AnnuAl RepoRt - · PDF filethe consolidated financial statements and ... Welltec® AnnuAl RepoRt 2011 8 ConsolIDAteD KeY ... and amortization. depreciation for these purposes includes

Welltec® AnnuAl RepoRt 2011 1

AnnuAl RepoRt

Welltec International ApS

Central Business Registration No: 30 69 50 03


focused on estAblishing A succesful tRend


Contents

company details 4

statement by Management on the Annual Report 5

independent Auditors’ Report 6

group chart 7

consolidated Key figures for the group 8

Management commentary 9

statement of comprehensive income 2011 28

statement of financial position at 31st december 2011 29

statement of changes in equity at 31st december 2011 31

statement of cash flows

for the period 1st January - 31st december 2011 32

notes 33


CoMpAnY DetAIls

Company Welltec international Aps

gydevang 25

3450 Allerød

denmark

phone: 48 14 35 14

fax: 48 14 35 18

internet: www.welltec.com

e-mail: [email protected]

central business Registration no: 30 69 50 03

Registered in: Allerød

Accounting year: 1/1 - 31/12 2011

Board of Directors søren Jørgensen

Jørgen hallundbæk

han sikkens

scott c. collins

Executive Board Jørgen hallundbæk

Company auditors deloitte statsautoriseret Revisionspartnerselskab

the Annual general Meeting adopted the annual report on March 27, 2012.

Chairman of the General Meeting


stAteMent BY MAnAGeMent on tHe AnnuAl RepoRt

We have today considered and approved the annual report of

Welltec international Aps for the financial year January 1, 2011

to december 31, 2011.

the consolidated financial statements and parent financial

statements are prepared in accordance with international

financial Reporting standards as adopted by the eu and addi-

tional danish disclosure requirements for annual reports.

in our opinion, the consolidated financial statements and the

parent financial statements give a true and fair view of the

group’s and the parent’s financial position at december 31,

2011 as well as of their financial performance and their cash

flows for the financial year January 1, 2011–december 31,

2011.

We also believe that the management commentary contains a

fair review of the development of the group’s and the parent’s

activities and financial position, together with a description of

the principal risks and uncertainties that the group and the par-

ent face.

We recommend the annual report for adoption at the Annual

general Meeting.

Allerød, March 2, 2012

Executive Board:

Jørgen hallundbæk

chief executive officer

Board of Directors:

søren Jørgensen scott c. collins

chairman

Jørgen hallundbæk Johannes K. J. sikkens


copenhagen, March 2, 2012

Deloitte

statsautoriseret Revisionspartnerselskab

Anders dons Martin faarborg state Authorised state Authorised public Accountant public Accountant

InDepenDent AuDItoRs’ RepoRt

To the shareholders of Welltec International ApS

Report on the consolidated financial statements and parent

financial statements

We have audited the consolidated financial statements and parent

financial statements of Welltec international Aps for the financial year

January 1 - december 31, 2011, which comprise the statement of

comprehensive income, statement of financial position, statement of

changes in equity, cash flow statement and notes, including the ac-

counting policies, for the group as well as the parent. the consolidated

financial statements and parent financial statements have been pre-

pared in accordance with international financial Reporting standards as

adopted by the eu and disclosure requirements of the danish financial

statements Act.

Management’s responsibility for the consolidated financial

statements and parent financial statements

Management is responsible for the preparation of consolidated finan-

cial statements and parent financial statements that give a true and fair

view in accordance with international financial Reporting standards as


statements Act and for such internal control as Management deter-

mines is necessary to enable the preparation of consolidated financial

statements and parent 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 the consolidated financial

statements and parent financial statements based on our audit. We

conducted our audit in accordance with international standards on

Auditing and additional requirements under danish audit regulation.

this requires that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether the

consolidated financial statements and parent financial statements are

free from material misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the consolidated financial

statements and parent financial statements. the procedures selected

depend on the auditor’s judgement, including the assessment of the

risks of material misstatements of the consolidated financial state-

ments and parent financial statements, whether due to fraud or error.

in making those risk assessments, the auditor considers internal control

relevant to the entity’s preparation of consolidated financial statements

and parent financial statements that give a true and fair view 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 the overall

presentation of the consolidated financial statements and parent finan-

cial statements.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

our audit has not resulted in any qualification.

Opinion

in our opinion, the consolidated financial statements and parent finan-

cial statements give a true and fair view of the group’s and the parent’s

financial position at december 31, 2011, and of the results of their op-

erations and cash flows for the financial year January 1 - december 31,

2011 in accordance with international financial Reporting standards as


statements Act.

Statement on the management commentary

pursuant to the danish financial statements Act, we have read the

management commentary. We have not performed any further proce-

dures in addition to the audit of the consolidated financial statements

and parent financial statements.

on this basis, it is our opinion that the information provided in the

management commentary is consistent with the consolidated financial

statements and parent financial statements.


GRoup CHARt

Welltec indiabranch

Welltec As Abu dhabibranch

Welltec Azerbaijanbranch

Welltec norwaybranch

Rs 2001 Aps(100% ownership)

Welltec Africa Aps(100% ownership)

Welltec oilfield services (Malaysia) sdn. bhd.(49% ownership)

Welltec canada inc.(100% ownership)

Welltec (uK) ltd.(100% ownership)

Welltec oilfield services pty. ltd.

(100% ownership)

Weltec latinamerica Aps(100% ownership)

pt. Welltec oilfield services indonesia

(95% ownership)

Welltec inc. (us)(100% ownership)

Welltec oilfield services (Rus) llc

(100% ownership)

Welltec oilfield services (Azerbaijan) limited(100% ownership)

Welltec oilfield services (in-dia) private limited(100% ownership)

Welltec oilfield services (saudi Arabia)

(75% ownership)

Welltec Angola lda.(49% ownership)

Welltec oilfield services (nigeria) ltd.

(30% ownership)

Welltec do brasil ltda(100% ownership)

Welltec Venezuela cA(99.9% ownership)

Welltec oilfield services (Mexico) s.A.

(100% ownership)

Welltec latin America Aps sucursal

columbiana branch

Welltec Africa Aps g.e. branch

Welltecinternational Aps

Welltec holding Aps(100% ownership)

Welltec A/s(100% ownership)

high pressure innovation As, norway

(100% ownership)

hpi technologi As, norway

(100% ownership)

Welltec oilfield services(south Africa) (proprietary)

ltd.(100% ownership)


ConsolIDAteD KeY FIGuRes FoR tHe GRoup

2011 2010 2009 2008 2007

STATEMEnT Of COMpREhEnSIvE InCOME (M DKK):

Revenue 1,220 927 723 663 253

earnings before interest, tax, depreciation and amortization (ebitdA)* 593 490 419 368 100

operating profit (ebit) before special items 303 272 210 198 34

net financials -129 -91 -117 -120 -50

profit before tax 175 168 85 64 -15

net profit for the year 89 102 41 48 -41

CASh flOWS (M DKK):

cash flows from operating activities 450 417 386 326 51

cash flows from investment activities -323 -261 -194 -240 -1,135

cash flows from financing activities -146 -164 -168 -72 1,106

total cash flows -19 -8 24 14 22

BAlAnCE (M DKK):

trade receivables 288 202 202 137 154

equity 1,808 1,685 1,522 1,438 1,399

total assets 3,427 3,237 3,126 3,059 3,011

investments in intangible assets 150 146 110 105 39

investments in tangible assets 189 125 89 95 83

investments in financial assets 0 0 0 40 1,014

KEy RATIOS In %:

ebitdA-margin (%) 48.6% 53.0% 57.8% 55.2% 39.5%

ebit-margin before special items(%) 24.9% 29.4% 29.0% 29.9% 13.6%

Roic excl. goodwill 29.4% 24.9% 21.2% 18.9% 4.4%

Return on equity 5.1% 6.1% 2.7% 3.4% -2.9%

* ebitdA is defined as profits/loss before income taxes, financial expenses, financial income, special items and total depreciation

and amortization. depreciation for these purposes includes depreciation attributable to development and manufacturing which is

capitalized because it is considered a part of the costs that are directly attributable to the manufacturing of our products. further-

more ebitdA has been adjusted for issued warrants (non-cash).

the key figures prepared in accordance with international financial Reporting standards (ifRs) as adopted by the eu and according

to the danish society of financial Analysts’ “Recommendations & financial Ratios 2010”.


MAnAGeMent CoMMentARY

RESulTS AnD OuTlOOK

Development in activities and finances

Welltec® achieved another successful year in 2011, secur-

ing record revenues of dKK 1,220 million in the period ended

december 31, 2011. this represents a growth of 31.7% year

on year in comparison to 2010 and is in line with the outlook

presented in the 2010 Annual Report.

the growth can be attributed to three main areas; an increase

of activity within our existing client base, commercialization of

new products and expansion within some geographical areas

brought about by an increase in tool fleet and client mix.

gross profit margin for the Year ending december 31, 2011

was 57.7% with the costs of service provision increasing rela-

tively to revenue as a result of required investments made in

the operational organization to perpetuate the growth plan.

Adjusted for issuance of non-cash warrants of dKK 33.3 mil-

lion, the administrative costs increased proportional to revenue.

profit from operations before special items (ebit) was dKK

303 million, a 11.5% increase on 2010. the ebit margin was

24.9% against 29.4% in 2010, reflecting the lower gross

profit margin compared to 2010.

profit for the year was dKK 89 million, a 12.2% decrease on

2010, reflecting the issuance of warrants (non-cash) to employ-

ees and increased taxes primarily related to tax provisions.

Welltec® once again recorded a positive cash flow from op-

erations, which in addition to investments in equipment and

development activities were used for installments and interest

payments.

Outlook

the outlook for the future remains positive. As the oil and gas

industry is risk averse due to the substantial economic costs

and business implications of failure or mishaps, many new

technologies fail to gain customer acceptance and therefore

do not succeed commercially. conversely, once a technology is

proven to be reliable, it secures a position of acceptance and

becomes a planned part of the work program. the group’s per-

formance is evidence of broad client acceptance by multiple oil

and gas companies around the world in many different operat-

ing environments.

Welltec® has created a unique position in the robotic well in-

tervention market through technology leadership and has the

highest market share of available robot tractors. growth will

continue in our tractor and intervention capabilities as well as

with new innovations. this is supported in 2012 by the intro-

duction of new products and services such as the Well cutter

tool.

furthermore Welltec® is in the process of increasing the organi-

zational capacity in order to support the future growth. this

process will continue into 2012.

Management expects growth for the group both in revenue as

well as ebitdA in 2012. Revenue is expected to be in the range

of dKK 1,350m to 1,500m and ebitdA margin is expected to

be at or around historic levels.

Events after the balance sheet date

february 1, 2012 we announced the completion of an us$

325 million aggregate principal amount 8 % senior secured

notes due 2019 offering. the 144A/Regs offering drew de-

mand from institutional investors in both europe and the us.

pRofit fRoM opeRAtions befoRe speciAl iteMs (ebit) WAs

dKK 303 Million, A 11.5% incReAse on 2010

MAnAgeMent coMMentARY /


the notes have been assigned a b1 rating by Moody’s (stable

outlook) and a bb- rating by standard & poor’s (stable outlook)

with equivalent corporate ratings. the notes have been listed

on the official list and admitted to trading on the euro Mtf

Market of the luxembourg stock exchange.

the net proceeds of the offering of the notes will be used to

refinance existing credit facilities, pay a special shareholder dis-

tribution and for general corporate purposes. part of the share-

holder distribution will be done through payout of extraordi-

nary divided from Welltec international Aps.

to complete the refinancing of existing facilities, the follow-

ing extraordinary dividends have been distributed in february,

2012. from Welltec Africa Aps dKK 31.4 million was distrib-

uted to Welltec A/s. from Welltec A/s dKK 728.6 million was

distributed to Welltec holding Aps. from Welltec holding Aps

dKK 787.3 million was distributed to Welltec international Aps.

in february 2012 Welltec® announced that the company,

through its wholly owned subsidiary Welltec canada inc. grew

its operations with the acquisition of endeavor e-line services,

the wireline portion of essential energy services, ltd. in calgary,

Alberta. the total cost of the business combination was agreed

to dKK 41.4 million. the transaction is financed through exist-

ing cash resources.

As the final acquisition date is february 2, 2012, it is not pos-

sible to provide details about the pre-acquistion balance sheet

and the total transaction costs.

no further significant events regarding the group’s activities

have occurred since december 31, 2011.

pROfIlE Of WEllTEC®

Who we are

As a leading provider of well intervention services to the oil

and gas industry, our robotic technology enables operators to

conduct interventions safer, faster and with higher accuracy,

thereby enabling the oil and gas industry to optimize the pro-

ductivity from wells draining a reservoir. Welltec® also provides

well completion products that help build flexible wells which

can be intervened through-out the life of the well, allowing

for a continuous adaptation of the well to the conditions in

the reservoir. by providing our services and solutions, we help

secure the most optimal use of the oil and gas resources , and

thereby enable a better supply of energy for people and allow

for improved production of reserves that otherwise couldn’t be

produced optimally.

historically, our founder began drawing up the plans for the

first Well tractor in 1987 and we were formally established

in 1989, changing our name to Welltec® in 1994. We initially

operated primarily in the north sea oil and gas market but have

since grown through new service development and geographi-

cal expansion to provide a wide range of services to our cus-

tomers all over the world.

today Welltec® is headquartered in Allerød, denmark, and

operates in all major hydrocarbon producing areas of the

world, employing more than 790 employees with offices in 22

countries.



What we do

We provide our services and solutions in any environment

where hydrocarbons are produced – onshore or offshore,

in oil or gas wells, in mature oilfields and in fields under

development.

Most of our activities are related to the production phase of oil

and gas wells, but as we grow our business, our services and

solutions portfolio addresses the entire life cycle of a well, from

drilling and evaluation to completion, production and plug and

abandonment.

our well intervention services, from which we currently de-

rive most of our revenue, provides our customers with well

management solutions through a wide range of services, from

conveyance of well logging and surveillance measurements to

complex clean-out and maintenance operations.

in addition, we have in 2011 started the full-scale commerciali-

zation of our well completion products and solutions aimed at

enabling wells to come on stream faster with increased safety,

reduced cost and higher productivity.

We develop, test, manufacture and use proprietary technology

and equipment to provide our services and solutions. our pro-

prietary high-technology equipment is developed, tested and

manufactured in-house for our exclusive use.

our tractor based, light footprint technology (Well tractor®) has

represented a breakthrough in deploying and operating oil and

gas well intervention tools. compared to coiled tubing or simi-

lar heavy-duty equipment, our technology has several benefits,

including an ability to operate at high pressure and tempera-

tures, in large depths, over long distances and at high devia-

tions. our technology is also deployable in a faster and more

flexible manner compared to our competitors (including being

transportable by helicopter or truck) and provides for riserless

well intervention and fast rig up / rig down time.

At Welltec®, we believe that bringing technology to a higher

level will yield benefits for the industry. therefore we con-

stantly work at pushing the boundaries for what we can do to

sweep reservoirs better though using improved technology. our

development and engineering (d&e) department continues to

develop new technology that allows us to both enhance our

existing solutions and provide new ones. We invest heavily in

the development of new technology, and during 2011 we in-

vested more than 11.1% of our total revenues in d&e.

Where we work

We can work in virtually any environments where oil or gas is

being extracted regardless of whether it is a conventional or

unconventional reserve that is being drained and regardless of

whether it is onshore or offshore. Also in more complicated or

hostile environments, such as deepwater, subsea, arctic, or re-

mote areas, or in wells sweeping challenging reserves, such as

heavy oil, sAgd, tight oil, geothermal and unconventional gas,

our technology is delivering tangible benefits for the operator.

our operations are focused in three geographic marketing

areas: (1) europe & Russia, (2) Americas and (3) Middle east,

Africa (MeA) & Asia pacific (ApAc). our customers include key

national and a wide range of the world’s most renown major

stRAtegicAllY, We focus on dRiVing the coMpAnY’s deVelopMent

thRough focus on thRee stRAtegic theMes foR the coMing YeARs: gRoWth, stRength And position.

GRowtH


Welltec® plAns to stRengthen ouR business And opeRAtionAl Model to pRoVide betteR seRVices

foR ouR custoMeRs in A WAY Which endoRses long teRM RelAtionships.

stRenGtH


and independent oil companies (such as statoil, saudi Aramco,

petrobras, petronas, sonangol, peMeX, conocophillips, total,

exxonMobil, shell, bp, chevron and canadian natural Resourc-

es limited (cnRl)), from which we derive the majority of our

revenue, as well as other oilfield services providers.

WEllTEC’S STRATEGy

strategically we are focused on driving the company’s devel-

opment through focus on three strategic themes; growth,

strength and position.

We believe that challenging conventional solutions will contin-

ue to allow us to deliver disruptive technology that adds value

for our clients. coupled with improved service delivery and a

responsiveness to our client’s needs, we will deliver growth in

several key regions:

• north America: We aim to leverage our existing operations

in the united states and canada, where we believe our cur-

rent footprint in the conveyance market for unconventional

oil and gas plays will serve as a solid basis for the diversifi-

cation of our offerings to include high-technology services

such as conveyance, milling and cleaning that today are

served primarily by conventional technologies.

• brazil: Recent offshore discoveries and our existing business

with petrobras constitute a potential for significant growth

in activities.

• Russia/cis: in the Russian market, we have been providing

mostly wireline conveyance services to many of our custom-

ers but we believe that there is potential for selling a broad-

er range of services, including more complex and high-value

services and solutions to our large gas producing customers.

• Middle east: We believe that there are also opportunities in

the Middle east, where the national oil companies represent

a large growth potential, in particular in saudi Arabia, uAe,

Qatar and Kuwait.

• southeast Asia: the large offshore activities in Malaysia, bru-

nei, Vietnam and indonesia represent growth opportunities,

where our current track record can help us get even further

work.

Build a stronger and more resilient company

We plan to continue to strengthen our business and opera-

tional models to provide better services in a way that endorses

long term relationships with our customers. Working more

closely with our customers over longer periods of time ensures

not only a more stable revenue stream but also allows Welltec®

to develop faster and more accurately solutions to meet our

customers’ challenges; thereby perpetuating the value cycle.

We have begun several projects which support this initiative,

including:

• expansion of our service offerings and product ranges to

broaden our portfolio and reduce dependency upon a single

offering.

• establishing more direct, contractual ties with our customers

as well as longer duration agreements which secures more

planned, dedicated work.

• streamlining our organizational structure to reflect our value

chain, and thereby matching a global, company-wide inte-

gration of services where roles, responsibilities and interac-

tions between different parts of the organization are being

clarified to improve performance;

• Recruiting and keeping new engineering and management

talent; and



• introducing scalable structures and procedures across our

organization that support our growth, primarily through lev-

eraging our already established it-driven infrastructure and

ensuring that knowledge is built into the structure of the

organization rather than depending on specific individuals.

Maximize the value we provide to our customers

Welltec® is focused on providing services where we can be

unique and avoiding those markets where services are effec-

tively commoditized. We intend to attract and satisfy more ref-

erence customers like statoil through a focus on global account

management, by maintaining our focus on direct customer re-

lationships and by accelerating the rate of technology replace-

ment to our offerings across all geographies.

We pursue strategic partnerships with other service providers,

such as selected wireline providers, vessel providers and tech-

nology companies, where our combined offerings can be pre-

sented to customers as a complete solution. Welltec® can posi-

tion ourselves as the lead contractor when required, thereby

gaining direct customer access in both tender and transactional

engagements.

furthermore we actively engage in developing new solution

concepts that addresses our customer’s largest challenges, such

as riserless well intervention services for subsea wells, plug and

abandonment of wells and open-hole intervention services in

horizontals that require integrated, specialized solutions and

equipment. in due time, these solutions will provide significant

value to our customers as they will enable them to redefine the

manner in which they operate today. We believe the value crea-

tion this delivers for our customers will be rewarded through

an increase in our own business. overall, Welltec’s goal is to

ensure that we maintain our status quo as a top provider of our

current offerings while simultaneously providing unique, new

solutions in other segments. our pipeline of new service and

product initiatives are aimed at developing a diversified and

growing business in terms of revenues and margins in 2012

and beyond.

WEllTEC®’S COMpETITIvE STREnGThS

position ourselves within important industry growth

areas

over the last decade, operational and capital expenditure by

oil and gas companies has increased. We expect this trend to

continue given the ongoing efforts to improve production from

existing fields and search for new reserves. forecast spend for

the major oil and gas companies is up and we believe this trend

will favor companies such as Welltec® that have advanced and

differentiated technological offerings covering all phases of the

well lifecycle. Moreover, we expect demand for well interven-

tion services to increase relatively unaffected by oil price fluc-

tuations due to capex budgets versus opex budgets, which are

historically less dependent on oil prices.

from a global perspective, oil fields are maturing and new dis-

coveries are not keeping pace with declines or demand consid-

eration. this combination of increasingly mature fields, reduced

quantity and size of new discoveries and increasing global

demand represents a huge challenge for all. Welltec’s expecta-

tions are that our value proposition of developing methods for

increased reservoir optimization will resonate with our custom-

er’s around the world as they seek to increase the life span of

existing fields.

new discoveries are increasingly being made in areas present-

ing significant operational complexity for exploration and

development. Almost half of all newly discovered oil reserves

since 2000 have been made in offshore deepwater or ultra

deepwater. An increasing portion of new supply is also coming

from unconventional reserves (such as shale gas or shale oil)

adding further complexity in the form of more horizontal well

designs. the shift in discoveries and resource types have also

increased the technical risk of projects and the requirements of

the equipment and services necessary to handle these extreme

operating conditions, which have also driven the need to use

ouR goAl is to ensuRe thAt We MAintAin ouR stAtus Quo As A top pRoVideR of ouR

cuRRent offeRings While siMultAneouslY deVeloping otheR uniQue offeRings.

posItIon



advanced technologies in well intervention. it is our experience

that oil and gas companies are becoming more likely to work

with suppliers of high-quality services as they deliver a higher

long-term value. With the increased complexity and costs of

new discoveries, we believe that well interventions have be-

come an attractive economic proposition compared to explor-

ing for new reserves. Welltec’s technology, which has a proven

record of successful operations in these environments, will

continue to be in demand.

Superior technology offering

the increased focus on enhancing oil and gas recovery rates

and improving well profitability has led to an increasing indus-

try acceptance of the robotic technology we offer.

Well intervention services increases well profitability through

increased recovery rates and cash flow from production. given

the challenges of sustaining oil and gas production to meet de-

mand we expect the well intervention market will grow signifi-

cant in the coming years. due to its superior performance, we

expect robotic technology to grow even faster than the market

for conventional intervention technologies, and gradually even

replacing older methods. Robotic intervention technology is

superior to these conventional methods because:

• it can be safer given its smaller footprint and lower num-

ber of personnel involved, leading to significant health and

safety advantages for our customers;

• it is less intrusive because it requires a smaller set up space

and a more limited amount of equipment to be inserted into

the well, typically resulting in less damage to the well;

• it can be an order of magnitude faster than conventional

methods due to deployment and rig up times; and

• it is more cost efficient, both in terms of lower direct in-

tervention costs and lower future costs for subsequent

interventions

Sustainable, protected market leadership

We were pioneers in the well intervention services market with

our robotic technology and continue to have a leadership posi-

tion. We believe we have one of the largest inventories of op-

erational tractors globally, and in 2011 we believe that we per-

formed more than half of all well interventions using tractors.

our technological leadership has been recognized by both cus-

tomers and industry associations, and we have been awarded

several industry leading recognitions, such as the 2010 spot-

light technology Award. We have also accumulated many

“firsts” for well-intervention tools within our industry, including

what we believe are records with our Well tractor for deepest

well intervention and highest deviation well intervention, as

well as deepest water depth intervention using riserless light

well intervention.

to maintain our leading position and further grow our business

we continue to focus on technological innovation. We often

work in conjunction with our customers on developing new

applications and tools in order to solve specific needs of our

customers. this enables us to develop a deep understanding

of our customers’ business requirements and the challenges

they face while strengthening our relationships with them. We

continue to devote considerable time and resources to develop-

ment and engineering, and are working on several projects to

deliver the next generation of tools and solutions.



hand-in-hand with our dedicated efforts on technology innova-

tions, we vigorously protect our technology and intellectual

property. We have implemented a rigorous intellectual property

rights strategy, including the registration of over 110 patent

families with more than 2.000 individual patents and patent

applications at various stages of registration or application.

We have measures in place to avoid unintended dissemina-

tion of our trade secrets and know-how. this includes in-house

manufacturing of key components, operating our tractors and

tools by our own personnel and restricting access to key manu-

facturing data such as blue-prints.

We believe that our leading position will be maintained and

our business will grow as a consequence of our commitment

to quality in execution and customer service. in the market for

well intervention services, technical reliability and overall service

quality are significant factors (along with price) in our custom-

ers’ purchasing decisions. through continuous evolution and

improvement of our work processes, we believe we offer supe-

rior service quality.

RISKS RElATED TO OuR BuSInESS

Business and industry related risks

our business is affected by the level of expenditures of compa-

nies engaged in the production, exploration and development

of oil and gas.

traditionally, the oil and gas industry is highly cyclical and ex-

penditures can be cancelled or reduced on short notice. While

demand for our services is primarily dependent on operating

expenditures by the oil and gas industry (primarily optimizing

recovery rates for existing wells), demand for our services also

depends on the capital expenditures of this industry (primarily

drilling new wells). A decrease in operating expenditures by the

oil and gas industry may have adverse effects on our revenue

and profits in the shorter term, while a decrease in the capital

expenditures of this industry may have adverse effects on our

revenue and profits in the longer term.

the total level of expenditures by the oil and gas industry for

production, exploration and development of oil and natural

gas reserves is sensitive to a number of factors, primarily oil

and gas prices and the industry’s view of future oil and gas

prices, which historically have been volatile. long-term oil and

gas prices are affected by numerous factors, including (i) the

demand for energy, which is affected by worldwide popula-

tion growth and general economic and business conditions; (ii)

the ability of the organization of petroleum exporting coun-

tries (opec) to set and maintain production levels; (iii) oil and

gas production by non-opec countries; (iv) the cost of explor-

ing for, producing and delivering oil and gas; (v) political and

economic uncertainty and socio-political unrest; (vi) the level of

worldwide oil exploration and production activity; (vii) tech-

nological advances affecting energy consumption; and (viii)

weather conditions.

if oil and gas prices were to increase significantly, companies

engaged in the production, exploration and development of

onshore and offshore oil and gas are more likely to focus on

exploration and development of new reserves rather than

seeking to increase production and recovery rates through well

intervention. further, if oil and gas prices were to decrease sig-

nificantly, well intervention may not be cost-effective for these

companies, although expenditures on well intervention would

likely be reduced less than capital expenditures. since we cur-

rently derive a majority of our revenues from well intervention

services, a significant increase or decrease of oil and gas prices

may have an adverse effect on our revenue and profits.

Skilled technical personnel

highly-skilled personnel are required to develop, manufacture

and operate Welltec®’s sophisticated equipment and support

our business. Management believes it has put in place an entre-

preneurial, international and flexible organization that is attrac-

tive to future and current employees. to date, the group has

successfully recruited, absorbed, trained and retained excellent

people, and expects to continue doing so.

We belieVe thAt ouR leAding position Will be MAintAined And ouR business Will gRoW As A conseQuence of ouR coMMitMent to QuAlitY in eXecution And custoMeR seRVice.



Intellectual property

the group’s business relies upon the proprietary knowledge

and innovation know-how. We have put in place an extensive

series of legal, human, process, physical and it security meas-

ures and controls to protect our intellectual property. Among

others, these measures include legal protection via patents and

patent applications pending on our sophisticated equipment

and contractual agreements.

Environmental performance

Welltec® considers quality, health, safety and respect for the

environment to be an integral part of our business. We build

quality, health, safety and respect for the environment into our

processes starting at the design phase and track performance.

Keeping high environmental standards is critical to ensure both

future and present contracts. there are no environmental inci-

dents to report. We believe our sophisticated clean technology

is part of the solution that helps our clients meet the world’s

need for energy security while at the same time reducing

greenhouse gas emissions and promoting sustainable economic

growth.

financial risks

Financial exposure

due to the group’s foreign activities and credit facilities in

foreign currencies, its profit/loss, cash flows and equity are

affected by changes in exchange rates and interest rates for a

number of currencies, primarily us dollars.

Foreign exchange fluctuations

the reporting currency of the group is the danish Kroner and

the functional currency of each of the groups’ subsidiaries

is that of the country in which the subsidiary is domiciled. A

significant proportion of the group’s revenues, expenses and

other liabilities are denominated in currencies other than the

danish Kroner, in particular us dollars. fluctuations in the value

of other currencies as compared with the danish Kroner could

result in translation losses or gains. the company has to a

significant extent hedged its net position in us dollars through

certain foreign exchange contracts.

Interest rate risk

since our primary financing is senior secured bonds at a

fixed interest rate, the interest rate risk has been substantially

reduced.

Credit risk

the group’s services are provided to a variety of contractual

counterparties and are therefore subject to the risk of non-

payment for services or non-reimbursement of costs. counter-

party credit risk is believed to be low because all of the group’s

customers are large corporations in the oil industry deemed

creditworthy. therefore, Management assesses that there are

no significant risks involved.

Liquidity risk

our ability to make payments on and to refinance our indebt-

edness, and to fund planned capital expenditures and other

strategic investments will depend on our ability to generate

cash in the future. this, to a certain extent, is subject to gen-

eral economic, financial, competitive, legislative, regulatory

and other factors that are beyond our control. We anticipate

that we will continue to make capital investments to develop

and purchase additional equipment to expand our services,

increase our capacity and replace existing equipment. our



capital investments require cash that we could otherwise ap-

ply to other business needs. however, if we do not incur these

expenditures while our competitors make substantial invest-

ments, our market share may decline and our business may be

adversely affected.

it is the group’s policy that capital raising and distribution of

cash are managed centrally by the group’s finance department

to the extent it is deemed appropriate. the group has the op-

tion of adjusting centrally the cash outflow in investments in in-

tangible assets and property, plant and equipment in denmark.

based on our current level of operations and anticipated cost

management and operating improvements, we believe our

expected cash flow from operations, available cash, proceeds

from bond issuance and other sources of available financing

will be adequate to meet our future liquidity.

uncertainty relating to recognition and measurement

the preparation of financial statements and related disclosures

in conformity with international financial Reporting standards

as adopted by the eu requires the group to make estimates

and assumptions that affect the reported amounts of assets

and liabilities, the disclosure of contingent assets and liabilities

and the reported amounts of revenue and expenses. the ac-

counting policies involved “critical accounting judgments and

key sources of estimation uncertainty” (see note 2), because

they are particularly dependent on estimates and assumptions

made by the group about matters that are inherently uncertain.

A summary of all the group’s significant accounting policies is

included in note 1 to the annual report.

the group bases its estimates on historical experience and on

various other assumptions that are believed to be reasonable

under the circumstances, the results of which form the basis for

making judgments about the carrying values of assets and lia-

bilities that are not readily apparent from other sources. Actual

results may be different from these estimates under different

assumptions or conditions.

unusual circumstances

there were no unusual circumstances in 2011 that affected the

annual report.

CORpORATE SOCIAl RESpOnSIBIlITy

the following statement of corporate social Responsibility

(csR) pursuant to the danish financial statements Act section

99a is part of the Management’s Review in the 2011 Annual

Report.

Corporate Social Responsibility policy

At Welltec®, we believe that we share a responsibility which

not only includes the interests of our stakeholders but also, due

to the nature of the business, extends beyond this in a greater

context.

this responsibility is defined in the various polices which have

been developed and implemented to comply with the objec-

tives of csR. the principles encompassed in the policies have

been developed and continue to be reviewed against and up-

dated by reference to relevant codes of corporate governance

and international standards including the united nations (un)

universal declaration of human Rights, the international labor

organization (ilo) declaration on fundamental principles and

Rights at Work, the guidelines for Multinational enterprises

established by the organization for economic cooperation and

We AnticipAte thAt We Will continue to MAKe cApitAl inVestMents to deVelop And puRchAse AdditionAl eQuipMent to eXpAnd ouR seRVices, incReAse ouR cApAcitY And ReplAce eXisting eQuipMent.



development (oecd), the Rio declaration on environment and

development, the un convention against corruption and ap-

plicable legislation governing the interest of our stakeholders.

the areas currently covered by our csR policies are:

• business ethics

• Anti-corruption

• health, safety and environment

• employment

• customers

the policies are approved by the board of directors; they have

been communicated to all employees and are posted on the

corporate intranet portal accessible to all employees. it is the

responsibility of each and every manager to ensure compliance

with the policies.

the chief executive officer has delegated the responsibility of

monitoring compliance to the following Vice presidents and

chiefs for their respective areas:

• legal

• human Resource

• Qhse (Quality, health, safety, environment)

• commercial

Key indicators and reports are monitored and appropriate au-

dits performed and followed up.

Business Ethics

Policy

Welltec® generally encourages, operates and enforces the fol-

lowing management principle: “At Welltec®, we say what we

do and we do what we say”. this general management princi-

ple facilitates certainty to all our stakeholders that predictability

and reliability are the norm when dealing with a Welltec® repre-

sentative. We consider this predictability and reliability as key

drivers in our approach to business ethics.

Implementation

our code of business ethics is embedded as an integral part of

our overall csR procedures, and is an underlying driver in all we

do.

procedurally, it is an integral part of our top management pro-

cedures on mission, vision and values, as well as the Welltec®

corporate social Responsibility policy – all of which is available

to all employees on the corporate intranet. below the primary

policies are presented

our employees and officers should conduct their business af-

fairs in such a manner that our reputation will not be damaged

if the details of their dealings should become a matter of public

discussion.

our conviction to uphold ethical standards in all our corporate

activities is a common mindset of all our employees. We strive

to do business with customers and suppliers of sound business

character and reputation and we do not knowingly support any

public or private organization, which supports discriminatory

policies or practices.



We expect all our employees to perform their work with hon-

esty, truthfulness and integrity, hereunder to respect and abide

by the guidelines expressed in this policy.

it is our policy to comply with all governmental laws, rules and

regulations applicable to our business.

All employees are responsible for the immediate and accurate

reporting to higher management of work-related information

of importance to this policy.

Key Results in 2011 and Future Plans

Maintaining high business ethical standards is part of the duty

for all employees in the company.

in 2011, there have been no major events caused solemnly by

an employee’s non-compliance with our business ethical code.

going forward in 2012, we will be continuously working on

keeping our high business ethical principles. As we see it busi-

ness of high principle

• generates greater drive and effectiveness because people

know that they can do the right thing decisively and with

confidence

• Attracts high-caliber people more easily, thereby gaining a

basic competitive and thereby profit edge.

• develops better and more profitable relations with cus-

tomers and suppliers, as well as with the general environ-

ment, such as the general society, competitors and other

stakeholders.

Anti-Corruption

Policy

Welltec® maintains a general screening program applicable for

agents, representatives and joint venture partners in territories

where transparency and corruption are imminent issues. this

screening program comprises of a questionnaire combined with

a review process under which a potential agent, representa-

tive and joint venture partner is screened for undue relation-

ships and channels of influence. further during such process,

a search up against applicable european and us lists of special

designated nationals will be done.

further, Welltec® operates a zero-tolerance policy towards cor-

ruptive behavior of employees and representatives. Any indica-

tion implying corruption will immediately trigger an internal

investigation led by the legal department and supplemented

by the hR department.

Implementation

in 2011 the new uK Anti-bribery Act became effective and this

required an examination of existing policies and compliance

with the new legislation in relation with Welltec®’s operations

in the uK.

in addition, Welltec® did in 2011 expand its partner screening

process, by the adaption and application of the methods from

common export control end user processes. to this extent,

Welltec®’s partner screening process now entails screening up

against the current lists of special designated nationals utilized

in export control end user screening.


As a result of this policy one ‘whistle-blowing’ incident was

recorded and duly acted upon. one incident was discovered

during internal control and acted upon.

two screenings took place. no agents were turned down. the

screening process has resulted in transparency with regard to

relationships as well as interests and hence an increased likeli-

hood of mitigating the risk of corruption.

RespeCtWe eXpect All ouR eMploYees to peRfoRM theiR WoRK With honestY, tRuthfulness And

integRitY, heReundeR to Respect And Abide bY the guidelines eXpRessed in this policY.



Welltec® will continue the improvement of the screening pro-

cedures, review processes and further incorporate additional

fcpA (foreign corrupt practices Act) based initiatives. further,

Welltec will continue to monitor initiatives and guidelines is-

sued by oecd and transparency international to identify poli-

cies and procedures that in the future will improve measures

against corruption.

in 2012 Welltec® will further develop and strengthen its efforts

within the consolidated compliance functions, which covers not

only csR related functions, but also trade and export control

compliance.

health, Safety and Environment

Policy

Welltec® generally promotes actions, attitudes and decisions

that facilitate maximum awareness towards potential health

and safety hazards thereby facilitating maximum alertness with

the objective to reduce and minimize the number of incidents.

Welltec® imposes certain duties upon employees and subcon-

tractors which require them to conform to any local statu-

tory or legal safety regulations in the location where we are

operating.

it is the intention of Welltec®, so far as is reasonably practica-

ble, to ensure that:

• the provision, commissioning and maintenance of plant and

systems of work are safe and without risks to health.

• Arrangements for use, handling, storage and transport of

articles and substances for use at work are safe and without

risks to health.

• Adequate information is available with respect to articles

and substances used at work detailing the conditions and

precautions necessary to ensure that when properly used

they will be safe and without risk to health.

• employees are provided with such information, instruction,

training and supervision as is necessary to secure their health

and safety.

• the maintenance of all plant, machinery and equipment

is safe not only to employees, and subcontractors and but

to any person who may be affected with regards to any by

premises or operations under our control.

• the working environment of all employees is safe and with-

out risks to health and adequate provisions are made with

regard to the facilities and arrangements for their welfare at

work.

• the risk of driving, which is assessed to be a potential safety

risk faced by our employees, is minimized.

it shall be the duty of all employees at work:

• to take reasonable steps for the health and safety of them-

selves and of other persons who may be affected by their

acts or omissions at work.

• to co-operate with the organization in regards to any duty

or requirement imposed on the employer or any other per-

son by or under any of the relevant statutory duties.

based on our mission, vision and values, Welltec® aspires to be

the leading global provider of well services to the oil- and gas

industry with focus on protection of the environment and the

surrounding society.



environmental preservation is regarded as being of paramount

importance. We integrate environmental aspects in all decisions

and actions, and we seek to plan and execute all activities in a

manner that lowers resource consumption and possible envi-

ronmental hazards.

Implementation

hse WAll - central board has been created with the most im-

port information in regards to hse.

hse intRoduction - All new hires attend an hse introduction

program where all hse policies, procedures and practices are a

part of the agenda. upon completion of the hse introduction,

employees read and sign an acknowledgement statement en-

suring that they have read and understand all Welltec govern-

ing procedures.

hse tRAining - health and safety training is an integral part of

all Welltec internal courses.

Qhse Meetings - At the bases – worldwide - health and safety

meetings as well as briefings are held monthly where all base

employees shall attend.

MAnAgeMent Meetings - As a result of the general ap-

proach, the weekly corporate management meetings are

opened with a review on any health and safety issues which

have occurred in the preceding week.

hse sYsteMs And pRogRAMs – for monitoring progress we

use incident Reporting system 3 (iRs3), safety card observa-

tion program (scop), health and safety statistics and Annual

internal Audits.

hse coMMittee - aims to influence Welltec business in a way

that best serves and inspires the working individual to achieve

the highest degree of safety and health practices through con-

tinuous improvement

hse officeRs / hse MAnAgeRs - All Welltec bases / locations

have a hse officer or an hse Manager employed. his/hers

main tasks is to lead the hse work at the base; ensuring that

all Welltec policies and procedures plus the local legislation is

implemented and followed

Key Results and Future plans

HSE Statistics

Welltec® is monitoring the hse performance by tracking the

Medical treatments (Mto), lost time incidents (lti), Restricted

Work cases (RWc), Vehicle accidents and fatalities (ftl). Also

the lost time incidents frequency, the total Recordable case

frequency and the Vehicle Accident frequency is also measured

and monitored. it is the hse officer / hse Manager´s responsi-

bility to ensure that the hse statistics are updated monthly. the

statistics are posted on the hse Wall and are also used during

the regional performance meetings.

We can observe from the graphs below that the total of Mto,

lti, RWc has decreased in 2011 even though the amount of

working hours has increased from 1,010,798 to 1,123,393

hours. the Vehicle accidents / collisions have increased however

the amount of kilometers driven has increased dramatically

(from 2,371,756 to 3,067,145). note that none of the vehicle

accidents / collisions has resulted in personal injury.

With more than 5 years of experience, incident Report-

ing has been developed as a comprehensive and extensive



non-conformance and hse performance reporting system, pro-

viding data for regular reviews of hse performance which can

be selected from a population of all listed Welltec® bases.

With Welltec’s business growing fast and with our client re-

quirements increase – playing closer scrutiny to the special

points of interest related to resolution of issues documented.

Welltec® therefore introduced a new and improved hse appli-

cation in november 2011. As the system is still new, and due to

the limited data entry, the iRs3 statistics cannot be a contribut-

ing factor in our performance monitoring at this point.

SCOP statistics

scop stands for Welltec´s safety card observation programme,

a programme aimed at preventing incidents and injuries.

the main objective of the program is to train each member

of the line organization to eliminate incidents and injuries by

skilfully observing people as they work, talking with them to

correct their unsafe acts, and encouraging them to follow safe

work practices.

Welltec® Qhse rolled out the scop program globally in

september 2011 and the results of the program are not yet

concluded. the statistics are used for monitoring trends either

within a local base or even globally.

Audits (internal)

our global Qhse continuously performs audits of selected

bases in order to assess the effectiveness of the continuous im-

provement cycle of the internal Quality and hse Management

system of Welltec. the audit tool is the prime instrument for

measuring the business interface between Welltec hQ and

Welltec bases worldwide and between the Welltec bases and

the oil operators.

the real product of the audit process is to create specific action

points for the Welltec base continuous improvement process.

in 2011, global Qhse audited hR, d&e Mechanical, com-

mercial, and sourcing based at headquarters and 9 bases

worldwide.

Environmental report

in 2011 the Welltec® facilities in denmark were audited by the

Municipality, nature and environment Auditor. the scope of

the audit concentrated in the environmental re-certification.

the audit results showed that great improvements were made

and therefore Welltec® was upgraded to category 1; which is

the highest scale achievable. in order to sustain the category 1,

great efforts were made ensuring that the environmental report

also contained a detailed description of the current environ-

mental state including continuous improvements, future plans

and detailed monitoring of the consumption of chemicals,

waste, electricity, heat and water.

Audit results (3rd party)

Welltec® is been also been audited by 3rd party companies as

well such as “det norske Veritas” (dnV) for ensuring compli-

ance with iso9001:2008, oil operators for assessing Welltec´s

ability to effectively manage the hazards associated with the

services provided to the oil operator as well as Authorities.

Welltec WoRldWide heAlth And sAfetY stAtistics

Figure 1: Worldwide HSE Statistics

Welltec WoRldWide Vehicle stAtistics

Figure 2: Worldwide Vehicle accidents and collision statistics



As Welltec® holds an iso 9001:2008 certificate, surveillance

audits are performed by dnV on a yearly basis as well as re-

certification audits every 3 years.

in 2011; Welltec dK has been audited by dnV, Welltec Angola

has been audited by totAl, Welltec colombia by Ruc, Welltec

brazil by petrobras, Welltec canada by certification of Recong-

nition and Welltec Mexico by peMeX. All audits results showed

increasing improvement.

Safety culture survey

in June 2011, Welltec´s first safety culture survey was born

and launched in denmark, norway, us and canada. the pur-

pose of the audit was to identify trends within the same geog-

raphy (denmark and norway as well as us and canada) and

to get an idea of how the employees perceived safety within

Welltec®.

the results were very positive, for example 70% of the partici-

pants said that the hse incidents/investigations are handled

appropriately in Welltec®, 100% of the participants they have

no problem of stopping an unsafe job/task.

Employment

Policy

the employment policy at Welltec is based on the fundamen-

tal belief that the employee as an individual and as part of a

group constitutes the key asset. hence, and with due consider-

ation to the working field and conditions, measures which go

beyond the norm are practiced to safeguard and maximize the

health and safety aspects of the employees when performing

their duties.

Welltec® recognizes a shared responsibility on behalf of all em-

ployees to exercise the principles of mutual respect and dignity

in all working relationships and consequently enforces a policy

of zero tolerance with regard to harassment or discrimination.

Welltec practices the principle of equal employment opportuni-

ty without regard to race, religion, national origin, gender, age,

physical disability or political affiliation.

Implementation

We apply a principle of duality in recruitment processes and

also use objective profiling tools to assess candidates.

We regularly measure physical and psychological work climate

and we closely follow up on undesired results from the work

place surveys.

for long-term ill employees, we work closely and actively with

local authorities and community centers in order to define indi-

vidual solutions, including definition of flex jobs (permanently

reduced work time), temporarily reduced work time, redefini-

tion of work area, etc.

employees are covered by a collective health insurance as ap-

propriate in country of employment. Where applicable, insur-

ances include psychologist assistance in connection with stress

and accidents/traumas.


Key results for 2011 include in addition to the above men-

tioned areas:

• At least half a dozen long term ill employees have benefit-

ted from the individual solutions approach to their work

assignment.



• More than 100 employees have followed internal training

in the areas of field engineer courses, special equipment

courses, project Management courses, etc.

• compliance reviews in a number of the countries in which

we operate – this has led to improved compliance.

• Results of the 2011 Work place survey in denmark indicate

no big issues, and subsequent sector action plans primarily

address physical workplace improvements.

• Welltec will continue work to improve employee condi-

tions, and expect during 2012 to launch additional initia-

tives such as a new hR it system to support information

capture, update and reporting thus enabling better focusing

of resources and improved decision making and worldwide

processes for global performance appraisal, employee on-

boarding, etc.

Customers

Policy

Welltec perceives customers as business partners and pursues

an open and transparent partnership characterized by frequent

and relevant dialogue with focus on serving their interests.

it is the policy of Welltec to provide services and products that

excel in quality and at all times conform to best practices as ex-

ercised by industry, herein adherence to responsible standards

of performance with particular consideration to protect the

environment and the health and safety of all people involved.

in situations, where a customer or regulatory body wishes to

investigate a non-successful operation or an issue of regulatory

non-compliance a failure investigation is initiated to ensure:

• that investigations requested by the clients are performed.

• that conformed and controlled methods are followed when

handling misruns; covering from job planning, equipment,

procedures, communication to human factors.

• lessons learned are properly communicated throughout the

organization in order to minimize the risk of re-occurrence.

• A failure report is prepared on a timely manner for the cli-

ent, prior to officially closing the investigation.

All non-optimal or non-compliant findings from the internal

Welltec investigation are openly disclosed to the customer or

regulatory body in order to achieve maximum transparency and

optimal lessons learned, enabling hindrance of repetition of

any such issues.

Implementation

to ensure continuously improvement of service quality on jobs

performed a training program “job editor champions” were

launched, to ensure the data quality remains high during the

high growth we are currently facing.


As a result of the constant focus on service quality throughout

the organization and the new training program “job editor

champions” Welltec has had an increase in service quality from

2010 to 2011.

the focus to drive dialogue with customers has led to an

increased focus on meeting with our customers regularly. in

2011, we have registered more than 8300 meetings in our

cRM system, versus the 2890 meetings registered in 2010.

it is the policY of Welltec® to pRoVide seRVices And pRoducts thAt eXcel in QuAlitY



2010 2011 change

(danish Kroner, in millions) in %

Revenue ................................................................................................................................... 926.6 1219.9 31.7

cost of service provided ........................................................................................................... (356.0) (516.4) (45.1)

gross profit ........................................................................................................................... 570.6 703.5 23.3

development and manufacturing costs ..................................................................................... (0.6) (0.7) (22.7)

Administrative and sales costs ................................................................................................... (239.5) (342.7) (43.1)

Amortization of acquired intangibles in a business combination ................................................ (58.4) (56.7) 2.9

special items ............................................................................................................................ (13.5) (0.0) nM

net financial expenses .............................................................................................................. (90.9) (128.5) (41.3)

income taxes ............................................................................................................................ (66.0) (85.6) (56.8)

profit/loss .............................................................................................................................. 101.6 89.2 (12.2)

AnAlySIS Of fInAnCIAl COnDITIOn AnD RESulTS Of OpERATIOnS

Year Ended December 31, 2011 Compared to Year Ended

December 31, 2010

Revenue

Revenue for the Year ended december 31, 2011 was dKK

1,219.9 million, an increase of dKK 293.3 million, or 31.7%,

compared to revenue of dKK 926.6 million for the Year ended

december 31, 2010.

the primary driver of revenue growth was increased activity

in europe and in particular Russia where both onshore and

offshore activity was strong. Revenue growth in norway was

mainly due to added sales of mechanical services. the higher

growth in these countries was partially offset by a revenue

decline in the uK due to lower activity levels at one of our

large customers in this market. in the Americas accelerated

growth was primarily due to strong demand for our wireline

and intervention services in canada, and an increased market

penetration in offshore brazil and onshore colombia (the lat-

ter, a newly established market for us). in Middle east & Africa

(MeA) and Asia pacific (ApAc), we have experienced an overall

increase in revenue, but with uneven levels of activity during

the Year ended december 31, 2011. in particular, our market

presence in uAe, Qatar and Malaysia resulted in significant

revenue growth. in Africa, strong revenue growth was mainly

driven by higher offshore activity in Angola.

Cost of service provided

cost of service provided for the Year ended december 31,

2011 was dKK 516.4 million, an increase of dKK 160.4 million,

or 45.1%, compared to cost of service provided of dKK 356.0

million for the Year ended december 31, 2010. the increase

was primarily a result of a dKK 54.9 million, or 38.6%, increase

in field staff costs, a 47.6 dKK million increase in other direct

operational costs and a dKK 16.8 million increase in deprecia-

tion on tractors and tools and development projects, compared

to the prior period. in addition, travel expenses increased by

dKK 10.3 million compared to the Year ended december 31,

2010. the increase in field staff costs was due to an increase

in average headcount in operations of 62, or 20.5%, equaling

an increase of dKK 24.3 million, an increase in overtime and

performance bonus payments of dKK 13.3 million or 85.9%,

and a dKK 6.6 million general increase in salary compared to

the Year ended december 31, 2010. the increase in other di-

rect operational costs of dKK 47.6 million was primarily due to

a dKK 11.2 million increase in equipment leasing costs, as well

as a dKK 16.2 million increase in shop supplies and a dKK 14.1

million increase on freight, all related to the increased activity

levels over the period.

Development and manufacturing costs

development and manufacturing costs for the Year ended

december 31, 2011 was dKK 0.7 million, an increase of dKK

0.1 million compared to development and manufacturing costs

at dKK 0.6 million for the Year ended december 31, 2010. the

increase was primarily due to an increase in accrued amounts

for obsolete items as a result of the general increase in our

activity levels.



Administrative and sales costs

Administrative and sales costs for the Year ended december

31, 2011 were dKK 342.7 million, an increase of dKK 104.2

million, or 43.1%, compared to administrative and sales cost

of dKK 239.5 million for the Year ended december 31, 2010.

the increase in 2011 was primarily a result of an increase in

staff costs of dKK 70.4 million, or 58.7%, compared to the

prior period. the staff costs include issuance of warrants (non-

cash) to employees at a value of dKK 33.3 million. Adjusted

for issuance of warrants staff cost increased by dKK 37.3 mil-

lion or 31.1%. Average headcount in sales and administration

increased by 61, or 40.1%, in 2011 compared to Year ended

december 31, 2010. other administrative and sales costs in-

creased by dKK 33.8 million, or 38.1%, compared to the prior

period. the increase was primarily due to an increase in lease

costs for premises of dKK 10.4 million, in particular related to

our new facility in norway. travel costs increased by dKK 4.1

million, or 45.8%, primarily due to the overall increased activ-

ity. insurance costs increased by dKK 6.4 million primarily re-

lated to increased activities in Russia. other administrative and

sales costs for the Year ended december 31, 2011 increased by

dKK 12.9 million primarily due to increased activity levels.

Amortization of acquired intangibles in a business combination

there was no change in the amortization of acquired intangi-

bles in a business combination for the Year ended december

31, 2011 compared to the Year ended december 31, 2010.

Special items

special items for the Year ended december 31, 2011 were dKK

0.0 million, a decrease of dKK 13.5 million compared to dKK

13.5 million for the Year ended december 31, 2010. special

items in the year ended december 31, 2010 primarily related to

costs for third party advisors (such as auditors and lawyers) in

connection with a proposed capital markets transaction.

Net financial expenses

net financial expenses for the Year ended december 31, 2011

were dKK 126.8 million, an increase of dKK 35.9 million com-

pared to dKK 90.0 million for the Year ended december 31,

2010. interest expenses were dKK 66.7 million, an increase by

dKK 13.1 million over the prior period. other financial ex-

penses were dKK 21.5 million for the Year ended december

31, 2011, compared to dKK 5.7 million in the same period in

2010. the increase was primarily related to expensed redemp-

tion fees of dKK 13.6 million regarding refinancing of earlier

credit facilities.

Income taxes

income taxes for the Year ended december 31, 2011 were dKK

85.6 million, an increase of dKK 19.6 million, or 29.8%, com-

pared to income taxes of dKK 66.0 million for the Year ended

december 31, 2010. the increase was primarily due to a dKK

18.6 million tax provision.



finAnciAl stAteMent

FINANCIAL STATEMENT / WELLTEC® ANNUAL REPORT 2011 28

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

Note

2011

2010

2009

(Danish kroner, in thousands) Revenue ............................................................... 3 1,219,922 926,612 722,718 Cost of services provided ..................................... 4, 5 -516,403 -356,009 -277,309 Gross profit ........................................................ 703,519 570,603 445,409 Development and manufacturing costs ................ 4, 5 -680 -554 -6,643 Administrative and sales costs ............................4, 5 -342,718 -239,549 -174,146 Amortization of acquired intangibles in a business combination ........................................... 5 -56,714 -58,422 -55,000 Operating profit (EBIT) before special items.. 303,407 272,078 209,620 Special items ........................................................ 6 0 -13,482 -8,193 Operating profit (EBIT) .................................... 303,407 258,596 201,427 Financial income .................................................. 7 24,630 30,138 10,797 Financial expenses ............................................... 8 -153,158 -121,073 -127,496 Profit before tax ................................................. 174,879 167,661 84,728 Income taxes ........................................................ 9 -85,645 -65,997 -43,236 Profit for the year .............................................. 89,234 101,664 41,492 Other comprehensive income for the year Unrealized exchange rate adjustments of foreign subsidiaries and branches ........................ 328 8,657 39,947 Total comprehensive income 89,562 110,321 81,439

Allocation of profit for the year Profit for the year attributable to: Welltec International ApS shareholders’ share of profit ................................................................ 91,360 102,545 42,512 Non controlling interests share of loss for the year ...................................................................... -2,126 -881 -1,020 89,234 101,664 41,492 Total comprehensive income attributable to: Welltec International ApS shareholders’ share of comprehensive income .................................... 91,854 111,202 82,459 Non controlling interests share of comprehensive income ........................................ -2,292 -881 -1,020 89,562 110,321 81,439


CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010

Note

2011

2010

(Danish kroner, in thousands) Non-current assets Intangible assets Goodwill ....................................................................................................................... 1,392,388 1,392,388 Technology ................................................................................................................... 404,006 430,720 Customer relationship ................................................................................................... 167,500 197,500 Brand ............................................................................................................................ 80,000 80,000 Completed development projects .................................................................................. 244,589 161,577 Development projects in progress ................................................................................. 158,986 172,913 Patents and licenses ...................................................................................................... 23,815 14,805 Total intangible assets ................................................................................................ 12 2,471,284 2,449,903 Tangible assets Land and buildings ....................................................................................................... 7,848 8,119 Leasehold improvements .............................................................................................. 11,508 11,047 Plant equipment and fleet ............................................................................................. 262,086 201,760 Other fixtures and fittings, tools and equipment ........................................................... 43,400 30,072 Plant equipment and fleet under construction ............................................................... 122,166 138,573 Total tangible assets .................................................................................................... 13 447,008 389,571 Financial assets Tax receivables ............................................................................................................. 7,481 7,481 Deferred tax assets ........................................................................................................ 19 22,846 2,485 Other receivables .......................................................................................................... 26,624 35,991 Total financial assets ................................................................................................... 56,951 45,957 Total non-current assets ............................................................................................. 2,975,243 2,885,431 Current assets Inventories ................................................................................................................... 15 10,552 0 Receivables Current portion of non-current assets ........................................................................... 12,066 11,900 Trade receivables .......................................................................................................... 16 288,035 202,485 Tax receivables ............................................................................................................. 0 15,470 Other receivables .......................................................................................................... 31,637 14,467 Prepayments .................................................................................................................. 17 32,182 11,525 Total receivables ......................................................................................................... 363,920 255,847 Cash and cash equivalents ......................................................................................... 77,262 95,902 Total current assets..................................................................................................... 451,734 351,749 Total assets .................................................................................................................. 3,426,977 3,237,180


CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010

Note

2011

2010

(Danish kroner, in thousands) Equity Share capital ............................................................................................................... 18 4,694 4,694 Currency translation reserve ....................................................................................... 333 -161 Retained earnings........................................................................................................ 1,807,732 1,682,742 Equity attributable to equity holders of the parent ............................................... 1,812,759 1,687,275 Non-controlling interest .............................................................................................. -5,005 -2,713 Total equity ............................................................................................................... 1,807,754 1,684,562 Non-current liabilities Deferred tax liabilities ................................................................................................ 19 282,125 243,742 Finance lease commitments ........................................................................................ 20 16,249 25,784 Bank debt .................................................................................................................... 20 892,062 896,780 Other non-current liabilities ........................................................................................ 4,846 8,237 Total non-current liabilities ..................................................................................... 1,195,282 1,174,543 Current liabilities Current portion of non-current liabilities .................................................................... 20 100,489 132,584 Other provisions ......................................................................................................... 22 0 10,952 Payables to affiliates ................................................................................................... 1,801 1,516 Trade payables ............................................................................................................ 102,416 76,266 Current tax liabilities .................................................................................................. 13,136 31,533 Other payables ............................................................................................................ 21 206,099 125,224 Total current liabilities ............................................................................................. 423,941 378,075 Total liabilities ........................................................................................................... 1,619,223 1,552,618 Total equity and liabilities ........................................................................................ 3,426,977 3,237,180


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

Share capital

Retained earnings

Currency

translation reserve

Non-

controlling interest

Total

(Danish kroner, in thousands) Equity at December 31, 2009 ................................ 4,515 1,528,195 -8,818 -1,832 1,522,060 Profit/loss for the year ........................................................ 0 102,545 0 -881 101,664 Unrealized exchange rate adj. of foreign subsidiaries ................................................................ 0 0

8,657 0 8,657

Total comprehensive income for the year ...................... 0 102,545 8,657 -881 110,321 Capital increases ................................................................179 50,518 0 0 50,697 Share-based payment to executives ................................ 0 1,484 0 0 1,484 Other transactions ...........................................................179 52,002 0 0 52,181 Equity at December 31, 2010 ................................ 4,694 1,682,742 -161 -2,713 1,684,562 Profit/loss for the year ........................................................ 0 91,360 0 -2,126 89,234 Unrealized exchange rate adj. of foreign subsidiaries ................................................................ 0 0

494 -166 328

Total comprehensive income for the year ...................... 0 91,360 494 -2,292 89,562 Share-based payment to executives ................................ 0 33,630 0 0 33,630 Other transactions ........................................................... 0 33,630 0 0 33,630 Equity at December 31, 2011 ................................ 4,694 1,807,732 333 -5,005 1,807,754


CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

Note

2011

2010

2009

(Danish kroner, in thousands) Operating profit (EBIT) ....................................... 303,407 258,596 201,426 Non-cash adjustments .......................................... 10 279,886 258,272 223,099 Changes in working capital.................................. 11 -68,216 -75,526 23,218 Income taxes paid ................................................ -70,550 -29,623 -17,524 Other receivables, long term ................................ 9,201 4,886 -43,762 Other payables, long term .................................... -3,391 0 0 Cash flows from operating activities ................ 450,337 416,605 386,457 Investments in intangible assets ........................... -149,649 -146,602 -110,195 Investments in tangible assets .............................. -175,692 -118,460 -81,969 Sale of tangible assets .......................................... -471 238 3,608 Financial income received ................................... 2,967 4,016 3,148 Acquisition of companies .................................... 0 0 -8,544 Cash flows from investing activities ................. -322,845 -260,808 -193,952 Financial expenses paid ....................................... -49,556 -57,052 -73,999 Other financial expenses ...................................... -20,349 -1,724 4,005 Derivative financial instruments .......................... -6,747 0 0 Proceeds from non-current debt ........................... 0 0 10,000 Installments on current and non-current debt ...... -69,480 -156,193 -109,040 Capital increase .................................................... 0 50,697 898 Cash flows from financing activities ................ -146,132 -164,272 -168,136 Increase/decrease in cash and cash equivalents .......................................................... -18,640 -8,475 24,369 Cash and cash equivalents at 01.01 ..................... 95,902 104,377 80,006 Cash and cash equivalents at 31.12 .................. 77,262 95,902 104,377

NOTES / WELLTEC® ANNUAL REPORT 2011 33

TABLE OF CONTENTS NOTES

1. Accounting policies .......................................................................................................................................... 34 2. Critical accounting judgments and key sources of estimation uncertainty ....................................................... 42

Statement of comprehensive income 3. Revenue ............................................................................................................................................................ 43 4. Staff costs ......................................................................................................................................................... 44 5. Depreciation, amortization and impairment losses ........................................................................................... 47 6. Special items .................................................................................................................................................... 47 7. Financial income .............................................................................................................................................. 47 8. Financial expenses ............................................................................................................................................ 48 9. Income taxes ..................................................................................................................................................... 49

Statement of cash flows 10. Non-cash adjustments ....................................................................................................................................... 50 11. Changes in working capital .............................................................................................................................. 50 12. Intangible assets ............................................................................................................................................... 51 13. Tangible assets ................................................................................................................................................. 53 14. Investments in subsidiaries ............................................................................................................................... 54 15. Inventories ........................................................................................................................................................ 54 16. Trade receivables .............................................................................................................................................. 55 17. Prepayments ..................................................................................................................................................... 55 18. Share capital ..................................................................................................................................................... 56 19. Deferred tax assets and liabilities ..................................................................................................................... 56 20. Current and non-current financial liabilities ..................................................................................................... 57 21. Other payables .................................................................................................................................................. 59 22. Other provisions ............................................................................................................................................... 59 Other 23. Fees to auditor appointed at the Annual General Meeting ............................................................................... 59 24. Assets charged and contingent liabilities .......................................................................................................... 59 25. Operating lease commitments .......................................................................................................................... 60 26. Financial instruments ....................................................................................................................................... 60 27. Related parties .................................................................................................................................................. 63 28. Events after the balance sheet date ................................................................................................................... 64


NOTES TO CONSOLIDATED ANNUAL FINANCIAL STATEMENTS

1. Accounting policies

Basis of accounting

The consolidated financial statements for 2011 are presented in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU and additional Danish disclosure requirements for annual reports of reporting class C (large) enterprises. Please see the Danish Executive Order on IFRS adoption issued in accordance with the Danish Financial Statements Act.

The consolidated financial statements are presented in thousands of Danish kroner (DKK), which is regarded as the primary currency in relation to the Group’s activities and the functional currency of the parent company.

The consolidated financial statements have been prepared on the historical cost basis, except for certain derivative financial instruments which are measured at fair value. The principal accounting policies adopted are set out below.

The consolidated financial statements are presented in accordance with the new and revised standards (IFRS/IAS) and Interpretations (IFRIC) which apply for the financial year. This has not resulted in any changes in accounting policies that have affected recognition and measurement in the current or previous years.

Implementation of new and amended standards and interpretations

Welltec has implemented the amendments to IAS 24 Related Party Disclosures.

Future IFRS changes

At the date of the publication of these consolidated financial statements, a number of new and amended standards and interpretations have not yet entered into force or have not yet been adopted by the EU. Therefore, they are not incorporated in the consolidated financial statements.

None of the new standards or amendments of existing standards are expected to have a material impact on future consolidated financial statements.

Change in presentation

The Group has changed the presentation of the comparative figures of 2009 in the statement of comprehensive income. DKK 4,000k is moved from administrative costs to special items. As this change only consists of split of items which does not otherwise affect the statement of comprehensive income, it is not assessed to be a reclassification adjustment under IAS1.

The presentation in the consolidated statement of cash flows has changed compared to earlier years. Addition to tangible finance lease assets is no longer included in the cash flows from investing activities and addition to finance lease debt is no longer presented in cash flows from financing activities. This changed presentation has the following affect on comparative figures:

Cash flows from investing activities has been reduced by DKK 6,614k in 2010 and DKK 6,475k in 2009. Equally cash flows from financing activites have been increased.


Recognition and measurement

Assets are recognized in the statement of financial position if it is probable that future financial benefits will flow to the Group and the value of the asset can be measured reliably.

Liabilities are recognized in the statement of financial position if they are probable and can be measured reliably. On initial recognition assets and liabilities are measured at cost or fair value. Subsequently assets and liabilities are measured as described for each item bellow.

Income is recognized in the statement of comprehensive income as earned and includes value adjustments of financial assets and liabilities measured at fair value or amortized cost.

Consolidated financial statements

The consolidated financial statements comprise the parent company and the group enterprises (subsidiaries) that are controlled by the parent company, see Group chart. Control is achieved where the parent company, either directly or indirectly, holds more than 50% of the voting rights or in any other way possibly or actually exercises controlling influence over a subsidiary. If the parent company holds less than 50% of the share capital, control exists when the parent company under agreement has more than 50% of the voting rights, has the power to govern financial and operating policies of the subsidiary, to appoint members of the Board of Directors or to cast the majority of votes at meetings of the Board of Directors of the subsidiary.

Basis of consolidation

The consolidated financial statements are prepared on the basis of the financial statements of the parent company and its subsidiaries, which are all prepared in accordance with the Group’s accounting policies. Upon consolidation, intra-group income and expenses, balances, investments and dividends as well as profits and losses on transactions between the consolidated enterprises are eliminated.

Subsidiaries’ financial statement items are recognized in full in the consolidated financial statements. Non controlling interests’ pro rata share of profit/loss and equity is shown as separate line items in the statement of comprehensive income and in the Group’s equity, respectively.

Business combinations

Newly acquired or newly established enterprises are recognized in the consolidated financial statements from the date of acquisition. The date of acquisition is when the parent company obtains control of the company. Divested or wound-up enterprises are recognized in profit or loss up to the time of their divestment or winding-up.

The purchase method is applied to the acquisition of new enterprises. According to this method, identifiable assets, including separable intangible assets, liabilities and contingent liabilities of acquired enterprises are measured at fair value at the acquisition date. Non-current assets acquired for the purpose of resale, however, are measured at fair value less anticipated selling costs. Restructuring costs are only recognized in the pre-acquisition statement of financial position if they constitute a liability for the acquired enterprise. If there is a tax effect, a corresponding asset or liability is booked. If the final determination of the consideration is conditional upon one or several future events, the value thereof will be recognized at fair value at the date of acquisition. Changes to contingent considerations are recognized in the profit or loss. Costs directly attributable to the business combination are recognized in the profit or loss.

Positive differences (goodwill) between cost of the enterprise acquired and the fair value of the assets, liabilities and contingent liabilities acquired are recognized as an asset under intangible assets and are tested for impairment at least once a year. If the carrying amount of goodwill is higher than its recoverable amount, it is written down to this lower recoverable amount.

Foreign currency translation

On initial recognition, transactions denominated in foreign currencies are translated at the transaction date exchange rate. Receivables, payables and other monetary items denominated in foreign currencies that have not been settled at the


end of the reporting period are translated using the exchange rate at the end of the reporting period. Exchange differences that arise between the rate at the transaction date and the exchange rate effective at the payment date or the exchange rate at the end of the reporting period are recognized in statement of comprehensive income as financial income or financial expenses. Property, plant equipment fleet, intangible assets, inventories and other non-monetary assets purchased in foreign currencies and measured on the basis of historical cost are translated at the transaction date exchange rate. If non-monetary items are restated at fair value, they are translated using the exchange rate at the date of restatement.

When foreign subsidiaries that use a functional currency different from DKK are recognized in the consolidated financial statements, the statement of comprehensive income is translated at average exchange rates on a monthly basis unless such rates vary significantly from the actual exchange rates at the transaction dates. In the latter case, the actual exchange rates are used. Statement of financial position items is translated using the exchange rates at the end of the reporting period. Goodwill is considered to belong to the relevant entity acquired and is translated using the exchange rate at the end of the reporting period.

Exchange differences resulting from the translation of foreign entities’ equity at the beginning of the year using the end of the reporting period exchange rates and by translating statements of comprehensive income from average exchange rates to the exchange rates at the end of the reporting period are recognized in other comprehensive income. Similarly, exchange differences resulting from changes made in a foreign entity’s other comprehensive income are also taken to other comprehensive income.

Exchange adjustments on receivables from, or payables to, subsidiaries that are considered part of the parent company’s total investment in the subsidiary in question, are also recognized in other comprehensive income.

When foreign subsidiaries that use DKK as their functional currency but present their financial statements in another currency are recognized in the consolidated financial statements, monetary assets and liabilities are translated using the end of the reporting period exchange rate. Non-monetary assets and liabilities measured on the basis of historical cost are translated using the transaction date exchange rate. Non-monetary items measured at fair value are translated at the exchange rate at the time of the last fair value adjustment.

The items in profit or loss are translated at average exchange rates on a monthly basis, with the exception of items deriving from non-monetary assets and liabilities, which are translated using the historical rates applicable to the relevant non-monetary assets and liabilities.

Derivative financial instruments

On initial recognition, derivative financial instruments are measured at fair value. Directly attributable expenses related to the purchase or issue of a derivative financial instrument are expensed.

Subsequent to initial recognition, derivative financial instruments are measured at fair value at the end of the reporting period.

For derivative financial instruments that do not qualify as hedging instruments, changes in fair value are recognized currently in profit or loss as financial income or financial expenses.

The Group does not apply hedge accounting to its derivatives financial instruments.

Share-based payment

Share-based incentive arrangements under which employees can only opt to receive new shares in Welltec International ApS (equity arrangements) are measured at the equity instruments’ fair value at the grant date and are recognized in profit or loss under staff costs over the vesting period. The related set-off entry is recognized in equity.

Income taxes

Tax for the year consists of current tax for the year and changes in deferred tax. The portion of tax that is attributable to profit is recognized in the income statement, and the portion of tax that is attributable to entries directly in other


comprehensive income is recognized in other comprehensive income. The portion of tax that is attributable to equity transactions is recognized in equity.

Exchange adjustments on deferred tax are recognized as part of the year’s adjustment in deferred tax.

The current tax payable or receivable is recognized in the statement of financial position, stated as tax calculated on this year’s taxable income, adjusted for prepaid tax.

When calculating the current tax for the year, the tax rates and rules in effect at the end of the reporting period are applied.

Deferred tax is recognized on all temporary differences between carrying values and tax-based values of assets and liabilities, apart from deferred tax on all temporary differences occurring on initial recognition of goodwill or on initial recognition of a transaction that is not a business combination, and for which the temporary difference found at the time of initial recognition neither affects profit nor loss for the year nor taxable income.

Deferred tax is recognized on all temporary differences related to investments in subsidiaries, unless the parent company is able to control when the deferred tax is realized, and it is probable that the deferred tax will not crystallize as current tax in the foreseeable future.

Deferred tax is calculated based on the expected use of each asset and the settlement of each liability, respectively.

Deferred tax is measured by using the tax rates and tax rules in the relevant countries which are based on acts in force or acts in force in reality at the end of the reporting period, which are expected to apply when the deferred tax is expected to crystallize as current tax. Changes in deferred tax resulting from changed tax rates or tax rules are recognized in profit or loss, unless the deferred tax is attributable to items previously recognized in other comprehensive income or in equity. If so, such changes are also recognized in other comprehensive income or in equity.

Deferred tax assets, including the tax base of tax loss carryforwards, are recognized in the statement of financial position at their estimated realizable value, either as a set-off against deferred tax liabilities or as net tax assets for set-off against future positive taxable income. At the end of each reporting period, it is reassessed whether sufficient taxable income is probable to arise in the future for the deferred tax asset to be used.

The parent company is jointly taxed with all Danish subsidiaries. The current Danish income tax is allocated among the jointly taxed Danish companies proportionally to their taxable income.

Statement of comprehensive income

Revenue

The Group provides multiple services to oil and gas companies around the world at their onshore and offshore locations using proprietary remote-control precision robotic equipment that Welltec® designs and manufactures.

Provision of services is recognized in revenue when the work is performed or when the agreed service is provided.

Revenue is measured at fair value of the consideration received or receivable. If an interest-free credit has been arranged for payment of the consideration receivable that is longer than the usual credit period, the fair value of the consideration is determined by discounting future payments receivable. The difference between fair value and nominal amount of the consideration is recognized as financial income in profit or loss by applying the effective interest method.

Revenue is calculated net of VAT, duties, etc. collected on behalf of a third party.

In addition, income from the sale of development projects is considered part of the Group’s activities and therefore is recognized as revenue.


Cost of services provided

Cost of services provided comprises direct and indirect expenses incurred to realize revenue including salaries, depreciation and amortization.

Development and manufacturing costs

Development and manufacturing costs comprise all development and engineering costs that are not capitalized.

Administrative and sales costs

Administrative and sales costs comprise costs required to sustain the business including finance, IT, legal, HR and other overhead.

Special items

Special items consist of costs of a special nature in relation to the activities of the Group, including costs of extensive structural changes and other significant amounts of a one-off nature. These items are shown separately to facilitate the comparability of the profit or loss and provide a better picture of the operational results.

Financial income and expenses

These items comprise interest income and expenses, the interest portion of finance lease payments, realized and unrealized capital gains and losses on securities, payables and transactions in foreign currencies, amortization premium/allowance on mortgage debt, etc. as well as tax interest.

Statement of financial position

Intangible assets

Goodwill

Upon initial recognition, goodwill is recognized in the statement of financial position and measured as the difference between cost of the enterprise acquired and the fair value of the assets, liabilities and contingent liabilities acquired.

When goodwill is recognized, the goodwill amount is distributed on those of the Group’s activities generating separate payments (cash-generating units). Determination of cash-generating units follows the management structure and internal finance management and reporting of the Group.

Subsequently, goodwill is measured at cost less accumulated write-downs. There is no amortization of goodwill but the carrying value of goodwill is tested for impairment at least once a year together with the other long-term assets in the cash-generating unit to which the goodwill is allocated. It is written down to recoverable amount in profit or loss if the accounting value exceeds the recoverable amount, this representing the higher of the fair value of the asset less expected disposal costs and the value in use. The recoverable amount is generally determined as the present value of the expected future net cash flows from the cash-generating unit to which the goodwill is allocated. Impairment losses of goodwill are stated in profit or loss under amortization and impairment losses of intangible assets.

Development projects and other intangible assets

Development projects on clearly defined and identifiable service equipment and processes are recognized as intangible assets if it is probable that the service equipment or process will generate future financial benefits for the Group, and the development costs of each asset can be measured reliably. Other development costs are recognized as costs in the profit or loss as incurred.

On initial recognition, development costs are measured at cost. The cost of development projects comprises costs such as salaries, amortization/depreciation and other indirect costs that are directly attributable to the development projects


(e.g. field tests) and are needed to complete the project, calculated from the time at which the development project first meets the specific criteria for being recognized as an asset.

Completed development projects are amortized on a straight-line basis using the estimated useful lives of the assets. The amortization period is usually 5 years, but in certain cases it may be up to 20 years if the longer amortization period is considered to better reflect the Group’s benefit from the developed product, etc. For development projects protected by intellectual property rights, the maximum amortization period is the remaining duration of the relevant rights, however, no more than 20 years.

Development projects and other intangible assets are written down to any lower recoverable amount. Development projects in progress are tested at least once a year for impairment. Borrowing costs to finance the investments in development projects are recognized in cost of these assets if such expenses relate to qualifying assets for which their development period last longer than 12 months. Other borrowing costs are taken to finance expenses in the statement of comprehensive income.

Other intangible assets

Acquired intellectual property rights in the form of patents and licenses are measured at cost less accumulated amortization and impairment losses. Patents are amortized over their remaining duration, usually 5 years, and licenses are amortized over the term of the agreement. If the actual useful life is shorter than the remaining duration and the term of the agreement, respectively, amortization is made over such shorter useful life.

Separable intangible assets acquired through business combinations are brand, customer relationship and technology. Brand is not amortized as the useful life is considered indefinite. Customer relationship is amortized on a straight-line basis over its estimated useful life of 10 years. Technology is amortized on a straight-line basis over its estimated useful life of 10 to 20 years.

Tangible assets

Land and buildings, plant and machinery as well as other fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and impairment losses. Land is not depreciated.

Cost comprises the acquisition price, costs directly attributable to the acquisition and preparation costs of the asset until the time when it is ready to be put into operation. For assets manufactured and owned by the Group, cost comprises expenses directly attributable to the manufacture of the asset, including materials, components, sub-suppliers and labor costs. In the year when the tool is completed and ready to generate income for the company, it is recognized under “Plant equipment and fleet.” During construction, the asset is recognized under “Plant equipment and fleet under construction.”

Interest expenses on loans to finance the investments in tangible assets are recognized in cost of these assets if such expenses relate to qualifying assets for which their production period lasts longer than 12 months. Other borrowing costs are taken to finance expenses in the statement of comprehensive income.

For assets held under finance leases, cost is measured as the lower of the asset’s fair value or present value of future lease payments.

The basis of depreciation is cost less estimated residual value after the end of useful life. The residual value is the estimated amount that would be earned if selling the asset today net of selling costs if the asset is of an age and a condition that is expected after the end of useful life Straight-line depreciation is made on the basis of the following estimated useful lives of the assets:

Buildings: 50 years Leasehold improvements: 3-10 years Plant equipment and fleet: 3-10 years Other fixtures and fittings, tools and equipment: 3-5 years

Depreciation methods, useful lives and residual amounts are reassessed annually.


Property, plant equipment and fleet are written down to the lower of recoverable amount and carrying amount.

Impairment of property, plant equipment and fleet and intangible assets

The carrying amounts of property, plant equipment and fleet and intangible assets with definite useful lives are tested at the end of the reporting period for any indication of impairment. If impaired, the recoverable amount of the asset is estimated to determine the need for any write-down and the extent thereof.

The recoverable amount of intangible assets with indefinite useful lives, development projects in progress, brand and goodwill is estimated annually irrespective of any recorded indications of impairment.

If the asset does not generate cash flows separately from other assets, an estimate is made of the recoverable amount of the smallest cash-generating unit of which the asset forms part.

The recoverable amount is calculated as the higher of the asset’s and the cash-generating unit’s fair value less selling costs and net present value. When the net present value is determined, estimated future cash flows are discounted at present value using a discount rate that reflects current market estimates of the value of money in terms of time, as well as the particular risks related to the asset and the cash-generating unit, respectively, and for which no adjustment is made in the estimated future cash flows.

If the recoverable amount of the asset or the cash-generating unit is estimated to be lower than the carrying amount, the carrying amount is written down to this lower recoverable amount. For cash-generating units, write-down is distributed in such a way that goodwill amounts are written down first and then any remaining need for write-down is distributed on the other assets of the unit, however, the individual asset is not written down to an amount that is lower than its fair value net of estimated selling costs.

Impairment losses are recognized in the profit or loss. In case of any subsequent reversals of impairment losses resulting from change in assumptions of the estimated recoverable value, the carrying values of the asset and the cash-generating unit, respectively, are increased to the adjusted estimate of the recoverable value, however, no more than the carrying value which the asset or the cash-generating unit would have had if the write-down had not been performed. Impairment losses of goodwill are not reversed.

Profits or losses from the sale of property, plant equipment and fleet are calculated as the difference between selling price less selling costs and carrying value at the time of sale. Profits or losses are recognized in the statement of comprehensive income if the selling price differs from the carrying amount.

Financial assets

Other receivables

Other receivables with a fixed maturity are measured at amortized cost, less any impairment.

Current assets

Trade receivables

On initial recognition, trade receivables are measured at fair value and subsequently at amortized cost, which usually equals nominal amount less bad debt provisions.

Prepayments

Prepayments comprise incurred costs relating to subsequent financial years. Prepayments are measured at cost.

Other financial assets and liabilities

Financial assets measured at fair value are classified as belonging to levels 1-3 depending on the pricing method applied. The value of financial assets belonging to level 1 is determined on the basis of quoted prices in an active


market. For level 2, the value is determined on the basis of other observable inputs from the market, and for level 3 on the basis of an assessment of the asset value less a liquidity premium.

Liabilities

Other provisions

Other provisions are recognized when the Group has a legal or constructive obligation as a result of past events in the financial year or prior years, and it is probable that settlement of such obligation will lead to an outflow of the company’s financial resources.

Lease commitments

Lease commitments relating to assets held under finance leases are recognized in the statement of financial position as liabilities other than provisions, and, at the time of inception of the lease, measured at the lower of the lease asset’s fair value and the present value of future lease payments. Subsequent to initial recognition, lease commitments are measured at amortized cost. The difference between the present value and nominal amount of the lease payments is recognized in profit or loss as a financial expense over the term of the leases.

Lease payments on operating leases are recognized on a straight-line basis in profit or loss over the term of the lease.

Other financial liabilities

On initial recognition, other liabilities, including bank loans and trade payables, are measured at fair value. Subsequently, these liabilities are measured at amortized cost applying the effective interest method to the effect that the difference between proceeds and nominal amount is recognized in profit or loss as a financial expense over the term of the loan.

Pension obligations

The Group has entered into pension agreements with certain groups of employees, which are classified as defined contribution pension plans.

Periodical payments to defined contribution pension plans are recognized in profit or loss at the due date, and any contributions payable are recognized in the statement of financial position under liabilities.

Statement of cash flows

The Group’s statement of cash flows is presented using the indirect method and shows cash flows from operating, investing and financing activities as well as the Group’s cash and cash equivalents at the beginning and end of the financial year.

Cash flows from operating activities are calculated as EBIT adjusted for non-cash operating items, working capital changes and income taxes paid.

Cash flows from investing activities comprise payments in connection with the acquisition and divestment of enterprises, tangible fixed asset investments, and purchase, development, improvement and sale, etc. of intangible assets, and property, plant equipment and fleet.

If any, cash flows from acquired and divested enterprises are shown as separate line items within cash flows from investing activities. Cash flows related to acquired enterprises are recognized in the statement of cash flow from their date of acquisition, and cash flows from divested enterprises are recognized up to the date of sale.

Cash flows from financing activities comprise financial expenses paid and changes in the size or composition of the parent company’s share capital and related costs, the raising of loans, installments on interest-bearing debt, purchase of treasury shares, and payment of dividends.


Cash and cash equivalents comprise cash and current securities with an insignificant price risk.

Ratios

The following ratios are compiled in accordance with Recommendations & Ratios 2010 issued by the Danish Society of Financial Analysts and generally accepted calculation formulas.

EBIT margin before special items

= Operating profit/loss [EBIT] before special items × 100

Revenue

EBITDA margin = Operating profit before depreciation and amortization × 100

Revenue

Return on equity = Net profit/loss for the year × 100

Average equity

ROIC excl. goodwill = EBITA

Average capital investment excl. goodwill

2. Critical accounting judgments and key sources of estimation uncertainty

The determination of carrying values and preparation of the annual report build upon estimates made by Management of the likely effect of future events on the value of plant equipment and fleet under construction and development projects. In addition Management has determined fair value of separable intangible assets acquired through business combination, including impairment test of goodwill and other intangible assets. The estimates used build upon assumptions which, in the opinion of Management, are valid albeit inherently uncertain and unpredictable. An assessment is made of the possibility of recovering the carrying value of intangible and tangible assets. The assessment of recoverable amounts is based upon estimated returns generated by those assets in the cash-generating unit.


3. Revenue

2011

2010

2009

(Danish kroner, in thousands) Revenue from sale of goods.............................................................................. 22,950 0 0 Revenue from rendering of services ................................................................1,196,972 926,612 722,718 Total revenue ................................................................................................... 1,219,922 926,612 722,718 3.1 Segment information Based on IFRS 8 Operating Segment, it is considered if the Group has more than one operating segment. The internal monthly management reporting follows the Group’s accounting policies. The management group of Welltec International ApS constitutes the chief operating decision maker of Welltec International ApS. The internal monthly management reporting is focused on group level as a whole, including revenue divided into geographical areas. It has been determined that the legal entities meet the requirements of aggregation in IFRS 8, for which reason Welltec International ApS also only has one reporting segment. Geographical information The Group’s revenue is divided into the following geographic areas:

2011

2010

2009

Europe & Russia ............................................................................................... 514,748 397,804 248,066 Americas ........................................................................................................... 459,146 326,949 257,248 Middle East and Asia Pacific ............................................................................ 131,889 109,097 83,627 Africa ................................................................................................................ 114,139 92,762 133,777 Total ................................................................................................................. 1,219,922 926,612 722,718

Information on major customers:

Out of total revenue as of December 2011, DKK 253m (December, 2010 DKK 217m) is derived from one customer.

Welltec® sells very reliable premium-quality solutions that solve important problems of a client portfolio that includes many of the world’s leading integrated, independent and national oil and gas companies. Welltec® provides high-technology services in all types of offshore and onshore wells, including in our clients’ most extreme operating conditions such as deepwater, subsea, arctic, high yield, heavy oil and unconventional gas environments. We provide multiple services across different phases of the well’s life, including evaluation, drilling and completion, production and intervention. Our employees provide our services using our fleet of proprietary high-technology equipment that we manufacture for our exclusive use.

Revenue for 2009 includes DKK 70,055k concerning sale of development project. In December 2009, Welltec A/S sold know-how and license rights of a Selective Perforation Switch. In accordance with the purchase agreement, there is a clause that the buyer has the right, at any time after the closing date but before April 1, 2013, to sell the Switch System Assets back to Welltec A/S for a determinable price. In accordance with Welltec’s accounting policies, payments for the sale of the Selective Perforation Switch are recognized when sales agreements are obtained pursuant to the agreement, while the estimated value of the put option of DKK 4,735k is recognized in the balance sheet and taken to income at a later date. In 2010 the value of the put option is DKK 3,279k, thus DKK 1,456k has been recognized as revenue. In 2011 the value of the put option is DKK 995k, thus DKK 2,284k has been recognized as revenue.


4. Staff costs

2011

2010

2009

(Danish kroner, in thousands) Breakdown of staff costs: Wages and salaries ......................................................................................... 449,779 329,140 242,683 Share-based payment to executives ............................................................... 33,268 469 736 Payments to defined contribution pension plans ............................................ 13,780 12,296 10,511 Other social security costs ............................................................................. 25,654 19,688 13,533 Total staff costs ............................................................................................ 522,481 361,593 267,463 Recognition of staff costs: Cost of services provided ............................................................................... 253,729 186,503 149,489 Development costs capitalized ....................................................................... 80,538 56,234 39,694 Administrative costs ...................................................................................... 188,214 118,856 78,280 Total staff costs ............................................................................................ 522,481 361,593 267,463 Number of employees: Average number of employees ...................................................................... 730 590 527

Defined contribution plans

The Group operates pension schemes that cover certain groups of employees in Denmark and abroad. Those pension schemes take the form of defined contribution plans. Welltec arranges for the regular payment (e.g. a fixed amount or a fixed percentage of the salary) of premiums to independent insurers who are responsible for the pension commitments. Once Welltec has made payments of the contribution under the defined contribution pension plans, Welltec has no further pension commitments related to employees or former employees.

Remuneration to members of the Executive Board, Board of Directors and Key management personnel

The total remuneration of the Executive Board, Board of Directors and Key management personnel of the Welltec Group (including Welltec A/S), including bonus, pension, other security costs and share-based payments can be specified as follows:

2011

2010

2009

(Danish kroner, in thousands) Short-term staff benefits ................................................................................ 18,646 17,322 16,328 Pension benefits ............................................................................................. 843 832 543 Share-based payments ................................................................................... 16,916 469 736 Total remuneration to Key management personnel ................................. 36,405 18,623 17,607

There has been no remuneration to members of the Board of Directors in 2009-2011.

Incentive programs

The Group operates incentive programs in the form of warrants to the Executive Board of Welltec A/S, certain senior executives (VPs) and other Key personnel in the Welltec Group. The purpose is to retain and motivate key employees of the Group. The schemes are based on the shares of Welltec International ApS, and the warrants have no voting rights attached.

In 2005, Welltec Holding ApS issued 80,080 warrants to the Executive Board of Welltec A/S. The total fair value of these warrants was at grant date DKK 586k which is recognized in the income statement in 2005.


In 2006, Welltec Holding ApS issued 105,820 warrants to senior executives (VPs) in the Welltec Group. The total fair value of these warrants was at grant date DKK 1,337k of which DKK 724k is recognized in the income statement in 2006.

In 2007, Welltec International ApS took over from Welltec Holding ApS 185,900 warrants issued to senior executives (VPs) in the Welltec Group. This number of warrants was converted to 400,052 warrants in Welltec International ApS of equal value of 185,900 warrants in Welltec Holding ApS granted to senior executives VPs.

The total fair value of these warrants was at grant date DKK 1,923k of which DKK 133k is recognized in the income statement in 2007.

In 2008 an amount of DKK 195k is recognized in the income statement.

In 2009, 68,000 warrants were issued to Key management personnel. The total fair value of these warrants was at grant date DKK 1,923k of which DKK 645k was recognized in the statement of comprehensive income in 2009. DKK 469 was recognized in the statement of comprehensive income in 2010 and DKK 168k was recognized in 2011.

In November 2011, Welltec International ApS issued 290,850 warrants to the Executive Board and Key management personnel in the Welltec Group. The total fair value of these warrants was at grant date DKK 47.4m of which DKK 33.1m is recognized in the statement of comprehensive income in administrative costs in 2011.

Grant date

Exercise

date Number of warrants

Exercise price

Exercise period

Warrants scheme Board members of Welltec International ApS Outstanding at 01.01.2011 ................................... 0 Grant .................................................................... 2011 10,000 525.0 Outstanding at 31.12.2011 ................................... 10,000 Executive Board of Welltec A/S Grant .................................................................... Dec. 2005 172,331 28.2 Apr. 2015 Outstanding at 01.01.2011 ................................... 172,331 Grant .................................................................... 2011 50,000 283.6 Outstanding at 31.12.2011 ................................... 222,331 Senior executives and Key management personnel of the Welltec Group

Grant .................................................................... Feb. 2006 227,721 28.2 Apr. 2015 Exercised ............................................................. Aug. 2009 -30,773 28.2 Grant .................................................................... Sept. 2009 68,000 283.6 Sep. 2012 Outstanding at 01.01.2011 ................................... 264,948 Grant .................................................................... 2011 21,000 283.6 Grant .................................................................... 2011 80,850 525.0 Grant .................................................................... 2011 60,000 900.0 Grant .................................................................... 2011 52,500 1,000.0 Grant .................................................................... 2011 16,500 1,100.0 Outstanding at 31.12.2011 ................................... 495,798 Total outstanding at 31.12.2011 ........................ 728,129

The 2006 warrants scheme is conditional upon continued employment with the Welltec Group. If employment ceases before a warrant is exercised, the warrant will be reduced proportionally. The warrant scheme is exercisable not earlier than 1 year, and not later than 9 years, after the grant date. The fair value of the warrants scheme at grant date was calculated on the basis of the Black-Scholes model. The total fair value of the incentive plan is DKK 1,923k. The warrants to senior executives vest over an employment period until 2009. The warrants are exercisable until April 2015 in the case of changes in the ownership structure (e.g. listing or sale of the company).


The calculation for both 2005 and 2006 schemes are based on an expected volatility of 28.4% and a risk-free interest rate computed at 2.4-3.4% depending on the expected life of the warrants of 1-4 years. The expected volatility has been determined using a historical volatility for a one-year period for comparable listed companies adjusted for a small-cap factor.

In 2009 30,773 of the warrants were exercised. The exercise price amount was DKK 867k.

In 2009 a new warrants scheme to Key management personnel was granted. The warrant scheme is exercisable not earlier than 3 years and not later than 6 years after the grant date. The fair value of the warrants scheme at grant date was calculated on the basis of the Black-Scholes model. The total fair value of the granted warrants in 2009 is DKK 1,281k. The calculation for 2009 schemes is based on an expected volatility of 38% and a risk-free interest rate at 2.07%. The expected volatility has been determined using a historical volatility for a five-year period for comparable listed companies adjusted for a small-cap factor.

In November 2011, new warrants schemes to the Board of Directors, Executive Board of Welltec Group and Key management personnel were granted. The warrant schemes are vested in the period from January 1, 2011 to January 1, 2015. The warrant schemes are only exercisable if certain events occur. The fair value of the warrants scheme at grant date was calculated on the basis of the Black-Scholes model. The total fair value of the granted warrants in 2011 is DKK 47.4m. The calculation for 2011 schemes is based on an expected volatility of 33% and a risk-free interest rate at 0.85%. The expected volatility has been determined using a historical volatility for a five-year period for comparable listed companies adjusted for a small-cap factor.

Summary:

The total expense recognized in the statement of comprehensive income for all warrants schemes amounted to DKK 33,268k for 2011. (DKK 168k from warrants schemes granted in 2009 and DKK 33,100k from warrants schemes granted in 2011.) The total expense recognized in the statement of comprehensive income for all warrants schemes amounted to DKK 469k in 2010 and DKK 645k in 2009.

No warrants have been exercised in 2011 or 2010.

The number of warrants which can be exercised as at December 31, 2011 is 369,279 (2010: 369,279) and the fair value of these warrants as at December 31, 2011 is DKK 336m.


5. Depreciation, amortization and impairment losses

2011 2010 2009 (Danish kroner, in thousands)

Completed development projects ................................................................... 59,938 35,798 26,276 Patents and licenses ....................................................................................... 2,592 2,489 2,266 Customer relationship .................................................................................... 30,000 30,000 30,000 Technology .................................................................................................... 26,714 28,423 25,000 Write-down on development projects ............................................................ 8,903 558 644 Total depreciation of intangible assets ....................................................... 128,147 97,268 84,186 Other fixtures and fittings, tools and equipment ............................................ 16,341 16,063 12,926 Land and buildings ........................................................................................ 284 284 185 Plant equipment and fleet .............................................................................. 88,674 91,729 99,031 Leasehold improvements ............................................................................... 2,732 2,780 2,161 Write-down on plant equipment and fleet ..................................................... 21,370 14,465 6,977 Reversal of previous write-downs ................................................................. 0 -4,104 0 Gain/loss from disposal of plant equipment and fleet .................................... -471 -238 3,608 Total depreciation of tangible assets .......................................................... 128,930 120,979 124,888 Total depreciation and amortization .......................................................... 257,077 218,247 209,074 Recognition of depreciation by function Cost of services provided ............................................................................... 165,090 115,708 111,759 Development costs capitalized ....................................................................... 11,350 16,308 20,205 Administrative and sales costs ....................................................................... 23,923 27,808 22,110 Amortization of acquired intangible assets .................................................... 56,714 58,423 55,000 Total depreciation and amortization .......................................................... 257,077 218,247 209,074 6. Special items


Salary cost related to resigned employees and special bonus ........................ 0 3,500 8,193 Non-recurring consultancy fees ..................................................................... 0 9,982 0 0 13,482 8,193 7. Financial income


Interest income .............................................................................................. 2,854 4,002 2,609 Interest income from affiliates ....................................................................... 113 14 539 Interest income from financial assets that are not measured at fair value through profit or loss ......................................................................... 2,967 4,016 3,148 Fair value adjustment of derivative financial instruments ............................. 0 1,567 1,012 Exchange rate gains ....................................................................................... 21,663 24,555 6,637 24,630 30,138 10,797


8. Financial expenses


Interest expenses .............................................................. -66,713 -53,596 -76,471 Redemption fee* .............................................................. -13,557 0 0 Other financial expenses .................................................. -7,938 -5,729 -5,063 Interest expenses from financial liabilities that are not measured at fair value through profit or loss ....... -88,208 -59,325 -81,534 Exchange rate loss ........................................................... -24,006 -40,448 -37,647 Fair value adjustment of derivative financial instruments....................................................................... -40,944 -21,300 -8,315 -153,158 -121,073 -127,496

*Redemption fee consists of costs related to refinancing of earlier credit facilities.

Borrowing costs capitalized on development projects are calculated based on the held costs and a weighted average capitalization rate of 5.9% (4.3% in 2010). The amount capitalized in 2011 is DKK 1.9m (DKK 2.5m in 2010 and DKK 0 in 2009).

The net profit impact at group level of derivative financial instruments measured at fair value through profit or loss amounted to a loss of DKK 40,944k at December 31, 2011 (a net loss of DKK 19,733k in 2010); (a net loss of DKK 7,303k in 2009).

The net exchange rate loss at group level at December 31, 2011 was DKK 2,343k (a net exchange rate loss of DKK 15,893k in 2010) and (a net exchange rate loss of DKK 31,010k in 2009).


9. Income taxes


Current tax ............................................................................................... 61,144 36,040 28,862 Adjustment in corporation tax previous years ......................................... 288 4,334 10,238 Current tax incl. adj. in corporation tax previous years .................... 61,432 40,374 39,100 Adjustment in deferred tax previous years .............................................. 3,775 14,784 2,378 Change in deferred tax ............................................................................. -4,231 9,048 -113 Tax effect from tax provision .................................................................. 18,587 0 0 Other taxes ............................................................................................... 6,082 0 0 Unrecognized deferred tax assets in foreign subsidiaries ........................ 0 2,674 2,285 Unrecognized deferred tax liabilities in foreign subsidiaries ................... 0 -883 -414 Income taxes ........................................................................................... 85,645 65,997 43,236 A breakdown of tax: Profit/loss before tax ................................................................................ 174,879 167,661 84,728 174,879 167,661 84,728 Reconciliation of tax rate (%) Danish corporation tax rate ...................................................................... 25 25 25 Effect of difference between tax rate for subsidiaries outside Denmark and Danish rate ........................................................................................ 4 1 Tax effect from tax provision .................................................................. 11 0 0 Non-taxable income and non-deductible expenses .................................. 4 1 9 Other taxes ............................................................................................... 3 1 2 Other, including adjustment to previous years......................................... 2 11 15 49 39 51

No income tax has been recognized directly in other comprehensive income or in equity in 2009, 2010 and 2011.

In 2007 the Norwegian tax authorities raised the corporation tax payable for the Norwegian branch by NOK 8,614k for the income years 2001, 2002, 2003 and 2004. Subsequently the company has paid the outstanding amount to the Norwegian tax authorities. Previously the Norwegian tax authorities raised the corporation tax payable for the income year 2005 by NOK 1,292k. This amount has also been remitted to the Norwegian tax authorities.

In 2009 the Danish tax authorities initiated the mutual agreement procedures with the Norwegian tax authorities. The Danish and Norwegian tax authorities met in May 2011, but did not reach an agreement. Both authorities have required further information from Welltec and have been provided with this during 2011. Management in Welltec has been informed that the authorities will recommence the negotiations in May 2012 regarding the applicable income and cost allocation principles between the Norwegian branch and Head Office for the said income years. As Management is of the opinion that the Danish and Norwegian tax authorities will reach an agreement on the allocation principles and as the current double taxation of the above mentioned income years as a consequence will be revoked, the additional paid in tax is treated as a receivable in the statement of financial position.


10. Non-cash adjustments


Depreciation of intangible and tangible assets ....................... 258,019 207,878 197,846 Disposals and write-downs .................................................... 2,233 10,365 12,577 Exchange rate adjustment depreciation and fixed assets ....... 339 0 0 Currency adjustments, other .................................................. -5,763 30,363 11,881 Write-down on trade receivables ........................................... 962 1,486 0 Special items .......................................................................... 0 4,500 -10,627 Other provisions .................................................................... -9,534 2,196 10,686 Share-based payments ........................................................... 33,630 1,484 736 279,886 258,272 223,099

11. Changes in working capital


Change in receivables and prepayments ........................................ -124,339 -88,006 29,622 Changes in inventories ................................................................... -10,552 0 0 Change in receivables from affiliates ............................................ 0 12,254 -11,020 Change in trade payables ............................................................... 26,150 17,555 -2,886 Change in other payables ............................................................... 40,240 -794 5,353 Change in working capital from acquisition of companies ............ 0 0 -1,544 Change in payables to affiliates ..................................................... 285 -16,535 3,693 -68,216 -75,526 23,218


12. Intangible assets

Goodwill Intangible

assets*

Completed development

projects Patents and

licenses Development

projects in progress Total (Danish kroner, in thousands)

Cost at 01.01 2010 .................. 1,392,388 894,670 164,928 14,833 121,028 2,587,847 Reclassification ....................... 0 0 0 266 0 266 Additions ................................. 0 4,890 0 6,089 135,357 146,336 Carryforward ........................... 0 0 82,393 0 -82,393 0 Exchange rate adjustment ........ 0 0 0 193 0 193 Cost at 31.12 2010 .................. 1,392,388 899,560 247,321 21,381 173,992 2,734,642 Amortization and impairment losses at 01.01 2010 ................. 0 132,917 49,388 4,030 1,079 187,414 Reclassification ....................... 0 0 0 57 0 57 Amortization for the year ........ 0 58,423 35,798 2,489 0 96,710 Write-down for the year .......... 0 0 558 0 0 558 Amortization and impairment losses at 31.12 2010 ..................... 0 191,340 85,744 6,576 1,079 284,739 Carrying value at 31.12 2010 1,392,388 708,220 161,577 14,805 172,913 2,449,903 Cost at 01.01 2011 .................. 1,392,388 899,560 247,321 21,381 173,992 2,734,642 Reclassification ....................... 0 0 0 -266 0 -266 Additions ................................. 0 0 0 11,723 137,926 149,649 Carryforward ........................... 0 0 149,615 0 -149,615 0 Exchange rate adjustment ........ 0 0 0 18 0 18 Cost at 31.12 2011 .................. 1,392,388 899,560 396,936 32,856 162,303 2,884,043 Amortization and impairment losses at 01.01 2011 ................. 0 191,340 85,744 6,576 1,079 284,739 Exchange rate adjustment ........ 0 0 0 3 0 3 Reclassification ....................... 0 0 0 -130 0 -130 Amortization for the year ........ 0 56,714 59,938 2,592 0 119,244 Write-down for the year .......... 0 0 6,665 0 2,238 8,903 Amortization and impairment losses at 31.12 2011 ................ 0 248,054 152,347 9,041 3,317 412,759 Carrying value at 31.12 2011 1,392,388 651,506 244,589 23,815 158,986 2,471,284

* Please see specification below.


Brand Customer

relationship Technology Total (Danish kroner, in thousands)

Cost at 01.01 2010 ...........................................................................80,000 300,000 514,670 894,670 Additions ......................................................................................... 0 0 4,890 4,890 Cost at 31.12 2010 ..........................................................................80,000 300,000 519,560 899,560 Amortization and impairment losses at 01.01 2010 ......................... 0 72,500 60,417 132,917 Amortization for the year ................................................................ 0 30,000 28,423 58,423 Amortization and impairment losses at 31.12 2010 .................... 0 102,500 88,840 191,340 Carrying value at 31.12 2010 ........................................................80,000 197,500 430,720 708,220 Cost at 01.01 2011 ...........................................................................80,000 300,000 519,560 899,560 Additions ......................................................................................... 0 0 0 0 Cost at 31.12 2011 ..........................................................................80,000 300,000 519,560 899,560 Amortization and impairment losses at 01.01 2011 ......................... 0 102,500 88,840 191,340 Amortization for the year ................................................................ 0 30,000 26,714 56,714 Amortization and impairment losses at 31.12 2011 .................... 0 132,500 115,554 248,054 Carrying value at 31.12 2011 ........................................................80,000 167,500 404,006 651,506

Goodwill

Goodwill from the acquisitions is related to Welltec Holding ApS of DKK 1,392,388k. The goodwill amount is allocated to the Group’s cash-generating unit “Welltec A/S”. It is the opinion of Management that the carrying amount for goodwill does not exceed its recoverable value based on an estimate of present value of expected future net cash flows from Welltec A/S. The estimate is based on a risk-adjusted after tax discount rate (weighted average cost of capital) of 11.1% (derived from an average industry gearing of 30%, cost of equity of 13.2% and cost of debt of 6.4%), applied to expected net cash flows from historically-achieved profit after tax, expectations about future earnings based on approved budget for 2012 and Management’s forecasts for the period 2012-2016 and a terminal value. The weighted average cost of capital before tax is 12.0%.

In 2010 weighted average cost of capital used was 12.8% which equals a before tax discount rate of 18.2%

The basis for the calculation of the discount rate has changed in 2011 due to changes in the assumptions regarding illiquidity premium. However the change in method has not affected the conclusion that no impairment is recognized.

Impairment of other intangible assets

Impairment of development projects amounted to DKK 8.9m, which has been recognized in the statement of comprehensive income under cost of services provided. The recoverable amount was calculated on the basis of Management’s re-assessed estimate of the value in use of the assets.


13. Tangible assets

Land and buildings

Other fixtures, fitting, tools and

equipment Plant equipment

and fleet Leasehold

improvement

Plant equipment and fleet under

construction Total (Danish kroner, in thousands)

Cost at 01.01 2010 .................... 7,743 54,780 436,622 16,938 103,737 619,820 Exchange rate adjustment .......... 1,068 8,294 597 228 16 10,203 Reclassification .......................... 0 -1,444 663 676 0 -105 Carryforward ............................. 0 0 66,440 0 -66,440 0 Additions ................................... 13 18,319 4,249 1,338 101,260 125,179 Disposals.................................... 0 -2,370 -70 -63 0 -2,503 Acquisition cost at 31.12 2010 . 8,824 77,579 508,501 19,117 138,573 752,594 Depreciation at 01.01 2010 ...... 343 28,075 203,956 4,711 0 237,085 Exchange rate adjustment .......... 78 5,898 332 93 0 6,401 Reclassification .......................... 0 -730 363 486 0 119 Depreciation for the year ........... 284 16,063 91,729 2,780 0 110,856 Write-down for the year ............. 0 0 14,465 0 0 14,465 Reversal of previous write-down .......................................... 0 0 -4,104 0 0 -4,104 Depreciation of disposals ........... 0 -1,799 0 0 0 -1,799 Depreciation at 31.12 2010 ...... 705 47,507 306,741 8,070 0 363,023 Carrying amount 31.12 2010 ... 8,119 30,072 201,760 11,047 138,573 389,571 Cost at 01.01 2011 .................... 8,824 77,579 508,501 19,117 138,573 752,594 Exchange rate adjustment .......... 0 114 106 31 11 262 Reclassification .......................... 0 6,798 -8,618 191 0 -1,629 Carryforward ............................. 0 0 171,389 0 -171,389 0 Additions ................................... 9 24,881 6,220 3,207 154,971 189,288 Disposals.................................... 16 -2,306 -6,970 0 0 -9,260 Acquisition cost at 31.12 2011 . 8,849 107,066 670,628 22,546 122,166 931,255 Depreciation at 01.01 2011 ...... 705 47,507 306,741 8,070 0 363,023 Exchange rate adjustment .......... 12 368 178 58 0 616 Reclassification .......................... 0 1,508 -3,452 178 0 -1,766 Depreciation for the year ........... 284 16,341 88,674 2,732 0 108,031 Write-down for the year ............. 0 0 21,370 0 0 21,370 Depreciation of disposals ........... 0 -2,058 -4,969 0 0 -7,027 Depreciation at 31.12 2011 ...... 1,001 63,666 408,542 11,038 0 484,247 Carrying amount 31.12 2011 ... 7,848 43,400 262,086 11,508 122,166 447,008

Write-downs in 2011 and in 2010 related to scrapped tools and tools lost in the wells.

2011 2010 (Danish kroner, in thousands)

The carrying amount includes: Assets held under finance leases ............................................................................................. 16,766 25,512 Interest expenses ..................................................................................................................... 995 3,664


14. Investments in subsidiaries

The Group has investments in the following subsidiaries:

Name Registered office Principal activity Year/

currency Capital Share Welltec Oilfield Services Ltd.** ........... Indonesia Sales Company 2005/USD 500,000 95% Welltec Oilfield Services Sdn. Bhd** ... Malaysia Sales Company 2005/MYR 300,000 49% Welltec (UK) Ltd.** .............................. Scotland – UK Sales Company 2002/GBP 1 100% Welltec Canada Inc.** ........................... Canada Sales Company 2001/CAD 1 100% Welltec Inc. (USA)** ............................ USA Sales Company 2000/USD 100 100% RS 2001 ApS** ..................................... Denmark Sales Company 2001/DKK 125,000 100% Welltec Oilfield Services Pty. Ltd.** .... Australia Sales Company 2005/AUD 10 100% Welltec Latinamerica ApS** ................. Denmark Sales Company 2005/DKK 125,000 100% Welltec Africa ApS** ........................... Denmark Sales Company 2005/DKK 125,000 100% Welltec Venezuela CA*** .................... Venezuela Sales Company 2005/VEB 1,000,000 100% Welltec do Brasil Ltda.*** .................... Brazil Sales Company 2006/BRL 174,000 98% Welltec Angola Lda.**** ...................... Angola Sales Company 2006/AON 400,000 49% Welltec Oilfield Services

(Nigeria) Ltd.**** ............................ Nigeria Sales Company 2006/DKK 1,075,000 30% Welltec Oilfield Services (RUS) Ltd.** Russia Sales Company 2007/RUB 100,000 99% Welltec Oylfield Services

(Azerbaijan) Ltd.** ........................... Azerbaijan Sales Company 2007/USD 5,000 99% Welltec Oilfield Services Mexico, S.A.***

.......................................................... Mexico Sales Company 2007/MXN 50,000 100% Welltec India Ltd.** .............................. India Sales Company 2008/INR 100,000 100% Welltec Oilfield Services (Saudi Arabia)**

.......................................................... Saudi Arabia Sales Company 2008/SAR 500,000 75% Welltec A/S***** ................................. Denmark Manufacture 1989/DKK 40,000,000 100% Welltec Holding ApS ............................ Denmark Holding Com. 2005/DKK 2,860,000 100% High Pressure Innovation AS** ............ Norway Sales Company 2009/NOK 500,000 100% HPI Technologi AS** ........................... Norway Sales Company 2009/NOK 1,500,000 100% Welltec Oilfield Services (South

Africa) Ltd.**** ................................ South Africa Sales Company 2010/USD 1 100% Welltec Oilfield Services (Kazakhstan)

LLP** ............................................... Kazakhstan Sales Company 2011/KZT 1,000 100%

** Held by Welltec A/S.

*** Held by Welltec Latinamerica ApS.

**** Held by Welltec Africa ApS.

***** Held by Welltec Holding ApS.

Even though Welltec A/S only holds a 49% and 30% ownership interest in three subsidiaries, Welltec A/S controls the three subsidiaries through holdings of more than half of the voting power.

15. Inventories

2011

2010

(Danish kroner, in thousands) Raw materials ......................................................................................................................... 9,239 0 Finished goods ........................................................................................................................ 1,313 0 Total inventories ................................................................................................................... 10,552 0

The total cost of goods sold included in cost of services provided for 2011 amounted to DKK 9,735k.


16. Trade receivables

2011

2010

(Danish kroner, in thousands) Trade receivables before allowance for doubtful debt ............................................................ 290,004 203,971 Write-downs ........................................................................................................................... -1,969 -1,486 Total ....................................................................................................................................... 288,035 202,485 Trade receivables – average fixed time of credit (days) ......................................................... 86 80 Development in write-downs of trade receivables Write-downs at 01.01 ............................................................................................................. -1,486 0 Reversed, unrealized write-downs .......................................................................................... 1,083 0 Amounts written off during the year as uncollectible ............................................................. -1,566 0 Write-down in profit or loss.................................................................................................... 0 -1,486 Write-downs at 31.12 ............................................................................................................ -1,969 -1,486 Specification of trade receivables by due date Not due ................................................................................................................................... 182,647 127,807 Up to 30 days .......................................................................................................................... 56,403 41,741 60-90 days............................................................................................................................... 22,075 21,334 90-120 days............................................................................................................................. 14,451 11,603 120+ days ................................................................................................................................ 12,459 0 Total trade receivables ......................................................................................................... 288,035 202,485

Credit risk management

The Groups credit risk on liquid funds and derivative financial instruments is limited because the counter parties are banks with high credit ratings assigned by the international credit-rating agencies.

The Group’s services are provided to a variety of contractual counter parties and are therefore subject to the risk of non payment for services or non reimbursement of costs. Receivables consist of a relatively small number of customers, but the customers are large corporations in the oil industry. Companies with high credit ratings and the Group’s loss on trade receivables are historically immaterial. There is an ongoing centralized follow-up on out-standing trade receivables in accordance with the Group’s dunning procedures. If there is uncertainty of a customer’s ability or will to pay, and if Management assesses that the receivables is dubious, the receivables will be written down to avoid this risk.

The maximum credit risk related to financial assets corresponds to the carrying amount including write-downs. In case where there may be a risk of loss, a write-down will be made based on individual assessment.

17. Prepayments

2011

2010

(Danish kroner, in thousands) Prepaid insurance .................................................................................................................... 1,054 2,097 Prepaid lease ........................................................................................................................... 2,786 1,458 Prepaid rent ............................................................................................................................. 1,314 2,593 Prepaid refinancing fee* ......................................................................................................... 20,955 0 Other prepayments .................................................................................................................. 6,073 5,377 32,182 11,525

*Prepaid refinancing fee is cost related to the refinancing in 2012, refer to note 29. The cost will be recognized as part of the new debt facility.


18. Share capital

The share capital consists of 4,692,784 units of DKK 1. All the shares are fully paid.

Class A Shares

Class B

Shares

2011 Total

Class A

Shares

Class B

Shares 2010 Total

Share units 01.01 ................................................................3,074 1,620 4,694 2,895 1,620 4,515 Capital increase 25.06.10 ................................................................0 0 0 179 0 179 Share units 31.12. ................................................................3,074 1,620 4,694 3,074 1,620 4,694

Both the Class A and Class B Shares are considered to be equity instruments as they do not include any contractual obligations to deliver cash to the shareholders. Class A and Class B shares have equal voting rights. Class B shares are preference shares as they within a certain frame have certain preference rights over Class A shares when distributions are made by Welltec.

In December 2008 and in relation to the capital increase of DKK 26,350k (nominal DKK 92,912 at DKK 283.60 per share), Welltec International ApS issued 103,582 warrants of DKK 1 to its owner to subscribe for Class A Shares. The warrants are considered to be equity instruments as they can only be exercised with the delivery of the underlying shares. There are four vesting periods commencing December 2008 through to December 2011 with equal portions of warrants and with certain vesting criteria attached for the individual vesting periods which are forward looking in nature. At the end of December 2011, the vesting critieria have not been met, for which reason the warrants no longer exist.

In 2007 Welltec International ApS issued 71,601 warrants to Jørgen Hallundbæk as owner, which can be exercised as at December 31, 2011. The total fair value of these warrants is DKK 34,540 k as at December 31, 2011.

19. Deferred tax assets and liabilities

2011 2010

(Danish kroner, in thousands) Deferred tax 01.01 .............................................................................................................. 241,257 210,274 Exchange rate adjustments.................................................................................................. -109 470 Unrecognized deferred tax assets in foreign subsidiaries ................................................... 0 2,674 Unrecognized deferred tax liability in foreign subsidiaries ................................................ 0 -883 Tax contingencies ............................................................................................................... 18,587 0 Addition as part of acquisition of HPI ................................................................................ 0 4,890 Adjustment in deferred tax previous years ......................................................................... 3,775 14,784 Change in deferred tax for the year..................................................................................... -4,231 9,048 Deferred tax assets (-)/liabilities 31.12 ............................................................................ 259,279 241,257 Deferred tax breakdown: Intangible assets .................................................................................................................. 268,538 258,228 Tangible assets .................................................................................................................... -13,729 -17,411 Current and non-current liabilities ...................................................................................... -9,537 6,306 Current assets ...................................................................................................................... 11,376 0 Tax contingencies ............................................................................................................... 25,482 0 Tax loss carried forward ..................................................................................................... -22,851 -5,866 Deferred tax assets (-)/liabilities 31.12 ............................................................................ 259,279 241,257 Deferred tax assets, not recognized: Value of deferred tax assets, not recognized................................................................... 0 25,018 Deferred tax liability, not recognized: Value of deferred tax liability, not recognized ............................................................... 0 8,441 Deferred tax is recognized in the statement of finansial position with: Deferred tax assets .............................................................................................................. -22,846 -2,485 Deferred tax liabilities ........................................................................................................ 282,125 243,742 259,279 241,257

The Group does not recognize deferred tax losses that are unlikely to be realized or otherwise exposed to major risk or uncertainty.


20. Current and non-current financial liabilities

2011

2010

(Danish kroner, in thousands) Bank debt ................................................................................................................................ 978,541 999,039 Finance lease commitments .................................................................................................... 30,259 56,109 1,008,800 1,055,148 Due within 1 year .................................................................................................................... 100,489 132,584 Due within 1-2 years ............................................................................................................... 138,397 113,165 Due within 2-3 years ............................................................................................................... 582,073 391,501 Due within 3-4 years ............................................................................................................... 0 236,275 Due within 4-5 years ............................................................................................................... 187,841 3,049 Due after 5 years ..................................................................................................................... 0 178,574 1,008,800 1,055,148 Recognition of short-term and long-term financial liabilities in the statement of financial position: Non-current financial liabilities — lease commitments .......................................................... 16,249 25,784 Non-current financial liabilities — bank debt ......................................................................... 892,062 896,780 Current financial liabilities ...................................................................................................... 100,489 132,584 1,008,800 1,055,148

2010

Currency Expiry

Fixed or floating interest

Effective interest rate %

Carrying amount

local’000

Carrying amount

DKK’000 DKK ............................................ 2014 floating 2.84-4.34 587,612 587,612 USD ............................................. 2013 floating 1.84-3.34 36,258 203,527 EUR ............................................. 2016 see below 2.76-10.04 35,079 261,493 CAD ............................................. 2010 floating 1.37-7.44 448 2,516 1,055,148

2011

Currency Expiry



Carrying amount

local’000

Carrying amount

DKK’000 DKK ............................................ 2012-2016 floating 3.95-5.51 525,954 525,954 USD ............................................. 2013-2014 floating 3.53-4.16 36,242 208,232 EUR ............................................. 2014-2016 see below 4.38-12.53 36,712 272,924 RUB ............................................. 2013 floating 5 847 151 CAD ............................................. 2012 floating 4.61-4.77 274 1,539 1,008,800 As the loans have floating interest, there is no significant difference between amortized cost and fair value.

Mezzanine loan facility

In July 2007 Welltec International ApS issued a mezzanine loan facility to certain debt lenders of EUR 20,588k. The loan has a floating interest of approx 11.99-12.53 and a PIK fixed interest of 6.75% per annum to the principal loan annually. The loan is repayable in full in July 2016 (interest of approx 9.99-10.04 and a PIK fixed interest of 5% in 2010).


20.1 Finance lease obligations

Finance lease relates to manufacturing equipment with lease terms of 3-5 years. The Group has options to purchase the equipment for a nominal amount at the conclusion of the lease agreements. The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets.

2011 2010

Minimum lease

payments

Present value of

minimum lease

payment

Minimum lease

payments

Present value of

minimum lease

payment (Danish kroner, in thousands)

Maturity of finance lease obligations Within 1 year ............................................................................................... 14,842 14,010 32,782 30,325 Between 1 and 5 years ................................................................................. 18,155 16,249 28,696 25,650 Over 5 years ................................................................................................. 0 0 116 133 Total ............................................................................................................ 32,997 30,259 61,594 56,108

The fair value of the finance lease liabilities is approximately equal to their carrying amount.

20.2 Maturity dates for financial liabilities

2010

DKK’000 Less than 1 year Between 1 and

5 years Later than 5 years Total

Finance lease commitments .. 30,325 25,651 133 56,109 Bank debt .............................. 102,259 718,348 178,432 999,039 Payables to affiliates ............. 1,516 0 0 1,516 Trade payables ...................... 76,266 0 0 76,266 Other payables ...................... 125,224 8,237 0 133,461

Total ................................................. 335,590 752,236 178,565 1,266,391

All debt is measured at amortized cost, except from derivative financial instruments of DKK 34,697k that are measured at fair value through statement of comprehensive income.

The amounts in the table above are exclusive of interest

2011



Finance lease commitments .. 14,010 16,249 0 30,259 Bank debt .............................. 86,479 892,062 0 978,541 Payables to affiliates ............. 1,801 0 0 1,801 Trade payables ...................... 102,416 0 0 102,416 Other payables ...................... 206,099 4,846 0 210,945

Total ................................................. 410,805 913,157 0 1,323,962

All debt is measured at amortized cost, except from derivative financial instruments of DKK 68,894k that are measured at fair value through statement of comprehensive income.

The amounts in the table above are exclusive of interest


21. Other payables


Wages and salaries, personal income taxes, social security costs, etc payable ....................... 33,497 25,402 Holiday pay obligation ........................................................................................................... 30,925 23,104 Derivative financial instruments ............................................................................................. 68,894 34,697 Vat and duties ......................................................................................................................... 13,517 15,471 Refinancing fee payable ......................................................................................................... 9,560 0 Other costs payable ................................................................................................................. 49,706 26,550 206,099 125,224

22. Other provisions


Balance at 01.01. .................................................................................................... 10,952 18,442 Additions earn-out provision .................................................................................. 0 1,778 Additions other provisions ...................................................................................... 0 1,418 Provisions used ....................................................................................................... -9,534 -5,496 Transfer to other payables....................................................................................... -1,418 -5,190 Balance at 31.12 .................................................................................................... 0 10,952

23. Fees to auditor appointed at the Annual General Meeting


Statutory audit services ..................................................................................... 3,108 2,456 1,892 Statutory audit services .................................................................................. 3,108 2,456 1,892 Non-audit services: Opinions ........................................................................................................... 20 20 30 Tax advising ..................................................................................................... 1,652 1,367 1,594 Other ................................................................................................................. 4,795 6,378 3,986 Non-audit services ........................................................................................... 6,467 7,765 5,610 Total fees to auditors ...................................................................................... 9,575 10,221 7,502

24. Assets charged and contingent liabilities

In 2011 the Group has issued bank guarantees to third parties in the amount of DKK 21,477k. In 2010 guarantees to third parties were DKK 36,776k.


25. Operating lease commitments


Rental and leasing obligations Due within 1 year........................................................................................... 26,799 15,040 15,852 Due within 1 to 5 years .................................................................................. 63,098 26,965 17,627 Total rental and leasing obligations ........................................................... 89,897 42,005 33,479 Rental and leasing cost for the year ........................................................... 31,287 17,140 17,297 The Group has entered into operational leasing agreement regarding office furniture and company cars for the period 2007-2013.

Rental obligations are running from 3 to 36 months.

26. Financial instruments

26.1 General capital structure

The Group is financed partly through self-financing and partly through long-term debt. It is the objective to reduce long-term debt through positive cash flow. A set of covenants has been defined for the Group, and Management has monitored the financial performance relatively to these in 2011. These covenants are set in relation to the bank debt and leasing debt.

In 2011 Welltec applied for a waiver for testing the debt covenant on Capex at December 31, 2011. The waiver was accepted by the banks. Therefore the terms for repayment remained unchanged at December 31, 2011.

It is Management’s intention to reduce exposure to foreign exchange risks by hedging parts of the forecasted net cash flow in selected currencies.

Exposure to fluctuations in interest rates will be reduced through swaps or zero cost collars on long-term loans.

26.2 Market risk

Due to the Group’s foreign activities and credit facilities in foreign currencies, its profit/loss, cash flows and equity are affected by changes in exchange rates and interest rates for a number of currencies.

26.2.1 Foreign currency risk management

The reporting currency of the Group is Danish kroner and the functional currency of each of the Group’s subsidiaries is that of the country in which the subsidiary is domiciled. A significant proportion of the Group’s revenues, expenses and other liabilities is denominated in currencies other than Danish kroner, in particular US dollars, Norwegian kroner and Canadian dollars. Exchange rate exposures are managed within approved policy parameters utilizing forward foreign exchange contracts.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.

Assets Liabilities 2011 2010 2011 2010 (Danish kroner, in thousands)

USD ........................................................................................ 219,922 177,075 551,997 490,990 CAD ........................................................................................ 84,159 81,763 42,429 47,078 NOK ....................................................................................... 721,376 426,159 488,923 208,841


26.2.2 Foreign currency sensitivity analysis

The Group is mainly exposed to the currency of USD, NOK and CAD.

The following table details the Group’s sensitivity to a 10% increase and decrease in USD, NOK and CAD against the relevant foreign currencies. The percentage used is the sensitivity rate and is representing Management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in a currency other than the currency of the lender or the borrower. A positive number below indicates an increase in profit and equity where the currency strengthens 10% against the relevant currency. For a 10% weakening of the currency against the relevant currency, there would be a comparable impact on the profit and other equity, and the balances below would be negative.

Currency

USD impact Currency

NOK impact Currency

CAD impact 2011 2010 2011 2010 2011 2010 (Danish kroner, in thousands)

Profit/Loss ............. -41,059 -37,446 45,883 42,029 11,789 10,637 Equity ..................... -10,111 -7,585 24,517 22,488 8,223 7,577

26.2.3 Fair value of swaps, caps and foreign exchange forward contracts

2010

Principal Market value Exchange gain/loss

recognized in the P/L Maturity

period (Danish kroner, in thousands)

Interest swap USD ......................................................................... 36,000 -2,494 2,994 2011 Total swap contracts (loss) .................................... -2,494 2,994 Interest cap DKK ........................................................................ 445,000 -3,329 4,817 2011 EUR ......................................................................... 31,000 -1,979 3,381 2011 Total cap contracts (loss) ....................................... -5,308 8,198 Foreign exchange forward contracts USD ......................................................................... 12,000 -8,865 -4,977 3 months USD ......................................................................... 10,000 -7,710 -4,592 6 months USD ......................................................................... 7,000 -5,046 -2,798 9 months USD ......................................................................... 7,000 -5,274 -2,829 1 year Total foreign exchange forward contracts (loss) . -26,895 -15,196 Total ........................................................................ -34,697 -4,004


2011

Principal Market value Exchange gain/loss

recognized in the P/L Maturity

period (Danish kroner, in thousands)

Interest swap USD ......................................................................... 36,000 -5,633 -3,139 2014 Total swap contracts (loss) .................................... -5,633 -3,139 Interest cap DKK ........................................................................ 445,000 -22,354 -19,025 2014 EUR ......................................................................... 31,000 -9,319 -7,340 2014 Total cap contracts (loss) ....................................... -31,673 -26,365 Foreign exchange forward contracts USD ......................................................................... 12,000 -10,211 -1,346 3 months USD ......................................................................... 10,000 -8,716 -1,006 6 months USD ......................................................................... 7,000 -6,100 -1,054 9 months USD ......................................................................... 7,000 -6,560 -1,286 1 year Total foreign exchange forward contracts (loss) . -31,587 -4,692 Total ........................................................................ -68,893 -34,196

26.2.4 Fair value hierarchy of derivative financial instruments that are measured at fair value in the statement of financial position

2010

Quoted prices level 1

Observable input level 2

Non-observable

input level 3 Total (Danish kroner, in thousands)

Derivative financial instruments ............................................................ 0 34,697 0 34,697 Total financial liabilities ...................................................................... 0 34,697 0 34,697

2011

Quoted prices level 1

Observable input level 2

Non-observable

input level 3 Total (Danish kroner, in thousands)

Derivative financial instruments ............................................................ 0 68,893 0 68,893 Total financial liabilities ...................................................................... 0 68,893 0 68,893

There have been no transfers between levels 1, 2 and 3 in 2011 or in 2010.

The derivative financial instruments that are measured subsequent to initial recognition at fair value are all measured by the level 2 measurements, which means that fair value measurements are based on observable input.

26.2.5 Interest rate risk management

The Group’s interest rate risk relates mainly to the Group’s interest-bearing debt to banks and credit institutions. The Group is primarily exposed to fluctuation in interest rates in US and EU. The Group has partially hedged fluctuations in the interest rate through certain interest swaps.

The Group does not apply hedge accounting to its derivative financial instruments. Thus changes in fair value are recognized currently in statement of comprehensive income as financial income or financial expenses.


26.2.6 Interest rate sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 250 basis point increase or decrease is representing Management’s assessment of the reasonably possible change in interest rate.

If interest rates had been 250 basis points higher/lower and all other variables were held constant, the Group’s:

Profit for the year and other equity ended December 31, 2011 would decrease/increase by DKK 25,613k (2010: Decrease/increase by DKK 23,981k).

The effect of financial instruments has not been included in the calculation.

26.3 Liquidity risk management

It is the Group’s policy that capital raising and distribution of cash are managed centrally by the Group’s finance department to the extent it is deemed appropriate. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows.

The Group is adjusting centrally the cash outflow in investments in intangible assets and property, plant and equipment in Denmark.

Please see note 20.2 Maturity dates for financial liabilities

27. Related parties

Welltec’s related parties

• The parent company’s principal shareholder, JH Holding. Allerød, ApS, Haregabsvej 15, 3230 Græsted, Denmark, which is wholly owned by Jørgen Hallundbæk

• Summit Partners VII-B S.a.r.l. Avenue de la Gare 41, L-1611 Luxembourg, Luxembourg (owns more than 5%) • Summit Partners VII-A S.a.r.l. Avenue de la Gare 41, L-1611 Luxembourg, Luxembourg (owns more than

5%) • Companies in which the principal shareholder exercises controlling influence, i.e. Haregabgaard ApS,

Haregabsvej 15, Esbønderup Skovhuse, 3230 Græsted • Members of the parent company’s Executive Management and Board of Directors as well as close relatives of

the people. • Subsidiaries of Welltec International Aps – see note 14 in the consolidated statements

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

27.1 Trading transactions

During the year, group entities entered into the following trading transactions with related parties that are not members of the Group:

2011 2010 Affiliates* Key management Affiliates* Key management

Interest income/-expenses (-) ................ 113 0 14 0 Total ..................................................... 113 0 14 0


*The parent company’s principal shareholder is defined as affiliates.

The following balances were outstanding at the end of the reporting period:

Amounts owed by related parties Amounts owed to related parties

2011 2010 2011 2010

JH Holding. Allerød, ApS ................................ 0 0 -1,801 -1,516

Please see note 4 Staff costs – remuneration to members of the Executive Board, Board of Directors and Key management personnel

28. Events after the balance sheet date

Welltec Secures $325m Senior Note Offering

On February 1, 2012 Welltec A/S announced the completion of an offering of US$ 325m aggregate principal amount of its 8% Senior Secured Notes due 2019 (the "Notes"). The 144A/RegS offering drew significant demand from institutional investors in both Europe and the US.

The Notes have been assigned a (P)B1-rating by Moody’s (stable outlook) and a BB-rating by Standard & Poor’s (stable outlook) with equivalent corporate ratings. The Notes have been listed on the Official List and admitted to trading on the Euro MTF Market of the Luxembourg Stock Exchange.

The net proceeds of the offering of the Notes will be used to refinance existing credit facilities, pay a special shareholder distribution and for general corporate purposes. Part of the shareholder distribution is done through payout of extraordinary dividend from Welltec International ApS. The offering marks Welltec’s successful debut in the international capital markets. The offering strengthens Welltec’s capital base in support of Welltec’s continued high growth. The Notes, which carry interest at a fixed coupon, will mature in 2019 and extend Welltec’s funding significantly compared to previous facilities. The US dollar denomination of the Notes, moreover, creates a natural hedge of Welltec’s predominantly US dollar based revenue.

The offering was arranged by Goldman Sachs International and Credit Suisse as Joint Book Runners and DNB Markets as Co-Manager. DNB Bank has made available a new multicurrency working capital facility in an amount of US$ 20m. Bruun & Hjejle acted as capital markets adviser and Danish legal counsel.

To complete the refinancing of existing facilities following extraordinary dividends have been distributed. From Welltec Africa ApS DKK 31.4m was distributed to Welltec A/S. From Welltec A/S DKK 728.6m was distributed to Welltec Holding ApS. From Welltec Holding ApS DKK 787.3m was distributed to Welltec International ApS. Welltec Canada Acquires Endeavor E-line Services in February 2012

In February 2012 Welltec announced that the company, through its wholly owned subsidiary Welltec Canada Inc. grew its operations with the acquisition of Endeavor E-line Services, the wireline portion of Essential Energy Services, Ltd. in Calgary, Alberta. The total cost of the business combination was agreed to DKK 41.4m. The transaction is financed through existing cash resources.

As the final acquisition date is after the publication of the annual report for 2011, it is not possible to provide details about the pre-acquisition balance sheet and the total transaction costs.

No further significant events regarding the Group's activities have occurred since December 31, 2011.



PARENT

PARENT STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

Note

2011

2010

2009

(Danish kroner, in thousands) Administrative costs ............................................ 3 -2,601 -825 -3,523 Operating loss (EBIT) before special items ..... -2,601 -825 -3,523 Special items ........................................................ 4 0 -1,652 0 Operating loss (EBIT) ....................................... -2,601 -2,477 -3,523 Financial income .................................................. 5 1,172 5,294 23,965 Financial expenses ............................................... 6 -64,192 -44,029 -60,580 Loss before tax ................................................... -65,621 -41,212 -40,138 Income taxes ........................................................ 7 4,998 3,012 5,415 Loss for the year................................................. -60,623 -38,200 -34,723 Total comprehensive income -60,623 -38,200 -34,723

Allocation of loss for the year Profit for the year attributable to: Welltec International ApS shareholders’ share of loss ................................................................... -60,623 -38,200 -34,723 -60,623 -38,200 -34,723 Total comprehensive income attributable to: Welltec International ApS shareholders’ share of comprehensive income .................................... -60,623 -38,200 -34,723 -60,623 -38,200 -34,723


PARENT STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010

Note

2011

2010

(Danish kroner, in thousands) Non-current assets Financial assets Deferred tax assets ........................................................................................................ 12 0 3,341 Investments in subsidiaries ........................................................................................... 10 2,007,210 2,007,210 Other receivables .......................................................................................................... 0 2,772 Total financial assets ................................................................................................... 2,007,210 2,013,323 Total non-current assets ............................................................................................. 2,007,210 2,013,323 Current assets Receivables Tax receivables ............................................................................................................. 8,518 5,227 Receivables from subsidiaries and affiliates ................................................................. 64,045 107,119 Other receivables .......................................................................................................... 0 594 Total receivables ......................................................................................................... 72,563 112,940 Cash and cash equivalents ......................................................................................... 114 329 Total current assets..................................................................................................... 72,677 113,269 Total assets .................................................................................................................. 2,079,887 2,126,592


PARENT STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010

Note 2011 2010 (Danish kroner, in thousands)

Equity Share capital ............................................................................................................... 11 4,694 4,694 Retained earnings........................................................................................................ 1,355,482 1,382,475 Equity attributable to equity holders of the parent ............................................... 1,360,176 1,387,169 Total equity ............................................................................................................... 1,360,176 1,387,169 Non-current liabilities Deferred tax liabilities ................................................................................................ 12 5 0 Bank debt .................................................................................................................... 13 632,564 660,526 Other non-current liabilities ........................................................................................ 0 362 Total non-current liabilities ..................................................................................... 632,569 660,888 Current liabilities Current portion of non-current liabilities .................................................................... 13 86,403 78,389 Other payables ............................................................................................................ 14 739 146 Total current liabilities ............................................................................................. 87,142 78,535 Total liabilities ........................................................................................................... 719,711 739,423 Total equity and liabilities ........................................................................................ 2,079,887 2,126,592


PARENT STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

Share- capital

Retained earnings Total

(Danish kroner, in thousands) Equity at December 31, 2009 ................................................................ 4,515 1,368,673 1,373,188 Loss for the year ................................................................................................0 -38,200 -38,200 Total comprehensive income for the year ..............................................................0 -38,200 -38,200 Capital increases ................................................................................................179 50,518 50,697 Share-based payment to executives................................................................ 0 1,484 1,484 Other transactions................................................................................................179 52,002 52,181 Equity at December 31, 2010................................................................ 4,694 1,382,475 1,387,169 Loss for the year ................................................................................................0 -60,623 -60,623 Total comprehensive income for the year ..............................................................0 -60,623 -60,623 Share-based payment to executives................................................................ 0 33,630 33,630 Other transactions................................................................................................0 33,630 33,630 Equity at December 31, 2011................................................................ 4,694 1,355,482 1,360,176


PARENT STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

Note 2011 2010 2009 (Danish kroner, in thousands)

Operating loss (EBIT) .......................................... -2,601 -2,477 -3,523 Non-cash adjustments .......................................... 8 -580 19,908 11,679 Changes in working capital.................................. 9 77,637 29,972 76,745 Income taxes paid ................................................ 5,053 9,848 3,505 Other receivables, long term ................................ 2,772 0 -2,772 Other payables, long term .................................... -362 0 0 Cash flows from operating activities ................ 81,919 57,251 85,634 Financial income received ................................... 1,172 257 22,019 Cash flows from investing activities ................. 1,172 257 22,019 Financial expenses paid ....................................... -38,781 -33,049 -50,845 Other financial expenses ...................................... -14,491 3,250 0 Installments on current and non-current debt ...... -30,034 -78,406 -57,698 Capital increase .................................................... 0 50,697 898 Cash flows from financing activities ................ -83,306 -57,508 -107,645 Increase/decrease in cash and cash equivalents .......................................................... -215 0 8 Cash and cash equivalents at 01.01 ..................... 329 329 321 Cash and cash equivalents at 31.12 .................. 114 329 329


TABLE OF CONTENTS NOTES

1. Accounting policies .......................................................................................................................................... 70 2. Critical accounting judgments and key sources of estimation uncertainty ....................................................... 70

Statement of comprehensive income 3. Staff costs ......................................................................................................................................................... 70 4. Special items ..................................................................................................................................................... 70 5. Financial income............................................................................................................................................... 71 6. Financial expenses ............................................................................................................................................ 71 7. Income taxes ..................................................................................................................................................... 72

Statement of cash flows 8. Non-cash adjustments ....................................................................................................................................... 72 9. Changes in working capital .............................................................................................................................. 72

10. Investment in subsidiaries................................................................................................................................. 73 11. Share capital ..................................................................................................................................................... 73 12. Deferred tax assets and liabilities ..................................................................................................................... 73 13. Current and non-current financial liabilities ..................................................................................................... 74 14. Other payables .................................................................................................................................................. 75

Other 15. Fees to auditor appointed at the Annual General Meeting ................................................................................ 75 16. Assets charged and contingent liabilities .......................................................................................................... 76 17. Derivative financial instruments ....................................................................................................................... 76 18. Related parties .................................................................................................................................................. 76 19. Events after the balance sheet date ................................................................................................................... 76


NOTES TO PARENT ANNUAL FINANCIAL STATEMENTS

1. Accounting policies

Basis of accounting

The annual report for 2011 of the parent company Welltec International ApS is presented in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the EU and additional Danish disclosure requirements for annual reports of reporting class C (large) enterprises. Please see the Danish Executive Order on IFRS adoption issued in accordance with the Danish Financial Statements Act.

The annual report is presented in thousands of Danish kroner (DKK), which also is the functional currency of the parent company.

Differences relative to the Group’s accounting policies

The parent company’s accounting policies for recognition and measurement are in accordance with the Group’s policies with the exceptions stated below:

Investments in subsidiaries

Investments in subsidiaries are measured at cost in the parent company’s financial statements. Where the recoverable amount of the investments is lower than cost, the investments are written down to this lower value. In addition, cost is written down to the extent that dividends distributed exceed the accumulated earnings in the company since the acquisition date.

2. Critical accounting judgments and key sources of estimation uncertainty

The determination of carrying values and preparation of the annual report build upon estimates made by Management of the likely effect of future events on the value of plant equipment and fleet under construction and development projects. In addition Management has determined fair value of separable intangible assets acquired through business combination, including impairment test of goodwill and other intangible assets. The estimates used build upon assumptions which, in the opinion of Management, are valid albeit inherently uncertain and unpredictable. An assessment is made of the possibility of recovering the carrying value of intangible and tangible assets. The assessment of recoverable amounts is based upon estimated returns generated by those assets in the cash-generating unit.

3. Staff costs

There have been no employees in the parent company for the financial years 2009-2011

4. Special items


Non-recurring consultancy fees ..................................................................... 0 1,652 0 0 1,652 0


5. Financial income


Interest income .............................................................................................. 192 257 22,019 Interest income from subsidiaries and affiliates ............................................ 980 5,037 0 Interest income from financial assets that are not measured at fair value through profit or loss ......................................................................... 1,172 5,294 22,019 Exchange rate gains ....................................................................................... 0 0 1,946 1,172 5,294 23,965

6. Financial expenses


Interest expenses .............................................................. -51,173 -41,580 -59,096 Redemption fee* .............................................................. -11,671 0 0 Other financial expenses .................................................. 0 -201 0 Interest expenses from financial liabilities that are not measured at fair value through profit or loss ....... -62,844 -41,781 -59,096 Exchange rate loss ........................................................... -1,348 -2,248 -1,484 -64,192 -44,029 -60,580

*Redemption fee consists of costs related to refinancing of earlier credit facilities.

The net exchange rate loss at parent level at December 31, 2011 was DKK 1,348k (a net exchange rate loss of DKK 2,248k in 2010) and (a net exchange rate gain of DKK 462k in 2009).


7. Income taxes


Current tax ............................................................................................... -8,518 -5,227 -10,642 Adjustment in corporation tax previous years ......................................... 174 794 5,577 Current tax incl. adj. in corporation tax previous years .................... -8,344 -4,433 -5,065 Adjustment in deferred tax previous years .............................................. 3,341 4,589 -1,144 Change in deferred tax ............................................................................. 5 -3,168 794 Income taxes ........................................................................................... -4,998 -3,012 -5,415 A breakdown of tax: Profit/loss before tax ................................................................................ -65,621 -41,212 -40,138 -65,621 -41,212 -40,138 Reconciliation of tax rate (%) Danish corporation tax rate 25 25 25 Non-taxable income and non-deductible expenses -12 -5 -1 Other, including adjustment to previous years -5 -13 -11 8 7 13

No income tax has been recognized directly in other comprehensive income or in equity in 2009, 2010 and 2011.

8. Non-cash adjustments


Currency adjustments, other .................................................. -580 13,387 10,943 Interest income from affiliates ............................................... 0 5,037 0 Share-based payments ........................................................... 0 1,484 736 -580 19,908 11,679

9. Changes in working capital


Change in receivables and prepayments ........................................ 594 -476 -117 Change in receivables from subsidiaries and affiliates .................. 76,704 41,636 81,065 Change in other payables ............................................................... 339 -11,188 -4,203 77,637 29,972 76,745


10. Investments in subsidiaries

2011

2010

(Danish kroner, in thousands) Acquisition cost 01.01 ............................................................................................................ 2,007,210 2,007,210 Additions ................................................................................................................................ 0 0 Acquisition cost 31.12 ........................................................................................................... 2,007,210 2,007,210

The carrying amount of the investment in the subsidiary is pledged as security for loans.

The parent company has an investment in the following subsidiary:

Name Registered office 2011 2010 Welltec Holding ApS ........................................................................................ Denmark 100%* 100%*

* Welltec Holding ApS was acquired on July 27, 2007.

11. Share capital

See note 18 Share capital in the consolidated financial statements

12. Deferred tax assets and liabilities


Deferred tax 01.01 .............................................................................................................. -3,341 -4,762 Adjustment in deferred tax previous years ......................................................................... 3,341 4,589 Change in deferred tax for the year..................................................................................... 5 -3,168 Deferred tax assets (-)/liabilities 31.12 ............................................................................ 5 -3,341 Deferred tax breakdown: Tax loss carried forward ..................................................................................................... 0 -3,341 Current and non-current liabilities ...................................................................................... 5 0 Deferred tax assets (-)/liabilities 31.12 ............................................................................ 5 -3,341 Deferred tax are recognized in the balance with: Deferred tax assets .............................................................................................................. 0 -3,341 Deferred tax liabilities ........................................................................................................ 5 0 5 -3,341

The parent company does not recognize deferred tax losses that are unlikely to be realized or otherwise exposed to major risk or uncertainty.


13. Current and non-current financial liabilities


Bank debt ................................................................................................................................ 718,967 738,915 718,967 738,915 Due within 1 year.................................................................................................................... 86,403 78,389 Due within 1-2 years ............................................................................................................... 126,839 78,389 Due within 2-3 years ............................................................................................................... 315,629 223,166 Due within 3-4 years ............................................................................................................... 0 180,531 Due within 4-5 years ............................................................................................................... 190,096 0 Due after 5 years ..................................................................................................................... 0 178,440 718,967 738,915 Recognition of short-term and long-term financial liabilities in the statement of financial position: Non-current financial liabilities – bank debt........................................................................... 632,564 660,526 Current financial liabilities ..................................................................................................... 86,403 78,389 718,967 738,915

2010

Currency Expiry



carrying amount

local’000

carrying amount

DKK’000 DKK ............................................ 2016 floating 2.84-4.34 407,682 407,682 USD ............................................. 2016 floating 1.84-3.34 12,424 69,740 EUR ............................................. 2016 see below 2.76-10.04 35,079 261,493 738,915

2011

Currency Expiry



carrying amount

local’000

carrying amount

DKK’000 DKK ............................................ 2016 floating 2.84-4.34 373,066 374,659 USD ............................................. 2016 floating 1.84-3.34 12,424 71,383 EUR ............................................. 2016 see below 2.76-10.04 36,712 272,925 718,967

As the loans have floating interest, there is no significant difference between amortized cost and fair value.

Mezzanine loan facility

In July 2007 Welltec International ApS issued a mezzanine loan facility to certain debt lenders of EUR 20,588k. The loan has a floating interest of approx 11.99-12.53 and a PIK fixed interest of 6.75% per annum to the principal loan annually. The loan is all repayable in July 2016 (interest of approx 9.99-10.04 and a PIK fixed interest of 5% in 2010).

Please see note 20 in the consolidated financial statements


13.1 Maturity dates for financial liabilities

2010



Bank debt .............................. 78,389 482,086 178,440 738,915 Other payables ...................... 146 362 0 508

Total ................................................. 78,535 482,448 178,440 739,423

All liabilities shown in the table above are measured at amortized cost. The amounts are exclusive of interest.

2011



Bank debt .............................. 86,403 632,564 0 718,967 Other payables ...................... 739 0 0 739

Total ................................................. 87,142 632,564 0 719,706

All liabilities shown in the table above are measured at amortized cost. The amounts are exclusive of interest.

14. Other payables


Other costs payable ................................................................................................................. 739 146 739 146

15. Fees to auditor appointed at the Annual General Meeting


Statutory audit services ..................................................................................... 125 125 125 Statutory audit services .................................................................................. 125 125 125 Non-audit services: Opinions ........................................................................................................... 0 20 20 Other ................................................................................................................. 0 0 0 Non-audit services ........................................................................................... 0 20 20 Total fees to auditors ...................................................................................... 125 145 145


16. Assets charged and contingent liabilities

See note 24 Assets charged and contingent liabilities

As security for bank debt, shares in the subsidiaries Welltec A/S, RS2001 ApS, Welltec Africa ApS, Welltec Latinamerica ApS, Welltec (UK) Ltd., Welltec Canada Inc. and Welltec Inc. (USA) have been pledged.

17. Derivative financial instruments

See note 26 Financial instruments in the consolidated financial statements

18. Related parties

See note 27 Related parties in the consolidated financial statements

18.1 Trading transactions

During the year, group entities entered into the following trading transactions with related parties that are not members of the parent company:

2011 2010 (Danish kroner, in thousands) (Danish kroner, in thousands)

Subsidiaries Affiliates Subsidiaries Affiliates Interest income/-expenses (-) ................ 450 530 4,830 207 Total ..................................................... 450 530 4,830 207

The following balances were outstanding at the end of the reporting period:

Amounts owed by related parties Amounts owed to related parties

2011 2010 2011 2010

JH Holding. Allerød, ApS ................................ 15,894 10,310 0 0 Subsidiaries ................................................................ 48,151 96,809 0 0

19. Events after the balance sheet date

See note 29 Events after the balance sheet date in the consolidated financial statements.

Documents

AnnuAl RepoRt - · PDF filethe consolidated financial statements and ... Welltec® AnnuAl RepoRt 2011 8 ConsolIDAteD KeY ... and amortization. depreciation for these purposes includes