Annual Report - AGR reports/AGR Annual Report 2012... · 2013. 4. 17. · 05 Director’s Report 22 Corporate Governance Report 25 Board’s Statement of Salaries ... 32 Consolidated

AnnuAl RepoRt 2012 1

Annual Report 2012



Content

04 KeyFigures

05 Director’sReport

22 CorporateGovernanceReport

25 Board’sStatementofSalaries

27 ConsolidatedIncomeStatement

29 Consolidatedstatementoffinancialposition

31 ConsolidatedStatementofChangesinEquity

32 ConsolidatedStatementofCashFlow

34 Notes

84 IncomeStatementsAGRGroupASA

85 BalanceSheetAGRGroupASA

87 StatementofCashFlowAGRGroupASA

88 Notes

105 Auditor’sReport

107 ResponsibilityStatement


Key FiguresAGRGroupASA-consolidated(FiguresinTNOK)

Profit and Loss Account 2012 2011

Operatingrevenue 1777913 1867914

EBITDA* 154742 247182

EBIT 43061 140454

Profit(loss)fromcontinuedoperations (103975) 17582

Balance/liquidity/capital 2012 2011

Equity 681461 1411469

Cashandequivalents 272683 820984

TotalCapital 2170949 2790739

Interest-bearingliabilities 747657 737698

Key figures per share 2012 2011

Sharecapital 251797 251797

Averagenumberofoutstandingshares 125898308 125898308

Outstandingshares31.12. 125898308 125898308

Dividendpershare(NOK) 5.64 -

EBITDApershare(NOK) 1.23 1.96

Equitypershare(NOK) 5.41 11.21

2011 Business segment

Petroleum Services

Drilling Services Group Elimin. Total

Operatingrevenue 1182558 710536 21431 (46610) 1867914

EBITDA 150506 140087 (43410) - 247182

*Earningsbeforeinterest,tax,depreciation,amortizationandassetwrite-down

2012 Business segment

Petroleum Services

Drilling Services Group Elimin. Total

Operatingrevenue 1268001 521895 27635 (39619) 1777913

EBITDA 128624 46498 (20379) - 154742


Letter from the CEO

WehaveconcludedanothereventfulyearforAGR,focusingevenfurtherourservicesandtechnologiesdirectlyonthewell.Wereflectedthisdevelopmentintheorganizationofthegroupintotwofocusedandautonomousbusinessareas,focusingoneonwellmanagementandreservoirservicesandtheotherontechnologyrelatedtothenewandexcitingmarketforDualGradientDrillingandManagedPressureDrillingforthefullwell.Theoilandgasindustrycontinuestochallengetraditionalmythsandtechnologiesinitscontinuedquestforbetterandsaferwaystoexploreforhydrocarbons,andwehavepositionedAGR’sservicesandtechnologiesrightwhereweseesomeofthegreatestdevelopmentsandgrowthmarketstobeinthenearfuture.Iwasverysatisfiedtoseeusmeetmanyoftheseexpectationsin2012andtoseeusimproveourcapabilitiesinordertocontinuetodoso.

AGRhasspearheadedtheDualGradientDrillingtechnologybythedevelopmentandsuccessfulimplementationoftheRMRTechnologywhichhasperformedDualGradientDrillingonthetopsectionofthewellsuccessfullyoverthelast10years.Thebenefitofthistechnologyissignificantlyenhancedwhentheabilityisreachedtodeploythetechnologyonthefullwell.Majorindustryplayerswillclaimthatcertainwellswillbedrilledwith30%lesstimeandcost,nottomentiontheabilitytodrillcertainwellsatall.AGRtookabigstepintothisarenain2012bythesuccessfuldeploymentoftheEC-Drillconfiguration,firstforRepsolthenforPetronasandPDVSA.Thesesuccessfuloperationshavebeendulynotedbytheindustry,andwecontinuetoseegreatdemand.Wewillcontinuetodevelopandgrowthistechnologytomeetthedemandandexpectationfrom

theindustry.Lastyear’sacquisition/mergerofOceanRiserSystemsintoAGRwasanotherimportantsteponthisjourney,strengtheningourcapabilitiesfurtherwithgreatcompetence,motivatedemployeesandIP.

Wemetasmaller,howeverimportantmilestoneonourtechnologyjourneylastyear,-thefieldtestingofCannSealwhichsetsanEpoxysealinannulusinanexistingwell.Themarketforthistechnologyseemsoverwhelmingwithasignificantnumberofexistingwellsexperiencingintegrity-,leak-,flow-andsimilarchallenges.Wearecommittedtotakethenecessarystepstomeetthedemandandexpectationsforthisveryimportanttechnology.

Ourindustryleadingwell-andreservoirmanagementservicescontinuedtodeliverprofessionalperformanceonsomeoftheindustry’sgreatestchallengeslastyear,beatingourownrecordsfordeepwellswithhighpressureandhightemperatureaswellasseveralotherstateoftheartprojects.Iwasverypleasedtoseethemarketcontinuetoacceptourconceptforoutsourcedwellmanagementservices,withseveralNOC’sandmajorsnowendorsingitandwithStatoilawardingasignificantpartofitsworktoAGRlastyear.Wecontinuedtodevelopourbusinessmodeltodomoredrillingcampaignsandtotakeonfurtherlicensesascontractoperator.Ourfirstwellascontractoperatorwasdrilledtowardstheendoftheyear.Weremainexcitedaboutthecontinueddemandfromtheindustrywelcomingusintotheprofessionaloperatorrole.

-beatingourownrecordsfordeepwellswithhighpressureandhightemperature...

Asthedemandforourservicescontinuestogrowin2013wewillcontinuetohavehealth,safetyandtheenvironment(HSEQ)asourforemostpriority.Wewillcontinuetoworkdiligentlytoattractnewandskilledprofessionals,aswellasmaintainingthegoodspiritandhighenergyinourhardworkingandloyalemployees,whohavepioneeredAGRtowherewearetoday.

Sverre Skogen stepped down as CEO 28 February 2013

Sverre SkogenCEO AGR

Director’s Report 2012AGR Group ASA Comp. reg. no: 986 922 113


Company Overview

AGRGroupASA(AGR)isaleadingsupplierofservicesandtechnologytotheglobaloilandgasindustry.TheGroup’smainoperationsarebasedatStraume(Bergen)andOslo,withotherofficesaroundtheworld,includingStavanger,Trondheim,Aberdeen,Guilford,Houston,Calgary,StJohn’s,Perth,Almaty,Baku,Moscow,Dubai,AbuDhabiandTelAviv.TheCompanyprovidestechnology,expertiseandservicestoseveraloftheworld’smajoroilandgasfields,withacustomerbasecomprisingseveralsmallandmediumsizedoperators,aswellasanumberoflargeinternationaloilcompaniesandNOCs.Attheendof2012,theGrouphad884professionals,whereof479permanentemployees,13projectemployees,372contracted-instaffand20associates.TheannualturnoverwasNOK1778million.

Corporate Governance

GoodcorporategovernanceisakeygoaloftheAGRBoardinordertoensurethatitsinvestorsandstakeholderscanbeconfidentthattheactionstakenareinthebestlongterminterestoftheCompany.AGRaimstoachievethebestpossibleprofitability,whilemaintaininganefficientandviableutilisationoftheCompany’sresourcesandensuringadherencetoHSE&Qbestpracticestandards.AGRbelievesthatadheringtotheGroup’svalueswillbenefittheCompany’sshareholders,employeesandsocietyingeneral.

Corporate Governance Policy for AGR

ThisPolicywasadoptedbytheBoardofDirectorson5November2007andhavethereafterbeenregularlyupdated.ItispredominantlybasedontheguidelinesonCorporateGovernanceof21October2010andupdated20October2011(AnbefalingforEierstyringogSelskapsledelse).

ThroughitscompliancewiththepolicytheCompanyaimstomaintaintheshareholders’trustintheCompany’sboardandmanagementaswellastheGroup’sreputation.

Thepolicylaysdownprinciplesoftransparencyinitscommunicationswithstakeholders,independenceoftheboard,equaltreatmentofshareholders,andcontroltoensurepredictabilityandappropriateriskmanagement.InpursuitoftheCorporateGovernancePolicy,theCompanyhasinplaceacodeonBoardProceedings,aManagementCodeandanInsiderTradingPolicy.

TheBoardofDirectorsalsoelectedaNominationCommitteeattheAnnualGeneralMeetingin2008.

TheBoardandmanagementoftheGrouparecontinuouslyassessingtheCompany’srisksanditsapproachtoethics.TheBoardofDirectorshasevaluatedpotentialconflictsofinterestamongthemembersoftheboardandmanagement,andhasconcludedthattotheknowledgeoftheboardtherewerenosuchincidentsin2012.

TheCompanyhasmonthlyfinancialreportingwhichisanimportanttooltoenablesuitablecontroloftheCompanyandtomonitorprogresstowardstheachievementofitsfinancialgoals.ThisreportingenablestheCompanytobeconfidentthatitisincompliancewithstatutoryandstockexchangereportingrequirements.

InformationabouttheremunerationoftheGroupCEOandexecutivemanagementin2012canbefoundinnote25intheannualaccounts.

Operations

FollowingthesaleofAGRFieldOperationsandattainingoperatorlicensesinIsrael,AGRconsistsoftwomainbusinessareas;AGRPetroleumServicesandAGRDrillingServices.TodayAGRischaracterizedbyastrongfocusonproductdevelopmentandacommitmenttoworkwithclientstounderstandandsolvetheirindividualrequirementsrangingfromassmallasprovidingoneconsultanttodevelopinganoperatorship.WhiletheGroupcontinuestofocusonitsgrowthandearningsperformance,soundandethicalbusinesspracticesareparamount.


Petroleum Services delivers a broad service offering within reservoir evaluations, well planning, well operations and integrated field management to the upstream oil and gas industry. Its core competencies include geology, geophysics, petrophysics, reservoir and petroleum engineering, well construction, drilling management, completion design and installation, field development planning, risk and economics evaluation.

Thebusinessunitalsodeliversabroadtrainingportfoliowithinthesetopics,aswellasasuiteofsoftwaresolutionsforefficientplanningandexecutionofthewelldeliveryprocess.TheservicesareofferedregionallybyregionalbusinesscentersestablishedinNorway,UnitedKingdom,USA,Russia,UnitedArabicEmiratesandAustralia.

PetroleumServicesdeliversabroadserviceofferingwithinreservoirevaluations,wellplanning,welloperationsandintegratedfieldmanagementtotheupstreamoilandgasindustry.Itscorecompetenciesincludegeology,geophysics,petrophysics,reservoirandpetroleumengineering,wellconstruction,drillingmanagement,completiondesignandinstallation,fielddevelopmentplanning,riskandeconomicsevaluation.Thebusinessunitalsodeliversabroadtrainingportfoliowithinthesetopics,aswellasasuiteofsoftwaresolutionsforefficientplanningandexecutionofthewelldeliveryprocess.TheservicesareofferedregionallybyregionalbusinesscentersestablishedinNorway,UnitedKingdom,USA,Russia,UnitedArabicEmiratesandAustralia.

In2012PetroleumServicesimplementedanumberofsignificantstrategicchangesandsecuredanumberofcontractsensuringthebasisforlong-termsustainablegrowthofthebusiness.Despiteahighactivitylevelthroughout2012,theEBITDAfor2012endedatNOK129millionandisdownfromNOK151millionin2011.ThedeclineoftheEBITDAwasmainlyrelatedtotheactivitymixwherethemajorityofactivityfor2ndhalfoftheyearwasplanningforfuturewelloperationsandan8NOKmilliongroupchargeinQ42012whichwasnotincludedin2011.In2012thebusinessspudded11wellsandhasintotalspudded474wellsthelasttwelveyears.

-Duringtheyear,PetroleumServiceswasverysuccessfulinsecuringnewcontractsandagreements.

InJanuary2012StatoilawardedaTotalWellManagementcontractforexecuting,planning,operationsandpostwellactivityfordrillingandwelloperationsforStatoil’sNorwegianContinentalShelfandinternationaloperations.Thedurationofthecontractwasfortwoyearswithanoptionalfouryears.PlanningofmultipleStatoilwellsstartedin2012anddrillingoperationsareexpectedtocommencein2013.In2012amulti-clientdrillingcampaignonBredfordDolphinwassecuredwhereAGRwillcoordinateamulti-well,multi-clientdrillingcampaignonbehalfoffourinternationaloperators.Thedurationofthecontractis570dayswithanoptional570daysbuildingthefoundationsforalongtermoperationfortheorganizationinNorway.

Inadditiontothelongtermcontracts,anumberofothercontractsandagreementswereawardedduringtheyear.Forexample,AGRwasawardedasubseaproductionsystemmanagementcontractwithLundin,anagreementwithRWEDeatoprovidereservoirservices,awellmanagementcontractwithCooperEnergyTunisaBargou,aReservoiradvisoryagreementwithWoodsideEnergy,asubsurfacecontractwithGassnovaforcarboncaptureandstorage(CCS),andawellmanagementcontractforNorecowithadurationoffiveyearsincludingoptions.

Åge LandroEVP of Petroleum Services

Petroleum Services AGRGroupASA


InQ22012PetroleumServicesacquired80%ofthesharesinSteinsvik&Co.Steinsvik&CooffersafetycoachingandotherHSErelatedservicesrelatedtodrillingoperations.ThisstrengthenedAGR’sHSEandRiskManagementofferingsbyaddingnewservicesandmorecapacitywithadditional23professionalstotheportfolioofservices.HSE&RiskManagementserviceswillbeakeypartofthebusinessportfolioandgrowthinthefuture.

AGR’snewestbusinessstream,AGREnergy,whoistheoperatorofeightlicensesinIsrael,startedtheplanninganddrillingoftheirfirstwellin2012.Thefirstwell,Aphrodite-two,wasspuddedinDecember2012andthedrillingoperationwassuccessfullycompletedbyPetroleumServiceswithintimeandbudgetinJanuary2013.

During2012AGRcametothepointofmaturitywhereeachofitsentitiesrequiredanewstrategicstructureinordertofacilitateindividualfocusandgrowth.Asaresult,AGRimplementedamoreautonomousstructureallowingthePetroleumServicesentitytobemanagedandoperatedmoreindependentlyfromtheotherentities

ofAGR.ÅgeLandro,whopreviouslywastheEVPofAGRFieldOperations,wasappointedheadofPetroleumServices.DuringtheyearPetroleumServicesinitiatedseveralorganizationalchangestofurtherstrengthenthemanagementteamandbetterpositionthebusinessforfuturegrowth.PetroleumServicesestablishedtheGlobalBusinessDevelopmentandSalesdepartmentbasedintheUKandappointedNickChilcottVPBusinessDevelopment&Sales.PatrickMcKinleywasappointednewEVPfortheAmericasregionandMortenHeirwasappointedVPfortheReservoirManagementbusinessinNorway.Inadditiontotheseseniorappointments,anumberofotherstrategicchangeswereimplementedduringtheyeartoreflectthenewgrowthstrategyofPetroleumServicesglobally.

Towardstheendof2012,PetroleumServicesstartedtheprocessofrenewingitsloanfacility.ThisprocesswassuccessfullyconcludedinJanuary2013withasecuredbondissueintheamountofNOK550millionintheNorwegianbondmarketwithmaturityinFebruary2018.Thebondwillbeusedtorefinanceexistingdebtandforgeneralcorporatepurposes.


Enhanced Drilling Services

In July 2012 it was announced that Enhanced Drilling Solutions (EDS) and Ocean Riser Systems (ORS) had joined forces to form EDS-ORS, a company within AGR Group.

InAugustitwasreportedthatEDS-ORSwasdevelopingthenextgenerationofManagedPressureDrillingsolutionforfloatingrigsinaUS$5.1magreementwithStatoil.ThistechnologywillbuildontheEC-Drill®system,developedanddeployedbyEDSonthreedeep-waterwellssinceitsintroductionin2012.

EC-Drill®isastep-changesolution,solvingachallengecommonlyencounteredindeep-waterwells:drillinginnarrowpressurewindows.Thisisachievedbymanipulatingthebottomholepressureinthewellborebyalteringthelevelofdrillingfluidintheriser.Thisisdonebymeansofapumpfittedontotheriser.Itispossibletocost-effectivelynegotiatenarrowpressurewindowsandreachdeeptargetsthatwouldotherwisebeimpractical.Otherbenefitsincludeimprovedsafetyduetofasterkick/lossdetection,rig-timesavings,drillingcapabilitieswithnear-constantBHP,reducedcasingstringsandtheabilitytochangerisermudlevelswithinminutes,ratherthanmudweightswithinhours.In2012EC-DrillwasusedoffCubafromtheScarabeo9rigforPetronas,RepsolandPDVSA.

MPC®(ManagedPressurecementing)wasalsolaunchedaspartoftheEDS-ORSsolutionsportfolioand,togetherwithEC-Drill®,wasnominatedforanInnovationAwardatONS2012.MPC®usesconventionalcementtofacilitatethesafeisolationofchallengingpressurezones(shallowgasorwater)innarrowpressurewindowscenarios.Thesystem

resolvestwomajorchallenges:effectivecementslurryplacement,plusgasflowaftercementing.Thetechnologyprovidesoperatorswithprecisecontroloverthepressureandflowparametersofreturningcement.Constantpressureisachievedatweakzones,preventinglossestotheformation.Thesystemissafetyenhancinginthatanyinfluxorlossisquicklydetected,enablingarapidoperatorresponsetopreventthesituationfromescalating.

Inadditiontothesetwonewsolutions,EDS-ORScornerstonetechnologiesremaintheCuttingTransportationSystem(CTS®)andRiserlessMudRecoverysystem(RMR®).During2012,theCompanybuiltonits500-welltrack-recordforRMR®andCTS®.Bothtechnologiesweredevelopedin-housebyAGR,whichownsallpropertyrightsassociatedwiththetwosystems.

TheRMR®encompassesasubseapumptherebyenablingaclosed-loopcirculationsystem.Thesystemimprovesdrillingoperationsbyreducingtheriskandcostofdrillingtop-holesections;italsoreplaces“pump-and-dump”andensureszerodischargetotheenvironment.

CTS®consistsofapowerfulandversatilesubseaelectrical-drivepump.Thesystemenablestheoperatortokeepthewell-headareaclearofcuttingsbytransportingthemawayfromthesite.Thismeanslaterprocedures,suchastyinginumbilicals,aremoreswiftlycarriedout,plusthesystemcancreatedrillingopportunitiesinareasdeemedtobeenvironmentallysensitive(forexample,coralreefs).

During2012,29wellsweredrilledwithRMR®and17withCTS®.

During2012developmentcontinuedonControlledMudPressure(CMP),atechnologyformanagingECD(EquivalentCirculatingDensity)effects,aswellasRDS™(RiserlessDrillingSystem).Theseenablingtechnologiesarebasedonpatents,licensesandcoretechnology,plusknow-howasaresultoftheprovenRMR®technology.Theyalsorepresentnext-generationsystemsinadditiontotheRMR®andEC-Drill®.

David HineEVP Enhanced Drilling Solutions

Drilling Services AGRGroupASA


2012 saw zero major incidents, nine near misses and one lost time incident (LTIs). This is considered acceptable considering the number of operations, but we continue to strive for a clean record and keep safety as our highest priority. In 2013 we will implement further safety initiatives to further educate, helping prevent unwanted safety incidents.

As planned, we implanted our Global Internal Audit Team (GIAT) including training and associated audit plan execution. To date, results are positive thanks to internal ownership and cross-functional scrutiny, as well as improved process compliance and transparency. In 2013 we will continue this focus while strengthening our GIAT with a minimum of one member from each operating base and associated audit activity.

The sick and employee turnover rates remained well below the industry average.

In line with the business plan, the Baku workshop/facilities were upgraded to our operating standards. In APAC we moved from sub-leased facilities in Karratha – 1 500km north of Perth - to Perth itself, bringing improved access for our operations team who are primarily resident there, as well as our customer base. In Houston we secured a long-term contract to provide extensive facilities to the Chevron DGD project as well as an option for future AGR activities.

Enhanced Drilling Services has subsequently changed its name to AGR Enhanced Drilling.

Tools & Technology

Tools & Technology has four business areas that provide equipment, tools and services, each performing task oriented offshore and onshore operations.

AGR Well SeRviceSThe Well Services business is predominantly related to the AGR Junk Trapper, a wellbore clean-out tool system, with multiple applications that efficiently removes well debris. The key markets are NCS (Norway), which saw less activity from 2011 to 2012 and Saudi Arabia, with a significantly increased activity level in 2012. Well Services works with its partners for further market penetration and introductions to other selected markets.

AGR cleAnUpCleanUp’s core business is the AGR Dynamic Desander (“DDS”). The technology removes solids during well testing and work-over operations, often in combination with Coil Tubing and Flow Back operations. AGR invested in two enhanced DDS new builds in 2011 in order to be

prepared for expected domestic NSC demand for Coil Tubing operations. During 2012 CleanUp utilized these two new tools in successful domestic NSC campaigns. In addition CleanUp has, since 2010, three tools engaged in Saudi Arabia, performing initial well projects and cleanups, supporting the strict zero-flair policy enforced in this market. The 2012 number of operational days in Saudi was in line with the 2011 level.

AGR SeAbed inteRventionSeabed Intervention’s core competence and technology is within the areas seabed excavation, trenching, burial and de-burial, supporting various subsea structure- and pipeline preparation projects. In 2012 Seabed Intervention was engaged in projects in the Baltic Sea and South-East Asia, however with lower project volumes, when compared to the Ormen Lange field work conducted for Shell in 2011. AGR cAnnSeAl CannSeal has designed and developed patented technology embedded in tools for well intervention tasks, with the ability to seal off water and gas inflow into oil wells. The core 4.4’’ and 3.3’’ tool technology utilize tailor made resins to create oil well barriers. In 2012 CannSeal made significant progress; with a milestone pilot “in-hole” commercial onshore test, and by signing yet one more commercial client agreement, which is complimentary to the existing client agreement from 2011. CannSeal’s client agreements extend beyond 2012 and supports technical and commercial development.

AGR Well Services and AGR Cleanup were divested in Q1 2013.

Lasse NergaardSVP Tools & Technology


AGR Energy AGR Group ASA

During 2011 AGR established AGR Energy and grew it through 2012. This company is Operator of several licenses in Israel, holding 5% of each license. This new business line is bringing together several of AGR’s areas of expertise and enabling AGR to take a stake in the licenses where that is required.



Research & development 2012

Technology is a core part of AGR Group s business and it has a number of technologies in development. During 2012 NOK 61 million was invested in research and development and this includes some significant projects that were still in development at year end 2012, such as:

contRolled MUd pReSSURe – cMp™ The CMP™ project is a Demo 2000 Joint Industry Project. The partners are Demo 2000, BG, BP, Statoil and AGR. The goal of the project is to demonstrate dual gradient drilling capabilities by employing AGR developed pump technology after the blow out preventer (BOP) and riser have been mounted on the wellhead. During 2012, a number of drilling procedures were developed and detailed design performed. The next phase of the CMP™ project is “Field Trial”, in conjunction with the ongoing EC Drill field trial to be performed on the NCS. It is anticipated that a field trial will be undertaken in second half 2013.

ec-dRill™Equivalent Circulating Density (ECD) effects arise from fluid frictional losses in the wellbore during pumping and circulation. ECD effects cause undesirable variations in bottom hole pressure during drilling. The EC-Drill™ concept compensate for these effects and moves AGR into the field of Managed Pressure Drilling (MPD).During 2012 AGR Drilling Services has merged with Ocean Riser Systems AS, which has increased the R&D capabilities considerably and strengthened the IPR portfolio within this segment. Together with Statoil and with support from Demo 2000 and Innovation Norway, AGR EDS-ORS is now developing a fully capable MPD system for the Norwegian Continental Shelf. The intention is to perform a full field test during the second half of 2013.

pUMp technoloGyAs AGR Drilling Services enter the post BOP market with EC-Drill®, the requirement and capabilities of the subsea pumps will be more demanding. To prepare for this, AGR EDS-ORS has developed two new subsea pumps. During 2012 two each of these specially designed drilling fluid and slurry pumps, have been manufactured and functionally tested. The intention is to test these pumps under realistic conditions during first half of 2013 in a purpose build test loop to be built at the Company’s premises in Sotra.

contRol SySteMSThe control systems to accurately manage and change the pressure in the well being drilled post BOP in real time, is a critical component and a core technology for the Company. Considerable development and testing has been performed on this proprietary system during 2012. A plan for 3rd.party Hardware In the Loop (HIL) testing of the proprietary control system has been signed in last quarter of 2012 with testing to be performed in first half 2013.

ipRAs a consequence of the ORS merger and through research and internal developments, AGR Drilling Services has during the 2012 substantially increased and strengthened it’s IPR portfolio. The Company now holds several core patents and IPR in our most important markets for it’s core technology within the field of subsea drilling.

cAnnSeAlAGR CannSeal has during the course of the year continued its investments in R&D towards further technical development of the 4.4’’ tool, and the development of the 3.3’’ prototype tools, which was initiated in 2011. The 3.3” tools are scheduled for tests and first operation in 2013. In addition CannSeal continued it focus on resin R&D to facilitate client specific qualifications of sealant applications. The Zonal Isolation resin application was developed in 2012 and became client qualified for commercial use, and a resin solution for Annulus Barrier applications has been prepared for large scale testing.


2012 Key Events

JAnUARy:Drilling Services:AGRsuccessfullycompleteditsfirstBrazilianoperationusingitsEC-Drilltechnology.AGR’sManagedPressureDrillingsystemwasusedontwoPetrobrasBrazilwellsintheRioGrandedoNorteregion.

MARCh:Petroleum Services: AGRsignedaFrameAgreementwithNorwayASforengineeringandtechnicalservicesuntiltheendof2013.

JUnE:Drilling Services: AGRsignedaMasterWellServicesContractandaServiceOrderwithChevronU.S.A.Inc.(Chevron).AGRwillprovideDualGradientDrilling(DGD)offshoreoperationalservicesforChevron’sdeepwaterGulfofMexicoprogrammeforuptofiveyears,startingin2012.

Petroleum Services: AGRacquired80%ofthesharesinSteinsvik&CoAS.TheStavangerbasedcompanyprimarilydeliversSafetyCoachesandICO(InternalControlOfficers)todrillingrigsontheNorwegianmarket.Inaddition,SteinsvikholdssafetyrelatedcoursesforoilcompaniesandperformssafetyinspectionsonrigsbothontheNorwegiansectorandinternationally.

JULy:Drilling Services: TOTALE&PAustralia(Total)signeduptouseAGR’sRiserlessMudRecovery(RMR)system.ThecontractwasfortwoexplorationwellsintheBrowseBasinoffNorthWestAustralia.

AUGUST:Drilling Services: AGRjoinedforceswithStatoiltodevelopanewgenerationofManagedPressureDrilling(MPD)solutionforfloatingrigs.

AGRsignedanagreementwithamajoroperatorfortheuseofAGR’sManagedPressureDrillingsystemEC-DrillfollowingitssuccessoffCuba.ThemovefollowedasuccessfuloperationforPetronasandanotherclientusingEC-Drill.

Petroleum Services: AGRwonaNOK50millioncontracttoprovidetechnicalconsultancytoGassnova,theNorwegianstateenterpriseforcarboncaptureandstorage(CCS),followingafive-waytender.

SEPTEMBER:Petroleum Services: AGRGroupappointedÅgeLandroasEVPofitsglobalPetroleumServicesdivision.ÅgewastheformerEVPofAGRFieldOperations(“FO”)whichhesuccessfullygrewuntilthesaleofFOin2011toOceaneering.

Drilling Services: ApacheEnergyLtdsigneduptouseAGR’sRiserlessMudRecovery(RMR)system.ApachewillusetheRMRsystemforthefirsttimeduringbatchdrillingofsixtopholesonitsConistonDevelopment,offshoreWesternAustralia,pendingreceiptofallnecessaryGovernmentandotherapprovalsfortheproject.

AGRGroupASA(AGR)purchased100%ofthesharesinOceanRiserSystemsAS(ORS).ThetransactionwassettledbyashareissueinAGRDrillingServicesHoldingsAS(“DSHO”),wheretheformerORSshareholdersassumed17.5%ofthesharesinDSHO.TheDrillingServicesdivisionwasreorganizedpriortothetransaction,wheretheT&TbusinesswastransferredfromDSHOtothenewholdingcompanyoftheDrillingServicesdivision,AGREDSandT&THoldingsAS.Accordingly,DSHOwasestablishedastheholdingcompanyofallAGRCompaniesofferingEnhancedDrillingSolutions(EDS)technologyandservices.

OCTOBER:Petroleum Services: AnAGRcoordinatedgroupoffouroilcompaniesenteredintoacontractforthesemisubmersibledrillingrigBredfordDolphin.AGRwillprovidewellprojectmanagementandoperationalsupport.Thecontractisforaneightwelldrillingcampaignwithanestimateddurationof570days.ThecampaigncanbeextendedbyfouradditionalwellsbyendofJune2013andanotherfiveWellsormorebeforecommencementdate.

TheexpectedcommencementdateforthedrillingoperationsisinthemiddleofOctober2013.Theproject’srevenueforAGRisapproximately130MNOKforthefirmperiod.

nOvEMBER:TheIsraelicommissionerforoilandgasconfirmedthatAGRwasappointedasOperatorontheShikmaYamlicense.AsapartoftheagreementwiththelicensepartnersCasallDrillingLTDandCasellaWinesPTYLTD,AGRhasa5%carriedinterestthroughouttheexplorationphase.


Working environment and personnel

AcoreobjectiveofAGRistohaveasafeandhealthyworkingenvironment.WemanageourbusinessinaccordancewiththeOSHAS18001:2004standardandpartsoftheCompanyiscertified.Wemonitorourperformancecontinuously,andreportstatustotheExecutiveManagementTeamandtheBoardofDirectorsonaregularbasis.

WehavefunctioningsafetyorganizationsandWorkingEnvironmentCommittees;ensuringemployeeinvolvementinHSErelatedissues.

During2012,theServicespartoftheCompanyhadzeroincidentsresultinginabsenceandzeromedicaltreatmentincidents.Hence,thefrequencyoflosttimeinjuriesandaccordinglythefrequencyofpersonnelinjuriespermillionworkinghours(H-value/H2-value)waszero.

Averageillnessrelatedabsenceduring2012was1.1%correspondingto1072days.Thisissimilarto2011andconsideredverylow.Therearesomevariationsbetweentheregions,Norway3.7%,UK0.4%,AP0.5%,Moscow2.6%andAmericas0.4%.

AGRhasoperatedsixrigsin2012,includingfacilitationoftherigcontract,projectmanagementandwelloperation,threeoutofNorwayandthreeoutofUK.Thefrequencyofpersonnelinjuriespermillionworkinghours(H2-value)was3.8,basedonapproximately1.0millionoffshoreworkinghours.Thisisasignificantdecreasefrom2011.Noneoftheincidentswereinjuriesofpermanentcharacter.

During2012,EDSandT&Thadonelosttimeinjuryandonemedicaltreatmentincident.Thefrequencyoflosttimeincidentspermillionworkinghours(H-value)was23-animprovementfrom2011.In2012themainfocushasbeentobuildauditcompetencewithintheorganizationandusethatforimplementinganinternalauditscheme.IllnessrelatedabsenceforEDSandTools&Technologywas3.6%comparedto2.2%in2011,stillconsideredacceptable.

AGRrunanannual,worldwideengagementsurvey,monitoringemployeesatisfaction,involvementandengagementwithourbusiness.Weusetheresultsofthissurveyforfurtherimprovingourperformance.

Peopleretentionandreducingturnoverwillbefocusareasalsoin2013.

AGRhasseveralinitiativesstimulatinganactiveandhealthylifestyle;in2012theAGRemployeeswerechallengedto‘RuntheWorld’,thatisrunning,walkingandhikingthedistancearoundtheequator,24901.55miles.Bytheendoftheyearwehadachievedthatwithgoodmargin,intotal32592.573miles,hence1.3timesthedistancearoundtheequator.

Gender equality

Asat31December2012theBoardofAGRhadsevenBoardMembersofwhichthreewerewomen.

AGRaspirestobeanattractiveemployerforpeoplewithdifferentbackgrounds,regardlessoftheirethnicity,gender,religionorage.Initspolicy,theCompanyhasimplementedconditionstoensureequalopportunitiesinareassuchassalary,promotionandrecruitment.Thecompetenceprincipleisdecisiveinallappointmentprocesses.Inadepartmentwhereonegenderisheavilyunder-represented,thisistakenintoaccountduringtheappointmentprocessifotherqualificationsareotherwiseequal.Inconnectionwiththeyearlysalaryevaluation,attentionisshowntopossibleinequalityregardingaveragelevelofpayformenandwomen.TheGroupprovidesequalpayforequalworkandrewardsgoodresults.

Environmental Reporting

AllAGRactivitiesthateffecttheenvironmentaremanagedbymeansofwellestablishedsystemsandprocessesinordertoidentifyandeliminateorreduceanynegativeimpact,andtoensure,asaminimum,compliancewithlegislationandregulationssetoutbytheauthorities.Theenvironmentalaspectsofouractivitiesareidentifiedandmanaged.AGRaimstofacilitatethecontinuousenvironmentalimprovementinouroperationsbyadoptingtheprinciplesofISO14001:2007,internationalstandardforenvironmentalmanagement,andanincreasingpartoftheAGRbusinessarebeingcertified.Wearerunninginternalcontrolactivitiestoverifycompliance.

“AcoreobjectiveofAGRistohaveasafeandhealthy

workingenvironment.”Tove MagnussenSVP HSEQ


Id. To: value: Currency: Region: value nOK

1 PrincessMargaretChildrensHospital,Perth

12000 AUD APAC 70720

2 NorthsoundRadio 2500 £ UK 22100

3 AGRKraftløp 67000 NOK Norway 67000

4 DoctorswithoutBorders 1000AGRcontributionand2344werefromtheemployees.Total=3344

£ UKandNorway 29600

5 BlackRockRace 10000cash,5000webdesign,2450t-shirts,racenumberandtrophiesTotal=17450

£ UK 155000

6 StavangerIF 15000 NOK Norway 15000

TherearenorelationshipbetweenAGRandthereceivingorganizations.

Donations and Charity Contributions

During2012,AGRhasdonethefollowingdonationsandcharitycontributions:

Furthermore,manyoftheoperationalactivitiesandproductsofthebusinessarefocusedonprotectingtheenvironment.AsanexampletheRMRisaproductwhichinadditiontoitsoperationaladvantagesoffersenvironmentalfriendlysolutionstoclients,byallowingzerodischargeofchemicalsandcuttingsindrillingoftopholesections.

EnvIROnMEnTAL PERfORMAnCE SUMMARy 2012

•Energyconsumptionisatanormallevelforourtypeofbusiness

•Wastemanagementisperformedtominimizewaste

amounts,andtofacilitateforreuseandrecyclingofgeneratedwaste

•Chemicalsaremanagedtoreduceuseandplanneddischargeofenvironmentallyhazardouschemicals

•Wehad12accidentalspillsfromouroperationsduring2012,fromsixdrillingrigs.Wearenotpleasedwiththisnumberofincidents,butitissomewhatlowerthanin2011.Outofthe12incidents,fourareassessedasmediumriskand0areassessedashighrisk.Wehavehighfocusonlearningfromtheseincidentstopreventrecurrence.

AGRKraftløpet2012


2013 Operations

AGR’sBoardofDirectorsemphasizesthatthereisalwaysanelementofuncertaintyrelatedtothedeliveryofbusinessperformanceandforwardlookingprojections.

Petroleum Services

Themarketoutlookfor2013andbeyondisverystrong.Theindustryisfacinghighdemandfordrillingofwells,whileatthesametimethereisashortageofcapacityinthemarket.Insuchamarket,trackrecordisvital.PetroleumServiceshasdrilled474wellsduringthelast12yearsandiswellpositionedtooffercostefficientwelloperationstotheglobaloil&gasindustry.Ourexperienceisexpectedtobeinhighdemandgoingforward,asdrillingefficiency,costefficiencyandsafetyduringdrillingoperationswillbekeyforoilcompaniestodeliverontheirexplorationplans.

Enteringinto2013,thebusinesshasastrongsecuredorderbacklogofdrillingoperations.Thisisspeciallythecasewithinitsmostimportantregions.Atyearend2012thebusinesswasworkingonwellplanningandpreparationworkfor2013operations-inNorway10wellsarescheduledfor2013.Withalargenumberofnewcontractsandagreementssecuredduringtheyear,thebusinessoutlooksarepositive.

ThesuccessofPetroleumServicesispartlyaresultofitsabilitytosecurerigaccesstosmallerE&Pcompanies.ThefocusonsecuringrigcapacitytosmallerE&Pcompaniesaroundtheworldwillbestrengthenedevenmorein2013andisexpectedtoincreasebusinessactivityfurther.

Towardstheendof2012PetroleumServiceslaunchedasignificantlyupdatedbetaversionofitsP1WellConstructionSoftware,aswellaslaunchingthenewM2MaterialsManagementsoftwareprogram.Withtheseavailableinthemarket,itisexpectedthat2013willbeabusyandstrongyearfortheSoftwareSolutionsdivisionofPetroleumServices.

Drilling Services

EnhAnCED DRILLInG SOLUTIOnS (EDS) 2012sawabreakthroughintermsofManagedPressureDrillingsolutionsforfloatingrigswithEC-Drill®deployedonthreedeep-waterwells.EDS-ORSwillbuildonthisachievementin2013,exploringnewmarketsgloballyfortheEC-Drill®system.

WealsoseerealinterestinthemarketplaceforMPC®asacomplimentarytechnologytoRMR®,withnewcustomersmakinginquiriesastothesystem’scapabilities.2013willseeacontinueddrivetofurtherraiseawarenessofMPC®andthebenefitsitoffers,securingitspresenceglobally.

RMR®itselfsawsustainedgrowthinallactivemarketsduring2012.ThesystembecomefurtherestablishedinthemarketplacebothbyitscontinuedusebycustomerswhoseethebenefitsRMR®candeliver,aswellasactiveSalesandMarketingefforts.Thefirsthalfof2013willseeunprecedentedRMR®activityinAustralia,withcontinuedhighactivityontheNCSalsopredicted.

Tools & Technology

AGRWellServicesandAGRCleanup,projectstabletoincreasedbusinessin2013.TheAGRJunkTrapperactivities,outsidethedomesticNCSmarket,sawhigherutilizationratestowardstheendof2012,thisisexpectedtocontinueinto2013,incombinationwithrevitalizedeffortsinthedomesticmarket.TheAGRDynamicDesanderhastwoscheduledcampaignsintheNorthSea,themostsignificantwithdeploymentearly2013.TheDDSoperationsinSaudiArabiaiswellpositionedforanincreasednumberofunitsandoperationaldaysin2013,duetoSaudiAramco’splanneddrillingactivitiesinrelationtothedevelopmentofoilreservesaimedatreplacingdiminishedsupplyfromLibya.

AGRWellServicesandAGRCleanupweredivestedinQ12013.

AGRSeabedIntervention’strenchingandexcavationbusinessistargetingsmallerprojectswithshortleadtimesin2013,andcontinuesitsdedicatedeffortstowardsgainingordersforglobalmegaprojectsscheduledinthemarketfor2014.

AGRCannSealcompleteditsinitial“in-hole”onshoreprojectin2012andasimilarprojectwiththesameclientisscheduledin2013.Inaddition,commercialagreementshavebeenenteredintowithglobalclients,withmultipleoffshorewellinterventionplansthroughout2013,thatareparticularlysuitableforCannSeal’scostefficienttechnologyapplication.

AGR Energy

AGREnergyaimstogrowitsactivitiesinIsraelandelsewhere,actingasanOperatorwithminoritystakesintheoilfields.

Board composition

AttheGeneralMeetingheldon25May2012,ReynirIndahl,HugoMaurstad,MariaTallaksen,ThomasNilssonandToveMagnussenwerereelectedforatwoyearperiod.

InformationconcerningremunerationoftheBoardofDirectors,theChiefExecutiveOfficerandtheAGR’sExecutiveManagementcanbefoundinNote25totheconsolidatedfinancialstatements.Thecompensationfor

theAGR’sexternalauditorcanalsobefoundinNote25.


Risk Management and Internal Control

Internal control

Effective controls ensure that the Group is not exposed to avoidable risk, that proper accounting records have been maintained, that the financial information used within the business is reliable and that the consolidated accounts preparation and financial reporting processes comply with all relevant regulatory reporting requirements. The dynamics of the Group and the environment within which it operates are continually evolving together with its exposure to risk. The internal control system is designed to manage rather than eliminate the risk of assets being unprotected and to guard against their unauthorised use and the failure to achieve business objective. Internal controls can only provide reasonable and not absolute assurance against material misstatement or loss.

The directors confirm that there is an ongoing process for identifying, evaluating and managing the risk faced by the Group and the operational effectiveness of the related controls, which has been in place for the year under review and up to the date of approval of the annual report and accounts. They also confirm that they have regularly reviewed the system of internal control utilising the review process set out below.

Standard

AGR has established a Finance Manual laying out the roles, responsibilities and timelines for the accounting procedures including guidelines on the minimum level of internal control that each of the subsidiary companies should exercise over specified processes. The internal control process has been formalized and implemented where all subsidiaries are carrying out a self-assessment of the internal control, and signing off on an internal control questionnaire.

The internal control questionnaire is standardized and similar for all subsidiaries, and includes questions about financial control, IT systems, transfer pricing, inventory, accounts receivables, fixed assets, cash, accounts payable, revenue recognition and cost accruals and so on. The

questionnaire is based on the Group policy, and provides adequate documentation that the policy is implemented.

All companies prepare annual operating plans and budgets, and business strategies are prepared at regional level and approved by the board. In addition AGR prepares financial forecast that are presented to the board at least two times per year. Detailed actual financial segment information is prepared monthly; performance compared to budget is monitored at company and group level. In addition, actual performance is compared to latest forecast and prior year on a monthly basis including analysis of any significant variances.

Capital expenditure and investment decisions are treated as a part of the budget and forecast processes. Details about who has right to approve investments are described in an authorization matrix. The cash position of the Group is monitored on a daily basis and variances from expected levels are investigated thoroughly.

An important factor in ensuring proper financial reporting is good IT controls. There are many IT controls in place to access the accounting systems for the year as a whole and at the year-end these controls have been intensified.

Results, Cash Flow, Investments, Finance and Liquidity

Revenue decreased from NOK 1 867 million in 2011to NOK 1 778 million in 2012. Operating profit in 2012was positive NOK 43 million compared to NOK 140 million in 2011. Profit after tax in 2012 was negative NOK 104 million, of which the majority relates to a one off write down of deferred tax assets of NOK 96 million. For more information about the background for the results, see the operational section. The accumulated cash flow from the Group’s operational activities was positive NOK 300 million. Net investments for the Group including acquisitions were NOK 119 million.The capital expenditure was mainly related to AGR Drilling Services equipment, positioning AGR for future growth, and development projects such as CannSeal. Due to the payment of dividend proceeds of NOK 700 million, the Group had a total net cash flow of negative NOK 549 million in 2012 compared to positive NOK 792 million in 2011. Cash and cash equivalents for the Group ended at NOK 273 million which includes an advance payment to AGR Energy of NOK 226 million relating to drilling costs on a well spudded in Q4 2012. Net interest-bearing debt for the Group was NOK 472 million, including the above mentioned advance payment to AGR Energy. Net interest-bearing debt adjusted for the advance payment amount to NOK 698 million, compared to negative NOK 92 million at the end of 2011 following the

Svein SollundCFO


sale of AGR Field Operations. At the end of 2012 NOK 435 million of interest-bearing debt was fixed through interest swaps and options, constituting 58 % of gross interest bearing debt. The Group had total assets of NOK 2 171 million at the end of 2012, a decrease from NOK 2 791 million at year end 2011. Equity decreased from NOK 1 411 million in 2011 to NOK 681 million in 2011. The reduction is mainly due to payment of dividend proceeds to shareholders of NOK 700 million in Q2 2012, and the above mentioned write down of tax assets. The equity ratio ended at 31 %.

Financial Risk

Financial risk factors

AGR’s activities are exposed to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. AGR’s overall risk management program seeks to minimize potential adverse effects from financial risks on AGR’s financial performance. AGR uses foreign currency debt and derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the board of directors. AGR Treasury identifies, evaluates and hedges financial risks in co-operation with AGR’s operating units. The board provides a financial risk management policy covering foreign exchange risk, interest rate risk, liquidity risk and credit risk.

Market risk

(I) FoReIgn exChange RIskAGR operates internationally and is exposed to foreignexchange risk arising from various currency exposures,primarily with respect to the US dollar, Australian dollarand the UK pound. Foreign exchange risk arises from futurecommercial transactions, recognized assets and liabilitiesand net investments in foreign operations.

AGR Financial risk policy states that 12 month forecastednet currency exposure shall be maximum 60 million in NOKequivalents. Positions are reviewed quarterly. Hedging isconducted by applying a combination of long term foreigncurrency term loans and currency derivatives.

(II) PRICe RIskAGR has very limited exposure to equity securities price risk due to very limited investments held by AGR classified on the consolidated balance sheet as fair value through profit or loss.

AGR is indirectly exposed to oil price changes.

(III) InteRest Rate RIskAGR’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose AGR to cash flow interest rate risk. AGR’s policy is that long-term borrowings shall be based on floating interest rates, however interest rate derivatives shall be applied in order to avoid catastrophic losses due to interest rate changes.

AGR manages its interest rate risk by applying derivatives such as interest rate collar swaps, in order to establish a cap on interest rates in case of significant increase in market interest rates. In addition, the Group has applied floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.

At 31 December 2012 AGR held three interest rate swap contracts and one interest rate collar contract with a total amount of NOK 445 million, which constitutes 58.4% of the Group’s gross interest bearing debt.

Credit risk

The risk that counterparties fail to fulfill their financial obligations is considered low as AGR’s historical losses related to receivables have been low. The majority of the Group’s debtors are publicly listed Norwegian and international oil companies. The Petroleum Services customers consist of medium to small oil companies. Some of these customers have moderate credit risk potential. The AGR policy is to obtain financial guarantees from debtors where the credit risk and exposure is considered to be high. In addition, AGR has put in place credit insurance where a majority of AGR’s receivables are insured in order to reduce credit risk. The overall credit risk is thus considered to be low.

Liquidity risk

AGR has relatively few, large customers. Delayed payments from several large customers at the same time could have a significant impact on the Group liquidity situation. AGR management and the individual business units have a high focus on working capital management, and continuously take actions if customers do not settle their obligations towards AGR in due time. AGR’s policy is to reduce the liquidity risk by having a long term multi-currency loan facility committed from relationship banks. The Group shall at any time have unused credits at least equal to next quarter’s interest & installment requirements under AGR’s loan facility.

At 31 December 2012 the Group had undrawn committed credit lines amounting to NOK 88 million.


Parent Company

AGR Group ASA is the listed parent company and its mainactivity is to act as the owner of the shares in the AGR’scompanies. The operating result in 2012 was negative NOK19 million compared to negative NOK 48 million in 2011.The net result was negative NOK 56 million compared topositive NOK 910 million in 2011. Accumulated cash flow from the company’s operations wasnegative NOK 57 million. Total net cash flow was negative NOK 718 million of which NOK 700 million relates to payment of dividends to shareholders. The total assets were NOK 936 million compared to NOK2 395 million the previous year. Total equity was NOK 898 million, of which share capital amounts to NOK 248 million. The equity to asset ratio was 96% at year-end 2012.

Free equity as of 31 December 2012 was TNOK 599 938.

Continued operation

In Q1 2013 AGR refinanced its Petroleum Services division by placing a five year bond of 550 MNOK in the market. The

Drilling Services division was refinanced through a three year traditional bank loan. The loan agreement was signed in February 2013.

AGR had financial covenants related to its previous loan agreements. Due to dispositions related to the refinancing process that has now been finalized, some of the financial covenants under the previous loan agreement effective per Q4 2012 were in technical breach.

The Board has considered the factors above in relation to continued operations and concluded that in accordance with the Accounting Act §3-3a, we confirm that the financial statements have been prepared under the assumption of a going concern.

The key assumptions made in the impairment test reflect the Board’s current assessment of AGR’s potential to adapt to and benefit from trends in the oil services industry. Management believes that the expectations reflected in the forward looking forecasts used as a basis for the impairment reviews, are reasonable. However, as the impairment valuations are based on forward looking information, they will involve risk and uncertainty. For more information, please refer to note 3.


Annual Result and Allocations

The Board proposes the following allocations of the AGR’s result for the financial year:

Loss for the year (103 975) TNOK

Non-controlling interests’ share of loss for the year (2 401) TNOK

total loss allocated to retained earnings (101 574) tnok

The parent company’s distributable equity at 31.12.2012 was:

Loss for the year (55 485) TNOK

total loss allocated to retained earnings (55 485) tnok

Oslo, 17 April 2013

Reynir kjær IndahlVice Chairman

tove MagnussenBoard member

Celeste annette MackieBoard member

eivind ReitenChairman

hugo Lund MaurstadBoard member

Maria tallaksenBoard member

thomas nilssonBoard member

Åge LandroCEO


The Norwegian accounting act section 3-3b requires the company to annualstate its principle and practice of corporate governance. This statementpresents a review of AGR’s principles for corporate governance and compliancewith the Norwegian Code of Practice for Corporate Governance of 21 October2010 (Code of Practice), updated code of practice of 20 October 2011, and notesAGR’s actions and where relevant any deviations from each of the requirements.If no deviation is stated then there have been no deviations from the Codeof Practice.

Implementation and reporting on corporate governance

The Board of Directors of AGR Group ASA (“AGR”) originally adopted its Corporate Governance Policy on the 22 May 2006 and it have thereafter been regularly updated. This is available on AGR’s website (www.agr.com).

AGR’s principles for corporate governance detail an adequate division of the tasks and positions of AGR’s owners, the Board and the executive management. An adequate division of tasks and positions provides for the adoption and implementation of objectives and strategies, and the achievement of the objectives is subject to evaluation and is followed up.

Furthermore, the principles contribute to keeping the business of AGR under appropriate supervision. An adequate division of tasks and supervision contributes to the best possible long term profitability, to the benefit of the shareholders and other stakeholders.

This statement sets out AGR’s compliance with each section of the Code of Practice, and also notes any deviations from the Code of Practice and the reasons for such deviation.

AGR will not be issuing an extensive Annual Report in 2013. It is not a legal requirement that AGR issue such an

annual report and instead, AGR is issuing this statement of compliance with the Code of Practice, the Directors Report and a summary of the 2012 figures together with the full audited annual accounts. This approach has been taken as a result of AGR’s shareholder base, whereby AGR has one major shareholder owning 78% of AGR. With fewer retail investors this approach is seen as more cost effective and environment friendly whilst still providing all shareholders with sufficient information and reporting as required by the law.

The Board of AGR has laid down AGR’s values and ethical guidelines. The values of AGR are outlined on AGR’s website.

Business

AGR’s objectives are laid down in article 3 of the Articles of Association which reads as follows: The objective, as laid down in the Articles, outlines the parameters within which AGR operates, and offers the shareholders certainty with regards to the type of activities which AGR will undertake. AGR’s main objectives and strategies are presented on AGR’s website.

“The Company is engaged in trade, industry, real estate investments and related activities, including participation in other companies with similar activities as well as investments in real property, securities and other assets”

Equity and dividends

The book equity of AGR as of 31 December 2012 was NOK 681 million which represents an equity ratio of 31%. Based on the Company’s objectives, strategies and risk profile, AGR considers the equity ratio as satisfactory. It is an objective for AGR to yield a competitive profit from the shareholders’ investment. AGR’s dividend profile shall at the same time ensure AGR’s need for stability and development in accordance with its objectives and strategies. AGR distributed NOK 700 million as dividends in 2012.

Equal treatment of shareholders and transactions with close associates

AGR has one class of shares, and all shares hold equal voting rights in AGR. AGR prioritises the furtherance of the interests of the shareholders, and equal treatment of shareholders.

Corporate Governance Report – 2012


AGR’s Corporate Governance Policy establishes the guiding principle that the Board shall act in the best interests of all shareholders. In total, the Company owns 1 745 915 AGR shares.

In the event of transactions, other than immaterial transactions, between AGR and shareholders, Board members, members of the executive management or any persons related to these, the Board shall in accordance with its policies, procure that the transaction is based on a valuation prepared by an independent third party. If required pursuant to section 3-8 of the Public Limited Companies Act and when the consideration exceeds 5% of AGR’s share capital, the transaction will be put to the general meeting for approval.

AGR’s Corporate Governance Policy establishes principles which require members of the Board and the executive management to report to the Board in the event that they have any material interest in AGR’s agreements.

Freely negotiable shares

AGR’s shares are listed on the Oslo Stock Exchange and are freely negotiable. No form of restriction on the negotiability of the shares is included in the Articles of Association.

General meeting

AGR encourages shareholders to attend AGR’s general meetings. AGR’s Corporate Governance Policy details, that notices for general meetings shall be distributed no later than two weeks in advance and placed on its website 21 days in advance of a general meeting.

AGR seeks to ensure that the notice of meeting and accompanying materials include sufficient information about the items on the agenda. For practical purposes the Company includes in its notices to general meetings a combined notice of attendance and proxy form which the shareholders are invited to use for registering attendance and submitting proxies. However, the Articles of Association of AGR does not provide for the use of mandatory prior notices of attendance at the general meeting and all shareholders who wish to attend will be welcome at the General Meeting.

AGR ensures that those shareholders not able to attend the general meeting in person can vote via proxy and proxy forms are supplied with the notice of meeting.

It is AGR’s preference to have the members of the Board, the Nomination Committee and the auditor attends the general meeting. A representative of AGR’s auditors, E&Y, has been present or available at all general meetings during the reporting period.

Proxy forms have been supplied with all notices of a general meeting. In accordance with the Public Limited Companies Act shareholders may raise items for consideration by

the meeting prior to the meeting, provided that such suggestions are submitted at least two weeks prior to the general meeting.

The notices of meeting issued during the reporting period note the address of the AGR web page and note that copies of the notices of meeting and supporting materials are available or referred to on the website. All notices issued since this recommendation was included in the Code of Practice clearly state on which web page the notice and supporting documents are made available.

AGR had a copy of the notice of meeting for all general meetings held during the period available or referred to on its website and the notices include proxy forms. Each candidate nominated for election was described by the Chairman of the Nomination Committee and elected by voting for all, as a group. AGR did not conduct a vote on each candidate for election, however, if this had been requested by the shareholders present then this would have been done.

Nomination committee

Pursuant to AGR’s Articles of Association AGR has established a Nomination Committee, which is comprised of three members elected by the general meeting.

The remuneration of the members of the Nomination Committee was resolved at the extraordinary general meeting of April 2008. Article 6 of AGR’s Articles of Association requires AGR to establish a Nomination Committee.

The first Nomination Committee of AGR was elected at the Annual General Meeting in 2007. The current Nomination Committee is comprised of three members. The Nomination Committee does not include the chief executive officer nor any member of the executive team. The chairman of the Nomination Committee is also a board member.

The Nomination Committee instructions state that the purpose of the committee is to nominate candidates for election as Board members, and make recommendations for the remuneration of the members of the Board. In the notice of meetings sent during the reporting period the Nomination Committee supplies sufficient information regarding proposed candidates and their background to justify the recommendations made to shareholders.

During the reporting period AGR has provided information regarding the membership of its Nomination Committee with the notices of meeting issued for the 2012 AGM.

There has been no specific mention on the Company’s website or in the notices or accompanying documentation to the effect that the shareholders may propose candidates to the board of directors. However, this is acknowledged in the Nomination Committee Instructions and the Nomination Committee has approached the major shareholders of AGR when formulating its recommendations.


Corporate assembly and board of directors: composition and independence

AGR does not have a corporate assembly. The Board of Directors is elected by the General Meeting.

Pursuant to the Company’s Articles of Association the Board shall be comprised of between three to nine members.

The experience of all the board members demonstrates a broad range of experience amongst the individuals on the board. The skills represented include a range of general business administration skills, financial markets competence and industry appropriate operational experience. In selecting the members of the board, consideration was given to how the individual members would operate as a collegiate body.

According to AGR’s Corporate Governance Policy a majority of the members of the board shall be independent of AGR’s management and main business partners. Furthermore, at least two board members shall be independent of the Company’s major shareholders. This is the case with the current composition of the board.

There are no representatives from the executive management among the members of the Board.

Article 5 of AGR’s Articles of Association states that the chairman shall be appointed by the general meeting.

The term of office for the board members is two years pursuant to the Public Limited Companies Act.

A summary of the expertise and capacity of the board members, noting which members are independent has been placed on AGR’s website.

Directors’ shareholdings are noted in note 25 in the Annual Accounts.

The work of the board of directors

The Board has adopted and implemented a code regulating board proceedings. The guidelines are evaluated in connection with the Board’s annual review of its own work. The Board prepares an annual plan for its work, particularly focusing on objectives, strategies and implementation, as well as any other tasks devolved as a consequence of the Board’s by Laws, Regulations, resolutions of the general meeting or the Stock Exchange Rules.

The Board assesses on a continuous basis the need for sub committees of the Board.

The Board established in 2008 an Audit Committee, headed by Thomas Nilsson. Furthermore a Remuneration

Committee has been established, providing advice to the Board on CEO compensation, Executive Compensation and overall guidance on bonus, share awards and remuneration for the employees of AGR.

Risk management and internal Control

AGR’s approach to risk management is described in the Director’s Report. In addition to monthly operational reporting the board carries out an annual evaluation of AGR’s major risks.

Remuneration of the board of Directors

Remuneration of the Board is decided by the general meeting and is believed to reflect the responsibilities, time commitment and complexity of the Company’s activities and expertise of the board members. The Board’s remuneration is not linked to AGR’s performance. No member of the Board has been granted share options. With the exception of Eivind Reiten, no Board members of AGR have been engaged in any specific assignments for AGR or its associated companies in addition to their appointment to theBoard. The remuneration of the Board of directors is detailed in the accounts, which can be viewed on the AGR website.

Remuneration of the executive Management

The Board has set guidelines for remuneration of the executive management. The guidelines are presented to the General Meeting for an advisory vote. Although advisory, the guidelines will be binding, and thus subject to the general meetings approval, in respect of any remuneration related to shares in the Company. Salary and other remuneration to the CEO are determined by the Board. AGR’s guidelines for remuneration to the executive management are described in the attachment to the AGM notice and therefore appear on AGR’s website and remuneration to the members of the executive management is presented in note 25 in the Annual Accounts. The executive management of AGR has the opportunity to be members of AGR’s management share scheme, in which management can buy shares directly in the two business units. Executive Management of AGR is also entitled to bonuses of up to 40% of their salary. The bonus scheme is linked to company performance. AGR does not offer any other form of remuneration to executives other than where expatriate packages may require some additional benefits. AGR does not have a share option scheme.

Information and communications

AGR has adopted and implemented an Insider Trading Policy and a management code with associated guidelines for the reporting of financial and other information.


It is a paramount principle of AGR that all information and communications shall be timely and relevant.

AGR’s financial calendar is available on AGR’s website, and provides an overview of the dates of major events. Other information is continuously made available to shareholders via AGR’s website.

AGR ensures through policy and established practice that all information provided to the market or to shareholders is also posted on the AGR website to keep all stakeholders informed of AGR’s activities.

Takeovers

The board of directors has established guiding principles for how it will act in the event of a takeover bid. These guiding principles are included in the Corporate Governance Policy. AGR’s Corporate Governance Policy states that the Board shall not carry out measures to prevent a take-over, unless otherwise resolved by the general meeting by no less than a 2/3 supermajority vote.

Auditor

In compliance with the Code of Practice and pursuant to AGR’s Corporate Governance Policy, AGR’s auditor attends Board meetings which deal with the Annual Accounts. The auditor meets annually with the Board for an evaluation of the auditor’s views on the Company’s accounting principles, risk exposures, internal control etc. The Board has met with the auditor without the CEO or management being present. The Board has adopted a management code which includes, inter alia, guidelines for the management’s use of the auditor for tasks other than the statutory audit. The auditor has been instructed to provide the board with a report annually detailing all the work undertaken by E&Y for AGR in addition to the audit work and to provide confirmation of the auditors continued independence. The remuneration to the auditor is presented in note 25 in the Annual Accounts.

BOARD’S STATEMENT OF SALARIES

MAIN PRINcIPLESThe main principles for AGR Group ASA’s management remuneration policy are that executive management shall be offered competitive compensation, when salaries, benefits in kind, bonuses, share awards and pension arrangements are taken into consideration.

Salaries and other benefits for executive management to be determined in the current year will be in accordance with the abovementioned main principles.

REMuNERATION cOMMITTEEThe Board has formed a Remuneration Committee to provide advice to the Board on CEO compensation,

Executive Compensation and overall guidance on bonus, share awards and remuneration for the employees of AGR. Hugo Maurstad, Reynir Indahl and Maria Tallaksen are the current members of the Committee. No additional compensation is awarded to the Committee members for their participation in the work of the Committee.

Bonuses and other additional BenefitsAs a guideline, annual bonuses in addition to base salary may be offered to executive management. Such bonuses shall however, be limited to certain percentages of the base salary and to achievement of certain predetermined objectives. Guidelines for distribution of bonuses shall be determined by the Board of Directors. Bonuses to the AGR CEO shall be determined by the Board of Directors, after consulting with the Company’s Remuneration committee.

Executive management shall as a general rule, be entitled to participate in pension schemes that ensure pension benefits in proportion to their level of salary as employees. The executive management of the Company are members of the Company’s collective pension scheme.

The members of the Company’s executive management have other ordinary benefits in kind, such as free phone, newspapers and trade magasines etc, but do not have other material benefits in kind. Where appropriate, employees working under expatriate conditions may also receive a car allowance. As a guideline car allowances shall not be offered to AGR employees, and existing arrangements will be phased out when the employment contracts are due for renegotiation.

In respect of severance payments these will be agreed on an individual basis. Some of the current members of the executive management have rights to severance payment, corresponding from 6 to 18 months base salary, if their employment is terminated by the Company. As a guideline severance payments shall be in accordance with the Company’s main principles, i.e. that the level of remuneration shall be competitive when all benefits are seen as a whole.

share related incentive schemesAGR does not have a share option scheme for its employees or other forms of remuneration which are linked to the shares in the Company or the quoted price of the Company’s shares. Some employees have, however, invested directly in the two holding companies owning AGR’s two divisions.

Please also refer to note 25 for AGR ASA’s annual accounts for details about remuneration of the executive management in 2012.



Consolidated Income Statement

GROUP Figures in TNOK

Year ended 31 December

Continuing operations Note 2012 2011

Revenue 5,6,7,29 1 716 148 1 832 245

Other operating revenue 5,6,7,29 61 765 35 669

Total operating revenue 1 777 913 1 867 914

Goods and consumables used 11,34 823 422 977 184

Payroll expenses 19,25 601 173 494 916

Depreciation, amortisation and impairments 8,9 111 681 106 728

Other operating expenses 25,27,30 198 575 148 632

Total operating expenses 1 734 852 1 727 460

Operating profit 43 061 140 454

Financial income 28 217 379 277 733

Financial expenses 28 272 235 362 549

Net financial items (54 856) (84 815)

Profit (loss) before income tax (11 795) 55 639

Income tax expense 20 92 180 38 056

Profit (loss) from continued operations (103 975) 17 582

Profit after tax from discontinued operations 36 - 737 016

Profit (loss) for the year (103 975) 754 598

Non-controlling interests’ share of profit (loss) for the year (2 401) 9 330

Profit attributable to equity holders (101 574) 745 268

(103 975) 754 598

Earnings per share from continuing operations (NOK) (0.82) 0.05

Earnings per share including discontinuing operations (NOK) (0.82) 6.01


Consolidated statement of comprehensive income

Statement of comprehensive income Twelve months ended 31 December

2012 2011

Profit for the period (103 975) 754 598

Other comprehensive income

Currency translation differences 4 520 6 835

Currency translation differences discontinued operations - (27 063)

Total comprehensive income for the period (99 455) 734 370

Profit attributable to:

- owners of the company (101 574) 745 268

- non-controlling interest (2 401) 9 330

(103 975) 754 598


Consolidated statement of financial position


As at 31 December

Note 2012 2011

Assets

Deferred tax assets 20 110 027 176 838

Other intangibles 4,8 206 780 166 757

Goodwill 4,8 649 277 581 627

Intangible assets 966 084 925 222

Machinery and operating equipment 9 297 805 345 169

Tangible fixed assets 297 805 345 169

Long term receivables 32 387 40 887

Financial fixed assets 32 387 40 887

Total non current assets 1 296 276 1 311 278

Inventories 11 23 995 20 535

Trade receivables 12,13,16,29 478 315 521 410

Other receivables 14 99 588 116 437

Receivables 577 903 637 847

Financial assets at fair value 16,33 92 95

Cash and cash equivalents 15,16 272 683 820 984

Current assets 874 673 1 479 461

Total assets 2 170 949 2 790 739


Consolidated statement of financial position

Reynir Kjær IndahlBoard Member

Tove MagnussenBoard Member

Celeste Annette MackieBoard Member

EivindReitenChairman of the Board

Hugo Lund MaurstadBoard Member

Maria TallaksenBoard member

Thomas NilssonBoard Member

Åge LandroCEO


As at 31 December

Note 2012 2011

Equity and liabilities

Share capital 17,18 251 797 251 797

Treasury Shares 17,18 (3 492) (3 631)

Total paid-in equity 248 305 248 166

Retained earnings 339 071 1 138 745

Non-controlling interest in equity 94 085 24 558

Total equity 681 461 1 411 469

Pension liabilities 19 8 596 8 146

Deferred tax 20 988 5 457

Provisions 26 2 271 1 158

Debt to credit institutions 21 - 651 067

Total non-current liabilities 11 854 665 828

Debt to credit institutions 21 744 646 77 398

Trade payables 29 437 627 271 822

Tax payable 20 63 61 158

VAT payable and other taxes payable 74 917 34 286

Other current liabilities 22 220 382 268 778

Total current liabilities 1 477 634 713 442

Total liabilities 1 489 488 1 379 270

Total equity and liabilities 2 170 949 2 790 739

Oslo, 17.04.2013


Consolidated Statement of changes in Equity

GR

OU

P F

igur

es in

TN

OK

Sha

re

capi

tal

Tre

asur

y Sh

ares

Sha

re

prem

ium

fu

nd

Tot

al p

aid-

in

equi

ty

Tra

nsla

tion

ef

fect

s R

etai

ned

earn

ings

Tota

l G

roup

Non

- co

ntro

lling

in

tres

tsTo

tal

equi

ty

Ope

ning

bal

ance

01.

01.1

1 2

51 7

97

(3 6

31)

827

543

1

075

709

1

3 61

0 (4

47 7

67)

641

552

2

3 82

0 6

65 3

72

Incr

ease

in s

hare

cap

ital

from

cas

h de

posi

t -

- -

- -

- -

- -

Red

ucti

on o

f sha

re p

rem

ium

fun

d -

- (8

27 5

42)

(827

542

) -

827

542

-

- -

Cap

ital

con

trib

utio

n fr

om n

on-c

ontr

ollin

g in

tere

st

- -

- -

- 2

0 31

9 2

0 31

9 (8

592

) 1

1 72

7

Tot

al o

ther

equ

ity

mov

emen

ts 2

011

- -

827

542

) (8

27 5

42)

- 8

47 8

61

20

319

(8 5

92)

11

727

Pro

fit f

or th

e pe

riod

-

- -

- -

745

26

8 7

45 2

68

9 3

30

754

59

8

Tra

nsla

tion

eff

ects

fore

ign

subs

idia

ries

-

- -

- 6

835

-

6 8

35

- 6

835

Tra

nsla

tion

eff

ects

dis

cont

inue

d op

erat

ions

-

- -

- (2

7 06

3) -

(27

063)

- (2

7 06

3)

Tot

al re

cogn

ised

inco

me

and

expe

nse

for 2

011

- -

- -

(20

228)

745

268

7

25 0

40

9 3

30

734

370

Adj

ustm

ent t

o eq

uity

for

201

1 -

- 8

27 5

42)

(827

542

) (2

0 22

8) 1

593

129

7

45 3

59

738

7

46 0

97

Clo

sing

bal

ance

31.

12.1

1 2

51 7

97

(3 6

31)

0

248

166

(6

618

) 1

145

363

1

386

911

2

4 55

8 1

411

469

Div

iden

d pa

ymen

t -

--

- -

(700

219

) (7

00 2

19)

- (7

00 2

19)

Red

ucti

on o

f Tre

asur

e S

hare

s -

139

-

139

-

- 1

39

- 1

39

Acq

uisi

tion

of s

ubsi

diar

y -

--

--

- -

90

437

90

437

Acq

uisi

tion

of N

on-c

ontr

ollin

g in

tere

st

--

--

--

- (1

8 51

0) (1

8 51

0)

Cap

ital

con

trib

utio

n, N

on-c

ontr

ollin

g in

tere

st

--

- -

- (2

401

) (2

401

)-

(2 4

01)

Tot

al o

ther

equ

ity

mov

emen

ts 2

012

- 1

39

- 1

39

- (7

02 6

20)

(702

481

) 7

1 92

8 (6

30 5

53)

Pro

fit f

or th

e pe

riod

-

--

- -

(101

574

) (1

01 5

74)

(2 4

01)

(103

975

)

Tra

nsla

tion

eff

ects

fore

ign

subs

idia

ries

-

--

- 4

520

4

520

4

520

Tot

al re

cogn

ised

inco

me

and

expe

nse

for 2

012

- -

- -

4 5

20

(101

574

) (9

7 05

4) (2

401

) (9

9 45

5)

Adj

ustm

ent t

o eq

uity

for

201

2 -

139

-

139

4

520

(8

04 1

94)

(799

535

) 6

9 52

7 (7

30 0

08)

Clo

sing

bal

ance

31.

12.1

2 2

51 7

97

(3 4

92)

0

248

305

(2

098

) 3

41 1

69

587

376

9

4 08

5 6

81 4

61


Consolidated statement of cash flow

GROUP Year ended 31 December

Note 2012 2011

Operating activities

Profit/(loss) before taxes from continuing operations (11 795) 55 639

Profit before taxes from discontinued operations 36 - 725 197

Profit before tax (11 795) 780 836

Non-cash adjustments to reconcile profit before tax to net cash flows

Depreciation,amortisation and impairment of tangible assets 8,9 111 681 106 728

Loss/(gain) on disposal of property, plant and equipment 8,9 (822) -

Loss/(gain) on disposal of discontinued operations 36 - (701 197)

Finance income 28 (238 270) (277 733)

Finance costs 28 293 126 362 549

Other operating income 6,7 - (5 026)

Pension 19 - (605)

1) Working capital adjustments:

Increase in trade and other receivables and prepayments 59 944 (53 337)

Increase in inventory (3 460) (10 557)

Decrease (increase) in trade and other payables 157 663 (57 583)

Decrease(increase) in other provisions (26 654) (63 549)

341 413 80 526

Interest received 9 992 3 116

Income tax paid (51 417) (13 201)

Net cash flow from operational activities 299 988 70 441

Investing activities

Proceeds from sale of property, plant and equipment and intangible assets 1 125 -

Capital expenditure for property, plant and equipment and intangible assets 8,9 (92 809) (85 804)

Purchase of financial instruments - (1 542)

Proceeds from sale of financial instruments - 1 224

Final earn out payment former acquisition of subsidiary - (25 297)

Net outflow from acquisition of subsidiary 8 (27 604) -

2) Net inflow from sale of subsidiary, net of cash disposed - 986 134

Receipt of government grant 32 - 1 394

Net cash flows used in investing activities (119 288) 876 109

Financing activities

Proceeds from borrowings 100 000 -

Repayment of borrowings 21 (79 785) (76 383)

Interest paid (49 502) (78 076)

Dividends paid to equity holders of the parent (700 219) -

Net cash flow from (used) in financing activities (729 506) (154 459)

Net increase in cash and cash equivalents (548 806) 792 091

Net foreign exchange differences 505 (737)

Cash and cash equivalents at start of period 15 820 984 29 630

Cash and cash equivalents at end of period 15 272 683 820 984

1) Amounts are exclusive discontinued operations

2) Total inflow from sale is amounted to TNOK 1 030 026, and cash disposed is amounted to TNOK 43 892, net of TNOK 986 134.

Figures in TNOK



NOTE 01 Accounting principles

Fundamental PoliciesAGR Group ASA (‘the Company’) and its subsidiaries (together ‘the Group’), is a leading supplier of services and technology to the oil and gas offshore industry. The Group’s main operations are based at Straume (Bergen), with other offices around the world including Stavanger, Oslo, Aberdeen, Houston, Perth, Almaty, Dubai and Kuala Lumpur.

The company has provided goods and services for several of the world’s major oil and gas fields, with a customer base comprising several small and medium sized operators as well as a number of the large international oil companies.

The company is a limited liability company incorporated and domiciled in Norway. The address of its registered office is Smålonane 12-14, 5353 Straume.

The Company is listed on the Oslo stock exchange.

The Group consolidated financial statements were authorised for issue by the board of directors on 17 April 2013.

Summary of significant accounting policiesThe principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

The consolidated financial statements of AGR Group ASA have been prepared in accordance with International Financial Reporting Standards as adopted by EU (IFRS) and IFRIC Interpretations.

The Group’s financial statements have been prepared under the historical cost convention, with exception of certain items: Financial assets and financial liabilities (including derivative instruments), which are reflected at fair value through profit or loss.

The financial year follows the calendar year. Income statement items are classified by nature.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

Consolidation principlesa) SubsidiariesSubsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the

financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquisition either at fair value or at the non-controlling interest’s proportionate share of the acquired net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquisition and the acquisition-date fair value of any previous equity interest in the acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(b) Transactions and non-controlling interestsThe Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had


directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (c) AssociatesAssociates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.

The primary reporting segment is business segment and the secondary reporting segment is geographical segment. Segment revenues and costs constitute the Group’s operating revenue and operating costs that can be directly classified as activities in the segments. Segment assets and liabilities are balance sheet items that can be directly related to the segment activity. Segment revenue and costs include transactions between the different segments (Group-internal transactions). Geographical segment information is presented and is specified if the region’s accumulated external revenues and assets exceed 10 % of total revenue/assets for the regions as a whole. Secondary segment information that fails to satisfy the requirement for specified reporting is presented as other revenues. Trans- actions between segments are made on arm’s length terms.

Functional currency and presentation currency(a) Functional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Norwegian Kroner (‘NOK’), which is the company’s functional and presentation currency.

(b) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or expense’. All other foreign exchange gains and losses are presented in the income statement.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in the available-for-sale reserve in equity.

(c) Group companiesThe results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(1) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(2) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

(3) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.


Classification of assets and liabilitiesAssets are classified as current assets when:

• the asset is a part of the unit’s service cycle and is expected to be realised or used during the course of the unit’s normal production period;

• the asset is held for trading purposes and is expected to be realised within 12 months of balance sheet date;

• the asset is cash or cash equivalent

All other assets are classified as non-current.

Liabilities are classified as current liabilities when:

• the liability is a part of the unit’s service range, and is expected to be settled during the course of normal production period;

• the liability is kept for trading purposes;

• settlement has been agreed within 12 months after balance sheet date;

• the unit does not have an unconditional right to postpone settlement of the liability until at least 12 months after balance sheet date;

All other liabilities are classified as non-current.

Property, plant and equipmentProperty, plant and equipment, are valued at cost less accumulated depreciation and write-downs. When assets are sold or divested, cost and accumulated depreciation are reversed in the financial statements, and any loss or gain on the disposal is recognised in the income statement. The cost of property, plant and equipment comprises the purchase price, including duties/taxes and direct acquisition costs linked to making the asset fit for use. Expenses accrued after the asset has been taken into use, such as repairs and maintenance, are normally recognised in the income statement. In cases where increased earnings can be demonstrated as a result of repairs/maintenance, the expenditure on this will be recognised in the balance sheet as additions to property, plant and equipment.

Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

• Machinery 5-10 years

• Vehicles 3-5 years

• Furniture, fittings and equipment 3-8 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

Assets under construction are classified as property, plant and equipment. Assets under construction are not

depreciated until the asset has been taken into use.

The write-down requirement for fixed assets is assessed if there are indications of impairment. If the carrying amount of an asset is higher than the recoverable amount, a write-down is recognised in the income statement. The recoverable amount is the higher of fair value less expected costs to sell and value in use.

Fair value less expected costs to sell is the amount which can be obtained if the asset is sold to an independent third party, less costs to sell. Recoverable amounts are determined separately for all assets, but – if impossible – recoverable amount is calculated together with the unit to which the asset belongs.

Write-downs which have been recognised in the income statement in previous periods are reversed if there is information to suggest that the write-down no longer exists. However, no reversal is made if the carrying amount is higher than it would have been if normal depreciation had been used.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘other operating revenue’ in the income statement.

Intangible assets(a) GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination. (b) Trademarks and licencesSeparately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of 15 to 20 years.

(c)Contractual customer relationshipsContractual customer relationships acquired in a business combination are recognised at fair value at the acquisition


date. The contractual customer relations have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship (3-8 years)

(d) Computer softwareAcquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (3-4 years).

Costs associated with maintaining computer software are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are probable to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised over their estimated useful lives (3-4years).

(e) Research and developmentExpenses relating to research are recognised in the income statement when they are incurred. Expenses relating to development are recognised in the income statement when they are incurred unless the following criteria are met in full:

• ability to measure reliably the expenditure attributable to the intangible asset during its development;

• the technical feasibility of completing the intangible asset so that it will be available for use or sale, has been demonstrated;

• the intention and ability to complete the intangible asset and sell it or use it in the company’s operations has been demonstrated;

• the intangible asset will generate probable future economic benefits; and

• availability of sufficient technical, financial and other resources for completing the project are present.

When all the above criteria are met, the costs relating to development start to be recognised in the balance sheet. Costs that have been charged as expenses in previous accounting periods are not recognised in the balance sheet.

Recognised development costs are depreciated on a straight-line basis over the estimated useful life of the asset (5-8 years). The recoverable amount of the development costs will be estimated when there is an indication of impairment or that the need for previous periods’ impairment losses no longer exists and should be reversed to the original cost.

(f) Other intangible assetsAcquired technology, licenses and customer relationships are capitalised and carried at cost less accumulated amortisation.Amortisation is calculated using the straight-line method over their estimated useful lives.

Impairment of non-financial assetsAssets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Non-current assets (or disposal groups) held for saleNon-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.

Financial assetsThe Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (a) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classi-fied in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(b) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the balance sheet


(c) Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss is initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement.

Impairment of financial assetsThe Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

• significant financial difficulty of the issuer or obligor;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• the Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

• it becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

• the disappearance of an active market for that financial asset because of financial difficulties; or

• observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition

of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

(i) adverse changes in the payment status of borrowers in the portfolio; (ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of impairment exists. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The asset’s carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

Derivative financial instruments and hedging activitiesDerivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group does not use hedge accounting according to IAS 39, and all financial derivatives are thus posted at fair value where changes in values are accounted for in the income statement.

InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Costs of inventories include the transfer from equity of any gains/losses on qualifying cash flow hedges purchases of raw materials

Obsolete inventories have been fully recognised as impairment losses.

Trade receivablesTrade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year


or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as noncurrent assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Discounting occurs only if the receivable are significant.

Cash and cash equivalentsCash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

The cash and cash equivalent amount in the cash flow statement includes overdraft facilities.

Share capitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the company’s equity holders.

Trade payablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Discounting occurs only if the payable are significant

BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent

that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Current and deferred income taxThe tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity. In this case, the tax is also recognised in equity, respectively

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes


levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Employee benefits(a) Pension obligationsGroup companies operate various pension schemes. The schemes are generally funded through payments to insurance companies, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or present value of the defined benefit obligation at the end of the previous reporting period, are charged or credited to income over the employees’ expected average remaining working lives.

Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to

the extent that a cash refund or a reduction in the future payments is available.

(b) Termination benefitsTermination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value.

(c) Bonus plansThe Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

ProvisionsProvisions are recognised when, and only when, the company has a present liability (legal or constructive) as a result of events that have taken place, it is probable that a financial outflow will take place as a result of this liability, and that the size of the amount can be estimated reliably. Provisions are reviewed on each balance sheet date and their level reflects the best estimate of the liability. When the effect of time is insignificant, the provisions will be equal to the size of the expense necessary to be free of the liability. When the effect of time is significant, the provisions will be the present value of future payments to cover the liability. Any increase in the provisions due to time is presented as interest costs. Contingent liabilitiesContingent liabilities are defined as:(i) possible obligations resulting from past events whose existence depends on future events;(ii) obligations that are not recognised because it is not probable that they will lead to an outflow of resources; and(iii) obligations that cannot be measured with sufficient reliability.

Contingent liabilities are not recognised in the annual financial statements, apart from contingent liabilities which are acquired through the acquisition of an entity. Significant contingent liabilities are disclosed, with the exception of contingent liabilities where the probability of the liability occurring is remote.

Contingent liabilities acquired upon the purchase of operations are recognised at fair value even if the liability is not probable. The assessment of probability and fair value is subject to constant review. Changes in the fair value are recognised in the income statement.


A contingent asset is not recognised in the annual financial statement unless deemed virtually certain to give rise to an inflow, but are disclosed where it is deemed probable that a benefit will accrue to the Group.

Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

Revenue includes only the gross inflows of economic benefits received and receivable by the entity on its own account. Amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes are not economic benefits which flow to the entity and do not result in increases in equity. Therefore, they are excluded from revenue. Similarly, when an agency relationship, the gross inflows of economic benefits include amounts collected on behalf of the principal and which do not result in increases in equity for the entity. The amounts collected on behalf of the principal are not revenue. Instead, revenue is the amount of commission.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

The Group’s operations mainly consist of services related to personnel and equipment hire. Consequently, the revenue recognition is based on daily/monthly rates and actual registered hours. Revenue is recognised when it is probable that transactions will generate future economic benefits that will flow to the company and the revenue amount can be reliably estimated. Revenues from the sale of goods are recognised in the income statement once delivery has taken place, the risk has been transferred and the company has established a receivable due by customer.

Revenues relating to projects are recognised in the income statement in line with the project’s progress and when the project’s results can be reliably estimated. Level of completion is calculated as an incurred cost’s percentage of anticipated total cost. For projects expected to generate a loss, the full estimated loss is recorded as cost immediately.

Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of

the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

Public grantsGrants received are classified as either income grants or investment grants. Income grants are accounted for together with the income as reduction of the costs to which it relates. Investment grants are posted as a pre-tax figure by recording the asset at gross acquisition cost and the asset is depreciated over its usful life. The grant is treated as deferred income, and is accounted for as an adjustment entry for depreciations in line with the depreciation period.

Other grantsThe Group receives grants from some of its collaborating partners to develop new technology. The grant is treated as deferred income, and is accounted for as an adjustment entry for depreciations in line with the depreciation period.

LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

Earnings per shareEarnings per share are calculated by the majority’s share of the result for the period being divided by a time-weighted average of ordinary shares for the period.

Events after date of balance sheet New information on the company’s positions at the balance sheet date is taken into account in the annual financial statements. Events after the balance sheet date that do not affect the company’s position at the balance sheet date but which will affect the company’s position in the future are disclosed if significant.

Cash Flow StatementThe cash flow statement presents the accumulated cash flow for operational, investment and financial activities. The statement outlines the effect each activity has on liquid assets. The cash flow statement has been prepared in line with the indirect model.

Discontinued operationsIf a significant part of the Group’s operations is divested or a decision has been made to divest it, this business is presented as “Discontinued operations” on a separate line of the income statement and the balance sheet. As a result, all the other figures presented are exclusive of the discontinued operations. The comparative figures in the income statement are restated and presented on a single line with the discontinued operations. Comparative figures in the balance sheet are not correspondingly restated.


Changes in accounting policy and disclosures

IFRSs implementedIFRS 7 Financial Instruments – Disclosures (amendment)The amendment relates to disclosure requirements for financial assets that are derecognised in their entirety, but where the entity has a continuing involvement. The amendmentswill assist users in understanding the implications of transfers of financial assets and the potential risks that may remain with the transferor. The amended IFRS 7 was effective for annual periods beginning on or after 1 July 2011. The Group implemented the amended IFRS 7 as of 1 January 2012. The amendment had no impact on disclosures, or the Group’s financial position or performance.

IFRSs and IFRICs issued but not yet effective IFRS 7 Financial Instruments – Disclosures (amendment)The IASB has introduced new disclosure requirements in IFRS 7. These disclosures, which are similar to the new US GAAP requirements, would provide users with information that is useful in (a) evaluating the effect of potential effect of netting arrangements on an entity’s financial position and (b) analysing and comparing financial statements prepared in accordance with IFRSs and US GAAP. The amended IFRS 7 is effective for annual periods beginning on or after 1 January 2013 The Group expects to implement the amended IFRS 7 as of 1 January 2013. The amendment affects disclosure only and has no impact on the Group’s financial position or performance. IFRS 9 Financial InstrumentsIFRS 9 as issued reflects the first phase of the IASBs work on replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. According to IFRS 9 financial assets with basic loan features shall be measured at amortised cost, unless one opts to measure these assets at fair value. All other financial assets shall be measured at fair value. The classification and measurement of financial liabilities under IFRS 9 is a continuation from IAS 39, with the exception of financial liabilities designated at fair value through profit or loss (fair value option), where change in fair value relating to own credit risk shall be separated and shall be presented in other comprehensive income. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. IFRS 9 is effective for annual periods beginning on or after 1 January 2015, but the standard is not yet approved by the EU. The Group expects to apply IFRS 9 as of 1 January 2015. IFRS 10 Consolidated Financial StatementsIFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation —Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special

purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27. The Group is currently assessing the impact that this standard will have on the financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2014. The Group expects to apply IFRS 10 as of 1 January 2014. IFRS 11 Joint ArrangementsIFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities —Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The Group is does not expect that the impact that this standard will have any effect on the financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2014. The Group expects to apply IFRS 11 as of 1 January 2014. IFRS 12 Disclosure of Involvement with Other EntitiesIFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. This standard becomes effective for annual periods beginning on or after 1 January 2014. The Group expects to apply IFRS 12 as of 1 January 2014.

IFRS 10, IFRS 11 and IFRS 12 Amendments - Transition guidanceThe amendments clarify and provide further relief in transition guidance. These amendments becomes effective for annual periods beginning on or after 1 January 2013, but are not yet approved by the EU which will likely provide an effective date on or after 1 January 2014. The Group expects to apply these amendments when it implements IFRS 10, IFRS 11 and IFRS 12.

IFRS 13 Fair Value MeasurementIFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but ratherprovides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2013. The Group expects to apply IFRS 13 as of 1 January 2013.


IAS 1 Financial Statement Presentation (amendment)The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment affects presentation only and has there no impact on the Group’s financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012. The Group expects to apply the amended IAS 1 as of 1 January 2013. IAS 12 Income Taxes (amendment)The amendments intend to provide a practical solution to a problem relating to investment properties that arises in certain jurisdictions. As a result of the amendments deferred tax on investment property measured at fair value is required to be determined using the rebuttable presumption that the carrying amount of the underlying asset will be recovered through sale (rather than use). The presumption is rebutted if the investment property is depreciable and it is held within a business model whose objective is to consume substantially all of the economic benefits in the investment property over time, rather than through use. The amendments incorporate SIC 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets into IAS 12. As a result IAS 12 will require that deferred tax arising from a non-depreciable asset measured using the revaluation model in IAS 16 Property, plant and equipment will always be determined on a sale basis. The amended IAS 12 is effective for annual periods beginning on or after 1 January 2013. The Group expects to implement the amended IAS 12 as of 1 January 2013 and does not expect the amendment to have an impact on the financial position and performance of the Group. IAS 19 Employee Benefits (amendment)The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The amended standard becomes effective for annual periods beginning on or after 1 January 2013. The Group expects to implement the amended IAS 19 as of 1 January 2013. IAS 27 Separate Financial Statements (as revised in 2011)As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. This revision will not have an impact on the consolidated financial statements of the Group. IAS 27 as revised in 2011 becomes effective for annual periods beginning on or after 1 January 2014. The Group expects to implement the revised IAS 27 as of 1 January 2014.

IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. IAS 28 as revised in 2011 becomes effective for annual periods beginning on or after 1 January 2014. The Group expects to implement the revised IAS 28 as of 1 January 2014 and does not expect the amendment to have an impact on the Group. IAS 32 Financial Instruments - Presentation (amendment)The amendments to IAS 32 clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneously. The amended IAS 32 is effective for annual periods beginning on or after 1 January 2014. The Group expects to implement the amended IAS 32 as of 1 January 2014. IFRIC 20 Stripping Costs in the Production Phase of a Surface MineIFRIC 20 is developed by the IFRS Interpretations Committee in order to clarify the requirements for accounting for stripping costs in the production phase of a surface mine. The Interpretation was developed to address issues comprising recognition of production stripping costs as an asset, the initial measurement of the stripping activity asset, and subsequent measurement of the stripping activity asset. IFRIC 20 is effective for annual periods beginning on or after 1 January 2013.The Group expects to implement IFRIC 20 as of 1 January 2013 and does not expect IFRIC 20 to have an impact on the financial position and performance of the Group.

NOTE 02 Financial risk management

Financial risk factorsThe Group’s activities are exposed to a variety of financial risks. Market risks including currency risk, interest rate risk, credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group uses debt and derivative financial instruments to hedge certain risk exposures. Risk management is carried out by a central treasury department (Group treasury) under policies approved by the board of directors. Group treasury identifies, evaluates and hedges financial risks in co-operation with the Group’s operating units. The board provides risk management policies covering specific areas, such as foreign exchange risk, interest rate risk, liquidity risk and credit risk.


(a) Market risk(i) Foreign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar and GBP. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

The Group s financial risk policy is that 12 month fore-casted net currency exposure shall be maximum 60 million in NOK equivalents. Positions are reviewed quarterly. Hedging is conducted by applying combination of long term foreign currency term loans and currency derivatives. If the NOK currency in 2012 had weakened/strengthened by 10% against the US Dollar with all other variables held constant, EBITDA for the year would have been approximately NOK 16 million higher/lower, mainly as a result of foreign exchange gains/losses on translation of net US Dollar revenues. If the NOK currency had weakened/strengthened 10% against the GBP with all other variables held constant, EBITDA for the year would have been approximately NOK 7 million lower/higher, mainly as a result of foreign exchange gains/losses on translation of net GBP costs.

(ii) Price riskThe Group is indirectly exposed to changes in the oil price, however current group policy is to not hedge oil price changes.

(iii) Cash flow and fair value interest rate riskAs the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Group policy is that long-term borrowings shall be based on floating interest rates, however interest rate derivatives shall be applied in order to avoid significant losses due to interest rate changes. The Group manages its interest rate risk by applying derivatives such as interest rate collar swaps, in order

to establish a cap on interest rates in case of significant increase in market interest rates. In addition, the Group has applied floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.

Based on the risk analysis where a 1% interest rate increase/decrease is applied, the impact of net interest expenses would be negative NOK 3 million and positive NOK 1 million respectively. At 31 December 2012 the Group held 3 interest rate swap contracts with a total amount of NOK 267 million and 1 interest rate collar swap amounting to NOK168 million, which in aggregate constitutes approximately 58% of the Group’s long-term interest bearing debt.

(b) Credit riskCredit risk is managed on Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks, as well as credit exposure to customers, including receivables and committed transactions.

The majority of the Group’s debtors are publicly listed Norwegian and international oil companies. The Group’s customers in the division Drilling Services are mainly the large international oil companies with limited to low credit risk potential. The Petroleum Services customers consist of large, medium and small oil companies. Some of these customers have moderate credit risk potential. The Group seeks to obtain financial guarantees from debtors where the credit risk and exposure is considered to be high. In addition, majority of the Group s receivables are credit insured in order to reduce credit risk.

The Group’s main banks at 31st December 2012 are DNB and Nordea where all long- and short term loan facilities are placed. DNB is the main bank for cash management deposits and services. In addition the Group has other local banking relations in countries where neither DNB nor Nordea offer their services. The table below shows the rating of the Group main cash management bank.

31.12.12 31.12.11

Counterparty RatingOverdraft

facility limit BalanceOverdraft

facility limit Balance

Moody s S&P

DNB Bank ASA Aa3 A+ 70 000 (2 780) 100 000 770 116

Figures in TNOK


(c) Liquidity riskThe Group has a significant customer portfolio with large, medium and small cap customers. Delayed payments from some of the largest customers at the same time could have a significant impact on the Group’s liquidity situation. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, Group treasury maintains flexibility in funding by maintaining availability under committed credit lines. At 31 December 2012 the Group had undrawn committed short-term credit lines amounting to NOK 87 million plus cash deposits of NOK 273 million, of which NOK 228 million were deposited

with Bank Hapoalim in relation to AGR Energy s operations in Israel. The funds are advance payments from AGR Energy s Israeli partners, and will be paid to subcontractors in January 2013. Management monitors rolling forecasts of the Group’s liquidity reserve and cash and cash equivalents on the basis of short-term and long-term cash flow forecasts.

The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date.

31.12.12 (TNOK)Less than

1 yearBetween 1

and 2 yearsBetween 2

and 5 years Over 5 Years

Borrowings - DNB (see note 21) 747 657 - -

Derivative financial instruments (interest rate swaps & collars) 3 618 -

Trade and other payables 732 989 - - -


1 yearBetween 1



Borrowings - DNB (see note 21) 80 647 657 051 - -

Derivative financial instruments (interest rate swaps & collars) 10 000 -

Trade and other payables 636 044 - - -


1 yearBetween 1



Forward exchange contracts - cash flow hedges - - - -

Forward exchange contracts - held for trading - - - -


1 yearBetween 1



Forward exchange contracts - cash flow hedges - - - -

Forward exchange contracts - held for trading - - - -

Figures in TNOK


Capital risk managementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group s long term target capital structure is an equity ratio of at least 25% which is also reflected in the financial covenants set out in the Group s Credit Facilities Agreement entered into with DNB and Nordea. Please refer to note 21 for details regarding covenants.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Dividends paid in 2012 amounted to NOK 700 million. The gearing ratios, defined as net debt to total capital, at 31 December 2012 and 31 December 2011 were as follows:

Fair value estimationThe fair value of financial instruments traded in active markets (such as trading) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows,

are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

2012 2011

Total borrowings (excluding capitalized arrangement fees) 747 657 737 698

Less: cash and cash equivalents (272 683) (820 984)

Net debt 474 974 (83 286)

Total equity 668 380 1 411 469

Total capital 2 157 869 2 790 739

Gearing ratio 22% -3%

Figures in TNOK


NOTE 03 Critical accounting estimates and judgements

The preparation of consolidated financial statements in accordance with IFRSs and applying the chosen accounting policies requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and the disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that require material adjustment to the carrying amount of the asset or liability affected in future periods. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The accounting policies applied by AGR Group in which judgements, estimates and assumptions may significantly differ from actual results are addressed below. Impairment of non-current assetsAGR Group accounts for the impairment of non-current assets in accordance with IAS 36 Impairment of Assets. Under IAS 36 AGR Group are required to assess the conditions that could cause an asset to become impairment at least annually, and to perform a recoverability test for potentially impaired assets held by the entity. Impairment exists when the carrying value of an assets or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less cost to sell and its value to use. Directly observable market prices rarely exist for AGR Groups’ assets, however, fair value may be estimated based on recent observed transactions on comparable assets, bids or other discussions of potential transaction involving the asset, or internal models used by AGR Group for transactions involving the same type of assets. The value in use calculation is based on a discounted cash flow model. The cash flow are derived from budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. Such estimate are subjects to a number of assumptions including the useful lives of assets, replacement costs and the timing and amounts of certain future cash flows, which may be dependent on future prices, future activity, currency rates, and a suitable discount rate in order to calculate present value. While AGR Group believe that the assumptions are appropriate, such amounts estimated could differ materially from what will actually occur in the future. Refer to note 9 for disclosure of fixed assets.

Impairment of goodwillIn accounting for the acquisition of business, AGR Group is required to determine the fair value of assets, liabilities, intangible assets and contingent liabilities at the time of acquisition. In case of business combination achieved in stages, AGR Group must also estimate the fair value of the existing ownership interest when it gains control. Any excess purchase price is included in goodwill. In the business AGR Group operates, fair values of individual assets and liabilities are normally not readily observable in active markets, which require AGR Group to estimate the fair value of acquired assets and liabilities through valuation techniques. Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the management to estimate the future cash flows expected to arise from cash-generating units. See discussion above regarding impairment of non-current assets. According to impairment test performed for 2012 and 2011 the recoverable amounts exceed the carrying amount for Petroleum Services. The impairment test of goodwill is not sensitive to an increase of 1 % in the discount rate in 2012 or 2011, or a 2% decrease in margins in 2012 or 2011 compared to management’s estimates.

Impairment test performed for 2012 the recoverable amounts also exceed the carrying amount for Drilling Services. The impairment test of goodwill is not sensitive to an increase of 1 % in the discount rate in 2012, or a 2 % decrease in margins in 2012 compared to management’s estimates. After impairment charges in 2009 there is no carrying amount in Drilling Services for 2011. Refer to note 8 for disclosure of goodwill. Fair value measurement of contingent considerationContingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definitions of a derivate and, thus a financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor. Refer to note 26 for provisions for business combinations. Capitalised development costsCertain development costs are capitalised when it is probable that a development project will generate future economic benefits and certain criteria, including commercial and technological feasibility, have been met. These costs are then amortised on a systematic basis over their expected useful lives. During the development


stage, management must estimate the commercial and technological feasibility of these projects as well as their expected useful lives. Whenever there is an indicator that development costs capitalised for a specific project may be impaired, the recoverable amount of the asset is estimated. See discussion above regarding impairment of non-current assets. Refer to note 8 for disclosure of capitalised development cost.

Trade receivablesCalculation of provision for impairment of trade receivables is based on a number of estimates. Areas including significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments (more than 30 days overdue) are all considered indicators that the trade receivable is impaired. However, assessing the fair value of the amounts recoverable is highly judgmental and incomplete or incorrect information could lead to significant changes in the recoverable amounts. Refer to note 13 for aging and provision for impairment of trade receivables.

Pension liabilitiesThe fair value of pension liabilities is calculated based on several actuarial and economic assumptions. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these

assumptions. The discount rate and other assumptions are normally reviewed annually when the actuarial calculation is carried out, unless there are significant changes during the year. Refer to note 19 for disclosure of actuarial assumptions for theGroup. Income taxAGR Group calculates income tax expense based on reported income in the different legal entities. Deferred income tax expense is calculated based on the differences between the assets’ carrying value for financial reporting purposes and their respective tax basis that are considered temporary in nature. The total amount of income tax expense and allocation between current and deferred income tax requires management’s interpretation of complex tax laws and regulations in the many tax jurisdictions where AGR Group operates. Valuation of deferred tax assets is dependent on management’s assessment of future recoverability of the deferred benefit. Expected recoverability may result from expected taxable income in the near future, planned transactions or planned tax optimizing measures. Economic conditions may change and lead to a different conclusion regarding recoverability, and such change may affect the result for each reporting period. Tax authorities in different jurisdictions may challenge AGR Group’s calculation of tax payable from prior periods. Such process may lead to changes to prior periods’ taxable income, resulting in changes to income tax expense in the period of change. During the period when tax authorities may challenge the taxable income, management is required to make estimates of the probability and size of possible tax adjustments. Such estimates may change as additional information becomes known. Refer to note 20 disclosure of tax.

On 9 May 2012 , the Group acquired an 80 % shareholding in Steinsvik & Co AS. Headquartered in Stavanger, Steinsvik & Co supplies safety professionals, including safety coaches and internal control officers (ICO), to drilling rigs in the Norwegian market. The firm also provides HSE training for oil companies and performs safety inspections on rigs operating both on the Norwegian sector and internationally. Business combinations:

The acquisition is part of AGR’s strategy to strengthen their HSE product offering. AGR Petroluem Services (PS) have worked closely with Steinsvik for many years, with Steinsvik now part of the PS product offering, will enhance our well management operations and help deliver safe and efficient drilling operations for our clients.

On 31 August 2012, the Group acquired 100 % of the share capital in Ocean Riser Systems AS (ORS), which has developed technology and intellectual property complementary to AGR’s EDS services. This acquisition is an exciting development for both companies: AGR EDS-ORS will be at the forefront of the marketplace when it comes to providing the industry with the next generation of Dual Gradient Drilling and Managed Pressure Drilling solutions. Together, they will provide a truly comprehensive technology portfolio, reduced risk and a constant R&D capability.

NOTE 04 Business combinations

NOTE 03 Critical accounting estimates and judgements


Acquisitions in 2011:

There were no acquisitions in the year ended 31 December 2011.

Acquisitions in 2012:

Purchase consideration: Steinsvik & Co ORS

Cash paid 27 604 70 000

Earn-out (note 26) 1 500 -

Total purchase consideration 29 104 70 000

The assets and liabilities arising from the acquisition are as follows:

Steinsvik & Co ORS

Acquiree’s carrying amount

Acquiree’s carrying amountFair value Fair value

Cash and cash equivalents 1 861 1 861 2 050 2 050

Property, plant and equipment (note 9) 84 84 82 82

Financial fixed assets 31 31 - -

Contractual customer relationship (included in intangibles) (note 8) - - - -

Other intangibles (note 8) - - 3 242 3 242

Deferred tax assets (note 20) - - - -

Inventories - - - -

Trade and other receivables 13 630 13 630 8 840 8 840

Trade and other payables (10 071) (10 071) (2 156) (2 156)

Deferred tax liabilities (note 20) (62) (62) - -

Fair value of net assets 5 473 5 473 12 058 12 058

Non-controlling interest measured at fair value (1 094) -

Goodwill (note 8) 24 726 - 57 942 -

Total purchase consideration 29 105 70 000

Purchase consideration settled in cash 27 604 70 000

Cash and cash equivalents in subsidiary acquired (1 861) (2 050)

Cash outflow on acquisition 25 743 67 950

The fair value of ORS s identifiable assets net of liabilities, amounts to TNOK 12 058. The remaining TNOK 57 942 of the purchase price has been allocated to goodwill. The purchase price allocation is preliminary as of 31 December 2012, and is subject to changes before 30 September 2013. The allocation of goodwill is incomplete, as part of it will be allocated to intangible assets. Valuation of technology and our complex international patent portfolio is ongoing. The goodwill arising from the acquisition relates to expected future earnings of the acquired company, which is supported by synergies expected to be achieved by combining AGR´s and ORS businesses.

NOTE 04 Business combinations

From the date of acquisition, Steinsvik & Co AS has contributed TNOK 29 764 of revenue and TNOK 3 964 of the net profit before tax of the Group. Ocean Riser Systems AS has contributed TNOK 6 059 of revenue and TNOK (15 801) of the net profit before tax of the Group.

If the combinations had taken place at the beginning og the year, revenue from continuing operations would have been TNOK 1 807 816 and the profit from continuing operations for the Group would have been TNOK (24 360).


For management purposes, the Group is organised into business units based on its products and services and has from 2011 three reportable segments, as follows:

• Petroleum Services segment, which deliver a broad service offering within reservoir evaluation, well planning, well operations and integrated field management to the upstream oil and gas industry.

• Drilling Services segment develops and supplies market-leading technologies and services for the offshore oil and gas market. Drilling Services consist of EDS and T&T.

• Group segment consist of corporate administration and special projects such as AGR CannSeal.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and EBITDA and is measured consistently with operating profit or loss and EBITDA in the consolidated financial statements. However, Group financing and income taxes are managed on a Group basis.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

NOTE 05 Segment information


Business areasPetroleum

ServicesDrilling

Services Group Elimin. Total

Profit and Loss Account 2012

External operating revenues 1 246 163 519 160 12 758 (167) 1 777 913

Intercompany operating revenues 21 838 2 735 14 879 (39 452) -

Project expenses/payroll expenses (1 139 377) (475 397) (48 016) 39 619 (1 623 171)

EBITDA1 128 624 46 498 (20 379) - 154 742

Depreciation and amortisation (20 896) (83 752) (7 033) - (111 681)

Operating profit(loss) 107 728 (37 254) (27 412) - 43 061

Net financial items (27 817) (32 983) 5 944 - (54 856)

Tax (28 519) (99 096) 35 436 - (92 180)

Key figures 2012

Assets 1 365 008 664 511 956 166 (814 736) 2 170 949

Liabilities 1 211 378 405 331 47 942 (175 163) 1 489 488

Investments 52 933 108 659 31 122 - 192 714

Investments ex.acquisition 23 029 38 659 31 122 - 92 810

Business areasPetroleum

ServicesDrilling

Services Group Elimin. Total

Profit and Loss Account 2011

External operating revenues 1 169 426 710 330 9 853 (21 694) 1 867 914

Intercompany operating revenues 13 132 206 11 578 (24 916) -

Project expenses/payroll expenses (1 032 052) (570 449) (64 841) 46 610 (1 620 732)

EBITDA1 150 506 140 087 (43 410) - 247 182

Depreciation and amortisation (24 629) (78 585) (3 514) - (106 728)

Operating profit(loss) 125 877 61 502 (46 924) - 140 454

Net financial items (47 690) (29 345) 163 892 (171 672) (84 815)

Tax (33 754) (16 464) 12 161 - (38 056)

Key figures 2011

Assets 2 154 464 738 359 2 417 531 (2 519 615) 2 790 739

Liabilities 2 045 949 385 686 750 920 (1 803 285) 1 379 270

Investments 12 039 51 903 21 862 - 85 804

Investments ex.acquisition 12 039 51 903 21 862 - 85 804

1 EBITDA is short for Earnings Before Interest, Tax, Depreciation and Amortization, excluding stock write downs and is a non-GAAP measure which management uses to measure operations.

Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, trade and other receivables, and cash and cash equivalents.

Segment liabilities comprise operating liabilities. Unallocated liabilities comprise items such as taxation and borrowings including related hedging derivatives. Investments comprises additions to property, plant and equipment and intangible assets, including additions resulting from acquisitions through business combinations.

AGR CannSeal is reported as a part of Group

Figures in TNOK

NOTE 05 Segment information


NOTE 06 Geographical segment information Figures in TNOK

Geographical segment reporting represents external customer sales based on the location of the customer.

NOTE 07 Operating Revenues Figures in TNOK

Total operating revenues 2012 2011

Norway 556 330 771 326

Europe ex. Norway 386 744 387 819

Australia 93 310 95 725

America 332 641 304 139

Asia 256 443 187 766

Africa 152 446 121 138

Total 1 777 913 1 867 914

AGR does not have transactions with single external customers where revenues amount to more than 10 % of the Group’s total revenues.

Non-current assets 2012 2011

Norway 843 616 810 552

Europe ex. Norway 198 400 202 511

Australia 12 148 36 463

America 240 297 260 546

Asia 1 815 1 206

Africa - -

Total 1 296 276 1 311 278

Operating revenue comprises: 2012 2011

Sale of goods 76 916 65 321

Sale of services 1 639 232 1 766 924

Total revenue 1 716 148 1 832 245

Profit from sale of fixed assets 18 -

Other sales 61 747 35 669

Total other operating revenue 61 765 35 669

Total operating revenue 1 777 913 1 867 914


NOTE 08 Intangible assets Figures in TNOK

2012 Goodwill

Acquired patents development

projects

Self-developed patents develop-

ment project Total

Historical cost 01.01.12 822 167 334 713 277 225 1 434 106

Additions 82 668 8 154 53 509 144 331

Disposals - (24 725) (4 769) (29 495 )

Exchange differences (17 010) (9 747) (314) (27 071)

Historical cost 31.12.12 887 825 308 395 325 651 1 521 871

Accumulated amortisation 01.01.12 - 247 673 42 845 290 518

Amortisation of the year - 7 388 6 419 13 807

Disposals amortisation during the year - (12 008) (10 880) (22 889)

Conversion variances (3 793) (9 327) (245) (13 364)

Amortisation 31.12.12 (3 793) 233 726 38 139 268 072

Accumulated impairments 01.01.12 240 541 76 332 78 332 395 205

Impairments/reversals for the year 1 800 - 6 743 8 543

Conversion variances - (12 717) 6 711 (6 006)


Book value 31.12.12 649 277 11 054 195 726 856 057

Amortisation rates 2.5 - 5 years 5 years

Amortisation method Linear Linear

Self developed assets are started amortized when they are fully developed.


2011 Goodwill

Acquired patents development

projects

Self-developed patents develop-

ment projects Total

Historical cost 01.01.11 1 162 427 488 018 260 255 1 910 699

Additions - - 43 209 43 209

Disposals - - (2 072) (2 072)

Disposal discontinued operations (352 806) (152 820) (24 145) (529 770)

Exchange differences 12 546 (485) (22) 12 039

Historical cost 31.12.11 822 167 334 713 277 225 1 434 105

Accumulated amortisation 01.01.11 - 366 106 39 522 405 628

Amortisation of the year - 12 596 10 199 22 795

Disposals amortisation during the year - - (352) (352)

Disposals discontinued operations - (131 028) (6 986) (138 014)

Conversion variances - - 461 461

Amortisation 31.12.11 - 247 673 42 845 290 517


Disposals discontinued operations - (540) (4 226) (4 766)


Book value 31.12.11 581 627 10 708 156 048 748 383

Amortisation rates 2.5 - 5 years 5 years

Amortisation method Linear Linear

In the specification of self-developed patents and developments projects 133 million of total 196 million in 2012, and 102 million of total 156 million in 2011, are related to a single project named CannSeal.

The CannSeal patented annular sealing technology is embedded in a unique tool designed for well intervention tasks with the ability to seal off water and gas in the annulus. The tool design is unique and contains a resin type sealant that is injected into the annulus to form a solid annulus plug during a single wire line run. The resin (epoxy) properties can be tailored to the application both prior to hardening to optimize deployment and post hardening to enhance durability. The sealant can be deployed in an open annulus, a gravel packed well, repairing leaking packers, repairing micro annulus leaks and several other annulus sealing applications. The initial application became qualified for zonal isolation in 2010.

In 2012 the project has been directed towards development of a sustainable hold barrier resin (epoxy) solution and a 3.3’’ tool version with similar features as the generation 4.4’’ tool. Both of these initiatives in 2012 were customer driven and developed to fit specific market demands. During 2012 CannSeal made significant progress with a milestone “in-well” commercial onshore test with the 4.4’’ tool and by signing additional commercial agreements with reputed global entities complimentary to existing clients.The recoverable amount of CannSeal is determined based on a value-in-use calculation. The calculation use cash flow projections based on a conservative financial forecast. Cash flows beyond the five-year period are extrapolated using the estimated growth rates.

The key assumptions used for value-in-use calculations are as follows:

CannSeal

Gross margin -6% - 28%

Growth rate 2.5%

Discount rate 19.4%

The impairment test of CannSeal is not sensitive to an increase of 0.5 % in the discount rate, or an 1 % decrease in margins.



Goodwill AGR DPT Triangle RES

Acquired 2004 189 747 - - -

Acquired 2005 - 87 468 25 162 -

Acquired 2006 - 20 000 - 103 462

Acquired over the year - - - -

Disposal during the year - - - -

Exchange differences - - - -

Acquisition cost 31.12.12 189 747 107 468 25 162 103 462

Amortisation for the year - - - -

Amortisation 31.12.12 - - - -

Accumulated impairments 01.01.12 189 747 - - -

Impairments for the year - - - -

Accumulated impairments 31.12.12 189 747 - - -

Book value 01.01.12 - 107 468 25 162 103 462

Book value 31.12.12 - 107 468 25 162 103 462

Goodwill Cleanup Well Peak SeaVation

Acquired 2004 9 893 13 558 - -

Acquired 2005 - - - -

Acquired 2006 - - 241 626 38 683

Acquired 2007 - - (5 241) (6 053)

Acquired over the year - - - -

Disposal diring the year - - - -

Exchange differences - - (50 328) (8 363)




Accumulated impairments 01.01.12 9 893 13 558 - 24 267

Impairments for the year - - - -

Accumulated impairments 31.12.12 9 893 13 558 - 24 267

Book value 01.01.12 - - 191 717 -

Book value 31.12.12 - - 186 057 -


The table below specifies goodwill per acquisition for the Group:


Goodwill FJ Brown Marine Engineering Tracs Steinsvik

Acquired 2007 69 452 - - -

Acquired 2008 - 1 800 101 956 -

Acquired 2009 - - (12 205) -

Acquired 2010 - - (1 076) -

Acquired over the year - - - 24 726

Disposal during the year - - - -

Exchange differences (4 453) - (9 213) -




Accumulated impairments 01.01.12 - - - -

Impairments for the year - 1 800 - -

Accumulated impairments 31.12.12 - 1 800 - -

Book value 01.01.12 70 138 1 800 81 880 -

Book value 31.12.12 64 999 - 79 462 24 726

Goodwill ORS Total

Acquired 2004 - 213 198

Acquired 2005 - 112 630

Acquired 2006 - 403 771

Acquired 2007 - 58 158

Acquired 2008 - 103 756

Acquired 2009 - (12 205)

Acquired 2010 - (1 076)

Acquired over the year 57 942 82 668

Disposal during the year - -

Exchange differences - (72 357)

Acquisition cost 31.12.12 57 942 - - 888 542



Accumulated impairments 01.01.12 - - - 237 465

Impairments for the year - - - 1 800

Accumulated impairments 31.12.12 - - - 239 265

Book value 01.01.12 - - 581 627

Book value 31.12.12 57 942 - - 649 277


Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the business segment. A segment-level summary of the goodwill allocation is presented below.



Goodwill per segment Group- Other Petroleum

Services Drilling

Services Field

Operations Total

Goodwill as of 31.12.12 - 591 335 57 942 - 649 277

Goodwill as of 31.12.11 1 800 579 827 - - 581 627

Goodwill as of 31.12.10 - 572 065 - 349 822 921 887

Goodwill as of 31.12.09 - 578 628 - 323 221 901 850

Goodwill as of 31.12.08 - 629 904 139 712 311 818 1 081 434

Goodwill as of 31.12.07 - 687 856 213 198 204 516 1 105 570

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

The key assumptions used for value-in-use calculations are as follows:

Drilling Services

Petroleum Services

EBITDA-margin1 13.7% - 30.3% 10.5% - 11.9%

Growth rate 2.5 % 2.5%

Discount rate 14.3 % 12.1 %

1 Budgeted EBITDA-margin. The margin varies in the budget period.

2 Weighted average growth rate used to extrapolate cash flows beyond the budget period.

3 After-tax discount rate applied to the cash flow projections.


NOTE 09 Fixed assets Figures in TNOK

2012 Machinery and

operating equipment Land, permanent

property Total

Historical cost 01.01.12 821 019 - 821 019

Additions 78 900 - 78 900

Disposals (15 698) - (15 698)

Conversion variances (2 948) - (2 948)

Historical cost 31.12.12 881 273 - 881 273

Accumulated deprecation 01.01.12 404 257 - 404 257

Depreciation of the year 89 330 - 89 330

Disposals depreciation during the year (4 370) - (4 370)

Conversion variances 15 856 - 15 856

Accumulated depreciations 31.12.12 505 073 - 505 073

Accumulated impairments 01.01.12 71 593 - 71 593

Disposals impairment during the year 6 801 - 6 801


Book value 31.12.12 297 805 - 297 805

Depreciation rates 3 - 8 years 20 years/indefinitely

Depreciation method Linear Linear

Information regarding disposal discontinued operations is disclosed in note 36.

2011 Machinery and

operating equipment Land, permanent

property Total

Historical cost 01.01.11 971 958 194 972 152

Additions 46 418 - 46 418

Disposals (4 454) - (4 454)

Disposals discontinued operations (194 203) (194) (194 397)


Historical cost 31.12.11 821 019 - 821 019

Accumulated deprecation 01.01.11 435 784 161 435 945

Depreciation of the year 83 934 - 83 934

Disposals depreciation during the year (4 392) - (4 392)

Disposals discontinued operations (112 404) (161) (112 565)


Accumulated depreciations 31.12.11 404 257 - 404 257


Impairments/reversals for the year (6 889) - (6 889)

Disposals discontinued operations (3 856) (3 856)


Book value 31.12.11 345 169 - 345 169

Depreciation rates 3 - 8 years 20 years/indefinitely

Depreciation method Linear Linear



NOTE 10 Group entities

Company Head Office Owner Equity interest/

voting share 2012 Equity interest/

voting share 2011

AGR Australia Pty Ltd Perth - Australia AGR Group Holdings Ltd 100% 100%

AGR Business Partner AS Fjell - Norway AGR Group ASA - 100%

AGR Canada Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR CannSeal AS Fjell - Norway AGR Group ASA 95% 95%

AGR Cleanup AS Fjell - Norway AGR EDS and T&T Holdings AS 100% 100%

AGR Central Asia AS Oslo - Norway AGR Petroleum Services AS 100% 100%

AGR Consultancy Services AS Stavanger - Norway AGR Petroleum Services AS 100% 100%

AGR Consultancy Solutions Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

AGR Deepwater Technologies Inc Delaware-USA AGR Group ASA 100% 100%

AGR Drilling Services Canada Inc Houston-USA AGR Drilling Services Holdings AS 100% 100%

AGR Drilling Services do Brasil Ltda Rio de Janeiro - Brasil

AGR Drilling Services Holdings AS 100% 100%

AGR Drilling Services Holdings AS Fjell - Norway AGR EDS and T&T Holdings AS 83% 93%

AGR Drilling Services Pty Ltd Perth - Australia AGR Drilling Services Holdings AS 100% 100%

AGR EDS and T&T Holdings AS Fjell - Norway AGR Group ASA 93% -

AGR Energy AS Oslo - Norway AGR Petroleum Services Holdings AS 100% 100%

AGR F.J Brown Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR Facilities Solutions AS Oslo - Norway AGR Petroleum Services AS 80% 80%

AGR Group Americas Inc Houston-USA AGR Petroleum Services Holdings AS 100% 100%

AGR Group Holdings Ltd Aberdeen - UK AGR Petroleum Services Holdings AS 100% 100%

AGR Group Mexico Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR Group Mexico S de R.L de C.V Houston-USA AGR Group Mexico Inc 100% 100%

AGR Marine Engineering AS Fjell - Norway AGR Group ASA 100% 100%

AGR Peak Solution Systems Pty Ltd Perth - Australia AGR Group Holdings Ltd 100% 100%

AGR Petroleum (ME) Ltd Dubai - United Arab Emirates

AGR Group Holdings Ltd 100% 100%

AGR Petroleum Services AS Oslo - Norway AGR Petroleum Services Holdings AS 100% 100%

AGR Petroleum Services Holdings AS Fjell - Norway AGR Group ASA 97% 98%

AGR Petroleum Services Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR Reservoir Evaluation Services Kazakstan Ltd Aberdeen - UK AGR Petroleum

Services AS 100% 100%





voting share 2011

AGR Seabed Intervention Ltd Aberdeen - UK AGR EDS and T&T Holdings AS 100% -

AGR Set Ltd Aberdeen - UK AGR EDS and T&T Holdings AS 100% -

AGR Solution Systems Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

AGR Subsea AS Fjell - Norway AGR Drilling Services Holdings AS 100% 100%

AGR Subsea Inc Houston-USA AGR Drilling Services Holdings AS 100% 100%

AGR Subsea Ltd Aberdeen - UK AGR EDS and T&T Holdings AS 100% 100%

AGR Well Management Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

AGR Well Services AS Fjell - Norway AGR EDS and T&T Holdings AS 100% 100%

Altinex Inc Houston-USA AGR Petroleum Services Holdings AS 100% 100%

Ocean Riser Systems AS Oslo - Norway AGR Drilling Services Holdings AS 100% -

Steinsvik & Co. AS Stavanger - Norway AGR Petroleum Services Holdings AS 80% -

Teredo AS Oslo - Norway AGR Petroleum Services AS 100% 100%

Tracs Consult LLC Moscow - Russia Tracs International Consultancy Ltd 100% 100%

Tracs International Consultancy Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

Tracs International Training Ltd Aberdeen - UK Tracs International Consultancy Ltd 100% 100%


2012 2011

Stocks 111 1 379

Work in progress - -

Finished goods 23 883 19 156

Total inventories 31.12. 23 995 20 535

All amounts are net of any write-downs for obsolescence. The total accumulated write-down for obsolescence included in inventory is TNOK 5 100 for both 2012 and 2011.

2012 2011

Trade debtors at nominal value 530 098 401 497

Revenues not invoiced 80 735 133 688

Trade receivables from related parties (refer to note 30) - 18

Provisions for bad debt (132 518) (13 794)

Trade receivables 31.12. 478 315 521 410

Of the total TNOK 132 518, TNOK 118 000 is reclassification from accounts payable to Provision for bad debt regarding amounts collected for third-parties. See note 31.

2012 2011

Receivables not overdue 287 592 326 995

Receivables overdue up to 3 months 140 716 162 181

Receivables overdue more than 3 months 182 525 46 027

Provision (132 518) (13 794)

Trade debtors 31.12. 478 315 521 410

Individually impaired Collectively impaired Total

Provision 01.01.11 (7 186) - (7 186)

Charge for the year (9 726) - (9 726)

Utilised 252 - 252

Unused amounts reversed 2 865 - 2 865

Provision 31.12.11 (13 794) - (13 794)

Charge for the year (119 477) - (119 477)

Utilised - - -

Unused amounts reversed 755 - 755

Provision 31.12.12 (132 518) - (132 518)

NOTE 11 Inventory Figures in TNOK

NOTE 12 Trade receivables Figures in TNOK

NOTE 13 Aging trade debtors at nominal value Figures in TNOK


2012 2011

Other taxes receivables 38 949 68 591

Advanced payments to suppliers 5 759 14 981

Overseas witholding taxes 2 182 -

Advanced payments employees 1 048 1 174

Other prepaid expenses 17 396 7 037

Receivables from related parties - 1 000

Other current assets 34 253 23 654

Other current receivables 31.12. 99 588 116 437

2012 2011

Cash 142 4 291

Bank deposits 272 541 816 693

Cash and cash equivalents 31.12. 272 683 820 984

Of which is restricted deposits* 2 779 757

Unused overdraft facilities 31.12. 87 000 190 000

* Deducted employee tax due within 3 months

NOTE 14 Other current receivables Figures in TNOK

NOTE 15 Cash and cash equivalents Figures in TNOK


31.12.12Loans and

receivables

Assets at fair value through the

profit and loss Total

Assets as per balance sheet

Derivative financial instruments - - -

Trade and other receivables 577 903 - 577 903

Other financial assets at fair value 92 - 92

Cash and cash equivalents 272 683 - 272 683

Total 850 678 - 850 678

Liabilities at fair value through the profit and loss

Derivatives used for hedging

Other financial liabilities Total

Liabilities as per balance sheet

Borrowings - DNB/Nordea - - 744 646 744 646

Derivative financial instruments (3 617) - - (3 617)

Total (3 617) − 744 646 741 029

31.12.11Loans and

receivables

Assets at fair value through the

profit and loss Total

Assets as per balance sheet

Derivative financial instruments - - -

Trade and other receivables 637 847 - 637 847

Other financial assets at fair value - - -

Cash and cash equivalents 820 984 - 820 984

Total 1 458 831 - 1 458 831

Liabilities at fair value through the profit and loss

Derivatives used for hedging

Other financial liabilities Total

Liabilities as per balance sheet

Borrowings - DNB/Nordea - - 737 698 737 698

Derivative financial instruments (10 000) - - (10 000)

Total (10 000) − 737 698 727 698

The accounting policies for financial instruments have been applied to the items below:

NOTE 16 Financial instruments by category Figures in TNOK


NOTE 17 Share Capital and Shareholder Information Figures in TNOK

Shareholders 31.12.12 Number of shares Equity interest

Altor Oil Service Invest AS 97 659 680 77.6 %

RBC Investor Services Bank 7 700 514 6.1 %

Hemca AS 3 489 759 2.8 %

BNYBE Invesco Perp Eur Small Com 1 832 185 1.5 %

Verdipapirfondet DNB Navigator 1 780 974 1.4 %

AGR Group ASA 1 745 915 1.4 %

Verdipapirfondet DNB SMB 1 367 630 1.1 %

Aequitas AS 1 334 092 1.1 %

Total shareholders with equity interest > 1.0 % 116 910 749 92.9 %

Total other shareholders 8 987 559 7.1 %

Total 125 898 308 100.0 %

Board:

Eivind Reiten (indirectly owned via Mocca Invest AS) 17 679 0.0 %

Tove Magnussen 30 065 0.0 %

Total shares owned by board members 47 744 0.0 %

Management:

Sverre Skogen (indirectly owned via Hemaca AS) 3 489 759 2.8 %

Åge Landro (indirectly owned via Nordstrøm Invest AS) 69 930 0.1 %

Total shares owned by the management group 3 559 689 2.8 %

At 31 December 2012 and at 31 December 2011 the company had a share capital of TNOK 251 797 distributed in 125 898 308 shares, each with a nominal value of NOK 2. All issued shares are fully paid. The company has one share class, and all shares have equal voting and dividend rights. During 2012, the company sold 69 930 of its own shares. The total amount received related to sale of the shares was TNOK 1 000. The nominal value of the shares is TNOK 140 and the premium TNOK 860. In total, the company owns 1 745 915 AGR shares per 31 December 2012, and 1 815 845 shares per 31 December 2011.

Shareholders in AGR Group ASA with a minimum of 1% share of ownership, as well as shares held by executive employees and board members including shares owned by affiliated individuals and companies, were at 31 December 2012 as follows:



Shareholders 31.12.11 Number of shares Equity interest

Altor Oil Service Invest AS 97 659 680 77.6%

RBC Dexia Investor Services Bank 7 717 390 6.1%

Hemca AS 3 489 759 2.8%

Invesco Perp Eur Small Comp FD 1 832 185 1.5%

AGR Group ASA 1 815 845 1.4%

Verdipapirfondet DNB Navigator 1 632 350 1.3%

DNB SMB 1 407 177 1.1%

Aequitas AS 1 334 092 1.1%

The Northern Trust Co 1 301 595 1.0%

Total shareholders with equity interest > 1.0 % 118 190 073 93.9%

Total other shareholders 7 708 235 6.1%

Total 125 898 308 100%

Board:

Eivind Reiten (indirectly owned via Mocca Invest AS) 17 679 0.0%

Tove Magnussen 30 065 0.0%

Total shares owned by board members 47 744 0.0%

Management:

Sverre Skogen (indirectly owned via Hemaca AS) 3 489 759 2.8%

Total shares owned by the management group 3 489 759 2.8%

Shareholder overview: Shareholders in AGR Group ASA with a minimum of 1% share of ownership, as well as shares held by executive employees and board members including shares owned by affiliated individuals and companies, were at 31 December 2011 as follows:


Number of shares

(thousands)Ordinary

sharesTreasury

sharesShare

premium Total

01.01.06 10 510 105 099 - 4 105 103

Share issue 2005 registered in 2006 117 1 173 - 1 173 2 346

Prior to the IPO the the share was split in a ratio 1:5 42 509 - - - -

– Proceeds from IPO issued July 2006 12 217 24 434 - 530 972 555 406

– Proceeds from shares issued December 2006 3 421 6 842 - 157 335 164 177

31.12.06 68 774 137 548 - 689 484 827 032

Employee share option scheme:

– Proceeds from shares issued December 2007 1 582 3 164 - 69 028 72 192

31.12.07 70 356 140 712 - 758 512 899 224

– Proceeds from shares issued June 2008 855 1 710 - 32 090 33 800

31.12.08 71 211 142 422 - 790 602 933 024

– Proceeds from shares issued October 2009 54 688 109 375 - 60 041 169 416

– Purchase of treasury shares - - (634) (4 118) (4 752)

31.12.09 125 898 251 797 (634) 846 525 1 097 688

– Proceeds from shares issued - - - - -

– Purchase of treasury shares - - (2 997) (18 982) (21 979)

31.12.10 125 898 251 797 (3 631) 827 543 1 075 709


– Reduction of share premium - - - (827 543) (827 543)

31.12.11 125 898 251 797 (3 631) - 248 166


– Sales of treasury shares - - 140 140

31.12.12 125 898 251 797 (3 491) - 248 306

NOTE 18 Share capital and premium Figures in TNOK

NOTE 19 Pensions and pension commitments Figures in TNOK

The Group companies provide various retirement plans in accordance with the local regulations and practice in the countries in which they operate. Contribution plansDefined contribution plans require the companies to make agreed contributions to a separate fund when employees have rendered services entitling them to contributions. The companies have no legal or constructive obligations to pay further contributions. Some companies make a contribution to multi-employer pension plans included in a joint arrangement with others. All multi-employer plans are accounted for as defined contribution plans. The premium related to the contribution plans are expensed when occurred as operating expenses. In 2012 the total expense for defined contribution schemes was MNOK 14.2 and in 2011 MNOK 12.0. Defined benefit plansDefined benefit plans are generally based on years of services and final salary levels, offering retirement benefits in addition to what is provides by state pension plans. The Group’s defined benefit plan is invested with an insurance company which manages the plan assets. The special pension schemes financed through company operations covers 8 employees.


NOTE 19 Pensions and pension commitments Figures in TNOK

Specification of the year’s pension cost 2012 2011

Costs according to defined benefit schemes:

Current service cost 1 805 1 792

Interest cost 644 942

Expected return on plan assets (725) (1 005)

Net actuarial losses 23 -

Administrative expenses 145 153

Pension cost excl. social security tax 1 892 1 882

Employers’ social security tax 268 265

Pension cost incl.social security tax 2 160 2 147

Balance sheet specification of net pension commitments 2012 2011

Guaranteed schemes:

Accumulated benfit obligation 15 641 19 429

Estimated effect of future wage adjustment 3 173 5 834

Gross pension commitments 18 814 25 263

Pension funds as of 31.12. (14 425) (16 413)

Net pension commitments 4 389 8 850

Social security tax 553 1 183

Estimate devations not recognised in the proft and loss accounts 3 654 (1 887)

Net pension commitment on the balance sheet 31.12. 8 596 8 146

The movement in the defined benefit obligation over the year is as follows: 2012 2011

Beginning of year 8 146 10 830

Net pension cost 2 160 2 147

Estimated payment to pension funds including administration costs (1 710) (4 832)

Net pension commitment on the balance sheet 31.12. 8 596 8 146

Actuarial assumptions for the Group 2012 2011

Expected return on funds 3.60 % 4.10%

Discount rate 2.30 % 2.60%

Annual salary increase 3.50 % 3.50%

Annual adjustment of the national insurance base amounts 3.25 % 3.25%

Annual adjustment of current pension payments 0.20 % 0.40%

Turnover 2-5% 2-5%

Expected average remaining servicetime 12 12

Demographic tariff K2005 K2005


NOTE 20 Tax Figures in TNOK

2012 2011

Current income tax expense Norway 5 161 1 358

Current income tax expense abroad 28 030 61 807

Adjustment of current income tax of prior years (996) 245

Changes in deferred tax Norway 62 068 (25 627)

Change in deferred tax abroad (2 083) 274

Income tax expense (from continuing operations) 92 180 38 056

Reconciliation of tax payable

Tax payable in profit and loss account adjustet for Group contribution 26 100 61 215

Prepaid tax (16 983) (12 828)

Credit deduction, international (15 463) -

Tax, international 5 348 (545)

Opening balance, tax from 2011 not paid in 2012 1 108 13 442

Corrections previous years (47) (127)

Tax payable in balance sheet 63 61 158

Reconciliation of nominal and effective tax rate

Pre-tax result (11 795) 55 639

Applicable tax with tax rate 28 % (3 303) 15 579

Variance, actual and expected income tax expense 95 483 22 477

Explanation of why actual tax cost deviates from expected tax cost

Tax effect from non-deductible costs 29 797 336 568

Tax effect from non-taxable income (19 847) (322 515)

Tax losses for which no deferred income tax asset was recognised 77 656 1 439

International tax rate deviates from Norwegian tax rate 8 873 6 741

Adjustment of current income tax of prior years (996) 245

Variance compared to applicable tax rate 95 483 22 477

Change in book value of deferred tax

Balance sheet value at 01.01. (171 381) (160 253)

Currency conversion 2 296 (4 857)

Charged to income in the period 59 950 (26 702)

Corrections previous years 34 (399)

Acquesition of Subsidary 62 -

Disposal of Field Operations - 20 830

Balance sheet value (109 039) (171 381)

Deferred tax assets as of 31.12. 110 027 176 838

Deferred tax liability as of 31.12. 988 5 457

Balance sheet value (109 039) (171 381)

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.



Basis for deferred tax 2012 2011

Receivables (20 721) (47 719)

Inventory (4 859) (5 100)

Other current balance sheet items (71 403) (63 383)

Amount linked to current balance sheet items (96 983) (116 201)

Fixed assets and intangible assets (9 179) (8 579)

Long term receivables (24 806) (999)

Pensions (8 733) (8 306)

Profit and loss account (4 698) (8 632)

Loss carried forward (846 999) (693 918)

Amount linked to long-term balance sheet items (894 415) (720 433)

Total basis for deferred tax assets (991 398) (836 634)

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The taxlosses are connected to privious years tax losses. Petroleum Services division has during the last 3-5 years delivered taxable profits, and based on future expected tax profit deffered tax asset is substantiated. Management believe that there is convincing evidence for future uses.

The Group did not recognise deferred income tax assets of TNOK 173 663 (2011: TNOK 68 934) in respect of losses amounting to TNOK 620 223 (2011: TNOK 246 193) that can be carried forward against future taxable income.

Due to the acquisition of Ocean Riser Systems and the restructuring of the Drilling Services Segment in 2012, AGR´s ownership in EDS went below 90% ownership. The EDS segment is therefore no longer a part of the tax group of AGR, meaning that the companies cannot give nor receive tax contributions. Based on historical profit and uncertainty in future taxable profit, the deferred tax asset in Drilling Services was written down to 0 in Q4 2012. This is shown as a tax cost in the profit & loss statement, amounting to NOK 96 million. Tax losses in the company AGR Group ASA are only capitalised for the part that will follow Petroleum Services division in the contemplated demerger. This is based on the conversion ratio. In 2012 TNOK 42 664 has been capitalised in AGR Group, due to convincing evidence for future usage.

Tax losses in Norway can be offset against future taxable profit, and there is no limit for usage. Deferred tax assets will be booked when there is convincing evidence for future taxable profit.

Of the total loss carried forward, TNOK 846 999 (2011 TNOK 693 918) TNOK 817 752 (2011: TNOK 663 820 ) relates to Norway.

Deferred taxBelow is a specification of temporary differences between accounting and tax values, as well as calculation of deferred tax / tax advantage at the end of the financial year.


NOTE 21 Debt to Credit Institutions Figures in TNOK

Guaranteed liabilities 2012 2011

Long-term and Short-term debt to credit institutions 747 657 737 698

Total guaranteed liabilities 747 657 737 698

Average interest rate NOK loans 4.88% 6.8%

Instalment profile Debt to Credit Institutions 2013 2014 2015 Thereafter Total

Revolving and overdraft credit facilities 102 780 - - - 102 780

Long-term loans* 644 877 - - - 644 877

Total 747 657 - - - 747 657

* all term loans is due in 2013 and has been classified as short-term debt

The Group has a Revolving Credit Facility (the “RCF”) of TNOK 120 000 and overdraft facility of TNOK 70 000. At 31 December 2012 TNOK 100 000 was drawn from the RCF and TNOK 3 drawn from the overdraft facility.

Accordingly the Group had total unused credit facilities of TNOK 87 000. Debt to credit institution is recorded at amortised cost, and the table below specifies the actual repayment schedule.

TNOK 515 756 of the short- and long-term borrowings is denominated in NOK, TNOK 126 672 is denominated in GBP and the remaining TNOK 105 221 is denominated in USD.

Overview of long-term debt to credit institutions 2012 2011

Long-term debt to credit institutions - 657 051

Capitalised arrangement fee deducted - (5 984)

Total long-term debt to credit institutions - 651 067



FINANCIAL COvENANTs

The Credit Facilities Agreement entered into with DNB and Nordea includes the following financial covenants as per 31 December 2012:

(a) Gross Interest Bearing Debt (GIBD) to EBITDA:the ratio of GIBD to EBITDA for each period referred to in Column A below shall not be greater than the ratio set out in Column B below opposite that period:

Period Ratio

Q4 2012 2.95

Q1 2013 2.50

Q2 2013 2.50

(b) EBITDA to Gross Cash Interest Expenses (GCIE):the ratio of EBITDA to GCIE for each period referred to in Column A below shall not be greater than the ratio set out in Column B below opposite that period:

Period Ratio

Q4 2012 4.36

Q1 2013 5.00

Q2 2013 5.00

(c) Book equity to total assets:

The ratio book equity to total assets of the Group for each period referred to in Column A below shall be greater than the ratio set out in Column B below opposite that period:

Period Ratio

Q4 2012 25.00

Q1 2013 25.00

Q2 2013 25.00

According to the borrowing agreement with DNB and Nordea, there are other conditions related to capital expenditure, disposals of assets, substantial change in the nature of business, mergers and further encumbrances.

Due to dispositions made in 2012 preparing for the re financing process that was finalised in February 2013, some of the financial covenants under the loan agreement effective per Q4 2012 were breached. Please refer to note 35 for further details.



The Group has entered into three interest rate swap agreements:

Start Currency Amount per

31.12.12 Expiration Interest rate Market value 31.12.12

29.10.2008 NOK 141 176 26.06.13 4.38% p.a. (1 398) TNOK

15.12.2009 USD 45 169 17.06.13 3.15% p.a. (591) TNOK

15.12.2009 GBP 80 909 17.06.13 3.20% p.a. (1 007) TNOK

Total 267 254 (2 996) TNOK

The Group has entered into one interest rate option agreement:

Start Currency Amount per

31.12.12 Expiration

Interest rate cap/floor

Market value 31.12.12

02.05.2010 NOK 168 033 05.02.13 6.00% / 2.44%

p.a. (622) TNOK

Total 168 033 (622) TNOK

Subsequent event: Group debt refinancing

In February 2013 the Group s multicurrency revolving credit facility, term loans and guarantee facilities was refinanced. Please refer to note 35 for further details

NOTE 22 Other current liabilities Figures in TNOK

NOTE 23 Outstanding from associated companies Figures in TNOK

2012 2011

Holiday pay and wages due 82 650 48 621

Advances from customers 17 221 12 790

Incurred interest cost 1 568 1 945

Accrued grants received for R&D 43 389 41 617

Other creditors 5 499 19 854

Accrued costs 37 087 67 009

Market value of financial instruments 3 618 10 001

Debt to FieldCo Invest - 56 719

Other current liabilities 29 349 10 220

Current liabilities 220 382 268 778

Specification of outstanding from associated companies 2012 2011

Other receivables - -

Provision - -

Net outstanding from associated companies - -


NOTE 24 Earnings per share

Basis for calculation of earnings per share 2012 2011

Net result allocated to shareholders from continuing operations (101 573 846) 8 252 233

Net result allocated to shareholders including discontinued operations (101 573 846) 745 267 649

Weighted average number of outstanding shares excluding treasury shares 124 130 169 124 082 463

Earnings per share from continuing operations (NOK) (0.82) 0.05

Earnings per share including discontinuing operations (NOK) (0.82) 6.01

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the company and held as treasury shares (note 18). There are no dilution effects as the company has no convertible bond or stock option plan.

NOTE 25 Wages, fees, number of employees etc. Figures in TNOK

2012 2011

Wages 461 048 408 352

Employers’ social security contributions 56 589 48 103

Pension costs 16 518 14 130

Other remunerations 78 242 33 960

Capitalised wages (11 224) (9 628)

Total 601 173 494 916

Average number of man-labour years 603 577

Pension costs are described in detail in note 19.Accumulated expenses for wages, pension premiums and other remuneration to managing director, other Group executives and members of the parent company’s board accordingly for 2012 and 2011 were:

2012

Management Directors (MD): Wages Bonus Pension

premiums Other

remuneration Total

Sverre Skogen - Chief Executive Officer 2 648 745 62 20 3 475

Svein Sollund - Chief Financial Officer 2 214 2 628 62 19 4 922

Åge Landro - EVP Petroleum Services 01.04.12 - 31.12.12 781 649 46 5 1 480

Tove Magnussen - HSE&Q 1 599 245 69 25 1 938

David Hine - EVP Enhanced Drilling Solutions 2 002 422 61 14 2 500

Erling Storaune - EVP Americas 2 089 514 115 1 484 4 202

Ian Burdis - EVP UK & Asia Pacific 1 891 402 143 - 2 437

Johan Jacob Møller Warmedal - EVP Tools & Technology 2 755 375 66 15 3 211

Sjur Talstad - EVP Norway & Russia 3 326 489 63 191 4 070

Eivind Reiten - Chairman 450 - - - 450

Thomas Nilsson - Board member 200 - - - 200

Total 19 955 6 468 688 1 773 28 884



2011

Management Directors (MD): Wages Bonus Pension

premiums Other

remuneration Total

Sverre Skogen - Chief Executive Officer 2 538 500 56 22 3 116

Svein Sollund - Chief Financial Officer 2 614 400 55 20 3 090

Tove Magnussen - HSE&Q 1 572 152 66 20 1 810

David Hine - EVP Enhanced Drilling Solutions 1 471 - 58 84 1 614

Erling Storaune - EVP Americas 1 798 - 111 67 1 976

Ian Burdis - EVP UK & Asia Pacific 1 602 - 120 - 1 722

Johan Jacob Møller Warmedal - EVP Tools & Technology 1 720 - 60 68 1 848

Sjur Talstad - EVP Norway & Russia 4 014 457 61 210 4 742

Eivind Reiten - Chairman 450 - - - 450

Thomas Nilsson - Board member 150 - - - 150

Total 17 929 1 509 587 492 20 517

Bonus disclosed for 2012 is the amount paid in 2012 based on performance achieved in 2011. Bonus disclosed for 2011 is the amount paid in 2011 based on performance achieved in 2010. Per 31.12.12 and per 31.12.11 there are no loans or guarantees to the group CEO or to members of the board. One member of the Executive management group has been granted a loan of MNOK 1, this loan was settled in november 2012. No related parties to these have loans or guarantees from AGR. The Executive management has between 3 and 12 months’ notice, and their salary is paid during the notice period. The Group CEO and CFO have 12 month severance pay. The Executive Officers for the business units have from 6 - 12 month severance pay in addition to the severance pay for the notice period, with deduction of any other wages received during this period.

REMuNERATION pOLICy:

Main principles The main principles for AGR management remuneration policy are that executive management shall be offered competitive remuneration, when salaries, benefits in kind, bonuses and pension arrangements are taken into consideration. Bonuses and other additional benefits As a guideline, compensation in the form of a cash bonus in addition to base salary may be offered to executive management. Such bonuses shall however, be limited to certain percentages of the base salary and to achievement of certain predetermined objectives. Guidelines for distribution of bonuses shall be determined by the Board of Directors, after consulting with the company’s remuneration committee.

Executive management shall as a general rule be entitled to participate in pension schemes that ensure pension benefits in proportion to their level of salary as employees. The executive management of the company are members of the company’s collective pension scheme.

In respect of severance payments or benefits these will be agreed on an individual basis. Some of the current members of the executive management have rights to severance payment, corresponding to 6 to 18 months base salary, if their employment is terminated by the company. As a guideline severance payments shall be in accordance with the company’s main principles, i.e. that the level of remuneration shall be competitive when all benefits are seen as a whole. Share investment program Information concerning the share investment program is in note 37.


NOTE 26 Provisions Figures in TNOK

NOTE 27 Leasing costs Figures in TNOK


Auditor’s fee

The Board has reviewed the level and distribution of fees paid to our auditors, and considers them to be appropriate.

Specification of auditor’s fee excl. VAT 2012 2011

Fees for audit of annual accounts 2 825 2 602

Fees for other attestation services 111 42

Fees for tax-related services 1 300 1 277

Fees for other services* 1 687 5 385

Total 5 922 9 306

* Fees for other services includes due diligence service and various technical assistance.

From financial year 2011 AGR appointed Ernst & Young as new auditors for the Group. Fees to Ernst & Young is amounted to 914 TNOK for audit, 758 TNOK for tax related services and 278 TNOK for other services.

Balance

2012 2011

Other provisions 771 1 157

Earn-out 1 500 -

Total provisions 2 271 1 157

AGR acquired 80 % of the share capital of Steinsvik Co AS in May 2012 for a cash consideration of TNOK 27 604. The earn-out structure has a maximum agreed amount of TNOK 1 500 , and is due for payment in November 2013. This is estimated to be the fair value of the provision.

2012 2011

Land, buildings and permanent property 34 914 39 291

Apartments 1 785 1 200

Machinery and operating equipment 7 298 8 545

Total 43 997 49 037

The Group has entered into lease agreements for premises, among others at Straume, Oslo and Stavanger, in Norway, Houston in USA, Aberdeen, Perth and Melbourne in Australia, Almaty in Kazakhstan, Moscow in Russia, Baku in Azerbaijan and Abu Dhabi in United Arab Emirates. The Group has not entered into non-cancellable operating leases.

The Group has entered into the following operating lease agreements for tangible assets not recognised in the balance sheet, but expensed as incurred:


NOTE 28 Financial income and expences Figures in TNOK

NOTE 29 Financial market risk Figures in TNOK

2012 2011

Interest income 10 723 3 116

Currency gain 199 255 269 678

Other financial income 1 018 -

Unrealised gain/(loss) of financial instruments calculated at fair value* 6 383 4 941

Financial Income 217 379 277 734

Interest expense (49 870) (64 070)

Currency loss (211 595) (270 047)

Other financial expense (10 770) (28 433)

Financial expences (272 235) (362 549)

Net financial items (54 856) (84 815)

* Gain on interest rate swap of TNOK 6 383 in 2012 and of TNOK 4 941 in 2011.

The Group has financial instruments linked to ordinary activities such as trade debtors, trade creditors and similar. Short-term and medium-term interest rate risk arises from floating interest rates on parts of the company’s debt. At 31 December 2012 the Group held 3 interest rate swaps contracts of NOK 267 million in total and 1 interest rate option contract of NOK 168 million, all accounted for at fair value in accordance with IAS 39. In 2012, an unrealized gain of NOK 6.4 million has been recognised under other financial expenses. The Group s credit risk exposure is considered to be low. The majority of the Group’s debtors are publicly listed Norwegian and international oil companies. The Group seeks to obtain financial guarantees from debtors where the credit risk and exposure is considered to be high. In addition, majority of the Group s receivables are credit insured in order to reduce credit risk. All loss provisions, as described in note 31, are made due to legal disputes with customers, and hence not due to high credit risk. A proportion of the Group’s turnover is in foreign currencies, primarily USD and GBP. As a result of international operations, the Group is exposed to fluctuations in currency exchange rates. In accordance with the Group’s financial risk policy, some of this exposure is partly hedged with foreign currency debt in USD and GBP, and partly with Foreign Exchange (FX) contracts. At 31 December 2012 USD debt amounted to NOK 105 million and debt in GBP amounted to NOK 127million. There were no FX contracts at year end 2012. The Group is not directly exposed to fluctuations in commodity prices. Below is an outline of the Group’s total operating revenue, trade receivables and -payables converted into NOK at balance sheet date:

Currency Currency

(1000) 2012 TNOK Share % Currency

(1000) 2011 TNOK Share %

Total operating revenue:

AUD 14 494 87 358 5% 13 206 76 280 4%

BRL 4 285 12 767 1% 8 128 27 667 1%

CAD 1 852 10 778 1% 2 161 12 295 1%

EUR 1 087 8 165 0% 1 738 13 004 1%

GBP 44 119 406 145 23% 61 614 551 466 30%

NOK 714 478 714 478 40% 719 321 719 321 39%

USD 92 095 534 966 30% 82 841 463 615 25%

Other* 3 256 0% - 4 265 0%

Total 1 777 913 100% 1 867 914 100%


NOTE 30 Related parties Figures in TNOK

Currency Currency

(1000) 2012 TNOK Share % Currency

(1000) 2011 TNOK Share %

Trade receivables:

AUD 6 572 37 970 8% 3 706 22 594 4%

BRL 467 1 269 0% 545 1 748 0%

CAD 283 1 584 0% 92 541 0%

EUR (951) (6 980) -1% 695 5 401 1%

GBP 15 152 136 301 28% 17 251 159 850 31%

NOK 132 227 132 227 28% 102 347 102 347 20%

USD 31 048 172 631 36% 31 090 187 046 36%

Other* 3 314 1% - 41 881 8%

Total 478 315 100% 521 410 100%

Trade payables:

AUD 2 504 14 467 3% 2 035 12 405 5%

BRL 98 265 0% 92 294 0%

CAD 448 2 505 1% 140 826 0%

EUR 664 4 861 1% 623 4 843 2%

GBP 6 496 58 422 13% 13 053 120 998 45%

MYR - - 0% 62 116 0%

NOK 63 697 63 697 15% 53 753 53 753 20%

SEK 738 631 0% - - 0%

USD 52 016 289 446 66% 12 330 74 060 27%

Other* 3 333 1% - 4 526 2%

Total 437 627 100% 271 822 100%


Key management personnel Other income

2012 2011

K&K Design AS - 21

Total - 21

Other related parties Other income

2012 2011

Altor Equity Partners AS (rental of premises) 184 2 537

Total 184 2 537

The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year.



Key management personnel Purchase of goods / other operating costs

2012 2011

Acatos Consulting AS 750 750

Combiunits AS - 576

G & G Consultans AS 4 997 4 546

K&K Design AS - 569

PIR AS 1 989 -

Racso Ltd - 1 750

Tøkon AS 3 148 3 282

Total 10 884 11 475

Other related parties Purchase of goods / other operating costs

2012 2011

Altor Equity Partners AS 968 169

Total 968 169

Key management personnel Trade receivables

2012 2011

K&K Design AS - 18

Total - 18

Key management personnel Trade payables

2012 2011

BroCo Marin AS - (131)

Combiunits AS - 57

G & G Consultans AS 532 233

PIR AS 246 -

Tøkon AS 212 234

Total 990 394

Other related parties Trade payables

2012 2011

Altor Equity Partners AS - 32

Total - 32

All transactions with related parties are carried out at market prices in connection with ordinary business transactions. There is not given or received any guarantees related to transaction with related parties in 2012 or 2011. There is not recognised any provision for doubtful debts related to the amount of outstanding balances, and there is not recognised any expense during 2012 or 2011 in respect of bad or doubtful debts due from related parties.

NOTE 31 Contingencies

During 2012 AGR Group was in a legal dispute with Hyperdynamics. In accordance with IAS 37.92 the Group does not provide further information on this dispute in order not to impair the outcome of the proceeding. A loss provision was made in the fourth quarter 2012 in connection with a significant seabed excavation project within the Drilling Services division. The provision reflects a conservative approach due to an unresolved contract dispute with the client.


NOTE 31 Contingencies

NOTE 32 Public grants Figures in TNOK

NOTE 33 Financial assets at fair value Figures in TNOK

The Group is involved in arbitration relating to a dispute with UP Offshore (UK) Limited, a sub-contractor, which is alleging that the Group has breached the terms of a contract between the parties, and is seeking damages of £1.54 million. The information usually required by IFRS is not disclosed on the grounds that it can be expected to prejudice seriously the outcome of the arbitration. The directors are of the opinion that the claim can be successfully resisted by the Group.

An invoice and demand for settlement for approximately $5.8 million has been presented to the Group by Awilco Drilling plc (“Awilco), a drilling contractor, in respect of services it claims were performed during January 2012 on a contract between the parties. The services were allegedly performed for a customer of the Group, Antrim Energy Inc (‘Antrim’). This liability has not yet been accepted pending the outcome of a dispute between the Group and Antrim. The directors, based on legal advice, understand that the Group has an agreement with Antrim, which, in their opinion, provides the Group with an enforceable indemnification against any costs arising in connection with the claim from Awilco, however Antrim are presently disputing this. A claim for approximately $47.3 million has been made against the Group by SCS Corporation in respect of cost over-runs incurred against the pre-estimate of costs for the Sabu-1 well which was completed in 2012. A defence and counterclaim for $22.2 million has been made by the Group against SCS Corporation in respect of amounts outstanding under the contract. The directors are of the opinion that the claim by SCS Corporation can be successfully resisted by the company. There is no impact on the financial position of the Group at 31 December 2011 in respect of this matter. An invoice and demand for settlement for approximately $10.25 million has been made against the Group by Jasper Drilling Private Limited, a service provider, in respect of services it claims were provided under a contract between the parties for the ultimate benefit of a customer of the Group, SCS Corporation. This liability has not been accepted pending the outcome of the dispute between the Group and SCS Corporation, as well as management’s concerns about the validity of various line items being claimed.

AGR Group ASA sold its shares in AGR Field Operations Holdings AS to Oceaneering AS on 20 December 2011. This agreement includes regular sales guarantees for such transaction. The guarantee is not secured by pledge. It is the Group’s assessment that it is not probable that a cash outflow will be required to settle the guarantee, therefore, no liability for the guarantee has been recognised.

2012 2011

Other current liability 01.01. 30 450 30 863

Received during the year (52) 1 394

Released to the income statement (3 014) (1 808)

Other current liability 31.12. 27 384 30 450

The Group has received grants from the Research Council of Norway in connection with research and developments projects. No terms and conditions apply to these grants. The grants from the Research Council of Norway are recognised in the balance sheet and are posted as revenue in line with depreciation on the fixed assets to which they are linked.

Specification of market-based shares: 2012 2011

Acquisition cost shares in Get Energy Inc 101 101

Conversion to market price at 31.12. (8) (6)

Market value 31.12. 92 95

Short-term financial investments as at 31 December 2012 and 2011 are accounted for at fair value with unrealised gains and losses included in the income statement.


NOTE 36 Assets of disposal group classified as held for sale and discontinued operations

NOTE 35 Events after the balance sheet date

Refinancing and restructuring of AGR Inthefirstquarterof2013AGRrefinanceditsPetroleumServicesdivisionbyplacinga5yearbondof550MNOKinthemarket.TheinterestrateisNIBOR+6.25%p.a.andthefinalmaturitydateis5February2018.TheDrillingServicesdivisionisrefinancedthrougha3yeartraditionalbankloan.TheinterestrateisNIBOR+3.25%p.a.andthefinalmaturitydateis28February2015.TheproceedsfromthebondandthenewbankloanwasreleasedtoAGRinMarchandtheexistingloanswererepaidsimultaneously.Consequently,theGroup’stwobusinessareas,PetroleumServicesandDrillingServices,arenowfinancedseparately.

Thisenablesthetwodivisionstoseekseparatestrategicalternativeswithautonomousmanagements.UndertheleadershipofÅgeLandro,EVPPetroleumServicesandDavidHine,EVPEDS-ORS,bothdivisionsarereadytoseekfurthergrowthasstand-alonecompanies.Asapartofthiswork,theBoardwillcontemplatealegaldemergeroftheGroup’stwodivisions.CurrentGroupCEOSverreSkogendecidedtostanddownasof1March2013aftereightyearswithAGR,butwillcontinuetheroleasChairmanofAGREnergy.ÅgeLandrowilltakeontheroleasGroupCEOinadditiontohispositionasheadofAGRPetroleumServices.

Divestment of AGR Cleanup and AGR Well ServicesInFebruary2013AGRsignedanagreementtosell100%ofthesharesinAGRCleanupASandAGRWellServicesAStoBR-IndustrierAS.ThetwocompaniesareapartoftheT&TsegmentundertheDrillingServicesdivision.ThetransactionwasclosedinMarch2013.

AGRGrouphasclosedasalein2011wherebyOceaneeringASacquiredAGR’sandFieldCoInvestAS’s100%shareofAGRFieldOperationsHoldingsAS.

ThepurchasepriceforFieldOperations,afterdeductingnetdebtasof30June2011,wassettoTNOK1010600basedonanenterprisevalueofTNOK1365000.

TheresultsfromAGRFieldOperationsHoldingsASanditssubsidiariesareincludedindiscontinuedoperationsintheincomestatementfor2011.

Analysis of the result of discontinued operations 2012 2011

Externaloperatingrevenues - 1081609

Projectexpenses/payrollexpenses - (881483)

Otheroperatingexpenses - (96112)

EBITDA - 104 014

Depreciationandamortisation - (52952)

Operating profit(loss) - 51 062

Netfinancialitems - (3424)

Shareofprofitofassociatedcompanies - -

Operating profit(loss) before tax - 47 638

Tax - (11819)

Profit after tax from discontinued operations - 35 819

Profit(loss)fromsaleofdiscontinuedoperations - 701197

Profit(loss) for the year from discontinued operation - 737 016

NOTE 34 Goods and consumables used

Expensesclassifiedasgoodsandconsumablesusedaredirectlyrelatedtoprojects,suchasprojectequipment,travellingexpenses,loadingetc.


NOTE 37 Share investment program

Share investment programIn 2011 AGR introduced co-investment program in AGR Petroleum Services. In May 2011 AGR Group ASA sold 42 939 A-shares in its subsidiary PetCo Invest AS to key employees and board members in AGR Group ASA and AGR Petroleum Services Holdings for NOK 102 per share. PetCo Invest AS owns 90 954 shares in AGR Petroleum Services Holdings AS, corresponding to 2.1%. AGR Group ASA is the owner of the remaining 97.9%. In April 2012 Petco Invest AS increased its ownership in AGR Petroleum Services Holdings with 41 532 shares and owns 132 480 shares, corresponding to 3.1% per December 2012. AGR Group ASA is the owner of the remaining 96.9 %.

In 2010 AGR introduced co-investment programs in AGR Drilling Services and AGR Field Operations. In September 2010 AGR Group ASA sold 73 453 A-shares in its subsidiary FieldCo Invest AS to key employees and board members in AGR Group and AGR Field Operations for NOK 102 per share. FieldCo Invest AS owns 166 812 shares in AGR Field Operations Holdings AS, corresponding to 5.5%. AGR Group ASA is the owner of the remaining 94.5%. Further, in September 2010 AGR Group ASA sold 69 000 A-shares in its subsidiary DrillCo Invest AS to key employees and board members in AGR Group and AGR Drilling Services for NOK 102 per share. DrillCo Invest AS owns 266 683 shares in AGR Drilling Services Holdings AS corresponding to 6.9%. AGR Group ASA is the owner of the remaining 93.1%.

AGR Group ASA’s shareholding in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS following the transaction was one controlling B-share respectively. DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS have been incorporated for the purpose of investing in AGR Drilling Services Holdings AS, AGR Field Operation Holdings AS and AGR Petroleum Services Holdings AS respectively.

The price per share in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS was determined based on the estimated fair value of AGR Drilling Services Holdings AS, AGR Field Operations Holdings AS and AGR Petroleum Services Holdings AS, using over-the-cycle EV/EBITDA trading multiples in accordance with EVCA guidelines. Accordingly, the transactions have not affected the profit and loss accounts of AGR. In order to increase the investments made by DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS, AGR Group ASA has provided loans in the form of seller’s credits with an annual interest rate of 8%. AGR Group ASA has an option to increase its shareholding in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS by cash payment or set-off against any outstanding amount under the loan agreements.

The co-investment programs within AGR Drilling Services, AGR Field Operations and AGR Petroleum Services are governed by the provisions in three separate shareholders agreements. The shareholders agreements are entered into by and between the holding companies, the investment companies and the participants in the program. Among other things the shareholder agreement will provide for drag-along and tag-along provisions for the event that AGR Group ASA should sell its shares in the holding companies. The participants cannot sell or transfer the shares in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS without the consent of AGR. If a participant in the program gives or is given notice of termination of employment before the second anniversary of the program, AGR has an option to buy the shares at fair value.

In December 2011 AGR Group ASA and FieldCo Invest AS sold its shares in AGR Field Operations Holdings AS.

In September 2012 there was a restructuring of the Group, and DrillCo Invest AS shares in AGR Drilling Services Holdings AS was exchanged for shares in AGR EDS and T&T Holdings AS.



PARENT


Note 2012 2011

Revenue 13 092 5 799

Other operating revenue 20 761 9 978

Total operating revenue 3, 4, 18, 19 33 853 15 778

Project cost 19 12 513 8 885

Payroll expenses 15 15 302 9 358

Depreciation, amortisation and impairments 8 1 366 248

Other operating expenses 5 ,15, 16, 19 23 332 45 517

Total operating expenses 52 513 64 008

Operating profit/(loss) (18 661) (48 230)

Financial income 25 886 972 225

Financial expenses 100 809 20 657

Net financial items 17 (74 923) 951 568

Profit/(loss) before income tax (93 584) 903 338

Income tax expense/(benefit) 11 (38 098) (6 980)

Profit/(loss) for the year (55 485) 910 318

Appropriation of net income and equity transfers

Dividend proposed - 700 000

Retained earnings (55 485) 210 318

Total appropriation (55 485) 910 318

Income statement AGR Group ASA Figures in TNOK


Balance sheet AGR Group ASA Figures in TNOK

PARENT

As at 31 December

Assets Note 2012 2011

Deferred tax assets 11 46 502 8 443

Intangible assets 46 502 8 443

Machinery and operating equipment 8 1 994 701

Tangible fixed assets 1 994 701

Investment in subsidiaries 2 675 143 751 900

Loan to subsidiaries 14 80 401 561 039

Investment in shares 1 496 500

Other financial fixed assets 30 067 40 362

Financial fixed assets 787 107 1 353 802

Total non current assets 835 603 1 362 946

Trade receivables 18 1 465 2 670

Group receivables 14 89 822 297 735

Other receivables 6 5 321 10 074

Receivables 96 608 310 479

Cash and cash equivalents 7 3 511 721 450

Current assets 100 120 1 031 929

Total assets 935 723 2 394 876


Reynir Kjær IndahlBoard member

Tove MagnussenBoard member

Celeste Annette MackieBoard member

Eivind ReitenChairman

Hugo Lund MaurstadBoard member


Thomas NilssonBoard member

Åge LandroCEO

PARENT

As at 31 December

Equity and liabilities Note 2012 2011

Share capital 9 251 797 251 797

Treasury shares (3 492) (3 632)

Total paid in equity 248 305 248 165

Earned equity 649 933 704 430

Total earned equity 649 933 704 430

Total equity 10 898 237 952 595

Trade payables 18 1 817 8 465

Public duties payable 1 251 751

Group debt 14 18 392 655 141

Other current liabilities 13 16 026 77 924

Dividends payable - 700 000

Total current liabilities 37 485 1 442 281

Total liabilities 37 485 1 442 281

Total equity and liabilities 935 723 2 394 876

Oslo, 17.04.2013

Balance sheet AGR Group ASA Figures in TNOK


Statement of Cashflow AGR Group ASA Figures in TNOK

PARENT


2012 2011

Ordinary profit/(loss) before taxes (93 584) 903 338

Income tax paid (15) -

Adjustment for group contribution entered as financial revenue - (1 680)

Impairment of financial assets 91 744 (164 470)

Gain on sale of subsidiary (3 289) (787 673)

Depreciation, amortisation and impairment of tangible assets 1 366 248

Change in trade receivables 1 220 (1 755)

Change in trade payables (6 709) 4 232

Change in other accruals (47 487) 28 182

Net cash flow from operational activities (56 753) (19 577)

Cash outflows for additions to equipment (1 564) (346)

Cash inflows/outflows from group debtors 34 912 (231 349)

Cash outflows for acquisitions of shares in subsidiaries - (4 540)

Cash inflows from sale of shares in subsidiaries 5 882 977 762

Cash outflows for purchase of shares (3 734) (900)

Cash inflows from sale of shares 2 150 400

Cash inflows from capital reduction of shares 388 -

Cash inflows from sale of treasury shares 1 000 -

Net cash flow from investment activities 39 034 741 027

Dividend paid (700 219) -

Net cash flow from finance activities (700 219) -

Net change in cash and equivalents (717 939) 721 450

Cash and equivalents at start of period 721 450 -

Cash and equivalents at end of period 3 511 721 450

The cash flow statement is based on the merger balance sheet 01.01.2012 with AGR Business Partner AS, and not the reported numbers as shown in the 2011 column in the financial statements that are not restated.


NOTE 01 Accounting principles

AGR Group ASA and its subsidiaries, is a leading supplier of services and technology to the oil and gas offshore industry. The company’s main operations are based at Straume (Bergen), with office in Abu Dhabi. The company provides management services to subsidiaries of the Group in addition to have a sale office in Abu Dhabi. The company is a limited liability company incorporated and domiciled in Norway. The address of its registered office is Smålonane 12-14, 5353 Straume. The consolidated financial statement is published on www.agr.com. The Company is listed on the Oslo Stock Exchange.

AGR Group ASA has entered into merger with its wholly-owned subsidiary AGR Business Partner AS, org.nr 992 018 615. For the accounting purposes the merger is imple-mented with continuity with effect from 1 January 2012.

The financial statements have been prepared in accordance with the Norwegian accounting act and accounting principles generally accepted in Norway (NGAAP). The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and the disclosure of contingent liabilities. The financial year follows the calendar year. Income statement items are classified by nature.

Changes in accounting policy and disclosuresEffects of changes in accounting policies and correction of material errors in previous annual financial statements are recognised directly in equity. The comparative figures are restated accordingly. Subsidiary companiesSubsidiary companies are valued in accordance with the cost method in the company accounts. The investment is calculated according to acquisition cost of the shares unless a write-down has been required. Group contributions are entered as revenue in the same year as allocation in the subsidiary company is made. If distribution exceeds ratio of retained earnings for the ownership in the period, the excess part is accounted for as a repayment of invested capital and recognised as a reduction of investment in the balance. Classification and valuation of balance sheet items Assets meant for permanent ownership or use is classified as non-current assets. Assets held as a part of the company’s service cycle and is expected to be realised or used during the course of the unit’s normal production period are classified as current assets. Receivables are classified as current if they are to be settled within one year. Analogous criteria apply for liabilities.

Non-current assets are valued at historical cost. Tangible fixed assets that deteriorate in value are depreciated on a linear basis over estimated financial lifespan. Tangible fixed assets are written down to real value in the event of a permanent decrease in value. Long-term liabilities in NOK, excluding other provisions, are entered in the balance sheet at nominal value at the time they arise. Provisions are discounted if the interest rate element is material. Current assets are valued at the lowest of acquisition cost and fair value. Current liabilities are entered at nominal value at the time they arise. Sales revenue The company’s business consists primarily of corporate services to subsidiaries of the Group. Services are recognised in the time of execution. Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met. The company’s business of services related to personnel and equipment hire are recognised based on daily/monthly rates and actual registered hours. Revenue is recognised when it is probable that transactions will generate future economic benefits that will flow to the company and the revenue amount can be reliably estimated. Revenues from the sale of goods are recognised in the income statement once delivery has taken place, the risk has been transferred and the company has established a receivable due by customer. Income is presented without value added tax and after any discounts. Revenues relating to projects are recognised in the income statement in line with the project’s progress and when the project’s results can be reliably estimated. Level of completion is calculated as an incurred cost’s percentage of anticipated total cost. For projects expected to generate a loss, the full estimated loss is recorded as cost immediately. Comparison principleAccrual in the financial statements is based on comparison of revenues and expenses during the period. Unrealised losses that are probable and quantifiable, and unconditional commitments and orders are expensed in accordance with generally accepted accounting principles. CurrencyMonetary items in foreign currency are converted according to the exchange rate of the balance sheet date. Foreign exchange gains and losses are recognised in the profit and loss account and are classified as financial items.


Contingent liabilities and contingent assetsContingent liabilities are recognised if there is more than 50 % chance that they will have to be settled. Best estimates are used in calculating the settlement value. Provisions for contingencies inherent in the product cycle or with the expected settlement date within one year from the balance sheet date are classified as current liabilities. Other provisions are classified as provisions for liabilities under long-term debt. PensionsThe company has entered into a contribution plan for its employees. Contribution plan comprise arrangements whereby the company makes annual contributions to the employees’ pension plans, and where the return on the pension plan assets will determine the amount of the pension. The premium related to the contribution plans are expensed when occurred as operating expenses. Extraordinary income and expensesIncome is classified as extraordinary if they are unusual, irregular and material considered in relation to the company’s business. Tangible fixed assetsTangible fixed assets are valued at cost less accumulated depreciation and write-downs. The costs of tangible fixed assets comprise the purchase price, including duties/taxes and direct acquisition costs linked to making the asset fit for use. Depreciation is calculated linearly based on the estimated useful life. Expenses accrued after the asset has been taken into use, such as repairs and maintenance, are normally recognised in the income statement. In cases where increased earnings can be demonstrated as a result of repairs/maintenance, the expenditure on this will be recognised in the balance sheet as additions to property, plant and equipment. The write-down requirement for fixed assets is assessed if there are indications of impairment. If indication of impairment is present there are performed an estimate of discounted future cash flows for assets that will continue to be in use in the company, and an estimate of selling price less cost of assets that are for sale. If calculation shows a value less than the carrying value assets will be write-down to fair value. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other operating revenue or other operating expenses in the income statement. Short-term investments Short-term investments (shares classified as current) are valued at lowest of average acquisition cost and fair value at the balance sheet date. Dividends and other disbursements are recognized as other financial income.

ReceivablesDebtors and other receivables are entered in the balance sheet at nominal value less provision for bad debt. Provision for bad debt is estimated based on individual assessment of the debtors. Completed, not invoiced/ advances for customers Earned, but not invoiced revenues by the percentage of completion, is carried out production which according to a contract are not invoiced at balance sheet date. Completed, not invoiced production is included in the line trade receivables. For projects where the invoicing exceeds the income from the completed production, the net amount is included in other current liabilities. Cash and cash equivalentsCash and cash equivalents are defined as cash and bank deposit. The company participates in the Group’s cash pool system. The company’s bank accounts included in the cash pool system, and balances on these accounts, represent exclusively an intercompany balance between the cash pool account holder and the individual participant. The cash pool will thus automatically establish credit relationships between participants and cash pool holder. In the financial statements all transaction between the cash pool holder and participants are recognised as intercompany balance. Best estimateWhen there is uncertainty associated with financial statement item, best estimate is used. Changes in estimates are recognised in the period in which the estimate is changed. Use of estimates is uncertain and may differ from actual results. Cash Flow StatementThe cash flow statement presents the accumulated cash flow for operational, investment and financial activities. The statement outlines the effect that each activity has on liquid assets. The cash flow statement has been prepared in line with the indirect model. TaxThe cost of tax in the profit and loss account comprises both the period’s tax payable, and changes in deferred tax. Deferred tax is calculated at a rate of 28% based on the temporary differences between accounting and tax values, as well as any loss to be carried forward at the end of the financial year. Taxable and deductible temporary differenced that reverse or may reverse in the same period is offset. Deferred tax assets are recognized when it is probable that the company will have a sufficient future profit to utilize the tax asset. Tax increasing and tax reducing temporary differences are disclosed net.





voting share 2011

AGR Australia Pty Ltd Perth - Australia AGR Group Holdings Ltd 100% 100%

AGR Business Partner AS Fjell - Norway AGR Group ASA - 100%

AGR Canada Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR CannSeal AS Fjell - Norway AGR Group ASA 95% 95%

AGR Cleanup AS Fjell - Norway AGR EDS and T&T Holdings AS 100% 100%

AGR Central Asia AS Oslo - Norway AGR Petroleum Services AS 100% 100%

AGR Consultancy Services AS Stavanger - Norway AGR Petroleum Services AS 100% 100%

AGR Consultancy Solutions Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

AGR Deepwater Technologies Inc Delaware-USA AGR Group ASA 100% 100%

AGR Drilling Services Canada Inc Houston-USA AGR Drilling Services Holdings AS 100% 100%

AGR Drilling Services do Brasil Ltda Rio de Janeiro - Brasil

AGR Drilling Services Holdings AS 100% 100%

AGR Drilling Services Holdings AS Fjell - Norway AGR EDS and T&T Holdings AS 83% 93%

AGR Drilling Services Pty Ltd Perth - Australia AGR Drilling Services Holdings AS 100% 100%

AGR EDS and T&T Holdings AS Fjell - Norway AGR Group ASA 93% -

AGR Energy AS Oslo - Norway AGR Petroleum Services Holdings AS 100% 100%

AGR F.J Brown Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR Facilities Solutions AS Oslo - Norway AGR Petroleum Services AS 80% 80%

AGR Group Americas Inc Houston-USA AGR Petroleum Services Holdings AS 100% 100%

AGR Group Holdings Ltd Aberdeen - UK AGR Petroleum Services Holdings AS 100% 100%

AGR Group Mexico Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR Group Mexico S de R.L de C.V Houston-USA AGR Group Mexico Inc 100% 100%

AGR Marine Engineering AS Fjell - Norway AGR Group ASA 100% 100%

AGR Peak Solution Systems Pty Ltd Perth - Australia AGR Group Holdings Ltd 100% 100%

AGR Petroleum (ME) Ltd Dubai - United Arab Emirates AGR Group Holdings Ltd 100% 100%

AGR Petroleum Services AS Oslo - Norway AGR Petroleum Services Holdings AS 100% 100%

AGR Petroleum Services Holdings AS Fjell - Norway AGR Group ASA 97% 98%

AGR Petroleum Services Inc Houston-USA AGR Group Americas Inc 100% 100%

AGR Reservoir Evaluation Services Kazakstan Ltd Aberdeen - UK AGR Petroleum Services AS 100% 100%

AGR Seabed Intervention Ltd Aberdeen - UK AGR EDS and T&T Holdings AS 100% -

AGR Set Ltd Aberdeen - UK AGR EDS and T&T Holdings AS 100% -

AGR Solution Systems Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

AGR Subsea AS Fjell - Norway AGR Drilling Services Holdings AS 100% 100%

AGR Subsea Inc Houston-USA AGR Drilling Services Holdings AS 100% 100%

AGR Subsea Ltd Aberdeen - UK AGR EDS and T&T Holdings AS 100% 100%





voting share 2011

AGR Well Management Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

AGR Well Services AS Fjell - Norway AGR EDS and T&T Holdings AS 100% 100%

Altinex Inc Houston-USA AGR Petroleum Services Holdings AS 100% 100%

Ocean Riser Systems AS Oslo - Norway AGR Drilling Services Holdings AS 100% -

Steinsvik & Co AS Stavanger - Norway AGR Petroleum Services Holdings AS 80% -

Teredo AS Oslo - Norway AGR Petroleum Services AS 100% 100%

Tracs Consult LLC Moscow - Russia Tracs International Consultancy Ltd 100% 100%

Tracs International Consultancy Ltd Aberdeen - UK AGR Group Holdings Ltd 100% 100%

Tracs International Training Ltd Aberdeen - UK Tracs International Consultancy Ltd 100% 100%

Subsidiary companies owned by AGR Group ASA 2012

Head office

Voting share Shares

Total share capital

TNOK

Equity TNOK

(100 %)

Result TNOK

(100 %) Book value

TNOK

AGR CannSeal AS Fjell 95% 10 000 1 000 15 419 (4 163) 23 928

AGR Deepwater Technologies Inc Delaware 100% 100 30 815 28 341 - 11 603

AGR EDS and T&T Holdings AS Fjell 93% 3 864 969 7 730 402 897 (4 103) 378 917

AGR Marine Engineering AS Fjell 100% 1 000 100 (21 971) (6 401) 39

AGR Petroleum Services Holdings AS Fjell 97% 4 307 065 8 614 289 030 28 856 260 656

Investment in subsidiaries per 31.12 713 715 14 189 675 143

Subsidiary companies owned by AGR Group ASA 2011

Head office

Voting share Shares

Total share capital

TNOK

Equity TNOK

(100 %)

Result TNOK

(100 %) Book value

TNOK

AGR Business Partner AS Fjell 100% 100 100 348 1 107 -

AGR CannSeal AS Fjell 95% 10 000 1 000 19 582 (2 990) 23 928

AGR Deepwater Technologies Inc Delaware 100% 100 30 815 30 582 - 11 603

AGR Drilling Services Holdings AS Fjell 93% 3 864 969 7 730 257 284 28 725 453 080

AGR Marine Engineering AS Ålesund 100% 1 000 100 (15 570) (12 566) 39

AGR Petroleum Services Holdings AS Fjell 98% 4 307 065 8 614 260 173 175 150 263 250

Investment in subsidiaries per 31.12 552 398 189 425 751 900


NOTE 03 Geographical segment information Figures in TNOK

NOTE 04 Operating revenues Figures in TNOK

NOTE 06 Other current receivables Figures in TNOK

NOTE 05 Other operating expenses Figures in TNOK

Geographical segment information presents the location of customer’s part of the company’s turnover

2012 2011

Norway 20 767 10 802

Europe 331 1 259

Asia 12 755 3 717

Total operating revenue 33 853 15 778

2012 2011

Sale of services 13 092 5 799

Rental of premises 5 856 956

Other operatning revenue 107 -

Group services 14 797 9 022

Total operating revenue 33 853 15 778

2012 2011

Rent of premises 13 139 12 806

Accrual for losses on premises (3 595) 17 475

Consulting fees 9 984 5 015

Group services 1 723 8 224

Other operating expenses 2 081 1 997

Other operating expenses 23 332 45 517

2012 2011

VAT receivables 2 420 7 480

Other current receivables 583 277

Prepaid costs 2 318 2 316

Other current receivables 5 321 10 074


NOTE 08 Fixed assets Figures in TNOK

NOTE 07 Cash and cash equivalents Figures in TNOK

2012 2011

Cash - 2

Bank deposits 3 511 721 448

Cash and cash equivalents 3 511 721 450

Of which is restricted deposits: - -

The company has obtained a guarantee for tax deduction means of TNOK 900.

2012 Machinery and

operating equimpent Total

Historical cost 01.01. 1 001 1 001

Historical cost 01.01. from merger 2 758 2 758

Additions 1 564 1 564

Disposal - -


Accumulated depreciation 01.01. 299 299

Accumulated depreciation 01.01. from merger 1 664 1 664

Amortisation of the year 1 366 1 366

Disposal depreciation during the year - -

Accumulated depreciation 31.12. 3 329 3 329

Book value 31.12. 1 994 1 994

Depreciation rates 3 years

Depreciation method Linear

2011 Machinery and

operating equimpent Total

Historical cost 01.01. 655 655

Additions 346 346

Disposal - -



Amortisation of the year 248 248

Disposal depreciation during the year - -


Book value 31.12. 701 701

Depreciation rates 3 years

Depreciation method Linear



At 31 December 2012 and at 31 December 2011 the company had a share capital of TNOK 251 797 distributed in 125 898 308 shares, each with a nominal value of NOK 2. All issued shares are fully paid. The company has one share class, and all shares have equal voting and dividend rights. During 2012, the company sold 69 930 of its own shares. The total amount received related to sale of the shares was TNOK 1 000. The nominal value of the shares is TNOK 140 and the premium TNOK 860. In total, the company owns 1 745 915 AGR shares per 31 December 2012, and 1 815 845 shares per 31 December 2011.

Shareholders in AGR Group ASA with a minimum of 1% share of ownership, as well as shares held by executive employees and board mem-bers including shares owned by affiliated individuals and companies, were at 31 December 2012 as follows:

Shareholders 2012 Number of shares Equity interest


RBC Investor Services Bank 7 700 514 6.1 %

Hemca AS 3 489 759 2.8 %

BNYBE Invesco Perp Eur Small Com 1 832 185 1.5 %


AGR Group ASA 1 745 915 1.4 %

Verdipapirfondet DNB SMB 1 367 630 1.1 %

Aequitas AS 1 334 092 1.1 %



Total 25 898 308 100.0 %

Board:




Management:


Åge Landro (indirectly owned via Nordstrøm Invest AS) 69 930 0.1 %




Shareholder overview: Shareholders in AGR Group ASA with a minimum of 1% share of ownership, as well as shares held by executive employees and board members including shares owned by affiliated individuals and companies, were at 31 December 2011 as follows:

Shareholders 2011 Number of shares Equity interest


RBC Dexia Investor Services Bank 7 717 390 6.1 %

Hemca AS 3 489 759 2.8 %

Invesco Perp Eur Small Comp FD 1 832 185 1.5 %

AGR Group ASA 1 815 845 1.4 %


DNB SMB 1 407 177 1.1 %

Aequitas AS 1 334 092 1.1 %

The Northern Trust Co 1 301 595 1.0 %



Total 125 898 308 100.0 %

Board:




Management:




NOTE 10 Changes in equity Figures in TNOK

2012 Share

capital Premium

funds Treasury

Shares

Total invested

capital Reserves Total equity

Opening balance 01.01. 251 797 - (3 632) 248 165 704 430 952 595

Result for financial year - - - - (55 485) (55 485)

Treasury shares - - 140 140 860 1 000

Dividend - - - - (219) (219)

Merger - - - - 348 348

Adjustment to equity - - 140 140 (54 497) (54 357)

Closing balance 31.12. 251 797 - (3 492) 248 305 649 933 898 238

2011 Share

capital Premium

funds Treasury

Shares

Total invested

capital Reserves Total equity

Opening balance 01.01. 251 797 827 544 (3 632) 1 075 709 (333 433) 742 276

Result for financial year - - - - 910 318 910 318

Reduction of share premium funds - (827 544) - (827 544) 827 544 -

Dividend proposed - - - - (700 000) (700 000)

Adjustment to equity - (827 544) - (827 544) 1 037 862 210 318

Closing balance 31.12. 251 797 - (3 632) 248 165 704 430 952 595

Reduction of premium funds was approved at extraordinary general meeting on 18 November 2011. The amount is in full allocated to reserves.



2012 2011

Tax payable Norway - -

Amendments, deferred tax Norway (38 098) (6 980)

Income tax expense (38 098) (6 980)

Reconciliation of tax payable

Tax payable - -

Tax payable in balance sheet - -

Reconsiliation of tax payable

Pre-tax result (93 584) 903 338

Expected 28% tax cost (26 203) 252 935

Variance, actual and expected tax cost (11 895) (259 915)

Explanation why actual tax cost deviates from expected tax cost:

Tax effect from non-deductible costs 27 182 6 685

Tax effect from non-taxable income (1 205) (266 600)

Tax effect from unrecognized tax loss carryforwards (37 872) -

Variance compared to expected tax cost (11 895) (259 915)

Calculation of tax payable: 2012 2011

Pre-tax result (93 584) 903 338

Tax effect from non deductible costs from impairment of shares and receivables 97 077 23 875

Non- deductible costs (4 303) (952 142)

Amendments, deferred tax (3 170) 17 102

Basis for tax calculation (3 979) (7 827)

Deferred taxBelow is a specification of interim variations between account-related and tax-related values, as well as calculation of deferred tax / tax advantage at the end of the financial year.

Basis for deferred tax 2012 01.01.2012 Change

Fixed assets (228) 222 (450)

Provision of contracts (13 480) (17 075) 3 595

Loss carried forward (263 036) (259 081) (3 954)

Amount linked to long-term balance sheet items (276 743) (275 934) (809)

Differences that are not included in the calculation of deferred tax 110 664 245 919 (135 255)

Total basis for deferred tax assets (166 080) (30 015) (136 065)

Calculation of deferred tax / tax advantage

Deferred tax entered in balance sheet

Deferred tax advantage entered in balance sheet (46 502) (8 404) (38 098)

The merger with AGR Business Partner AS is implemented with effect from 1 January 2012. Basis for deffered tax as stated per 01.01.2012 is the sum of the basis for deferred tax of AGR Group ASA and AGR Business Partner AS.

There is no time limit attached to the application of the loss carried forward.

Tax losses in AGR Group ASA are capitalised for the part that will follow Petroleum Services division in the demerger. This is based on the conversion ratio. In 2012 TNOK 42 664 has been capitalised in AGR Group, due to convincing evidence for future usage.


NOTE 14 Intra group balances Figures in TNOK

NOTE 12 Other long-term liabilities Figures in TNOK

NOTE 13 Other current liabilities Figures in TNOK

Joint and severally responsibility:The company does not have any interest bearing loans, but they are joint and severally responsible for the long term loan for the Group. The Group has in its agreement with the bank issued a negative pledge, this also applies to the majority of the subsidiaries in the Group.

2012 2011

Advances from customers - 185

Holiday pay and wages due 1 250 1 944

Other incurred costs 1 295 1 600

Accrual for losses on premises 13 480 17 475

Debt to FieldCo Invest AS - 56 719

Total current liabilities 16 026 77 924

Specification of intra group balances 2012 2011

Long term-loan to subsidiaries:

AGR CannSeal AS 80 401 80 451

AGR Marine Engineering AS 17 562 20 589

AGR Petroleum Services Holdings AS - 460 000

Total long term-loan to subsidiaries 97 962 561 038

Long term-loan to subsidiaries 97 962 561 038

Provision for bad debt (17 562) -

Total long term-loan to subsidiaries 80 401 561 038

Interest charge on intra group loans is NIBOR + 4.50% for 2012. For 2011 interest charge was NIBOR + 3.75%.



Short-term group receivables: 2012 2011

AGR Asia Pacific Pty Ltd 90 130

AGR Business Partner AS - 1 682

AGR CannSeal AS 211 -

AGR Cleanup AS 454 -

AGR Consultancy Services AS 185 -

AGR Consultancy Solutions Ltd 231 161

AGR Drilling Services Canada Inc 14 -

AGR Drilling Services do Brasil Ltda 52 39

AGR Drilling Services Holdings AS 163 4

AGR Drilling Services Pty Ltd 277 305

AGR EDS and T&T Holdings AS 3 522 -

AGR Energy AS 7 -

AGR Facilities Solutions AS 24 -

AGR F.J. Brown Inc 193 -

AGR Marine Engineering AS - 8

AGR Peak Solution Systems Ltd - 17

AGR Petroleum Services AS 466 217

AGR Petroleum Services Holdings AS 76 944 290 282

AGR Seabed Intervention Ltd 69 -

AGR Solution System Ltd 11 -

AGR Subsea AS 3 188 3 105

AGR Subsea Inc 80 -

AGR Subsea Ltd 504 821

AGR Well Management Ltd 330 283

AGR Well Services AS 292 -

ARG Petroleum (ME). Ltd 350 7

Steinsvik & Co. AS 79 -

Tracs Consult LLC 12 -

Tracs International Consultancy Ltd 2 072 672

Total short term group receivables 89 822 297 735



Short-term group paybles: 2012 2011

AGR Business Partner AS - 524

AGR CannSeal AS 995 -

AGR Cleanup AS 175 -

AGR Drilling Services Holdings AS 1 651 -

AGR Group Holdings Ltd - 37

AGR Marine Engineering AS 39 -

AGR Petroleum Services AS 42 56

AGR Petroleum Services Holdings AS 13 642 759

AGR Subsea AS 3 506 -

ARG Petroleum (ME). Ltd 11 210 11 748

AGR Well Services AS 15 -

Tracs International Consultancy Ltd 746 18

Total short-term group payables 18 392 655 141

The Norwegian companies in the Group are part of a cash pool system. The companies covered by the scheme are jointly and severally liable for obligations under the scheme. In the list of short-term group payables the company’s share of the corporate account is recognised as payables to AGR Petroleum Services Holdings AS.


Accumulated expenses for wages, pension premiums and other remuneration to managing director, other Group executives and members of the company’s board accordingly for 2011 were:

2012 2011

Wages 13 072 8 234

Employers’ social security contributions 2 058 948

Other remunerations 172 176

Other wage costs - -

Total 15 302 9 358

Average number of man labour 8 2

The company is obligated to have pension scheme for its employees, and have entered into a defined contribution plan covering all employees. The pension premium is expensed when occurred as operating expenses. The plan complies with requirements for pension plans in Norway.




Wages Pension

premiums Other

remuneration Total

Chief Executive Officer 3 393 62 20 3 475

The board

Thomas Nilsson 200 - - 200

Eivind Reiten 450 - - 450

Total board 650 - - 650

Total 4 043 62 20 4 125


Wages Pension

premiums Other

remuneration Total

Chief Executive Officer 3 038 56 22 3 116

The board

Thomas Nilsson 150 - - 150

Eivind Reiten 450 - - 450

Total board 600 - - 600

Total 3 638 56 22 3 716

Other remuneration mainly consists of electronic communication, car allowance, traveling expenses for the partner and assurance. The Group CEO has a bonus agreement that entitles him to up to 40 % of his annual salary based on the group’s profit. In 2012 there was paid out a bonus related to the result in 2011 of TNOK 745. In 2011 there was paid out a bonus related to the result in 2010 of TNOK 500. Per 31 December 2012 and per 31 December 2011 there are no loans or guarantees to the Group CEO, members of the board, members of the group management directors, or any related parties of these. The Group CEO has a 12 month notice period and12 month severance pay, with deduction of any other wages received during this period.

Specification of auditor’s fee excl. VAT 2012 2011

Fees for audit of annual accounts 903 1 021

Fees for tax-related and corporate legislation advice 114 432

Fees for other attestation services 18 42

Fees for other services 744 5 201

Total 1 778 6 696

From financial year 2011 AGR Group ASA appointed Ernst & Young as new auditors. Fees to Ernst & Young is amounted to 434 TNOK for audit, 232 TNOK for tax related services and 278 TNOK for other services.



NOTE 17 Financial income and expense Figures in TNOK

2012 2011

Interest income from group companies 7 194 8 253

Other interest income 8 862 3 119

Other financial income 6 541 8 711

Reversal of depreciation of shares - 164 470

Gain on sale of subsidiary 3 289 787 673

Total financial income 25 886 972 225

Interest cost from group companies (2 347) (13 127)

Depreciation of shares and receivables (91 744) -

Other interest expense (2) (0)

Other financial expense (6 716) (7 530)

Total financial expences (100 809) (20 657)

Net financial items (74 923) 951 568

2012 2011

Currency Currency NOK Share % Currency NOK Share %

Turnover:

NOK 20 767 20 767 61% 9 978 9 978 63%

USD 2 257 13 086 39% 948 5 799 37%

Total 33 853 100% 15 778 100%

Debtors:

NOK 1 316 1 316 90% 103 103 4%

USD 27 150 10% 424 2 567 96%

Total 1 465 100% 2 670 100%

NOTE 16 Leasing costs Figures in TNOK

The Company has entered into the following lease agreements for tangible assets not recognised in the balance sheet, but expensed as incurred.

The company has entered into lease agreement for premises at Smålonane 12-14 with Sartor Næringspark AS. Rental expense is allocated to subsidiaries based on the used area. The agreement with Sartor Næringspark AS runs until 1 October 2016.

2012 2011

Land, Buildings and permantent property 13 139 12 806

Apartments - -

Machinery and operating equipment 3 9

Total 13 142 12 815



NOTE 20 Contingencies Figures in TNOK

NOTE 21 Events occurring after date of balance sheet


Sales of goods/ other operating revenue 2012 2011

Sales to subsidiary 23 806 10 076

Total 23 806 10 076

Purchase of goods/ other operating costs 2012 2011

Acatos Consulting AS 750 750

Altor Equity Partners AS 968 169

PIR AS 200 -

Racso Ltd - 1 750

Purchase from subsidiary 3 550 9 028

Total 5 468 11 697

Refer to note 30 in the Group accounts.

AGR Group ASA was not involved in any significant disputes or legal action in 2012 or 2011. As a result, provision for possible claims has not been made.

AGR Group ASA sold its shares in AGR Field Operations Holdings AS to Oceaneering AS on 20 December 2011. This agreement includes regular sales guarantees for such transaction. The guarantee is not secured by pledge. It is the company’s assessment that it is most likely that the guarantee not will be settled, the guarantee is therefore not recognised.

Refer to note 35 in the Group accounts.

Creditors:

AED - - 0% 56 92 1%

AUD - - 0% 4 27 0%

GBP - - 0% - - 0%

NOK 1 701 1 701 94% 8 233 8 233 97%

USD 21 116 6% 19 113 1%

Total 1 817 100% 8 465 100%


NOTE 22 Share investment program

Share investment programIn 2011 AGR introduced co-investment program in AGR Petroleum Services. In May 2011 AGR Group ASA sold 42 939 A-shares in its subsidiary PetCo Invest AS to key employees and board members in AGR Group ASA and AGR Petroleum Services Holdings for NOK 102 per share. PetCo Invest AS owns 90 954 shares in AGR Petroleum Services Holdings AS, corresponding to 2.1%. AGR Group ASA is the owner of the remaining 97.9%. In April 2012 Petco Invest AS increased its ownership in AGR Petroleum Services Holdings with 41 532 shares and owns 132 480 shares, corresponding to 3.1% per December 2012. AGR Group ASA is the owner of the remaining 96.9 %.

In 2010 AGR introduced co-investment programs in AGR Drilling Services and AGR Field Operations. In September 2010 AGR Group ASA sold 73 453 A-shares in its subsidiary FieldCo Invest AS to key employees and board members in AGR Group and AGR Field Operations for NOK 102 per share. FieldCo Invest AS owns 166 812 shares in AGR Field Operations Holdings AS, corresponding to 5.5%. AGR Group ASA is the owner of the remaining 94.5%. Further, in September 2010 AGR Group ASA sold 69 000 A-shares in its subsidiary DrillCo Invest AS to key employees and board members in AGR Group and AGR Drilling Services for NOK 102 per share. DrillCo Invest AS owns 266 683 shares in AGR Drilling Services Holdings AS corresponding to 6.9%. AGR Group ASA is the owner of the remaining 93.1%.

AGR Group ASA’s shareholding in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS following the transaction was one controlling B-share respectively. DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS have been incorporated for the purpose of investing in AGR Drilling Services Holdings AS, AGR Field Operation Holdings AS and AGR Petroleum Ser-vices Holdings AS respectively.

The price per share in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS was determined based on the estimated fair value of AGR Drilling Services Holdings AS, AGR Field Operations Holdings AS and AGR Petroleum Services Holdings AS, using over-the-cycle EV/EBITDA trading multiples in accordance with EVCA guidelines. Accordingly, the transactions have not affected the profit and loss accounts of AGR. In order to increase the investments made by DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS, AGR Group ASA has provided loans in the form of seller’s credits with an annual interest rate of 8%. AGR Group ASA has an option to increase its shareholding in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS by cash payment or set-off against any outstanding amount under the loan agreements.

The co-investment programs within AGR Drilling Services, AGR Field Operations and AGR Petroleum Services are gov-erned by the provisions in three separate shareholders agreements. The shareholders agreements are entered into by and between the holding companies, the investment companies and the participants in the program. Among other things the shareholder agreement will provide for drag-along and tag-along provisions for the event that AGR Group ASA should sell its shares in the holding companies. The participants cannot sell or transfer the shares in DrillCo Invest AS, FieldCo Invest AS and PetCo Invest AS without the consent of AGR. If a participant in the program gives or is given notice of termination of employment before the second anniversary of the program, AGR has an option to buy the shares at fair value.

In December 2011 AGR Group ASA and FieldCo Invest AS sold its shares in AGR Field Operations Holdings AS.

In September 2012 there was a restructuring of the Group, and DrillCo Invest AS shares in AGR Drilling Services Holdings AS was exchanged for shares in AGR EDS and T&T Holdings AS.

~~ ~ ~IIIIII~~~~~~ "''~ _/ ERNST&YOUNG

To the Annual Shareholders' Meeting of

AGR Group ASA

AUDITOR'S REPORT

Report on the financial statements

State Authorised Public AccountantsErnst &Young AS

Thormøhfens gate 53 D; NO-5008 BergenPostboks 5163 Bedriftssev#er, NO-5892 Bergen

Business Register: NO 976 3F39 387 MVATel.: +47 55 21 30 00Fax'. +47 55 21 30 01www. ey. no

Member of the iVorwegian institute of PublicFlccountants

We have audited the accompanying financial statements of AGR Group ASA, comprising the financial

statements for the Parent Company and the Group. The financial statements of the Parent Company

comprise the balance sheet as at 31 December 2012, the statements of income and cash flows for the

year then ended and a summary of significant accounting policies and other explanatory information.

The financial statements of the Group comprise the consolidated statement of financial position as at

31 December 2012, the statements of income, comprehensive income, cash flows and changes in

equity for the year then ended as well as a summary of significant accounting policies and other

explanatory information.

The Board of Directors' and Chief Executive Officer's responsibility for the financial statements

The Board of Directors and Chief Executive Officer are responsible for the preparation and fair

presentation of these financial statements in accordance with the Norwegian Accounting Act and

accounting standards and practices generally accepted in Norway for the financial statements of the

Parent Company and the International Financial Reporting Standards as adopted by the EU for the

financial statements of the Group, and for such internal control as the Board of Directors and Chief

Executive Officer determine is necessary to enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with laws, regulations, and auditing standards and practices

generally accepted in Norway, including International Standards on Auditing. Those standards require

that we comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor's judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the entity's

preparation and fair presentation of the financial statements in order to design audit procedures that

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.

A me;rciY~er fira°~. 01 fi=rust & Yo~:nn (: Ic~bal ~irn~~'e~d

=~ ERNST &YOUNG 2

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinion on the financial statements for the Parent Company and the Group.

Opinion on the financial statements of the Parent Company

In our opinion, the financial statements of AGR Group ASA have been prepared in accordance with

laws and regulations and present fairly, in all material respects, the financial position of the Company

as at 31 December 2012 and its financial performance and cash flows for the year then ended in

accordance with the Norwegian Accounting Act and accounting standards and practices generally

accepted in Norway.

Opinion on the financial statements of the Group

In our opinion, the financial statements of the Group have been prepared in accordance with laws and

regulations and present fairly, in all material respects, the financial position of the Group as at 31

December 2012 and its financial performance and cash flows for the year then ended in accordance

with the International Financial Reporting Standards as adopted by the EU.

Report on other legal and regulatory requirements

Opinion on the Board of Directors' report and the statement on corporate governance

Based on our audit of the financial statements as described above, it is our opinion that the information

presented in the Directors' report and the statement on corporate governance concerning the financial

statements, the going concern assumption and the proposal for the allocation of the result is consistent

with the financial statements and complies with the law and regulations.

Opinion on registration and documentation

Based on our audit of the financial statements as described above, and control procedures we have

considered necessary in accordance with the International Standard on Assurance Engagements

(ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial

Information», it is our opinion that the Board of Directors and Chief Executive Officer have fulfilled their

duty to ensure that the Company's accounting information is properly recorded and documented as

required by law and generally accepted bookkeeping practice in Norway.

Eirik MoeState Authorised Public Accountant (Norway)


Responsibility Statement

We confirm, to the best of our knowledge, that the financial statements for the period 1 January to 31 December 2012 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and AGR taken as a whole. We also confirm that the management report includes a true and fair review of the development and performance of the business and the position of the entity and AGR, together with a description of the principal risks and uncertainties facing the entity and AGR.

Oslo, 27 April 2013

Reynir Kjær IndahlVice Chairman

Tove MagnussenBoard member

Celeste Annette MackieBoard member

Eivind ReitenChairman

Hugo Lund MaurstadBoard member


Thomas NilssonBoard member

Åge LandroCEO


www.agr.com

Documents

Annual Report - AGR reports/AGR Annual Report 2012... · 2013. 4. 17. · 05 Director’s Report 22 Corporate Governance Report 25 Board’s Statement of Salaries ... 32 Consolidated