PROSPECTUS. Spectrum ASA. Offering of 8,052,767 Offer Shares and application for listing of Spectrum ASA on Oslo Axess

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1 PROSPECTUS Spectrum ASA Offering of 8,052,767 Offer Shares and application for listing of Spectrum ASA on Oslo Axess Offer Price NOK per Offer Share Application Period: From and including 16 June 2008 to 1300 hours (Norwegian time) on 27 June 2008 Manager: 12 June 2008

2 IMPORTANT NOTICE Please see section 13 Definitions for definitions, which apply also to the preceding pages. This Prospectus has been prepared in connection with the application for listing of the shares of Spectrum ASA on Oslo Axess and the Offering as set out herein. This Prospectus has been prepared to comply with the Norwegian Securities Trading Act and related legislation and regulations including the EC Commission Regulation EC/809/2004. The Prospectus has been prepared solely in the English language. Oslo Børs has reviewed and approved this Prospectus in accordance with the Norwegian Securities Trading Act Section 7-7. The Company has furnished the information in this Prospectus. The Manager makes no representation or warranty, expressed or implied, as to the accuracy or completeness of such information, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by the Manager. All inquiries relating to this Prospectus must be directed to the Company or the Manager. No other person is authorised to give any information about or to make any representations on behalf of the Company in connection with the Listing or the Offering. If any such information is given or made, it must not be relied upon as having been authorised by the Company or by the Manager. The information contained herein 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 relating to the information included in the Prospectus, which is capable of affecting the assessment of the Shares between the time when the Prospectus is approved and the time of the Listing, will be included in a supplement to the Prospectus. Publication of this Prospectus shall not create any implication that there has been no change in the Company s affairs or that the information herein is correct as of any date subsequent to the date of the Prospectus. In the ordinary course of their respective businesses, the Manager and certain of its affiliates have engaged, and may continue to engage, in investment and commercial banking transactions with the Company. The contents of this Prospectus are not to be construed as legal, business or tax advice. Each reader of this Prospectus should consult with its own legal, business or tax advisor as to legal, business or tax advice. If you are in any doubt about the contents of this Prospectus you should consult your stockbroker, bank manager, lawyer, accountant or other professional adviser before making any investment decision. This Prospectus is subject to Norwegian law. Any dispute arising in respect of or in connection with this Prospectus or the Offering is subject to the exclusive jurisdiction of the Norwegian courts with Oslo District Court as legal venue. No action has been or will be taken in any jurisdiction other than Norway by the Manager or the Company that would permit a public offering of the Offer Shares, or the possession or distribution of any documents relating thereto, in any jurisdiction where specific action for that purpose is required. Accordingly, this Prospectus may not be used for the purpose of, and does not constitute, an offer to sell or issue, or a solicitation of an offer to buy or subscribe for, any securities in any jurisdictions in any circumstances in which such offer or solicitation is not lawful or authorised. The Company and the Manager require persons in possession of this Prospectus to inform themselves about and to observe any such restrictions. Explicitly, the Offer Shares are not being offered and may not be offered or sold, directly or indirectly, in Canada or Japan or to or for the account of any resident of Canada or Japan. The Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), and may not be offered or sold in the United States. The Shares are being offered outside the United States in accordance with Regulation S under the Securities Act ( Regulation S ). 2

3 Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Shares or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Each prospective investor and applicant must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, applies for, offers or sells the Offer Shares or possesses or distributes this Prospectus and must obtain any consent, approval or permission required by it for acquiring Offer Shares. Each subscriber of Offer Shares will be deemed to have acknowledged, by its application for Offer Shares, which the Company and the Manager and their respective affiliates and other persons will rely on the accuracy of the acknowledgements, representations and agreements set forth herein. 3

4 LIST OF CONTENTS IMPORTANT NOTICE RISK FACTORS STATEMENTS CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS PRESENTATION OF THE COMPANY THE COMPANY S BUSINESS AND INDUSTRY ORGANIZATION, BOARD AND MANAGEMENT FINANCIAL INFORMATION TERMS OF THE OFFERING AND LISTING SHARES AND SHARE CAPITAL SHAREHOLDER MATTERS AND NORWEGIAN SECURITIES LAW NORWEGIAN TAXATION OF SHAREHOLDERS DEFINITIONS

5 Appendices Appendix 1. Articles of Association of Spectrum ASA 2. Application Form 3. Interim first quarter 2008 financial accounts by Spectrum ASA (IFRS), subject to full audit 4. Interim first quarter 2008 financial accounts for GGS (IFRS), unaudited annual accounts for GGS group and parent company (IFRS group, NGAAP parent company), subject to full audit (with 2005 comparatives) annual accounts for GGS group and parent company (IFRS group, NGAAP parent company), subject to full audit Spectrum UK annual accounts (UKGAAP), subject to full audit Spectrum US annual accounts (USGAAP), subject to full audit Spectrum UK annual accounts (UKGAAP), subject to full audit Spectrum US annual accounts (USGAAP), subject to full audit Spectrum UK annual accounts (UKGAAP), subject to full audit Spectrum US annual accounts (USGAAP), subject to full audit 13. Independent assurance report on pro forma condensed financial information Q1 Spectrum ASA auditors report The following documents will for the lifetime of the Prospectus be available for review at the Company s offices, Sjølyst Plass 2, 0278 Oslo, Norway, and be available at the Company s internet pages 1. Articles of Association 2. Memorandum of incorporation The Prospectus has also been made publicly available at the below address. The Manager s office: ABG Sundal Collier Norge ASA Munkedamsveien 45E N-0250 Oslo, Norway 5

6 1. SUMMARY This summary provides selected information about the Company, the Offering and the Listing. The summary should be read as an introduction to the Prospectus. The summary does not provide investors and potential investors with a complete summary of all information contained in this Prospectus. Investors should carefully review the entire Prospectus with its appendices and any other information deemed appropriate prior to making an investment decision. 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 this Prospectus is brought before a court, the plaintiff might under the applicable legislation have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability attaches to those persons who have tabled the summary including any translation thereof, and applied for its notification, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the prospectus. 1.1 Description of the Company General Spectrum ASA is a Norwegian public limited liability company (in Norwegian: Allmennaksjeselskap) with organisation number Spectrum s registered place of business is Oslo, Norway. Spectrum s registered business address is at: Spectrum ASA Sjølyst Plass Oslo Norway Telephone: Facsimile: Business Description Spectrum s business is comprised of the acquisition, processing, marketing and sale of seismic data. Spectrum s operational headquarters are at Woking, England with subsidiaries in Houston (USA), Egypt, Libya and Beijing (China). The Company also has operations in East Timor, the Gulf of Mexico, West Africa and other areas of the Middle East. The Company s multi-client library consists of more than 200,000 line kilometres of 2D data and 700 square kilometres of 3D data. Spectrum employs around 200 persons worldwide including affiliates. The Company s customers for data processing, multi client data and seismic acquisition are mainly larger and medium-sized oil and gas companies worldwide. The major drivers of demand for geophysical services are the increased global demand for oil and gas combined with the depletion of world oil and gas reserves. 6

7 1.1.3 History and development Spectrum is the holding company in the Spectrum group. It was incorporated on 25 March 2008 in connection with the sale of the Seismic Business (as defined below) from GGS to Spectrum (the Transaction ). On 16 April 2008, the board of directors of GGS and Spectrum agreed to transfer the majority of GGS seismic business (the Seismic Business ) to Spectrum pursuant to an arm s length transaction against a cash consideration of NOK 275 million (the Transaction ) and as more particularly described below in section Major Shareholders and Related Party Transactions. The Seismic Business is comprised by the acquisition, processing, marketing and sale of seismic data through the company Spectrum Limited ( Spectrum UK ) and its subsidiaries and related companies, in addition to the ownership of certain libraries of multi-client seismic data, and the chartering and operation of one vessel for compilation of seismic data, the GGS Atlantic. The Seismic Business that will be transferred from GGS to Spectrum includes: All of the shares of Spectrum UK including subsidiaries and commercial activity; All of GGS 50 percent shareholding in GeoBridge Pte. Ltd; and Certain multi client seismic libraries. Further, pursuant to the terms and conditions of the Transaction Spectrum has become bareboat charterers of the Vessel by GGS, Spectrum and Atlantic Seismic AS (the Vessel s owner) entering into a transfer and assignment agreement pursuant to which all of GGS rights and obligations under the Bareboat Charter have been transferred to Spectrum. The Company will finance the Transaction by way of equity and debt. The Company will invite existing GGS shareholders to subscribe for Spectrum shares in an offering further described in section 1.4 The Offering and Listing below. For the purpose of financing in part, the Transaction and for general working capital purposes, GGS has extended a loan to Spectrum, as more particularly described in section Major shareholders and related party transactions below. Settlement of the Transaction will take place immediately subsequent to completion of the Offering. GGS-Spectrum Limited was established in 1986, and was acquired by GGS on 28 December The company is located in the UK. GeoBridge Pte. Ltd was established by GGS and BGP in December GeoBridge Pte. Ltd. targets the seismic market in the Asia Pacific region with multi client geophysical surveys as its priority area. BGP owns 50% of the shares in GeoBridge Pte. Ltd. 7

8 1.1.4 Board of Directors, Management and Employees Board The Company s Board consists of the following persons: Name of director Director Current term Business address: since expires Knut Øversjøen Sjølyst Plass 2, 0278 Oslo Anne Mürer Lysaker Torg 8, 1366 Lysaker Tone Bjørnov Veslekroken 8B, 0379 Oslo Glen Rødland Sjølyst Plass 2, 0278 Oslo Jon Chr. Syvertsen Klingenberggt 7, 0161 Oslo Management The Company s management consists of the following persons: Name: Position Business address: David Rowlands CEO Sjølyst Plass 2, 0278 Oslo Jon Elde CFO (on hire from GGS) Sjølyst Plass 2, 0278 Oslo Trond Christoffersen EVP Seismic operations Sjølyst Plass 2, 0278 Oslo Employees As of the date of the Prospectus, the Company has approximately 200 employees, including affiliates Patents and trademarks The Company does not hold patents and/or trademarks that are considered to be of significant importance to its business Research and development In the opinion of the Company, its business is not materially dependent on any research and development Auditor The Company's auditor is Ernst & Young AS Advisors The Company's advisors in connection with the Offering and the Listing have been ABG Sundal Collier as Manager. PWC has performed a financial and tax due diligence and Wiersholm has performed a legal due diligence on the Company according to scope agreed with the Manager. 8

9 1.1.9 Major shareholders and Related Party Transactions Shareholders Shareholders owning more than 1% of the Company registered in the VPS as of the date of this Prospectus: Shareholders Shares % Ownership Global Geo Services ASA 1,000, Total 1,000, Related party transactions As part of the Transaction, Spectrum and GGS has entered into a loan agreement and a service agreement. The loan agreement is for an amount of NOK 150 million. The loan matures on 31 December Interest payable during the term of the loan is NIBOR 3-months + 300bps (For the purposes hereof NIBOR shall mean the arithmetic mean of the rates appearing on the Reuters screen NIBP). Spectrum may prepay the loan earlier without incurring penalties. Spectrum shall apply any amount made available by GGS under the Loan Agreement towards payment of the consideration for the Seismic Business, and the operations of Spectrum and its subsidiaries. The Loan Agreement contains standard provisions relating to covenants and events of default. Spectrum has agreed a negative pledge on the Seismic Assets for the term of the Loan Agreement. Further, GGS and Spectrum has entered into a services agreement ancillary to the Transaction (the Services Agreement ) pursuant to which GGS, inter alia, shall; designate and make the CFO of GGS available as CFO and investor relations responsible for Spectrum; provide full scale financial support, accounting and book-keeping services to Spectrum in order to ensure a well functioning accounting and reporting regime for Spectrum; and make available business premises for Spectrum s head office, and facilities and services related to ICT and helpdesk functions, support personnel, IT equipment and computer systems and other administrative functions. The consideration accruing to GGS is based on accrued time pursuant to hourly rates for the various services as specified in the agreement. The monthly fees under the Services Agreement are estimated to NOK 344,000. Spectrum and GGS has as part of the transfer of the Vessel to Spectrum agreed that GGS' contract with Reliance Industries Ltd for acquisition of seismic data offshore East Coast of India, operated in co-operation with Cellseis Geophysical Inc, will not be transferred to Spectrum. GGS and Spectrum has entered into an agreement whereby GGS for a limited time hires the Vessel on a time charter in order to fulfill GGS' remaining obligations under the contract. The Company has further entered into underwriting agreements in connection with the Offer as described in section The Underwriting below. All underwriters are shareholders of GGS. Additionally, Ferncliff DAI 1 AS has sub-syndicated parts of its underwriting commitment to each of KOV Invest Holding (wholly owned by the Company s chairman Knut Øversjøen), JE Oil Services AS (wholly owned by CFO (on hire from GGS), Jon Elde), and Gross Management AS, a company owned 50% by Corona Maritime AS (wholly owned by Board member in the Company Glen Ole Rødland). The Underwriters will each receive a fee of 2% of their respective underwriting commitments, in aggregate NOK 3 million. 9

10 1.2 Key Financial Information Key financial data For complete financial statements, accounting policies, management discussion & analysis and other financial information see section 8 Financial Information below Significant changes and trends after 31 March 2008 Other than the Transaction as described in section History and Development and section Major Shareholders and Related Party Transactions, there have been no significant changes to report in the period from 31 March 2008 to the date of this Prospectus Capitalization and indebtedness The following table is a summary of the consolidated capitalisation and indebtedness of the Company as at 31 March The summary is based on the unaudited pro forma balance sheet as per 31 March 2008: Capitalisation and Indebtedness Figures in NOK thousands Capitalisation and Indebtedness 31 March 2008 Total current debt 15,773 Total Non-current Debt 153,409 Equity 143,500 Total Capitalisation and Indebtedness 312,682 Net Indebtedness Liquidity 22,982 Current trade and other receivables 18,138 Current financial debt -15,773 Net Current Financial Indebtedness 25,347 Non-current financial debt -153,409 Non-current Financial Indebtedness -153,409 Net Financial Indebtedness -128,062 The indebtedness amounts have been prepared using policies which are consistent with those used in preparing the financial information relating to the Company. For a complete and detailed description of the consolidated capitalisation and indebtedness of the Company, see section 8 Financial Information. The annual reports for GGS-Spectrum Inc and GGS-Spectrum Limited for are included as appendix GGS annual report for 2006 and 2007 as well as first quarter 2008 are included as appendix Investments The two tables below summarises the investments in GGS-Spectrum Limited (Spectrum UK) and GGS- Spectrum Inc (Spectrum US) for

11 GGS-Spectrum limited Figures in GBP thousands Short leasehold improvements Fixtures and fittings 3-13 Tools and equipment Total GGS - Spectrum Inc Figures in USD thousands Seismic data library 1, Property and equipment Total 1, The expected investment level going forward will be in the range of NOK 15 million in a normal year, exclusive of larger multi client projects. 1.3 Share Capital The Company s current share capital is NOK 1,000,000 divided on 1,000,000 Shares, each with a par value of NOK The Offering and Listing Purpose of the Listing, Background of the Offering and Use of Proceeds NOK 125 million of the proceeds will be used as a payment to GGS of parts of the Consideration in the Transaction. The remaining NOK 25 million will be used by Spectrum as working capital and for general corporate purposes. The Company has on 22 May 2008 applied for listing on Oslo Axess, which is a regulated market place. The Listing will provide a regulated marketplace for the trading of the Company s shares and will help enable Spectrum to obtain funding for the purposes described hereunder. The Listing may also facilitate the use of the capital markets in order to raise further equity should this prove required in the future, as well as enhancing the Company s ability to use the shares as transaction currency in future acquisitions and mergers, if any Overview of the Listing and Offering In conjunction with the application for Listing, the Company plans to carry out the Offering, which will be open for the public in Norway and to institutional and professional investors outside Norway in reliance on Regulation S under the Securities Act. Shareholders in GGS as of 9 June 2008 (the Record Date ) will have preferential rights to allotment of Shares in the Offering based on their shareholding in GGS. 11

12 Number of Offer Shares: Offer Price: Application period: Listing: Listing Conditions: Minimum order in the Offering: Allocation date: The Offering comprises 8,052,767 new Shares. NOK per Offer Share. The Application Period will last from and including 16 June 2008 to 1300 hours (Norwegian time) on 27 June 2008, subject to possible extension. Intended listing of the Company s Shares on Oslo Axess. Approval of listing application by the board of directors of Oslo Børs, and sufficient shareholders (100) and free float of shares (25%) to qualify for Oslo Axess, which the Company intends to achieve through the Offering. 500 Offer Shares Payment date: On or about 3 July Settlement: First day of trading on Oslo Axess: On or about 1 July The final allocation will take place after the expiry of the Application Period on or about 27 June Allotment letters will be sent on or about 1 July The Offer Shares are expected to be delivered to the purchasers VPS accounts against payment on or about 4 July Number of Shares after the Offering: 8,106,452 Shares, each of nominal value of NOK 1. Gross proceeds of the Offering: Costs: NOK 150 million. Estimated transaction cost for the Company related to the Offering is approximately NOK 7.5 million The Underwriting The Offering is underwritten on a firm commitment basis (the Underwriting ) by a syndicate of Underwriters (each underwriter an Underwriter and all Underwriters jointly the Underwriting Syndicate ) for a maximum total amount of NOK 150 million (the Total Underwriting Commitment ). The members of the Underwriting Syndicate shall be liable on a pro rata basis in proportion to their respective share of the Total Underwriting Commitment Dilution The immediate dilution of the Offering for the Company s shareholder will amount to NOK 150 million equalling percent of the issued Shares Costs Transaction costs directly attributable to the Offering are expected to be approximately NOK 7.5 million. For further information please see section 9.18 Costs below. 12

13 1.5 Summary of Risk Factors Please revert to section 2 "Risk Factors" below for a description of certain relevant risk factors summarised in the following: Risk factors related to the Company and the industry in which it operates: Market Risk Economic, political and legal risk Risks related to the sale of seismic data Operational risk and harm to personnel and property Technological risks Trade secrets and intellectual property risks Risks related to the Vessel Contractual risks Risks related to jointly controlled entities Risk related to the competitive situation Risks related to uninsured losses Risk related to environmental, health and safety issues Dependence on key personnel Dependency on services provided by GGS through transitional services agreement Financial Risks Liquidity risks Refinancing risks The Company does not have an operating history as a separate entity Financial reporting and internal control risks Currency risks Risk for interest rate increase Risk factors relating to the Shares, the Listing and the Offering: Risk that the Listing will not be carried out Certain shareholders may hold a large percentage of the shares in the Company and might therefore be able to influence matters that require shareholder approval Volatility of Share price Risk that Shareholders may be diluted if they are unable to participate in future offerings The ability to bring an action against the Company may be limited under Norwegian law Holders of the Company s 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 The transfer of Shares is subject to restrictions under the securities laws of the United States and other jurisdictions Additional risks not presently known to the Company or risks the Company currently deems immaterial may also impair the Company's business operations and adversely affect the price of the Company's Shares. 13

14 1.6 Additional information For the life of this Prospectus the following documents are available for inspection at the Company s offices: The Articles of Association of Spectrum ASA Memorandum of Incorporation The Prospectus has been made publicly available at the below addresses. The Company's office: Spectrum ASA Sjølyst Plass Oslo Norway The Manager s office: ABG Sundal Collier Norge ASA Munkedamsveien 45 E N-0250 Oslo, Norway 14

15 2. RISK FACTORS Before investing in the Company, investors should carefully consider all of the information contained in this Prospectus, and in particular the following risk factors, which may affect some or all of the Company's activities, the industry in which it operates and the securities being offered. The risk factors described below are not the only ones that will be faced by the Company. Other risks and uncertainties, including those not currently considered material by the Company s management, may impair the Company s business. The risk factors discussed below may adversely affect the business, financial condition, operating results or cash flow of the Company. The order in which risk factors appear is not intended as an indication of the relative weight or importance thereof. Such information is presented as of the date hereof and is subject to change, completion or amendment without notice. An investment in the Shares is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of all of the investment. 2.1 Risk factors related to the Company and the industry in which it operates Market risks Demand for offshore geophysical services depends on the level of capital spending by oil and gas companies, particularly exploration and development expenditures. Capital expenditures, and in particular exploration and development expenditures, by oil and gas companies can be negatively affected by a number of factors including, but not limited to, decreases in oil and gas prices, fluctuations in production levels and disappointing exploration results. On the supply side, there is uncertainty when it comes to the level of construction of new seismic vessels, the upgrading and maintenance of existing production units, and the conversion of other vessel types to seismic vessels. Demand for offshore exploration, development and production has historically been volatile and closely linked to the prices of oil and gas. Low oil prices typically lead to a reduction in capital expenditures as the oil and gas companies scale down their investment budgets. Sustained periods of substantially reduced capital expenditures by oil and gas companies may reduce the demand for the Company's products and services. Furthermore, recoveries in oil and gas prices do not immediately increase exploration, development and production spending, so improving demand for the Company s services will generally lag oil and gas price increases. Economic, political and legal risks The Company s seismic activities take place in several foreign countries and regions and changes in political regimes could constitute a material risk factor for the Company s operations. All seismic companies operating in international waters are also subject to risks of war or other armed conflicts, terrorist activities and political, civil or labour disturbances and embargos. Furthermore, the Company s operations in foreign countries and regions may cause both legal and practical difficulties in case of a dispute or conflict. The Company operates in regions where the ability to protect contractual and other legal rights may be more limited than compared to regions with more well-established markets. Changes in the economic, regulatory and political situation in the regions of which the Company s operations are dependent on could have material adverse effect on exploration, production and development activity and could, directly or indirectly, materially adversely affect the Company s business, results of operations and financial conditions. Risks related to the sale of seismic data The Company has invested significant amounts in acquisition and processing of seismic data. The Company s future sales of seismic data are uncertain and depend on a variety of factors, many of which are beyond the Company s control. The Company cannot guarantee that it will be able to meet expectations neither with 15

16 respect to how much seismic data it will be able to sell nor at which price the seismic data will be sold in the future. If the Company is not able to recover from sales of its seismic data the costs of acquiring and processing the data, or if the Company is affected by any material adverse change in the general prospects for oil and gas exploration, development and production activities in areas where the Company acquires multiclient data, the value of such seismic data would be impaired, and which again could materially adversely affect the Company s future business, results of operations and financial conditions. Operational risks and harm to personnel and property There will always be operational risks involved in performing offshore seismic surveys. This includes among others unexpected failure or damage to vessels and technical equipment, work accidents, or adverse weather conditions. These risks can cause personal injury, prevent surveys to be performed as scheduled and other business interruptions, property and equipment damage, pollution and environmental damage. The Company may be subject to claims as a result of these hazards. The Company seeks to prevent loss or damages from such incidents by insurances, contractual regulations and emergency routines. However, there will always be some exposure to technical and operational risks, with unforeseen problems leading to unexpectedly high operating costs, substantial losses, additional investments, etc., which may have a material negative effect on the Company s operating results and financial position. If e.g. a vessel is rendered a total loss, the charter party will be void and the Company will under such circumstances experience a shortfall of income that would otherwise come from operating this vessel. Additionally, the occurrence of any of these risks could damage the Company s reputation. Technological risks Segments of the seismic and oil service industry are characterised by rapid changes in technology. The development of new technology may render it necessary to develop and protect new technology through registration of patents. There can be no assurance that the Company will be able to successfully patent, develop, and commercialize new technology. Furthermore, there can be no assurance that the Company will be able to respond to new technological developments and challenges or identify and respond to new market opportunities. The Company s technology projects and efforts to respond to technological innovations may require significant financial investments and resources. There can be no assurance that the Company will have the necessary financial and human resources to respond to new technological changes and innovations and emerging competition. Trade Secrets and Intellectual Property Risks Trade secrets and intellectual property are recognized by the Company as important assets and potential reasons for disputes and legal battles. The Company relies on a combination of development, non-disclosure and other contractual provisions and restrictions on disclosure to protect the Company s intellectual property rights and trade secrets. However, there can be no assurance that the Company s efforts to implement protective measures and to register (where appropriate) and defend its intellectual property rights will be sufficient. Risks related to the Vessel The Company has chartered the seismic vessel GGS Atlantic (the Vessel ) pursuant to a bareboat charter with Atlantic Seismic AS and with the charter period expiring on 4 September No assurance can be given with respect to securing future contracts for the Vessel, nor can any assurance be given that any future contracts will be at such commercial terms required in order for the operation of the Vessel to be a profitable business for the Company. Furthermore, the fact that the Company s fleet consists of only one vessel, makes the Company highly vulnerable in case of technical failure, breakdown etc. The Vessel may have unforeseen 16

17 technical problems or deficiencies, new environmental requirements may be enforced, or new and better technical solutions or vessels may be introduced which again could make it difficult or even impossible for the Vessel to obtain new contract awards in certain markets. If the Company fails to secure future contracts for the engagement of the Vessel, the Company may incur significant financial losses. Contractual risks The Company s income depends on contracts with customers regarding collection and sale / licensing of seismic data. Each contract normally involves a substantial value or consideration to the Company. Any breach or alleged breach or other contractual disputes related to the Company s contracts might result in material losses or other negative effects on the Company. Contracts may governed by foreign laws which may create both legal and practical difficulties in case of a dispute or conflict. The Company also operates in regions where the ability to protect contractual and other legal rights may be limited compared to regions with more well-established markets. Risks related to jointly controlled entities The Company has made, directly and indirectly, investments in several joint venture projects and companies. Since the Company does not fully control these joint venture projects and companies, the Company is dependent on its joint venture partners in order to make the decisions in relation to the relevant joint venture operations that it believes is in the best interest of the Company. Should the Company in the future not be able to cooperate with its joint venture partners in making decisions regarding these joint venture projects and operations, or should the Company not be able to prevent actions relating to jointly controlled entities that it believes is not in its best interests, this could materially adversely affect the Company s business, results of operations and financial conditions. Risks related to the competitive situation The seismic industry is highly competitive. The Company competes with other companies with an equal or larger resource base. There can be no assurance that the Company will be able to respond to existing and new sources of competition. Overcapacity, increased competition and price pressure in the seismic market may materially adversely affect the Company s business, results of operations and financial conditions. Risks related to uninsured losses The Company s business is subject to a number of risks and hazards, including adverse environmental conditions, accidents, unusual or unexpected geological conditions, changes in the regulatory environment and natural phenomena such as inclement weather conditions. There can be no assurance that the Company s insurances will cover all the potential risks associated with its operations. Unanticipated occurrences, insured or uninsured, could have a material adverse effect on the Company s operating results and financial condition. Risks related to environmental, health and safety issues The Company s operations are subject to numerous national and supra-national, environmental, health and safety laws, regulations, treaties and conventions (together, Regulations ), including, inter alia, those controlling the discharge of materials into the environment, requiring removal and clean-up of environmental contamination, establishing certification, licensing, health and safety, taxes, labour and training standards, operation of the vessels or otherwise relating to the protection of human health and the environment. The amendment or modification of existing Regulations or the adoption of new Regulations curtailing or further regulating the Company s business could have a material adverse effect on the Group s operating results and financial condition. The Company cannot predict the extent to which future earnings or capital expenditures may be affected by compliance with such new Regulations. 17

18 In addition, the Company may be subject to significant fines, penalties or liability if it does not comply with any such existing or future Regulations. Dependence on key personnel The Company s depends, to a significant extent, upon management personnel and other key employees. The Company is dependent upon attracting and retaining key employees and management personnel. The seismic business faces competition for skilled personnel, and it is always a risk that management personnel or other key employees may decide to leave the Company. Competition for qualified personnel is intense and the Company may be unable to identify and recruit such personnel if and when needed on short notice. The loss of the services of management personnel or other key employees could have a material adverse affect on the financial condition of the Company. Dependency on services provided by GGS through transitional services agreement The Company is currently dependent on CFO and investor relations services provided by GGS pursuant to a transitional services agreement entered into between the Company and GGS in connection with the Transaction. This arrangement is intended to be for a transitional period only, and the Company intends to have its own qualified CFO and investor relations and financial reporting department in place as soon as reasonably practicable. However, no assurance can be given as to if and when the Company will be able to get the necessary resources and sufficiently qualified personnel in place in order for the Company to no longer be dependent on such services being provided by GGS. 2.2 Financial risks Liquidity risks The Company is dependent upon having access to long term funding. There can be no assurance that the Company may not experience net cash flow shortfalls exceeding the Company s available funding sources. Furthermore, there can be no assurance that the Company 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. Refinancing risks The Company is currently financed by way of a loan from GGS which matures on 31 December Although the loan agreement with GGS is entered into on an arms-length basis, no assurance can be given that GGS as a finance provider will act as professional, reliable and independent of any potential conflicting interests as one would expect from a professional bank. Furthermore, although the Company intends to replace the loan from GGS with external bank financing as soon as possible, no assurance can be given that Spectrum will be able to repay or refinance its debt to GGS prior to its maturity, or that a refinancing through external bank financing can be achieved at terms favourable to the Company. The Company does not have an operating history as a separate entity Following completion of the Offering, Spectrum shall operate as a separate and independent company. The Company has no operating history as a separate entity, and the financial performance of the Company s business has historically been interlinked with the results of operations of GGS, and the historical financial statements included in this Prospectus does not reflect what the Company s results of operations, financial position and cash flows would have been had the Company business been conducted by a separate, publicly traded company during the periods presented and may not be indicative of the Company s future results of operations, financial position and cash flows. 18

19 Financial reporting and internal control risks GGS independent auditors, Ernst & Young, have previously, with respect to the financial years 2006 and 2005, identified weaknesses regarding elements of GGS internal financial reporting and control systems. Furthermore, and as also stated in GGS auditors report for the financial year 2007, due to inadequate valuein-use documentation for certain assets and inadequate reporting from certain subsidiaries and joint ventures in 2006, Ernst & Young has not been able to express an opinion with regards to the valuation of certain of the companies and joint ventures transferred to Spectrum as part of the Transaction. Although measures have been taken to significantly improve financial reporting and internal control reporting routines within GGS, if such improvements should turn out not to be sufficient to prevent deficiencies to reoccur in the future, this could affect the Company to the extent it continues to be dependent on certain financial reporting services to be provided by GGS. A failure to maintain effective internal control over financial reporting could cause investors and rating agencies to lose confidence in the Company s reported financial information and the trading prices of the Company s Shares could be materially adversely affected. Currency risks The Company s business has NOK as its functional currency. Operating revenues and the majority of its expenses are denominated in USD. Fluctuating foreign exchange rates can have an effect on the results of operations when costs are incurred in currencies other than USD, such as NOK. Risk for interest rate increases Interests on the Company s borrowings are subject to fluctuations in the Norwegian Interbank Offered Rate (NIBOR). Increase in NIBOR will increase the Company s interest payments and may have a negative effect on the Company s liquidity and financial position. 2.3 Risk Factors relating to the Shares, the Listing and the Offering Risk that the Listing will not be carried out The Listing of the Company s shares on Oslo Axess is conditional upon meeting certain listing criteria which, at the date of this Prospectus, are not met. Such criteria include minimum number of shareholders (100) and free float of shares (25%). The fulfilment of such criteria are dependent upon the number of investors subscribing for shares in the Offer, and the number of shares subscribed for by shareholders which are deemed independent of the Company. Furthermore, Listing is conditional upon approval by the board of directors of Oslo Børs, and there can be no assurances that the board of directors of Oslo Børs will approve the Company s listing application. Consequently, there is a risk that the Company s shares will not be listed on Oslo Axess and that there will not be a regulated market in which the Company s shares may be traded. Certain shareholders may hold a large percentage of the shares in the Company and might therefore be able to influence matters that require shareholder approval The two largest shareholders in GGS (holding approximately.18% and 15 % of the shares in GGS respectively) may, if exercising their preferential right of allocation in the Offering, also become major shareholders in Spectrum. Such major shareholders may, acting alone or with others, be able to influence matters requiring shareholder approval, including the election of directors and approval of significant transactions and changes in the by-laws (including any change in the number of shares or capital of the company). Furthermore, such a concentration of ownership may have the effect of, among other things, delaying or preventing a change of control in Spectrum, which some investors may deem to be in the best interest of the shareholders. 19

20 Volatility of share price No public market for the Shares has existed or will exist at the time of the Offering, and the Offer Price may not correspond to the price at which the Shares are subsequently traded. The market price of the Shares subsequent to the Offering and Listing could fluctuate widely in response to a number of factors, including the following: actual or anticipated variations in operating results; changes in financial estimates or recommendations by stock market analysts regarding the Company or its competitors; announcements by the Company or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; sales or purchases of substantial blocks of stock; additions or departures of key personnel; future equity or debt offerings by the Company and its announcements of these offerings; and general market and economic conditions. Moreover, in recent years, the stock market in general has experienced large price fluctuations. These broad market fluctuations may adversely affect the Company's stock price, regardless of its operating results. Risk that Shareholders may be diluted if they are unable to participate in future offerings Because certain non-norwegian investors may be unable to participate in future offerings, their percentage shareholding may be diluted. Unless otherwise resolved by the general meeting or the Board by proxy, shareholders in Norwegian public companies, such as the Company, have pre-emptive rights proportionate to the aggregate amount of the shares they hold with respect to new shares being issued by the Company. For reasons relating to foreign securities laws or other factors, foreign investors may not be able to participate in a new issuance of shares or other securities and may face dilution as a result. Risk of limited shareholder base following the Offering The Offering is underwritten by a limited number of investors. There can be no assurances that the Company will have a broad shareholder base following the Offering. The ability to bring an action against the Company may be limited under Norwegian law The Company is a public limited liability company incorporated under the laws of Norway. The rights of holders of Shares are governed by Norwegian law and by the articles of association. These rights might differ from the rights of shareholders in other jurisdictions. In particular, Norwegian law limits the circumstances under which shareholders of Norwegian companies may bring derivative actions. Under Norwegian law, any action brought by the Company in respect of wrongful acts committed against the Company takes priority over actions brought by shareholders in respect of such acts. In addition, it may be difficult to prevail in a claim against the Company under, or to enforce liabilities predicated upon, securities laws in other jurisdictions. Holders of the Company s 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 Beneficial owners of the Company s Shares that are registered in a nominee account may not be able to vote such shares unless their ownership is re-registered in their names with the VPS prior to the Company s general meetings. The Company cannot guarantee that beneficial owners of the Company s 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. The transfer of Shares is subject to restrictions under the securities laws of the United States and other jurisdictions The Company has not registered the Shares under the Securities Act or the securities laws of other jurisdictions other than Norway and the Company does not expect to do so in the future. The Shares may not 20

21 be offered or sold in the United States or to U.S. persons (as defined in Regulation S under the Securities Act) nor may they be offered or sold in any other jurisdiction in which the registration of the shares is required but has not taken place, unless an exemption from the applicable registration requirement is available or the offer or sale of the shares occurs in connection with a transaction that is not subject to these provisions. In addition, there can be no assurances that shareholders residing or domiciled in the United States will be able to participate in future capital increases or subscription rights. 21

22 3. STATEMENTS 3.1 Board of Directors The Board of Directors of Spectrum ASA is responsible for this Prospectus and its contents. The members of the Board of Directors of Spectrum ASA confirm that to the best of their knowledge, after having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect its import. Oslo, 12 June 2008 The Board of Directors of Spectrum ASA Knut Øversjøen (Chairman) Glen Rødland Anne Mürer Tone Bjørnov Jon Christian Syvertsen 3.2. Third-party information The information in this Prospectus that has been sourced from third parties has been accurately reproduced and, as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. 22

23 4. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Prospectus contains forward-looking statements. The forward-looking statements are contained principally in sections 1 Summary, 2 Risk Factors, 5 Presentation of the Company, 6 The Company s Business and Industry, and 8 Financial Information. These statements involve known and unknown risks, uncertainties and other factors which may cause the Company s actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as may, will, could, should, expect, plan, intend, anticipate, believe, estimate, predict, potential or continue, the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, prospective investors should specifically consider various factors, including the risks outlined in section 2 Risk Factors above. These factors may cause our actual results to differ materially from any forward-looking statement. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement. Except as required by law, the Company undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this Prospectus to conform these statements to actual results or to changes in our expectations or publicly release the result of any revisions to these forward-looking statements which the Company may make to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. Investors are advised, however, to consult any further public disclosures made by the Company, such as filings made with Oslo Børs or press releases. 23

24 5. PRESENTATION OF THE COMPANY 5.1 General Spectrum ASA is a Norwegian public limited liability company (in Norwegian: Allmennaksjeselskap) incorporated under and governed by the Norwegian Public Limited Companies Act (In Norwegian: Allmennaksjeloven) with organisation number and operates under Norwegian law. Spectrum s business is comprised of the acquisition, processing, marketing and sale of seismic data. Spectrum s operational headquarters are at Woking, England with subsidiaries in Houston (USA), Egypt, Libya and Beijing (China). The Company has operations in East Timor, the Gulf of Mexico, West Africa and other areas of the Middle East. The Company s multi-client library consists of more than 200,180 line kilometres of 2D data and 700 square kilometres of 3D data. Spectrum employs around 200 persons worldwide, including affiliates. Spectrum s registered place of business is Oslo, Norway. Spectrum s registered business address is at: Spectrum ASA Sjølyst Plass Oslo Norway Telephone: Facsimile: Internet: Historical background and development The Company was incorporated on 25 March 2008 in preparation for the Transaction (as described in section 5.3 The Transaction below), as a wholly owned subsidiary of GGS. Since the Company s operations are continuations of certain parts of GGS seismic business, the background and history of GGS and its seismic business will be set out below. GGS was incorporated in 1999 as Mid East Geophysical Alliance (MEGA) in order to collect multi client 2D and 3D seismic data offshore Iran in the Persian Gulf and the Oman Sea. The name was changed to GGS in connection with the conversion from a private limited liability company to a public limited liability company in GGS was listed on Oslo Børs SMB list later the same year. Up to late 2003, the majority of GGS seismic activities were related to the acquisition and sale of the PC 2000 survey. In September 2004, GGS in partnership with BGP International Equipment signed a contract with the Government of the República Democrática de Timor Leste (East Timor) to carry out 6,000 line kilometres of multi-client seismic data. Based on this contract, data was collected and processed in 2005 and marketed for the first East Timor licensing round announced in the summer of During 2004 and 2005, GGS carried out multi-client surveys in the Joint Petroleum Development Area (JPDA) between East Timor and Australia, Indonesia and off the west coast of Florida. The Florida survey 24

25 was approved by the Florida state authorities for a multi-client seismic programme planned off the west coast of Florida more than 150 kilometres from the coastline. The programme called US Open - West Florida Escarpment, was planned for more than line kilometres. In December 2005, GGS and BGP agreed to establish `GEO BRIDGE - a BGP GGS company` as a jointly owned limited company registered in Singapore. GEO BRIDGE Pte. Ltd. targets the seismic market in the Asia Pacific region with multi client geophysical surveys as its priority area. In December 2005, GGS acquired Spectrum Energy and Information Technology limited (Spectrum UK), a seismic niche player providing non-exclusive surveys, seismic data processing and electronic data management services. Spectrum UK has its headquarters in Woking, England, with operational centres in Houston, Tripoli, Beijing and Cairo. Spectrum UK is a party to joint ventures in Buenos Aires, Islamabad and New Delhi. The Spectrum Group has centralised computer hardware facilities based in Houston. Spectrum UK was established in In May 2007, a private share placement of NOK 200 million provided GGS with two new strategic shareholders, Spencer Energy and AS Ferncliff. In February 2008, GGS completed the acquisition of three tender barge rigs for a consideration of USD 215 million. On 16 April 2008, the board of directors of GGS resolved the Transaction regarding transfer of the majority of the seismic assets of GGS to Spectrum. 5.3 The Transaction On 16 April 2008, the board of directors of GGS resolved to complete a restructuring of GGS pursuant to the terms of a Sale and Purchase Agreement (the SPA ) according to which Spectrum shall acquire from GGS; (a) (b) (c) (d) % of the shares in GGS-Spectrum Limited (the Spectrum UK Shares ), a company incorporated under the laws of England ( Spectrum UK ) and being the 100 % owner of the shares of GGS-Spectrum US Inc, a company incorporated under the laws of Texas ( Spectrum US ), 50 % of the shares in Spectrum-Geopex Egypt Limited ( Spectrum-Geopex Egypt ) and 10 % of the shares in Napsco-Spectrum-Geopex Libya Limited ( Spectrum-Geopex Libya ), and another 22.5 % indirect shareholding in Spectrum-Geopex Libya via Spectrum- Geopex Egypt; 50% of the shares in GeoBridge Pte. Ltd (the GeoBridge Shares ), a company incorporated under the laws of Singapore ( GeoBridge ); a multi-client seismic library relating to surveys in East Timor, West Florida, Indonesia and Australia (the Seismic Assets ); and the charter of the seismic vessel GGS Atlantic (the Vessel ) pursuant to a bareboat charter party (the Bareboat Charter ) dated 31 October 2007 entered into with Atlantic Seismic AS as owner, and thereto related agreements. ((a) through (d) above hereinafter referred to as the Seismic Business ). 25

26 Through the Transaction, Spectrum has become bareboat charterers of the Vessel by GGS, Spectrum and Atlantic Seismic AS (the Vessel s owner) entering into a transfer and assignment agreement pursuant to which all GGS rights and obligations under the Bareboat Charter have been transferred to Spectrum as further described in section 5.10 GGS Atlantic below. Pursuant to the SPA, GGS shall transfer, and Spectrum shall acquire, the Seismic Business. As consideration for the acquisition, Spectrum shall pay to GGS NOK 275 million. GGS has, for financing of the acquisition of the Transaction, provided Spectrum with credit for the consideration of NOK 275 million accruing under the Transaction until Spectrum has received the proceeds from the Share Issue. The Purchase Price shall be payable in full by Spectrum on the date occurring no later than on the third Oslo business day after the date on which the Business Enterprise Register (in Norwegian: Foretaksregisteret) has registered the capital increase in Spectrum following from the Share Issue. On the Settlement Date, Spectrum shall pay NOK 125 million of the proceeds from the Share Issue as a partial down-payment of the consideration owed under the SPA. The remaining NOK 150 million shall be financed by way of a loan from GGS to Spectrum pursuant to the terms of the Loan Agreement. The loan matures on 31 December Interest payable during the term of the loan is NIBOR 3-months + 300bps (For the purposes hereof NIBOR shall mean the arithmetic mean of the rates appearing on the Reuters screen NIBP). Spectrum may prepay the loan earlier without incurring penalties. Spectrum shall apply any amount made available by GGS under the Loan Agreement towards payment of the Seismic Business, and the operations of Spectrum and its subsidiaries. The Loan Agreement contains standard provisions relating to covenants and events of default, and also incorporates a change of control provision in case of a change of control in Spectrum ASA occurring subsequent to the Listing. Spectrum has agreed a negative pledge on the Seismic Assets for the term of the Loan Agreement. On 2 May 2008 GGS and Spectrum entered into a services agreement ancillary to the Transaction (the Services Agreement ) pursuant to which GGS, inter alia, shall; designate and make the CFO of GGS available as CFO and investor relations responsible for Spectrum; provide full scale financial support, accounting and book-keeping services to Spectrum in order to ensure a well functioning accounting and reporting regime for Spectrum; and make available business premises for Spectrum s head office, and facilities and services related to ICT and helpdesk functions, support personnel, IT equipment and computer systems and other administrative functions. The consideration accruing to GGS is based on accrued time pursuant to hourly rates for the various services as specified in the agreement. The monthly fees under the Services Agreement are estimated to NOK 344,000. The Transaction was approved by the general meeting of Spectrum on 13 May As the Transaction was entered into by GGS and the Company as related parties, the procedures of section 3-8 and 3-9 of the Companies Act were observed. In accordance with those provisions, an expert statement was provided to the general meeting of Spectrum stating that there was a fair accordance between the consideration to be paid by the Company and the value of the consideration received by the Company in the Transaction. 26

27 The transfer of the Seismic Business has required certain third-party consents in relation to transfer of agreements. Although all third party consents considered to be of material importance to the Transaction have been obtained prior to closing, which took place on 12 June 2008, certain third party consents are still outstanding. If any remaining third-party consents should not be obtained, GGS and Spectrum will make arrangements pursuant to which Spectrum will be compensated for loss of income related to such agreements 5.4 Legal structure of the Spectrum Group The legal structure of the Spectrum group following the Transaction is set out below. Spectrum ASA 50% 100% Geobridge Ltd Spectrum UK 100% 50% Spectrum USA Joint Venture (Pakistan, India, Trinidad, Singapore) Spectrum Egypt 100% 45% Spectrum China Libya 1) Source: Spectrum 1) Additionally, 10% is owned directly by Spectrum UK 5.5 Description of the main companies in the Spectrum group Spectrum ASA: Spectrum ASA is the holding company in the Spectrum group. It was incorporated on 25 March 2008 in connection with preparation for the Transaction. In addition to the shares in GeoBridge and Spectrum UK, Spectrum ASA owns a multi-client seismic library relating to surveys in a number of areas, including East Timor, West Florida, Indonesia and Australia, as further described in section 5.9 Spectrum s multi-client seismic libraries below. GeoBridge Pte Ltd: On 5 December 2005, GGS established, together with BGP, GeoBridge Pte. Ltd., which is a 50/50 owned company registered in Singapore. The company is targeting the seismic market in the Asia Pacific region with multi-client geophysical surveys as its priority area. BGP is a major land and shallow water geophysical contractor. Spectrum UK Limited: Spectrum UK Limited was established in 1986, and was acquired by GGS on 28 December The company is located in the UK. Spectrum UK provides non-exclusive surveys, seismic data processing and electronic data management services. Spectrum UK is the 100 % owner of the shares of Spectrum US Inc, a company incorporated under the laws of Texas ( Spectrum US ), 50 % of the shares in Spectrum-Geopex Egypt Limited ( Spectrum-Geopex Egypt ) and 10 % of the shares in Napsco-Spectrum- Geopex Libya Limited ( Napsco-Spectrum-Geopex Libya ), and another 22.5 % indirect shareholding in 27

28 Napsco-Spectrum-Geopex Libya via Spectrum-Geopex Egypt. As of the date hereof, Spectrum has a total of approximately 200 employees including affiliates. 5.6 Strategy and mission Spectrum will be a provider of seismic data processing, multi-client seismic data and offshore acquisition to the oil industry. The Company mission is to focus on innovative data processing techniques and to expand on the current client base. Spectrum intends to take part in the ongoing consolidation of the seismic industry. 5.7 Business model The Spectrum business model can be divided into two categories. The first is to acquire and process seismic data on a proprietary, cash-paying basis for oil companies on a global basis. The second category (multi client) is whereby Spectrum acquires and processes seismic data at its own expense. The resultant data is non-exclusive and licences to this data are marketed and sold to as many oil companies as possible. 5.8 Processing of Seismic Data Overview Spectrum is engaged in the time and depth processing of offshore and onshore seismic data from centres in Houston, Woking and Cairo, and with local offices in Tripoli, New Delhi, Islamabad, Buenos Aires and Trinidad. The group s offices are strategically located to cover some of the major oil producing regions of the world. A new on board processing service was added to the portfolio in Q4 2007, and this completes a full range of seismic processing services that Spectrum offers. Spectrum also provides electronic document management services and systems to clients in both the oil sector and other vertical markets. Spectrum sells and installs the contemporary ViewPortal document management software and also provides the associated support services of document scanning, indexing and electronic warehousing. Spectrum also offers land and marine seismic data processing in both depth and time. Along with seismic data processing, Spectrum also provides specialised services such as AVO and Inversion. In Spectrum s opinion, one of its strengths is the level experience amongst its data processing geophysicists. Technology Spectrum uses a combination of proprietary software (SPA) and specialist third party programs enabling complex processing and the ability to offer individual solutions. The technology utilised by Spectrum includes several noise removal techniques, Kirchhoff time migration and specialist technologies such as AVO. Spectrum makes use of third party software to enhance its processing results, mainly in the fields of statics modelling and depth migration. The Company aims for its software components to be compatible and enable seamless transition between software packages. Spectrum has entered into agreements with various research bodies and individual academics. Spectrum is part of the Delft Consortium, an international initiative led by the Delft University of Technology (TU Delft) at Delft, The Netherlands. Members and contributors to the Delft consortium include several major oil companies and exploration service suppliers. Spectrum has also entered into a partnership with Tariq Ali Alhalifah, a professor at King Abdulaziz City for Science and Technology University in Saudi Arabia who is a prominent figure in Middle Eastern geophysical 28

29 research. Spectrum supports Tariq s work and contributes in developing his ideas for commercial use. Mr. Alhalifah has twice been awarded the EAGE gold medal for technical excellence. Examples of Spectrum Technologies: Depth migration MULLOCK Specialist Imaging Tool Impulse Response from SPA PSTM Algorithm Tau-P Migration Before(L) & After(R) Source: Spectrum Organisation Spectrum s data processing division is run from two centres which between them control the other international operations. Most administrative work for the Company is undertaken in the UK office. Also based in the UK are teams of data processing geophysicists, sales specialists, a marketing team and the company s HR department. The US office houses the Company s main hardware infrastructure which can be accessed by all other centres via high speed internet links. The Houston based geophysicists process data mainly for US-based companies. 29

30 Spectrum UK organisational structure Spectrum US organisational structure Late 2007, Spectrum established a team to provide seismic data processing services on-board vessels owned and managed by offshore acquisition specialists. Up until the date hereof, Spectrum has deployed data processing teams and computer systems on four separate seismic vessels. The department now employs 18 people. Two of the on-board data processing contracts are scheduled to continue through to the second half of Spectrum also has on-board computer system and data processing team on the GGS Atlantic. Satellite Offices Spectrum s main processing centres provide support and guidance to the Company s remote centres in Libya, China, Trinidad, India and Pakistan. This enables the company to expand its presence in locations key to the seismic industry. Each remote centre has a high speed internet link to the company s major processing centres as a means of both technical and geophysical support as well as providing access to additional software and hardware resources as needed by the individual company. 30

31 Source: Spectrum Libya: The remote office in Tripoli, Libya operates under the name of NAPSCO-Spectrum Geopex and is managed jointly by the local business partner (NAPSCO), the Spectrum UK and our Egyptian subsidiary (Spectrum-Geopex). The latter provide personnel support when needed and also have a regular input into the general management of the company. Egypt: Located in Cairo, Spectrum-Geopex was established in 1997 and has grown steadily and consistently over the last 10 years. Spectrum-Geopex now employs 41 local staff including 26 geoscientists. The Cairo office has traditionally focused on the local Egyptian marketplace but has recently expanded into other markets such as Syria, Pakistan and the Arabian Gulf. China: Established in 2005 this joint venture was incorporated as a 100% subsidiary of Spectrum US in 2007, the Beijing office was set-up to provide key access to this emerging marketplace and also as a means of providing additional on-line processing resource for the US processing centre. The Beijing office currently employs 9 staff in total, 8 of which are geophysicists. The Beijing staff mainly support US processing projects but they also aim to attract work from local companies. Pakistan: In 2007 Spectrum signed a joint venture agreement with local company Fecto to provide on-line data processing support to the UK and US offices and thus add remote processing capacity to both. The company has recruited 10 local geophysicists to work in the newly established Islamabad offices. Trinidad: In 2005 Spectrum signed an agreement with local company Geoserve Trinidad Ltd to provide a full range of seismic data processing services from their centre in Port of Spain, Trinidad. The new entity is called GeoserveSpectrum. Local content is provided by Geoserve and seismic processing software and procedures by Spectrum. India: Samit Spectrum PVT, based in New Delhi, India, was established in This centre provides 2D seismic processing to oil companies operating in India. Samit Spectrum has more recently provided support to Spectrum s various on-board data processing teams operating offshore India. 31

32 Spectrum group worldwide geophysical experience (per 2008) Source: Spectrum Examples of Technologies: VELTUNE: Veltune is Spectrum s proprietary automatic continuous velocity analysis package, producing velocity information for each sample of each mid-point bin. Manual Velocity Analysis 1km x 1km velocity field High Resolution Residual Velocity Analysis 12.5m x 40m velocity field from VELTUNE Source: Spectrum MULLOCK: MULLOCK is Spectrum s product for targeted multiple attenuation. It aims to be useful in instances where there is little to no velocity separation between the multiple and primary trends in which case traditional methods such as Radon are ineffective. It may also function well in situations where the aliasing of multiples occurs. The process can be parameterized to be spatially variant so that when the dip of the primaries and multiples coincide, it can be effectively turned off. 32

33 PSTM without MULLOCK Multiple Attenuation Source: Spectrum PSTM with MULLOCK Multiple Attenuation Straight Ray Datuming: Straight Ray Datuming is a statics modelling tool developed for commercial use by Tariq Ali Alhalifah, a professor at King Abdulaziz City for Science and Technology University in Saudi Arabia. It was directly sponsored, supported and developed for commercial use by Spectrum. The main advantages of this technique compared to conventional statics correction include the removal of a vertical ray path requirement. It allows time distortion corrections conducive to actual wave propagation and contains a lateral extension to consider the finite size of the Fresnel zone at the reflector. The technique has been applied to both 3D and 2D acquisition. 5.9 Spectrum s multi-client seismic libraries Spectrums portfolio of multi client data and reports includes projects in several major oil producing regions of the world. The library consists of more than 200,000 line kilometres of 2D data and 700 square kilometres of 3D data. Spectrum s multi client library consists of more than 40 multi client 2D surveys. In most cases the data is owned by the country in which the data is acquired, and Spectrum will then enter into a long term agreement with the relevant governing body (normally the Ministry of Oil) to acquire and sell licences of the data on behalf of the Ministry, to international oil companies. In addition to its own multi client library, Spectrum also has interests in certain other companies multi client data. Spectrum will process multi client data on behalf of such companies at no cost. In return, Spectrum will charge a percentage share of any revenues generated. In 2007/2008 new multi client projects have included projects from the US Gulf of Mexico, offshore India, the Far East (3 projects) and offshore Norway. Furthermore, the Company engages in the reprocessing of selected datasets. The aim of this is to enhance the quality of a particular dataset, and to extend the sales shelf life of a project or to extend the duration of a contract. Spectrum sells licences of multi client data to several major international oil companies. Recent clients include Shell, BP, Statoil, Exxon Mobil, Hess, ENI, Petronas, Edison, OMV, Murphy and BHP. 33

34 A number of the surveys in the Spectrum multi client library have been undertaken in partnerships. As an example, Fugro are 50% partners in certain East Mediterranean surveys. TGS are partners in the Gulf of Mexico Phase 51 project. BGP or Australian Seismic Brokers are partners in the Far East Surveys. See the table below for a detailed list of the Spectrum Data Library subdivided in geographical areas. Region 2D 3D United Kingdom continental shelf (UKCS) 1998 NUK Northern UKCS (reprocessed 2003) 4, UKCS Rockall Trough 3, West Shetlands 1, Colwyn / Liverpool Bay 1, Forth Approaches 2,900 Ireland 1997 South Porcupine (Reprocessed post stack 2001) 4, Irish Rockall Trough (2740 km reprocessed 1999) 4,285 Europe 2001 Spain, North Baleric Basin 2, Spain, North Baleric Basin (scanned & reprocessed 8, Poland, Lublin & Carpathian reports Nordland VI and VII (reprocessed) 11,000 South America NA Brazil Campos and Espirito Santo Basins 10,230 South Atlantic South Atlantic / Zone of Co-operation (reprocessed ) 3, /5 North Falkland Islands (reprocessed 2004) 11,160 West Africa 2001 Nigeria - block specific 11, Niger Delta Compilation Study 216 wells 7, Mauritania (scanned & reprocessed) 1,500 Middle East 2004 Oman, Arabian Sea (reprocessed) 6, Lebanon 2, East Mediterranean 12, Algeria Chellif Basin 2, East Mediterranean (reprocessed 1999) 7,834 Far East & Australasia 2004 New Zealand (reprocessed) 9,000 34

35 1996 Pakistan Atlas (Scanned & reprocessed) 7, Indonesia 4, East Timor & Australia 3, JPDA (East Timor) (through Geobridge) 4, East Java survey (through Geobridge) 5, East Timor 6, West Coast India 12, Exmouth basin (reprocessed) 5, Browse basin (reprocessed) 3, Central Bonaparte (reprocessed) 5,653 North America 2007 Eastern Gulf of Mexico (50/50 JV with TGS) 28, West Florida 10,000 2D multi client library by region Source: Spectrum 35

36 The following is a brief description of selected surveys within Spectrum s multi client library. These are provided as an example subset of the library. West Florida Phase I & III Source: Spectrum The survey consists of two projects collected in the Eastern Gulf of Mexico west of the coast of Florida. The surveys have been collected with deep water specifications using 3 different vessels with 8-10 km streamer length. The West Florida Phase 1 survey was mainly collected in It consists of 10,000 km of data and is available both with pre stack time and pre stack depth migrated products. The project has revealed a highly prospective geology across the platform area, the Florida escarpment and into the deep water including multiple play types. The West Florida Phase 3 was mainly collected in 2006 and has been renamed Phase 51 after a Joint Venture agreement with TGS to combine both parties initiatives into one big survey consisting of 28,000 km and owned 50/50 between the parties. The GGS Atlantic collected 19,000 km while TGS vessel collected 9,000 km. The data is being processed through PSTM and PSDM by Spectrum while TGS is responsible for the marketing. 36

37 East Mediterranean Surveys Source: Spectrum Spectrum s East Mediterranean surveys consist of 22,150 km of 2D seismic data, of which 7,850 km were acquired in 1975 and reprocessed in 1999 (East Med I), 14,300 km were acquired in two separate surveys in 2000 (East Med II) and 2002 (LEB02). The surveys cover a wide area of the Eastern Mediterranean sea including the outer Nile Delta and regional basins offshore Turkey, Syria, Cyprus, Lebanon and (Israel). The largest of the surveys is East Med II (Emed-2000). The East Med II was reprocessed with Pre-Stack Depth Migration (PSDM) in The reprocessing generated improvement in structural resolution facilitating a better identification of various potential plays from Triassic to Tertiary levels. The Spectrum surveys have identified thirteen potential exploration plays in the region and tie into 11 wells offshore Israel, an area where several oil discoveries have been made. 37

38 Far East Surveys Spectrum is currently engaged in the reprocessing of three surveys in the Far East. The surveys are situated offshore Northern Australia in each of the Exmouth plateau, Bonaparte basin and Browse basin areas. The reprocessing is being undertaken in anticipation of the Australian licensing rounds expected to take place in September 2008 and in April The reprocessing work will total more than 15,000 kilometres of 2D data. Exmouth Survey Browse Basin Survey Bonaparte Survey Source: Spectrum 38

39 Offshore West India - NELP VII (reprocessed 2007) Source: Spectrum In September 2007, Spectrum commenced a reprocessing contract with India s Directorate General of Hydrocarbons (DGH) to reprocess for third party licensing up to kilometres of seismic data offshore the west coast of India, in connection with India s NELP-VII licensing round. The NELP-VII licensing round is India s largest-ever exploration licensing round and is due to close medio The survey area, illustrated by the black lines shown relative to the NELP VII blocks, extends from the Laxmi depression and ridge in the north to the Kerala Konkan and Laccadive basins in the south. The Laxmi depression and ridge lie to the west of the petroliferous Bombay High in a deep water area. The area lies next to some of India s most significant oil fields and is, in the Company s opinion, prospective. 39

40 Nordland VI and VII (Offshore Northern Norway) Source: Spectrum The Nordland VI and VII reprocessing initiative constitutes km of 2D seismic data covering the moratorium blocks Nordland VI and Nordland VII off the Lofoten islands of northern Norway. The original data, obtained from the NPD, was acquired between 1986 and These areas are among the remaining frontier exploration targets in the Norwegian Sea. Presently, exploration drilling is not permitted in the Nordland VI and VII areas. However, the Company believes that there is a chance that the areas will be opened for licensing in 2009 or 2010 when the Norwegian government is expected to discuss an integrated management plan concerning the marine environment of the Barents Sea and the sea areas off the Lofoten Island. East Timor survey In September 2003, the Government of the República Democrática de Timor Leste (RDTL), East Timor, awarded a multi-client seismic contract to a partnership of GGS and the Chinese Geophysical contractor BGP. The seismic, gravity and bathymetric data collected was mandatory data for the first licensing round in East Timor, which closed in March The survey is located between the southern coast of East Timor and the JPDA (Joint Petroleum Development Area). The JPDA contains two petroleum discoveries (the Bayu-Undan and the Greater Sunrise fields). The seismic survey is approximately 6,000 kilometres and was completed in the fourth quarter of Spectrum has processed and interpreted the data, arranged training and cooperation measures in East Timor and supported the RDTL Government in its first international licensing round. Source: Spectrum 40