtain confirmation from the subscriber s bank that the subscriber has the right to dispose over the specified account and that there are sufficient funds in the account to cover the payment. If there are insufficient funds in a subscriber s bank account or if for other reasons it is impossible to debit such bank account when a debit attempt is made pursuant to the authorisation from the subscriber, the subscriber s obligation to pay for the Offer Shares will be deemed overdue. If payment for the allotted Offer Shares is not received when due, the Offer Shares will not be delivered to the Subscriber, and the Board of Directors reserves the right, at the risk and cost of the Subscriber, to cancel the subscription in respect of the Offer Shares for which payment has not been made, or to sell or otherwise dispose of the Offer Shares, and hold the Subscriber liable for any loss, cost or expense suffered or incurred in connection therewith. The original Subscriber remains liable for payment of the entire amount due, including interest, costs, charges and expenses accrued, and the Managers may enforce payment of any such amount outstanding. Payment by direct debiting is a service that banks in Norway provide in cooperation. In the relationship between the subscriber and the subscriber s bank, the standard terms and conditions for Payment by Direct Debiting Securities Trading, which are set out on page 2 of the Subscription Form, will apply, provided, however, that subscribers who subscribe for an amount exceeding NOK 5 million by signing the Subscription Form provide the Managers with a one-time irrevocable authorisation to directly debit the specified bank account for the entire subscription amount Subscribers who do not have a Norwegian bank account Subscribers who do not have a Norwegian bank account must ensure that payment with cleared funds for the Offer Shares allocated to them is made on or before the Payment Date. Prior to any such payment being made, the subscriber must contact the Managers for further details and instructions. 39

45 Overdue payments Overdue and late payments will be charged with interest at the applicable rate from time to time under the Norwegian Act on Interest on Overdue Payment of 17 December 1976 No. 100, currently 8.75% per annum. If a subscriber fails to comply with the terms of payment, the Offer Shares will, subject to the restrictions in the Public Limited Companies Act and at the discretion of the Manager, not be delivered to the subscriber Financial Intermediaries Overview All persons or entities holding Shares or Subscription Rights through financial intermediaries (i.e., brokers, custodians and nominees) should read this section. All questions concerning the timeliness, validity and form of instructions to a financial intermediary in relation to the exercise of Subscription Rights should be determined by the financial intermediary in accordance with its usual customer relations procedure or as it otherwise notifies each beneficial shareholder. The Company is not liable for any action or failure to act by a financial intermediary through which Shares or Subscription Rights are held Subscription Rights If an Eligible Shareholder holds Ordinary Shares registered through a financial intermediary on the Record Date, the financial intermediary will customarily give the Eligible Shareholder details of the aggregate number of Subscription Rights to which it will be entitled. The relevant financial intermediary will customarily supply each Eligible Shareholder with this information in accordance with its usual customer relations procedures. Eligible Shareholders holding Ordinary Shares through a financial intermediary should contact the financial intermediary if they have received no information with respect to the Subsequent Offering. Ineligible Shareholders holding their Shares through a financial intermediary will not be entitled to exercise their Subscription Rights Subscription Period The time by which notification of exercise instructions for subscription of Offer Shares must validly be given to a financial intermediary may be earlier than the expiry of the Subscription Period. Such deadline will depend on the financial intermediary. Eligible Shareholders who hold their Shares through a financial intermediary should contact their financial intermediary if they are in any doubt with respect to deadlines Subscription Any shareholder who is not an Ineligible Shareholder and who holds its Subscription Rights through a financial intermediary and wishes to exercise its Subscription Rights, should instruct its financial intermediary in accordance with the instructions received from such financial intermediary. The financial intermediary will be responsible for collecting exercise instructions from the Eligible Shareholders and for informing the s of their exercise instructions. Please refer to section 14 for a description of certain restrictions and prohibitions applicable to the exercise of Subscription Rights in certain jurisdictions outside Norway Method of payment Any Eligible Shareholder who holds its Subscription Rights through a financial intermediary should pay the Subscription Price for the Offer Shares that are allocated to it in accordance with the 40

46 instructions received from the financial intermediary. The financial intermediary must pay the Subscription Price in accordance with the instructions in this Prospectus. Payment by the financial intermediary for the Offer Shares must be made to the Managers in accordance with section 6.10 Payment for the Offer Shares no later than the Payment Date. Accordingly, financial intermediaries may require payment to be provided to them prior to the Payment Date Publication of information relating to the Subsequent Offering Publication of information related to any changes in the Subsequent Offering and the amount subscribed, will be published on under the Company s ticker SONG, and will also be available on the Company s website The announcement regarding the subscribed amount is expected to be made on or about 13 June VPS registration The Offer Shares will be registered electronically in book-entry format with VPS, first on an interim basis as Class B Shares with ISIN CY and following conversion to Ordinary Shares registered under the Company's ordinary ISIN CY The Offer Shares will not be delivered to the Subscribers' VPS accounts before they are fully paid, and registered in the VPS Delivery and listing of the Offer Shares All Subscribers subscribing for Offer Shares must have a valid VPS account (established or maintained by an investment bank or Norwegian bank that is entitled to operate VPS accounts) to receive Offer Shares. Assuming that payments from all Subscribers are made when due, it is expected that the Offer Shares will be registered in the VPS and delivered on or about 23 June 2016 (the "Delivery Date"). Due to the fact that the Capital Reduction will most likely not have been completed by the time of the estimated settlement date as described above, the Offer Shares are expected to be issued in a separate share class (Class B Shares) on an interim basis and sought listed separately on Oslo Børs from upon or immediately after the expected Delivery Date and until the Capital Reduction has been completed. Following the completion of the Capital Reduction, the Offer Shares will be converted from Class B Shares to Ordinary Shares and listed and traded on Oslo Børs as Ordinary Shares. The Offer Shares will not be sought or admitted to trading on any other regulated market than Oslo Børs. The Subsequent Offering is conditional upon the Offer Shares being listed as described above (either as Class B Shares or Ordinary Shares) upon or immediately after the Delivery Date Share capital following the Subsequent Offering The final number of Offer Shares to be issued in connection with the Subsequent Offering will depend on the number of Offer Shares subscribed for. The maximum number of Offer Shares to be issued is 1,418,100,000 Offer Shares with a nominal value of EUR For further information of the Company's share capital and share classes, please refer to section Transferability of the Offer Shares The Offer Shares may not be transferred or traded before they are fully paid and the Offer Shares have been registered in the VPS. The Offer Shares are expected to be delivered to the Subscribers 41

47 VPS accounts on or about 23 June For further details on selling and transfer restrictions, please refer to section Dilution The immediate dilutive effect for the Company s shareholders who do not participate in the Subsequent Offering is approximately 13.2% Shareholders rights attached to the Offer Shares The Offer Shares will be created pursuant to the Companies Law (Chapter 113 of the statutes of the Republic of Cyprus). The rights attached to the Offer Shares will be the same as those attached to the Company s existing Shares, however they are expected to be issued as Class B Shares on an interim basis pending completion of the Capital Reduction. Following completion of this, the Offer Shares will be converted into Ordinary Shares. The Offer Shares will rank pari passu with existing Shares in all respects including the right to dividend from the time of issuance. Please see section 12 for more details regarding shareholder matters Advisors Swedbank and ABG Sundal Collier are joint lead managers and joint bookrunners for the Company in connection with the Subsequent Offering. Advokatfirmaet Schjødt AS (Norwegian law) and Harneys Aristodemou Loizides Yiolitis LLC (Cyprus law) act as legal advisors to the Company Interests of natural and legal persons involved The Managers and their affiliates may have interests in the Offer Shares as they have provided from time to time, and may in the future provide, investment and commercial services to the Company and its affiliates in the ordinary course of their respective businesses, for which they may have received and may continue to receive customary fees and commissions. The Managers, their employees and any affiliate may currently own existing Shares and New Convertible Bonds in the Company. The Managers will receive a commission in connection with the Subsequent Offering and, as such, have an interest in the Subsequent Offering. Reference is made to section above. 42

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60 8 BUSINESS AND GROUP OVERVIEW 8.1 Overview Songa Offshore is a group of companies, with Songa Offshore SE as the group parent company, whose principal business is to construct, own and operate drilling rigs to be used in the exploration and production of hydrocarbons. Songa Offshore owns seven semisubmersible drilling rigs whereof one, Songa Enabler, is in transit from the yard in Korea and is scheduled to arrive in Norway in July Upon arrival in Norway, Songa Enabler will carry out the same acceptance tests as Songa Equinox, Songa Endurance, and Songa Encourage and it is expected to commence drilling operation in August The acceptance test is a custom driven test program that includes anchor winch testing and verification of crew competency with equipment and procedures. Songa Dee and Songa Delta are contracted until September and November 2016 respectively with Statoil for work on the Norwegian Continental Shelf, while Songa Equinox, Songa Endurance, Songa Encourage and Songa Enabler are each contracted on long term drilling contracts with Statoil, also on the Norwegian Continental Shelf. The operating rigs have as per 31 December 2015 an aggregate contract backlog of approximately USD 5.4 billion, with options corresponding to approximately USD 7.6 billion. Songa Trym is stacked closed to Bergen, Norway. Songa Mercur and Songa Venus, both previously owned 100% by Songa Offshore, now owned 100% by the Opus Offshore Group, are operated in Asia through a 50% owned Joint Venture operating company established with the Opus Offshore Group. 8.2 Songa Offshore s object and business strategy As stated in the Memorandum of Association of Songa Offshore SE, its object is ownership, acquisition and operation of vessels, rigs and offshore installations, as well as other related business, and it may also acquire and own shares, securities and ownership interests in other companies. Songa Offshore has defined its vision as follows: Songa Offshore s vision is to be the preferred International Midwater Drilling Contractor with a strong presence in the harsh environment North Atlantic basin. Songa Offshore intends to accomplish this vision by: Providing safe and cost efficient operations which exceeds its customers expectations; Following its customers worldwide; Being recognised for having competent and passionate employees combined with robust systems and procedures; Working with its customers to effectively utilise value added technologies; and Offering high-quality engineering and Rental Services. 8.3 Business overview Nature of operations Songa Offshore is, and has been since its formation, primarily involved in ownership, acquisition and operations of mobile offshore drilling units. Songa Offshore refers to its business as being a 55

61 drilling contractor, a term used to signify that it provides drilling services to oil and gas companies. The term mobile offshore drilling units, which is often abbreviated as MODUs, is used to describe rigs, drillships, and other equipment used in the offshore drilling activities. Songa Offshore focuses its business on semisubmersible drilling rigs, although Songa Offshore has also in the past (from 2005 to 2010) been involved in the ownership of a drillship. Offshore drilling takes place in several geographical locations worldwide. Songa Offshore currently focuses on the Norwegian sector of the North Sea and the Norwegian Sea for all of its rigs. In the past, Songa Offshore has also had drilling operations for rigs now sold in, Australia, Malaysia, Vietnam, Angola ( ), in Cuba ( ), and in Central and North Africa ( ). Songa Offshore generates its revenues from providing drilling services. Revenues are a product of the applicable day rate and the number of days in operation. Songa Offshore s ability to generate a profit stems from the margin between such revenues and the expenses associated with the rigs, the applicable overhead expenses, depreciation, financing costs, and taxes. Typical reasons for generating no revenue or a day rate lower than the 100% operating rate would be bad weather and accordingly a lower percentage applicable day rate if the rig is not able to perform drilling operations during the circumstances, the rig performing certain other operations than drilling operations (rig move, logging operations etc), technical problems or maintenance that requires the rig to stop drilling operations for a period or periods of waiting for spares or specialist personnel that is not generally available on the rig. Most drilling rigs will during a period experience such circumstances and not regularly deliver 100% of the potential revenue. This will be taken into account when developing internal revenue projections and the Company also announces monthly Fleet Updates to inform the market in general of such developments. The costs associated with the rig operating costs might increase in periods with higher personnel costs due to substitution of personnel on sick-leave, high training, travel activity or higher than normal overtime. Operating costs might also increase in periods of higher maintenance activity, unexpected repairs or break-downs and higher than normal procurement of spares and consumables. These operating costs items might fluctuate from period to period, while for example other operating cost elements such as the crew's base salary and pension costs, shore-based warehouse costs, as well as insurance costs will trend over time. In relation to the Songa Equinox and Songa Endurance start-up issues from late December 2015 to early February 2016, this was primarily related to BOP control system design-issues and related repair. As part of the Songa Endurance Offshore Deployment Test one of the required activities was an Emergency Disconnect Sequence (EDS) to confirm the steps necessary to disconnect from the well when the EDS function is initiated. The reason to disconnect from the well quickly may include a well control event, severe weather, intrusion into the operating area due to another vessel (i.e. potential collision) etc. When the EDS function is activated the lower BOP shear rams close, the hydraulic stabs from the LMRP (Lower Marine Riser Package, or upper BOP package) are deenergized and retract and the connector that connects the lower BOP and LMRP is unlocked and the LMRP is lifted off of the lower BOP. All of this is done within 30 seconds or less. During the applicable test the hydraulic stabs from the LMRP did not completely de-energized and retract in time, and when the connector (locking the lower BOP and LMRP) unlocked and the LMRP lifted off, the hydraulics stabs were still connected to the receptacles located on the lower BOP. The receptacles were therefore pulled up with the hydraulics stab when the LMRP lifted off. For clarity the normal sequence would be for the hydraulic stabs to de-energize (unlock) from the receptacles and then retract, the LMRP would unlock from the lower BOP and lift off. 56

62 The root cause of the event is known. There was ingress of air into the hydraulic line that deenergizes the hydraulic stabs, so when the EDS was activated the hydraulic signal to de-energize the hydraulic stabs was delayed due to air in the hydraulic line. The BOP manufacturer was involved with the investigation and corrective actions, which have been carried out on all Cat D rigs. The rigs are generally crewed with Songa Offshore personnel but the Group also works with third parties to perform certain services in relation to its rigs. This includes maintenance operations and catering services where some of the main vendors and related services are: Cameron for BOP related repair and maintenance MH Wirth for drilling equipment repair and maintenance Wärtsila for engines and thruster maintenance Kongsberg for repair and maintenance of Dynamic Positioning (DP) and navigation systems Siemens for repair and maintenance of power management systems and other rig control systems and NOC for catering services Operating costs related to the rigs fuel consumption and logistic operations between the rigs and the various shore bases, are normally covered by the client Overview of rigs and contracts The Group s core asset base consists of seven semisubmersible drilling rigs. A summary of the technical details of each of these units are set out below. For a detailed overview of each rig and equipment, please refer to the Company s web site at Songa Dee Rig type: Built: Design: Semi-submersible drilling rig, winterized 1984, Mitsubishi Heavy Industries, Ltd. Mitsubishi type MD-602 enhanced Upgraded: 2004 / 2012 / 2014 Next main survey: 4Q 2019 Flag: Class: Water depth: Drilling capacity: Accommodation: Operation: Contract status: Marshall Islands DNV Class A1 Column Stabilized Unit 1,800 ft 30,000 ft sick berths Songa Offshore Norwegian Continental Shelf with Statoil on a five year contract ending September 2016 with current day rate USD 361,815 57

63 Songa Delta Rig type: Built: Design: Semi-submersible drilling rig, winterized 1981, Rauma Repola Oy, Pori Finland Modified Ocean Ranger design Upgraded: 1996, 2011, extensive upgrade completed in 2012 Next main survey: 4Q 2016 Flag: Class: Water depth: Drilling capacity: Accommodation: 100 Operation: Contract status: Norwegian DNV + 1A1 Column Stabilized Unit 2,300 ft 25,000 ft Songa Offshore Norwegian Continental Shelf with Statoil on a four year contract ending November 2016 with current day rate USD 369,454 Songa Trym Rig type: Built: Semi-submersible drilling rig, winterized 1976, Verdal/Bergen Design: Modified Aker H-3 Upgraded: Next main survey: 1Q 2018 Flag: Class: Water depth: Drilling capacity: Accommodation: Operation: Contract status: 1996, 2002, 2005, extensive upgrade completed in 2012 and 2013 Norwegian DNV Class A1 Column Stabilized Unit 1,312 ft 25,000 ft sick berths Songa Offshore The rig is stacked since 17 November 2015 and is marketed for new employment following completion of the Statoil contract 58

64 Songa Equinox Rig type: Built: Design: Upgraded: - Semi-submersible drilling rig, winterized harsh environment 2015, DSME Korea GVA 4000 NCS Next main survey: 2Q 2020 Flag: Class: Water depth: Drilling capacity: Accommodation: 130 Operation: Contract status: Norwegian 1A1 Column Stabilized Drilling unit, DP-3 1,640 ft 28,000 ft Songa Offshore The rig performs drilling services on the Troll field in Norway under its long term drilling contract with Statoil. The current day rate is USD 490,226. Songa Equinox is a winterised harsh environment semi-submersible drilling rig, built by DSME and delivered in June The rig is performing drilling services on the Troll field in Norway under its long term drilling contract with Statoil. The current day rate is USD 490,226. The day rate is subject to annual cost escalation, as well as certain adjustments as per the drilling contract. The Statoil drilling contract stipulates that the client is entitled to revise the duration of the drilling contract up to the amount of time that the rig has been delayed, relative to a pre-agreed delivery window. In this respect, Songa Offshore received in March 2016 notice that Statoil has exercised its contractual right to reduce the contract length on the Songa Equinox by 347 days. The Statoil drilling contract also included rights for Statoil to extend the drilling contract with up to 4x3 years at contract rate. Songa Endurance Rig type: Built: Design: Upgraded: - Semi-submersible drilling rig, winterized harsh environment 2015, DSME Korea GVA 4000 NCS Next main survey: 3Q 2020 Flag: Class: Water depth: Drilling capacity: Accommodation: 130 Operation: Contract status: Norwegian 1A1 Column Stabilized Drilling unit, DP-3 1,640 ft 28,000 ft Songa Offshore The rig performs drilling services on the Troll field in Norway under its long term drilling contract with Statoil. The current day rate is USD 490,226. Songa Endurance is a winterised harsh environment semi-submersible drilling rig, built by DSME and delivered in August The rig is performing drilling services on the Troll field in Norway under its long term drilling contract with Statoil. The current day rate is USD 490,226. The day rate is subject to annual cost escalation, as well as certain adjustments as per the drilling contract. The Statoil drilling contract stipulates that the client is entitled to revise the duration of the drilling 59

65 contract up to the amount of time that the rig has been delayed, relative to a pre-agreed delivery window. In this respect, Songa Offshore received in March 2016 notice that Statoil has exercised its contractual right to reduce the contract length on the Songa Endurance by 184 days. The Statoil drilling contract also included rights for Statoil to extend the drilling contract with up to 4x3 years at contract rate. Songa Encourage Rig type: Built: Design: Upgraded: - Semi-submersible drilling rig, winterized harsh environment 2015, DSME Korea GVA 4000 NCS Next main survey: 3Q 2020 Flag: Class: Water depth: Drilling capacity: Accommodation: 130 Operation: Contract status: * Based on USD/NOK exchange rate of 8.81 as per 31 December 2015 Norwegian 1A1 Column Stabilized Drilling unit, DP-3 1,640 ft 28,000 ft Songa Offshore The rig performs drilling services on the Skuld field in Norway under its long term drilling contract with Statoil. The current day rate is USD 438,474*. Songa Encourage is a winterised harsh environment semi-submersible drilling rig, built by DSME and delivered in December The rig is performing drilling services in the mid-norway area under its long term drilling contract with Statoil. The current day rate is USD 438,474*. The day rate is subject to annual cost escalation, as well as certain adjustments as per the drilling contract. Statoil has the right to extend the contract with up to 4x3 years at contract rate. Songa Enabler Rig type: Built: Design: Upgraded: - Semi-submersible drilling rig, winterized harsh environment 2016, DSME Korea GVA 4000 NCS Next main survey: 1Q 2021 Flag: Class: Water depth: Drilling capacity: Accommodation: 130 Operation: Contract status: Norwegian 1A1 Column Stabilized Drilling unit, DP-3 1,640 ft 28,000 ft Songa Offshore The rig will commence drilling services on the Snöhvit field in Norway under its long term drilling contract with Statoil. The current day rate is USD 442,562*. * Based on USD/NOK exchange rate of 8.81 as per 31 December 2015 Songa Enabler is a winterised harsh environment semi-submersible drilling rig, built by DSME and delivered in March The rig will commence drilling services on the Snöhvit field in Norway under its long term drilling contract with Statoil. Contract commencement is scheduled for August 2016 The current day rate is USD 442,562*. The day rate is subject to annual cost escalation, as 60

66 well as certain adjustments as per the drilling contract. Statoil has the right to extend the contract with up to 4x3 years at contract rate. Statoil has the option for cancellation or termination of the Cat D drilling contracts. The drilling contracts for each of the Company's Cat D rigs stipulate that Statoil as client is entitled to shorten the duration of the drilling contracts by the same amount of time that the rigs have been delayed, relative to a pre-agreed delivery window. In this respect, as reported on 15 March 2016, Songa Offshore has received notice that Statoil has exercised its contractual rights to reduce the contract lengths on the Songa Equinox by 347 days and on the Songa Endurance by 184 days. Songa Encourage and Songa Enabler are scheduled to commence their drilling contracts in April 2016 and August 2016, each approximately four months after their respective pre-agreed delivery windows. The risk of late delivery by DSME, which in turn can trigger a right of termination by the client due too late to commence the drilling contract, has now been eliminated by the actual delivery of the four Cat D rigs. Each such contract stipulates that Statoil has the right to cancel the contract at any time by giving written notice to Songa Offshore in which case Songa Offshore will be paid (i) the unpaid portion of any monies for the work performed up to the cancellation date (ii) the operating rate multiplied by the number of days from the cancellation date until either the last anchor has been bolstered or the drilling unit is ready for departure and (iii) a cancellation fee corresponding to the net present value of 100% of the capital element of the operating rate multiplied by the remaining days of the current contract period with a maximum of 8 years. Statoil also has the opportunity to terminate the Cat D drilling contracts in cases of certain events of default (for example insolvency, substantial breach of contract, the drilling unit becoming a total loss) in which case no further compensation will be paid. While the Cat D drilling rig design is a product of a cooperation between Statoil and the industry to develop the next generation rigs well suited to cover Statoil s future drilling needs, the Cat Ds will also be able to work for all other clients in the mid-water segment Offshore drilling contracts in general Songa Offshore expects its future contracts for the provision of offshore drilling services to vary in their terms and conditions. The Company may obtain drilling contracts either through competitive bidding or through direct negotiations with oil companies. Drilling contracts generally provide for a fixed day rate that is payable regardless of whether the drilling results in a successful well. Drilling contracts usually provide for lower rates for days on which the rig is in transit or drilling operations are interrupted by adverse weather conditions or other conditions beyond the Company s or the customer s control. Likewise, the Company may receive lower day rates or no day rates at all, for periods during which drilling is restricted or interrupted as a result of equipment breakdowns. Under typical drilling contracts, interruptions in drilling operations that accumulates to more than one to two days per month result in a loss of day rate, and longer interruptions (typically lasting for more than 15 to 30 consecutive days, however the Company's contracts for the Cat D rigs deviate significantly from this and have 220 consecutive days) may permit the oil company to cancel the drilling contract. The Company typically would continue to incur full operating costs during any interruptions in the operation of its rigs. Certain interruptions caused by technical breakdowns may be covered by the Company s insurance. Some day rate contracts provide for the payment of performance bonuses. Payments under day rate contracts are expected to account for the most substantial portion of the Company s revenues. As a result, it is unlikely that the Company will realize revenues from its rigs for periods during which they are not under contract or are not in use due to repairs or maintenance. Under day-rate 61

67 contracts, the Company will be responsible for all operating expenses of its rigs, including wages, supplies, insurance, repair and maintenance costs and the fees payable under rig management contracts with third parties (if any). The duration of day rate contracts generally encompasses either the drilling of a single well or group of wells or a stated calendar period (the latter being known as term contracts ). Drilling contracts may usually be terminated by the customer if the rig is destroyed or lost, if the performance of the contractor does not meet the contractual obligations, or if drilling operations are suspended for a set period of time due to a breakdown of equipment or certain events beyond the control of the parties. Drilling contracts normally contain provisions regarding early termination of the contract. Drilling contracts also normally contain provisions regarding shortening or termination of the drilling contract if the relevant drilling rig commences the contract later than agreed in the drilling contract Contract overview The table below shows the contracts for the drilling fleet. The current contracts for Songa Dee and Songa Delta expire in September and November 2016 respectively. The Company is currently making every effort to find new employment for those two rigs. Should the Company be unsuccessful in these efforts, it is expected that a decision about cold stacking will be taken during the two last months of each of the contracts. In such a case, operating costs will decline from a normal operating level through a period of four to five months of demobilization and equipment preservation, to around USD 3,000 per day, which basically will cover insurance and inspections A new contract for Songa Delta will require the Company to perform the five-year SPS, which is estimated to amount approximately USD 50 million. The Company is of the opinion that such investment will only be made if this can be repaid from revenue generated from any potential new contract Operating statistics and operating expenses The tables below set forth the operational efficiency and earnings efficiency for the drilling rigs currently owned by Songa Offshore for the respective years. 62

68 Operational efficiency is a measure to illustrate the available time that the rig is actually operating, and illustrates the time lost due to factors specific to the rig and/or its crew. Earnings efficiency is a measure to illustrate how much of the potential full day rate the rig is on earning, and will often (but not always) be lower than operating efficiency since it takes into account days used for reduced or no revenue such as yard stays, rig moves, waiting on weather etc. Operational efficiency (averages) Q Cat Ds (Equinox, Endurance) n.a. n.a. 68%* 66%* Norwegian rigs (Dee, Delta, and Trym***) 98.6% 100% 100% 100% Earnings efficiency (averages) Q Cat Ds (Equinox, Endurance) n.a. n.a. 67% 64%** Norwegian rigs (Dee, Delta, and Trym***) 96.7% 98% 97% 99% *During December 2015 and January 2016 Songa Equinox and Songa Endurance experienced BOP start-up problems. Songa Equinox achieved an operational efficiency of 46% and an earnings efficiency of 45% working for Statoil in Norway. The rig performed weather related repairs until 12 January when it returned to operations. From 22 January the rig experienced further unplanned BOP related downtime. Songa Equinox was back on operating rate on 5 February Songa Endurance achieved an operational efficiency of 11% and an earnings efficiency of 11% in the January, working for Statoil in Norway. Songa Endurance experienced BOP equipment failure while performing a final test on location the first week in January. This was repaired during January and the rig was back on operating rate on 5 February ** Cat Ds are planned to ramp up to 97% earnings efficiency from start up to six months *** When on contract. The table below sets forth the average daily operating expenses relating to the drilling rigs currently owned by Songa Offshore for the respective years. These expenses include direct costs attributable to the rigs, but do not take into account onshore costs or overheads, depreciation, financing costs, or taxes. The calculations are based on actual historical costs (including periods when rigs have been out of service with lower than normal operating expenses) divided by calendar days in each period. Operational costs (averages) Q Cat Ds (Equinox, Endurance) n.a. n.a. 125, ,000* Norwegian rigs (Dee, Delta, and Trym**) 180, , , ,000 * The Cat Ds are planned to have higher opex the first six months ** When on contract. 8.4 Corporate information Songa Offshore SE, the parent company of the Songa Offshore group of companies, is a European public company limited by shares organised under the laws of the Republic of Cyprus. Its predecessor company, Songa Offshore ASA, was incorporated on 18 April 2005 as a Norwegian public limited liability company and converted to an SE, by means of a merger between Songa Offshore ASA and Songa Offshore Cyprus Plc, on 12 December With effect from 11 May 2009, the survivor of the merger, renamed to Songa Offshore SE, transferred its registered office to Cyprus in accordance with Article 8 of the SE Regulation and section 7 of the SE Act. The Company is registered with the Cyprus Registrar of Companies with registration number SE 9 and is subject to the laws of Cyprus, and in particular the Cyprus Companies Law, Cap 113. The Company s principal place of business is in Limassol, Cyprus. Its registered office is Porto Bello building, Office 201, No 1 Siafi Street, 3042, Limassol, Cyprus and its visiting address is Porto Bello building, Office 201, No 1 Siafi Street, 3042, Limassol, Cyprus, telephone , telefax and its web address is 63

69 The rig operations are managed from the Group s offices in Stavanger, Bergen and Stjørdal, Norway. The Group currently has also presence in Bermuda, Korea, Oslo, Singapore and Aberdeen. Since the Cat D project in South Korea came to a conclusion with the delivery of Songa Enabler on 31 March 2016 the Company will transform from being mainly a project-based organization with three rigs in operation to a focused seven rig drilling contractor. Due to this shift to an operating organization, the Company is currently and will throughout 2016 implement a Right Sizing Project, which will see the Company reducing the onshore organization by 200 employees (in a five rig operational scenario). As part of this project, and as previously disclosed, the Company will also centralize the support functions out of Norway and hence will close the offices in Korea and Aberdeen by the end of The aim of this Right Sizing Project is to stay competitive with a sustainable cost structure. The Company s Ordinary Shares have been listed on Oslo Børs since 26 January 2006 under the ticker code SONG. 8.5 History and development The following table sets forth a brief overview of the main events in the history and development of the Group. Year Event 2005 Company founded and listed on the Norwegian OTC list Songa Venus and Songa Mercur acquired from IPC Songa Saturn acquired from GlobalSantaFe 2006 Listed on Oslo Børs in January Songa Dee acquired from Stena Songa Venus and Songa Mercur underwent major refitting and upgrading in Singapore 2007 Songa Trym acquired from Odfjell Drilling 2008 Songa Delta acquired from Odfjell Drilling New corporate headquarters established in Limassol, Cyprus Converted to Societas Europaea, Songa Offshore SE 2009 Songa Offshore SE redomiciled to Cyprus 2010 USD 50 million investment in Deepwater Driller Ltd, the owner of UDW rig Songa Eclipse, giving Songa Offshore a 31.25% stake Songa Saturn sold 2011 Increased ownership in Songa Eclipse to 100% Awarded 18 months contract plus 1 firm well for Songa Eclipse with Total E&P in Angola following delivery from Jurong in August Awarded contracts for the two initial Cat D rigs with Statoil on 8 year tenors, to be constructed at DSME in South Korea 2012 Awarded contracts for two additional Cat D rigs with Statoil on 8 year tenors, to be constructed at DSME in South Korea Extensive upgrades on Songa Dee, Songa Delta and Songa Trym Songa Eclipse sold 2013 New management team and strengthening of the Board of Directors 64

70 Comprehensive refinancing to facilitate successful delivery of the Company s Cat D rigs as well as to create a solid and sustainable long term financial platform for the Company 2014 Sale of Songa Mercur and Songa Venus and establishment of strategic Joint Venture for international operations with Opus Offshore 2015 Delivery of Songa Equinox, Songa Endurance and Songa Encourage from DSME Decreasing charter-free rig valuations for all industry segments prevented Songa Offshore to draw the fully agreed loan amount at the Songa Encourage delivery, as well as at the future Songa Enabler delivery, due to certain Market Value Clause covenants in the loan agreement, leading to a weakening of available liquidity of USD 41 million Songa Equinox and Songa Endurance commenced drilling operations on 7 December 2015 and 31 December 2015 respectively under their long term drilling contract with Statoil at the Troll Field on the Norwegian Continental Shelf Songa Trym received a notice of cancellation of its drilling contract with Statoil effective from 17 November Songa Equinox and Songa Endurance experienced start-up issues and extended downtime, primarily in January 2016, from design issues related to the BOP control systems, resulting in USD million loss of revenue. Delivery of Songa Enabler from DSME on 31 March 2016 Songa Encourage commenced drilling operations on 11 April 2016 Comprehensive Refinancing, as further described in section Legal structure of the Group The Company is the parent company for the Songa Offshore group of companies. All group companies are fully owned or controlled, and are direct subsidiaries under Songa Offshore SE. The chart below illustrates the organisation structure of the Group. The tables below sets forth the companies and branches constituting the Group, divided between the active companies and dormant companies. Active companies in the Group Name Registration Function Songa Offshore SE Cyprus, SE 9 Group parent company. No operating activities. Songa Offshore SE Norway branch Financing, investor relations 65

71 Songa Offshore SE Bermuda branch Rig owner of Songa Dee and Songa Trym Songa Offshore Rig AS Norway, To operate the Songa Dee, the Songa Delta, and the Songa Trym on the Norwegian continental shelf Songa Offshore Rig 2 AS Norway, To operate the Songa Equinox and Songa Endurance drilling rigs operating on the Troll Field on the Norwegian continental shelf Songa Offshore Rig 3 AS Norway, To operate the Songa Encourage and Songa Enabler drilling rigs operating on the Troll Field on the Norwegian continental shelf Songa Offshore Management AS Norway, Provides management services to Norwegian operations Songa Offshore Management Ltd Songa Offshore Drilling Ltd Songa Offshore Pte. Ltd Songa Offshore Endurance Ltd (formerly Songa Tor Ltd) Songa Offshore Endurance Ltd (formerly Songa Tor Ltd) Songa Offshore Equinox Ltd (formerly Songa Odin Ltd) Songa Offshore Equinox Ltd (formerly Songa Odin Ltd) Songa Offshore Enabler Ltd. Songa Offshore Enabler Ltd Songa Offshore Encourage Ltd Songa Offshore Encourage Ltd Songa Offshore Services AS Songa Offshore Services International AS Cyprus, HE Cyprus, HE Singapore, R Cyprus, HE Bermuda Branch Cyprus, HE Bermuda Branch Cyprus, HE Bermuda Branch Cyprus, HE Bermuda Branch Norway, Norway, Provides management services to rig owning entities, Currently inactive Provides agency services Rig owner Rig owner of Songa Endurance Rig owner Rig owner of Songa Equinox Rig Owner Rig owner of Songa Enabler Rig owner Rig owner of Songa Encourage Provides crew and personnel services for Norwegian crew Provides crew and personnel services for offshore international employees in Norway Songa Offshore Delta Ltd Cyprus, HE Rig owner Songa Offshore Delta Ltd Bermuda branch Rig owner of Songa Delta Songa Offshore Equipment Rental AS Norway, Provision of base services for the rigs in operation. Songa Offshore T&P UK United Kingdom, SC Provide technical engineering services to companies in 66

72 Ltd the offshore drilling industry Songa Offshore T&P Cyprus Ltd Songa Offshore T&P Norway AS Cyprus, HE Norway, Provision of management services, financing activities and investment holding Provide Technical service to other Songa Offshore Entities Dormant companies Name Registration Function Songa Saturn Chartering Pte. Ltd Songa Saturn Chartering Pte. Ltd Songa Eclipse Management Pte. Ltd Singapore Libya branch Singapore Dormant Dormant Dormant Songa Offshore Saturn Ltd Cyprus Dormant Pegasus Invest Pte. Ltd Singapore Dormant Songa Offshore Eclipse Ltd Cyprus Dormant Songa Offshore Eclipse Ltd Bermuda branch Dormant Songa Offshore Equipment Rental Ltd (ex Shenga Trading Company Ltd) Songa Offshore Malaysia Sdn. Bhd Cyprus Malaysia, D Dormant Dormant Deepwater Drilling Ltd Cayman Islands Dormant 8.7 QSMS HSE ( Quality, Safety Management System, Health, Safety and Environment ) policy The Quality & Safety Management System (QSMS) is the main and key element in achieving Songa Offshore s vision Through our dedication and hardwork, we shall create premium value to our customers. To be able to achieve the Company's vision, we have worked out a set of Core Values, that the Company's employees have been taken part in developing, these are: Trust Respect Innovation These core values are not simply three words, they will help the Company's achieve the Company's objectives, by setting the expected standard, bind the Company together as a company, guide the Company's behaviour and give the Company a common identity. Maintaining a robust QSMS which provides clear direction on how to manage the quality, health, safety and environmental issues offers a competitive advantage over other organisations in terms 67

73 of protecting the Company's people, the environment, the Company's assets and business in general. Therefore, continuous improvement, training, enforcement and evaluation of the QSMS are important management responsibilities. Compliance with the Songa Offshore QSMS is mandatory for all personnel employed within the organisation both at offshore and shore-based facilities. The foundation of Songa Offshore s integrated QSMS is a set of seven policies which apply to all Company activities worldwide. The seven policies detail the focus on people, environment, and assets. A brief abstract is shown below; Quality Policy - Songa Offshore will set standards and continuously improve. Health, Safety and Environment (HSE) Policy - Songa Offshore will always put people and the environment first. Ethics Policy - Songa Offshore will be recognized as an organization with high ethical values. Operational Policy - Songa Offshore will be recognized as the driller of choice. Security Policy - Songa Offshore will ensure the safety and security of company personnel, company assets, and installations by preventing or mitigating unlawful acts. Human Resource Policy Songa Offshore will be looked upon as the preferred employer in our industry and be known as a great place to work Risk Policy Songa Offshore will manage risk in its business effectively and proactively Quality Policy In achieving efficient and safe operation, Songa Offshore requires to continuously improve its QSMS. Such development is based on various changes in the organisational structure, lessons learned from operations, industry best practices, client feedback or simply proposals and suggestions from personnel. Our QSMS system is undergoing adjustments and updates constantly, all to ensure lessons learned and fine-tuning of operational processes and procedures. All updates to the QSMS are closely tracked and followed though an established document controlled process. In this highly competitive industry to succeed it is required a high degree of expertise, experience and reliability to be able to perform safely and efficiently in order to consistently provide high standards of drilling services, it is required to develop a management system that conforms to or exceeds contractual, industry and regulatory standards and requirements. To achieve this, the Songa Offshore QSMS is developed based on the following: ISM Code. The company and its rigs are certified against the International Safety Management (ISM) Code and maintains official certificates issued by the American Bureau of Shipping (ABS), on behalf of the Marshall Islands Administration and the Norwegian Maritime Authority. This essentially means that the QSMS suffices the international requirements of all facets of safety and the environment. ISO 9001:2008. Relevant parts of the International Standardisation Organisation (ISO) 9001:2008 quality management system. National Regulations. In areas where Songa Offshore operates, it adopts the national regulation, such as the Petroleum Safety Authorities (PSA) Norway, Framework regulation - section

74 Industry Best Practice. The Company always seeks to incorporate guidance from industry best practise from organisation such as the International Marine Contractors Association (IMCA), International Association of Drilling Contractors (IADC), Dropped Objects Prevention Scheme (DROPS), Working together for Safety (SfS) and others. During 2015, numerous audits were performed at Songa Offshore shore-based and offshore facilities in order to confirm compliance with international and regional requirements, and the Company's process and procedures. Such audits included ISM Code audits, QSMS compliance audits, class society audits, local regulator audits, flag administration audits and client audits. Songa Offshore continually aims to improve further its QSMS as well as other Company systems, by identifying the expectations and needs of its customers and by establishing processes including data collection and experience feedback from QSMS users, both at offshore and shore-based facilities Health, safety and the environment (HSE) Policy It is Songa Offshore s top priority to place people and the environment first. All activities performed are subject to a risk management process resulting to efficient operations and a safe and healthy working environment for personnel. Further, Songa Offshore continues to maintain its standards that all rigs shall have valid HSE Cases, regardless of where a rig is operating and whether or not it is a requirement in the respective market, such as it is in Norway and the United Kingdom. Songa Offshore has adapted the IADC guidelines for the preparation of an HSE Case. QHSE Performance Songa Offshore has established a QHSE annual plan which includes a set of corporate objectives together with the supporting rig specific objectives and key performance indicators (KPI) as set by Songa Offshore management. All Songa Offshore personnel are expected to work as a team in order to successfully achieve all objectives and KPIs. The KPIs consists of detailed performance criteria within the following areas: quality & HSE, client satisfaction, operational uptime, rig maintenance and rig budget adherence. Incident Statistics Songa Offshore recorded six recordable incidents in 2015 as per IADC guidelines and definitions, resulting in a Total Recordable Frequency Rate (TRFR) of 2.55 and a Lost Time Incident Frequency Rate (LTI FR) of 0.42 per one million working-hours. Of the six incidents five were Medical Treatment Only (MTO), and one Lost Time Incident (LTI). Despite the fact that Songa Offshore HSE performance has improved we will still challenge the optimal target of zero incident philosophy and continue to strive towards excellence by achieving an injury free environment. The figure below shows the statistical trends for incident rates in Songa Offshore during the last 6 years. 69

75 Songa Total Rec Freq Rate Songa LTI Freq Rate QHSE Planning The Group has established a QHSE annual plan which includes a set of corporate objectives together with the supporting rig specific objectives and key performance indicators (KPI) as set by Songa Offshore management. All Songa Offshore personnel are expected to work as a team in order to successfully achieve these objectives and KPIs. The KPIs consists of detailed performance criteria within the following areas: Quality & HSE, Operations, Client satisfaction, Rig Maintenance and Rig budget adherence Environment The protection of the environment is considered of primary importance for Songa Offshore and great emphasis has been placed so that the offshore facilities meet all statutory requirements for emissions, pollution and environmental impact. The Company strives to comply with all class society, flag state, national and international regulations, but more importantly the International Maritime Organization (IMO) requirements with regards to environmental issues. All offshore installations maintain valid certificates for the following: IOPP (International Oil Pollution Prevention), IAPP (International Air Pollution Prevention) and ISPP (International Sewage Pollution Prevention). Respect of the environment is continuously promoted within Songa Offshore and emphasis is provided to all personnel responsibilities and duties in terms of environmental performance. It is a requirement within Songa Offshore that all uncontrolled environmental spills both on board and overboard are reported, investigated and corrective action is implemented to prevent reoccurrence. Waste Management Songa Offshore ensures that all waste and waste products generated as a result from rig operations are disposed of in a safe and efficient manner, without harm to personnel, the environment or third parties, and in compliance with relevant statutory environmental legislation. Considerations are given to the following in terms of waste management: the nature and quantities of waste products the environmental impact of relevant waste disposal methods at the particular location the waste products that will be generated (and their subsequent disposal) when purchasing raw materials (including the containers and packaging containing the raw material) the exposure of personnel to accumulations of waste and strategies for personnel protection Type and Quantity of Energy and Raw Materials Consumed The type of raw materials consumed on board rigs are as follows: 70

76 Drilling with non-aqueous drilling fluids: High-speed shale shakers will be used to provide an average of less than 20% wet weight mud on cuttings over the sections of the well where nonaqueous drilling fluids are used. Upon completion of drilling with non-aqueous drilling fluids, the drilling fluid is returned to the supplier for reconditioning and re-use. Drill cuttings: Discharged to sea through a shunt pipe placed below the sea surface. The discharge depth is set and selected to achieve maximum dilution effects and to minimise impacts upon the surface waters. Deck Drainage: Spillage of diesel, cleaning solvents or mud chemicals will be cleaned up completely using absorbent pads and low toxicity biodegradable detergents. Deck drainage, wash down water and machinery space drainage will be processed through an oil-water separator as required and in accordance with rules and regulations. Sewage: The drilling units are equipped with sewage treatment units; all sewage is properly treated prior to disposal at sea. Galley wastes: Food waste will be macerated to less than 25 mm and discharged to the sea at a distance of more than 12 nautical miles (22 km) from shore. The table below shows the quantity of fuel consumed, and waste oil and air emissions produced due to rig activity during the year 2015: Atmospheric Emissions Rig Fuel consumed (m 3 ) Waste Oil (m 3 ) SO x (T) NO x (T) Songa Dee , ,706 Songa Delta , ,667 Songa Trym , ,730 Songa Equinox* , ,441 Songa Endurance* , ,419 * Figures for Equinox and Endurance includes transit from South Korea to Norway, Dee includes shipyards stay during 2015 and Trym is stacked from last part of Pollution prevention Pollution prevention is integral part of Songa Offshore procedures and processes. The focus areas of environmental protection spans from assessing, handling and controlling chemicals in order to reduce environmental impact by having proper controls and measures in place to prevent a spill. All Songa Offshore rigs have a classification society approved Ship Oil Pollution Emergency Plan (SOPEP). The purpose of these plans is to provide guidance to the personnel on board with respect to the steps to be taken when pollution incidents have occurred or are likely to occur. Planning is considered vital in ensuring that the necessary actions are taken in a structured, logical, and timely manner. The SOPEP contains all information and operational instructions required by the Guidelines set forth by the flag state. 71

77 These plans have been approved by the Flag Administration and no alteration or revision shall be made to any part of the plan without prior approval of the Administration. The SOPEP is designed to link into the Corporate Crisis Management Plan for dealing with oil pollution emergencies. The Offshore Installation Manager (OIM) will be backed up on-scene by managementappointed personnel as the circumstances and the position of the rig at the time of the incident require. Regular exercises and drills are performed by the crew on board with the involvement of shore- based support personnel to ensure that the SOPEP functions as expected and that the contacts and communications specified are accurate. Such exercises and drills may be held in conjunction with other shipboard exercises and are appropriately logged. 8.8 Property, plant and equipment The Group leases its offices and other premises from several parties. The lease agreements are on commercial terms and satisfactory to the Group s needs. For other properties owned by the Group please see the assets described in detail in section 8.3 Business overview. All investments made by the Company in property, plant and equipment relates only to investments in drilling rigs, except investments in office and IT equipment, all related to the drilling rig operations. 8.9 Research and development and patents The Company does not carry out any research or development activities nor does it have any intellectual property or patents. The Company does not hold any material research or development patents. For dependence on contracts and licenses reference is made to section 8.11 Dependence on contracts and licenses Environmental issues All phases of the oil business, including the drilling business in which the Group operates, present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of international conventions and state and municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. See also section Environment above for the Company s environmental system. The Group is in compliance with its obligations under existing environmental regulations, and is not obligated to carry out environmental protection measures that would be significant to the business or financial situation. The Group is not aware of significant changes in environmental regulations that are expected to have significant impact to its business or financial situation Dependence on contracts and licences The Group has operating contracts for most of its drilling units (except for Songa Trym which has been stacked) with Statoil. For the period from 1 January to 30 November 2015, one customer, Statoil, accounted for 100% of the consolidated operating revenues of the Group. The Group s business and profitability is dependent on entering into new operating contracts as existing contracts come to an end. These contracts are entered into in a competitive market based on 72

78 bidding procedures against other drilling units with capacities and availabilities matching the requirements of the respective customers. An overview of the current contracts, and the expiration of these contracts, is provided in sections and above. Reference is also made to section 7 Market overview for a discussion of the competitive situation for the Group s drilling units. The Group has received the required licenses for all of the drilling rigs for drilling operations, and it is not expected that the Group will lose any of these licences. Particularly in the case of the Cat D rigs in operations, the Company has obtained the Norwegian Acknowledgement of Compliance (Norwegian: Samsvarsuttalelse, SUT). Such license is pending in respect of Songa Enabler, since such rig is on transit from Korea to Norway. The Company expects to obtain the Norwegian Acknowledgement of Compliance for Songa Enabler before such rig enters into service. The Group relies on third parties to perform certain services related to operations, including maintenance of equipment, supply of spares parts and consumables, medical and catering services and transportation and loading services. Please also see section In the opinion of the Company, and except as set forth above and in section 11.8 (Borrowings), the Group s business or profitability is not dependent on any new licences, industrial, commercial or financial contracts or new manufacturing processes to conduct its business Material contracts The Group has not for the past two years entered into any material contract outside its ordinary course of business nor have any such contracts which have been entered into before Trend information and other factors that may affect the operations of Songa Offshore Except as described in this Prospectus, with particular reference to section 7 Market overview and this section 8, Songa Offshore has not experienced changes in trends regarded as significant to the Group after 31 December 2015, the date of the Group s last financial report, and is not aware of trends, commitments, events or uncertainties that are reasonably expected to have a material effect on its business for at least the current financial year New products and/or services Songa Offshore has not introduced, and does not plan to introduce, significant new products or services. The Board of Directors does not expect any major changes in the principal activities of the Group in the foreseeable future Basis for statements regarding competitive position By the nature of its business, Songa Offshore is dependent on entering into new operating contracts as existing contracts come to an end. These contracts are entered into in a competitive market based on bidding procedures against other drilling units with capacities and availabilities matching the requirements of the respective customers. An overview of the current contracts, and the expiration of these contracts, is provided in sections and above. Reference is also made to section 7 Market overview for a discussion of the competitive situation for the Group s drilling units. 73

79 The statements made by Songa Offshore regarding its competitive position are provided on a going concern basis and are not based on any assumptions of changes in the Group s relative competitive position, other than as described in this Prospectus Significant external factors With the exception of factors customary to the drilling business, as described elsewhere in this Prospectus, in particular section 7.1 and 7.5 with regards to regulatory framework and section 15.2 regarding taxation, Songa Offshore is not aware of any governmental, economic, fiscal, monetary or political policies or factors that have materially affected, directly or indirectly, its operations, or of proposed changes to such policies or factors that could materially affect its operations. 74

80 9 BOARD OF DIRECTORS, MANAGEMENT AND EMPLOYEES 9.1 Board of Directors Overview of the Board of Directors The overall management of the Company pertains to the Board of Directors, which shall oversee the proper organisation of the business. The Board of Directors schedules quarterly meetings annually in advance with a tentative agenda and holds other meetings on an ad hoc basis to the extent necessary to discuss issues arising and strategic planning for commercial and financial matters. The auditors attend the Board of Directors meeting at least once a year. The members of the Board of Directors are elected by the General Meeting. The General Meeting also resolves the annual remuneration of the Board of Directors based on the proposal made by the nomination committee. The Articles of Association provide that the Company s Board of Directors shall not be subject to a maximum number of members, but the minimum number of members is two. The Company s current Board of Directors is composed of six members, all of which have been elected by the shareholders. The Articles of Association provide that a Director can be elected by the Board of Directors. Any Director so appointed will be eligible for reappointment by the shareholders on the next Annual General Meeting. The names, positions and term of the members of the current Board of Directors are set out in the table below. Name Position Served since Business address Frederik W. Mohn Chairperson 2013 Statsminister Michelsens vei 38, Rekstenbyggene Building 5231 Paradis, Norway Johan Kr Mikkelsen Board Member 2015 Kvernabekkveien 47e, 5243 Fana, Norway Ronald Blakely Board Member 2015 c/o Songa Offshore SE, Porto Bello Building, No. 1 Siafi Street (2nd floor, office 201),3042, Limassol, Cyprus Arnaud Bobillier Board member , Rue Montfleury, Versailles (France) Christina Ioannidou Board member 2014 c/o Songa Offshore SE, Porto Bello Building, No. 1 Siafi Street (2nd floor, office 201),3042, Limassol, Cyprus Michael Mannering Board member 2013 c/o Songa Offshore SE, Porto Bello Building, No. 1 Siafi Street (2nd floor, office 201),3042, Limassol, Cyprus Under the Norwegian Code of Practice of Corporate Governance (the "Code of Practice") it is recommended in order to ensure independence in the decisions of the Company, that the majority of the members of the Board of Directors be independent of the executive personnel of the Company and that they do not enter into material business contracts with the Company. In addition to that, at least two of the members of the Board of Directors shall be independent of the main shareholders. None of the directors of the Company are, or are affiliated with, executive personnel or have entered into material business contracts with the Company. During 2015, three of the Board of Director members, namely Mr Mohn, Mr Mikkelsen and Mr Bobillier, were affiliated with Perestroika AS, the Company s largest shareholder. Mr Mohn is the sole owner of Perestroika AS. Moreover, Mr Mikkelsen is an employee of Perestroika AS and Mr. Bobillier was engaged by Perestroika AS 75

81 pursuant to a consultancy agreement. As from March 2016, Mr Bobillier is no longer engaged by Perestroika AS and is now an independent director. Liability of directors The duties of Directors of Cyprus companies are not comprehensively codified and are set out, amongst others, in Cyprus law, common law principles (the Common Law ), duties provided for in a Articles and respective EU directives transposed in Cyprus. There are four main common law fiduciary duties that the directors owe to the Company and must take into account when they are acting for the Company, these are to (i) act in good faith for the benefit of the Company and for proper purpose; (ii) avoid conflicts of interests; (iii) exercise independent judgment; and (iv) act with due care and skill. Their principal task is to safeguard the interests of the Company. Members of the Board of Directors may each be held liable for any damage they cause the Company through gross negligence or wilful misconduct. Subject to the Law, each of the current or former officers of the Company may be indemnified out of the Company assets against any losses or liabilities which he or she may sustain or incur in or about the execution of his/her duties. This includes liability incurred by him/her in defending any proceedings, whether civil or criminal, in which judgment is given in his or her favour or in which he/she is acquitted, or in connection with any application under section 383 of the Law in which relief is granted to him/her by the court from liability for negligence, default, breach of duty or breach of trust in respect of the affairs of the Company Brief biographies of the members of the Board of Directors Set out below are brief biographies of the members of the Board of Directors of the Company, including their relevant management expertise and experience, an indication of any significant principal activities performed by them outside the Company and names of companies and partnerships of which a member of the Board of Directors is or has been a member of the administrative, management or supervisory bodies or partner the previous five years (not including directorships and management positions in subsidiaries of the Company, however no such positions are or have been held). Frederik W. Mohn, Chairperson Mr. Mohn is the sole owner of Perestroika AS, which is the largest shareholder of Songa Offshore SE. He holds extensive industrial experience from his world-wide family business, Frank Mohn AS, where he also held the position of Managing Director. The Frank Mohn Group was sold in Mr. Mohn is a Norwegian citizen and resides in Bergen, Norway. Overview of directorships, partnerships and management positions Current: Songa Offshore SE Chairperson Perestroika AS Chairperson and Managing Director Viken Crude AS Board Member Past five years: Frank Mohn AS managing director Johan Kr Mikkelsen, Board member Mr. Mikkelsen has over 40 years of experience from Norsk Hydro and Statoil. He entered the oil and gas industry at the Mongstad refinery in 1974 as process engineer and a couple of years later as Production Manager at the refinery. In 1983 he moved on as Production Director for Oseberg field and in 1992 as SVP for Norsk Hydro drilling. In 2000 he continued as SVP for Oseberg asset 76

82 and in 2003 as SVP for the Troll asset. In 2005 he became Country manager for Norsk Hydro Canada before he moved on as Peregrino Project Director and later Production Director for the Peregrino field in Brasil. In 2012 he returned to Norway as VP for the Statoil Subsea Improvement Project until early 2014 when he retired from Statoil. At present he is the Chief Technology Officer with Perestroika AS. He holds a Master degree from NTH from 1973 in Industrial Chemistry and a Master degree in Chemical Engineering from University of Wisconsin, USA in Mr. Mikkelsen is a Norwegian citizen and resides in Bergen, Norway. Overview of directorships, partnerships and management positions Current: Perestroika AS Chief Technical Officer Songa Offshore SE Board Member VTC Offshore AS Board Member Past five years: Statoil, Subsea Improvement Project Vice President Peregrino Production Vice President Production Ronald Blakely, Board member Mr. Blakely is a retired former executive whose career spanned more than 38 years with Royal Dutch Shell companies. At time of retirement in October 2008 he was Executive Vice President at Global Downstream Finance based in London, UK. In previous roles he had been CFO of Shell Oil Products in the USA and CFO of Shell Canada, a then Canadian public integrated oil and gas company. He is a graduate of the University of Guelph with a major in Economics and a member of the Chartered Professional Accountants (CPA) of Alberta. Mr. Blakely is currently a non-executive Director, Senior Independent Director and Chair of the Audit Committee of Ophir Energy Plc. Mr Blakely is a Canadian Citizen and resides in London, United Kingdom. Overview of directorships, partnerships and management positions Current: Ophir Energy Plc Non Executive Director Songa Offshore SE Board Member Past five years: Oil Sands Quest Inc Non Executive Director Arnaud Bobillier, Board member Mr. Bobillier has held a number of senior line management positions within the industry in countries around the world, including the United States, Saudi Arabia, Indonesia, Brazil, South Africa and China. Between 1980 and year 2000, he held various management positions within Schlumberger and was the Operations Manager for Sedco-Forex Schlumberger during the preparations for the upcoming merger with Transocean. As Vice President of Transocean's European and African business units between 2004 and 2008, he was very much involved in the company's Norwegian operations. More recently, he served as the Executive Vice President of Transocean where he was responsible for the execution of integration of Aker Drilling into Transocean. Between 2011 and 2012 he served as a Special Advisor to the CEO of Transocean. He has also been a Member of the Board of Directors at Texas Institute of Science. Mr. Bobillier holds an Engineering Degree in Fluid Mechanics and Thermodynamics from the Ecole Superieure des Techniques de l'ingenieur de Nancy, France, with a Major in thermodynamics. Mr. Bobillier is a French citizen and resides in Paris, France. 77

83 Overview of directorships, partnerships and management positions Current: Songa Offshore SE Board Member Past five years: None Christina Ioannidou, Board member Mrs. Ioannidou is a lawyer at the Cypriot law firm Ioannides Demetriou LLC. Mrs. Ioannidou is an accomplished corporate lawyer and her areas of practice includes corporate and commercial law, banking, finance, structuring loan and security documentation and M&A. Mrs. Ioannidou holds a first class BSc (Hons) from Imperial College, London in Mathematics, an AM from Harvard University in Statistics, and a first class BA (Hons) from the University of Oxford in Jurisprudence. Mrs. Ioannidou is a Cypriot citizen and resides in Nicosia, Cyprus. Overview of directorships, partnerships and management positions Current: Ioannides Demetriou LLC Executive Director and Partner Nobel Trust Limited Executive Director Cyprus resident companies (unrelated to Songa Offshore) Non-Executive Director Songa Offshore SE Board Member Past five years: None 78

84 Michael Mannering, Board member Mr. Mannering has over 40 years of experience in the energy industry. From 2008, Mr. Mannering has been President of Rig Management at Schlumberger and responsible for rigs contracted by IPM and for the Schlumberger equity participation in Schlumberger rig joint ventures. He was also Chairman of Saxon Energy Services, a Canadian based international drilling contractor with 95 land rigs, and member of the board of Schlumberger Oilfield UK. Mr. Mannering joined Schlumberger's drilling contracting organization, Sedco Forex, in 1985 where he went on to take various managerial responsibilities including the overall responsibility for the land and offshore fleet in the Middle East and S.E. Asia. In 1999 he became Managing Director for Schlumberger Oilfield Services UK with responsibility for all of Schlumberger's N. Sea Operations. Mr. Mannering retired from Schlumberger in March Mr. Mannering is a mechanical engineer with first class Honors from Southampton University UK. Mr. Mannering is a UK citizen and resides in London, United Kingdom. Overview of directorships, partnerships and management positions Current: Navetas Energy Management Limited - Non-Executive Chairman Songa Offshore SE Board Member Past five years: PetroAlliance Services Limited Director I20 Water Limited Director President IPM Rig Management including board member Saxon and since 2011 Chairman Saxon Schlumberger oilfield UK Plc : Oilfield Service - Director and named director responsible for Safety Remuneration to the Board of Directors, and benefits upon termination The remuneration paid to the Board of Directors for 2015 was a total of USD 427,000 and the current estimate of remuneration payable to the Board of Directors for 2016 is USD 648,000. The remuneration of the members of the Board of Directors is determined on an annual basis. The directors will be reimbursed for, inter alia, travelling and other expenses incurred by them in attending meetings of the Board of Directors. A director who has been given a special assignment beside the normal duties of a member of the Board of Directors may be paid such extra remuneration as the Board of Directors may determine. Directors of the Company have appointment letters which provide for quarterly payment of annual directorship fees. None of the members of the Board of Directors have entered into service contracts with the Company or any of its subsidiaries providing for benefits upon ceasing to be a member of the Board of Directors. The Group has not paid or accrued pensions, pension benefits, or other similar benefits including benefits in kind to members of the Board of Directors in respect of 2015 or Remuneration in 2015: Amounts in USD '000 Director's fee Salary Bonus Pension Benefits in kind Other payment Annual Leave Paid out of options exercised Total Board of Directors: Frederik W. Mohn - Chairman (appointed 24 January 2014) Michael Mannering board member Arnaud Bobillier - board member Jon E. Bjorstad - board member (resigned 18 February 2015) Christina Ioannidou - board

85 member Johan Mikkelsen - board member (appointed 18 February 2015) Ronal Bruce Blakely (appointed 29 April 2015) Geir Sandvik non executive director Total remuneration Board of Directors Loans and guarantees The Company does not have a policy for granting loans and guarantees and has not granted any loans or guarantees to any of its Board members, members of the executive management or other related parties of these groups. Conflicts of interests and other disclosures The Company believes that it has taken reasonable steps to avoid, and to mitigate effects of, potential conflicts of interests arising from the Board members and management s private interests and other duties. The Company is not aware of conflicts of interests between the duties of members Board of the Board of Directors (other than as disclosed) or the senior management toward the Company and their private interests and/or other duties Shares and options held by members of the Board of Directors As of the date of this Prospectus, the members of the Board of Directors have the following holdings of Shares and amount (in USD) of convertible bonds in the Company, including Shares convertible bonds held by close associates: Name Position Number of Shares New and Convertible bonds Frederik W. Mohn* Chairman - - Johan Kr Mikkelsen Board member - - Ronald Blakely Board member - - Arnaud Bobillier Board member 710,000 - Christina Ioannidou Board member - - Michael Mannering Board member 525,000 - * See section 12.4 for holdings by Perestroika AS, a company controlled by Mr. Mohn. As of the date of this Prospectus, none of the members of the Board of Directors holds any options for Shares in the Company Sub-committees of the Board of Directors Remuneration committee The Company has established a remuneration committee. The remuneration committee, amongst other, prepares guidelines and policies for the remuneration of executive personnel and generally advises the Board of Directors on matters relating to the compensation paid to executive personnel. Meetings of the remuneration committee are held not less than once a year. The remuneration committee consists of the following persons: Name Position Served since Frederik W. Mohn Chairman

86 Michael Mannering Member 2013 Arnaud Bobillier Member 2013 Audit committee The Company has established an audit committee. The audit committee is tasked with, but not limited to, the following; (i) preparing the follow-up of the financial reporting process for the Board, (ii) monitoring the systems for internal control and risk management, including the internal audit of the Company, (iii) having continuous contact with the appointed auditor of the Company regarding the auditing of the annual accounts, and (iv) reviewing and monitoring the independence of the auditor, including in particular to which extent other services than audit services which have been rendered by the auditor or the audit firm represents an undermining of the independence of the auditor. The audit committee meets in connection with the preparation of quarterly reports and annual statutory accounts, and may have additional meetings whenever deemed necessary by the committee. The audit committee currently consists of the following persons: Name Position Served since Ronald Blakely Chairman 2015 Frederik W. Mohn Member 2014 Christina Ioannidou Member Nomination committee The role of the nomination committee is to propose candidates for election to the Board of Directors of the Company and make recommendations to the General Meeting on the composition of the Board of Directors and level of remuneration. On June 3, 2015, Mr Johan Mikkelsen resigned from his position as member of the nomination committee due to his appointment as member of the Board Director of the Company. The composition of the nomination committee is as follows: Name Position Served since Paal Minne Chairman 2015 Geir Sandvik Member Senior Management Overview The present Management of the Company is comprised of three executives. The following table sets out the name and position for each of the executive members of the Management as at the date of this Prospectus, followed by additional bibliographical information. Name Position Served since Business address Bjørnar Iversen Chief Executive Officer 2013 Porto Bello, Office 201, No 1 Siafi Street Limassol 3042, Cyprus Jan Rune Steinsland Chief Financial Officer 2013 Haakon VIIs Gate 1, 9th Floor, 0161 Oslo, Norway Mark Bessell Chief Operating Officer 2013 Maskinveien 32, 4033, Stavanger, Norway 81

87 9.2.2 Brief biographies of the members of Management Set out below are brief biographies of the members of the Management, including their relevant management expertise and experience, an indication of any significant principal activities performed by them outside the Company and names of companies and partnerships of which a member of the Management is or has been a member of the administrative, management or supervisory bodies or partner the previous five years (not including directorships and management positions in subsidiaries of the Company). Bjørnar Iversen (born 1968), Chief Executive Officer Mr. Iversen joined Songa Offshore in February 2013 as COO and was appointed CEO in May Before joining Songa Offshore, Mr. Iversen was a member of the executive leadership team at Odfjell Drilling AS. During his 17 year's tenure at Odfjell Drilling, he has been executive vice president for Corporate Business Development, Odfjell Drilling Technology and Odfjell Well Services. His latest position was President and CEO of Odfjell Galvao Ltda in Brazil. Mr. Iversen holds a Master of Science in Business from the Norwegian School of Business and Economics (NHH), and various management courses from Harvard Business School and NHH. Mr. Iversen is a Norwegian citizen and resides in Cyprus. Overview of directorships, partnerships and management positions Current: Songa Offshore SE Chief Executive Officer Past five years: Odfjell Galvao Ltda (Brazil) CEO and President Odfjell Drilling Executive Vice President Business Development PSW Group AS Chairman / board member Ross Offshore AS board member Jan Rune Steinsland (born 1960), Chief Financial Officer Mr. Steinsland jointed Songa Offshore in May He previously held the position of CFO at Ocean Rig from 2006 to 2013, a period of great expansion and development, including an IPO and listing on NASDAQ. Prior to that, he was CFO at Oslo Børs Stock Exchange listed Acta Holding ASA, a position he held for six years from 2000 to From 1988 to 2000, he held several management positions at ExxonMobil. Mr. Steinsland holds a Master of Business Administration from University of St. Gallen and is Certified European Financial Analyst (AFA) from The Norwegian Society of Financial Analysts/Norwegian School of Economics and Business Administration. Mr. Steinsland is a Norwegian citizen and resides in Norway. Overview of directorships, partnerships and management positions Current: Private family companies Director Songa Offshore SE Chief Financial Officer Past five years: Ocean Rig ASA / Ocean Rig AS CFO and director in various subsidiary companies Mark Bessell (born 1964), Chief Operating Officer Before joining the company in October 2013, Mr Bessell previously held the position of Senior Vice President with Ocean Rig. Mr Bessell commenced in the industry with Sedco, he then remained with Transocean for over 20 years, where he held a number of senior positions within operations, projects, technical and HR having gained extensive industry and business experience. Mr Bessell holds a BSc in Petroleum Engineering, he is a British Citizen and resides in Norway. 82

88 Overview of directorships, partnerships and management positions Current: Songa Offshore SE Chief Operating Officer Past five years: Ocean Rig Senior Vice President Transocean various senior positions Remuneration and benefits Total remuneration The following amounts have been paid or set aside for such salaries and other benefits for the executive management of the Group: For 2015: Amounts in USD 000 Paid out Salary Bonus Pension Benefits in kind for options exercised Annual leave Total Bjørnar Iversen CEO ,010 Jan Rune Steinsland CFO ,043 Mark Bessell COO Aggregate 1, ,908 For 2014: Amounts in USD 000 Salary Bonus Pension Benefits in kind Paid out for options exercised Annual leave Total Bjørnar Iversen CEO ,097 Jan Rune Steinsland CFO Mark Bessell COO Aggregate 1, ,778 The CEO and the COO are included in defined contribution plans. The CFO is included in the defined benefit plan for qualifying employees of the Norwegian branch of Songa Offshore SE. Under the plan, the employees are entitled to retirement benefits of 70% of final salary, limited to twelve times the national insurance base amount (Folketrygdens grunnbeløp (G)), on attainment of a retirement age from 62 to 67. No other post-retirement benefits are provided to the executive management. Each of the CEO and CFO of the Group have an agreement for 18 months severance pay. The COO of the Group has an agreement for 3 months severance pay. Except for this, the executive management do not have other benefits upon termination of employment. Share based compensation The Company has implemented a cash-settled share-based compensation plan for senior management and key personnel. The options are in the form of synthetic options, or so called stock appreciation rights or SARs, meaning that the employee will not be given the right to subscribe for Shares as such, but will be entitled to receive, in cash, the difference between the 83

89 exercise price and the strike price multiplied with the number of synthetic options exercised. Each synthetic share option converts into the value of one ordinary share of Songa Offshore SE on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. The plan is valued at fair value for each reporting period end. The options that are fully vested are recognized with at full fair value in the balance sheet, but for options not fully vested, only the portion which has been vested (using linear model) is recognized in the balance sheet at fair value. Any changes in the fair value of the liability are recognized as personnel expenses within general and administrative expenses in profit or loss. This options plan has been discontinued and replaced by the LTIP as described below and no awards have been made since There are still options outstanding as included in section Equity settled long term incentive plan (LTIP) In 2014 the Company has implemented an equity settled plan. The equity settled plan (Long Term Incentive Plan, or LTIP ) is in the form of restricted share units (RSU) granted to management and to selected key employees. Each RSU gives the right to receive one share upon vesting. The fair value of each RSU is calculated when the RSU is awarded to each employee and recognised on a straight line basis over the vesting period. Any person leaving the Group may only exercise RSU fully vested at the time. All awarded RSUs under the LTIP have vested. The CEO, CFO and COO are subject to restrictions providing that they may not sell Shares under the program before such shareholding is worth at least one year s net salary. Employee Discounted Share Purchase Plan (EDSPP) The Group has established a new Employee Discounted Share Purchase Plan (EDSPP) available to all employees. EDSPP gives the opportunity to all employees within the Group to save a part of their salary. Following a certain period of such savings, the relevant company in the Group, with which the employee is employed, will provide an additional contribution of 15% based on the amount saved by the respective employee. The saving made by the employee and the additional contribution are used to purchase Songa Offshore SE Shares under the employee's name on a semi-annual basis Shares and options held by members of the Management As of the date of this Prospectus, the members of the Management have the following shareholdings and options in the Company, including Shares held by close associates. No members of the Management or their close associates own convertible bonds of the Company. Name Position Number of Shares Number of options Bjørnar Iversen... Chief Executive Officer 2,143,141 1,625,149 Jan Rune Steinsland... Chief Financial Officer 1,127, ,718 Mark Bessell... Chief Operating Officer 735,482 - The option series are vested and exercisable as follows: Name / Option series Number of options Grant date Vesting date Expiry date Exercise price (NOK) Bjørnar Iversen ,716 03/06/ /06/ /06/ Bjørnar Iversen ,716 03/06/ /06/ /06/ Bjørnar Iversen ,717 03/06/ /06/ /06/

90 Jan Rune Steinsland ,859 21/05/ /05/ /05/ Jan Rune Steinsland ,859 21/05/ /05/ /05/ RSU series have vested as follows: Name / Option series Number of options Grant date Vesting date Fair value (NOK) Bjørnar Iversen ,104 13/11/ /07/ Bjørnar Iversen ,105 13/11/ /01/ Jan Rune Steinsland ,671 13/11/ /07/ Jan Rune Steinsland ,672 13/11/ /01/ Mark Bessell ,671 13/11/ /07/ Mark Bessell ,672 13/11/ /01/ Loans and guarantees The Company does not have a policy for granting loans and guarantees and has not granted any loans or guarantees to any of its Board members, members of the executive Management or other related parties of these groups. The executive management has not received any other remuneration from any Group companies other than what is disclosed above. There has been no additional remuneration for any special services exceeding the normal work scope of executive management. 9.4 Conflicts of interests and other disclosures The Company believes that it has taken reasonable steps to avoid, and to mitigate effects of, potential conflicts of interests arising from the Board members and Management s private interests and other duties. The Company is not aware of conflicts of interests between any duties to the Company of the members of the Board or the senior management and their private interests and/or other duties. During the last five years preceding the date of this Prospectus, no member of the Board of Directors or the executive management has: had any convictions in relation to fraudulent offences; been officially publicly incriminated and/or sanctioned by any statutory or regulatory authorities (including designated professional bodies) or 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 the affairs of a company; or been associated with any bankruptcy, receivership or liquidation. There are no family relationship between any member of the Board of Directors and the member of the executive management. No member of the Board of Directors or executive management is subject to restrictions on their disposal of the Company s securities within any period of time other than as described in section above. 85

91 9.5 Corporate governance The development of the Group s corporate governance is a continuous and important process to which the Board of Directors devotes a strong focus. The Group has adopted the corporate governance requirements set out in the Norwegian Securities Trading Act and the Norwegian Stock Exchange Regulations and has established and maintains a separate Corporate Governance Policy that is published on the Group s website ( as well as a Business Code of Ethics. Code of Practice The Group s corporate governance principles are in accordance to the Code of Practice. The Code of Practice is a comply or explain guideline. The Company considers that it is, in all material respects, in compliance with the Code of Practice. All issued Shares in the Company are vested with equal rights in all respects. As of December 31, 2015 there was only one class of Shares issued (Ordinary Shares) and all those Shares were freely transferable. Pursuant to shareholder s resolutions taken at the extraordinary general meeting of the Company held on 13 April 2016, the shareholders approved the issuance of two new classes of Shares: Class A Shares and Class B Shares. The Class A Shares and Class B Shares have equal rights as and rank pari passu with the Company's Ordinary Shares, including with respect to voting and dividends. The Class A Shares and Class B Shares are convertible into Ordinary Shares, and are expected to be so converted upon fulfilment of certain conditions. The Company s Articles of Association do not contain any provisions imposing any limitations on the ownership or the tradability of the Shares. Pursuant to Regulation 4 of the Articles of Association of the Company, unissued Shares may be issued as Shares with such preferred, deferred or other special rights or such restrictions as the General Meeting of shareholders may by ordinary resolution determine and, subject to the provisions of the Companies Law, unissued shares may be issued as preference shares, redeemable on such terms and in such manner as the General Meeting may by special resolution (adopted by a majority in favour of at least 75% of the votes cast) determine. Shares ranking pari passu in all respects with existing issued Shares may be issued as the Board of Directors determines in accordance with Regulation 5 of the Articles, subject to pre-emption rights. Dividend policy and payment of dividends All Shares (including the new Class A Shares and Class B Shares) in the Company have equal rights to dividends. Pursuant to Regulation 112 of the Articles of Association and provided that the Company has sufficient distributable profits, the Group may, at a General Meeting of its shareholders, declare by ordinary resolution (simple majority) dividends to be paid out of profits and to be distributed to the shareholders pro rata to their holdings in the Company but no dividend will exceed the amount recommended by the Board of Directors. The Board of Directors may declare interim dividends as appear to the Board of Directors to be justified by the profits of the Company (Regulation 113 of the Articles of Association). The Company s current ability to pay dividends is restricted by contractual arrangements including restrictions under its different loan agreements. Over time, when and as the Company has adequate financial resources, declaration of dividends will be considered by the Board of Directors. The Company has not paid any dividends for any of the years 2014, 2013, 2012, 2011, or 2010 and the Board of Directors are not proposing a dividend for

92 General Meetings The shareholders collective membership rights and powers are exercisable in General Meetings of the Company. In accordance with the Cyprus Companies Law, every annual General Meeting shall take place not more than 15 months from the previous annual General Meeting. The Board of Directors proposes that the annual General Meeting is held on or prior to 30 June each year. In addition to the annual General Meeting, extraordinary General Meetings of shareholders may be held if deemed necessary by the Board of Directors. An extraordinary General Meeting must also be convened by the Board of Directors at a written request of the Company s shareholders representing a total of at least 5% of the issued and paid up share capital carrying a right to vote and if the Board of Directors does not proceed to convene it, it may be convened by such shareholders themselves, as per the Articles of Association of the Company. A written notice shall be sent to all shareholders at least 21 days prior to an annual General Meeting and any other General Meeting at which a special resolution is proposed to be passed. All other extraordinary General Meetings shall be called by at least 14 days notice, if the shareholders are able to cast votes electronically. The shareholders may participate at a General Meeting in person or by proxy. The instrument appointing a proxy shall be in writing in usual form or in any form approved by the Company and is ordinarily enclosed in the notice calling the General Meeting. No business shall be transacted at any General Meeting unless a quorum is present. According to the Company s Articles of Association (the Articles ), at least three shareholders present in person or by proxy and together representing at least 5% of all the issued Shares, shall be a quorum. The Cyprus Companies Law (the Companies Law ) (Amendment) (No. 2) of 2010, Law No. 60(I) of 2010, has established certain provisions concerning members of Cypriot companies listed on regulated market, as follows: Irrespective of any provisions contained in the articles of association of a Cyprus company listed on a regulated market, members who hold not less than 5% of the paid-up share capital and who have voting rights in General Meetings can call an extraordinary General Meeting; Cyprus companies listed on regulated markets shall provide their members with a notice of the meeting, the agenda and the documents that must be used for appointing proxies and for voting (if applicable) by mail or by electronic means; Members holding not less than 5% of the issued share capital (representing at least 5% of the total voting rights of those who have the right to vote in the meeting) of a Cyprus company listed on a regulated market can propose a subject to be added to the agenda through electronic means or by post; A person must be registered as a member in the relevant register of members (including the register kept abroad) on the record date in order to be able to attend and vote in a General Meeting. Any amendment to the relevant register after the record date will not be taken into account when determining the rights of any person to attend and vote in the meeting. The right of a member to attend a General Meeting and vote in respect of his or her shares is not subject to a condition that the shares be deposited with, or transferred to another person or registered in the name of another person, prior to the General Meeting. Furthermore, a member is free to sell or otherwise transfer his or her shares in a Cyprus company listed on a regulated market at any time between the record date and the 87

93 General Meeting, provided that such right to sell would not otherwise be subject to any restrictions; Cyprus companies listed on regulated markets may make voting by electronic means available to their members and without the need for the member or their proxies to be present and may also provide real time communication; Members of Cyprus companies listed on regulated markets may appoint more than one proxy if their shares are held in different security accounts; Members entitled to more than one vote (either in person or through a proxy) in a meeting of members of a Cyprus company listed on a regulated market are not obliged to use all of votes or to cast all of votes in the same manner; and When members of Cyprus companies listed on regulated markets apply for a full report of the voting results of a General Meeting, the company shall announce, for every resolution proposed (i) the number of shares on which votes were validly placed; (ii) the proportion of issued share capital at the end of the day before the meeting which is represented by such votes; (iii) the total number of valid votes; and (iv) the number of votes which were cast in favor and against every proposed resolution and, if counted, the number of abstentions. If no members apply for such a full report, it will be sufficient for Cyprus companies listed on regulated markets to announce the results on their websites within 14 days of the meeting and only to the extent necessary in order to ensure that the required majority was reached for every resolution. At the date of this Annual Report, all the issued Shares rank pari passu and each issued Share in the Company confers one vote on a show of hands and on poll. As mentioned above, the new classes of Shares (Class A Shares and Class B Shares) have equal rights as and rank pari passu with the Company's Ordinary Shares, including with respect to voting and dividends. As a general rule (and except where otherwise required), all matters raised at the General Meeting require decision by simple majority (more than 50% of the votes cast). Under the Companies Law and the Articles of Association, a special resolution adopted by a majority in favour of at least 75% of the votes cast is required, inter alia, in respect of the following matters: Variation of the rights attached to the Shares (Regulation 13 of the Articles of Association) Amendments to the Articles of Association of the company; Change of name of the company; Reduction of the issued share capital, the premium account or the redemption reserve, any of which also requires court sanction (Regulation 14 of the Articles of Association); and Merger and de-merger. In order to be entitled to vote at a General Meeting, a shareholder must, as a general rule, be registered as owner of the Shares in the Company s shareholder register kept by the VPS. Pre-emption rights Where the share capital is proposed to be increased by consideration in cash, the existing shareholders have a right of pre-emption to subscribe for new shares to be issued in proportion to the aggregate number of such shares of the shareholder. Rights of pre-emption are also applicable to the issuance of securities which are convertible to shares but there are no pre-emption rights with respect to shares issued for non-cash consideration or shares issued on the conversion of convertible instruments or the exercise of options. 88

94 Pre-emption rights may be restricted or dis-applied in accordance to the provisions of the Companies Law. Specifically, a disapplication of pre-emption rights requires a resolution of the general meeting which is passed by a specified majority. Most recently, pursuant to shareholder s resolutions taken at the extraordinary general meeting of the Company held on 13 April 2016, the shareholders increased the authorised share capital of the Company and the pre-emption rights on an issuance of the authorised but unissued share capital of the Company have been dis-applied up to and including 13 April For further information in this respect please see note 30 to the financial statements. 9.6 Employees Geographic location and business areas As of the date of this Prospectus, the Group has approximately 1,239 employees in total. The table below shows the development in the average number of man-years in the Group as of 31 December 2013 and 2014 and as of 31 December Number of employees by year end Below is an overview of the geographical location of the employees in the Group as of 31 December 2015: Location Onshore Offshore No. of employees Norway Singapore Cyprus Korea United Kingdom Total

95 10 SELECTED FINANCIAL INFORMATION 10.1 General The selected condensed financial data set forth in this section may not contain all of the information that is important to a potential purchaser of Shares in the Company, and the data should be read in conjunction with the relevant consolidated financial statements and the related notes thereto, incorporated by reference into this Prospectus (ref. section 16.3 Incorporation by reference ), and other financial information included elsewhere in this Prospectus. The amounts from the financial statements are presented in USD, rounded to the nearest 000, unless otherwise stated. As a result of rounding adjustments, the figures in one or more rows or columns included in the financial statement information may not add up to the total of that row or column Selected condensed financial information This section set forth selected condensed consolidated financial information for Songa Offshore for the years ended, 31 December 2015, 2014 and 2013, which has been derived from the audited consolidated financial statements as of, and for the year 31 December 2015, 2014 and The audited consolidated financial statements as of, and for the year ended, 31 December 2015, 2014 and 2013, including an overview of the accounting policies, explanatory notes and auditor s report, are incorporated by reference into this Prospectus. The consolidated financial statements may also be inspected at the Company s website or be obtained, free of charge, at the visiting address at Porto Bello, Office 201, No 1 Siafi Street, Limassol, Cyprus. Key financial information Amounts in USD million (audited) (audited) (audited) Operating revenues Operating expenses (152) (217) (279) EBITDA EBIT (366) 17 (19) Income tax expense (37) - (57) Net profit (loss) for the year (470) (57) (159) Cash and cash equivalents Current assets Current liabilities (445) (391) (500) Working capital (150) (59) 244 Total indebtedness (2,174) (846) (1,067) Total equity 573 1,036 1,081 Total assets 3,250 2,307 2,439 90

96 Accounting policies The Company s historical financial statements have been prepared in accordance with IFRS as adopted by EU and the requirements of the Cyprus Companies Law, Cap 113. Please refer to note 3 of the annual report for 2015 as incorporated by reference into this Prospectus for a full summary of the Company s accounting policies Condensed consolidated statement of comprehensive income The table below summarizes the consolidated statement of comprehensive income for the Group for the years ended 31 December 2015, 2014 and Amounts in USD (audited) (audited) (audited) Revenues 513, , ,211 Operating Expenses (151,719) (217,119) (278,690) Reimbursables (35,146) (33,196) (11,790) General and administrative expenses (44,581) (48,678) (60,148) Other gain and loss (866) 799* 922 Depreciation and amortization (126,344) (114,299) (139,554) Impairment (521,005) (64,899) (92,261) Finance income 7,318 3, Finance expense (20,638) (33,546) (83,822) Other financial items (52,789) (43,794) 169 Profit (loss) before tax (432,367) (56,566) (102,406) Income tax (expense) / credit (37,364) (97) (56,777) Profit (loss) for the year (469,730) (56,663) (159,183) Cashflow hedge 3,324 (3,698) 27,109 Remeasurement of net defined pension liability 1,505 (10,092) (9,840) Total comprehensive income (464,901) (70,453) (141,914) *During 2014 there was a change in presentation due to the foreign exchange forward hedge being discontinued. The change in mark to market valuations of foreign exchange forward transactions are recognized through Other Financial Items, from 2014 onwards, while before, the change in mark to market valuations were recognized to Other Comprehensive Income and reflected in Other Gains/Losses in the Consolidated Statement of Comprehensive Income when realized. This change reflects that the foreign exchange forward hedge is not regarded as a Perfect Hedge. In addition the Net foreign exchange gain /loss and the Currency element in currency and interest swaps, previously presented under Other Gain/Loss in the Consolidated Statement of Income, were presented under Other Financial Items in the Consolidated Statement of Income. The Group believes that the new presentation provides more relevant information, and it is in line with industry practice. 91

97 Condensed consolidated statement of financial position The table below summarizes the consolidated statement of financial position for the Group as at the years ended 31 December 2015, 2014 and Amounts in USD (audited) 2014 (audited) 2013 (audited) ASSETS Non-current assets Rigs, machinery and equipment 1,963,647 1,063,416 1,028,480 Newbuilds 869, , ,564 Financial assets 8,044 53,722 - Deferred tax assets 16,771 52,971 55,503 Derivative financial instruments 97,129 72,740 28,822 Total non-current assets 2,955,005 1,973,907 1,695,369 Current assets Assets held for sale ,000 Trade receivables 34,431 41,577 62,986 Prepayments 6,106 4,597 5,308 Earned revenue 38,104 25,419 44,292 Financial assets 37, Derivative financial instrument Other assets 10,707 24,556 10,747 Cash and cash equivalents 168, , ,122 Total current assets 295, , ,455 TOTAL ASSETS 3,250,309 2,306,554 2,438,824 92

98 Amounts in USD 000 EQUITY AND LIABILITIES 2015 (audited) 2014 (audited) 2013 (audited) Capital and reserves Issued capital 132, , ,448 Share premium 633, , ,825 Other equity (193,523) 269, ,282 Total equity 573,107 1,035,768 1,080,553 Non-current liabilities Bank loan and other facilities 1,516, , ,669 Bond loans 242, , ,089 Convertible bond 116, , ,584 Derivative financial instruments 251, ,089 64,326 Deferred revenue 91,273 22,335 61,237 Other long term liabilities 13,531 22,512 14,545 Total non-current liabilities 2,232, , ,450 Current liabilities Bank loans related to assets held for sale ,261 Current portion of bank loans and other facilities 291, , ,770 Trade payables 34,712 13,424 25,166 Tax payable 3,621 3,519 16,724 Derivative financial instruments - 39,125 - Deferred revenue 35,927 41,710 37,716 Other liabilities 78, ,613 80,183 Total current liabilities 444, , ,820 Total liabilities 2,677,202 1,270,785 1,358,270 TOTAL EQUITY AND LIABILITIES 3,250,309 2,306,554 2,438, Condensed consolidated statement of changes in equity The table below summarizes the consolidated statement of changes in equity for the Group for the years ended 31 December 2015, 2014 and

99 Amounts in USD 000 Share capital Share premium Other reserves Post employment benefit reserve Hedging reserve Retained earnings Total equity Balance as at 1 January , ,118 15,585 (772) (20,125) 446, ,993 Loss for the year (159,183) (159,183) Other comprehensive income (9,840) 27,109-17,269 Total comprehensive income for the year (9,840) 27,109 - (141,914) Issue of share capital 92, , ,963 Issue of convertible bond , ,511 Total Transactions with owners, recognised directly in equity 92, ,707 39, ,474 Balance as at 31 December 2013 (audited) 123, ,825 55,096 (10,612) 6, ,814 1,080,553 Balance as at 1 January , ,825 55,096 (10,612) 6, ,814 1,080,553 Loss of the year (56,663) (56,663) Other comprehensive income (10,092) (3,698) - (13,790) Total comprehensive income for the year (10,092) (3,698) (56,663) (70,453) Issue of share capital 9,314 16,043 (1) ,356 Employee long term incentive program Total transactions with owners, recognised directly in equity 9,314 16, ,668 Balance as at 31 December 2014 (audited) 132, ,869 55,407 (20,704) 3, ,151 1,035,768 Balance as at 1 January , ,869 55,407 (20,704) 3, ,151 1,035,768 Loss for the year (469,730) (469,730) Other comprehensive income ,505 3,324-4,869 94

100 Total comprehensive income for the year ,505 3,324 (469,730) (464,901) Issue of share capital Employee long term incentive program - - 2, ,239 Total transactions with owners, recognised directly in equity - - 2, ,239 Balance as at 31 December 2015 (audited) 132, ,869 57,646 (19,199) 6,610 (238,579) 573, Condensed consolidated statement of cash flows The table below summarizes the consolidated cash flow statement for the Group for the years ended 31 December 2015, 2014 and

101 Amounts in USD (audited) 2014 (audited) 2013 (audited) Cash flows from operating activities: Profit (loss) before tax (432,367) (56,566) (102,406) Adjustment for: Depreciation 126, , ,554 Cost of option plans (248) Impairment 521,005 64,899 92,261 Finance income (7,318) - - Finance costs 20,638 33,546 83,822 Other financial items 52,789 43,794 (169) Other gain and loss 866 (799) (922) Movements in working capital: Change in receivables (2,861) 36,846 (3,110) Change in payables 21,288 (11,742) (26,581) Change in other liabilities 10,921 (75,498) (46,415) (Increase)/ decrease in restricted cash balances (53,608) 6,704 (8,530) Cash generated from operations 257, , ,256 Taxes paid (1,586) (4,779) (4,439) Interest paid (86,905) (57,740) (60,154) Interest income received Financing fees paid (6,396) (41,328) (21,368) Cash effect from other financial items (18,714) (10,274) - Cash effect from other gains and losses ,500 Net cash generated from operating activities 144,320 42,364 45,795 Cash flows from investing activities: Purchase of property, plant and equipment (1,649,277) (237,821) (222,520) Proceeds from sale of property, plant and equipment - 112, ,000 Investment in other companies, net of cash acquired - (1,000) - Net cash (used in) / generated from investing activities (1,649,277) (126,321) 367,480 Cash flows from financing activities: Proceeds from issue of share capital net of share issuance cost - 22, ,222 Share issuance transaction costs - (79) (14,575) Convertible bond transaction costs - - (6,847) Proceeds from issue of bonds and new bank loan raised 1,690, , ,000 Repayment of bonds and bank loans (316,298) (242,130) (397,924) Net cash (used in) / generated from financing activities 1,373,702 (113,052) (19,125) Net increase/(decrease) in cash and cash equivalents (131,255) (197,008) 394,150 Cash and cash equivalents at the beginning of the year 227, ,308 30,158 Unrestricted cash and cash equivalents at end of the year 96, , ,308 96

102 10.3 Segment information The Group operated four rigs during 2015, two rigs for the full year, one rig up to 15 November 2015 and one from 7 December 2015, all of which were operated in the midwater segment. Operating results are regularly reviewed by the Group in order to make decisions about resources to be allocated to the rigs and to assess the performance. The rigs are reported together as the drilling services provided are the same, the drilling operations are the same and the customers approached are the same. Time charter revenues are received from customers in the below countries: USD million Norway Malaysia Angola Russia Vietnam Total operating revenue In 2015, revenue from one of the Group s customers individually represents more than 10% of the total Group operating revenue. Revenue from these customers represents 100% of Group operating revenue. In 2014 revenue from these customers represents 81% and 14%, in total 95% of Group operating revenue. Other operating revenues derives mostly from Norway. In 2013, revenue from these customers represents 71% and 10, in total 81% of the Group operating revenue Statutory auditors The Consolidated Financial Statements as at and for the years ended 31 December 2015, 2014 and 2013 have been audited by PricewaterhouseCoopers Limited, independent auditors, as stated in their report incorporated by reference to this Prospectus. PricewaterhouseCoopers Limited has its registered offices at Themistokli Dervi,3 Julia House, 1066, Nicosia, Cyprus. PricewaterhouseCoopers Limited is a member of the Institute of Certified Public Accountants of Cyprus Statement of audited historical financial information The historical financial information for 2015, 2014 and 2013 have been audited. Unqualified opinions were issued by PricewaterhouseCoopers Limited on the consolidated financial statements as at and for the years ended 31 December 2015, 2014 and

103 11 OPERATIONAL AND FINANCIAL REVIEW This operating and financial review should be read together with section 10 Selected financial information and the financial statements incorporated into this Prospectus by reference (see section 16.3 Incorporation by reference ) Comments to the financial statements The following presents a discussion and analysis of Songa Offshore s financial position and results of operation for the years ended 31 December 2015, 2014 and The following discussion and analysis should be read in connection with, and is qualified in its entirety by reference to, the full year financial statements incorporated into this Prospectus by reference. Comments are unaudited and not reviewed Overview of current financial situation Since 31 December 2015, Songa Offshore has completed a comprehensive refinancing under which it has raised USD 125 million through a new convertible bond issue and also intends to raise up to USD 25 million at NOK 0.15 per share through a subsequent equity offering. The New Convertible Bond was partly underwritten by way of a USD 91.5 million bridge financing subscribed for in full by the largest stakeholders in the Company. The refinancing further includes a full conversion to equity of SONG06 in an amount of USD 150 million at NOK per share, significant interest reductions, maturity extensions and other amendments to SONG 04, SONG 05 and the Perestroika Shareholder Loan, as well as amendments to the Company s secured debt facilities. Covenants have been partially suspended and amended, providing the Company with increased financial headroom in the years ahead. As of the date of this Prospectus, the Company had a cash balance of USD 184 million, whereof 118 million consist of free and available cash. Restricted cash is primarily related to cash collateral under Cat D financing agreements and tax withholding deposits. The Company is now in a significantly improved financially position and with the newest rig fleet for harsh environment operations on the Norwegian Continental Shelf. The long term Cat D contracts and backlog of USD 5.1 billion with Statoil provides Songa Offshore with one of the largest backlogs in the industry in excess of 30.5 rig years As at and for the years ended 31 December 2015 and 2014 Operating results Revenue for the Group was USD million in 2015 compared to USD million for 2014, an increase of 3.8%. The main reasons for the increase, are Songa Trym contract cancellation fee from Statoil of USD 41.1 million, that accelerated January and February 2016 revenue into 2015, revenue contribution from Songa Equinox from 7 December, full year revenue from Songa Dee in 2015 as opposed to being out of service for the Special Periodic Surveys ("SPS") for a period in the fourth quarter 2014, partly offset by lower revenue contribution deriving from the sale of Songa Trym due to its contract cancellation in November 2015 and being on 75.0% suspension rate for 18 days in 2015, as well as the absence of revenue contribution from Songa Venus and Songa Mercur as a result of strategic decisions to operate in the East through a Joint Venture which was established in 2014 with the Opus Offshore Group. Operating expenses decreased by 30.1% compared to last year, from USD million in 2014 to USD million in The decrease in operating expenses is to a large extent due to favourable currency fluctuation from stronger USD and to the divestment of the Songa Mercur and 98

104 the Songa Venus from July 2014, partly offset by Songa Equinox being in operation for a period in December 2015 and to higher Songa Dee operating costs in 2015, as operating expenses incurred during the 2014 yard stay were partly capitalized. General and Administrative (G&A) expenses for the year were USD 44.6 million as compared to USD 48.7 million in 2014, a decrease of 8.4%. The decrease is mainly explained by lower East G&A cost in 2015, reflecting the Songa Mercur and Songa Venus divestments, and to favourable currency fluctuation from stronger USD. Other gains and losses decreased from a gain of USD 0.8 million in 2014 to a loss of USD 0.9 million in The loss in 2015 relates to a bad debt provision made with respect to a receivable from the Songa Mercur resulting from a contract rig prior to its sale. EBITDA for 2015 was USD million compared to USD million in 2014, representing an EBITDA margin of 54.8% compared to 39.7% in This mainly reflects the higher operating revenue and the lower operating expenses as discussed in the above paragraphs within this section. Depreciation expense was USD million in 2015, USD 12.0 million higher than the 2014 depreciation expense, primarily reflecting Songa Equinox depreciation in December 2015 and the 2014 Songa Dee Special Periodic Survey, which is depreciated over five years, partly offset by no depreciation for 2015 for the Songa Mercur and the Songa Venus as a result of their divestment. During the year the Group recognised an impairment loss of USD million related to the Songa Dee, the Songa Delta and the Songa Trym compared to USD 64.9 million in No impairment loss has been recognised in 2015 for the Cat Ds. The aforementioned impairment is owed to the decline in market day rates in 2015 and Impairment tests were performed for all seven rigs during The recoverable amount of Songa Dee which has been determined based on the valuein-use calculations, estimated using cash flows projections form financial budgets approved by management, equals to USD million. The recoverable amount of Songa Delta and Songa Trym, which has been determined based on the fair values less costs to sell, equal to USD million and USD 61.0 million respectively. Finance income in 2015 was USD 7.3 million compared to USD 3.4 million in The increase is mainly due to additional income earned on the financial assets derived from the sale of the Songa Mercur and the Songa Venus and the investment in the Joint Venture established with the Opus Offshore Group. Finance costs in 2015 were USD 20.6 million compared to USD 33.5 million in 2014, a decrease of 38.5%. The decrease is mainly explained by the additional capitalization of the finance cost related to Cat D new-builds. The gross finance costs for 2015 were USD million, while capitalized interest were USD 79.4 million. The gross finance costs for 2014 were USD 85.3 million, while capitalized interests were USD 51.7 million. Moreover, the increase relates to increased finance cost due to the inception and the full utilization of the credit facilities for three of the four Cat Ds. Other financial items of USD 52.8 million were recognized in 2015 compared to USD 43.8 million in USD 15.3 million is attributable to the Songa Mercur sale, where estimates for two earn-out arrangements have been reassessed and reduced in light of the weaker drilling market. USD 51.1 million represents realized foreign exchange losses in relation to forward transactions. This was partly offset by a gain of USD 13.6 million, primarily related to unrealized mark to market valuation changes of foreign exchange forward transactions. The foreign exchange items are reflecting the sharp appreciation of the US Dollar vs. the Norwegian Kroner during the year. 99

105 Loss before tax for the year was USD million compared to a loss of USD 56.6 million in This mainly reflects the impairment loss of million as mentioned above, counter affected by the increase in operating revenue and the decrease in operating costs mentioned in the aforementioned paragraphs within this section. Income tax charge in 2015 was USD 37.4 million compared to a charge of USD 0.1 million in 2014, a difference of USD 37.3 million. Income tax charge for 2015 included USD 19.7 million related to profit from ongoing operations for the year and USD 5.7 million in relation to the recognition of the Songa Trym cancellation fee. In addition, USD 6.3 million relates to revaluation of the NOK denominated deferred tax asset, USD 4.0 million represent tax related to revaluation of other balance sheet items and USD 1.7 million relates to the decreased value of the deferred tax assets due to the change in the Norwegian corporate tax rate from 27% to 25%. Net Loss for the year was USD million compared to a net loss of USD 56.7 million in Basic and diluted loss per share (EPS) for the year ended 31 December 2015 was USD 0.54 compared to a loss of USD 0.07 in This reflects the increased loss for the year. Balance sheet The Group s total assets as at year end were USD 3,250.3 million compared to USD 2,306.6 million in The increase is mainly attributed to the higher carrying value of the Group s drilling rigs and new-builds accounted for USD 2,817.4 million compared to USD 1,781.7 million in 2014 as a result of the Songa Equinox and the Songa Endurance going into operation in December 2015 and due to additional capital investments in all four Cat D rigs. See also section for investments per rig. Total cash and cash equivalents as at the end of the year were USD million, compared to USD million at year end The decrease mainly reflects payment of USD million used for loan repayments. Moreover, the decrease further relates to the payment of the final DSME yard instalments for the three Cat D rigs delivered from the yard during 2015 as well as other capital expenditures related to both to the Cat D new-builds and the Songa Trym, Songa Delta and Songa Dee of an amount of USD 1,649.3 million. The aforementioned are partly offset by the proceeds from the full draw down of the financing related to the Cat D rigs of USD 1,640 million and the USD 50.0 million related to the shareholder loan from Perestroika AS. Free and available cash as at the end of the year were USD 96.1 million, compared to USD million at year end Total equity has decreased from USD 1,035.8 million in 2014 to USD million in The decrease is due to the loss for the year of USD million, partly offset by a positive movement in other comprehensive income of USD 4.8 million and by USD 2.2 million related to movement in other reserves. As of 31 December 2015 the book equity ratio of the Group (defined as total equity divided by total assets) is 17.6% compared to 44.9% in The decrease is as a result of the increased carrying value of the Group s drilling and new-build rigs as mentioned above and the decrease in equity as a result of net loss for the year As at and for the years ended 31 December 2014 and 2013 Operating results Total revenue for the Group was USD million in 2014 compared to USD million in 2013, reflecting a decrease of 12.0%. This decrease was a result of lower revenue contribution 100

106 from Songa Mercur and Songa Venus, which were both divested during the year (transaction with Opus Offshore Group completed 23 July 2014). In addition, Songa Dee was out of service from the second half of the third quarter up until the 24 of December 2014 in relation to its five year SPS. The Group s rig operating expenses were USD million in 2014, which was USD 61.6 million lower than the operating expenses of USD million in 2013 resulting in a 22.1% decline. The majority of the decrease in operating expenses is explained by the divestment of Songa Mercur and Songa Venus, in addition to the partial capitalisation of operating expenses incurred during the 2014 yard stay of Songa Dee. General and Administrative (G&A) expenses for the Group were USD 48.7 million in 2014 compared to USD 60.1 million in 2013, corresponding to a 18.9% reduction. The decrease was mainly related to the absence of USD 4.4 million in severance payments and other special compensation incurred in 2013, combined with a decrease in G&A relating to the South East Asia in Other gains and losses for the year 2014 was USD 0.8 million compared to USD 0.9 million in 2013 (restated), which was primarily caused by lower positive insurance claim contribution of USD 0.8 million (2013: USD 1.3 million). Note that 2013 figures have been restated, and as a consequence the currency element in currency and interest swaps and currency exchange rate results are included in Other financial items instead of Other gain and loss, effectively reducing the 2013 gain from USD 1.1 million to 0.9 million (and from hereon reported above EBITDA and EBIT lines). The Group s EBITDA for 2014 was USD million compared to USD million in 2013, corresponding to an improved EBITDA margin of 39.7% compared to 37.8% in The fluctuation was primarily explained by a relative improvement in operating expenses. The depreciation expense decreased by USD 25.3 million to USD million in 2014 and primarily reflected the abovementioned divestment of Songa Mercur and Songa Venus for which depreciation has ceased from 1 January 2014 as a result of the asset held for sale classification. In addition, absence of depreciations on the life extension investments incurred in 2013 and 2012 on Songa Delta and Songa Trym impacted the expense positively. The Group recognised impairments of USD 64.9 million in 2014 compared to USD 92.3 million in The 2014 impairment comprised USD 60.7 million related to Songa Venus and Songa Mercur in line with the asset held for sale accounting rules, where the net selling price of the two rigs has been reduced by the earned EBITDA during the period that are recognised as held for sale. As such the two rigs have been written down by the EBITDA contribution earned from the two rigs. Impairment recognised also relates to USD 4.2 million in equipment impairment related to Songa Dee and Songa Trym. Net financial expenses was USD 73.9 million in 2014 compared to USD 83.1 million in Finance income increased from USD 0.6 to USD 3.4 million relative to 2013, mainly driven by additional income earned on financial assets derived from the divestment of Songa Mercur and Songa Venus and the Joint Venture established with Opus Offshore Group. Finance costs were USD 33.5 million (2013: USD 83.3 million), where the decrease was primarily related to absence of USD 48.2 million in refinancing expenses incurred during Other financial items charged totalled USD 43.8 million in 2014 (not recognised in 2013). The main component was USD 29.7 million primarily related to unrealised mark to market valuation changes of currency forward transactions, driven by the depreciation of NOK versus USD during the year. The Group s loss before tax was USD 56.6 million in 2014 compared to a loss of USD million in 2013, reflecting the abovementioned fluctuations. Accounting for the decrease in tax charge 101

107 from USD 56.8 million in 2013 to USD 0.1 million in 2014, a difference of USD 56.7 million. The 2014 tax expense included a partial reversal of USD 12.4 million in provisions related to international operation (non-cash). Furthermore, it included a non-cash realisation effect of USD 4.5 million from the re-domiciliation to Cyprus. However, this was outweighed by a non-cash tax expense of USD 12.2 million primarily reflecting effects of the revaluation of the loss carry forward at a depreciated NOK exchange rate. Net Loss for the year was USD 56.7 million compared to a net loss of USD million in Basic and diluted earnings per share (EPS and DEPS) for the year ended 31 December 2014 came in at a loss of USD 0.07 per share (2013: loss of USD 0.74). This is mainly as a result of lower net loss for the year reflecting the above changes. Balance sheet The Group s total assets at year end 2014 were USD 2,306.6 million (2013: USD 2,438.8 million) of which USD 1,794.5 million (2013: USD 1,791.0) were related to the net carrying value of the Group s rigs, machinery and equipment. While USD 1,063.4 million was related to currently operating rigs not held for sale (2013: USD 1,028.5 million), USD million (2013: USD million) was related to new-builds. As at end year 2014, the Group did not hold assets for sale (2013: USD million). From 2013 to 2014 the current ratio (defined as current assets to current liabilities) declined from 145.3% to 85.0%. This is due to the decline in the cash and cash equivalents balance, the absence of the Songa Eclipse held for sale (as a result of the sale of the rig in 2013), partly offset by a decrease in the bank loan related to asset held for sale and the reduction current portion of bank loans and other facilities as a result of the restructuring in 2013 and the repayment of part of the Legacy Fleet Loan of USD million as a result of the sale of Songa Eclipse. Total equity decreased by USD 44.8 million to USD 1,035.8 million despite of the USD 25.4 million equity issuance, caused by negative other comprehensive income (OCI) of USD 70.5 million. As at end year the Group s equity ratio (defined as total equity to total assets) stood at 44.9%, marginally higher than the 44.3% in Total cash and cash equivalents as at year end were USD million (2013: USD million). The main reasons for the decrease are reduced working capital and higher fee expenditures related to financing of the Cat Ds. Moreover, capital expenditures of USD million related to the Cat D new-builds and the Songa Dee SPS, partly offset by the cash portion of the sale of the Songa Mercur and the Songa Venus of USD million and the sale proceeds of USD 590 million related to the sale of Songa Eclipse in The reduction is also contributed from loan repayments of USD million, partly offset by the net proceeds from the subsequent offering of share completed in March 2014 of USD 25.4 million and proceeds from the Cat D 1 and 2 junior loan pre-delivery tranche of USD million As at and for the years ended 31 December 2013 and 2012 Operating results The Group had revenues of USD million in 2013, reflecting a decrease of 3.9% relative to the revenue for 2012 of USD million. The main factor behind the revenue decrease was lower revenue contribution from Songa Eclipse, which was sold in January However, this effect was partly offset by higher revenue contribution from rigs Songa Mercur, Songa Trym and Songa Delta, the two latter commencing operations after yard stays early in

108 Operating expenses decreased from USD in 2012 to USD million in 2013, i.e. a 15.7% decline. Lower operating expenses for the year were primarily related to the Songa Eclipse divestment. The decline in operating expenses related to the sale of Songa Eclipse was partly outweighed by higher operating expenses on Songa Trym and Songa Mercur. The Group s General and Administrative (G&A) expenses for the year 2013 were USD 60.1 versus USD 55.5 the prior year. The main explanation behind the increase was USD 4.4 million related to refinancing expenses and severance payments. Other gains and losses decreased from a gain of USD 7.3 million in 2012 to a gain of USD 1.1 million in 2013 (restated 2013 figures in 2014 report state a gain of USD 0.9 million). This was mainly driven by a negative contribution from the currency element in the currency and interest swaps, which was offset by exchange rate gains. In addition, a lower positive insurance claim contribution in 2013 compared to 2012 had negative impact. In terms of EBITDA for 2013 the Group experienced an increase to USD million from USD million in 2012, driven by the aforementioned operating expenses deflation. The corresponding EBITDA margin was 37.8% for the year compared to 33.9% in The Group s depreciation expense was USD million in 2013, which was USD 15.3 higher than in While the Songa Eclipse divestment lowered depreciation on an isolated basis, the net increase primarily reflected the depreciations of capital expenditures related to the life extension projects on Songa Delta and Songa Trym in fourth quarter 2012 and first quarter For 2013 the Group recognised an impairment of USD 92.3 million, down from USD million in The impairment charge was related to Songa Venus and Songa Mercur which both were written down to the estimated net market value. Net finance costs increased from USD 38.8 million in 2012 to USD 83.1 million in 2013, primarily driven by a USD 48.2 million increase from the refinancing process, of which USD 42.7 million were non-cash. The Group s loss before tax was USD million in 2013 compared to a loss of USD million the prior year. Adjusting for the tax charge, which was USD 56.8 million (2012: USD 10.7 million), the Group s net loss after tax was USD million in 2013 compared to a net loss of USD in The large increase in tax charge in 2013 comprised i.a. a non-recurring item related to adjustments of tax losses carried forward (USD 6.0 million) and provisions for potential exit tax related to assets held for sale (USD 21.8 million). Basic and diluted earnings per share (EPS and DEPS) for the year ended 31 December 2013 came in at a loss of USD 0.74 (2012: loss of USD 1.59). Balance sheet The Group s total assets as at year end 2013 were USD 2,438.8 million (2012: USD 2,739.3 million) of which USD 1,791.0 million (2012: USD 2,468.9 million) were related to the net carrying value of the Group s rigs, machinery and equipment. The net carrying value related to operating rigs not held for sale was USD 1,028.5 million (2012: USD 1,372.3 million), while USD million (2013: USD million) was related to new-builds. As at end year 2013, the Group held assets for sale of USD million (2012: USD million). The current ratio increased from 104.5% to 145.3% during the year. The Group s total equity increased from USD million to USD 1,080.6 million, mainly due to an equity issuance with gross proceeds of USD million, which more than outweighed the negative contribution from 103

109 total comprehensive income of USD million. The equity issuance, combined with the debt restructuring including the equity component of the USD million convertible bond, increased the equity ratio from 34.6% to 44.3%. As at end year 2013 total cash and cash equivalents were USD million (2012: USD 37.6 million). This is as a result of the net proceeds from the share issue in December 2013 of USD million and proceeds from the convertible bond issue of USD million partly set off from USD million of loans repaid as a result of the Songa Eclipse divestment as well as USD 93.0 million of Syndicate bank facility instalments Investments The main capital expenditures are connected with newbuilds, acquisition and refurbishment of the Company s asset base Historical capital expenditures The following table sets forth information about the Group s capital expenditures for the periods indicated, split on the respective rigs. The amounts include capitalised interests. Investments in Rigs Amounts in USD 000 YTD Songa Venus (sold 2014) ,657 Songa Mercur (sold 2014) ,843 Songa Delta 199 1,457 10,106 3,335 Songa Dee , ,528 9,059 Songa Eclipse (sold 2013) Songa Trym 557 2, ,986 Songa Equinox 1, ,587 55,469 24,176 Songa Endurance 1, ,360 44,278 22,659 Songa Encourage 39, ,278 24,382 14,396 Songa Enabler 476,223 53,505 24,365 14,746 Other 35 1,636 4,218 3,121 Total 519,624 1,681, , ,976 On 23 July 2014, Songa Offshore completed the sale of the Songa Mercur and the Songa Venus rigs to the Opus Offshore Group for proceeds of USD million. The Songa Mercur and the Songa Venus, were from the same date operated through a 50% owned Joint Venture established with Opus Offshore Group. Songa Eclipse has been sold in January 2013 at sales proceeds of USD million Ongoing- and future committed capital expenditures The Company have had significant investments in progress related to the Cat D rigs. The final yard instalment of USD 436 million for Songa Enabler was paid upon delivery of the rig in March The remaining capital expenditure is primarily related to the mobilization of Songa Enabler and amounts to approx. USD 60 million. Overview of other planned capital expenditures Capital expenditures for the Group s operating rigs mainly relate to Special Periodical Surveys (SPS). These surveys are required in order to maintain classification certificates, which are renewed every five years. SPSs normally involve yard stays and are for older rigs often combined with rig upgrades. The duration and cost of SPSs depend on many factors including the rig s 104

110 general condition, regular maintenance, extent, and planning of the survey, area of operation, and local requirements. Normally no charter hire is received during SPSs. Songa Delta is due for its next SPS in 2016, Songa Trym in 2018 and Songa Dee in The four Cat D rigs will be due for their first SPSs in 2020 and It is estimated that the Songa Delta SPS costs would be about USD 50 million, should the Company decide to move forward with such investment decision. For the 2018 and 2019 SPSs for Songa Trym and Songa Dee no estimate exist as per today. In addition to the SPS capital expenditures, there will be other capital expenditures for the rigs driven by regulatory requirements, client s request and efficiency improvements. It is expected that the Cat D rigs will have relatively lower levels of capital expenditure during their first years of operation Sources of funds needed to fulfil capital expenditure commitments Following the completion of the Refinancing the Company expects to be fully financed until secured Cat D debt and senior unsecured bonds matures in 2020 and 2021, and thus meet its financing and operations requirements for this period. It is expected that the funding requirements including 2020 and beyond will be met by refinancing of debt related to the Cat D rigs. Other capital expenditures are expected to be covered by available liquidity resources and cash flows generated from operations Working capital The Company is of the opinion that the working capital of the Company is sufficient for the Group's present requirements in a twelve months perspective as from the date of this Prospectus 11.4 Significant changes in the Group s financial or trading position since 31 December 2015 Other than the Refinancing described in section 5 of this Prospectus, the delivery and the mobilization of the Songa Enabler and the mobilization of the Songa Encourage, and the downtime in January for Songa Equinox and Songa Endurance (as described in Section 8.3.5) there have been no significant change in the financial or trading position of the Group which has occurred since 31 December 2015, being the end of the last financial period for financial information that has been provided Capitalization and indebtedness The tables below should be read in conjunction with the information included elsewhere in this Prospectus, including section 10 Selected financial information and the financial statements and related notes, incorporated into this Prospectus by reference Capitalization The following table sets forth information about the Group s unaudited consolidated capitalization as of 31 December 2015 and adjusted to reflect if the below-mentioned material changes had been in place as at that time for comparative purposes, as further set out in section Material changes in cash flow after 31 December

111 As of 31 December 2015 Adjustments Adjusted per the date of this Prospectus Amounts in USD 000 (audited) (unaudited) (unaudited) Total current debt Secured 297,656 (33,049) 264,607 Unsecured 107,519 (29,883) 77,635 Total 405,174 (69,932) 342,242 Total non-current debt (excl. current portion of longterm debt) Secured 1,516, ,530 1,939,379 Unsecured 610,827 (190,695) 420,132 Total 2,127, ,835 2,359,511 Shareholders equity Share capital 132,762 (99,285) 33,477 Legal reserve 633,869 (270,694) 904,562 Other reserves (193,523) 67,736 (125,787) Total 573, , ,253 In terms of the indebtedness, all bank loans are secured and given parts of the bank facilities are also guaranteed by GIEK (Garantiinstituttet for Eksportkreditt) and commercial banks in respect of certain bank loan facilities with Eksportfinans as Lender, as described in section In terms of the indebtedness described as secured above, the assets provided as security are made up of seven rigs: Songa Delta, Songa Dee and Songa Trym in respect of the Legacy facility, as described in section ; Songa Equinox and Songa Endurance in respect of the Cat D 1+2 facility, as described in section , and; Songa Encourage and Songa Enabler in respect of Cat D 3+4 facility, as described in section The following adjustments have been made in the table above: Current Secured debt: Adjustment of USD 33.0 million: o Repayment of the pre-delivery loan of USD 90.0 million in connection to the credit facility for the Songa Enabler rig, resulting in a decrease of current secured debt. The latter is offset by the increase in current debt of USD 48.0 million relating to the current portion of the fully utilised credit facility of total USD million relating to the Songa Enabler rig. o The adjustment also relates to loan interest paid, resulting in a decrease of current debt, of USD 3.2 million with respect to the Legacy Fleet Loan, USD 16.7 million interest paid in relation to the credit facilities under Cat D 1 and Cat D 2 rigs and USD 7.7 million relating to the credit facilities under the credit facilities for Cat D 3 and Cat D 4 rigs. This is partly offset by the amortisation of USD 36.6 million of effective 106

112 interest, resulting in an increase of current debt, relating to the Legacy Fleet Loan, the Perestroika Shareholder Loan and the credit facilities under the Cat D rigs to profit and loss. o As per 31 December 2015, Current secured debt includes accrued bank loan interest of USD 5.7 million which is presented under other liabilities within the annual report. Other Current Financial Debt: Adjustment of USD 29.9 million: o Decrease in accrued expenses of USD 14.4 million. o Decrease in trade payables balance of USD 15.5 million. Non Current Secured Debt: Adjustment of USD million: o o Increase in non-current debt arising from the utilisation of USD million of the credit facility related to the Songa Enabler, out of which USD 48.0 million (decrease in noncurrent debt) is reflected in the current secured portion. This is offset by instalments paid, resulting in a decrease, with respect to the Legacy Fleet Loan of USD 34.0 million and USD 46.7 million with respect to the credit facilities under the Cat D 1 and Cat D 2 rigs. The adjustment also relates to loan related fees paid, resulting in a decrease, of USD 1.8 million related to the Legacy Fleet Loan and the credit facilities under the four Cat D rigs, offset by USD 3.0 million effective fee amortisation for the Legacy Fleet Loan, the Perestroika Shareholder Loan and the credit facilities under the Cat D rig to profit and loss. Unsecured Non Current Debt: Adjustment of USD million: o Decrease of USD million relating to the 100% conversion into new shares of the Company of the Subordinated Convertible Bond issue 2013/ 2019 at par on an interim basis into Class A Shares with a nominal value EUR o Increase of USD 17.3 million relates to the accrued and unpaid interest under the senior bonds that has been agreed not to be paid as part of the restructuring but compensated with Equity Compensation. o Increase of USD 24.9 million relates to the net proceeds from the issue of the New Convertible bond of USD million adjusted for USD 94.3 million relating to the equity part. o Decrease of USD million arising from the derecognition of cross currency swaps. o Increase resulting from adverse market to market changes relating to interest rate swaps held by the Company of USD 11.5 million. o Decrease from positive market to market changes relating to cross currency swaps held by the Company of USD 22.7 million. Share capital: Adjustment of USD 99.3 million: o Increase of USD 1.3 million related to Class A Shares with respect to the equity compensation for the Perestroika Shareholder Loan and the Senior Bonds. 107

113 o o Increase of USD 8.4 million relates to the convertible bond 2013/2019 conversion into new Class A Shares with a nominal value of EUR Decrease of USD million relates to the share capital reduction of the nominal value of the Ordinary Shares from EUR 0.11 to EUR Share premium: Adjustment of USD million: o o Decrease of USD million relates to the share capital reduction of the nominal value of the Ordinary Shares from EUR 0.11 to EUR Decrease of USD 18.1 million related to Class A Shares with respect to Equity Compensation for the Perestroika Shareholder Loan and the Senior Bonds. o Decrease of USD million relates to the convertible bond 2013/2019 conversion into new Class A Shares with a nominal value of EUR Other Reserves: Adjustment of USD 67.7 million: o o o Increase of USD 94.2 million relates to the equity part from the issue of the New Convertible Bond net of estimated fees and expenses. Decrease of USD 30.1 million relates to the convertible bond 2013/2019 conversion. Increase of USD 3.6 million relates to other movements in profit and loss. 108

114 Indebtedness The following table sets forth information about the Group s unaudited net indebtedness as of 31 December 2015 and adjusted to reflect if the below-mentioned material changes had been in place as at that time for comparative purposes, as further set out in section Material changes in cash flow after 31 December As of 31 December 2015 Adjustments Adjusted per the date of this Prospectus Amounts in USD 000 (audited) (unaudited) (unaudited) Net indebtedness (A) Cash 168,388 15, , 000 (B) Cash equivalents (C) Trading securities (D) Liquidity (A) + (B) + (C) 168,388 15, ,000 (E) Current financial receivables 34, , ,228 (F) Current bank debt (G) Current portion of long-term debt 297,656 (33,049) 264,607 (H) Other current financial debt 107,519 (29,883) 77,635 (I) Current financial debt (F) + (G) + (H) 405,174 (62,932) 342,242 (J) Net current financial indebtedness (I) - (E) - (D) 202,357 (185,342) 17,015 (K) Non-current bank loans 1,516, ,530 1,939,379 (L) Bonds issued 359,323 (74,204) 285,119 (M) Other non-current loans 251,503 (116,491) 135,012 (N) Non-current financial indebtedness (K) + (L) + (M) 2,127, ,834 2,359,510 (O) Net financial indebtedness (J) + (N) 2,330,032 46,493 2,376,525 The following adjustments have been made in the table above: Current Financial Receivables: Adjustment of USD million: o Increase in trade receivables balance of USD million as a result of the Songa Equinox and the Songa Endurance being in operation during first quarter and April 2016, and the Songa Encourage being in operation from April Current Secured debt: Adjustment of USD 33.0 million: o Repayment of the pre-delivery loan of USD 90.0 million in connection to the credit facility for the Songa Enabler rig, resulting in a decrease of current secured debt. The latter is offset by the increase in current debt of USD 48.0 million relating to the current portion of the fully utilised credit facility of total USD million relating to the Songa Enabler rig. 109

115 o The adjustment also relates to loan interest paid, resulting in a decrease of current debt, of USD 3.2 million interest paid with respect to the Legacy Fleet Loan, USD 16.7 million interest paid in relation to the credit facilities under Cat D 1 and Cat D 2 rigs and USD 7.7 million relating to the credit facilities under the credit facilities for Cat D 3 and Cat D 4 rigs. This is partly offset by the amortisation of USD 36.6 million of effective interest, resulting in an increase of current debt, relating to the Legacy Fleet Loan, the Perestroika Shareholder Loan and the credit facilities under the Cat D rigs to profit and loss. o As per 31 December 2015, Current secured debt includes accrued bank loan interest of USD 5.7 million which is presented under other liabilities within the annual report. Other Current Financial Debt: Adjustment of USD 29.9 million: o Decrease in accrued expenses of USD 14.4 million (negative direction). o Decrease in trade payables balance of USD 15.5 million (negative direction). Non Current Bank Loans: Adjustment of USD million: o o Increase in non-current debt arising from the utilisation of USD million of the credit facility related to the Songa Enabler, out of which USD 48.0 million (decrease in noncurrent debt) is reflected in the current secured portion. This is offset by instalments paid, resulting in a decrease, with respect to the Legacy Fleet Loan of USD 34.0 million and USD 46.7 million with respect to the credit facilities under the Cat D 1 and Cat D 2 rigs. The adjustment also relates to loan related fees paid of USD 1.8 million, resulting in a decrease, related to the Legacy Fleet Loan and the credit facilities under the four Cat D rigs, offset by USD 3.0 million effective fee amortisation for the Legacy Fleet Loan, the Perestroika Shareholder Loan and the credit facilities under the Cat D rig to profit and loss. Bonds issued: Adjustment of USD 74.2 million: o o Decrease of USD million relates to the 100% conversion into new shares of the Company of the Subordinated Convertible Bond issue 2013/ 2019 at par on an interim basis into Class A Shares with a nominal value EUR Increase of USD 17.3 million relates to the accrued and unpaid interest under the senior bonds that has been agreed not to be paid as part of the restructuring but compensated with Equity Compensation. o Increase of USD 24.9 million relates to the net proceeds from the issue of the New Convertible bond of USD million adjusted for USD 94.3 million relating to the equity part. Other non-current loans: Adjustment of USD million: o Decrease of USD million arising from the derecognition of cross currency swaps. 110

116 o o Increase resulting from adverse market to market changes relating to interest rate swaps held by the Company of USD 11.5 million. Decrease from positive market to market changes relating to cross currency swaps held by the Company of USD 22.7 million. Cash: Adjustment of USD 15.6million o Increase of USD 15.6 results from Proceeds from the New Convertible Bond, net of fees and expenses, less instalments with respect to the Legacy Fleet Loan and the credit facilities under the four Cat D loans The following items are regarded as contingent liabilities: The Group s exposure to a possible exit tax in Norway is considered a contingent liability. The Company s redomiciliation from Norway to Cyprus took effect on 11 May The redomiciliation was done in accordance to the EU s SE directive and the Company is consequently not considered liquidated nor are the assets considered realised for neither tax nor accounting purposes. The Company is of the opinion that its redomiciliation to Cyprus in 2009 will not result in immediate taxation. In the event that the Company has to pay immediate exit tax, the Company estimates that the tax can be offset against available losses. No provision has been made in its financial statement for any such potential tax liability. For further information see section Exit tax in connection with redomiciliation. As at the date of this Prospectus, the Company is not aware of material liabilities, direct or indirect, actual or contingent, apart from the liabilities set out above Capital resources The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. By managing capital efficiently, the Company will be able to continue as a going concern while maximising the return to shareholders Key ratios The table below sets forth some consolidated key ratios for the Company as of 31 December 2015, 2014 and Key ratio 2015 (audited) 2014 (audited) 2013 (audited) Working capital ratio Interest coverage ratio Solidity 21.2% 49.7% 48.6% *Working capital ratio is defined as current assets/current liabilities (less short-term portion of long term debt), interest coverage ratio is defined as EBITDA/net interest expense and solidity is defined as total equity (including subordinated debt)/total assets. 111

117 Funding and treasury policies and financial risk management Long term financing of the rig fleet is primarily done in the bank and bond markets, including available export credit agency financing. Such financing is complimented by equity financing in order to maintain an effective capital structure. The Group is exposed to fluctuations in interest rates. A major part of the Group s interest costs on its bank loans are subject to floating interest rate (LIBOR) plus a margin. The risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings and by the use of interest rate swap contracts. The Company s keeps its long term loans denominated in USD. The two Bond loans are, however, denominated in NOK, but swapped to USD in order to minimize the NOK foreign exchange exposure. The Company s cash position is primarily held as short term USD deposits with reputable banks in order to minimize credit risk and in close relation to banks where the Company has established its cash management and payment systems. The Group is also exposed to foreign currency risks in relation to its operations. The Group s expenses are primarily in USD and NOK. As such, the Group s earnings are exposed to fluctuations in the foreign currency market for NOK in relation to USD. The Company will attempt to minimize these risks by implementing hedging arrangements as appropriate, and uses the foreign currency spot and forward market to buy foreign currencies. The Group is mainly exposed to the currency of Norway (NOK). In addition, to a lesser extent, the Group is exposed to the currencies of the United Kingdom (GBP) and the European currency (EUR). Due to the nature of the Group s operations, revenues and related receivables are typically concentrated amongst a relatively small customer base of international oil and gas companies. The majority of the revenues are generated by contracts with Statoil. The Company continually evaluates the credit risk associated with customers and, when considered necessary, requires certain guarantees, either in the form of parent company guarantees, bank guarantees or escrow accounts. The maximum credit risk is equal to the capitalized value of trade receivables and incurred revenue not billed. Songa Offshore has a centralised treasury function with a team who is responsible to monitor and optimise the cash flow position and cash and cash equivalents. The intragroup and external use of cash is monitored by the centralised treasury function. The treasury function will perform cash flow forecasting for subsidiary and Group financial management, it will manage debt, derivatives and investments and will ensure that contractual terms and covenants do not constrain the business. Lastly the treasury function performs financial risk management by implementing interest rate risk management and foreign currency risk management in order to minimise impact of external risk on the statement of comprehensive income and balance sheet Cash flows The following presents a discussion and analysis of Songa Offshore s cash flow for the years ended 31 December 2015, 2014 and The following discussion and analysis should be read in connection with, and is qualified in its entirety by reference to, the full year financial statements incorporated into this Prospectus by reference. 112

118 The cash flow is divided into three types of activities generating cash in the Group. Cash flow from operating activities is derived from profit before tax for the period, adjusted for P&L items not carrying cash effects (depreciation, cost of option plans etc.). Movements in working capital, payments relating to taxes, interest and fees, and cash effects from other gain and loss are taken into account in order to arrive at net cash generated from operations. The principal activity of the Group is to provide offshore oil and gas drilling services, and is hence the main contributor with regards to activities generating cash flow. Net cash used in investing activities is derived from purchase of property, plant and equipment and investment in other companies. Cash flow from financing activities consists of proceeds from issued of bonds and new bank loans rasied, proceeds from share issue to non-controlling interest and repayment of bonds and bank loans. Net cash flow for the period is then a total of net cash generated from operations, net cash used in investment activities and net cash generated from financing activities As of and for the year ended 31 December 2015 and 2014 Net cash generated from operating activities for the year was USD million compared to net cash generated from operating activities of USD 42.4 million in The main reasons for the increase are decreased working capital due to higher operating cash flow of USD 82.5 million and a decrease in working capital of USD 19.4 million, related to mobilisation fees received in connection to the three Cat Ds deliveries. Net cash used in investing activities for the year was USD 1,649.3 million, compared to net cash used in investing activities of USD million in This is mainly driven by the final yard instalments for three of the Cat D rigs and other capital expenditures related to the Cat D newbuilds. Net cash generated from financing activities for 2015 was USD 1,373.7 million (2014: net cash used USD million). At delivery of Cat D 1 and 2 in June and August 2015 respectively, the Company utilized USD million in senior secured loan and the USD 68.4 million post-delivery tranche of the junior secured loan for each of the two rigs. The Company utilized the USD million predelivery loan on Cat D 3 and 4 at the end of second quarter At delivery of Cat D 3 in December 2016 the Company utilized the USD million senior secured loan and used USD 90.0 million to repay the relevant pre-delivery loan. The USD million debt repayment was partly offset by a USD 25.5 million equity issue and proceeds from the Cat D 1 and 2 junior loan predelivery tranche of USD million. During the year, the Company also established a USD 50.0 million unsecured debt facility with the main shareholder, Perestroika AS, made scheduled repayments on the fleet loan for Songa Dee, Songa Delta and Songa Trym and repaid in full the USD million pre-delivery loan from Statoil in relation to Cat D 3 and Cat D 4. The Company s cash position as of 31 December 2015 was USD million, of which USD 96.0 million was free and available and the balance represented restricted cash. Net decrease in cash and cash equivalents for the year was USD million compared to a net increase of USD million in This is as a result of the above mentioned changes. At 31 December 2015 the Group had USD million of unutilised financing facilities in relation to the financing of Songa Enabler that is available upon repayment of the current pre-delivery financing of USD 90.0 million. The decrease in the free and available cash position to USD 96.0 million reduced the Company s ability to complete the construction and mobilization of the Cat D rigs without further injection of capital beyond the secured financing already agreed for draw-down at Songa Enabler delivery. 113

119 As of the date of this prospectus the Group does not have any unutilized credit facilities As of and for the year ended 31 December 2014 and 2013 Net cash generated from operating activities amounted to USD 42.4 million (2013: net cash generated from operating activities USD 45.8 million). The Group s cash flow was positively affected by i.a. a release in receivables of USD 36.8 million, reducing the negative effect from movements in working capital from USD 84.6 million to USD 43.7 million in This, combined with reduced loss before tax, lifted gross cash generated from operations by USD 28.5 million. However, this was partly offset by i.a. higher financing fees related to the Cat Ds, resulting in lower net cash generation. Net cash used in investing activities in 2014 was USD million (2013: net cash generated from investing activities USD million). The decrease was primarily driven by reduced proceeds from sale of property, plant and equipment (PP&E), which equalled USD million for the sale of Songa Mercur and Songa Venus, versus USD 590 million in 2013 for the sale of Songa Eclipse. In addition, investments in PP&E increased slightly. Net cash used in financing activities for 2014 was USD million (2013: net cash used in financing activities USD 19.1 million). The USD million debt repayment was partly offset by a USD 25.5 million equity issue and proceeds from the CAT D 1 and 2 junior loan pre-delivery tranche of USD million. The Company s cash position as of 31 December 2014 was USD million, of which USD million was free and available and the balance represented restricted cash. The Group as at 31 December 2014 had USD million of unutilised financing facilities related to the pre-delivery of Cat D 3 and As of and for the year ended 31 December 2013 and 2012 Net cash generated from operating activities was USD 45.8 million in 2013 (2012: net cash generated USD million). The decrease in operating cash generation was primarily caused by the changes in net working capital. In addition, the sale of Songa Eclipse to Seadrill in January had a negative impact on operating revenues. Net cash generated from investing activities for 2013 was USD million (2012: net cash used in investing activities USD million). The reasons behind the significant increase was a combination of reduced investment in PP&E, down USD million to USD in 2013, and the sale of Songa Eclipse for USD million. Net cash used in financing activities for the year was USD 19.1 million (2012: net cash generated USD million). This was a result of net proceeds from the share issue of USD million and proceeds from the convertible bond issue of USD million. In addition, and related to the divestment of Songa Eclipse, USD million was repaid in debt. The Group also repaid USD 93.0 of the bank facility instalments. The Company s cash position as of 31 December 2013 was USD million, of which USD million was free and available and the balance represented restricted cash. The Group as at 31 December 2013 had no unutilised financing facilities Material changes in cash flow after 31 December 2015 Please refer to sections and for material changes after 31 December In addition, the Company's cash flow was significantly influenced by the Songa Equinox's and Songa Endurance's experienced BOP start-up problems during December 2015 and January 2016 as 114

120 further described in section From 24 December 2015 when Songa Equinox went off day rate to 5 February when Songa Equinox and Songa Endurance came on day rate again, the Company lost approximately USD million in revenues Borrowings Overview of debt facilities and debt maturities The illustration below sets forth an overview of the Group s debt facilities and debt maturities (excluding cross currency interest rate swaps) as of 31 March *NOK 750m to be repaid with 1/3 at 100% of par value in 2018, 2/3 repaid at % in 2021 **NOK 1,400m to be repaid with 1/3 at 103.5% of par value in 2018, 2/3 repaid at % in 2020 ***NOK 750m and NOK 1,400m based on USDNOK exchange rate 8.27 as per quarter end The pre-delivery facility in respect of Cat D 3 (Songa Encourage) was fully repaid with USD 90 million in December The pre-delivery facility in respect of Cat D 4 (Songa Enabler) was fully repaid with USD 90 million in March The Company expects to repay the respective debt facilities upon their maturity by means of available cash on hand and by refinancing in the bank or bond market, depending on the financial situation and available alternatives at the time of such maturity. The illustration below sets forth an overview of the Group s expected interest payments (excluding cross currency interest rate swaps) as of 31 March

121 ***NOK 750m and NOK 1,400m coupons based on USDNOK exchange rate 8.27 as per quarter end Cross currency interest rate swaps As per date of this Prospectus, the Company had the following outstanding cross currency interest rate swaps: Notional amount USD Notional amount NOK Pay (on USD notional) Receive (on NOK notional) Maturity Date USD million NOK 1,347.8 million % 6 month NIBOR + 10% 17 Nov 2016 USD million NOK million % % 11 Dec 2018 As part of the Refinancing the abovementioned cross currency interest rate swaps have been agreed amended and extended in order to hedge the amended NOK million and NOK 1,400 million bonds. In January 2016 the following cross currency swaps were discontinued: Notional amount USD USD million USD million Notional amount NOK Pay Receive NOK 1,347.8 million 6 month NIBOR + 10% % (on USD (on NOK notional) notional) NOK 1,400.0 million % (on USD % (on NOK notional) notional) Maturity Date 17 Nov May Status on covenants As per the date of this Prospectus, the Company is in compliance with all its debt covenants. 116