annual report ao - Atlantic Offshore

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annual report 2012

32

We will lead in our business segment

-This is Atlantic Offshore 4-The Management and board of Directors 8-The Fleet 12

-Newbuildings 20

-QHSE 24

-Director’s Report and Accounts 28

-Profit and loss account 34-Balance sheet 35-Cash Flow Statement 37-Notes to the Accounts 38-Auditor’s Report 56

CONTENT

Atlantic Offshore is building competences and assets in order to further develop our position in the rescue/field support and platform supply markets.

Our clients rely on our ability to deliver quality services in an environmentally responsible manner. We know that every day of the year, we have to earn the trust of our clients. This is the basis of everything that we do.

An introductionAtlantic Offshore AS’ main office is located at the Coast Center Base, Sotra, outside Bergen, Norway, with a branch office in Aberdeen, Scotland. Both offices with full manage-ment set up. The Group currently operates 23 vessels off Ireland, in the Mediterranean, Southern Atlantic and in the North Sea. Atlantic Offshore continuously strives to improve the environmental aspect in operating our vessels.

Atlantic Offshore is a supplier of ERRV (Emergency Rescue and Recovery) and PSV (Platform Supply) services to the oil and gas industry that customers prefer to work with and employees prefer to work for.

2012 - A summarySuccess is always based upon following a roadmap that describes a journey towards a goal. In Atlantic Offshore, the goal is to become a preferred supplier of services in the ERRV and PSV segments. The roadmap towards the goal includes activities such as building competences in our organization, improving our internal systems so that quality and efficiency will improve, and renewing our fleet.

Last year, we took significant strides on this journey:

- The management systems for Atlantic Offshore AS were approved by Det norske Veritas according to the ISO 9001 and ISO 14001 standards;

- Considerable resources were invested into the training of our vessel crews;

- Orders for five vessel newbuildings were placed with yards in Norway and Spain.

- We placed two loans in the Norwegian bond market, with a total outstanding amount of NOK 300 mill.

During 2012, Atlantic Offshore secured four long-term charter contracts with large oil companies. We believe that more contracts will follow in the years ahead.

Commitment to Safety and the Environment

This is Atlantic Offshore

6

HistoryAtlantic Offshore AS was founded in 2008, under the name Sartor Offshore AS. The Company was built by acquiring vessels and organizational assets from Sartor Shipping AS and Irish Main-port Ltd, and is based upon long-standing traditions in the offshore vessel sector.

Corporate visionOur vision is to be a preferred supplier of multirole and platform supply vessels to the international oil and gas industry. We shall be a company that customers prefer to work with and employees prefer to work for.

Operational objectivesOur goal is to have zero injuries to people, to minimize our impact on

the environment and to minimize loss of or damage to equipment

Financial objectivesOur goal is to achieve profitable growth.

Business segmentsMRV: We shall focus on advanced, built-to-purpose multirole vessels that meet our customers’ expec-tations through delivering the agreed services at a competitive price.

PSV: We shall be a preferred supplier of platform supply vessels, by focussing on customer needs.

Atlantic Offshore AS owns and operates vessels within several market segments, but our main segments are Multirole Rescue

Vessels (Rescue/Environmental/Supply/Tanker Assist Vessels) and Platform Supply Vessels. We have over 400 crew members trained in rescue operations.

Our focusOur main objective is to achieve and maintain best practice in all areas we operate. In Atlantic Offshore, we have a strong focus on competence, health, environ-ment and safety.

The company invests considerable resources in creating a safe and healthy work environment to maintain reliable and environment friendly operations as per national and international regulations and standards for the offshore indus-try.

annual report 2012

Competence is our most valuable asset. It consists of several parts: education, hands-on training, key values, and attitudes. Development of competence is a continuous process in our company.

Atlantic Offshore Rescue LtdAtlantic Offshore Rescue Ltd. is the Aberdeen based Safety Standby operation that evolved from the business of the Havila Group in the United Kingdom dating back to 1995. Today our company is a multinational group providing a full range of multi-role and dedi-cated Emergency Response and Rescue vessels to the offshore oil industry. We are committed to providing our customers with the best possible recovery service in the event of any offshore emer-gency.

The innovative approach we take to our business is backed up by expertise and experience estab-lished over many years. AORL staff are committed to providing our customers with the highest stand-ard of support. We strive to exceed the expectations of our customers by providing a service focussed on safety, reliability and being environmentally conscientious.

From our offices in Aberdeen we own, manage and operate 9 ERRVs & 3 PSVs. In addition we provide crewing services to 2 vessels off-shore Brazil. All of these vessels are manned by highly trained seagoing personnel who are dedicated to the well being of those we sup-port.

Through our commitment to oper-ational know-how, innovation and marine safety, Atlantic Offshore Rescue Ltd aims to be a market leader in offshore vessel operation.

The Customer in Focus

Operational Excellence

The Company

Key ValuesCommitment to Safety and the Environment

The Customer in FocusOperational ExcellenceA Preferred Employer

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Management andBoard of Directors

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annual report 2012

A presentation of Atlantic Offshore’s management and board of directors is given below.

Management

Board of Directors

Stein Hauger started as Superintendent in the Company in March 2009 and is now the project Department

Manager with responsibility of managing all new projects. Previous background includes the Royal Norwegian Navy/Operation with

experience from the Frigate Project and as the Norwegian Defence Attaché in Madrid.

Stein HaugerProject Department

Manager (b.1956)

Rune Stikholmen has been employed in the Company since March 2008. Since 1993 he has worked within personnel management in

public and private sectors.

Rune Stikholmen, HR manager

(b.1969)

Knut Gunnar Hamre has been employed in the Company since December 2005. Prior experience includes 12

years at Viking Life-Saving Equipment AS, as Service Manager and thereafter Area Sales Manager.

Knut Gunnar Hamre, Purchasing Manager

(b.1956)

Knut Øgreid is the chairman and CEO of the Øgreid group of companies. He is also a board member of Scana Industrier ASA, as well as several compa-nies in the Øgreid group. Mr. Øgreid has more than 35 years of experience

across a wide array of businesses and has been instrumental in the crea-tion and growth of the Optimera group, Bavaria Nordic, and several other

businesses as well as a substantial real estate portfolio. Øgreid Eiendom AS owns 8 909 620 shares. Knut Øgreid indirectly controls Øgreid Eiendom AS.

Knut Øgreid, Chairman

(b.1950)

Runar Sakkestad is the CFO of the Øgreid group, and has together with Knut Øgreid worked on the investments and the daily opera-tions of the group since 1993. Mr Sakkestad is also a board mem-

ber of several of the companies in the Øgreid group. He owns 86 393 shares in the Company.

Runar Sakkestad, Board Member

(b.1958)

Halvor Øgreid works for the Øgreid group, and has previously worked for Cubera Private Equity AS, Norsk Hydro and Procter and Gamble. Øgreid Eiendom AS owns 8 909 620 shares. Halvor Øgreid

indirectly owns 33% of the shares in Øgreid Eiendom AS.

Halvor Øgreid, Board Member

(b.1981)

Ove Gjerstad is one of the founders of Atlantic Offshore AS, and is currently employed in the Chartering Depart-ment of the Company. He owns 910 334 shares in the company.

Ove Gjerstad,Board Member

(b.1958)

Roy Wareberg has founded several companies within the fisheries sec-tor, and also has extensive senior experience from the banking sector, including senior positions in DNB. For a period of 9 years he was Head

of Commercial Banking and Regional Head for DNB in Sør Rogaland. He owns 86 393 shares in the Company.

Roy Wareberg, CEO

(b.1960)

Knut Kvinnsland has 25 years’ experience from shipping and ship financing. He has worked for 2 large Norwegian shipping com-panies (Wilh Wilhelmsen and Grieg Shipping) and for 3 banks

involved in ship financing (DNB, ING Bank, DVB Bank). He owns no shares in the Company.

Knut Kvinnsland, CFO

(b.1962)

Arnfred Apeland has 25 years experience from commercial operations in the shipping industry. He was employed by SeaTrans AS for 10 years, involving the chartering of a fleet of

parcel tankers. Mr Apeland owns 86 393 shares in the Company.

Arnfred Apeland, COO

(b.1958)

Håkon Golten has been employed by the Company since 2007. He has previously been employed by Odfjell SE, a leading company in the chemical tanker sector, as Technical Superintendent from 1991

to 2007, as well as having held other technical positions in the maritime industry.

Håkon Golten,Technical Manager

(b.1951)

Lars Arild Strøm was employed in the company in October 2012. His previous position was Marine Superintendent and Company

Security Officer in Rederiet Stenersen AS, and has served as Officer on Chemical Tankers and Offshore Service vessels.

Lars Arild Strøm, QHSE Manager

(b.1979)

John Bryce has more than 40 years experience in the offshore industry. Previous employers include Offshore Marine Ltd, Star

Offshore Services Ltd, BUE North Sea Ltd. Prior to joining BUE he was involved mainly in the operation of AHTS & PSVs but on join-

ing BUE in 1998 his main focus has been ERRV vessels.

John A. Bryce,Managing Director Atlantic Offshore

Rescue Ltd (b.1950)


Our Fleet

1514

VS465 multi role FSV designed by V&S (WSDNO) and Wison Heavy

Industries/Nantong China. The ship will carry a ROV for waterdepths of

approx 2000m.

Owner(s): Atlantic Offshore Alpha ASManager: Atlantic Offshore

Management ASCrew: Atlantic Offshore Crew AS

ClassificationBureau Veritas , BV, BV I + Hull + MAC,

Clean Ship Super awt, STBY- and Supply vessel, Tug, DP II, SDS damage

stability, AUT UMS, FIFI 1, Water Spray, SYS-NEQ-1, Oilrec and NOFO

2009, ROV.

Built: Wison Heavy IndustryLength о.а.: 66,9mBreadth mld: 18m

Main Engines:2 x Wickman 6L28C

Bow Thruster: 4 x SchottelAccommodation: 19

OCEAN ALDEN

OCEAN FIGHTER

OCEAN KING

annual report 2012

OCEAN CLEVER

ClassificationDNV +1A1 – Tug and Supply vessel, Ice

C – DK(+), hl (2.0)

Built: 1975Length о.а.: 71,4m

Breadth mld: 12,35mMain Engines: 221 m3

Bow Thruster: 1×560 BHP

Ocean Clever is a Multi Role Offshore Support Vessel (AHTS/ MRV), Code A

with 2 x FRDC’s and 2 x FRC’s.

Owner(s): Atlantic Offshore Rescue Ltd

Manager: Atlantic Offshore Rescue Ltd

Crew: Atlantic Offshore Rescue Ltd

ClassificationLMC Offshore Supply, FiFi I

Built: 1980, Yokohama ZosenLength о.а.: 61.24 m

Breadth mld: 11.84 mMain Engines: 2 x 1,600 BHP

(Yanmar 6Z-ST)Bow Thruster: 1 x 350 BHP

Accommodation: 18 persons

Ocean Fighter is a Standby/Supply vessel.

Owner(s): Atlantic Offshore Alpha ASManager:

Atlantic Offshore Management ASCrew: Atlantic Offshore Crew AS

ClassificationDNV +1A1 – Tug/Supply – SF, Dynpos, AUT-FI-FI, EO, Oilrec, Strandby Rescue

Built: 1984Length о.а.: 75.00 m

Breadth mid: 16.00 mMain Engines: 12,560 BHP

(4 x 2,310 Kw)Bow Thruster: 2 x 1,000 PHPAccommodation: 43 persons

Ocean King is a multipurpose an-chorhandling, tug, supply vessel.

Owner(s): Ocean LanHoy KS

Manager: Atlantic Offshore Manage-ment AS

Crew: Atlantic Offshore Crew AS

An introduction to the fleetAtlantic Offshore’s fleet currently includes 13 advanced field support vessels that have additional capabilities related to oil recovery, emergency towing, ROV services etc. The fleet also includes 4 standby vessels which are capable of performing standby duties and supply duties. The vessels operate mainly in the North Sea basin. In the PSV sec-tor, the fleet comprises 2 vessels including one large modern vessel which was deliv-ered from the yard in February 2012.

OCEAN NESS

OCEAN PRIDE

ClassificationDNV +1A1, Tug SF EO

Built: 2000Length о.а.: 66 m

Breadth mld: 15 mMain Engines: 2×2005 kWBow Thruster: 1×515 kW

Ocean Ness is a Multi Role Offshore Support Vessel (Field standby/

Rescue/ Tug/ Supply).

Owner(s): Ocean Ness AS



ClassificationDNV , +1A1, E0, SF, DK+, HL(2,8),

LFL, FOMF-V(3), Clean Design, Naut OSV(A), Dynpos Autr, Oilrec and NOFO

2009 (1,5), LFL.

Built: HavyardLength о.а.: 86,00mBreadth mld: 17,6m

Main Engines: 4 x 1628 kW CatBow Thruster: 3 x 880 kW


832 L-8, 500 BHP PSV.

Owner(s): North Sea PSV

Manager: Atlantic Offshore Management AS


1716

OCEAN PRINCE

annual report 2012

ClassificationDNV +1A1, Tug Supply, E0, Oil Rec,

Standby Vessel

Built: 1976, Ulstein Hatlø ASLength о.а.: 64.54 m

Breadth mld: 13.83 mMain Engines: 2 x 3,520 BHP (Nohab Polar F216V-D825)Bow Thruster: 1x 560 BHP


Ocean Prince is an AH–Tug/ Standby/ Supply vessel.

Owner(s): Atlantic Offshore Beta AS



OCEAN PRODUCE

OCEAN SEARCHER

OCEAN SKY

ClassificationDNV 1A1 – Supply Vessel – Fi-Fi I,

Oilrec, SF

Built: 1974Length о.а.: 62,15 m

Breadth mld: 11,49 mMain Engines: 2 x 1,000 BHPBow Thruster: 1 x 350 BHP


Ocean Produce is a Supply/ Rescue/ Standby vessel.

Owner(s): Ocean Rescue KS



ClassificationDNV +1A1, Tug Supply, EO, Dynpos T,

DoT 400 Class A


Breadth mld: 13.8 mMain Engines: 2×4,000 BHPBow Thruster: 1×600 BHP


The vessel is a Multi Role Offshore Support Vessel (Anchorhandling Tug/

Supply/Standby/Rescue).




ClassificationDNV +1A1, Tug Supply, E0, Oil Rec,

Standby, Fi-Fi II

Built: 1975, Ulstein Hatlø ASLength о.а.: 64.55 m

Breadth mld: 13.83 mMain Engines: 2 x 3.520 BHP

(Nohab Polar F216V-D)Bow Thruster: 1 x 550 BHP


The vessel is a AH-Tug/Standby/Sup-ply vessel.

Owner(s): Atlantic Offshore Beta AS



OCEAN SPEY

OCEAN SPRITE

OCEAN SUN

ClassificationDNV +1A1, Tug, SF, EO


Breadth mld: 15 mMain Engines: 2×2005 kW


Ocean Spey is a Multi Role Offshore Support Vessel (Field standby/ Res-

cue/ Tug/ Supply).




ClassificationDNV +1A1, Supply/Rescue, Dot Class A




Ocean Sprite is a Multi Role Offshore Support Vessel (PSV/ Standby/

Rescue).




ClassificationDNV +1A1, Standby / Rescue, Dot 400

Surv. Class A




Ocean Sun is a Multi Role Offshore Support Vessel (Supply/Standby/

Rescue).




OCEAN RESPONSE


COMF-V3 (c)3, Clean Design, Naut OSV, Dynpos Autr, FiFi I&II, Towing,

Oilrec.

Built: Bergen Yards ASLength о.а.: 74,60mBreadth mld: 18,0mGross Tonnage: 4000

Main Engines:2 x 3500Kw + Azimuth 1000Kw

Bow Thruster: 1 x 1000Kw + Azimuth 1000Kw

Stern thruster: 2 x 500KwAccommodation: 24 persons

Ocean Response is an ERRV vesselVS 465 MKII – 12.540 BHP PSV.

Owner(s): Atlantic Offshore Gamma AS



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annual report 2012

OCEAN SWAN

OCEAN SWIFT

OCEAN TROLL

OCEAN WEST

ClassificationBV Deep Sea Supply Vessel


Breadth mld: 12.5 mMain Engines: 1×1600 HPBow Thruster: 1×800 HP


Ocean Swan is a Rescue/ Recovery vessel.

Owner(s): Atlantic Offshore Scotland Ltd



ClassificationDNV +1A1, Ice-C



Ocean Swift is a Standby/Rescue/ERRV vessel.




ClassificationDNV +1A1 – Tug/Supply – SF, Dynpos, AUT-FI-FI, EO, Oilrec, Standby/Rescue


Breadth mld: 16.00 mMain Engines: 12,560 BHPBow Thruster: 2 x 800 BHP


Ocean Troll is a multipurpose an-chorhandling, tug, supply vessel.




ClassificationDNV +1A1, Supply, SF, Standby Vessel

Built:1974, Volharding Shipyard Waterhuizen

Length о.а.: 58.72 mBreadth mld: 11.52 m

Main Engines: 2 x 1,050 BHP (De Industrie 6D7HDN)

Bow Thruster: 1 x 550 BHPAccommodation: 27 persons

The vessel is a Standby/Supply vessel.

Owner(s): Atlantic Offshore Scotland Ltd



OCEAN SURF

ClassificationDNV + 1A1, SF, EO, DP II AUTR


Breadth mld: 16 mMain Engines: 2 x 2,730 BHPBow Thruster: 1 x 700 BHP


Ocean Surf is a Platform Supply Ves-sel, which has been converted to low

NOx emission.




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Phases of a vessel newbuilding project and the shipowner role.A new building project can in prin-ciple be divided into the following phases: Initial phase Contract signature Design development Construction Outfitting Testing and delivery Warranty and closing

Initial phaseThe initial phase of the project consists of a close cooperation with the Operation department and relevant designhouses for developing the required docu-mentations. The duration of the phase depends on the purpose of the project. This phase terminates when the parties are ready for starting con-tract negotiations.

Contract signatureIn the contract negotiation phase the main scope of work for the project department is to follow the negotiations and contribute with technical clarifications. This process can take 1-2 weeks also depending on the total scope and situation.This phase terminates when the

contract is signed.

Design developmentThe scope of the design develop-ment depends on the the nature of the vessel, and whether it is a new design or an already finished design. However even if it is a designed concept there will be some design development for tai-loring the vessel to the contract specifications. This phase has a sliding transition into the construction phase.

ConstructionThe construction phase starts when the shipyard starts cutting, welding and painting. This will normally start even if the detailed design is not finished. Hence many of the activities in this phase will be a continuation of the activities in the previous design develop-ment phase.Basically this phase is completed upon launching the hull which the initiates the next phase.

OutfittingThe outfitting is a delicate activity which requires an increased focus and follow-up. The challenges are to ensure the correct installations (maker and/or rules and regula-tions), right protection of equip-

ment and evaluation of the prac-tical lay out. In many cased the outfitting will take place in a differ-ent shipyard. There is no distinct end of this phase since outfitting will continue almost to the delivery.

Testing and deliveryTesting comprises mooring- and sea trials. It is important to staff the test with proper personnel and documentation of the test results. The test phase starts by the first mooring trials. It must be focused on that the test is well prepared by the shipyard and that all relevant documentation is present. The activities are in many ways the same as in the previous phase. The phase is completed upon a successfully delivery.

Warranty and closingThe warranty period starts when the vessel is delivered and is normally 1 year.

What does Atlantic Offshore look for in a vessel design.In principle there are the following relevant factors:

The charter requirements. Often the charter has complex require-ments to be fulfilled.


annual report 2012

Project DepartmentThe compliance with all relevant standards such as safety, labour conditions, functionality etc.

Energy efficiency and “smart cost effective” solutions.

The vessel shall have a good “look”.

Vessels currently under construc-tion: A brief descriptionCurrently Atlantic Offshore is run-ning 3 projects and have 1 new build (Ocean Response) under warranty.

The projects are the following:

1 UT 755 LC (PSV) under construc-tion at SIMEK/Flekkefjord. Ocean Scout will be delivered by 3 of May.

2 HY 820 (ERRV) under construction at Zamakona/Pasaia/San Sebastian/Spain. Ocean Osprey and Ocean Marlin will be deliv-ered the 1 and 2 Q in 2014.

2 VS 485 MKIII L (PSV) under designdevelopment (Kleven) and construction (Stocznia/Poland). The vessels shall be delivered at the end of 1Q and 2Q in 2014.

The project department is man-aged by the Project Department Manager with 3 project manag-ers (Operation, Ship technical and Electrical/Automation). In addi-tion the department has a part time document controller for the system engineering. Atlantic Offshore has strengthened the focus on the importance of com-prehensive maintenance system on board and has in the context hired support for achieving this goal.

S HaugerProject Department Manager (Capt RNoN/Ret)

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NewbuildingsDelivery Q2 2013: Ocean Scout

ClassificationClassification: DNV , +1A1, E0, SF, DK+,

HL(2,8), COMF-V(3), Clean Design, Dynpos Autr.

Built Simek AS Length о.а. 76.60 m

Breadth mld 16.00 m Gross Tonnage 3150

Main Engines 2 x 2560 Kw RRM Bergen

Bow Thruster 2 x 590 Kw Stern Thruster 2 x 590 Kw

Accommodation 32 persons

UT 755 LC – 6.960 BHP PSV.Owner(s): Atlantic Offshore Delta ASManager: Atlantic Offshore Manage-

ment ASCrew: Atlantic Offshore Crew AS

Delivery Q1 2014: Ocean Osprey


COMF-V3 (c) 3, Towing.

Built Zamakona Length о.а. 66.80 m


Main Engines 2 x 1930 Kw MAN Bow Thruster 1 x 400 Kw + Azimuth

800 Kw Accommodation 21 persons

HY 820 – 5.250 BHP MRV.Owner(s): Atlantic Offshore Zeta ASManager: Atlantic Offshore Rescue

LTDCrew: Atlantic Offshore Rescue LTD

22 23

The first Daughter Craft goes to the Anasuria for the morning personnel transfer, while the mother ship carries out the same opera-tion at the Gannet platform, This operation is usually completed by approx 0800 hrs.All Close Standby operation to the instal-lations is considered by the ship weather permitting. If all three installation require st/by we can offer one installation a full days cover with the mother ship,with the remaining cover being carried out by the ships Daughter Crafts, by the agreed rules a DC crew is only to be deployed for a maximum of four hrs with four hrs back on board the ship, So effectively a DC crew can be out at least twice in one day for the maximum amount of time.

We have at times launched our Daughter Crafts at least seven or eight times in any one day to cover both st/by duties and for helicoptor cover etc. We are also required to offer Tanker assis-tance capabilities while a shuttle Tanker at-tends either the Triton or the Anasuria. This operation is carried out with the mother ship. This can leave us stretched with regards to st/by cover and for heli ops as we have to keep ample crew on board in case of an inci-dent involving the shuttle tanker needing to be pulled clear of the installation in an emer-gency We can then only launch one DC at any one time No one day is the same as we are assigned different jobs each day by the three installa-tions we are responsible for.

For example we may be required to take a container from one installation to the other, but still have to be able to provide heli cover at all times. This all leads to a very busy schedule es-pecially in fine weather, Attached are some photos of the ship showing her involved in various operations, CSB, Heli cover, Tanker assist, and general cargo operations as they are required In addition we all have our Company main-tenance programmes to fulfil as well as nu-merous statutory monthly drills to complete which can sometimes make it challenging to get everything completed by the end of our trip.

A,Maginnis – Master – Ocean Searcher

SHORT REPORT ON A NORMAL DAY’S WORKA normal day starts during the night when the bridge is informed of the Close Standby requirements for the coming next day. In the summer time this can mean the first boat crew being mustered for launching at approximately 0530am.

No one day is the same as we are requested different jobs each day

ClassificationClassification: DNV , +1A1, E0, SF,

DK(10 t/ m2), HL(2,8), LFL*,

Methanol, COMF-V(2) C(3), Clean Design, NAUT OSV, Dynpos Autr.

Built Kleven AS Length о.а. 99.40 m


Main Engines 4 x 1665 Kw Wartsila Bow Thruster 2 x 1000 Kw + Azimuth

880 Kw Steerprop 2 x 2200 Kw


VS 845 MKIII L – 9.890 BHP PSV.Owner(s): Atlantic Offshore Epsilon ASManager: Atlantic Offshore Manage-


Delivery Q3 2014: TBN II

Delivery Q2 2014: TBN I

ClassificationClassification: DNV , +1A1, E0, SF,

DK(10 t/ m2), HL(2,8), LFL*,

Methanol, COMF-V(2) C(3), Clean Design, NAUT OSV, Dynpos Autr.

Built Kleven AS Length о.а. 90.40 m


Main Engines 4 x 1665 Kw Wartsila Bow Thruster 2 x 1000 Kw + Azimuth

880 Kw Steerprop 2 x 2200 Kw


VS 485 MKIII L – 9.890 BHP PSV.Owner(s): Atlantic Offshore Epsilon ASManager: Atlantic Offshore Manage-


annual report 2012

Delivery Q2 2014: Ocean Marlin


COMF-V3 (c) 3, NAUT-OSV Dynpos Autr. FiFi I&II, Towing.

Built Zamakona Length о.а. 66.80 m



800 Kw Stern Thruster 1 x 400 Kw


HY 820 – 6.800 BHP MRV.Owner(s): Atlantic Offshore Zeta AS



Delivery Q2 2015: TBN III


COMF-V3 (c) 3, Towing.

Built tbn Length о.а. 66.80 m



800 Kw Accommodation 21 persons

HY 820 – 5.250 BHP MRV.Owner(s): Atlantic Offshore Zeta ASManager: Atlantic Offshore Rescue

LTDCrew: Atlantic Offshore Rescue LTD

QHSE

A Preferred Employer

26 27

Quality and Health

We continuously strive to improve the

Environmental Aspect in Operating our

vessels

As a company with rescue and supply as core business, QHSE is vital. Atlantic Offshore combines extensive experience and specialised knowledge to provide high quality services.

Our QHSE Policy is based on the Zero philosophy. The policy is applicable to equipment, environment, and injuries to personnel. Our goal is to prevent all incidents. One of the tools to achieve this is to report all near accidents. All incidents are logged in our electronic management system and shared throughout the fleet. This process educates us - as experi-ence transfer teaches us to be aware of how we execute our work, and focus on safe performance through the incorporation of safe routines.

In 2012 the Quality and Ship Man-agement System was ISO 9001 and ISO 14001 certified. In a continuous process, we will further develop and improve the quality and ship manage-ment system. Our motivation for this job is to safely operate our vessels by minimising the risk to our crew and the environment.

Commitment to Safety and the

Environment

annual report 2012

All operations which may lead to pollu-tion are identified and carefully planned. We strive to reduce fuel consump-tion and make environmental friendly choices in all aspects of our business. A Ship Energy Efficiency Management Plan(SEEMP) was implemented at the end of 2012, giving us a tool to monitor the fuel consumption and provide guid-

ance on how to operate the vessels more eco-friendly.

A continuous focus on minimising the use of harmful chemicals on board was kept in 2012, and the efforts will be continued in 2013. All vessels deliver garbage for recycling. New vessels are designed with low emission state of the

art technology, and when completed they will have a clean ship notation from the class society.

Safety and EnvironmentSafe operation of our vessels is the most efficient way of preventing pollu-tion. In 2012 Atlantic Offshore had 2 Lost Time Injuries (LTI). As of February 2013, Atlantic Offshore Rescue Ltd had 12 consecutive months without LTI, for the second time in 3 years.

Director’s Report

A Preferred Employer

and Accounts

30

THE NATURE OF THE BUSINESSAtlantic Offshore AS is the parent company of the Atlantic Offshore Group. The Group owns and oper-ates offshore vessels through its subsidiaries in Norway, Ireland and the UK, as well as management and staffing companies in these coun-tries. The Company is headquar-tered in Ågotnes. The Group owns 16 offshore vessels, and has ownership interests in an additional 2 vessels also operating in the offshore segment. 5 vessels are also operated on behalf of other owners.

FAIR REVIEW OF THE COMPANY’S DEVELOPMENT, PERFORMANCE AND POSITIONThe Board considers the presented income statement and balance sheet to give a true picture of the activ-

ity that has been in the company in 2012 and the status as of 31.12.2012. The equity of the Company and the Group was enhanced through a conversion of shareholder loans into equity during the year. Please refer to note 18 regarding significant events during the year.

PRESENTATION OF FINANCIAL STATEMENTSIn 2012 the Group achieved total operating income of 488,98 MNOK compared with 471,34 MNOK in 2011.

Group operating profit before depre-ciation (EBITDA) was 131 MNOK in 2012 compared with 131.6 MNOK in 2011. Adjusted for profits on vessel sales, EBITDA is NOK 21,2 mill. higher in 2012 than in the previous year.

Group operating profit (EBIT) in 2012 was 50,1 MNOK compared with 44.8 MNOK in 2011.

Earnings from investments in asso-ciated companies in 2012 was -11,8 MNOK compared with -13.2 MNOK in 2011.

The parent company’s profit before tax was – 18,6 MNOK. The negative result is mainly caused by a write-down of shares in daughter company Team Atlantic AS of – 13,9 MNOK.

Group profit before tax was 8,0 MNOK against 2,6 MNOK last year. The change in earnings is largely due to an improved operating profit compared with the previous year.


ANNUAL REPORT FOR 2012

The Group and parent company solidity as of 12/31/2012, measured by book equity ratio was 37,2% and 50% respectively against 36.9% and 66.6% for 2011. The reduction in relative equity for the parent com-pany is due to bond loans in the total amount of 300 MNOK that were arranged in 2012. The Group’s equity amounted to 481 MNOK against 395.5 MNOK last year.

The equity and liquidity of the parent Company and the Group is consid-ered to be satisfactory.

The company’s operations do not include research and development activities.

Operational activities in 2012 had a positive cash flow of 110,3 MNOK compared with 77,9 MNOK in 2011. Including investing and financing activities, the Group’s cash flow was 129,1 MNOK in 2012 compared with -17.1 MNOK in 2011. The change in net cash flow is mainly caused by the raising of capital in the bond market in 2012.

GOING CONCERNIn the board’s opinion, the proposed income statement and balance sheet for 2012 with notes gives a correct expression of the company’s position and the operational result.

No material events have occurred after the close of the financial year that in the Board’s opinion would have a material effect on the assessment of the accounts.

The financial statements have been

prepared on a going concern basis.

THE MARKETThe Company operates primarily in the North Sea, both in the English and Norwegian sectors, but oppor-tunities in other markets are also pursued. Throughout 2012, “Ocean Prince” operated in the Falkland Islands.

An increase in market activity is expected during the coming years. The company’s strategy is to posi-tion itself for this increased activity through the ordering of new vessels and the purchase of newer tonnage, especially in the PSV and ERRV seg-ments. The Company has established a plan for phasing out older tonnage.

The North Sea PSV spot market performed below expectations last year, mainly due to several new-buildings coming into the market and less drilling activity than ex-pected. An improvement of market conditions is dependent on a net departure of vessels to other regions and/or increased activity. We also reduced our exposure last year by selling “Ocean Scout” and “Ocean Mainport”, both built in 1976. Despite a soft spot market for PSVs, we are satisfied with the utilisation and rate levels obtained by “Ocean Pride” and “Ocean Surf”, our two remaining vessels in the spot market. The contracting activity improved during 2012, and yielded several new contracts for Atlantic Offshore. A 5-year contract (plus 5 yearly options) was awarded to us by Shell UK for an ERRV vessel of HY820 design, with commencement in Q1

2014. The vessel will operate on the Gannet field. Total Norge also awarded a 4-year contract (plus 4 yearly options) to us for an ERRV with the same basic design as the vessel going to Shell. The vessel will oper-ate on the Martin Linge field. We also won two 6-year contracts (plus 3 yearly options in each contract) for Statoil, for large PSVs of VS 485 MkIIIL design. The vessels represent the forefront of ship design in the PSV segment, and they will undertake general supply duties to the Statoil operated fields on the Norwegian continental shelf.

In February 2013, we were awarded a 5-year contract (plus 5 yearly options) from Shell UK for an ERRV vessel of HY820 design, with com-mencement in 2015.

The Company also secured several medium-term contracts for its existing fleet, both in Norway and the United Kingdom. The firm contract backlog currently stands at 2,900 MNOK. Including options, the back-log stands at 4,800 MNOK equalling 10 times the 2012 revenue.

FLEET RENEWALIn 2012, Atlantic Offshore embarked on a significant fleet renewal programme, to further develop its position in the ERRV and PSV markets.

In February, the Company took delivery of the PSV newbuild “Ocean Pride” from Havyard, Leirvik. The vessel is a large PSV of Havyard 832 L design.

The ERRV newbuild “Ocean Alden” was named in March, and thereafter

annual report 2012

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annual report 2012

commenced its long-term charter party with Gas de France on the Gjøa field.

The ERRV newbuild “Ocean Response” was constructed at Bergen Group BMV AS, and the vessel will be delivered to Atlantic Offshore in March 2013.

In May, the Company ordered a PSV of UT 755 LC design at Simek, Flekkefjord. The vessel will be deliv-ered in May 2013.

Yard contracts were signed with Astilleros Zamakona, Spain, for the construction of two Multi-Role Vessels of HY820 design, both to be deliv-ered in 2014.

Two newbuilds of VS 485 Mk IIIL design have been ordered at Kleven Maritime. The vessels will be deliv-ered in 2014.

FINANCINGLong-term mortgage-based financ-ing has been secured for all vessels in our newbuilding programme. Despite a challenging bank market, the Company has a satisfactory access to mortgage-based financing.

Another significant development for Atlantic Offshore last year was the Company’s successful introduction to the Norwegian bond market. A NOK 200 million secured bond is-sue was placed in June 2012, and a NOK 100 million tap issue of a NOK 150 million unsecured bond issue was place in December 2012. The remaining tap issue of NOK 50 million was placed in februar 2013. Although the bond loans have a

higher interest cost, the Company’s overall cost of borrowing remains satisfactory at 7,1%.

EQUALITYThe personnel policy of the group is considered to be gender neutral in all areas. In our opinion, gender equali-ty issues are satisfactorily addressed, and no specific measures have been implemented or are planned in this area. The Board of Directors of Atlantic Offshore AS consists of 4 men.

NON-DISCRIMINATIONEmployees are not discriminated against based on ethnicity, national origin, ancestry, color, language, religion or belief.

HEALTH, SAFETY AND ENVIRONMENTAL ISSUESIn 2012 Atlantic Offshore Manage-ment’s management system was ISO 9001 and ISO 14001 certified. Sick leave in 2012 was 5,94% versus 7,2% in 2011. Work-related sick leave was 2,44% in 2012. 2 injuries that affected the Company’s Total Recordable Cases frequency (TRC) were recorded last year, and total exposure man hours (based on 13 hours per day) was 622 440 hours.

As a continuation of the environ-mental savings that the company has invested in through the modification of ships to reduce NOx emissions, further environmental savings are expected through the fleet renewal. The Board is not aware of accidents that have resulted in significant emissions or other damage to the environment.

FINANCIAL RISKThe Company is subjected to ordi-nary risk of interest rate changes. Developments in short-term and long-term interest rates will affect the company’s markets regarding the chartering of vessels. In addi-tion, the market’s expectation of the long-term trends in the economy affects the ship values in the short term. The company’s long-term financing is exposed to fluctuations in the interest rate levels. This is managed through a combination of interest rate swaps and utilization of fixed-rate financings on CIRR terms. On the balance sheet date, the Com-pany had one outstanding interest rate swap of USD 20 mill. relating to the loan on Ocean Alden, with final expiry in July 2020. The mentioned swap corresponds to approximately 16% of the Group’s long term debt. As newbuildings are delivered during the next years, the hedging percent-age will increase as the newbuildings are fully or partly financed via fixed-rate long term CIRR loans.

The Group is subjected to fluctua-tions in exchange rates, but income and expenses for the individual vessels are mainly nominated in the same currency, which reduces the overall currency risk. Each vessel’s long-term financing is nominated in the revenue currency for the vessel in question. For the two HY820 vessels under construction at Astil-leros Zamakona, the majority of the inherent currency risk has been covered through forward purchases of EUR to covered outstanding yard instalments.

Commitment to Safety and the

Environment

Ågotnes 22.04.2013

Knut ØgreidChairman

Roy WarebergCEO

Halvor ØgreidBoard Member

Ove GjerstadBoard Member

Runar SakkestadBoard Member

MARKET RISKThe company aims to reduce the effect of market fluctuations by maintaining a high level of contract coverage. On the balance sheet date, Atlantic Offshore had a contract coverage for its fleet of approx. 78% for 2013 and 66% for 2014. At the present time, this has increased to 90% for 2013 and 70% for 2014.

LIQUIDITY RISKCash flow from operations was lower than budgeted in 2012, due to weaker market conditions than anticipated and a delay in the deliv-ery of Ocean Response, which neces-sitated cash inflows from the main

shareholder. Investments in new tonnage was also higher than budg-eted, due to several new contracts. The Company has fully financed 8 of its 9 newbuildings, and alternatives for financing the last vessel are being pursued. Total capital requirement depends on factors such as the oper-ating cash flow and decisions regard-ing sale of vessels.

CREDIT RISKThe credit risk in the group is considered to be quite limited. The risk that counterparties do not have the financial ability to meet its obli-gations is considered to be low. The Group’s customers are mainly large

oil companies. This, together with short credit periods and the fact that the group historically has had insig-nificant losses on accounts receiv-able provides a low credit risk.

For more detailed comments on the financial risk associated with the group we refer to Note 14 in the financial statements.

PROFIT ALLOCATIONThe Board proposes that the net loss of – NOK 18 606 634 is transferred from other equity.

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Profit and Loss Account

annual report 2012

Balance sheet

3736

Knut ØgreidChairman

annual report 2012

Ågotnes 22.04.2013

Roy WarebergCEO

Halvor ØgreidBoard Member

Ove GjerstadBoard Member

Runar SakkestadBoard Member

Cash Flow Statement

Notes to the accounts


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annual report 2012

The company’s head office is located at building K2, 5347 Kystbasen Ågotnes. The company’s main activi-ties are further described in note 3.

Note 1 – General information

The annual accounts have been prepared in accordance with the Norwegian Accounting Act of 1998, and generally accepted accounting principles in Norway. These principles are further described below.

The GroupThe consolidated financial state-ments consist of Atlantic Offshore AS and its subsidiaries, hence where the parent company directly or indirectly has a controlling interest that is nor-mally above a 50% stake. Subsidiaries of the Group are disclosed in Note 4. The group consists pr. 31.12.2012 of the parent company Atlantic Off-shore AS, subsidiaries Team Atlantic AS (100%), Atlantic Offshore Alpha AS (100%), Atlantic Offshore Beta AS (100%), Atlantic Offshore Gamma AS (100%), Atlantic Offshore Delta AS (100%), Atlantic Offshore Epsilon AS (100%), Atlantic Offshore Zeta AS (100%), Atlantic Offshore Crew AS (100%), Atlantic Offshore Man-agement AS (100%) and the Irish Sartor Offshore Ireland Ltd (100%), and affiliated companies, Ocean Mainport AS (100%), Ocean Rescue AS (100%), Ocean LanHoy AS (100%), Ocean Lan-Hoy KS (50.5% ), Sartor Offshore Cork Ltd (100%), Atlantic Offshore Surveys Ltd (100%), Atlantic Offshore Europe Ltd (100%), Atlantic Offshore Aber-deen Ltd (100%), Atlantic Offshore Rescue Ltd (100%), Atlantic Offshore Scotland Ltd (100%) and Atlantic Off-shore Crewing Services Ltd (100%).

Functional currencyFor consolidation purposes, the bal-ance sheet figures for subsidiaries with differing functional currencies are translated into NOK at the ex-change rate prevailing at the balance sheet day, and the income statement is translated at the periodic average exchange rates. Translation differenc-es are recorded as part of the equity.

Cash and cash equivalents Cash and cash equivalents include cash, bank deposits and other mon-etary instruments with a maturity of less than three months at the date of purchase.

Principles of consolidationThe consolidated financial state-ments include Atlantic Offshore AS and companies where Atlantic Off-shore AS has a controlling influence (subsidiaries). Decisive influence is achieved when the company actu-ally has control over the subsidiary’s finances and operations in such a way that it benefits from the subsidiary’s business. Controlling interest will normally exist when Atlantic Offshore AS has a voting interest of more than 50% through ownership or agree-ments.Business combinations are accounted for using the purchase method. Acquisition cost is the sum of fair values at the time of acquisition of the assets transferred and liabilities incurred or acquired in exchange

for control of the acquired business, plus costs directly attributable to the group formation. Companies that are purchased or sold during the year are consolidated from / to the time of transfer of control of the company in question.The identifiable assets and liabilities on the transaction date are recorded at fair value on the transaction date.Inter-company transactions and balances, including internal profits and unrealized gains and losses are eliminated.The consolidated financial statements are prepared under the assumption of uniform accounting policies for similar transactions and other events in similar circumstances.

Investments in subsidiary companies Investments in subsidiariesare carried at cost. Investments are written down to fair value if the impairment is not temporary and is deemed necessary in accordance with generally accepted accounting principles. Dividends and group contributions from subsidiaries are recognized as other financial income.

Investment in associated companiesAssociated companies are companies where the investor has a significant influence without the company be-ing a subsidiary. Shares in associ-ated companies are valued at cost in the companies that have such interests. The investment is valued

Note 2 – Accounting principles

at acquisition cost of shares / units unless write-downs have been neces-sary. Transferred dividends relate to undistributed profits in the underly-ing companies after the investment date. Dividends are recognized in the same year as they are deposited in an associated company to the extent it is probable at 31.12 that the proceeds will be received.The consolidated financial state-ments include holdings in associated companies using the equity method. Share of net income adjusted for amortization of excess value are presented on a separate line in the income statement and added to the book value of the shares.

Classification of assets and liabilitiesAssets intended for permanent own-ership or use in the business is classi-fied as fixed assets. Other assets are classified as current assets. Receiva-bles due within one year are classi-fied as current assets. The classifica-tion of current and long-term debt is based on the same criteria.Fixed assets are carried at cost and written down to fair value when the value reduction is expected to be permanent. Fixed assets with limited economic life are depreciated on a systematic basis in accordance with a reasonable depreciation schedule. Long-term loans are recorded at the nominal value received at the time of establishment of the loan in question.Current assets are valued at the low-er of acquisition cost or fair value. Current liabilities are recorded at nominal value received at the time of establishment of the liability in ques-tion.

Classification and maintenance costsIn connection with the docking/classification of ships, expenses are recognized and accrued as depre-ciation up to the next docking/ classification. When purchasing a ship, a share of the cost is broken

down and written off until the next docking/classification. Other main-tenance is charged to operations as incurred. In cases where the docking includes significant enhancements and improvements that represent an improvement of quality with a signifi-cant duration, the costs associated with this will be recognized as acqui-sition cost for the vessel and depreci-ated over the remaining lifetime.

InventoriesStocks of fuel are valued at the lower of acquisition cost or net realizable value.

ReceivablesTrade receivables and other receiva-bles are recognized at nominal value, less provisions for doubtful debts. Provisions for losses are based on an individual assessment of each receiv-able.

TaxesParent companyAtlantic Offshore AS is subject to ordinary Norwegian income tax.Tax expenses are matched with the accounting profit before tax. The tax cost consists of payable tax, i.e. tax on the taxable income for the year) and changes in net deferred taxes. Deferred taxes and deferred tax ben-efits are presented on a net basis in the balance sheet.Income tax expense comprises current tax (tax on the year directly taxable income) and change in net deferred tax. Deferred tax and deferred tax assets are presented as a net amount in the balance sheet.GroupAs of 31/12/2012, 4 group companies are subject to ordinary Norwegian taxation, 11 companies are within the tonnage tax scheme in Norway, 4 companies are subject to ordinary taxation in Ireland, with the effective tax rate close to zero and 4 compa-nies are subject to ordinary company

taxation in the United Kingdom. The following group companies are structured according to the rules for shipping companies (Norwegian Taxation Code § 8.10 et seq); Team Atlantic AS, Ocean Mainport AS, Ocean LanHoy AS, Ocean LanHoy KS, Ocean Rescue AS, Atlantic Offshore Alpha AS, Atlantic Offshore Beta AS , Atlantic Offshore Gamma AS, Atlantic Offshore Delta AS, Atlantic Offshore Epsilon AS and Atlantic Offshore Zeta AS. This means that only the net result from financial items is taxable.Sartor Offshore Ltd and Cork Sartor Offshore Surveys Ltd have in earlier years had activity on the Norwegian continental shelf and are taxable to Norway for this activity.Those companies that were under the old tonnage tax scheme were charged with a gain in the transition to the new tonnage tax scheme, with effect from 01.01.07. These companies have chosen a voluntary arrange-ment with the settlement of the contingent tax liabilities as of 01/01/07 (the settlement scheme). This arrangement results in an amount equal to approximately 23.8% of the gain at 01.01.07 being registered as income in equal parts for the fiscal years 2010, 2011 and 2012.This is the basis for accounting by the application of a discounted tax rate of 6.5%.

RevenueRevenue is recognized when earned, i.e. when the right to compensation arises. This happens when the service is provided. Revenues are accounted for by the value of the consideration at the time of the transaction.Crew costs invoiced to companies outside the group are presented on a gross basis as other operating income in the accounts.

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CostsAs a rule, costs are accounted for in the same period as the correspond-ing income. In cases where there is no clear connection between expenses and revenues, the cost allocation will be established by the application of subjective criteria. Other exceptions to the matching principle are stated where applicable.

PensionsThe pension obligations to the crews are funded through a group plan. Defined benefit plans are measured at present value of future pension which in terms of the accounting are considered earned at the balance sheet date. Plan assets are measured

at fair value.Change in defined benefit pension liabilities due to changes in pension plans, are allocated over the estimated average remaining earning period.Cumulative effect of changes in esti-mates and changes in financial and actuarial assumptions (actuarial gains and losses) less than 10% of the larger of the pension obligations and plan assets at beginning of year is not recognized. When the cumulative impact exceeds the 10% limit at the start of the year, the excess is recog-nized over the expected average re-maining earning period. The period’s net pension cost is classified as crew costs.Shore-based employees in the Group

have a deposit-based contribution plan. Contribution plans are accrued according to the matching principle and the annual contribution to the pension plan are ex-pensed.

Cash Flow StatementThe cash flow statement shows the Group’s total cash distributed by operating activities, investing and financing activities. Statement is prepared using the indirect method and shows the individual activities impact on the balance of payment.

annual report 2012

The Group owns 16 offshore vessels and has ownership interests in an additional 2 vessels also working in the offshore segment. Main area of operation is in the North Sea, Norwegian and British sector. In re-

cent years there has also been com-missioned ship in the Mediterranean, the Persian Gulf and the Falkland Islands. The group has the majority of vessels in the segment MRV and PSV with a focus on solid charterers.

The group has also had management responsibilities for ships operating in the North Sea, Canada, the Mediter-ranean Sea and Brazil.

Note 3 – Segment Information

Note 4 – Shares in subsidiaries

Shares owned directly by Atlantic Offshore AS (parent)

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annual report 2012

Note 5 – Investment in associated companies

Note 6 – Fixed Assets

Through Team Atlantic AS the Group has the following investments in associated companies as per 31.12.2012:

The rental period for “Ocean Ness” expires in 2020.The calculation of depreciation assumes that the ships have a total economic life of 35 years and a scrap value equal to kr 5 000 000. Docking is amortized over 2.5 years and good-will over 5 years. The life of operat-ing equipment varies between 3 - 5 years. All depreciation is linear.

Vessels under constructionThe subsidiary Atlantic Offshore AS Gamma has a ship under construc-tion at Bergen Yards. Estimated de-livery during Q1 2013. The subsidiary Atlantic Offshore Delta AS has a ship under construction at Simek, Flekkef-jord. The subsidiary Atlantic Offshore Epsilon AS has two vessels under construction at Kleven Maritime. The

subsidiary Atlantic Offshore Zeta AS has two vessels under construction at Astilleros Zamakona, Spain.

Note 7 – Payroll expenses, number of employees, benefits, loans to employees, etc.ParentThere are no employees in Atlantic Offshore AS. The daily operations in 2011 have been taken care of by Atlantic Offshore Management AS. Expensed administration fee is NOK 300 000.

GroupSeafarers who work on the Group’s NOR registered ships are employed in Atlantic Offshore Crew AS. Seafarers who man the ships in the United Kingdom are employed in Guernsey company Ocean Supply Guernsey Ltd.

Remuneration of executives

The CEO and the COO each have a right to buy 100,000 shares per year in Atlantic Offshore AS in 2013, 2014 and 2015. The agreed share price for these purchases are NOK 22, NOK 33 and NOK 38 respectively.

Loans and guarantees to executives, shareholders, etc.:No loans or collateral for loans have been granted in favor of CEO, chairman or other closely related party either employed by or otherwise closely affiliated with the company.

Average number of sailors in the group, including crew employed by Ocean Supply Guernsey Ltd, has been 467.

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Note 8 - Pension obligations

The Group is required to have a pension plan under the Act on mandatory occupational pension and a pension plan that satisfies the requirements of this Act.The seafarers have a defined benefit pension plan that includes 216 people in 2012. The benefits are mainly dependent on the length of service, salary at retirement and the social security benefit. The Group’s obligations are covered by an insurance company.

annual report 2012

Government grantsThe company receives state reimbursement through the net pay arrangement to secure employment of Norwegian seamen. The refund is determined every year through the state budget. The grant is accrued and recognized as a reduction of personnel costs in the companies that are included in the scheme. Received gross subsidy for 2012 amounts to MNOK 34.

Of the total fees of the Group, MNOK 1,2 relates to fees paid to corporate auditors.

Shore-based employees have a deposit-based contribution plan. Contribution plans are accrued by the matching prin-ciple and the annual contribution to the pension plan are expensed. Total expenses relating to the scheme amounted to NOK 1.22 million in 2012.

A defined contribution scheme is operated for seafarers employed by Ocean Supply Guernsey Ltd and land-based personnel employed by Atlantic Offshore Rescue Ltd.

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Note 9 - Share capital and shareholder information

Øgreid Eiendom AS owns 8 909 620 shares. Knut Øgreid indirectly controls Øgreid Eiendom AS. Halvor Øgreid indirectly owns 33% of the shares in Øgreid Eiendom AS. The Company has not entered into agreements that ensure the CEO or the Chairman of the Board special payments upon termina-tion or change of employment or office/position.

annual report 2012

Note 10 – Equity

*) In an Extraordinary General Meeting 10.12.12 it was decided to undertake a conversion of debt.**) In an Extraordinary General Meeting 21.12.11 it was decided to undertake a reduction of the share premium account by conversion into equity. The decisions were recorded in the Company Registry in April 2012.

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Note 11 – Long term debt

Bond loans consist of a secured loan of MNOK 200 with final maturity 27 June 2015, secured by a pledge of all shares in Team Atlantic AS and Atlantic Offshore Beta AS, and an unsecured loan of MNOK 100 with final maturity 31 March 2015.

CovenantsThe long-term loan agreements with external lenders contain a mini-mum equity requirement, a mini-mum ratio of EBITDA to net inter-est expenses, and requirements for the relationship between the

market value of vessels and out-standing debt at company level. For some loans, a requirement for equity at a group level is stipulated.

In 2012, a significant portion of subordinated loans from the owners

has been converted into share capi-tal, and this provides a solid founda-tion for compliance with applicable capital requirements for the parent.The The Group is in compliance with its covenants in all loan agreements.

Note 12 – Intercompany accounts

annual report 2012

*) Verket Investering AS is 100% owned by Øgreid AS.

There is a lease agreement between the Verket Investering AS and Atlantic Offshore AS‘ subsidiary Atlantic Offshore Rescue Ltd. The lease agree-ment is classified as a finance lease,

and the interest element is booked as other interest expense to Group companies. The rent is treated as ordinary operating expenses.

During the year, interest is calculated on loans from the parent company and other shareholders. Reference is

made to note 11 in this regard.

Other payments to shareholders are further described in Note 8.

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Note 13 – Tax costs

annual report 2012

Note 14 – Financial risk

The Group operates internationally and is exposed to currency and interest rate risk. Currency risk is largely elimi-nated by the fact that both costs and financing are in the income currency. Interest rate hedging has also been used, but primarily for loans that have more than 5 years remaining repayment period.

Credit riskThe Group’s maximum risk exposure is represented by the balance sheet values for financial assets.

The counterparty for bank deposits are banks and the credit risk associat-ed with these deposits is considered to be limited.

Group companies have historically had insignificant losses on accounts receivable. The maximum credit risk is therefore considered to be the car-rying value of accounts receivable, short-term receivables and the sell-er’s credit.

Price risk bunker oilFor the majority of the Group’s activi-ties changes in bunker prices do not pose any considerable a risk, as this is included in the contract with the cli-ent.

Interest rate riskLoans to group companies, bank deposits, liabilities to credit institu-tions and long-term debt constitute items that are exposed to interest rate risk.The group has had a policy where 50% of long-term debt related

to ship financing interest secured. On the balance sheet date, the company had an interest rate swap agreement of MUSD 20 concerning the loan for Ocean Alden, with final expiry in July 2020. The swap represents approxi-mately 16% of the Group’s long-term debt. As newbuildings are delivered over the next years, the proportion of interest hedged debt wil gradually increase as the newbuildings are fully or partly financed by long term CIRR loans with fixed interest rates.

Liquidity riskThe Group’s strategy is to have suffi-cient cash, cash equivalents or credit facilities at any time to finance operations and investments in accord-ance with the Group’s strategic plan for the same period. Cash flow from operations was lower than budgeted in 2012 due to weaker than expected market conditions and a delay in the delivery of Ocean Response, which necessitated capital injections from the main share-holder. Investment in new tonnage was higher than budg-eted, due to several new contracts.

Currency riskThe Group has all substantial income and expenditure in the same currency for each ship that it operates. For these vessels, currency risk is there-fore limited to excess liquidity. This applies to both crew costs, finan-cial costs and other operating costs. For the two HY820 vessels under construction at Astilleros Zamakona, currency risk is covered through for-ward purchases of EUR to cover out-

standing shipyard instalments.

Market conditionsThe Company aims to reduce the im-pact of market fluctuations by main-taining a high contract coverage. At balance sheet date, Atlantic Offshore had at coverage for its fleet of approx. 78% in 2013 and 66% in 2014.

The total tax charge of MNOK 2,43 was made up of respectively MNOK 1,04 to the UK, MNOK 2,71 to the Falkland Islands and - MNOK 1,32 to Norway.

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Note 15 – Mortgages and guarantees etc.

Note 16 - Financial InstrumentsThe Group’s interest rate swaps are accounted for as hedges. At year end the Group had only one interest rate swap, in Atlantic Offshore Alpha AS. The swap amount is MUSD 20 million, with a tenor of 10 years and a swap rate of 2.65% p.a.

Atlantic Offshore Zeta AS has two outstanding currency forward contracts, to hedge the 60% yard instalments that become payable upon delivery of two ERRV vessels in 2014. The first contract is for the sale of GBP and the purchase of EUR, total amount of MEUR 14.4 with final maturity 17.01.2014. The second contract is for the sale of NOK and the purchase of EUR, total amount of MEUR 16.3 with final maturity on 30 June 2014.

annual report 2012

Note 17 – Bank depositsWithheld taxes are are included in deposits with MNOK 5.28 which is sufficient to cover the total tax liability on salaries on the balance sheet date.

Of the total bank deposits, MNOK 23.1 are restricted funds in Atlantic Offshore Zeta AS. These funds can only be used for the payment of shipbuilding contract instalments in the company.

Note 18 – Significant events

Note 19 – Events after the balance sheet dateShell UK awarded Atlantic Offshore a 5-year contract for a HY820 ERRV vessel.

The company drew a further NOK 50 million in the above referenced unsecured bond loan of NOK 150 million, which means that the loan is fully drawn.

In February, we signed a management agreement with Blue Ship Invest AS for commercial and technical management of the PSV newbuild “Blue Thunder.”

Over 400 Crew Members Trained in Rescue Operations

In February 2012 the associated com-pany North Sea PSV AS (owned 25%) took delivery of PSV newbuild “Ocean Pride” with HY832L design from Havyard, Leirvik. The ERRV vessel “Ocean Alden” with VS 465 design, built in China, commenced its long-term contract with Gaz de France on the Gjøa field.

In May 2012, a PSV newbuild with UT 755L design was ordered from Simek, Flekkefjord. The vessel will be delivered in May 2013. In the same month, our management systems were approved by Det norske Veritas in accordance with the ISO 9001 and ISO 14001 standards.

In June 2012, Atlantic Offshore placed a three-year secured loan of MNOK 200 in the Norwegian bond market.

The loan has final maturity in June 2015.

In the same month, the company obtained three long-term contracts. From Statoil, we secured 2 PSV con-tracts for vessels with VS 485 MkIIIL design. The vessels will be built at Kleven Maritime. The contracts each have firm periods of 6 years from 2014, with three yearly options in favour of the charterer after the firm period. From Total E & P Norway AS we secured a ERRV contract for a ves-sel with HY820 design. The contract has a firm period of 4 years from 2014, with four yearly options in fa-vour of the charterer after the firm period.

In July 2012 Shell UK awarded At-lantic Offshore a 5-year contract for

a ERRV vessel with HY820 design. The contract has 5 yearly options in favour of the charterer after the firm period. The vessels destined for the Total and Shell contracts will be built at Astilleros Zamakona, Spain.

In November we signed a manage-ment agreement with Blue Ship Invest AS for commercial and techni-cal management of the PSV newbuild “Blue Power”.

In December we placed MNOK 100 of an unsecured loan with a total bor-rowing limit of MNOK 150 million in the Norwegian bond market. The loan has final maturity in March 2015.

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ERRV: Emergency Rescue Response Vessel. General definition which contains two sub-categories: MRV and Standby vessel.

FRDC: Fast Rescue Daughter Craft

Group: The Company and its Subsidiaries

MRV: Multi-Role Vessel. Equipped for rescue services, oil recovery, Remotely Operated Vehicle (ROV), fire fighting and standby.

NIS: Norwegian International Ship Register

NOR: Norsk Ordinært Skipsregister

KS: Kommandittselskap, a Norwegian limited partnership

PSV: Platform Supply Vessel

Standby vessel: Converted vessel with limited deck area, or smaller purpose-built vessel

Subsidiaries: Companies which are subsidiaries (“datterselskap”) under Section 1-3 of the Norwegian Public Companies Act.

QHSE: Quality, Health, Safety & Environment

Definitions

www.atlantic-offshore.no

60

Office address:Building K2, 3rd floor5347 Kystbasen ÅgotnesNorway

Telephone: +47 56 31 94 00Telefax: +47 56 33 86 70

Postal address:PO box 245347 Kystbasen ÅgotnesNorway

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www.atlantic-offshore.no

Atlantic Offshore Rescue Ltd.Merchants HouseWaterloo QuayAberdeen, AB11 5DE

Telephone: +44 (0)1224 212159Telefax: +44 (0)1224 211513

Documents

annual report ao - Atlantic Offshore