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S j ø l y s t P l a s s 2 • 0 2 7 8 O s l o , N o r w a y

T e l : + 4 7 2 3 0 1 4 9 0 0 • F a x : + 4 7 2 3 0 1 4 9 0 1

w w w . s t a n d a r d d r i l l i n g . n o

80

4 5

C O N T E N T S

BRIEF INTRODUCTION TO THE COMPANY 4

The corporate structure as of May 2009 6

Accounting and auditing 6

Financing 6

DIRECTORS’ REPORT 8

Contracts 9

Technical support 9

Organisation 9

Accounting 10

Financing 10

Repayment of share capital

in the second quarter of 2008 10

Risk factors 10

Progress on and construction of rigs 11

Contingent liabilities 11

Going concern 11

Environment and safety 12

Outlook for 2009 12

FINANCIAL STATEMENTS 14

NOTES TO THE FINANCIAL STATEMENTS 18

AUDITOR’S REPORT 36

4 5

Brief introduction to the company

Standard Drilling was founded in 2005. The Company’s purpose is to invest in Ultra Premium

jack-up rigs.

Contracts were signed with Labroy Offshore Ltd. in March and October 2006 for the construction

of four jack-up rigs (MSC-CJ-46x 100D).

During 2006, the Company raised about USD 103 million in new equity and another USD 17 million

in 2007, for a total of USD 120 million.

Marketing and operations

Standard Drilling has gone in with the Malaysian company UMW Petropipe in the joint owner-

ship of rig 1 (L201) and rig 3 (L203). UMW Petropipe owns 51% of the two rigs, which are under

construction, and Standard Drilling owns 49%.

The ownership is organised in the following companies:

• UMW Standard 1 Pte. Ltd. – a Singapore-based rig company that owns building-contract L201

and that has now named the rig Naga 2.

• UMW Standard 3 Pte. Ltd. – a similar rig company that owns building-contract L203 and that

has now named the rig Naga 3.

• UMW Standard Drilling Sdn. Bhd. – a Malaysian operating company that develops and builds

up an operational organisation that handles marketing and subsequent operation of the rigs.

In 2008, Standard Drilling sold rigs L202 and L204 to Saipem.

Technical support

Noble Denton Sandefjord AS (Standard Engineering) is responsible as project manager on behalf

of Standard Drilling and UMW Petropipe.

Mr. Rune Steen is the new CEO from 1 June 2009.

Standard Drilling has collaborated with partners that have international experience in important areas:

Marketing and operations : UMW Petropipe (Malaysia)

Technical : Noble Denton Sandefjord AS (Standard Engineering)

Accounting : Mirror Accounting AS (Norway)

BOARD OF DIRECTORSMR. ØYSTEIN STRAY SPETALEN (CHAIRMAN)

MS. TONE ØSTENSEN

MR. PETER GEORGIOPOULOS

CEOMR. JAN KILDAL

ADMINISTRATION

MS. HANNE GRØSTAD

MS. INGER-JOHANNE DAHL-HANSEN

FINANCE AND ACCOUNTING:

MIRROR ACCOUNTING AS

TECHNICAL:

COO: MR. BJØRN BAKKEN

NOBLE DENTON SANDEFJORD AS

MARKETING & OPERATION

MR. ØYSTEIN IKDAHL

STANDARD ENGINEERING ASCEO: MR. RUNE STEEN

UMWSD BERHAD

NORWAY

SINGAPORE

MALAYSIA

15% OWNERSHIP

ELECTRICAL

SUPERINTENDANT

MACHINERY

SUPERINTENDANT

STEEL

SUPERINTENDANT

MARINE

SUPERINTENDANT

DRILLING

SUPERINTENDANT

PROJECT

ADMINISTRATOR

SINGAPORE

SITE MANAGER

SINGAPORE/BATAM

ACCOUNT SERVICE

SANDEFJORD

QA/PLAN SERVICE

SANDEFJORD

SITE MANAGER

SINGAPORE/BATAM

6 7

Accounting and auditing

Mirror Accounting in Norway takes care of the accounting for the Norwegian parent company,

and UMWSD in Malaysia takes care of the accounting for the Singapore-based companies.

PricewaterhouseCoopers is the auditor for Standard Drilling, and Ernst & Young is the auditor

for the two associates UMW Standard 1 and UMW Standard 3.

Financing

UMW Standard 1 has a loan in Maybank for USD 120 million with a term of 6 years (3 years

repayment + 3 years interest-only).

Likewise, UMW Standard 3 has a loan in Affi n Bank for USD 132 million (USD 120 million and

USD 12 million) with a term of 7 years (4 years repayment and 3 years interest-only).

Shareholders (17.04.2009)

Standard Investering II AS 33,60 %

Ferncliff AS 16,16 %

Georgiopoulos Peter 9,14 %

KBL European Privat Bankers S.A 6,38 %

Tycoon Industrier AS 5,39 %

Hønefoss Invest AS 3,92 %

Deutsche Bank 3,89 %

Aksjevold AS 2,49 %

Curare Invest AS 2,44 %

R.S. Platou Shipbrokers AS 2,34 %

Gross Management AS 1,45 %

Rand AS 1,03 %

The corporate structure as of May 2009

UMW STANDARD 1 PTE. LTD UMW STANDARD 3 PTE. LTDUMW STANDARD

DRILLING SND. BHD

STANDARD DRILLING ASA(NORWAY)

UMW PETROPIPE

49 % 49 %

15 %

51 % 51 % 85 %

8 9

Standard Drilling ASA was founded in 2005. The Company’s purpose is to invest in Ultra Premium

jack-up rigs. The Company’s head offi ce is located at Skøyen in Oslo, Norway.

In January 2007, a group structure was established with subsidiaries and a separate operational

organisation in Singapore.

After the sale of the building contracts for the rigs L202 and L204 to Saipem in the fi rst half of

2008, it was natural to reorganise the group’s structure. This was mainly done by selling Stand-

ard Drilling Far East Pte. Ltd. (including the companies Standard 2 Pte. Ltd. and Standard 4 Pte.

Ltd.) to Chamal Holding Pte Ltd at the end of December 2008.

That means that Standard Drilling has gone from being a group to an individual company with

49% shares in each of the two Singapore-based rig companies, UMW Standard 1 Pte. Ltd. and

UMW Standard 3 Pte. Ltd. UMW Petropipe owns the remaining 51% of the two rig companies.

The two companies own the building contract for the rigs Naga 2 (L201) and Naga 3 (L203) re-

spectively.

Contracts

The contract for construction of Naga 2 was signed on 9 March 2006, whereas the contract for

Naga 3 was signed on 4 October 2006, both for type Ultra Premium jack-up rigs, MSC-CJ-46x

100D.

The rig design is proven and is used by several major rig operators. According to a revised plan,

Naga 2 is supposed to be delivered during the second quarter of 2009, Naga 3 is expected to be

delivered in the fourth quarter of 2009.

Technical support

Noble Denton Sandefjord AS (formerly Standard Engineering AS) in Sandefjord, Norway has been

hired to act as Standard Drilling’s project organisation in order to monitor the construction pro-

grammes for the rigs at Dubai DryDock World Batam, Indonesia.

Noble Denton Sandefjord AS is an engineering division with highly qualifi ed employees with long

experience from newbuildings for the shipping and offshore sector.

Part of the project team has been at the offi ce in Singapore and part of it has been based as a lo-

cal team at the new rig yard in Batam for daily supervision of the construction process. The whole

project organisation numbered 8-10 persons in 2008/9.

Organisation

The Board of Directors of Standard Drilling ASA consists of Øystein Stray Spetalen (Chairman of

the Board), Tone Østensen and Peter Georgiopoulos. Øystein Stray Spetalen controls 59% of the

Company’s shares through direct and indirect ownership.

In January 2008, Standard Drilling Far East opened an offi ce in Singapore and appointed Rune

Steen as General Manager.

Together with our Malaysian partner, we established an operator company called UMW Standard

Drilling Sdn Bhd in Kuala Lumpur. The Company will be in charge for marketing and operation of

Naga 2 and Naga 3.

Directors´ report

8

10 11

The project team will also be strengthened with representatives

from our partner UMW Petropipe.

Dubai DryDock World Pte Ltd. has also issued a parent company

guarantee for fulfi lment of these contracts.

The sale of L202 (rig 2), L204 (rig 4) and 51% of the shares in

Standard 1 Pte Ltd and Standard 3 Pte Ltd has also signifi cantly

reduced the operational risk. The Company is left with the risk

for 49% of two rigs, compared with the former risk for 100% of

four rigs.

Progress on and construction of rigs

The building contracts have been carefully monitored and closely

supervised by the project team. All in all, there is a delay on

Naga 2. This rig will probably be delivered in second quarter 2009

rather than in the third quarter of 2008 as planned. A similar

delay for Naga 3 will be expected (delivery near the end of 2009

instead of in the summer of 2009). The contract for Naga 2 is

with PCPP (Petronas Pertamina PetroVietnam) and is for 3+1+1

years. Substantial delays in the completion of the rigs (Naga 2)

may have consequences for the contract.

Contingent liabilities

In December 2008, the Company received a letter from the

Norwegian Revenue Service with notice of a change of tax assess-

ment for 2007. The basis for the notice of an increase of

NOK 155.4 million in taxable revenue was the fact that the Tax

Offi ce bases its assessment on a different view than the Company

as to how the value of the rig contracts L201, L202, L203 and L204

should be calculated for taxable realisation in 2007. The Tax Offi ce’s

notice of a change of income is based on a disagreement about the

method that was utilised in order to calculate the value of the rig

contracts based on the subsequent sales of shareholdings

mentioned above.

In a letter to the Tax Offi ce in 2009, the Company provided more

detailed information and explained why the Company’s original tax

assessment should be used as a basis. So far, the Tax Offi ce has

not concluded its administrative procedure and has not yet

responded to the Company’s arguments and additional information.

The Company disagrees with the Tax Offi ce’s view and has not

recognised a tax liability related to the relevant matters. If the Tax

Offi ce should gain acceptance for its view, however, the increase in

taxable income will be taxed at a rate of 28%, and the Company’s

tax expenses and tax liability owed will increase accordingly.

Going concern

The Company expects a good cash fl ow and sound revenue when

the rig Naga 2 come into operation starting in the summer of

2009 in the form of dividends from UMW Standard 1 Pte Ltd,

which will be the operative company.

Standard Drilling sold L202 for USD 215 million in January 2008.

In addition, L204 was sold for USD 185 million at the end of May.

At the end of April 2008, UMW exercised its option to purchase

51 % of UMW Standard 3 Pte. Ltd.

Accounting

Standard Drilling is still in an early development stage, and, according to plan, the fi rst rig,

Naga 2, should be delivered to UMW Standard 1 in second quarter of 2009

The Company’s revenue in 2008 consists of dividends as well as capital reduction and earnings

from the sale of Standard Drilling Far East. The dividend capacity in the former subsidiary

Standard Drilling Far East is a result of gains from the sale of the rigs L202 and L204 to Saipem.

The company had a profi t before tax of NOK 173.2 million (compared with NOK 83.7 million in

2007) and a profi t for the year of NOK 173.0 million in 2008 (NOK 1.8 million in 2007). The balance

sheet shows a total balance of NOK 448.0 million (NOK 1,168.8 million in 2007) and equity of

NOK 191.6 million as of 31 December 2008 (NOK 764.6 million in 2007). The Company had a

distributable reserve of NOK 146.8 million on 31 December 2008.

Financing

In addition to equity of USD 103 million, which was raised in 2006, there was a private placement to

Peter Georgiopoulos of USD 17 million in August 2007.

UMW Standard 1, which is 49% owned by Standard Drilling, took out a bank loan of USD 120 million

from Malaysian Maybank in 2008. The loan has a term of 6 years, including an interest-only period of

3 years. The loan was at good market terms (Sibor +0.2%).

UMW Standard 3, which is 49% owned by Standard Drilling took out a similar bank loan of

USD 132 million from Affi n Bank in Malaysia. The loan has a term of 7 years, including an

interest-only period of 3 years. The loan was on good market terms (Sibor +0.95%).

Repayment of share capital in the second quarter of 2008

According to the assessment of the Board of Directors, the Company was overcapitalised after

the sale of L202 (rig 2) from Standard 2 Pte. Ltd., the sale of 51% of UMW Standard 3 Pte Ltd.

(rig 3) and the sale of 100% of L204 (rig 4) from Standard 4 Pte. Ltd. A decision was made to

recommend to the General Meeting that NOK 3.60 per share be repaid, which comes to a total of

NOK 746.1 million. On 4 March 2008, the General Meeting passed a resolution to this effect, and

the repayment took place in June 2008.

Risk factors

The Group is in an early stage and has no operating activity. The most important risk areas are

therefore to be found in the market, fi nancing and rig yards.

The Group’s market risk is primarily exposure to the rig market, which has contracted considera-

bly in 2008 and the fi rst half of 2009. The rig Naga 2, in which the Company has a 49 % stake, has

a contract and will enter into production as soon as the delivery has occurred. The Company’s

49% indirectly owned rig Naga 3 does not have any contract. The Board of Directors expects that

Naga 3 may sign a contract during 2009 so that it too can come immediately into operation upon

delivery from the rig yard, but the board emphasise simultaneously that there is risk associated

with this expectation.

The Company has fully fi nanced the newbuilding project, so they have a comfortable project

fi nancing.

With regard to the rig yard risk, Standard Drilling has an engineering, procurement and

construction contract with Dubai DryDock World Pte Ltd. In addition, Noble Denton Sandefjord AS

has been hired as project management in Singapore with offi ces at the rig yard and daily moni-

toring of the project. At most there will be about 10 persons working in this organisation.

11

12 13

After these transactions, Standard Drilling was overcapitalised, and the General Meeting resolved

to repay NOK 3.60 per share to the shareholders, provided that fi nancing could be obtained. The

fi nancing was approved at an extraordinary General Meeting on 23 May 2008, and the payment

occurred in June 2008.

The Company has a lack of funding of approximatly USD 12 million to the fi rst repayment on debt

to Ferncliff TIH AS in second quarter 2009. The Board and the administration has started to work

with alternativ solutions and expect the fi nancing to be obtained within maturity.

The Board of Directors is of the opinion that the Financial Statements give a true and fair view of

the Group’s results for 2008 and the fi nancial position on 31 December 2008. In accordance with

Section 3-3 of the Norwegian Accounting Act, we confi rm that the Financial Statements have

been prepared in accordance with the going concern assumption and that the assumption is

adequate. The Board of Directors has based this assumption on the assessment that the notice

of a change of tax assessment for the year 2007 will not gain acceptance and will therefore not

affect the funding needs.

Environment and safety

There have not been any accidents in 2008, nor have there been any environmental problems

of any sort in 2008 since the Company is not responsible for health, safety and the environment

during the contract period.

Outlook for 2009

The rig market declined in 2008 and so far in 2009. Naga 2 has a contract with PCPP (Petronas

Pertamina Petro Vietnam) and will be put into operation immediately after the delivery date. For

Naga 3, the Board of Directors expects to win a contract during the year so that it will also be put

into operation immediately after delivery.

An operational organisation has been built up in Singapore, and there is close collaboration with

our Malaysian partner UMW Petropipe.

The Board of Directors will closely supervise the building contract through the project organi-

sation. Naga 2 is expected to be delivered in the second quarter of 2009 and Naga 3 in the

fourth quarter of 2009.

Oslo, 20 May 2009

Øystein Stray Spetalen

Chairman of the Board

Tone Østensen

Board Member

Peter Georgiopoulos

Board Member

Jan Kildal

CEO

12 13

14 15

FINANCIAL STATEMENTS

INCOME SSTATEMENT FOR STAANDARD DRILLING ASAA

Amounts in whole NOK 1,000 Note 2008 2007

OPERATING REVENUE

Other gains 15 567 905 118 578Total operating revenue 567 905 118 578

OPERATING EXPENSES

Payroll expenses 4, 5 2 210 2 332 Depreciation 8 282 251 Other operating expenses 16,13 50 730 10 043Total operating expenses 53 221 12 626

OPERATING PROFIT/(LOSS) 514 683 105 952

FINANCE INCOME AND EXPENSES

Finance income 6 37 203 82 821Interest received from group companies 6 0 9 279 Finance expenses 6 (366 605) (113 999)Interest paid to group companies 6 (12 043) (315) Net finance items (341 446) (22 214)

PROFIT/(LOSS) BEFORE TAX 173 237 83 738

Tax expense 7 188 81 985

PROFIT/(LOSS) FOR THE YEAR 173 049 1 753

Information on provisions for:

Allocated to other reserves 14 173 049 1 753Total allocations 173 049 1 753

BALANCEE SHEET FOR STANDDARD DRILLING ASAASSETS AAS AT 31 DECEMBERR

Amounts in whole NOK 1,000 Note 2008 2007

FIXED ASSETS

Intangible assetsDeferred tax assets 7 0 188 Total intangible assets 188

Tangible fixed assetsFixtures 8 532 762Total tangible fixed assets 532 762

Financial fixed assetsInvestments in subsidiaries 10,15 0 755 329Investments in associates 10 394 644 0 Investment in shares 105 0

Loans to companies in the same group 9 0 218 317Total financial fixed assets 394 749 973 646

Total fixed assets 395 281 974 596

CURRENT ASSETS

ReceivablesIntercompany accounts 9 130 26 948Other receivables 13 34 565 1 113Total receivables 34 695 28 061

InvestmentsOther financial investments 4 887 587Total investments 887 587

Bank deposits, cash in hand, etc. 9 17 179 165 579

Total current assets 52 761 194 227

TOTAL ASSETS 448 042 1 168 823

14 15

16 17

CASH FLOOW STATEMENT FORR STANDARD DRILLING ASA

Amounts in whole NOK 1,000 Note 2008 2007

Cash flow from operating activitiesProfit/(loss) before tax 173 237 83 738 Tax payableResult element with no impact on cash flow inconnection with reorganisation

(73 086) (81 425)

10,15 (270 817)Ordinary depreciation and impairmentsChange in inventories, accounts receivable andaccounts payable

282 251

(472) (23 887) Change in other accruals (18 386) 81 425 Items classified as investment or financing activities 0 395 Net cash flow from operating activities (189 242) 60 497

Cash flow from investment activitiesPayments for purchase of shares/units in other companies 0 (372)Payments for purchase of capital assets (52) (762) Change in other investments 0 (336 895) Net cash flow from investment activities (52) (338 030)

Cash flow from financing activitiesProceeds from new debt, group companies 238 624 0Payment for settlement of current liabilities (323 848) 0Proceeds from new current liabilities 19 872 279 323 848 Deposit/withdrawal of equity 14,19 (746 160) 98 000 Net cash flow from financing activities 40 895 421 848

Net change in liquidity for the year (148 400) 144 315 Cash and bank deposits as of 1 January 165 579 21 264 Cash and bank deposits as of 31 December 17 179 165 579

BALANCE SHEET FOR STANDAARD DRILLING ASA EQUITY ANND LIABILITIES AS AAT 31 DECEMBER

Amounts in whole NOK 1,000 Note 2008 2007

EQUITY

Paid-in equity Nominal share capital 12, 14 2 073 2 073 Share premium reserve 14 6 200 759 664Other paid-in equity 14 524 410Total paid-in equity 8 797 762 147

Retained earningsOther reserves 14 182 813 2 460 Total retained earnings 182 813 2 460

Total equity 191 610 764 607

LIABILITIES

Liabilities to companies in the same group 9 154 676 0Other long-term liabilities 7 678 0Pension liabilities 4 887 587 Total other long-term liabilities 163 241 587

Current liabilitiesDebt to credit institutions 0 323 848 Liabilities to companies in the same group 9 83 949 0Accounts payable 9, 13 5 668 6 649 Tax payable 7 0 73 086Payable government taxes 118 19 Other current liabilities 3 456 26Total current liabilities 93 192 403 629

Total liabilities 256 432 404 216

TOTAL EQUITY AND LIABILITIES 448 042 1 168 823

Oslo, 20 May 2009

Øystein Stray Spetalen Tone Østensen Peter GeorgiopoulosChairman of the Board Board Member Board Member

Jan KildalCEO

16 17

18 19

1 - General information Standard Drilling ASA is a public limited company that is listed on the OTC list in Oslo, Norway. The purpose of the company is to invest in Ultra Premium Jackups. Standard Drilling ASA is registered and domiciled in Norway, and the head office is located at Sjølyst Plass in the City of Oslo. The Annual Accounts were approved by the Company’s Board of Directors on 20 May 2009. All amounts are in thousands of NOK in the Financial Statements, unless otherwise stated. There may be some minor rounding off (+/- 1) or the total may deviate from the sum of the individual amounts. This is due to the rounding off to whole thousands in the tables.

2 - Summary of significant accounting policies The most important accounting policies applied in the preparation of the company accounts for Standard Drilling ASA are described below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation

The accounts of Standard Drilling ASA have been prepared in accordance with simplified IFRS. The preparation of accounts in accordance with simplified IFRS requires the use of estimates. In addition, the application of the company’s accounting policies requires that the management make discretionary assessments. The group does not have any items in the accounts that contain such discretionary assessments, or a high degree of complexity, or areas where the assumptions and estimates are of significance to the accounts. (a) Interpretations and amendments of standards that have entered into force in 2008, but are not relevant to the Company The following interpretations of published standards are mandatory for annual accounts that start on 1 January 2008 or later, but they are not considered to be relevant to the Company.

- IFRIC 12, Service concession arrangements

- IFRIC 14, IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.

- IFRIC 11, IFRS 2 – Group and Treasury Share Transactions.

- IAS 39 - Financial Instruments: Recognition and measurement. In special cases,

amendment allows reclassification of certain financial assets on the basis of the held-for-trading and available-for-sale categories.

(b) Standards, amendments and interpretations of existing standards that have not yet entered into force, and for which the Company has not chosen early implementation

NOTES TO THE FINANCIAL STATEMENT

The following standards, amendments and interpretations of existing standards have been published and will be mandatory for the annual accounts that start on 1 January 2009 or later, but without the Company having chosen early implementation:

- IFRS 2 (amended), Share-based payment (entry into force from 1 January 2009). The amendments to the standards are related to the contribution terms and cancellations. The amendments clarify that the contribution terms are limited to service conditions and vesting conditions. The Company will employ IFRS 2 (amended) starting 1 January 2009. It is not expected that the standard will have any material effect on the accounts.

- IAS 36 (amended), Impairment of assets (entry into force from 1 January 2009).

Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made.. The Company will apply the IAS 36 (amended) and provide the required disclosure where applicable for impairment tests from 1 January 2009.

In addition, amendments have been approved in certain other standards as a part of IASB’s annual improvement project that was published in May 2008. These amendments will probably not affect the accounts and have therefore not been analysed in detail. This applies to the following standards:

- IFRS 7, Financial instruments: Disclosures - IAS 1, Presentation of financial statements - IAS 8, Accounting policies, changes in accounting estimates and errors - IAS 10, Events after the reporting period - IAS 18, Revenue - IAS 34, Interim financial reporting - IAS 39, Financial Instruments: Recognition and measurement.

(c) Interpretations of and amendments in existing standards that have not yet entered into force and are not relevant to the Company Amendments in certain standards and interpretations have been approved. These amendments will not affect the accounts because the amendments are not relevant to the Company. This applies to the following standards and interpretations:

- IFRS 3, Business combinations - IFRS 5, Non-current assets held-for-sale and discontinued operations - IFRS 8, Operating segment - IAS 1, Presentation of financial statements – Puttable financial instruments and

obligations arising on liquidation. - IAS 16, Property, plant and equipment - IAS 19, Employee benefits - IAS 20, Accounting for government grants and disclosure for government assistance. - IAS 23, Borrowing costs - IAS 27, Consolidated and separate financial statements - IAS 29, Financial reporting in a hyperinflationary economics - IAS 31, Interests in joint ventures - IAS 32, Financial Instruments: Presentation - IAS 38, Intangible assets - IAS 40, Investment property - IAS 41, Agriculture - IFRIC 13, Customer loyalty programmes - IFRIC 15, Agreements for construction of real estate - IFRIC 16, Hedges on a net investment in a foreign operation

20 21

2.2 Associates Associates are units where the Company has a significant, but not controlling, influence. A significant influence exists normally for investments where the Company has between 20 and 50 % of the voting shares. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. Investments in associates include goodwill identified at the time of the acquisition, net of any accumulated impairment loss. The Company's share of any associates’ post-acquisition profits or losses is recognised in the income statement and is added to the carrying value of the investments together with its share of changes in equity that have not been recognised in the income statement. The Company does not recognise its share of the losses if this entails that the carrying value of the investment becomes negative (including unsecured claims against the unit), unless the Company has assumed liabilities or granted guarantees for the associated company’s liabilities. The Company’s share of unrealized gains on transactions between the Company and its associates are eliminated. The same applies to unrealized losses unless the transaction indicates an impairment of the asset transferred. The accounting principles in the associates have been changed as required to ensure consistency with the Company’s accounting principles. Gains or losses on the dilution of ownership interests in associated companies are recognised in the income statement. 2.3 Segment information A business segment is a portion of the business operations that delivers products or services that are subject to a risk and return that are distinct from that of other business areas. A geographic market (segment) is a portion of the business operations that delivers products or services within a limited geographic area that are subject to a risk and return that are distinct from that of other geographic markets. The Company’s business operations consist of holding assets in companies with drilling rigs under construction. The entire business operations are therefore reported as a segment. 2.4 Foreign currency translation The Company’s functional currency is USD, but starting in 2007, the Company has chosen to keep its accounts in NOK since the Company is domiciled in Norway. Transactions involving foreign currency are translated into NOK using the exchange rates that are in effect at the time of the transactions. Foreign currency gains and losses that arise from the payment of such transactions and from the translation of monetary items (assets and liabilities) in foreign currencies at the rates in effect on the balance sheet date are recognised in the income statement. 2.5 Tangible fixed assets Tangible fixed assets are recognised at historical cost less depreciation. Fixed assets are depreciated based on the straight-line method, so that the historical cost of the fixed asset is depreciated to the residual value over the expected useful life of the asset, which is 3-5 years for inventory and office equipment. The useful life of the fixed asset and the residual value are reviewed on each balance sheet date and adjusted as required. When the carrying value of the fixed asset is higher than the estimated recoverable amount, the value is written down to the recoverable amount. Gains and losses on disposals are recognised in the income statement under other net (losses)/gains and represent the difference between the sales price and carrying value.

2.6 Financial assets The Company classifies financial assets into the following categories: loans and receivables. This classification is dependent on the purpose of the asset. The management classifies financial assets when they are acquired. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable cash flows that are not traded in an active market with the exception of instruments the group has designated as measured at fair value through profit or loss or available for sale. Loans and receivables are classified as current assets unless they mature later than 12 months after the balance sheet date. In this case they are classified as fixed assets. 2.7 Customer receivables Receivables from customers are recognised initially at fair value on the balance sheet. For subsequent measurements, receivables from customers are assessed at their amortized cost by means of the effective interest method, less provisions for losses that have incurred. Provisions for losses are recognised when there are objective indicators that the company will not receive settlement in accordance with the original terms. The provisions represent the difference between the nominal value and the recoverable amount, which is the net present value of the expected cash flows, discounted by the original effective interest rate. 2.8 Cash and cash equivalents Cash and cash equivalents consist of cash, bank deposits, and other short-term, readily negotiable investments with an original maturity of less than three months. 2.9 Share capital and share premium Expenses that are directly attributable to the issuance of new shares or options less tax effects are entered against equity as a reduction in the proceeds. 2.10 Accounts payable to suppliers Payables to suppliers are measured initially at fair value on the balance sheet. Payables to suppliers are recognised subsequently at their amortized cost, as calculated by means of the effective interest rate method. 2.11 Loans Loans are recognised at their fair value when they are disbursed, less any transaction costs. In subsequent periods, loans are recognised at their amortized cost, as calculated by means of the effective interest rate. The difference between the loan amount disbursed (less transaction costs) and the redemption value are recognised in the income statement over the term of the loan. Loans are classified as current liabilities unless there is an unconditional right to postpone payment of the debt by more than 12 months after the balance sheet date. 2.12 Current and deferred income tax The tax charge is calculated in accordance with the tax laws and regulations that have, or have essentially, been adopted by the tax authorities on the balance sheet date. It is the legislation in the countries where the group's subsidiaries or associates operate and generate taxable income that determine how the taxable income is calculated. The management evaluates the Company's tax positions for each period with regard to situations where the current tax laws are subject to interpretation. Provisions are allocated for the expected tax charges based on the management's evaluations.

22 23

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined by means of the tax rates and tax laws that have been adopted or essentially adopted on the balance sheet date, which are assumed to apply when the deferred tax asset is realized or the deferred tax is settled. Deferred income tax assets are recognised on the balance sheet provided future taxable income is probable and the temporary differences can be offset against this income. Deferred income tax is calculated based on temporary differences from investments in subsidiaries and associates except when the group controls the timing for the reversal of the temporary differences and it is probable that they will not be reversed in the foreseeable future. 2.13 Pension liabilities, bonus schemes and other compensation schemes for employees (a) Pension liabilities As of 31 December 2008, the Company had two employees in 60% and 50% positions respectively. The person employed in the 60% position has a pension agreement with the Company. The pension scheme is a defined contribution plan in which the company pays fixed contributions to a separate legal entity. The Company does not have any further payment liabilities after the contribution has been paid. The amount that the employees will receive after their employment period will be equal to the amount of the contributions paid by the enterprise to the pension scheme as well as the return that arises on these. The contributions are recognised as payroll expenses during the period the employee provides the services. b) Share-based compensation For a share-based compensation plan with settlement in shares, the fair value of services received from the employees as a return service for the options allotted is recognised as an expense. The total amount that is to be charged as an expense over the contribution period will be calculated on the basis of the fair value of the options at the time of allotment, less the affect of any contribution terms that are not market-based (such as profitability or sales growth goals). Contribution terms that are not market-based affect the assumptions through the number of options that can be expected to be exercised. On each balance sheet date, the estimates are reassessed for the number of options that can be expected to be exercised. Any effect of the change in the original estimates is recognised in the income statement with a corresponding adjustment against equity. The payments received in connection with the exercise of options, less directly attributable transaction expenses, are credited to the share capital (nominal value) and the share premium when the options are exercised. (c) Termination benefits Termination benefits are provided when an employment contract is terminated by the Company prior to the normal retirement age or when an employee accepts voluntarily to resign in return for such pay. The Company recognises termination benefits when it is demonstrably obligated to terminate the employment of the existing employees in accordance with a formal, detailed plan that the Company cannot retract, or to provide termination benefits as a result of an offer made to encourage voluntary retirement. Termination benefits that fall due more than 12 months after the balance sheet date are discounted to their present value.

2.14 Provisions The Company recognises provisions when: there is a legal or self-imposed obligation to do so as a result of earlier events, there is a preponderance of evidence that the obligation will be settled by a transfer of financial resources, and the size of the obligation can be estimated with an adequate degree of reliability. Provisions are measured as the net present value of the expected payments to redeem the obligation. A pre-tax discount rate is used that reflects the current market situation and risk specific to the obligation. An increase in the obligation as the result of a change in the time value is recognised as a finance cost. 2.15 Revenue recognition (a) Interest income Interest income is recognised proportionally in the income statement over time in accordance with the effective interest method. If receivables are written down, the carrying value of the receivables is reduced to the recoverable amount. The recoverable amount is the estimated future cash flow discounted by the original effective interest rate. After a write-down interest income is recognised based on the amortized cost and original effective interest rate. (b) Income from dividends Dividend income is recognised in the income statement when the right to receive payment arises.

3 - Financial risk management 3.1 Market risk Market risk affects the financial risks the Company is exposed to. There has been overcapacity in the rig industry since the mid 1980s. Few new rigs have been built since the mid 1980s. The fleet is therefore old and newbuildings are required. The average age of the fleet is currently 25 years. A reduction in petroleum reserves and production for several oil companies results in a continued increase in oil drilling and test drilling and argues for a high level of R&D activity. Combined with a higher oil price, this resulted in an increased demand for rigs up to the spring/summer of 2008.

0

10

20

30

40

50

60

70

80

90

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

Source: Pareto Securities ASA

# of

uni

ts

On order/under constructionDelivered

24 25

Since the summer of 2008, there has been a slowdown in the demand for rigs and lower rig rates, but it is expected that this may pick up again in 1-2 years. Expected completion date for the Company's indirectly owned rigs: Naga 2 (Rig 1, L201), owned by UMW Standard 1 Pte. Ltd.: Second quarter 2009 Naga 3 (Rig 3, L203), owned by UMW Standard 3 Pte. Ltd.: Fourth quarter 2009 For Naga 2 and Naga 3, the Company has entered into a cooperative agreement with UMW in Malaysia. Naga 2 has won a contract with Petronas Pertamina Petro Vietnam (“PCPP”), but so far Naga 3 does not have a contract. The contract with PCPP is for 3+1+1 years. Substantial delays in the completion of the rigs may have consequences for the contract.

3.2 Financial risks The Company sold the rig contracts for rig 2 and rig 4, owned by former subsidiaries, in 2008. Remaining projects after this are two 49% interests in the companies that own the building contracts for Naga 2 and Naga 3. These projects are fully financed. The Company has a lack of funding of approximatly USD 12 million to the first repayment on debt to Ferncliff TIH AS in second quarter 2009. The Board and the administration has started to work with alternativ solutions and expect the financing to be obtained within maturity. In addition, the Board of Directors has based the going concern assumption on the assessment that the notice of change of tax assessment for financial year 2007 will not gain acceptance

3.3 Debt capital Naga 2 and Naga 3 will be financed in cooperation with the UMW Group. Maybank, a state-owned Malaysan bank, has given a loan for USD 120 million to Naga 2, whereas Affin Bank has given a loan for USD 132 million to Naga 3. The shares in Standard Drilling Far East Pte. Ltd., Standard 2 Pte. Ltd. and Standard 4 Pte. Ltd. were sold in December 2008.

3.4 Agreement with UMW Petropipe On 21 January 2007, the Company entered into cooperation with the Malaysian company UMW Petropipe, a division of UMW Holdings Berhad. Entering into the agreement with the Malaysian company UMW (58 % state-owned) significantly reduces the risk associated with the financing of the group. The rig-owning companies UMW Standard 1 Pte. Ltd. and UMW Standard 3 Pte. Ltd. have paid USD 56 million and USD 57 million in equity respectively and as mentioned before are also fully financed with external loans.

3.5 Exchange rate risk Standard Drilling ASA’s contracts are mainly in USD, excluding the contract with Noble Denton Sandefjord AS concerning the supervision of the construction of the rigs, which have a total contract scope of about USD 21 million. (NOK 132 million). Future revenues related to the operation or leasing of the rigs will be agreed on and invoiced in USD.

3.6 Rig yard risk Through the ownership of the rig-owning companies, Standard Drilling bears a risk of the rigs not being delivered from the rig yard at the agreed time, quality and price. Naga 2 is about 8 months delayed, but is expected to be delivered at during the second quarter of 2009,

whereas Naga 3 is expected to be delivered very near the end of 2009. The Company has hired Noble Denton Sandefjord AS, which has long experience managing these rig projects, to monitor that the construction projects are implemented by the rig yard in accordance with the building contracts. Furthermore, Labroy Offshore Ltd. has been acquired by Dubai Drydock World, which is a sound company with substantial financial resources and long experience. A parent company guarantee has been granted for fulfilment of the contract. The acquisition of rigs through building contracts will always be associated with building risks and delay risks. As a result of these risks, disputes may arise with the rig yard related to matters such as quality requirements, use of subcontractors and equipment specifications. The Company is aware of these risks and, by hiring Noble Denton Sandefjord AS, devotes substantial resources to reducing them. There is a high-priority focus on identifying any deviation from the contracts at an early point in time and finding a quick solution to identified deviations through discussions with the shipyard. 4 - Company pension Pursuant to the Act relating to mandatory occupational pensions, the Company is not required to establish a mandatory company pension.

4.1 Pensions

The company has an uninsured pension scheme financed through operations. The liability corresponds to the monthly payments to the equity fund plus the return on the fund. 2008 2007Liabilities recognised on the balance sheet: – Pension benefits 887 587 887 587Expenses charged to the income statement: - Pension benefits 300 360 300 360

Balance sheet pension fund: 887 587

5 - Payroll expenses, number of employees, loans to employees and auditor fees Payroll expenses 2008 2007 Wages and salaries Employer's share of National Insurance contributions

1 577 1 353

168 283 Pension expenses 300 392 Other benefits 165 303 Total 2 210 2 332

26 27

The company employed a total of 1.1 full-time equivalents during the financial year.

Benefits to persons in leading positions CEO Board of Directors

Salaries 1 034 70Pension expenses 314 0Other remuneration 131 0

The CEO has an agreement that entitles him to six months' salary if he should resign from his position. The CEO had an option to acquire 1,000,000 shares in the Company, which fell due on 1 July 2008. The options were not exercised. No loans have been granted to, nor security pledged for, the Chairman of the Board or employees in other leading positions.

5.1 Share options Share options were allotted to the CEO. The exercise price on the options was equal to the market price on the date of allotment. The accrual of options was dependent on the CEO being employed during the exercise period. The options had a term of 23 months. Movements in the number of outstanding share options and the associated weighted average exercise prices are as follows:

2008 2007

Average exercise pricein NOK per share Options

( h d)

Average exercise price in NOK per share Options

( h d)As of 1 January 3.5 1.000 3.5Allotted 0 0 1.000Forfeited 0 0 0Exercised 0 0 0Expired 0 (1000) 0 0As of 31 D b

0 1.000

The fair value of the allotted options calculated with the Black&Scholes option pricing model was TNOK 524 at the time of allotment. The options could not be exercised until 2008 and accrual of the options was dependent on the CEO being employed during the entire exercise period. The accounting cost of the option, calculated on the basis of the fair value at the time of allotment, is amortized over the exercise period. The amount charged as an expense in 2008 was TNOK 114. The most important prerequisites were the share price of NOK 3.5 at the time of allotment, exercise prices listed above, a standard deviation for the expected return on the shares of 20 %, expected dividends of 0, the option's term as listed above and an annual risk-free interest rate of 3,9 %. Shares or rights to such that are owned by the CEO or board members and their close personal associates. As of 31 December 2008, the CEO and board members and their close associates owned the following number of shares in Standard Drilling ASA. Name Position No. of shares Jan Kildal CEO 750 000Øystein Stray Spetalen Board Chairman 117 321 869Peter C. Georgiopoulos Board Member 18 934 167

Board of Directors' statement concerning executive remuneration in 2008 The Board of Directors wants to motivate the management of the company to perform at maximum capacity with respect to the creation of value by the company. This is accomplished by means of a remuneration programme consisting of: A fixed salary that is competitive with corresponding companies and industries A share and bonus programme that is based on the company's share price and earnings

performance Auditor 2008 2007Remuneration to the auditor may be broken down as follows: Statutory auditing 826 505Other assurance services 114 0Tax services 791 183 Other non-assurance services 153 162Total 1 884 849

The auditor's fees include value-added tax.

6 - Financial items Financial income 2008 2007 Interest income, group companies 0 9 279Other interest income 5 762 11 203 Foreign currency gain (agio) 31 441 71 605Other financial income 0 12 Total 37 203 92 099 Financial expenses Interest expenses, group companies 12 044 315Other interest expense 42 730 31 069Foreign currency loss (disagio) 299 948 73 594Other financial expenses 23 927 9 335Total 378 649 114 313 Net financial items (341 446) (22 214)

Out of a foreign currency loss of TNOK 299,948, TNOK 217,871 was due to a loan from Standard Drilling Far East Pte Ltd and subsidiaries that was settled in connection with the capital reduction and distribution of dividends. TNOK 58,180 was due to a loan from Ferncliff TIH AS, and the remaining foreign currency loss amounted to TNOK 23,897.

28 29

7 – Income Tax Temporary differences: 31.12.2008 01.01.2008 ChangeCapital assets (91) (4) 87Pension liabilities (887) (587) 300Provisions for National Insurance contributions for pension expenses (83) (83)

0

Net temporary differences (1 061) (674) 387Differences in shares not included in the tax exemption method (113 494) (208 784) Tax loss carried forward Differences that are not included in the calculation of deferred tax assets

(326 275) 0

113 494 208 784 Basis for deferred tax assets (327 335) (673) Deferred tax (assets)/liabilities (91 654) (188) Deferred tax assets not recognised on the balance sheet 91 654 0 Deferred tax and/or tax assets in the balance sheet 0 (188)

Tax base for the year: 2008 2007 Profit/(loss) before tax 173 237 83 738Permanent differences* -499 899 209 066 Expenses for increase in capital 0 (2 000)Change in temporary result differences 387 459Change in tax loss carried forward 326 275 (30 329)Basis for tax payable 0 261 023 Breakdown of tax charge Tax payable 0 73 086Change in deferred tax 188 8 339Tax effect of expenses for increase in capital 0 560Tax charge 188 81 985

*) Permanent differences are additions/deductions for accounting gains from capital reduction, interest expenses owing taxes, dividends received and other non-deductible expenses.

Tax payable on the balance sheet 2008 2007 Tax payable 0 73 086 Reconciliation from nominal to effective tax rate: Profit/(loss) before tax 173 237 83 73828% tax on profit before tax 48 506 23 447Tax effect of permanent differences Effect of deferred tax assets not recognised on the balance sheet

(139 971) 57 979

Tax effect of expenses for increase in capital

(91 465)

0 560Tax payable 0 81 985 Effective tax rate 0 % 97,9 %

8 - Tangible fixed assets FixturesHistorical cost as of 1 January 2008 1 013Additions (purchase of capital assets) 51 Disposals (sale of capital assets) 0 Historical cost as of 31 December 2008 1 064 Accumulated depreciation 31 December 2008

(532)

Accumulated depreciation 31 December 2008 0 Reversed impairments 31 December 2008 0 Carrying value as of 31 December 2008 532 Depreciation for the year 281Depreciation rate 3-5 years

Ordinary depreciation is calculated based on the straight line method over the economic life of the capital asset based on the historical cost price.

30 31

9 - Intercompany loans and balances Loans to companies in the same group (receivables) 2008 2007Standard Drilling Far East PTE Ltd 0 7 489 Standard Drilling Far East 2 Pte Ltd 0 166 735 Standard Drilling Far East 3 Pte Ltd 0 22 047 Standard Drilling Far East 4 Pte Ltd 0 22 047 Tycoon Industrier AS 130 0Total loans to companies in the same group 130 218 317

Intercompany balances (liabilities): 2008 2007Standard Drilling Far East PTE Ltd 0 13 710 Standard Drilling Far East 2 Pte Ltd 0 7 908 Standard Drilling Far East 3 Pte Ltd 0 2 636 Standard Drilling Far East 4 Pte Ltd 0 2 636 Ferncliff TIH AS – long-term 154 676 0Ferncliff TIH AS – short-term 83 949 0Noble Denton Sandefjord AS – accounts payable to suppliers 5 480 0Tycoon Industrier AS - accounts payable to suppliers 1 631 0Total balances with companies in the same group 245 736 26 890

10 – Investment in associates In connection with the reorganisation of the former group Standard Drilling ASA, a capital reduction was carried out in Standard Drilling Far East Pte Ltd. The shares in the associates UMW Standard 1 Pte Ltd and UMW Standard 3 Pte Ltd were distributed to Standard Drilling ASA on 29 December 2008 as part of the capital reduction. Other distribution in the form of liquidity was offset with intercompany balances. See note 15 for further information. The former group’s consolidated carrying value for the associates is carried forward in the company accounts for Standard Drilling ASA.

Figures in NOK thousand

UMW Standard 1 Pte Ltd

UMW Standard3 Pte Ltd TOTAL

Carrying value 1 January 2008 0 0 0

Additions to associates 199 506 195 137 394 644

Share of profit/loss for the year 0 0 0

Carrying value on 31 December 2008 199 506 195 137 394 644

The Company’s share of the profit/loss, assets and liabilities in associates translated at the exchange rate on 31 December 2008 is: Name

Registered in

Assets

Liabilities

Operati

ng

Profit/(Loss) for the year

Stake in

%

Figures in NOK thousand

UMW Standard 1 Pte. LTD Singapore 974 744 13 584 2 128 (280) 49 %

UMW Standard 3 Pte. LTD Singapore 746 261 228 896 420 (147) 49 %

11 – Bank deposits Restricted tax withholding deposits totalled TNOK 91 as of 31 December 2008.

12 - Share capital and shareholder information As of 31 December 2008, the share capital consisted of 207,266,667 shares at a nominal value of NOK 0.01 per share. There is only one class of shares.

List of the largest shareholders as of 31 December 2008

Domiciled in

No. of shares

Stake and percentage of votes

Standard Investering II AS1) NOR

69,640,000 33.60 %

Ferncliff AS1) NOR

33,501,869 16.16 %

Fearnley Fonds ASA (Peter Georgiopoulos)

NOR

18,934,167 9.14 %

KBL European Private Bankers S.A. LUX

13,228,400 6.38 %

Tycoon Industrier AS1) NOR

11,180,000 5.39 %

Hønefoss Invest AS NOR

8,120,000 3.92 %

Deutche Bank AG GB

8,056,400 3.89 %

Aksjevold AS NOR

5,160,000 2.49 %

Curare Invest AS NOR 5,048,121 2.44 %

R.S Platou ASA NOR

4,850,000 2.34 %

Gross Management AS1) NOR

3,000,000 1.45 %

Rand AS NOR

2,130,000 1.03 %

Muslink AS NOR

2,099,888 1.01 %

Credit Suisse Securities GBR

1,945,000 0.94 %

Citibank N.A. HK 1,913,000 0.92 %

Nexus Capital AS NOR

1,066,500 0.51 %

Langebru AS NOR

1,065,000 0.51 %

Confederation of Norwegian Business & Industry (NHO)

NOR

970,112 0.47 %

Frank Mohn AS NOR

900,000 0.43 %

Loco AS

NOR

900,000 0,43 %

193,708,457 Other shareholders 13,558,210 Total 207,266,667 1) Part of the Ferncliff TIH AS Group; see Note 13 for a more detailed description.

32 33

13 – Related parties The company's principal shareholder is Standard Investering II AS, which owns 33.60 % of the shares in Standard Drilling ASA. Standard Investering II AS is part of the Ferncliff TIH Group, which is wholly owned by Øystein Stray Spetalen. Ferncliff TIH AS is registered in Norway. In addition, the Ferncliff TIH AS Group owns shares in Standard Drilling ASA via the group companies Ferncliff AS, AS Simask, Tycoon Industrier AS and Gross Management AS. Altogether the group directly and indirectly controls 56.94 % of the shares in Standard Drilling ASA. All the information is current as of 31 December 2008.

The company has had the following transactions with related parties: a) Purchase of services 2008 2007

– from the Ferncliff TIH AS Group Tycoon Industrier AS 4 402 3 155Ferndrill Management AS 32 475 0

Total 36 877 3 155 Services are purchased from Tycoon Industrier AS and Noble Denton Sandefjord AS, which are controlled by Ferncliff TIH AS through an ownership interest exceeding 50%. The prices are fixed at market terms. b) Balance sheet items Receivables from related parties: 2008 2007

Ferncliff TIH AS – the group 130 4.096

UMW Standard 1 Pte Ltd (associates) 2 820 2.244

UMW Standard 3 Pte Ltd (associates) 2 660 0

Total 5 610 6.340

Liabilities to related parties: 2008 2007

Ferncliff TIH AS – long-term 154 676 3.604

Ferncliff TIH AS – short-term 83 949

Noble Denton Sandefjord AS – accounts payable 5 480 0

Tycoon Industrier AS - accounts payable 1 631 0Total 245 736 3.604 Current debt to related parties is primarily attributed to the purchase of goods and services, and it falls due for payment a month after the purchase date. The debt is non-interest bearing.

14 - Equity

Share ShareOther

paid-in Total paid-in Other Total capital premium equity equity equity equityEquity as of 1 January 2007 1 906 661 271 137 663 314 708 664 021Share issue Expenses for increase in capital recognised against equity

167 99 833 100 000 0 100 000

Value change for options

0 (1 440)

- (1 440) - (1 440)

0 0 274 274 0 274Profit for the year 0 0 0 0 1 753 1 753Equity as of 31 December 2007 2 073 759 664 411 762 147 2 460 764 607Equity as of 1 January 2008 2 073 759 664 410 762 147 2 460 764 607Capital reduction 0 (753 464) 0 (753 464) 7 304 (746 160)Value change for options 0 0 114 114 0 114Profit for the year 0 0 0 0 173 049 173049Equity as of 31 December 2008 2 073 6 200 524 8 797 182 813 191 610

15 – Other gain Other gains in 2008 consist of recognised dividends and gains through the reorganisation of the group in December 2008, plus the sale of the subsidiary Standard Drilling Far East Pte Ltd. (”SDFE”). The capital reduction in SDFE was partly implemented by distributing liquidity and partly by distributing 49% of the shares in the companies UMW Standard 1 Pte Ltd and UMW Standard 3 Pte Ltd (cf. note 10 for further information). Figures in TNOK 2008 2007Dividend from SDFE 406 479 0Gain through capital reduction in SDFE 147 668 0Gain through sale of shares in SDFE 13 758 0Gain through transfer of rig contracts 0 118 576Total gains 567 905 118 576

Accounting gains through capital reduction in SDFE: 2008Distribution of liquidity 508 353Distribution of shares in UMW Standard 1 and UMW Standard 2 for group continuity (cf. note 10) 394 644Accounting value of capital reduction 902 997 Carrying value of shares in SDFE at the time of the sale 755 329Accounting gains through capital reduction 147 668

34 35

16 – Other operating expenses Other operating expenses consist of: 2008 2007Legal assistance 5 479 3 785Accounting, auditing and financial advice 4 215 1 784Other consulting services 5 917 1 342Commission, Ferndrill Management in connection with the sale of rigs 32 475 0Other expenses 2 644 3 132Total other operating expenses 50 730 10 043

17 - Earnings per share The earnings per share are calculated by dividing the portion of the net profit for the year that is attributable to the company's shareholders with a weighted average of the number of outstanding ordinary shares throughout the year. 2008 2007Profit for the year attributable to the company's shareholders 173 049 1 753Weighted average of number of outstanding shares (thousand) 207 266 198 563

Earnings per share (NOK per share) 0.835 0.009

Diluted earnings per share In calculating the diluted earnings per share, the weighted average of the number of outstanding ordinary shares adjusted for the effect of the conversion of all the potential shares that can entail dilution is used. The company has a category of potential shares that may entail dilution, the share options. For the share options, a calculation is made to find the number of shares that could have been subscribed for at the market price (calculated at the average share price for the company's shares throughout the year) based on the monetary value of the subscription rights for the outstanding share options. The number of shares calculated as explained above is compared with the number of shares that would have been outstanding if all the share options had been exercised. The difference is placed in the denominator in the fraction as outstanding shares without consideration. 2008 2007Net profit for the year attributable to the company's shareholders 173 049 1 753 Profit used to calculate the diluted earnings per share 173 049 1 753Average number of shares outstanding, ordinary shares 207 266 198 563

Adjustments for – effect of share options (thousands) 154 154Average number of ordinary shares for calculation of dilutedearnings per share (thousands)

207 420 198 717Diluted earnings per share (USD per share) 0.834 0.009

18 – Contingent liabilities In December 2008, the Company received a letter from the Norwegian Revenue Service with notice of a change of the tax assessment for 2007. The basis for the notice of an increase of NOK 155.4 million in taxable revenue was the fact that the Tax Office bases its assessment on a different view than the Company as to how the value of the rig contracts L201, L202, L203 and L204 should be calculated for taxable realisation in 2007. The rig contracts were realised by the Company when they were utilised as a contribution in kind to Standard Drilling Far East Pte Ltd., which was a subsidiary at that time. The Company’s calculation of fair value from the realisation was based on an agreement concerning the partial sale of UMW Standard 1 Pte Ltd (owner of rig contract L201) and the entering into of an option agreement for the partial sale of UMW Standard 3 Pte Ltd (owner of rig contract L203), both to external parties. The Tax Office’s notice of a change of income is based on a disagreement about the method that is utilised in order to calculate the value of the rig contracts based on the subsequent sales of shareholdings mentioned above. In addition, the Tax Office stated in the same letter that they disagree about the significance of changes in the quoted price for the Company’s shares in the period prior to the transaction, when considered in relation to the valuation of the rig contracts. The Tax Office states that they assess an increase in taxable income as a result of the situation, at the same time as they ask to hear the Company’s point of view in the matter. The Company disagrees with the Tax Office’s assessments, both the statement that the Company’s chosen method of valuation cannot be used as a basis for the calculation and in the way in which the Tax Office’s alternative method is used if this method was to have been used. In a letter to the Tax Office in 2009, the Company provided more detailed information and explained why the Company’s original tax assessment should be used as a basis. So far, the Tax Office has not completed the administrative procedure and has not yet responded to the Company’s arguments and additional information. The Company disagrees with the Tax Office’s view and has not recognised tax liability related to the relevant matters. If the Tax Office should gain acceptance for its view, however, the increase in taxable income will be taxed at a rate of 28%, and the Company’s tax expenses and tax liability owed will increase accordingly. 19 – Cash flow In the second quarter of 2008, the Company took out TNOK 872,728 in a loan in USD from Standard Drilling Far East Pte. Ltd. and its other subsidiaries. The loan was settled by an offset against dividends and capital reduction in Standard Drilling Far East Pte. Ltd. in December 2008. Thus, the settlement of the loan, the distribution of dividends and the capital reduction had no cash flow effects.

36 37

PricewaterhouseCoopers AS Postboks 748 NO-0106 Oslo Telephone +47 95 26 00 00 Telefax +47 23 16 10 00

Alta Arendal Bergen Bodø Drammen Egersund Florø Fredrikstad Førde Gardermoen Gol Hamar Hammerfest Hardanger Harstad Haugesund Kongsberg Kongsvinger Kristiansand Lyngseidet Mandal Mo i Rana Molde Mosjøen Måløy Namsos Oslo Sandefjord Sogndal Stavanger Stryn Tromsø Trondheim Tønsberg Ulsteinvik Ålesund PricewaterhouseCoopers navnet refererer til individuelle medlemsfirmaer tilknyttet den verdensomspennende PricewaterhouseCoopers organisasjonen Medlemmer av Den norske Revisorforening • Foretaksregisteret: NO 987 009 713 • www.pwc.no

To the Annual Shareholders' Meeting of Standard Drilling ASA

Auditor’s report for 2008

We have audited the annual financial statements of Standard Drilling ASA as of December 31, 2008, showing a profit of NOK 173 049 000. We have also audited the information in the directors' report concerning the financial statements and the going concern assumption. The annual financial statements comprise the balance sheet, the statements of income and cash flows and the accompanying notes. Simplified IFRS according to the Norwegian accounting act § 3-9 have been applied in the preparation of the financial statements. These financial statements are the responsibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act on Auditing and Auditors.

We conducted our audit in accordance with the laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by The Norwegian Institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and auditing standards an audit also comprises a review of the management of the Company's financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements have been prepared in accordance with the law and regulations and give

a true and fair view of the financial position of the Company as of December 31, 2008, and the results of its operations and its cash flows for the year then ended, in accordance with simplified IFRS according to the Norwegian accounting act § 3-9

the company's management has fulfilled its duty to produce a proper and clearly set out registration and documentation of accounting information in accordance with the law and good bookkeeping practice in Norway

the information in the directors' report concerning the financial statements and the going concern assumption are consistent with the financial statements and comply with the law and regulations

Without qualifying our opinion, we emphasise that the company needs to be supplied with liquidity. We refer to additional information in the directors’ report and note 18 to the financial statements. The Company is dependent on receiving further financing, thus there is uncertainty related to the company’s ability to continue as a going concern.

Oslo, June 17, 2009 PricewaterhouseCoopers AS

Anders Ellefsen State Authorised Public Accountant (Norway)

Note: This translation from Norwegian has been prepared for information purposes only.

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