A public limited liability company organized under the laws of the Kingdom of Norway

Transcription

1 PROSPECTUS 13JUN A public limited liability company organized under the laws of the Kingdom of Norway Global Offering of 7,499,995 Firm Shares and up to 7,499,995 Additional Shares Indicative Offer Price Range: NOK 37 to NOK 47 per Share The information contained in this Prospectus relates to the global offering (the Global Offering ) of up to 14,999,990 ordinary shares of Petrojarl ASA ( Petrojarl or the Company ), with a par value of NOK 2 each (the Shares ), to be sold by Petroleum Geo-Services ASA ( PGS ), and the listing of the Shares on the Oslo Stock Exchange (the OSE ). The Global Offering will be effected concurrently with the demerger of Petrojarl from PGS (the Demerger ). The Global Offering consists of 7,499,995 Shares (the Firm Shares ) and up to 7,499,995 additional Shares (the Additional Shares ). To the extent that ABG Sundal Collier Norge ASA and UBS Limited (together, the Joint Global Coordinators ), on behalf of the managers named herein (the Managers ), sell more Shares than the Firm Shares, PGS has granted them an option (the Over-Allotment Option ) to purchase up to an additional 7,499,995 Shares at the Offer Price (as defined below), exercisable by the Joint Global Coordinators within 30 days after the first day of trading of the Shares on the OSE, solely to cover over-allotments or short positions incurred, if any, in connection with the Global Offering. The Shares offered in the Global Offering, both the Firm Shares and the Additional Shares are herein referred to as the Offer Shares. Petrojarl will not receive any proceeds from the sale of the Offer Shares by PGS. The Global Offering comprises (i) a Retail Offering, in which Offer Shares are being offered to the public in Norway; (ii) an Institutional Offering, in which Offer Shares are being offered to institutional investors and professional investors in Norway and to institutional investors outside Norway and the United States in compliance with Regulation S ( Regulation S ) under the United States Securities Act of 1933, as amended (the U.S. Securities Act ) and, in the United States, to qualified institutional buyers ( QIBs ) as defined in, and in reliance on, Rule 144A ( Rule 144A ) under the U.S. Securities Act; (iii) an Employee Offering directed at employees of Petrojarl in Norway and the United Kingdom; and (iv) a Management Offering directed to the directors and senior management of Petrojarl. The Offer Shares have not been and will not be registered under the U.S. Securities Act and may not be offered or sold within the United States other than as set forth herein. Prospective purchasers that are QIBs are hereby notified that the Managers and PGS may be relying on the exemption from the registration requirements of Section 5 of the U.S. Securities Act provided by Rule 144A. For a description of certain restrictions regarding the offer, sale, resale and transfer of the Offer Shares, see Terms of the Global Offering and Transfer Restrictions. Investing in the Offer Shares involves risks. See Risk Factors beginning on page 11. Prior to the Global Offering, there has been no public trading market for the Shares. It is expected that the Shares will be admitted for trading and listing on the OSE. At the time of the Global Offering, the Shares will not be listed on any stock exchange outside of Norway. The price for the Offer Shares (the Offer Price ) is expected to be determined on or about June 29, The Offer Shares are being offered by the Managers severally subject to, among other conditions, their receipt and acceptance of the Offer Shares and their right to reject any application for Offer Shares in whole or in part. It is expected that delivery of the Offer Shares through the book-entry facilities of the Norwegian Registry of Securities, Verdipapirsentralen ( VPS ), Clearstream Banking S.A., Luxembourg ( Clearstream ) and Euroclear Bank S.A./N.V. ( Euroclear ) against payment will occur on or about July 5, Dealings in the Shares on the OSE are expected to commence on or about June 30, ABG Sundal Collier Joint Global Coordinators and Joint Bookrunners Co-Manager Carnegie ASA UBS Investment Bank June 14, 2006

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3 In accordance with requirements under applicable U.S. securities laws, this Prospectus should be deemed to be confidential in connection with its distribution in the United States. You are authorized to use this Prospectus solely for the purpose of considering the purchase of the Offer Shares in the Global Offering. You may not reproduce or distribute this Prospectus, in whole or in part, and you may not disclose any of the contents of this Prospectus or use any information contained herein for any purpose other than considering an investment in the Offer Shares. You agree to the foregoing by accepting delivery of this Prospectus. This Prospectus has been prepared to comply with the Norwegian Securities Trading Act and related secondary legislation including the EC Commission Regulation EC/809/2004. This Prospectus has been prepared solely in the English language. The OSE has reviewed and approved this Prospectus in accordance with the Norwegian Securities Trading Act Section 5-7. PGS and Petrojarl have furnished the information in this Prospectus. You acknowledge and agree that 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. You also acknowledge that you have not relied on the Managers in connection with your investigation of the accuracy of this information or your decision whether to purchase any of the Offer Shares. PGS and Petrojarl acknowledge responsibility for the information contained in this Prospectus and confirm, to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), that the information contained in this Prospectus is in accordance with the facts and contains no omissions likely to affect the import of the information contained herein. No person is authorized to give information or to make any representation in connection with the Global Offering or the sale of the Offer Shares other than as contained in this Prospectus. If any such information is given or made, it must not be relied upon as having been authorized by PGS, Petrojarl, any of the Managers or any of their affiliates, advisers or selling agents. The information contained herein is as of the date hereof and subject to change, completion and amendment without notice. In accordance with Section 5-15 of the Norwegian Securities Trading Act, every new factor, material mistake, or material inaccuracy relating to the information included in this Prospectus, which is capable of affecting the assessment of the Offer Shares between the time when this Prospectus is approved and the expiry of the Offering Period (as defined herein) will be included in a supplement to this Prospectus. Neither the publication nor distribution of this Prospectus nor any sale made hereunder shall under any circumstances create any implication that the information herein is correct as of any date subsequent to the date of this Prospectus. In making an investment decision, prospective investors must rely upon their own examination of Petrojarl and the information in this Prospectus, including the information relating to the risks involved with an investment in Petrojarl. None of PGS, Petrojarl, the Managers or any of their respective representatives is making any representation to you regarding the legality of an investment in the Offer Shares, and you should not construe anything in this Prospectus as legal, business or tax advice. You are encouraged to consult your own advisors as to legal, tax, business, financial and related aspects of an investment in the Offer Shares. You must comply with all laws applicable in any jurisdiction in which you may buy, offer or sell the Offer Shares or possess or distribute this Prospectus, and you must obtain all applicable consents and approvals. None of PGS, Petrojarl or the Managers shall have any responsibility for any of the foregoing legal requirements. The distribution of this Prospectus and the offering and sale of the Offer Shares in certain jurisdictions may be restricted by law. PGS, Petrojarl and the Managers require persons in possession of this Prospectus to inform themselves about and to observe any such restrictions. This Prospectus does not constitute an offer of, or an invitation to purchase, any of the Offer Shares in any jurisdiction in which such offer or sale would be unlawful. No one has taken any action that would permit a public offering of the Shares to occur outside of Norway and the United Kingdom. For a description of such restrictions in certain jurisdictions, please see Notices to Investors.

4 Table of Contents Page Summary... 1 Risk Factors Responsibility for this Prospectus Statement from Petrojarl Cautionary Note Regarding Forward-looking Statements Dividends and Dividend Policy Pro Forma Capitalization and Indebtedness Exchange Rate Information Selected Combined Financial Data Management s Discussion and Analysis of Financial Condition and Results of Operations Petrojarl Pro Forma Financial Information Industry Overview Petrojarl s Business Management Significant and Selling Shareholders Related Party Transactions The Demerger Description of the Shares and Share Capital Exchange Controls Securities Trading in Norway Taxation Notices to Investors Terms of the Global Offering Transfer Restrictions Enforcement of Civil Liabilities Legal Matters Independent Auditors Available Information Norwegian Summary Glossary of Terms Index to Financial Statements for Petrojarl... F-1 Appendix A Articles of Association... A-1 Appendix B Retail Application Form... B-1 Appendix C Employee Application Form... C-1 Appendix D Management Application Form... D-1

5 Summary This summary must be read as an introduction to this Prospectus and any decision to invest in the Offer Shares should be based on a consideration of this Prospectus as a whole. Following the implementation of the relevant provisions of the Prospectus Directive (as defined in Notice to Investors Notice to Prospective Investors in the EEA ) in each Member State of the European Economic Area ( EEA ), no civil liability will attach to the responsible persons in any such Member State solely on the basis of this summary, including any translation thereof, unless it is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus. Where a claim relating to the information contained in this Prospectus is brought before a court in a Member State of the EEA, the plaintiff may, under the national legislation of the Member State where the claim is brought, be required to bear the costs of translating this Prospectus before the legal proceedings are initiated. Unless otherwise indicated or the context otherwise requires, all references in this Prospectus to Petrojarl or the Company refer to Petrojarl ASA together with its consolidated subsidiaries. For definitions of certain technical terms used throughout this Prospectus, see Glossary of Terms found elsewhere in this Prospectus. This summary highlights certain information about Petrojarl, the Shares and the Global Offering. It likely does not contain all the information that may be important to you. You should read the entire Prospectus, including the Petrojarl Combined Financial Statements and Petrojarl Pro Forma Financial Information included herein, before making an investment decision. In particular, you should carefully consider the information set out under the heading Risk Factors. Introduction Petrojarl is one of the largest operators of floating production, storage and offloading vessels ( FPSOs ) in the North Sea, measured by production capacity and number of vessels. Petrojarl owns and operates four FPSOs, Ramform Banff, Petrojarl I, Petrojarl Foinaven and Petrojarl Varg, operates two shuttle tankers and charters one storage tanker on a time charter basis. The four FPSOs have a combined maximum production capacity of 339,000 barrels of oil per day and a crude oil storage capacity of one million barrels. Average production for the three months ended March 31, 2006 was 96,500 barrels of oil per day. All four FPSOs are double hulled, rated for harsh environments and capable of working in deepwater fields. Petrojarl s revenues for the years ended December 31, 2004 and 2005 were $298.2 million and $280.7 million, respectively. Petrojarl s principal executive office is at Beddingen 16, Trondheim, Norway. The mailing address is P.O. Box 482 Sentrum, NO-7014 Trondheim, Norway, and the telephone number is Petrojarl s registration number is Explanatory Note Regarding Petrojarl and the Demerger The Global Offering is subject to consummation of PGS separation of its activities relating to the business of contractor operation of FPSOs in the North Sea (the Production Business ) through the Demerger. Under Norwegian law, a demerger is the transfer of part of the assets, rights and liabilities of a company to a newly formed or pre-existing company in exchange for shares of the receiving company. Petrojarl was incorporated as a wholly-owned subsidiary of PGS on March 2, 2006, for the purpose of acting as the receiving company in the Demerger. On March 27, 2006, the respective Boards of Directors of PGS and Petrojarl entered into a demerger plan (the Demerger Plan ) governing the allocation of assets, rights and liabilities between PGS and Petrojarl pursuant to the Demerger. PGS shareholders approved the Demerger Plan at an extraordinary general meeting held on April 28, Upon consummation of the Demerger, the Production Business will be demerged to Petrojarl. Until the Demerger is consummated, Petrojarl will remain a wholly-owned subsidiary of PGS with no subsidiaries or operational activity. The Demerger will be consummated upon registration of the transaction in the Norwegian Register of Business Enterprises (the Completion Date ), expected to occur on or about June 29, In general, this Prospectus has been prepared on the basis that all conditions for consummation of the Demerger will be satisfied, that the Demerger will be consummated and that Petrojarl will operate as a separate company 1

6 from the Completion Date. While all of the consents to the Demerger required under various agreements of PGS and Petrojarl have not been received as of June 14, 2006, PGS and Petrojarl are confident that all the material consents will be received prior to consummation of the Demerger. However, no assurances can be given that such consents will be received prior to consummation of the Demerger. In conjunction with the consummation of the Demerger, 80.01% of the outstanding Shares will be issued to PGS shareholders. The remaining 19.99% of the Shares, or 14,999,990 Shares, will be held by PGS and offered hereby pursuant to the Global Offering. For a further description of the Demerger, please see The Demerger. History Petrojarl was incorporated on March 2, 2006 by PGS ASA under the name of Petrojarl ASA. Petrojarl is a public limited liability company organized under, and governed by, Norwegian law. Competitive strengths Petrojarl believes that its principal competitive strengths are its: high quality fleet; experienced management team; established position in the North Sea; high operating standards; attractive contract model; track record of successful project execution; hulls available for conversion; capacity to undertake new projects; and health, safety, environment and quality ( HSEQ ) performance. Business Strategy Petrojarl aims to double its FPSO fleet by 2010 under a strategy comprised of two key components: to continue to build on Petrojarl s position as one of the leading FPSO operators in the North Sea; and to target suitable growth opportunities beyond the North Sea. Board of directors Keith Nicholas Henry (Chairperson), Clare Mary Joan Spottiswoode and Rolf Erik Rolfsen, directors of PGS, serve as the current members of the interim Board of Directors of Petrojarl. Upon consummation of the Demerger, Messrs. Henry and Rolfsen shall resign from the Board of Directors of PGS. With effect from consummation of the Demerger, Keith Nicholas Henry (Chairperson), Rolf Erik Rolfsen, Jarle Erik Sandvik, Jorunn Johanne Sætre and Joey Shaista Horn will serve on the Board of Directors of Petrojarl. Executive management Petrojarl s senior management consists of the following persons: Espen Klitzing (President and CEO), Erik Evjen (Chief Financial Officer), Helge Krafft (Executive Vice President), Rolf Børresen (Senior Vice President, Engineering), Sverre W. Stenvaag (Senior Vice President, Operations) and Nils B. Johannessen (Vice President, Human Resources, Information Technology & Administration). 2

7 Employees As of the date of this Prospectus, the Production Business employs 524 employees (including 4 temporary employees). Of these, 108 are employed in the onshore organization, while 416 employees are employed in offshore positions on FPSOs and tankers. Upon completion of the Demerger, such employees will be employed by Petrojarl. Auditor Ernst & Young AS ( Ernst & Young ) is Petrojarl s independent auditor. Ernst & Young is a member of Den Norske Revisorforening (the Norwegian Institute of Public Accountants). Advisors ABG Sundal Collier and UBS Limited are acting as Joint Global Coordinators and Joint Bookrunners for the Global Offering. Arntzen de Besche Advokatfirma AS and Willkie Farr & Gallagher LLP are PGS legal advisors in connection with the Global Offering. Share capital As of the date of this Prospectus, Petrojarl s share capital is NOK 29,999,980, divided into 14,999,990 Shares, each with a par value of NOK As of the Completion Date, Petrojarl will have a fully paid share capital of NOK 149,999,980, divided into 74,999,990 Shares, each with a par value of NOK Key shareholders Until the Completion Date, PGS will be the sole shareholder of Petrojarl. Upon consummation of the Demerger, Petrojarl will issue one Share for each outstanding PGS share. The table below sets forth information concerning the four largest registered holders of PGS shares as of June 9, Number of Shareholders shares: Share (%) Citibank, N.A. (1)... 4,815, Morgan Stanley & Co. Inc.... 4,129, State Street Bank & Trust Co.... 3,441, Umoe Industri AS (2)... 3,087, (1) Citibank, N.A. serves as the depositary for the PGS American depositary receipt facility. (2) Umoe Industri AS is controlled by the Chairman of PGS, Mr. Jens Ulltveit-Moe. Mr. Ulltveit-Moe also controls Agra AS, which holds 100,000 shares of PGS. On June 14, 2006 Fidelity Investments Ltd. disclosed that it, on behalf of investors, controls 6,063,837 shares in PGS equal to 10.11%. Documents on display The following documents (or copies thereof) may be physically inspected at Petrojarl s principal executive offices at Beddingen 16, P.O. Box 482 Sentrum, NO-7014 Trondheim, Norway (telephone number ): The articles of association of Petrojarl, The Petrojarl Combined Financial Statements, The Demerger Plan, and The Shareholder Information Statement in connection with the Demerger, dated April 10,

8 The Global Offering Unless otherwise indicated, the information in this Prospectus assumes that the Managers will not exercise their Over-Allotment Option to purchase additional Shares from PGS. For further information See Terms of the Global Offering Over-Allotment Option and Stabilization. The Global Offering... The Global Offering comprises: a Retail Offering, in which the Offer Shares are being offered to the public in Norway; an Institutional Offering, in which the Offer Shares are being offered to institutional investors and professional investors in Norway and to institutional investors outside Norway and the United States in compliance with Regulation S and, in the United States, to QIBs in reliance upon Rule 144A; an Employee Offering, in which the Offer Shares are being offered, at a discount to the Offer Price, to Petrojarl s employees in Norway and the United Kingdom; and a Management Offering, in which the Offer Shares are being offered to the directors and senior management of Petrojarl. The Selling Shareholder... PGS is the sole Selling Shareholder. If the Over-Allotment Option is exercised in full, PGS will sell all of its equity interest in Petrojarl. If the Over-Allotment Option is not exercised at all, PGS will continue to hold 10% of the Shares. Offer Shares... PGS is offering 7,499,995 Offer Shares, exclusive of any Shares offered pursuant to the Over-Allotment Option. Indicative Offer Price Range... The indicative offer price range for the Offer Shares has been set at NOK 37 to NOK 47 per Offer Share. The Offer Price will be established by the Joint Global Coordinators and representatives of PGS following completion of the Offer Period on or about June 29, Shares Outstanding After the Global Offering... 74,999,990 Shares. Offering Period... June 19 to 29, 2006, unless extended. Over-Allotment Option... PGS has granted to the Joint Global Coordinators, on behalf of the Managers, an option to purchase up to an additional 7,499,995 Shares (equal to 50% of the total number of Offer Shares and 10% of the total Shares outstanding after the Demerger), exercisable by the Joint Global Coordinators within 30 calendar days after the first day of trading of the Shares on the OSE, solely to cover overallotments or short positions incurred, if any, in connection with the Global Offering. Joint Global Coordinators, and Joint Bookrunners... ABG Sundal Collier Norge ASA and UBS Limited. Co-Manager... Carnegie ASA. Managers... ABG Sundal Collier Norge ASA, UBS Limited and the Co-Manager. Listing of the Shares... It is expected that the Shares will be admitted for trading and listing on the OSE on or about June 30, At the time of the Global Offering, the Shares will not be listed on any stock exchange outside of Norway. Use of Proceeds... Petrojarl will not receive any proceeds from the sale of the Offer Shares by PGS. 4

9 Lock-up Agreements... OSE Ticker Symbol... Payment and Delivery... Petrojarl, PGS (to the extent it continues to hold Shares following the Global Offering) and the directors and members of senior management of Petrojarl have agreed to restrictions on transfers of the Shares following the Global Offering. See Terms of the Global Offering Trading Market and Lock-up Agreements. PETRO Delivery of, and payment for, the Offer Shares is expected to occur on or about July 5, Share Codes... The Shares have ISIN NO

10 Summary Historical Financial Data This Prospectus includes the audited combined financial statements of Petrojarl as of and for the years ended December 31, 2004 and 2005, and the unaudited combined financial statements of Petrojarl as of March 31, 2006 and for the three months ended March 31, 2005 and 2006, prepared in accordance with U.S. GAAP. These financial statements are referred to herein as the Petrojarl Combined Financial Statements. The Petrojarl Combined Financial Statements have been derived from PGS consolidated financial statements (the PGS Financial Statements ) as of and for the years ended December 31, 2004 and 2005, and as of March 31, 2006 and for the three months ended March 31, 2005 and 2006, respectively, and reflect the operations being transferred to Petrojarl in the Demerger. The Petrojarl Combined Financial Statements have been prepared using PGS historical basis (book values) and are presented as if Petrojarl had been a separate entity for all periods presented. However, they do not reflect the capitalization and debt level outlined in the Demerger Plan. For a further description of the basis for presentation of the Petrojarl Combined Financial Statements, please see Management s Discussion and Analysis of Financial Condition and Results of Operations Petrojarl Combined Financial Statements, and the Petrojarl Combined Financial Statements included elsewhere in this Prospectus. Once listed on the OSE, Petrojarl will prepare its financial statements in accordance with International Financial Reporting Standards ( IFRS ). Accordingly, the Petrojarl Combined Financial Statements may not be indicative of Petrojarl s future performance and do not necessarily reflect what its financial position and results of operations would have been had it actually operated as a stand-alone entity during the periods presented. The following tables present certain summary financial information derived from the Petrojarl Combined Financial Statements as of and for the periods indicated. You should read the following summary of combined financial information with Management s Discussion and Analysis of Financial Condition and Results of Operations and the Petrojarl Combined Financial Statements included elsewhere in this Prospectus. Three Months Ended Years Ended December 31, March 31, (thousands of U.S. dollars) (unaudited) (unaudited) Selected Combined Statement of Operations Information (U.S. GAAP): Revenues... $298,202 $280,677 $67,712 $66,518 Cost of Sales (1) , ,324 38,925 40,852 Depreciation and amortization... 44,562 44,064 11,187 11,121 Selling, general and administrative costs (1)... 13,878 14,823 3,713 3,239 Other operating (income) expense, net... 2,008 (5,593) Total operating expenses , ,618 53,825 55,212 Operating profit... 69,751 43,059 13,887 11,306 Other income (expense) Income from associated companies Interest expense... (29,094) (23,477) (6,250) (4,586) Debt redemption and refinancing costs... (28,975) Other financial items, net... (7,468) (2,441) (179) (212) Income (loss) before minority interest... 33,911 (11,591) 7,458 6,550 Minority interest... (289) (27) (40) (1) Net (loss) income... $ 33,622 $ (11,618) $ 7,418 $ 6,549 (1) Excluding depreciation and amortization which is presented separately. 6

11 December 31, March 31, (thousands of U.S. dollars) (unaudited) Selected Combined Balance Sheet Information (U.S. GAAP): Cash and cash equivalents... $ 4,529 $ 13,550 $ 12,295 Property and equipment, net , , ,358 Total assets , , ,968 Total liabilities , , ,674 Capital from parent , , ,508 Total liabilities and capital from parent... $751,870 $676,447 $707,968 Summary Pro Forma Financial Data This Prospectus includes certain pro forma financial information for Petrojarl for the year ended December 31, 2005 and as of and for the three months ended March 31, 2006 (the Petrojarl Pro Forma Financial Information ). The Petrojarl Pro Forma Financial Information has been prepared on the basis of the Petrojarl Combined Financial Statements, adjusted for differences between U.S. GAAP and IFRS and certain other pro forma adjustments described under Petrojarl Pro Forma Financial Information. The Petrojarl Pro Forma Financial Information has been prepared for illustrative purposes only and is not intended to present what Petrojarl s financial position or results of operations would have been if the Demerger had occurred on an earlier date and Petrojarl had operated as a separate entity and prepared its financial statements in accordance with IFRS. The Petrojarl Pro Forma Financial Information is not intended to project Petrojarl s financial position or results of operations for any future period. For further information, please see the Petrojarl Pro Forma Financial Information included elsewhere in this Prospectus. The pro forma adjustments reflected in the Pro Forma Income Statement for the year ended December 31, 2005 have been examined by Ernst & Young, Petrojarl s independent auditors, as indicated in their report included elsewhere in this Prospectus. The pro forma adjustments reflected in the unaudited Petrojarl Pro Forma Financial Information as of March 31, 2006 and the three months then ended have been reviewed by Ernst & Young. The examination and the review reports in respect of the pro forma adjustments are prepared in accordance with Norwegian Auditing Standards. The Petrojarl Pro Forma Financial Information has been prepared based on IFRS and the requirements of the OSE (including Annex I of the Prospectus Directive Regulation (commission regulation (EC) No. 809/2004). This information is not in compliance with Regulation S-X in the United States. In the event the Shares would be registered under the U.S. Securities Act, the Petrojarl Pro Forma Financial Information, including the examination and review report by the auditors, would be amended and/or removed from any registration statement under the U.S. Securities Act. The Pro Forma Financial Information has been prepared on a basis consistent with the accounting policies to be applied by Petrojarl under IFRS. For purposes of the Petrojarl Pro Forma Financial Information it has been assumed that January 1, 2005 was the transition date to IFRS for the entities, assets and liabilities transferred in the Demerger, which is consistent with the transition date to be applied by Petrojarl. 7

12 The following tables present certain summary pro forma financial information derived from the Petrojarl Pro Forma Financial Information for the periods indicated. You should read the following summary pro forma financial information with Selected Combined Financial Data, Management s Discussion and Analysis of Financial Condition and Results of Operations and the Petrojarl Pro Forma Financial Information included elsewhere in this Prospectus. Three Months Ended March 31, 2006 Combined Pro forma (US GAAP) Adjustments Pro forma (thousands of U.S. dollars) (unaudited) (unaudited) Revenues... $66,518 $ $66,518 Cost of sales (1)... 40,852 (678) 40,174 Depreciation and amortization... 11,121 2,490 13,611 Selling, general and administrative costs (1)... 3,239 3,239 Other operating (income) expense, net... (1,302) (1,302) Total operating expenses... 55, ,722 Operating profit... 11,306 (510) 10,796 Other income (expense): Income from associated companies Interest expense... (4,586) 1,445 (3,141) Other financial items, net... (212) Income (loss) before minority interest... 6,550 1,720 8,270 Minority interest... (1) 1 Net income... $ 6,549 $ 1,721 $ 8,270 Attributable to: Shareholder of Petrojarl... $ 8,246 Minority interest... $ 24 (1) Excluding depreciation and amortization which is presented separately. Year Ended December 31, 2005 Combined Pro forma (US GAAP) Adjustments Pro forma (thousands of U.S. dollars) Revenues... $280,677 $ $ 280,677 Cost of sales (1) ,324 (3,225) 181,099 Depreciation and amortization... 44,064 (6,297) 37,767 Selling, general and administrative costs (1)... 14,823 14,823 Reversal of impairment long-lived assets... (207,853) (207,853) Other operating (income) expenses net... (5,593) 28,464 22,871 Total operating expenses ,618 (188,911) 48,706 Operating profit... 43, , ,970 Other income (expense): Income from associated companies Interest expense... (23,477) 6,643 (16,834) Debt redemption and refinancing costs... (28,975) 28,975 Other financial items, net... (2,441) (4,899) (7,340) Income (loss) before minority interest... (11,591) 219, ,039 Minority interest... (27) 27 Net (loss) income... $(11,618) $ 219,657 $ 208,039 Attributable to: Shareholder of Petrojarl... $ 207,645 Minority interest... $ 394 (1) Excluding depreciation and amortization which is presented separately. 8

13 Summary of Risk Factors Risks Related to Petrojarl s Business Petrojarl may incur operating losses if it cannot keep its vessels and other equipment utilized at high levels. Petrojarl may be adversely affected if demand for its services from oil and natural gas companies decreases. PGS has recorded substantial losses in the past and Petrojarl may, as a standalone entity, do so in the future. Petrojarl is subject to risk of labor disputes and adverse employee relations, and such disputes may disrupt its business operations and adversely affect its results of operations and financial condition. Petrojarl will have significant indebtedness and other obligations that restrict it in various ways. Petrojarl s future revenues may fluctuate significantly from period to period, including as a result of the natural decline in output over the life of a field. Petrojarl s technology could be rendered obsolete by existing technologies or as a result of technological changes, and Petrojarl may not be able to develop and produce competitive technologies on a cost-effective and timely basis. Petrojarl s business is subject to governmental regulation and environmental laws with which it may be difficult to comply and which could lead to significant liabilities. Petrojarl s joint venture agreement with Teekay Shipping Corporation is dependent on future agreement to realize projects, and is subject to approval from the competition authorities. Petrojarl is subject to a number of hazards relating to its offshore operations. Because Petrojarl does not carry insurance to cover some operating risks, its results of operations could be materially adversely affected if one or more of those uninsured events occurred. Because Petrojarl generates revenue and incurs expenses in various currencies, exchange rate fluctuations and devaluations could have a material adverse effect on its results of operations. Petrojarl faces strong competition that could limit its ability to maintain or increase its market share and to maintain the prices it charges for its services at profitable levels. Petrojarl s operating results could suffer as a result of risks arising from its service agreements. Petrojarl s operating results could suffer from failure to redeploy vessels following expiration or termination of its service agreements. Petrojarl generates the majority of its revenues from a limited number of FPSOs and customers, and the loss of revenues from any of these vessels or customers could have a material adverse effect on its financial condition and business prospects. Petrojarl s strategy of pursuing selective acquisition opportunities and conversion projects is subject to a number of challenges. Petrojarl depends on attracting and retaining qualified employees to manage, operate and develop its business. Petrojarl is subject to complex tax regimes in Norway and the United Kingdom. Petrojarl could be adversely affected by violations of applicable anti-corruption laws. 9

14 Petrojarl is subject to various risks associated with international operations, some of which could materially adversely affect its business or results of operations. Risks Related to Financial Reporting Matters Petrojarl will apply new accounting standards in accordance with IFRS subsequent to the Global Offering, and, as a result, financial reporting and financial results for subsequent periods may not be comparable with some of the financial information presented herein. PGS has had issues regarding its internal control over financial reporting, and as a result, Petrojarl may also have significant control deficiencies regarding its system of internal controls over financial reporting. Failure to achieve and maintain effective internal controls could adversely affect both Petrojarl s ability to provide timely and accurate financial statements and the trading prices of the Shares. Risks related to the Demerger Petrojarl does not have an operating history as an independent public company. Norwegian law subjects Petrojarl to secondary joint-liability with PGS after the Demerger. Risks Related to the Ownership of the Shares There has been no public market for the Shares prior to the Global Offering, and the price of the Shares may be volatile. Holders of the Shares that are registered in a nominee account may not be able to exercise voting rights as readily as shareholders whose Shares are registered in their own names with the VPS. Pre-emptive rights may not be available to U.S. holders. Because Petrojarl is a non-u.s. company and many of its directors and executive officers are not residents of the United States, you may have difficulty bringing a lawsuit against Petrojarl and such persons in the United States and obtaining or enforcing judgments against them. Because PGS may retain up to a 10% stake in Petrojarl, PGS may be able to influence matters requiring stockholder approval. 10

15 Risk Factors The Global Offering involves a high degree of risk. You should carefully consider the risks and uncertainties described below, in addition to the other information included in this Prospectus, before deciding whether to invest in any of the Offer Shares. Petrojarl s business, financial condition and results of operations could be seriously harmed by any of the events or occurrences described in these risks. Any of the following risks could cause the trading price of the Shares to decline, and you may lose all or part of your investment. Furthermore, the risks and uncertainties described below may not be the only ones Petrojarl faces. Additional risks and uncertainties not presently known to Petrojarl or that it currently deems immaterial may also adversely affect its business operations and financial results. Risks Related to Petrojarl s Business Petrojarl may incur operating losses if it cannot keep its vessels and other equipment utilized at high levels. Petrojarl s business is capital intensive, and it will make significant investments in vessels and in processing and other equipment. Petrojarl will also incur relatively high fixed costs in its operations. If it cannot keep its vessels and other equipment utilized at relatively high levels, due to reduced demand, weather interruptions, equipment failure, technical difficulties, labor unrest or other causes, Petrojarl could incur significant operating losses. Petrojarl may be adversely affected if demand for its services from oil and natural gas companies decreases. Petrojarl s results of operations will depend substantially upon exploration, development and production spending by oil and natural gas companies. Capital expenditures, and in particular exploration and development expenditures, by oil and natural gas companies have tended in the past to follow trends in the prices of oil and natural gas, which have fluctuated widely in recent years. Lower oil and natural gas prices, actual or projected, may reduce the level of that spending, which could materially adversely affect Petrojarl. PGS has recorded substantial losses in the past and Petrojarl may, as a standalone entity, do so in the future. Although Petrojarl has no operating history as a separate entity, Petrojarl s parent company prior to the Demerger, PGS, has experienced substantial losses in the past. For the year ended December 31, 2004, PGS suffered a net loss of $135 million. PGS also reported operating losses and net losses for 2002 and a small operating profit for In addition, in July 2003, PGS implemented a financial restructuring plan that was accomplished through a reorganization under Chapter 11 of the U.S. Bankruptcy Code. In the Petrojarl Combined Financial Statements for 2005, Petrojarl recorded a net loss of $11.6 million. Petrojarl may continue to incur operating losses and net losses in the future as a standalone entity. For instance, Petrojarl expects to record an operating loss in the second and third quarters of For further information, please see Management s Discussion and Analysis of Financial Conditions and Results of Operations Outlook. Petrojarl is subject to the risk of labor disputes and adverse employee relations, and such disputes may disrupt its business operations and adversely affect its results of operations and financial condition. Approximately 255 of Petrojarl s employees are represented by trade unions pursuant to industry-wide collective bargaining agreements. In 2004, the FPSO Petrojarl I was selected by the Norwegian Shipowners Association to be included in a general employee lockout affecting several Norwegian Continental Shelf installations. Production from Petrojarl I was shut down from September 12 through October 27, In addition, for approximately two weeks in October 2004, production on the FPSO Petrojarl Varg was shut down as a result of the same labor conflict. There can be no assurances that similar or more serious labor disputes will not arise in the future, and Petrojarl can not predict the extent to which such disputes may affect its business, results of operations or financial condition. Petrojarl will have significant indebtedness and other obligations that restrict it in various ways. After the consummation of the Demerger, Petrojarl will have a high level of indebtedness in relation to its equity capitalization. Petrojarl will have approximately $325 million of interest-bearing indebtedness outstanding upon consummation of the Demerger, solely consisting of amounts outstanding under the 11

16 revolving credit facility with ING Bank N.V. (the ING Facility ), for which ING Bank N.V. has committed pursuant to a mandate letter and term sheet. The ING Facility will be entered into prior to the Completion Date of the Demerger. This high leverage exposes Petrojarl to additional risks and restricts Petrojarl in various ways in terms of how Petrojarl operates its business. Petrojarl s credit facility, and other debt and contractual obligations, contain customary prepayment provisions, representations and warranties, covenants and restrictions, events of default and other customary provisions for such financings. The covenants and restrictions include provisions that could restrict Petrojarl s ability, among other things, to: sell assets; incur additional indebtedness or issue preferred stock; prepay interest and principal on its other indebtedness; pay dividends and distributions or repurchase its capital stock; create liens on assets; make investments, loans, guarantees or advances; make acquisitions; engage in mergers or consolidations; enter into sale and leaseback transactions; engage in transactions with affiliates; amend material agreements governing its indebtedness; change its business; enter into agreements that restrict dividends from subsidiaries; and enter into speculative financial derivative agreements. In addition, Petrojarl s credit facility requires it to comply with certain financial covenants, which include: a minimum interest coverage ratio; a minimum liquidity amount; a forward looking debt service cover ratio and loan to FPSO value ratio. The credit facility will be guaranteed by most of Petrojarl s subsidiaries and will be secured with liens and other security interests over substantially all of its material assets and those of its subsidiaries. For a further description of the ING Facility, please see Management s Discussion and Analysis of Financial Condition and Results of Operations Long-Term Borrowings New Bank Facilities. Because of the high level of debt and related contractual obligations: Petrojarl will need to dedicate a substantial portion of its cash flow from operations to debt service, which will reduce the amount of cash flow it will have available for capital investment, working capital and other general corporate purposes; Petrojarl will be vulnerable to adverse developments in general economic and industry conditions; Petrojarl may have constraints in responding to changing market conditions or in pursuing favorable business opportunities; Petrojarl may be limited in its ability to borrow additional funds; and Petrojarl may be at a competitive disadvantage as compared to competitors that have less debt and/or less onerous contractual obligations. Petrojarl s future revenues may fluctuate significantly from period to period, including as a result of the natural decline in output over the life of a field. Petrojarl s future revenues may fluctuate significantly from quarter to quarter and from year to year as a result of various factors including but not limited to the following: fluctuating oil and natural gas production levels on the fields it produces as a result of the natural decline in output over the life of a field or otherwise; levels of activity planned by its customers, including drilling activities, well interventions and maintenance; the commencement or termination of significant contracts for offshore production services; weather and other seasonal factors, including lower production in summer months as a result of scheduled maintenance; and reduced production capacity on its FPSOs as a result of mechanical and technical problems. Petrojarl s technology could be rendered obsolete by existing technologies or as a result of technological changes, and Petrojarl may not be able to develop and produce competitive technologies on a cost-effective and timely basis. Petrojarl will be required to invest substantial capital to maintain competitive technologies. Technology changes rapidly and its success depends on its ability to develop and produce new and enhanced 12

17 technologies on a cost-effective and timely basis in accordance with industry demands. For instance, Petrojarl s vessels could be rendered obsolete by existing and competing technologies such as long distance pipelines and satellite tie-ins. While Petrojarl will commit resources to research and development, it may encounter resource constraints or technical or other difficulties that could delay introduction of new and enhanced technologies in the future. In addition, continuing development of new technologies inherently carries the risk of obsolescence of older technologies. New and enhanced technologies, if introduced, may not gain market acceptance or may be adversely affected by technological changes. Petrojarl s business is subject to governmental regulation and environmental laws with which it may be difficult to comply and which could lead to significant liabilities. Petrojarl s operations are subject to various governmental laws and regulations, including those relating to equipping and operating offshore vessels, vessel safety, oil production and taxation of earnings. In addition, Petrojarl depends on demand for its services from the offshore oil and gas industry and, therefore, is affected by changing taxes, price controls and other laws that affect the oil and gas industry generally and offshore exploration and production specifically. New laws and regulations curtailing exploration and development drilling for oil for economic or other policy reasons or practical restrictions on Petrojarl s ability to provide services to its clients could adversely affect its operations by limiting demand for offshore production services. Petrojarl cannot predict the extent to which its future operations and earnings may be affected by new legislation, new regulations or changes in existing regulations. Petrojarl s operations and assets are also affected by various environmental protection laws and regulations, including, but not limited to, those relating to discharges of materials into the environment, the handling and disposal of waste and the health and safety of employees. The technical requirements of these laws and regulations are becoming increasingly complex, stringently enforced and expensive to comply with and this trend is likely to continue. The enactment of stricter legislation or the adoption of stricter regulation could have a significant impact on Petrojarl s operating costs, as well as on the oil and gas industry in general. Sanctions for non-compliance with environmental laws may include, but are not limited to, revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. Certain environmental laws provide for strict, joint and several liability without regard to negligence or fault for natural resource damages, health and safety, remediation and clean-up costs of spills and other releases of hazardous substances, and such laws may impose liability for personal injury or property damage as a result of exposure to hazardous substances. Further, such laws and regulations may expose Petrojarl to liability for the conduct of others or for acts that complied with all applicable laws when they were performed. There can be no assurances that Petrojarl will be able to comply with such laws in the future. The failure to comply with such laws or regulations could result in substantial liabilities to third parties or governmental entities which could have a material adverse effect on Petrojarl s business, financial condition and results of operations. Petrojarl s joint venture agreement with Teekay Shipping Corporation is dependent on future agreement to realize projects, and is subject to approval from the competition authorities. The joint venture agreement entered into between Petrojarl and Teekay Shipping Corporation is dependent on the two parties being able to find the right form of cooperation under the joint venture to carry out the projects envisioned to be undertaken by the joint venture, and to make corresponding firm commitments pursuant to the joint venture agreement. If the parties are unable to consummate projects under the joint venture, Petrojarl will have to refocus its strategy outside the North Sea. Furthermore, the joint venture agreement is subject to approval from the competition authorities, and there can be no assurance that such approval will be obtained, and if so, on acceptable terms. Petrojarl is subject to a number of hazards relating to its offshore operations. Petrojarl s services often take place under extreme weather and other hazardous conditions. In particular, substantially all of its operations will be subject to perils that are customary for marine operations, including capsizing, grounding, collision, interruption and damage or loss from severe weather conditions, fire, explosions and environmental contamination from spillage. Any of these risks could result in damage to or destruction of vessels or equipment, personal injury and property damage, suspension of operations or environmental damage. In addition, its operations will involve risks of a technical and operational nature 13