independent oil tools asa presentation to the general meeting may 24, 2005

Independent Oil Tools ASA

Presentation to the general meeting

May 24, 2005

May 24, 2005 Presentation to IOT ASA general meeting 2

Agenda

1. Review of 2004 financial results

2. Proposed authorization to increase share capital (issue new shares)

3. Proposed authorization to buy back own shares

4. Board remuneration

5. Remuneration of auditor

6. Election of new board members

7. Indemnification of board of directors and management

8. Reduction of share premium fund (transfer to ”free equity”)

9. Information regarding planned stock exchange listing

10.General business update


1. Review of financial results

P&L summary, MNOK 2002 2003 2004

Revenues 98,5 76,7 63,1

Operating expenses -37,4 -32,8 -35,4Write-down/reversal fixed assets -27,3 3,0Write-down/reversal accounts receivables -11,7 -25,2 32,4EBITDA 49,4 -8,6 63,1

Depreciation -42,6 -29,6 -29,4EBIT 6,8 -38,2 33,7

Net finance -3,6 -3,5 -3,5Pre-tax result 3,2 -41,7 30,2

Tax -1,0 -3,8 2,6Net result 2,2 -45,4 32,8

Full year



Pro forma P&L summary, MNOK PDR Other PDR Other PDR Other

Revenues 28,4 70,1 13,8 62,9 1,9 61,2

Operating expenses -37,4 -32,9 -32,4Write-down/reversal fixed assets -27,3Write-down/reversal a. receivables -11,7 -25,2 32,4EBITDA 16,7 32,7 -38,7 30,0 34,3 28,8

Depreciation -24,2 -18,4 -10,7 -18,9 -9,3 -20,1EBIT -7,5 14,3 -49,4 11,1 25,0 8,7

Net finance 2,5 -6,1 -4,2 0,7 -1,5 -2Pre-tax result -5,0 8,2 -53,6 11,8 23,5 6,7

20042002 2003



Balance sheet summary, MNOK 2002 2003 2004

Deferred tax 6,2 6,2 10,0Fixed assets 106,4 60,6 34,2Financial assets 3,2 27,9 60,4Total long-term assets 115,8 94,7 104,6

Receivables 17,9 14,2 43,6Cash and cash equivalents 1,7 8,2 10,9Total short-term assets 19,6 22,4 54,5

Total assets 135,4 117,1 159,1

Total equity 15,9 35,9 118,9

Total long-term debt 46,9 56,2 29,1Total short-term debt 72,6 25,1 11,1Total debt 119,5 81,3 40,2

Total equity and liabilities 135,4 117,1 159,1

Long-term debt - cash 45,2 48,0 18,2Equity ratio 11,7 % 30,7 % 74,7 %

31.12.



1) Partly due to conversion of debt to equity.

Cash flow summary, MNOK 2002 2003 2004

Net cash flow from operations 46,5 11,4 26,3Net change in working capital 5,6 -53,5 -10,9Cash flow from operations 52,1 -42,1 15,4

Investments in fixed assets -12,1 -11,2 -19,0Sale of fixed assets 3,5 1,1 21,1Investments in financial assets 0,0 -25,5 -38,0Cash flow from investments -8,6 -35,5 -35,8

Net change in long-term debt -54,3 9,0 -27,1Increase in equity 1) 0,0 75,2 50,3Cash flow from financing -54,3 84,1 23,2

Net cash flow during period -10,8 6,5 2,7Cash at end of period 1,7 8,2 10,9

Full year


2. Proposed authorization to increase share capital

• Used 93% of current authorization:

– Petrojack investment: 5.600.000 shares.

– Rights offering: 20.717.840 shares.

– Remaining: 1.958.920 shares.

• New proposed Board authorization equal to approx. 50% of existing share capital (41.435.000 new shares):

– Authorization to be valid for two years.

– Board may waive shareholders’ preferential subscription rights (cf. Norwegian Public Limited Companies Act section 10-2).

– May accept non-cash payment for IOT-shares (cf. Norwegian Public Limited Companies Act section 13-5).


2. Proposed authorization to increase share capital

• The proposed authorization will improve IOT’s flexibility and enable IOT to take advantage of possible investment / acquisition opportunities.

• The Board of IOT intends to strengthen IOT ahead of the planned stock exchange listing.

– IOT’s core operations are currently considered too small for a stock exchange listed company.

• The Board will consider investments primarily in:

– Additional rental equipment.

– International rental companies.

– New products, technologies, services and business areas that may strengthen IOT’s overall market position and strategic platform.

– Follow-up rig investments (to avoid dilution).


3. Proposed authorization to buy back own shares

• May acquire up to 100.000.000 shares (with a nominal value of NOK 2.500.000) under new proposed authorization.

– IOT may not own treasury shares exceeding 10% of IOT’s total share capital.

– The max. amount to be paid per share = NOK 20,00.

– The min. amount to be paid per share = NOK 0,50.

– The authorization shall be valid for 18 months.

– The Board is free to decide how to buy own shares and sell treasury shares:• All shareholders shall be treated equally.

• In the Board’s opinion, the current valuation of IOT is below the “fair value” of IOT.

• By acquiring own shares at “low” levels, the Board may:– Contribute to a positive share price development.

– Create shareholder value.

– Have shares available in connection with possible acquisitions.

• Investments in own shares should create shareholder value relative to other investment opportunities or relative to possible dividend payments.


4. Proposed 2004 board remuneration

• Proposed total 2004 remuneration of Board of Directors: NOK 87.952. (NOK 25.000 to each board member)


5. Proposed 2004 remuneration of auditor

• Proposed remuneration of Ernst & Young of NOK 134.400.


6. Election of new board members

• Current Board members were elected on November 16, 2004, succeeding two DNO board members.

• Siv F. Christensen proposed as new Board member:

– Employed by Statoil ASA (division for natural gas).

– Former VP & Treasurer of Kverneland ASA.

– Former senior project leader of business development of Orkla ASA.

– Former associate of The LEK Partnership, UK and U.S.

– M.Sc. University of Oxford and B.Sc. Wharton School.

• Siv F. Christensen has considerable international M&A experience.

• Other Board members are: Petter Tomren (Chairman), Harald Smedsvik (Managing Director), Lars Moldestad (Petrolia Drilling ASA) and Martin Nordaas (oil & offshore consultant).

• Further changes to the Board of Directors may be expected ahead of the planned stock exchange listing to fully comply with Oslo Stock Exchange’s corporate governance guidelines.


7. Indemnification of board of directors and management

• According to the Norwegian Public Limited Companies Act section 17-5, the Board is proposing the following “hold harmless statement”:

“The Company shall hold the Board of Directors and top management harmless to the extent permissible by relevant law for any responsibility and costs related to all civil- or criminal legal and administrative processes which these may be liable for through their work for the company, including liabilities towards the company and due to the preparation and approval for the yearly financial accounts.”



• The Board is proposing to transfer NOK 49.890.218 from the premium fund to free equity.

• Premium fund is currently approximately MNOK 91 (as per March 31, 2005, pro forma for recent rights offering):

– Represents approximately 56% of total equity.

• As per December 31, 2004, the actual premium fund equaled MNOK 50.

• As per March 31, 2005, the actual premium fund equaled MNOK 60.

• A transfer to free equity will increase the flexibility of the general meeting regarding future equity dispositions hereunder dividend payments.



• In order to improve the visibility of IOT’s core business, the Board may consider distributing shares in PDR as extraordinary dividend in 2005.

– The transfer from the premium fund to free equity may bee seen in this context.

– The Board has not yet made a time schedule for such dividend payment, but has started a review of necessary prerequisites.

– The timing of such dividend payment will also depend on the near-term development of PDR (especially the final outcome of the dispute with the owners of the drill ship DS Valentin Shashin).

• Prior to proposing such a dividend payment, the Board will seek to review alternative ways of maximizing the return on IOT’s investment in PDR.

• Such dividend distribution may reduce the volatility of the IOT-share price and make it “easier” to price the IOT-share.



• IOT intends to seek stock exchange listing in late 2005.– The listing-process has been initiated and all Board decisions will be made with such

listing in mind.

• Prior to the listing, the Board intends to:– Hire a new CFO.

– Review possible acquisitions and investments in IOT’s core business area:• Rental.• New products.• New technologies.

– Implement International Financial Reporting Standards (IFRS).

• The development of PDR may also impact the timing of IOT’s listing.– The Board of IOT is hopeful that uncertainty concerning PDR (disputes and rig

contracts) has been eliminated by the second half of 2005.

• IOT will also consider a stock exchange listing through integration with a suitable stock exchange listed partner.

To strengthen IOT’s core rental operations


Future scenario for IOT: “Provider of value added offshore products and services”


IOT ASA

RentalOffshore

investmentsRig

investments

Norway International Products Technology PDR PetrojackServices

= Planned investments to enhance core rental operations.


Agenda

10. General business update:

• Review of First Quarter 2005 Results

• Brief discussion of market outlook


10. General business updateRecent results

P&L summary, MNOK 2002 2003 2004 2004 2005

Revenues 98,5 76,7 63,1 16,3 17,7

Operating expenses -37,4 -32,8 -35,4 -8,6 -9,6Write-down/reversal fixed assets -27,3 3,0Write-down/reversal accounts receivables -11,7 -25,2 32,4 -1,1EBITDA 49,4 -8,6 63,1 6,6 8,0

Depreciation -42,6 -29,6 -29,4 -7,5 -5,4EBIT 6,8 -38,2 33,7 -0,9 2,6

Net finance -3,6 -3,5 -3,5 -0,5 -1,5Pre-tax result 3,2 -41,7 30,2 -1,5 1,1

Tax -1,0 -3,8 2,6Net result 2,2 -45,4 32,8

Full year First quarter



Pro forma P&L summary, MNOK PDR Other PDR Other PDR Other PDR Other

Revenues 13,8 62,9 1,9 61,2 0,5 15,8 0,1 17,6

Operating expenses -32,9 -32,4 -8,6 -9,7Write-down/reversal fixed assets -27,3Write-down/reversal a. receivables -25,2 32,4 -1,1EBITDA -38,7 30,0 34,3 28,8 -0,6 7,2 0,1 7,9

Depreciation -10,7 -18,9 -9,3 -20,1 -0,5 -7,0 -0,3 -5,1EBIT -49,4 11,1 25,0 8,7 -1,1 0,2 -0,2 2,8

Net finance -4,2 0,7 -1,5 -2,0 -0,6 -0,8 -0,7Pre-tax result -53,6 11,8 23,5 6,7 -1,1 -0,4 -1,0 2,1

2004 Q1-20052003 Q1-2004



Balance sheet summary, MNOK 2002 2003 2004 Actual Pro forma1)

Deferred tax 6,2 6,2 10,0 10,0 10,0Fixed assets 106,4 60,6 34,2 31,6 31,6Financial assets 3,2 27,9 60,6 70,9 70,9Total long-term assets 115,8 94,7 104,8 112,4 112,4

Receivables 17,9 14,2 43,6 44,3 44,3Cash and cash equivalents 1,7 8,2 10,9 8,9 37,6Total short-term assets 19,6 22,4 54,5 53,2 81,9

Total assets 135,4 117,1 159,3 165,6 194,3

Total equity 15,9 35,9 118,9 130,6 159,3

Total long-term debt 46,9 56,2 29,1 26,9 26,9Total short-term debt 72,6 25,1 11,1 8,1 8,1Total debt 119,5 81,3 40,2 34,9 34,9

Total equity and liabilities 135,4 117,2 159,1 165,6 194,3

Long-term debt - cash 45,2 48,0 18,2 18,0 -10,7Equity ratio 11,7 % 30,6 % 74,7 % 78,9 % 82,0 %

1) Pro forma for net offering proceeds from rights offering of approx. MNOK 28,7.

31.12. 31.03.05.


10. General business update

Financial assets Book Marketas per 31.03.05, MNOK value value 1) Comment

PDR shares 34,8 26,2 50,4 million sharesPDR convertible bonds 6,9 5,0 Face value of MNOK 4,5, convertible at NOK 0,47 per sharePDR subscription rights 17,0 0,0 2) 128,8 million s. rights, excercisable at NOK 0,55 per sharePetrojack shares 10,6 11,7 1,637 million sharesPension fund 1,5 1,5Total financial assets 70,9 44,4

1) PDR share price = NOK 0,52, Petrojack share price = NOK 7,15.2) Disregarding value of warrant.

Receivables, MNOK 31.03.05.PDR receivable:- nominal value 64,4- write down -32,0- net book value 32,4Other receivables 11,9Total receivables 44,3



1) 2005E revenue figures derived by annualizing Q1-2005 revenues (for illustration purposes only).

Development of core operations

0

20

40

60

80

100

120

2001 2002 2003 2004 Q1-2005 1)

MNOK

10,0 %

20,0 %

30,0 %

40,0 %

50,0 %

Margin (%)

Core rental revenues EBITDA (%) EBIT (%)


10. General business updateMarket outlook

1) 2005E revenue figures derived by annualizing Q1-2005 revenues (for illustration purposes only).

0

20

40

60

80

100

120

1997 1998 1999 2000 2001 2002 2003 2004 May.2005

1)

MNOK

0

10

20

30

40

50

$ per barrel

Core revenues Brent spot

0

10

20

30

40

1999 2000 2001 2002 2003 2004 2005E 1)

Wells

0

25

50

75

100

MNOK

Exploration wells NCS (estimate by IOT) Core revenues


10. General business updateStock price development

PDR arbitration ruling regarding DS Valentin Shashin announced

independent oil tools asa presentation to the general meeting may 24, 2005

Documents

board of iot

remuneration of board

treasury shares

current authorization

share capitalthe

share capitalused

iots total share capital

existing share capital