GDI 2011 Annual Report English - Gulf Drilling International

A N N U A L R E P O R T

2011

A N N U A L R E P O R T

2011

Emir of the State of QatarHH SHEIKH HAMAD BIN KHALIFA AL-THANI

Crown PrinceHH SHEIKH TAMIM BIN HAMAD AL-THANI

Company Profile .....................................................................12

Vision Mission & Values ........................................................14

Board of Directors ..................................................................16

2011 Highlights ......................................................................20

Financial Highlights & Key Figures ....................................21

Message from the Board of Directors

and Management ..................................................................32

Corporate Governance .........................................................36

Quality,Health,Safety& Environment (QHSE) ..................38

Operational Review ...............................................................40

Financial Statements .............................................................46

Contents

1110

GIS is a public shareholding company owned 30% by QP and 70% by individual

investors and selected institutions. The shares of GIS are listed on the Qatar

Exchange. GIS also holds 100% of the shares of Gulf Helicopters Company and

Al-Koot Insurance and Reinsurance Company, and is Qatar’s premier service group

dedicated to serving the oil and gas industry.

JDC is an international drilling contractor that has been providing offshore drilling

services worldwide for more than 40 years. The shares of JDC are listed on the Japan

Stock Exchange. As the Joint Venture’s technical partner, JDC supplies management

and operational personnel to GDI through a Technical Services Agreement.

GDI is a growth-oriented company. In less than 8 years, GDI has accumulated

ten rigs, consisting of 5 offshore jack-up rigs, 1 offshore accommodation jack-up

barge and 4 Land rigs. In addition, orders have been placed for the construction

of three new build offshore jack-up rigs and two new land rigs. The jack-ups are

scheduled to be delivered in 2013, 2014 and 2015 respectively, while GDI will

take delivery of the land rigs in 2012.

GDI had 841 employees as of 31st December 2011, including 87 Qatari

Nationals that account for more than 10% of the total work force.

GDI strives to be a world class drilling services provider and the rig contractor

of choice for operators in Qatar, providing safe and efficient drilling rig services

of the highest quality and class. GDI is driven by its pursuit of excellence and

determination to continuously improve.

GDI has thus far operated exclusively in Qatar and currently holds a 42% share

of the offshore rig market and a 100% share of the onshore rig market. As part of

the GDI’s growth strategy, plans are underway to increase GDI’s offshore market

share to 50% or more over the next five years while maintaining 100% share of

the onshore market. GDI is also diversifying its range of services to include jack-up

accommodation barges as the demand for this service arises since such activity

would be complementary to GDI’s existing drilling operations.

GDI was originally formed as a joint venture between Qatar Petroleum (QP) and

Japan Drilling Co. Ltd (JDC) with paid-up capital of US$ 103.2 million. The shares

of QP, comprising 70% ownership in GDI, were transferred to Gulf International

Services Q.S.C. (GIS) effective 12 February 2008.

13

Established in May 2004 as the first offshore and onshore drilling

service provider in Qatar, Gulf Drilling International Ltd Q.S.C.

(GDI) specializes in the provision of contract land and offshore

drilling services to oil and gas exploration and production

companies. GDI’s client base includes Qatar Petroleum and

other international oil and gas operators.

COMPANYPROFILE

12

15

Integrity

Creativity

Teamwork

Respect for diversity

Work Safely

Work efficiently

Promote hi-tech, cost effective technology

Continuously improve performance

Add value to everything we do

A World Class Drilling Service Provider

VISION, MISSION& VALUES

VISION

MISSION

VALUES

14

Sheikh Abdulaziz Bin Thani

Al-ThaniDirector

Sheikh Abdul Aziz holds a Bachelor’s

degree in Business Information Technology

from the American University in Washington,

D.C. With over 10 years experience in

recruitment and manpower planning, he

previously held the position of Head of

Recruitment in the HR Department of Qatar

Petroleum and is currently the Asst. Manager,

Personnel Administration within the same

Department. Sheikh Abdul Aziz is also a

member of several governmental committees,

including Permanent Population Committee,

Permanent Recruitment Committee of Qatar,

Committee of Strategy for the State Labor

Market and Conflict of Interest Committee.

Mr. Yuichiro Ichikawa Director

Mr. Ichikawa holds a BSc in Petroleum

Engineering from Tokyo University,

Japan. He has over 35 years of

experience in the drilling industry,

especially in the areas of Operations,

Engineering and Marketing. He serves

as Representative Director and Senior

Managing Executive Officer of JDC as

well as President and Representative

Director of MQJ (Mantle Quest Japan

Company Limited).

Mr. Kenzo YamadaDirector

Mr. Yamada holds a MBA in Business

Administration from Loyola Marymount

University, USA. He has over 35 years’

of experience in the drilling industry,

especially in the areas of Administration

& Corporate Planning. He also serves

as a Managing Executive Officer

and General Manager of Corporate

Strategy Planning Department of JDC.

17

Mr. Yoichi OnoeCOO & Director

Mr. Onoe holds a BSc. in

Engineering from Waseda

University, Japan. He has

over 34 years’ of experience

in the dril l ing industry,

especially in the areas of

Operations, Engineering and

Marketing. He also serves as a

Managing Executive Officer

of JDC.

Mr. Abdulrahman

Ahmad Al-Shaibi Vice Chairman

Mr. Al-Shaibi is currently Director Finance

of Qatar Petroleum. He serves on the

Board of key financial, oil & gas and

other companies that are at the heart

of the State’s economy. Some of the

major companies include QatarGas

Group of Companies, Qatar Steel

Company, Tasweeq, Qatar Aluminum

and Qatar Petroleum International

(QPI). Mr. Al-Shaibi is also member

of the State of Qatar Finance Policy and

Strategy Committee.

Mr. Ibrahim Jassim

Al Othman CEO & Director

Mr. Al-Othman is the Chief Executive

Officer and Board Member of Gulf

Drilling International Ltd. He holds a BSc. in

Petroleum Engineering from the University of

Southern California and an MBA in Business

Administration from the American University of

Beirut. He has over 24 years’ of experience

in the oil industry working for National,

International and Service Oil Companies. He

also represents QP as a Director on Boards of

several Joint Ventures.

Mr. Saad Sherida Al-Kaabi Chairman of the Board

Mr. Al-Kaabi graduated from the

Pennsylvania State University, USA

in 1991 with a BSc in Petroleum &

Natural Gas Engineering. Currently,

he is the Director of Oil & Gas Ventures

at Qatar Petroleum. He oversees all

exploration and oil & gas development

activity in Qatar. Mr. Al-Kaabi reports

directly to H.E. Dr. Mohammed Bin

Saleh Al-Sada, Minister for Energy

& Industry and QP’s Chairman and

Managing Director.

16

BOARD OF DIRECTORS

1918

FINANCIAL HIGHLIGHTS & KEY FIGURES

US Dollars in Millions


2010

2010

2011

2011

Gross Profit

Finance Income

60.29

1.15


2010

2010 2011

2011

Direct Costs

(127.55)

(109.11)


(26.57)

(25.08)

110.47

3.43


2010 2011

2010 2011

Revenue

187.84

219.57


Other Net (Expense) / Income

4.19

(0.65)

General & Administrative Expenses

21

2011 HIGHLIGHTS

Health and Safety:

GDI had its best safety record since inception.

Operational Efficiency:

GDI had its lowest rig down time since inception.

Engineering and Maintenance:

Al-Doha and Zikreet rigs were significantly upgraded,

refurbished and repaired.

Growth Strategy:

US$550 million business expansion was approved and

financing secured to place orders for 2 new build jack-

up rigs, an accommodation jack-up rig and 2 land rigs

that will be placed into service over the next 3 years.

In April of 2012 a 3rd new build jack-up rig was ordered

for delivery in Q1 of 2013.

Business Development & Marketing:

A new contract was secured for Zikreet, GDI’s new

accomodation jack-up rig.

2011 was a very successful year for GDI, as reflected by a number of stellar performances and achievements accomplished, including:

20

Human Resources:

GDI had its lowest staff turnover and currently employs

the highest number of Qatari staff since inception.

Administration:

A new senior accommodation facility was constructed

for the D.S.S.A. base camp in Dukhon and a cafeteria

and suite of mezzanine floor offices were added to

GDI’s head office.

Accolades:

Al-Khor rig was awarded as the most improved rig

in Shell’s global rig ranking system. Al-Khor was also

ranked in the top quartile of all rigs working for Shell

worldwide.

12

23


Deferred TaxUS Dollars in Millions

Profit before Taxation

36.69

85.22


Finance Expenses


Net Profit for the year

2010 2011

35.64

84.93

22

2010 20112010 20112010 2011

(2.37)(2.95)

(1.05)

(0.29)

Gulf Drilling International Limited Q.S.C.

1.30

(155.81)

(34.25)

2010 2011

66.62

102.83

(102.19)





131.32

2010 2011

102.83 107.95

Net Cash flow from Operating activities

Cash & Cash Equivalents at beginning of year

Net cash used in Investing activities

Cash & Cash Equivalents at end of the year


Net cash used in Financing activities

118.29

25

2010 20112010 20112010 2011

350.6

374.96


2010 2011

Current Liabilities

87.52


2010

2010

2011

2011

Current Assets

123.64

188.32


75.85


2010 2011

436.72


2010 2011

Long-term Debt

232.88

174.23

Shareholders’ Equity

Property & Equipment (Net Book Value)

547.35

24


55 0 14 4

Number of Onshore Rigs Number of Offshore Rigs Number of Jack-up accommodation barge

Total Employees

841

839

27

2010 2010 20102011 2011 2011

2010 2011

26


12

2928

Revenue and Income Growth


2011

Net Income

Revenue

2004

2005

2006

0 100 200 300

2007

2008

Year

2009

2010

Rig and Barge Fleet

Total Number of Rigs and Barges

2011

Jack-up Accom. Barge

Jackup Rigs

Land Rigs2004

2005

2006

2007

2008

0 1 2 3 4 5

Year

2009

2010


3130

It is also encouraging to see a more seasoned leadership

team in place at GDI and our operating personnel are

becoming more experienced as well. Employee turnover

in 2011 was the lowest it has ever been and this continuity

has enabled us to introduce several new initiatives that

will help us operate more safely and further mitigate fleet

downtime. While we were pleased to have achieved in

2011 our best safety record and lowest rig down time

since the company’s inception, we are looking forward to

improving on these records in the future.

Looking ahead, we have developed several additional

business opportunities that could trigger further business

expansions in the future. However, so that future growth

can be achieved in measured steps that promote stability

while mitigating financial risks, we are carefully assessing

the financing options available to GDI to determine the

most optimum combination of debt and equity financing,

should GDI’s criteria for future investments be met.

While the effect of reduced demand, lower day rates and

time taken for the performance of planned maintenance

activities made 2011 a challenging year for GDI, a

solid foundation continues to be laid that will ensure that

GDI’s future remains bright and prosperous. We are very

thankful for the continued support of our employees and

are especially thankful for the wise guidance provided

by His Excellency Dr. Mohamed Bin Saleh Al-Sada,

the Minister of Energy and Industry and Chairman and

Managing Director of Gulf International Services Q.S.C.

33

Ibrahim J. Al-OthmanChief Executive Officer

While ever mindful of the need to keep our existing rig

fleet in good working condition, we also completed this

year the second of three major shipyard projects that

are designed to enhance the capabilities and extend

the useful life of our three older rigs. In 2011, the jack-up

rig Al-Doha had extensive shipyard work performed. In

2010, the jack-up rig Gulf-2 (Al-Rayyan) had similar work

done and in 2013, Gulf-3 (Al-Wajabah) is scheduled

to go in for its shipyard work. This work is needed to

keep these rigs running and marketable and while our

earnings may suffer a little bit while these rigs are in the

shipyard, it is still considered to be money well spent as

it will help keep these rigs working well into future.

In the meantime, GDI is continuing to build upon its

competencies, efficiencies and expertise in order

to enhance our reputation as a world class drilling

contractor and improve our competitive position. An

indication of the progress being made in this regard can

be drawn from the Al-Khor jack-up rig that is currently

working for Qatar Shell. This rig was recognized this

year as being the most improved rig in Shell’s global

rig ranking system and is now ranked in the top quartile

of all rigs working for Shell worldwide. We are now

cascading the operating strengths of the Al-Khor rig to the

rest of GDI’s fleet to help replicate this fine performance

throughout the rest of the company.

While still impacted by the cyclical effects of the industry

downturn that had created unfavorable market conditions

and resulted in significantly lower day rates for drilling

contractors worldwide, GDI took significant steps in

2011 to position itself for an anticipated recovery amid

recent signs that market conditions are starting to improve.

Greater demand, particularly for high specification

rigs, and higher day rates are starting to emerge which

could prove to be a timely complement to the US$550

million business expansion that was approved by GDI’s

Board in February of 2011 to add the following assets to

GDI’s fleet:

which are set for delivery in the third quarter of 2013

and 2014, respectively;

acquired in 2011, refurbished and placed into service

in January of 2012;

and placed into service in the 2nd half of 2012.

The specifications of these assets have been tailored to

fit the long term requirements of targeted clients, hence,

utilization of these assets over their useful life is expected

to be high, which is a trademark of GDI’s business model.

Our challenge is to place these investments into service

on time and under budget. We are pleased to report that

progress thus far has been good and that our new build

program is on schedule.

BOARD OF AND

MESSAGE FROM THE

32

3534


In addition, with the Board’s oversight, direction and

approval, the management of the company has

developed and adopted the following corporate

governance tools to educate and guide all employees

through an Integrated Management System (IMS)

designed to document the company’s:

Vision, Mission & Values

Protocols & Codes of Conduct with respect to:

- Communication via chain of command

- Quality expectations

- Business ethics and integrity

- Environmental protection

Company Policies & Procedures

The Board of Directors considers the development of

Corporate Governance to be an ongoing process that is

subject to continuous improvement. Therefore, the Board

is reviewing, and may from time to time adopt, additional

best practices as are deemed necessary or appropriate

for GDI.

The primary roles of the Board of Directors are to:

Exercise business judgment to promote the long term interests of the shareholders and continuity and

vitality of the company.

Review, monitor and approve fundamental financial and business strategies and major corporate actions

of the company.

Monitor the performance of the company and management by providing advise and feedback.

Oversee processes for evaluating the adequacy of internal controls, risk management, financial reporting

and compliance, and satisfy itself as to the quality of such processes.

To assist in the discharging of its responsibilities, the

Board has established an Audit Committee comprised

solely of Directors who are not officers of the company,

to interface with the company’s:

which is under the

direct control of the Board and performs audits

concerning the execution of business activities

by all departments as well as verification

of appropriateness and effectiveness of

the internal management system; and

who are

appointed by the Board and ratified by the

company’s shareholders

The Audit Committee reviews the scope and coverage

of external and corporate audit activities and meets

with management, external auditors and internal

auditors from time to time to discuss any matters that

require their attention.

37

CORPORATE GOVERNANCE

GDI operates under a set of formal corporate governance

guidelines that have been established through the Board

of Directors by the company’s:

GDI’s Board of Directors, management and all its

employees share an ongoing commitment to the highest

standards of corporate governance.

Unless reserved to the shareholders under applicable

law, all corporate authority resides with the Board of

Directors. However, pursuant to the company’s Manual

of Financial Authorities (MOFA), specified authority has

been delegated by the Board to the CEO who, in turn,

has further delegated specified authority to other members

of management and employees of the company, in order

to implement the company’s mission.

36


39

1.06

1.59

0.62 0.55 0.51

0.79

GDI Safety Statistics:Total Recordable Incident Rate (TRIR) per 200,000 manhours

1.81.61.41.2

10.80.60.4

2006 2007 2008 2009 2010 2011

0.20

GDI's TRIR

QUALITY, HEALTH, SAFETY & ENVIRONMENT (QHSE)

GDI is committed to achieving the superior standards

of Quality, Occupational Health & Safety and

Environmental care that have been set by the company

and we are dedicated to conducting our business in

the best manner possible to deliver results that meet or

exceed such standards.

In 2011, GDI continued to focus on reviewing and

updating its policies and procedures so that they remain

in-line with the industry’s best practices.

The ‘Safety Leadership’ Training Program was again

conducted in 2011 that included 6 workshops held in

GDI’s head office and at operation sites. More than

120 persons, including crew, staff and client personnel,

participated in these programs this year, which provided

an excellent forum from which to communicate the

proper safety practices and procedures to be taken by

GDI’s staff and crew.

In 2011, GDI achieved a landmark safety record of

0.51 Total Recordable Incident Rate (TRIR) that marks the

best safety record GDI has had since its inception. This

rate is less than the latest IADC (International Association

of Drilling Contractors) Industry average for the region of

0.70. This achievement is a reflection of our relentless

commitment to incorporate safety in all our activities. It is

a priority and a mission of GDI to work safely and we

will strive for even better safety results in future.

GDI’s Business Continuity Management project

continued into 2011. Once fully tested and implemented,

this project is expected to strengthen GDI’s resilience

and reduce the impact of an incident/disaster to a

tolerable limit.

GDI continues to be certified to the following International

Standards: ISO 9001 for Quality Management System,

ISO 14001 for Environmental Management and

OHSAS 18001 for Occupational Health and Safety.

GDI also is in compliance with all applicable laws and

regulations as well as IADC standards and regulations.

We will continue striving to eliminate injuries, illnesses

and incidents with ‘Zero Impact’ to the environment.

38


GDI operates five offshore jack-up rigs, one accommodation jack-up barge and four land rigs. All of

these rigs are all located within the State of Qatar and are working under contracts with international

oil and gas companies operating in the region, including Qatar Petroleum. We drill, complete and

work-over oil and gas wells pursuant to the drilling service contracts that we have entered into with our

clients. The present status of those contracts, as of January 2012, is summarized below.

Rig Name Rig Type Operator/Status

Al-Doha Offshore Jack Up Rig Qatar Petroleum

Gulf-2 (Al-Rayyan) Offshore Jack Up Rig Occidental Petroleum

Gulf-3 (Al-Wajbah) Offshore Jack Up Rig Occidental Petroleum

Al-Khor Offshore Jack Up Rig Qatar Shell

Al-Zubarah Offshore Jack Up Rig Qatar Petroleum

Zikreet Offshore Accommodation RasGas

- Jack-Up Barge

GDI-1 Onshore Rig Qatar Petroleum


GDI-3 Onshore Rig (Work-Over) Qatar Petroleum


41

OPERATIONAL REVIEW

40


GDI’s competitive position has been strengthened by

the various associations and relationships that it has

established and developed and over the years with

various industry players. Our strong affiliation with Qatar

Petroleum has served as the keystone to our business

model. In addition, the technical support that GDI

receives from Japan Drilling Co., Ltd has proven to be

invaluable in positioning GDI as a world class drilling

service provider.

Our rig crews are considered to be a key core competency

of GDI. They form a safety oriented, environmentally

conscious and highly skilled multinational workforce

possessing a performance driven work ethic that ensures

delivery of the highest level of service to our clients at all

times. We are proud of the continued development that

has been shown by our skilled work force.

With a broad range of offshore and onshore drilling

rigs in our fleet, including two high tech jack-up rigs that

were built in the last four years and three new build jack-

ups on the way, GDI has positioned itself as an industry

leader in Qatar. GDI is the sole Qatari based drilling

contractor and has gained vast experience in upstream

oil and gas industry over the last several years. This view

is supported by the strong operational results that GDI

was able to post in 2011, which compares favorably to

the rest of the industry.

Competitive Position

43

We provide drilling services on a “day rate” basis which includes the provision of drilling rig, rig crew and associated

services to safely carry out the drilling operations required by our clients.

The average downtime rate for GDI’s rigs in 2011 was 1.07% compared to 1.09% for 2010 and compares favorably

against the industry’s standard downtime rate of approximately 2%. This downtime rate marks the best efficiency result

that GDI has achieved since its inception. GDI is pleased to see continued improvement in this critical operating

statistic and we will strive to improve our efficiency even further in the years to come.

A US$550 million business expansion was approved

and financing has been secured to place two new build

jack-up rigs, an accommodation jack-up barge and two

new land rigs into service over the next three years.

Several additional business opportunities have also been

developed that could trigger further business expansions

in the near future.

All of our rigs remained under contract throughout most

of the year. This yielded a high contract utilization rate of

96% compared to the industry average of less than 80%.

The high utilization rate combined with better operating

efficiencies helped offset the detrimental effect of reduced

demand for drilling services, lower day rates and planned

maintenance activities that GDI faced in 2011.

Al-Doha went to the shipyard at end of June, 2011 for

significant upgrades, refurbishments and repairs, in order

to extend the useful life of the rig and to meet the clients’

and class requirements for the rig. Routine rig condition

surveys were also conducted for several other rigs in order

to identify any major problems or areas that may need

further attention or major maintenance work in the future.

GDI’s accommodation jack-up barge, Zikreet (formerly

the “Ensco 95”) was acquired in June of 2011 and was

sent to the shipyard for refurbishment and conversion to

accommodation mode during the second half of the year.

This vessel was released from the shipyard in January of

2012 and was placed immediately into service.

In other highlights, the Al-Khor rig was awarded the most

improved rig in Shell’s global rig ranking system and is

currently ranked in the top quartile of all rigs working for

Shell worldwide.

A strong focus on cost controls and cost optimization

was again a primary target for GDI in 2011 and

improvements in supply chain management and

warehousing activities helped drive the improvements

that were realized in those processes over the last year.

42

GDI Average Downtime %5.00%4.50%4.00%3.50%3.00%2.50%2.00%1.50%1.00%0.50%

2006 2007

3.92%

4.53%

2.91%

1.24% 1.09% 1.07%

2008 2009 2010 20110.00%

GDI's average downtime %


4544

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF GULF DRILLING INTERNATIONAL LIMITED Q.S.C.

Report on the Financial StatementsWe have audited the accompanying financial statements of Gulf Drilling International Limited Q.S.C. (‘the Company’),

which comprise the statement of financial position as at 31 December 2011 and the statement of comprehensive

income, cash flow statement and statement of changes in equity for the year then ended, and a summary of significant

accounting policies and other explanatory information.

Director’s responsibility for the Financial StatementsThe Directors are responsible for the preparation and fair presentation of these financial statements in accordance with

International Financial Reporting Standards, and for such internal control as management determines is necessary to enable

the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our

audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of

material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the

auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements

in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting estimates made by the management, as well as

evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

audit opinion.

OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Company

as at 31 December 2011 and its financial performance and cash flows for the year then ended in accordance with

International Financial Reporting Standards.

Report on other Legal and Regulatory RequirementsFurthermore, in our opinion, proper books of accounts have been kept by the Company, an inventory count has been

conducted in accordance with established principles and the financial statements comply with the Qatar Commercial

Companies’ Law No. 5 of 2002 and the Company’s Articles of Association. We have obtained all the information

and explanations we required for the purpose of our audit, and are not aware of any violations of the above

mentioned law or the Articles of Association having occurred during the year which might have had a material effect

on the business of the Company or its financial position.

Ziad Naderof Ernst & Young

Auditor’s Registration No. 258

Date: 15 February 2012

Doha

47


FINANCIAL STATEMENTS

46

For the year ended 31 December 2011

2011 2010

Notes US$ US$

Revenue 187,844,650 219,571,574

Direct costs (127,548,844) (109,106,538)

GROSS PROFIT 60,295,806 110,465,036

Other income (expenses), net 14 4,188,242 (651,934)

General and administrative expenses 15 (26,569,383) (25,077,263)

Finance income 1,145,553 3,434,735

Finance costs (2,371,661) (2,950,825)

PROFIT BEFORE TAX 36,688,557 85,219,749

Deferred tax 12 (1,049,596) (286,056)

PROFIT FOR THE YEAR 35,638,961 84,933,693

Other comprehensive income - -

TOTAL COMPREHENSIVE INCOME 35,638,961 84,933,693

FOR THE YEAR

49


STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2011

The attached notes 1 to 21 form part of these financial statements.

Current liabilities

Amounts due to related parties 5 6,806,654 4,626,727

Accounts payable and accruals 13 31,499,961 28,468,594

Current portion of term loans 10 49,217,432 42,755,894

87,524,047 75,851,215

Total liabilities 320,399,219 250,078,759

TOTAL EQUITY & LIABILITIES 670,997,795 625,038,374

Saad Sherida Al-KaabiChairman of the Board

Ibrahim J. Al-OthmanChief Executive Officer

2011 2010

Notes US$ US$

ASSETS

Non-current asset

Property and equipment 3 547,354,242 436,719,921

Current assets

Inventories 4 13,314,629 11,107,636

Amounts due from related parties 5 23,102,192 66,288,097

Accounts receivable and prepayments 6 20,610,868 8,092,820

Bank balances and cash 7 66,615,864 102,829,900

123,643,553 188,318,453

TOTAL ASSETS 670,997,795 625,038,374

EQUITY AND LIABILITIES

Equity

Share capital 8 103,200,000 103,200,000

Legal reserve 9 40,475,844 36,911,948

Retained earnings 206,922,732 234,847,667

Total equity 350,598,576 374,959,615

Non-current liabilities

Non-current portion of term loans 10 229,700,226 172,487,132

Employees’ end of service benefits 11 1,653,174 1,268,236

Deferred tax liability 12 1,521,772 472,176

232,875,172 174,227,544


STATEMENT OF FINANCIAL POSITIONFor the year ended 31 December 2011


Share Legal Retained Total

capital reserve earnings

US$ US$ US$ US$

Balance at 1 January 2010 103,200,000 28,418,579 218,407,343 350,025,922

Total comprehensive income - - 84,933,693 84,933,693

for the year

Transfer to legal reserve - 8,493,369 (8,493,369) -

Dividends paid - - (60,000,000) (60,000,000)

Balance at 31 December 2010 103,200,000 36,911,948 234,847,667 374,959,615

Total comprehensive income - - 35,638,961 35,638,961

for the year

Transfer to legal reserve - 3,563,896 (3,563,896) -

Dividends paid - - (60,000,000) (60,000,000)

Balance at 31 December 2011 103,200,000 40,475,844 206,922,732 350,598,576

Note:

(i) During the year, the Company paid dividends amounting to US$ 60,000,000 from profits earned in 2010

(2010: US$ 60,000,000) at US$ 1.60 per share (2010: US$ 1.60 per share).

51

STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2011



2011 2010

Notes US$ US$

OPERATING ACTIVITIES

Profit before taxation 36,688,557 85,219,749

Adjustments for:

Depreciation of plant and equipment 3 45,593,125 42,095,155

Provision for end-of-service benefits 11 427,295 428,534

Loss on disposal of plant and equipment 14 724,850 666,200

Net finance costs (income) 1,226,108 (483,910)

Operating profit before changes inworking capital 84,659,935 127,925,728

Working capital changes:

Accounts receivable, prepayments and 30,667,857 (7,372,608)

due from related parties

Inventories (2,206,993) 1,799,721

Accounts payable, accrued expenses 5,211,294 9,011,838

and due to related parties

118,332,093 131,364,679

Employees’ end of service benefits paid 11 (42,357) (42,367)

Net cash from operating activities 118,289,736 131,322,312

INVESTING ACTIVITIES

Purchase of property and equipment 3 (158,538,380) (37,762,389)

Proceeds from sale of property and 1,586,084 76,636

equipment

Interest income 1,145,553 3,434,735

Net cash used in investing activities (155,806,743) (34,251,018)

50

FINANCING ACTIVITIES

Net movement in term loans 63,674,632 (39,239,300)

Interest expense (2,371,661) (2,950,825)

Dividends paid (60,000,000) (60,000,000)

Net cash from (used in) financing activities 1,302,971 (102,190,125)

DECREASE IN CASH AND CASH EQUIVALENTS (36,214,036) (5,118,831)

Cash and cash equivalents at 1 January 102,829,900 107,948,731

CASH AND CASH EQUIVALENTS AT 7 66,615,864 102,829,900

31 DECEMBER

STATEMENT OF CASH FLOWSFor the year ended 31 December 2011



53

IAS 32 Financial Instruments: Presentation (Amendment)The IASB issued an amendment that alters the definition of a financial liability in IAS 32 to enable entities to classify

rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given

pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, to

acquire a fixed number of the entity’s own equity instruments for a fixed amount in any currency. The amendment has

had no effect on the financial position or performance of the Company because the Company does not have these

type of instruments.

IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment)The amendment removes an unintended consequence when an entity is subject to minimum funding requirements and makes

an early payment of contributions to cover such requirements. The amendment permits a prepayment of future service cost

by the entity to be recognised as a pension asset. The Company is not subject to minimum funding requirements in Qatar,

therefore the amendment of the interpretation has no effect on the financial position nor performance of the Company.

Changes in accounting policies and disclosures (continued)

Improvements to IFRSsIn May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies, but no impact on the financial position or performance of the Company.

IFRS 7 Financial Instruments — Disclosures: The amendment was intended to simplify the disclosures

provided by reducing the volume of disclosures around collateral held and improving disclosures by

requiring qualitative information to put the quantitative information in context.

IAS 1 Presentation of Financial Statements: The amendment clarifies that an entity may present an analysis of each

component of other comprehensive income maybe either in the statement of changes in equity or in the notes to

the financial statements.

IFRS 3 Business Combinations: The measurement options available for non-controlling interest

(NCI) were amended. Only components of NCI that constitute a present ownership interest that

entitles their holder to a proportionate share of the entity’s net assets in the event of liquidation should be

measured at either fair value or at the present ownership instruments’ proportionate share of the acquiree’s

identifiable net assets. All other components are to be measured at their acquisition date fair value.

The amendments to IFRS 3 are effective for annual periods beginning on or after 1 July 2011.

The Company, however, adopted these as of 1 January 2011 and changed its accounting policy accordingly

as the amendment was issued to eliminate unintended consequences that may arise from the adoption of IFRS 3.

Other amendments resulting from Improvements to IFRSs to the following standards did not have any impact

on the accounting policies, financial position or performance of the Company:

The following interpretation and amendments to interpretations did not have any impact on the

accounting policies, financial position or performance of the Company:

IFRS 3 Business Combinations (Contingent consideration arising from business combination prior to adoption of IFRS 3 (as revised in 2008)IFRS 3 Business Combinations (Un-replaced and voluntarily replaced share-based payment awards)IAS 27 Consolidated and Separate Financial StatementsIAS 34 Interim Financial Statements

IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits)IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

NOTES TO THE FINANCIAL STATEMENTSAt 31 December 2011

BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2


Gulf Drilling International Limited Q.S.C. (“the Company”) is registered and incorporated in the State of Qatar under

commercial registration number 27968 as a Qatar Shareholding Company in accordance with the resolution of the

Minister of Economy and Commerce pursuant to the Qatar Commercial Companies’ Law No. 5 of 2002, in particular

Article 68 thereof. The Company commenced operations on 18 May 2004. The objectives of the Company are to

own or charter offshore jack up drilling rigs, land rigs, work over rigs and accommodation barges and to provide

drilling related services to oil and gas companies in Qatar and other countries in the region.

The activities of the Company are governed by a joint venture agreement dated 22 March 2004 between Qatar

Petroleum and Japan Drilling Co. Ltd. and the Company’s Memorandum and Articles of Association. As per the joint

venture agreement, the Company will continue for a period of 25 years unless extended or terminated in accordance

with the joint venture agreement. Qatar Petroleum, which owned 70% of the shares in the Company has transferred

its ownership of these shares to Gulf International Services Q.S.C. on 12 February 2008. Gulf International Services

Q.S.C. is a listed public shareholding company owned 30% by Qatar Petroleum and 70% by the individual investors

and selected institutions.

The Company’s current shareholders and their respective shareholdings are as follows:

CORPORATE INFORMATION

IAS 24 Related Party Transactions (Amendment) The IASB issued an amendment to IAS 24 that clarifies the definitions of a related party. The new definitions emphasise

a symmetrical view of a related party relationships and clarifies the circumstances in which persons and key management

personnel affect related party relationships of an entity. In addition, the amendment introduces an exemption from the

general related party disclosure requirements for transactions with government and entities that are controlled, jointly

controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did

not have any impact on the financial position or performance of the Company.

1

Basis of preparationThe financial statements of the Company have been prepared on a historical cost basis. The financial statements are

presented in United States Dollars which is the Company’s functional and presentation currency.

Statement of complianceThe financial statements of the Company have been prepared in accordance with International Financial Reporting

Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the applicable requirements of

Qatar Commercial Companies’ Law No. 5 of 2002.

Changes in accounting policies and disclosuresThe accounting policies adopted are consistent with those of the previous financial year, except for the following new

and amended IFRS and IFRIC interpretations effective as of 1 January 2011:


2

Country of Percentage incorporation of holding

2011 2010

70% 70%30% 30%

QatarJapan

The financial statements of the Company for the year ended 31 December 2011 were authorised for issue by the Board

Members on 15 February 2012.

Gulf International Services Q.S.C.

Japan Drilling Co. Ltd.

The adoption of the standards or interpretations is described below:



InventoriesInventories are stated at the lower of cost and net realisable value. Costs are those expenses incurred in bringing

inventories to their present location and condition at purchase cost on a weighted average basis. Net realisable value

is based on estimated selling price less any further costs expected to be incurred on disposal.

Trade receivablesTrade receivables are carried at original invoiced amount less provision for non-collectability of these receivables.

A provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant

financial difficulties of the debtor) that the Company will not be able to collect all of the amounts due under the original

terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired

debts are derecognized when they are assessed as uncollectible.

Cash and cash equivalentsFor the purpose of the cash flow statements, cash and cash equivalent consist of cash in hand, bank balances, and

short-term deposits with an original maturity of three months or less, net of bank overdrafts, if any.

Financial assets

Initial recognition and measurementFinancial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans

and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging

instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at

initial recognition.

All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or

loss, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a

time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade

date, i.e., the date that the Company commits to purchase or sell the asset.

The Company’s financial assets include cash and short-term deposits, trade and other receivables.

Subsequent measurementThe subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and financial assets designated

upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are

acquired for the purpose of selling or repurchasing in the near term. Financial assets at fair value through profit and loss

are carried in the statement of financial position at fair value with changes in fair value recognised in finance income or

finance costs in the income statement.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in

an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the

effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or

premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance

income in the income statement. The losses arising from impairment are recognised in the income statement in

finance costs.

55

BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2



Standards issued but not yet effective

IAS 1 Financial Statement Presentation – Presentation of Items of Other Comprehensive Income

(Effective 1 July 2012)

IAS 12 Income Taxes – Recovery of Underlying Assets (Effective 1 January 2012)

IAS 19 Employee Benefits (Amendment) (as revised in 2011) (Effective 1 January 2013)

IAS 27 Separate Financial Statements (as revised in 2011) (Effective 1 January 2013)

IAS 28 Investments in Associates and Joint Ventures (as revised in 2011) (Effective 1 January 2013)

IFRS 7 Financial Instruments: Disclosures – Enhanced Derecognition Disclosure Requirements

(Effective 1 July 2011)

IFRS 9 Financial Instruments: Classification & Measurement (Part 1)

(Effective 1 January 2013)

IFRS 10 Consolidated Financial Statements (Effective 1 January 2013)

IFRS 11 Joint Arrangements (Effective 1 January 2013)

IFRS 12 Disclosure of Involvement in Other Entities (Effective 1 January 2013)

IFRS 13 Fair Value Measurement (Effective 1 January 2013)

The Group is currently considering the implications of the new IFRSs which are effective for future accounting periods

and has not early adopted any of the new Standards as listed below:

Property and equipmentProperty and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost includes

expenditures that are directly attributable to the acquisition of the asset. The cost of self – constructed assets includes

the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition

for its intended use.

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances

indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed

the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair

value less costs to sell and their value in use.

Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately

is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure

is capitalised only when it increases future economic benefits of the related item of property and equipment. All other

expenditure is recognised in the income statement as the expense is incurred.

Capital work in progress is stated at cost. When the asset is ready for its intended use, it is transferred from capital work-in-

progress to the appropriate category under property and equipment and depreciated in accordance with the

Company’s policies.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected

from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the

year the asset is derecognised.

The asset’s residual values, useful lives and method of depreciation are viewed and adjusted, if appropriate, at each

financial year end.


2

Changes in accounting policies and disclosures (continued)

Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows:

Rigs 10-20 years

Plant and machinery 6 to 7 years

Furniture and Fixtures 6 to 7 years

Computers and other equipments 3 to 13 years

Vehicles 5 years



Financial assets (continued)

Financial assets carried at amortised costFor financial assets carried at amortised cost, the Company first assesses whether objective evidence of impairment

exists individually for financial assets that are individually significant, or collectively for financial assets that are not

individually significant. If the Company determines that no objective evidence of impairment exists for an individually

assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit

risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment

and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment

of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the

difference between the assets carrying amount and the present value of estimated future cash flows (excluding future

expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted

at the financial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuri

ng any impairment loss is the current effective interest rate.

Financial assets carried at amortised cost (continued)The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is

recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is

accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

The interest income is recorded as part of finance income in the income statement. Loans together with the associated

allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or

has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases

or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment

loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is

credited to finance costs in the income statement.

Financial liabilities

Initial recognition and measurementFinancial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss,

loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The

Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised

initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings.

Subsequent measurementThe measurement of financial liabilities depends on their classification as follows:

Loans and borrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using

the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are

derecognised as well as through the effective interest rate method (EIR) amortisation process. Amortised cost is calculated

by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The

EIR amortisation is included in finance costs in the income statement.

DerecognitionA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When

an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms

of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of

the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is

recognised in the income statement.


2



DerecognitionA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is

derecognised when:

the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either

(a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither

transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through

arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred

control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset.

In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are

measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that

takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the

asset and the maximum amount of consideration that the Company could be required to repay.

Impairment of financial assetsThe Company assesses at each reporting date whether there is any objective evidence that a financial asset or a

group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and

only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial

recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of

the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include

indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in

interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where

observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in

arrears or economic conditions that correlate with defaults.


2

Available-for-sale financial investmentsAvailable-for-sale financial investments include equity and debt securities. Equity investments classified as available-for-

sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt

securities in this category are those which are intended to be held for an indefinite period of time and which may be sold

in response to needs for liquidity or in response to changes in the market conditions. After initial measurement, available-

for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other

comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative

gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss

is reclassified to the income statement in finance costs and removed from the available-for-sale reserve.

For a financial asset reclassified out of the available-for-sale category, any previous gain or loss on that asset that has

been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any

difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of

the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is

reclassified to the income statement.

56



59


2

Foreign currenciesThe financial statements are presented in US$, which is the Company’s functional and presentation currency. The

official currency of the State of Qatar, the Company’s country of domicile, is the Qatari Riyal (QR). Certain domestic

transactions are conducted in QR, which is pegged to the US$. The Company maintains its financial records and

prepares its financial statements in US$, as required by the JVA. All major sales and purchase agreements entered into

by the Company are denominated in US$.

Transactions in foreign currencies are initially recorded in the approximate functional currency rate of exchange ruling

at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at

the functional currency rate of exchange ruling at the end of the reporting period. All differences are taken to the

income statement. Non-monetary items measured in terms of historical costs in a foreign currency are translated using

the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign

currency are translated using the exchange rates at the date when the fair value was determined. Foreign currency gains

and losses are reported on a net basis.

Fair valuesFor investments traded in active markets, fair value is determined by reference to quoted market bid prices. The fair value

of interest-bearing items is estimated based on discounted cash flows using interest rates for items with similar terms and

risk characteristics.

Revenue recognitionRevenue represents rig rental and supply of related ancillary services income earned and invoiced during the year, in

accordance with the terms of the contracts entered into with customers. Rig mobilisation fees received and costs incurred

to mobilise a drilling unit at the commencement of a contract are recognised over the term of the related drilling contract.

Costs incurred to relocate drilling units for which a contract has not been secured are expensed as incurred.

Interest revenue is recognised as the interest accrues using the effective interest method, under which the rate used

exactly discounts, estimated future cash receipts through the expected life of the financial asset to the net carrying

amount of the financial asset.

Use of estimatesThe preparation of financial statements in conformity with International Financial Reporting Standards requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period. Although these estimates are based on management's best knowledge of current

events and actions, actual results may ultimately differ from those estimates.

The estimates and underlying assumptions are reviewed regularly. Revisions to accounting estimates are recognised in

the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future

periods if the revision affects both current and future.




2

58

Accounts payable and accrualsLiabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the

supplier or not.

Income tax and deferred taxThe Company is exempted from income tax for an initial period of 10 years commencing from 18 May 2004.The Company

may be granted with an additional tax exemption period after the expiry of the initial tax exemption period. Accordingly, no

provision for current income tax has been provided for these financial statements.

Deferred tax is provided to the extent of the foreign shareholding of the Company, using the liability method on all temporary

differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial

reporting purposes. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the

period when the asset is realized or the liability is settled, based on laws that have been enacted as of the reporting date.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

ProvisionsProvisions are recognised when the Company has an obligation (legal or constructive) arising from a past event, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be

reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The

expense relating to any provision is presented in profit or loss net of any reimbursement. If the effect of time value of money

is material, provisions are discounted using a current pre tax rate that reflects, when appropriate, the risks specific to the

liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a

finance cost.

Employees’ end of service benefitsThe Company provides end of service to its employees. The entitlement to these benefits is based upon the

employees’ final salary and length of service, subject to the completion of a minimum service period, calculated

under the provisions of the Qatar Labour Law and is payable upon resignation or termination of the employee.

The expected costs of these benefits are accrued over the period of employment.

With respect to its Qatari employees, the Company makes contributions to Government Pension Fund

calculated as a percentage of the employees’ salaries in accordance with the requirements of Law No. 24

of 2002 pertaining to Retirement and Pensions. The Company’s obligations are limited to these contributions,

which are expensed when due.

Borrowing costsBorrowing costs that are directly attributable to acquisition or construction of property and equipment are capitalised

as part of cost of the asset. Capitalisation of borrowing costs ceases when substantially all the activities necessary

to prepare for its intended use are completed. A capitalisation rate of 100% is used up to the date of completion of

substantially all the activities necessary to prepare for its intended use as the entire loans are related to the acquisition

of qualifying assets. For the purpose of determining interest available for capitalisation, the costs related to these

borrowings are reduced by any investment income on the investment of the borrowing. Other borrowing costs are

recognised as expense in the period in which they are incurred.



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63

5 RELATED PARTY DISCLOSURES

Name of related party Nature of relationship Type of

transaction

2011

US$

2010

US$

Qatar Petroleum Affiliated Company Sales 103,050,997 134,856,219

Secondee fees 484,232 550,152

Group Insurance 319,864 302,573

Services rendered 261,445 256,644

Qatar Liquefied Gas

Company Limited

Affiliated Company Sales 3,553,619 50,588,043

Japan Drilling

Company Ltd.

Shareholder Secondee fees &

services

3,379,083 3,405,823

Amwaj Catering Affiliated Company Catering services

for rigs

4,201,299 3,954,276

Qatar Fuel Affiliated Company Purchase of diesel 6,377,113 3,381,801

Al Koot Insurance Affiliated Company Staff medical

insurance

premium

778,579 718,153

Gulf Helicopters Affiliated Company Services rendered 20,000 12,500

Al Shaheen Well Services

Company

Affiliated Company Services rendered 711,856 1,542,866

Related parties represent shareholders, directors and key management personnel of the Company. Pricing policies and

terms of these transactions are approved by the Company’s management.

Transactions with related parties included in the statement of comprehensive income are as follows:

Balances with related parties included in the statement of financial position are as follows:

(a) Amounts due from related parties

Qatar Petroleum and its related parties:

Trade receivables 6,622,604 35,689,894

Unbilled revenue 16,479,588 30,598,203

23,102,192 66,288,097

2011

US$

2010

US$



Cost of sales 43,747,153 40,517,132

General and administrative expenses (Note 14) 1,845,972

45,593,125

1,578,023

62

At 1 January 1,155,805 115,176

Provision for the year 443,405 1,040,629

1,599,210 1,155,805

Drilling materials, spare parts and consumables 14,251,976 12,158,298

Goods in transit 661,863 105,143

14,913,839 12,263,441

Less: Allowance for slow moving and damaged inventories (1,599,210) (1,155,805)

13,314,629 11,107,636

4 INVENTORIES

The movement in the allowance for slow moving inventories is as follows:

2011

US$

2010

US$

2011

US$

2010

US$

3 PROPERTY AND EQUIPMENT (continued)

The depreciation charge has been allocated in the statement of comprehensive income as follows:

During the previous year, the Company, based on its annual review and reassessment of the economic

useful lives, reassessed the useful lives of certain of its new offshore jack-up rigs from 15 years to 20 years

with effect from 1 January 2010. The remaining useful lives were adjusted accordingly.

(a)

(b)

(d)

(c) The Company started construction of two offshore drilling rigs in 2011 which are expected to be completed

between 2013 and 2014. The new jack-up rigs are financed via a syndicated loan of US$ 430 million from

a consortium of lenders (refer to Note 9 for the loan facility). The amount of borrowing costs capitalised during

the year ended 31 December 2011 was US$ 1,716,004 (2010: Nil).

The encumbrances and liens on plant and equipment are set out in Note 10.

2011

US$

2010

US$



42,095,155

65

9 LEGAL RESERVE

10 TERM LOANS

In accordance with the provisions of Qatar Commercial Companies’ Law No 5 of 2002, 10% of the net profit for the

year is transferred to the legal reserve until the balance in the reserve equals 50% of the paid up capital. This reserve

is not normally available for distribution except in circumstances specified in the Qatar Commercial Companies’ Law

No. 5 of 2002.

Loan 1 (i) 15,384,621 20,512,826

Loan 2 (ii) 45,675,688 59,729,740

Loan 3 (iii) 73,125,000 89,375,000

Loan 4 (iv) 24,000,000 28,000,000

Loan 5 (v) 18,280,000 18,280,000

Loan 6 (vi) 107,000,000 -

283,465,309 215,897,566

Less: Unamortised finance cost associated with raising finance (4,547,651) (654,540)

278,917,658 215,243,026

Classified in the statement of financial position as follows:

Current portion 49,217,432 42,755,894

Non-current portion 229,700,226 172,487,132

278,917,658 215,243,026

(i)

(ii)

(iii)

(iv)

Loan 1: The Company obtained a syndicated loan of US$ 50 million to finance the construction, upgrading and refurbishment of

rigs and purchase of other related assets. The effective interest is LIBOR plus 0.7% and the loan is repayable in 39 equal quarterly

instalments of US$ 1,282,051 commencing from 24 May 2005. The loan is secured over the proceeds from Rig Gulf – 1.

Loan 3: The Company obtained a syndicated loan of to finance the construction and purchase of drilling rig, Al Zubarah

and the upgrade and refurbishment works on existing drilling rigs owned by the Company. The effective interest rate is LIBOR

plus 0.80% and the loan is repayable in 32 equal quarterly instalments of each commencing from 31 July 2008. The loan is

secured by creating a first preferred mortgage on rig Gulf – 3 in favour of the lenders.

Loan 2: The Company obtained a syndicated loan of US$ 130 million to finance the purchase, upgrading and refurbishment

works of drilling rigs. The effective interest is LIBOR plus 0.7% and the loan is repayable in 37 equal quarterly instalments

of US$ 3,513,514 commencing from 31 March 2006. The loan has been drawn-down to finance the construction and or

purchase of rigs, Gulf 3, Al Khor, Al Zubarah, and GDI 4. The loan is secured by creating a first preferred mortgage on rig

Gulf – 2 in favour of the lenders. The proceeds from rigs GDI – 1 and Gulf – 2 has also been assigned in favour of the lenders.

Loan 4: The Company obtained a loan of US$ 40 million from a commercial bank to finance the purchase of offshore rig Al

Khor. The effective interest is LIBOR plus 0.55% and the loan is repayable in 40 equal quarterly instalments of US$ 1 million

each commencing from 31 March 2008. The loan is secured by way of granting the lender a right of set-off against the credit

balances in other accounts of the Company maintained with the lender.

2011

US$

2010

US$

2011

US$

2010

US$



5 RELATED PARTY DISCLOSURES (continued)

6 ACCOUNTS RECEIVABLE AND PREPAYMENTS

7 CASH AND CASH EQUIVALENTS

8 SHARE CAPITAL

Qatar Petroleum 1,215,806 1,493,486

Qatar Fuel (WOQOD) 1,013,081 461,762

Japan Drilling Company 1,675,071 1,026,825

Amwaj Catering 2,323,833 1,063,412

Al Koot Insurance 298,757 249,943

Al Shaheen Well Services Company 280,106 331,299

6,806,654 4,626,727

(b) Amounts due to related parties

Short term benefits (including directors’ remuneration) 1,077,038 1,214,121

The remuneration of directors and other members of key management during the year was as follows:

(c) Compensation of key management personnel

Prepayment and advances 4,941,093 5,383,739

Other accounts receivables 15,669,775 2,709,081

20,610,868 8,092,820

Authorised, issued and paid up :

37,574,088 ordinary shares of US$ 2.75

(QR 10) each

103,200,000 103,200,000

Included in bank balances and cash is debt service reserve amounting to US$ 11,080,844 (2010: US$ 11,057,914) which is

restricted in use, in accordance with the provisions of the term loan agreements entered into with the lenders. Bank balances also

include term deposits denominated in Qatari Riyals maturing within three months which carry an effective interest rate of 2.25%.

(2010: 3%).

102,829,900Bank balances and cash

2011

US$

2010

US$

2011

US$

2010

US$

2011

US$

2010

US$

2011

US$

2010

US$

2011

US$

2010

US$



66,615,864

67

12 DEFERRED TAX LIABILITY

The deferred tax attributable to temporary differences arising between the books of accounts and taxation basis of

depreciation of rigs have been provided using the liability method to the extent of the foreign share holding of the

Company and are measured at the generally applicable tax rate of 10% based on the newly enacted tax law effective

from 1 January 2010.

Further, it has been agreed by the shareholders that the appropriate income tax rate will be applied by the Company

for the measurement of taxation based on the clarification obtained from the Qatar Income Tax authorities.

Balance at the beginning of the year 472,176 186,120

Tax expense relating to the origination and reversal of temporary

differences

1,521,772 472,176

14 OTHER INCOME (EXPENSES), NET

Loss on disposal of property and equipment (724,850) (666,200)

Miscellaneous income 4,913,092 14,266

4,188,242 (651,934)

2011

US$

2010

US$

13 ACCOUNTS PAYABLE AND ACCRUALS

The amount recognised for the year ended 31 December 2011 as an expense for the pension liability for Qatari

employees is US$ 311,747 (31 December 2010: US$ 151,846) and the amount yet to be remitted to the Retirement and

Pension Authority amounts to US$ 50,682 (31 December 2010: US$ 33,632), which is included in accrued expenses

and provisions.

2011

US$

2010

US$

Trade accounts payables 14,419,629 5,781,806

Other payable 169,759 2,085,997

Accrued expenses and provisions 16,910,573 20,600,791

31,499,961 28,468,594

2011

US$

2010

US$

2011

US$

2010

US$

1,049,596 286,056



11 EMPLOYEES’ END OF SERVICE BENEFITS

10 TERM LOANS (continued)

(v)

(vi)

Loan 5: The Company entered into a loan agreement (“The bridge loan”) with a commercial bank for a project facility up

to US$ 20 million to finance the final payment for Al Zubarah rig and also acquire a new onshore drilling rig. The effective

interest is LIBOR plus 1.05%. The bridge loan will be replaced by a credit facility when the loan agreement currently under

progress is executed.

During the year, the Company obtained a syndicated loan of US$ 430 million from a consortium of lenders, to finance the

construction of two offshore drilling rigs, purchase of one offshore drilling rig and purchase of two rigs for land operations. The

effective interest is LIBOR plus 1.5%. The loan is divided into three sub facilities of US$ 368 Million, US$ 42 Million and US$

20 Million, repayable in 28 equal quarterly installments, 26 equal quarterly installments and 24 equal quarterly installments

respectively. The loan is secured by creating a first preferred mortgage on all of the above mentioned assets in favor of

the lenders.

The maturity profiles of the loans are as follows:

Nominal

interest rate

Year of

maturity 1 year

2 – 5

years

5 years

and above Total

Nominal

interest rate

Year of

maturity 1 year

2 – 5

years

5 years

and above Total

Loan 1 LIBOR+0.7% 2014 5,128,205 10,256,416 - 15,384,621

Loan 2 LIBOR+0.7% 2015 14,054,052 31,621,636 - 45,675,688

Loan 3 LIBOR+0.8% 2016 16,250,000 56,875,000 - 73,125,000

Loan 4 LIBOR+0.55% 2017 4,000,000 16,000,000 4,000,000 24,000,000

Loan 5 LIBOR+1.05% 2013 3,562,953 14,717,047 - 18,280,000

Loan 6 LIBOR+1.50% 2021 6,222,222 89,888,889 10,888,889 107,000,000

49,217,432 219,358,988 14,888,889 283,465,309

As at 31 December 2010

Loan 1 LIBOR+0.7% 2014 5,128,204 15,384,622 - 20,512,826

Loan 2 LIBOR+0.7% 2015 14,054,054 45,675,686 - 59,729,740

Loan 3 LIBOR+0.8% 2016 16,250,000 65,000,000 8,125,000 89,375,000

Loan 4 LIBOR+0.55% 2017 4,000,000 16,000,000 8,000,000 28,000,000

Loan 5 LIBOR+1.05% 2013 3,323,636 14,956,364 - 18,280,000

42,755,894 157,016,672 16,125,000 215,897,566

Balance at the beginning of the year 1,268,236 882,069

Provision for the year 427,295 428,534

Less: Payments made during the year (42,357) (42,367)

Balance at the end of the year 1,653,174 1,268,236


2011

US$

2010

US$




67

12 DEFERRED TAX LIABILITY

The deferred tax attributable to temporary differences arising between the books of accounts and taxation basis of

depreciation of rigs have been provided using the liability method to the extent of the foreign share holding of the

Company and are measured at the generally applicable tax rate of 10% based on the newly enacted tax law effective

from 1 January 2010.

Further, it has been agreed by the shareholders that the appropriate income tax rate will be applied by the Company

for the measurement of taxation based on the clarification obtained from the Qatar Income Tax authorities.

Balance at the beginning of the year 472,176 186,120

Tax expense relating to the origination and reversal of temporary

differences

1,521,772 472,176

14 OTHER INCOME (EXPENSES), NET

Loss on disposal of property and equipment (724,850) (666,200)

Miscellaneous income 4,913,092 14,266

4,188,242 (651,934)

2011

US$

2010

US$

13 ACCOUNTS PAYABLE AND ACCRUALS

The amount recognised for the year ended 31 December 2011 as an expense for the pension liability for Qatari

employees is US$ 311,747 (31 December 2010: US$ 151,846) and the amount yet to be remitted to the Retirement and

Pension Authority amounts to US$ 50,682 (31 December 2010: US$ 33,632), which is included in accrued expenses

and provisions.

2011

US$

2010

US$

Trade accounts payables 14,419,629 5,781,806

Other payable 169,759 2,085,997

Accrued expenses and provisions 16,910,573 20,600,791

31,499,961 28,468,594

2011

US$

2010

US$

2011

US$

2010

US$

1,049,596 286,056



11 EMPLOYEES’ END OF SERVICE BENEFITS

10 TERM LOANS (continued)

(v)

(vi)

Loan 5: The Company entered into a loan agreement (“The bridge loan”) with a commercial bank for a project facility up

to US$ 20 million to finance the final payment for Al Zubarah rig and also acquire a new onshore drilling rig. The effective

interest is LIBOR plus 1.05%. The bridge loan will be replaced by a credit facility when the loan agreement currently under

progress is executed.

During the year, the Company obtained a syndicated loan of US$ 430 million from a consortium of lenders, to finance the

construction of two offshore drilling rigs, purchase of one offshore drilling rig and purchase of two rigs for land operations. The

effective interest is LIBOR plus 1.5%. The loan is divided into three sub facilities of US$ 368 Million, US$ 42 Million and US$

20 Million, repayable in 28 equal quarterly installments, 26 equal quarterly installments and 24 equal quarterly installments

respectively. The loan is secured by creating a first preferred mortgage on all of the above mentioned assets in favor of

the lenders.

The maturity profiles of the loans are as follows:

Nominal

interest rate

Year of

maturity 1 year

2 – 5

years

5 years

and above Total

Nominal

interest rate

Year of

maturity 1 year

2 – 5

years

5 years

and above Total

Loan 1 LIBOR+0.7% 2014 5,128,205 10,256,416 - 15,384,621

Loan 2 LIBOR+0.7% 2015 14,054,052 31,621,636 - 45,675,688

Loan 3 LIBOR+0.8% 2016 16,250,000 56,875,000 - 73,125,000

Loan 4 LIBOR+0.55% 2017 4,000,000 16,000,000 4,000,000 24,000,000

Loan 5 LIBOR+1.05% 2013 3,562,953 14,717,047 - 18,280,000

Loan 6 LIBOR+1.50% 2021 6,222,222 89,888,889 10,888,889 107,000,000

49,217,432 219,358,988 14,888,889 283,465,309


Loan 1 LIBOR+0.7% 2014 5,128,204 15,384,622 - 20,512,826

Loan 2 LIBOR+0.7% 2015 14,054,054 45,675,686 - 59,729,740

Loan 3 LIBOR+0.8% 2016 16,250,000 65,000,000 8,125,000 89,375,000

Loan 4 LIBOR+0.55% 2017 4,000,000 16,000,000 8,000,000 28,000,000

Loan 5 LIBOR+1.05% 2013 3,323,636 14,956,364 - 18,280,000

42,755,894 157,016,672 16,125,000 215,897,566

Balance at the beginning of the year 1,268,236 882,069

Provision for the year 427,295 428,534

Less: Payments made during the year (42,357) (42,367)

Balance at the end of the year 1,653,174 1,268,236


2011

US$

2010

US$




69

18 FINANCIAL RISK MANAGEMENT

Term loans (283,465,309) (215,897,566)

Objectives and policiesThe Company’s principal financial liabilities comprise term loans, accounts payable and certain accruals and due to

related parties. The main purpose of these financial liabilities is to raise finance for the Company’s operations. The

Company has various financial assets such as accounts receivables and certain other receivables, amounts due from

related parties and cash and short-term deposits, which arise directly from its operations.

The Board of Directors have the overall responsibility of the establishment and oversight of the Company’s risk

management framework. The Company’s risk management policies are established to identify and analyse the risks

faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.

The main risks arising from the Company’s financial instruments are interest rate risk, foreign currency risk, credit risk

and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks which are

summarised below.

Interest rate risk

The Company is exposed to interest rate risk on its interest bearing assets and liabilities (bank deposits and syndicated

loans).At the reporting date the interest rate profile of the Company interest bearing financial instruments were:

Variable rate instruments:

The following table demonstrates the sensitivity of the statement of income to reasonably possible changes in interest

rates, with all other variables held constant, of the Company’s profit. The sensitivity of the statement of income is the

effect of the assumed changes in interest rates on the Company’s profit for one year, based on the floating rate financial

assets and financial liabilities held at 31 December 2011 and 2010.

Carrying amount

31 December 2011

+50 (882,326)

-50 882,326

31 December 2010

+50 (570,416)

-50 570,416

Increase decreaase

in basis point

Effect on profit

before tax

US$

2011

US$

2010

US$



Estimated capital expenditure contracted but not provided

for as of the reporting date

334,050,000 109,200

Estimated capital expenditure approved but not contracted

for as of the reporting date

29,478,205 24,950,000

15 GENERAL AND ADMINISTRATIVE EXPENSES

16 COMMITMENTS

Capital expenditure commitments;

Operating lease commitments:

Staff costs 14,971,059 14,523,504

Qatarisation expenses 3,200,090 2,538,517

Depreciation (Note 3) 1,845,972 1,578,023

Office rent 1,415,462 1,330,504

Secondment fees 1,423,103 1,315,152

Travelling and transport 874,232 830,334

Communication expenses 944,096 769,148

Professional fees 400,351 348,521

Printing and stationery 180,564 333,250

Advertising expenses 361,009 307,773

Recruitment costs 119,399 206,021

Disaster recovery expenses 154,775 201,160

Directors’ remunerations 138,634 375,075

Training expenses 146,580 96,650

Repairs and maintenance 68,777 50,236

Entertainment expenses 24,072 26,361

Miscellaneous expenses 301,208 247,034

26,569,383 25,077,263

Letters of credit 875,000 813,972

Guarantees 3,350,050 1,250,050

4,225,050 2,064,022

17 CONTINGENT LIABILITIES

Future minimum lease payments

Within one year

After one year but not more than five years

Total operating lease expenditure contracted for at the reporting date

68

1,414,879 1,269,780

2,829,758 3,809,340

4,244,637 5,079,120

2011

US$

2010

US$

2011

US$

2010

US$

2011

US$

2010

US$

2011

US$

2010

US$



At 31 December 2011 Less than 3

months

US$

3 to 12

months

US$

2 to 5 years

US$

More than

5 years

US$

Total

US$

Term loans 11,413,620 37,564,497 233,016,753 15,888,888 297,883,758

Accounts payable and

accruals

14,419,629 - - - 14,419,629

Amounts due to related

parties

6,806,654 - - - 6,806,654

32,639,903 37,564,497 233,016,753 15,888,888 319,110,041

Term loans 11,287,849 33,296,711 160,817,917 16,234,609 221,637,086

Accounts payable and

accruals

5,781,806 - - - 5,781,806

Amounts due to related

parties

4,626,727 - - - 4,626,727

21,696,382 33,296,711 160,817,917 16,234,609 232,045,619

The Company limits its liquidity risk by ensuring bank facilities are available. The Company’s terms of sales require

amounts to be paid within 30-45 days of the date of sale.

The table below summarises the maturities of the Company’s undiscounted financial liabilities at 31 December 2011 and

2010, based on contractual payment dates and current market interest rates.

Liquidity risk

18 FINANCIAL RISK MANAGEMENT (continued)

Capital managementThe primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and

healthy capital ratios in order to support its business and maximise shareholder value.

The Company manages its capital structure and makes adjustment to it, in light of changes in economic conditions.

To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, after fulfilling

senior debt obligations, return capital to shareholders or issue new shares. No changes were made in the objectives,

policies or processes during the year ended 31 December 2011 and 31 December 2010.

The Company monitors capital using a gearing ratio, which is debt divided by capital plus debt.

The Company includes within debt, interest bearing loans and borrowings and accounts payable and accruals.

Capital includes equity less any net unrealised gains reserve.

Interest bearing loans and borrowings 283,465,309 215,897,566

Accounts payable and accruals 31,499,961 28,468,594

Net debt 314,965,270 244,366,160

Equity 350,598,576 374,959,615

Capital and net debt 665,563,846 619,325,775

Gearing Ratio

2011

US$

2010

US$

At 31 December 2010 Less than 3

months

US$

3 to 12

months

US$

2 to 5 years

US$

More than

5 years

US$

Total

US$

47% 39%



Liquidity riskLiquidity risk

2011 2010

Trade payables & due to related parties

18 FINANCIAL RISK MANAGEMENT (continued)

Foreign currency riskThe Company does not hedge its currency exposure due to its minimal exposure to currency risk as most of the foreign

currency financial liabilities are denominated in Qatari Riyals. As the Qatari Riyal is pegged to the US Dollar, balances

in Qatari Riyals are not considered to represent significant currency risk.

The following table presents the Company’s exposure on major currencies on payables.

Qatari Riyals 6,244,577 15,525,998

United States Dollar 11,291,102 3,215,556

UAE Dirhams 165,010 740,771

Japanese Yen 223,810 10,731,416

Singapore Dollars 145,365 37,565

Great Britain Pounds 56,965 24,609

Euro 4,103 28,400

Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other

party to incur a financial loss. The Company’s exposure to credit risk is as indicated by the carrying amount of its

financial assets which consist principally of accounts receivable, due from related parties and bank balances. Accounts

receivable and due from related parties are shown net of provision for doubtful receivables and bank balances are with

reputed banks having high credit ratings assigned by international credit rating agencies.

The Company provides its services to a small number of oil and gas companies. Its three largest customers account for

100% of outstanding accounts receivable at 31 December 2011

(2010: 100%).

The Company has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. However,

as the customer is contractually committed to discharge its obligation, management believes that the credit risk with

respect to debtors is also limited.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at

the reporting date in respect of amounts due from related parties and other receivables were as follows:

Total

US$

2011

2010

Past due but not impaired

Neither past

due

nor impaired

US$

31 – 60

days US$

61 – 90

days

US$

91 – 180

days

US$

30 days

US$

181days

US$

17,722,024

36,717,797

16,610,031

34,532,826

1,046,666

2,179,611

65,325- --

- -- 5,360

70



20 KEY SOURCES OF ESTIMATION UNCERTAINTY

21 COMPARITIVE FIGURES

Financial instruments comprise of financial assets and financial liabilities.

Financial assets consist of bank balances and cash, amount due from related parties and trade receivables.

Financial liabilities consist of term loans, amounts due to related parties and payables.

The fair values of the financial instruments are not materially different from their carrying values as at

the balance sheet date.

Impairment of accounts receivables An estimate of the collectible amount of trade and other receivable is made when collection of the full amount is no

longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts

which are not individually significant, but which are past due, are assessed collectively and a provision applied

according to the length of time past due, based on historical recovery rates.

At the balance sheet date, gross amounts due from related parties and trade accounts receivable were US$ 38,533,973

(2010: US$ 68,997,178) and no provision was made for doubtful debts for the year. (2010: Nil). Any difference between

the amounts actually collected in future periods and the amounts expected will be recognised in the income statement.

Impairment of inventoriesInventories are held at the lower of cost or net realizable value. when inventories become old or obsolete, an estimate is

made of their net realizable value. For individually significant amounts this estimation is performed on an individual basis.

Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision

applied according to the inventory type and the degree of ageing or obsolescence.

At the reporting date, gross value of inventories were US$ 14,913,839 (2010: US$ 12,263,441), with provisions for

non-moving and obsolete inventories of US$ 1,599,210 (2010: US$ 1,155,805). Any difference between the amounts

actually realised in future periods and the amounts expected will be recognised in the income statement.

The presentation and classification of items in the financial statements shall be retained from one period to the

next unless a change in presentation including the reclassification of comparative figures provides more reliable and

relevant information to the users of the financial statements and does not affect the previously reported net profit or

shareholder’s equity.

Certain accounts in the 2010 financial statements have been reclassified to conform to the 2011 presentation and

classification. The reclassification has not had any effect on the net profit, total assets, total liabilities or total equity of

the comparative figures.

Useful lives of property, plant and equipment The Company’s management determines the estimated useful lives of its property, plant and equipment for calculating

depreciation. This estimate is determined after considering the expected usage of the asset, physical wear and tear,

technical or commercial obsolescence.

19 FAIR VALUES OF FINANCIAL INSTRUMENTS

72



Documents

GDI 2011 Annual Report English - Gulf Drilling International