information memorandum - thule drillingotc.nfmf.no/public/news/3580.pdf · information memorandum...

INFORMATION MEMORANDUM

Thule Drilling ASA

The date of this Information Memorandum is October 28, 2005

Information Memorandum

1

IMPORTANT NOTICE

This Information Memorandum has been produced to provide an overview of Thule Drilling ASA ( Thule Drilling ). While the information contained herein is believed to be reliable, neither Thule Drilling or any other person make any representation or warranty to its accuracy and completeness. The issue and distribution of this Information Memorandum do not imply in any way whatsoever that information included herein is correct and complete at any date after the date of this Information Memorandum.

The restrictions and limitations listed below are not exhaustive, and other restrictions and limitations that are not known or identified by the Company at the date of this Information Memorandum may apply in various jurisdictions as they relate to the Information Memorandum.

Only Thule Drilling is entitled to provide information in respect of matters described in this Information Memorandum. Information that might be provided by any other parties is of no relevance to the contents of this Information Memorandum.

In certain jurisdictions, the distribution of this Information Memorandum is subject to legal restrictions. No actions have been taken, other than inspection of this Information Memorandum in any jurisdiction where such specific action is required. Any person receiving this Information Memorandum is required by the Company to inform themselves about and to observe such restrictions.

This Information Memorandum does not constitute an offer to sell or a solicitation of an offer to buy any of the shares in the Company.

No securities are being offered in the United States pursuant to the Information Memorandum. The shares have not been and will not be registered under the U.S. Securities Act. Transfer of outstanding shares may be restricted. Any subsequent offer or sale of such shares in the United States may only be made if an exemption from registration under the U.S. Securities Act is available.

The shares of the Company have not been approved or recommended by any United States federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the adequacy or accuracy of this document. Any representation to the contrary is a criminal offence.

This Information Memorandum and its contents are confidential and its distribution (which term shall include any form of communication) may be restricted pursuant to Section 21 (Restrictions on Financial Promotion) of the Financial Services and Markets Act 2000 (as amended). In relation to the United Kingdom, this Information Memorandum is only directed at, an may only be distributed to, persons who fall within the meaning of Article 19 (Investment Professionals) and 49 (High Net Worth Companies, Unincorporated Associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended) or who are persons to whom the document may otherwise lawfully be distributed. This Information Memorandum may only be distributed in circumstances which do not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 (as amended).

The contents of this Information Memorandum are not to be construed as legal, business or tax advice. Each prospective investor should consult with its own legal adviser, business adviser or tax adviser as to legal, business and tax advice.

This Information Memorandum is subject to Norwegian law, unless otherwise indicated. Any dispute arising in respect of this is Information Memorandum is subject to the exclusive jurisdiction of the Norwegian courts.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements in Summary , Thule Drilling , Financial Information , Risk Factors and elsewhere in this Information Memorandum are forward-looking. Such forward-looking statements and information are based on the beliefs of the Company s management or assumptions based on information available to the Company. When used in this Information Memorandum, the words anticipate , believe , forecast , estimate and expect and similar expressions, as they relate to the Company or its management, are

intended to identify forward-looking statements. Such forward-looking statements reflect the current views of the Company or its management with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of Thule Drilling to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, risks or uncertainties associated with Thule Drilling s products, technological development, unforeseen cost overruns, construction delays, relations with customers and, more generally, general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, and other factors referenced in this document. Some of these factors are discussed in more detail under Risk Factors in section 9. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document as anticipated, believed, estimated or expected. The Company does not intend, and does not assume any obligation, to update the forward-looking statements included in this Information Memorandum as at the date set forth on the cover.

PRESENTATION OF FINANCIAL INFORMATION AND DEFINITION OF TERMS Certain financial and other information set forth in this Information Memorandum may have been rounded, for the convenience of the readers. Accordingly, in certain instances, the sum of the numbers in a column may not conform exactly to the total figure given. All references in this Information Memorandum to (i) Norwegian kroner , NOK or MNOK refer to the currency of Norway, (ii) U.S. dollars , U.S.$ or USD refer to the currency of the United States of America, (iii) Pound sterling or GBP refer to the

currency of the United Kingdom of Great Britain and Northern Ireland, and (iv) Euro or EUR refer to the single currency of the European Union member states participating in the European Monetary Union ( EMU ).

ENFORCEABILITY OF JUDGMENTS The Company is a public limited company organised under the laws of the Kingdom of Norway. A majority of its directors and executives, and certain of the experts named herein, reside in Norway or other countries other than the United States. All or a substantial portion of the assets of such persons and of the Company are located outside the United States. As a result, it may not be possible for investors to affect service of process within the United States upon such persons or the Company or to enforce, in U.S. courts or outside the United States, judgments obtained against such persons in jurisdictions outside the United States. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, liabilities predicated upon the civil liability provisions of U.S. securities laws. The Company has been advised by its Norwegian counsel, Wiersholm, Mellbye & Bech Advokatfirma, that there is doubt as to the enforceability in Norway, in original actions or in actions for the enforcement of judgments of U.S. courts, of civil liability predicated upon U.S. securities laws or other laws of the United States or any state thereof.

THULE DRILLING


2

TABLE OF CONTENTS

Definitions........................................................................................................................................3

1. Thule Drilling ..............................................................................................................................5

1.1. Background ....................................................................................................................................... 5

1.2. Objective and strategy...................................................................................................................... 6

1.3. The Shipyard..................................................................................................................................... 7

1.4. Jack-up Rig: Thule Power ............................................................................................................... 8

1.5. The reconstruction of Thule Power................................................................................................. 8

1.6. Options to build 13 new jack up rigs at QGM yard .................................................................... 10

1.7. Semi submersible rig Thule Challenge (former Gulfdrill 7) .................................................... 11

1.8. Semi submersible rig Thule Phoenix.......................................................................................... 11

2. Organisation, board and management .....................................................................................13

2.1. Legal structure ................................................................................................................................ 13

2.2. Company organization, Board of Directors, and Management.................................................. 13

2.3. Related party issues, conflicts of interest ...................................................................................... 18

3. Financial information ...............................................................................................................20

3.1. General............................................................................................................................................. 20

3.2. Accounting policies as of June 30, 2005 ........................................................................................ 20

3.3. Selected financial statements ......................................................................................................... 22

3.4. Other financial information........................................................................................................... 25

4. Share capital and shareholder matters.....................................................................................27

4.1. Shares and other equity instruments ............................................................................................ 27

8.1.6 Other equity instruments ............................................................................................................. 28

4.2. Shareholders and share trading .................................................................................................... 28

5. Risk factors ................................................................................................................................31

5.1. Financial risks ................................................................................................................................. 31

5.2. Commercial risks ............................................................................................................................ 32

5.3. Other risks ....................................................................................................................................... 35

6. Legal issues ................................................................................................................................36

6.1. The Reconstruction Contract Thule Power............................................................................... 36

6.2. Other contractual relationships..................................................................................................... 37

6.3. Litigation ......................................................................................................................................... 37

I Articles of association .................................................................................................................38

II Quarterly report for q2 2005 .....................................................................................................39

III Statement from the auditor regarding the Review report of the financial statements at 30. June 2005.......................................................................................................................................42

THULE DRILLING - INFORMATION MEMORANDUM

3

DEFINITIONS

Definitions, abbreviations, industry terminology and other terminology referred to in the Information Memorandum. Baker Marine: Baker Marine Pte Ltd and / or Baker Marine Technology, Inc., as the case

may be. Board or Board of Directors: Board of Directors of Thule Drilling ASA, unless otherwise stated. Bond issue: MNOK 250 bond issue carried out by Thule Drilling in April 2005. BOP: Blow Out Prevention. Commission Agreement A commission agreement between Thule Drilling and TECO Management

dated September 6, 2005 Company: Thule Drilling ASA. Construction Period: The 14-month period beginning on May 9, 2005 and ending on July 9,

2006 Delivery Date: According to the Reconstruction Contract, the Jack-up Rig shall be

delivered 14 months after the Effective Date. The Delivery Date is presently scheduled for July 9, 2006.

Effective date The effective date is May 9, 2005, the beginning of the construction period EBITDA: Earnings before interest, taxes, depreciation and amortization. EBIT: Earnings before interest and taxes. E&P: Exploration & Production (of oil & gas). HP: Horse Power. IFRS: International Financial Reporting Standards. Jack-up Rig: The Baker Marine jack-up drilling unit to be constructed by QGM pursuant

to the Reconstruction Contract. Loan Agreement A loan agreement dated May, 4 2005 between the Company and Norsk

Tillitsmann ASA (as trustee for the bondholders) in respect of a bond issue in the principal amount of MNOK 250.

Information Memorandum: This document dated October 28, 2005 Management Agreement: Agreement between Thule Drilling and TECO Management entered into on

August 30, 2005 whereby TECO Management undertakes to provide general administrative services for Thule Drilling.

MNOK: Million NOK. MUSD: Million USD. Norwegian Securities Trading Act: The Securities Trading Act of June 19, 1997 no 79 (in Norwegian:

Verdipapirhandelloven ). Nm: Not meaningful. Noble Denton Noble Denton & Associates Ltd NOK: Norwegian Kroner, the lawful currency of the Kingdom of Norway. Norwegian GAAP, or NGAAP: Generally accepted accounting principles in Norway (in Norwegian:

Norsk god regnskapsskikk ). Oslo Børs: Oslo Stock Exchange (in Norwegian: Oslo Børs ASA ). OTC: The Norwegian over-the-counter market, administered by the Norwegian

Securities Dealers Association. Project Management Agreement: Agreement between Thule Drilling and Noble Denton entered into on

March 17, 2005 whereby Noble Denton undertakes to provide yard supervision services for Thule Drilling.

QGM: QGM Group LLC, a company incorporated in the United Arab Emirates and having its registered address at Al Jadaf Dry Dock, Dubai.

Reconstruction Contract: The contract entered into on March 17, 2005 (and amended on September 8, 2005) between Thule Drilling and QGM for the design, construction, launch, equipping, testing, completion and delivery of the Jack-up Rig.

Shares: Shares in Thule Drilling ASA. TECO Invest: TECO Invest AS, a Norwegian private limited liability company with

registered in the Norwegian Register of Business Enterprises with company registration no. 877 389 332.

TECO Management: TECO Management AS, a Norwegian private limited liability company registered in the Norwegian Register of Business Enterprises with company registration no. 987 958 790.

Thule Drilling: Thule Drilling ASA, and any or all of its subsidiaries as the case may be. Total Project Cost: Total estimated cost for the design, construction, launch, equipping,

testing, completion and delivery of the Jack-up Rig, including estimated

THULE DRILLING


4

Reconstruction Contract and financing related fees and expenses, estimated financing costs and working capital during the construction period, success fee to QGM and the management fee for yard supervision services.

USD: U.S. Dollar. VPS: The Norwegian Securities Registry (in Norwegian: Verdipapirsentralen ).


5

1. Thule Drilling

1.1. Background

In 1982, PPL Shipyard delivered a cantilever, jack-up type offshore drilling rig of Baker Marine 200 IC design named SEDNETH 202 to Arabian Drilling. Arabian Drilling renamed the rig to Arabdrill 19 and registered its title to the rig in the Saudi Arabian Ships registry and classed the rig with ABS. The rig served principally in the Arabian Gulf and on a four-year assignment offshore Nigeria.

The rig suffered a punch-through of a leg resulting in the buckling of the leg and a subsequent capsizing of the rig. As a result of the capsize damage occurred to the hull of the unit in way of the stern and port side. The rig capsized and sank offshore Khafji, Saudi Arabia in October 2002. The rig was declared a total loss under the rig s insurance policies with Qatar Insurance Company (QIC).

The rig was salvaged in March 2003 and brought alongside QGM Group s yard facilities in Hamriyah Free Zone, UAE where it currently remains. The illustration below provides an overview of the history of the Arabdrill 19 rig and the expected reconstruction.

Arab Drill 19 Capsize After salvation After reconstruction

Tore Enger located the rig hull in January 2005. His interest in the reconstruction of the rig was based on the attractive construction package offered by QGM and the strong market outlook and fundamentals for the jack-up segment.

TECO Invest AS, a company controlled by Tore Enger, Bjarne Eia and Christian Thyholdt, incorporated Thule Drilling AS on February 7, 2005 for the purpose of serving as the corporate vehicle through which the rig should be acquired and the reconstruction completed. On February 10, 2005, a preliminary contract to reconstruct the rig had been negotiated. The reconstruction contract was agreed on March 17, 2005 and it was subsequently amended on September 8, 2005.

Thule Drilling entered into an agreement on April 3, 2005 to acquire the rig hull at an aggregate price of MUSD 2.5. Thule Drilling AS was converted to a public limited company, under the name Thule Drilling ASA, on April 15, 2005. The Arab Drill 19 rig was renamed to Thule Power following transfer of ownership.

On April 15, 2005, Thule Drilling completed a MNOK 250 equity offering, and a MNOK 250 bond issue. The equity and bond issue secured the necessary funding for the rebuilding of the rig. Thule Drilling completed the acquisition of the rig hull and the registration in the Liberian Ships Register on May 19, 2005.

Before the equity and bond issue in Thule Drilling ASA, TECO Invest AS secured option agreements with the QGM yard in Dubai for the construction of 13 additional new jack-up rigs. The option agreements were transferred at a price of USD 1 per option to Thule Drilling ASA on June 7, 2005.

Thule Drilling and TECO Management entered into a Commission Agreement on September 6, 2005. The Commission Agreement is described in section 2.2.6. The Commission Agreement will be on the agenda for approval by the Thule shareholders in an extraordinary general meeting scheduled for November 4, 2005.

THULE DRILLING


6

On August 25, 2005, Thule Drilling entered into a Memorandum of Agreement with Momentum Engineering to acquire the former semi submersible drilling rig Gulfdrill 7 now renamed Thule Challenge .

On August 30, 2005, Thule Drilling entered into a Memorandum of Agreement with Atwood Oceanic to acquire the former semi submersible drilling rig Seascout

now renamed Thule Phoenix . The

aggregated acquisition price for the two units was MUSD 27.

Both Thule Challenge and Thule Phoenix are currently banned from being maintained or upgraded to ordinary drilling units by previous owners. The ban on Thule Challenge expires in 2008. The two rigs can be converted to accommodation/service platforms, tender rigs or to floating production. The aggregate acquisition price of the two units of MUSD 27 was financed through a private placement of shares with gross proceeds of MNOK 198.75.

1.2. Objective and strategy

1.2.1. Objective

Thule Drilling s objective is to secure attractive investment opportunities in the offshore oil exploration and development industry with a potential to create attractive return on equity for its shareholders.

1.2.2. Strategy

Take advantage of the present shortage of nearly all kind of assets within the offshore service sector to build, reconstruct, upgrade or modify drilling rigs, service-, accommodation-, or production-platforms or ships in the most economical and efficient way to create an early cash flow and maximum return on invested capital.

Strategic ambitions

The rebuilding of Thule Power shall be completed by July 2006 and the cost shall not exceed the budget of 76 MUSD pluss a contingency of MUSD 5

The rig shall be suitable for water depth up to 250 feet and drilling depth up to 30,000 feet. The rig shall be well suited for Middle East drilling operations

Thule Drilling shall upgrade and modify the newly acquired two semi submersible rigs to alternative usage as accommodation / service platform, tender barge or production platform as soon as possible to obtain an early, long term cash flow

Thule Drilling shall select the best suited design, find financial resources and develop the marketing potential for the new-building options at QGM

Thule Drilling will consider alternative rig acquisitions or new-buildings for operations in all relevant regions of the offshore market

Thule Drilling shall build up a qualified organisation that will handle the new-building, reconstruction, modifications and marketing of the company s assets

Thule Drilling will adopt a sound financial strategy, with financial leverage adjusted to the market outlook and the Company s contract situation


7

1.3. The Shipyard

QGM Group LLC was founded in 1982 and has its headquarters in Dubai. It operates an inspection, repair, maintenance site at Hamriyah Free Zone port in Sharjah, UAE. QGM will manage the entire rebuilding of the rig at the Hamriyah yard facility as an EPIC (Engineer, Procure, Install, Commission) contract. The yard facilities are currently being upgraded to enable the engineering and other services related to the rebuilding of the rig.

The Hamriyah yard facility was first established in 2003 and is currently being upgraded to enable the engineering and other services related to the rebuilding of the rig. The yard will focus on construction, inspection, repair and maintenance of jack-up rigs, together with the fabrication of offshore related packaged equipment. The yard has a dedicated waterfront jetty allocation. The total site area is 100,000 m2. The UAE has an extensive yard industry and QGM has a significant pool of resources it can draw on. The figure below provides an overview of the yard after upgrading.

QGM has since its initiation worked on several onshore/offshore EPS projects with project sizes between 0.3 and 5.0 MUSD. The reconstruction of the jack-up rig for Thule Drilling will be the largest project QGM has managed.

The management team at QGM has significant experience from the offshore industry. The management team has experience from engineering, procurement, outfitting, testing, precommissioning, load out and sea fastening a wide range of structures associated with the oilfield development, including drilling rig conversions, and production of topside modules and sub sea structures.

THULE DRILLING


8

1.4. Jack-up Rig: Thule Power

The table below sets forth the Jack-up Rig s main technical specifications.

Item Data Item Data

Operating water depth: 250 feet (after enhancement)

Mud pumps: 2 x National Oilwell Hex 240

Drilling reach: 30,000 feet

Top drive: 2,250 HP

Max. cantilever reach: 45 feet

Draw-works: 3,000 HP

BOP stack: Cameron 10,000PSI

Generators: 4 x 2,500 HP; 4 x 1,900 kVA

Max. variable load: 2,000 tons

Accommodation: 105 persons

The Jack-up Rig is designed for all major jack-up drilling regions assumed to constitute approximately 85% of all available drilling jobs. The rig is ideally suited to the Middle East, and is not designed to operate in harsh environment regions. Geographical areas where the rig can operate include:

Gulf of Mexico.

Australia and New Zealand.

Indian Ocean.

India.

Middle East.

West Africa (Nigeria-Angola range).

Mediterranean.

South East Asia.

Contracts with major vendors are in place. Prices and delivery schedules are firm and all major contracts include participation by experienced engineers from the various vendors during installation, commissioning and testing.

The Jack-up Rig is registered with the American Bureau of Shipping (ABS). The certificates have expired, but will be renewed upon completion of the reconstruction. Surveyors from ABS are present during the reconstruction period and are approving the work during the process.

1.5. The reconstruction of Thule Power

Thule Drilling entered into a contract with QGM for the reconstruction of the Thule Power rig on March 17, 2005. The Reconstruction Contract is described in section 10.2 of this Information Memorandum. The Reconstruction Contract, as amended, provides that the contract price payable by Thule Drilling to QGM is MUSD 25.5. The Reconstruction Contract Also requires that Thule Drilling enter into direct contracts totalling MUSD 35.582 with suppliers of certain major equipment and supplies needed by QGM for the reconstruction. See section 10.2 for a detailed description of the Reconstruction Contract.


9

The total costs for the reconstruction are estimated at MUSD 75.8, which includes the total of the sums indicated in the above paragraph and success fees, project management fees and financing costs.

The rig hull will be reconstructed to a state of the art jack up rig. The rig hull, a Baker Marine 200 IC, will be enhanced to a 250 ft water depth capacity drilling unit, with a 30,000 ft drilling depth. An overview of the main work on the rebuilding of the rig is set forth below.

Area or rig Key work Hull Cleaning, blasting and repairs to damaged areas.

Additional internal stiffening for increased loads. Addition of sponsons to facilitate extra weight when afloat.

Legs Cleaning, blasting and repair and strengthening of existing legs. Installation of an additional 50 ft of legs. Addition of spud cans.

Jacking gear Refurbishment of gearwheels. Repairs to jacking guides. Replacement of old hydraulic system with new electric drive system. Addition of an extra layer of jacking gears to handle increased weight.

Cantilever Repairs and strengthening for increased weights. Modifications to drilling sub structure. Installation of new skidding gear.

Marine systems Installation of power generation package, utilities, piping, cabling etc. Installation of two new deck cranes.

Drilling system Installation of new 1.5 million pound derrick with top drive, pipe racking systems etc. Installation of two new state of the art mud pumps and high pressure piping systems.

Living quarters Fabrication and installation of new living quarters in three module sections with capacity for 105 personnel, galley, mess rooms, offices etc. Fabrication and installation of helideck.

Safety systems Installation of 2 x 105 man lifeboats, life rafts and life saving appliances. Installation of fire and gas detection system. Installation of fire fighting system.

Documentation Rig will be classed ABS SEDU and comply with IMO MODU code and other international standards. Certified operations manual.

A time schedule, updated as of beginning of October 2005, for the construction of the Jack-up Rig is set forth below.

Milestones Date Status Effective date May 9, 2005 Essential yard preparations complete End of May 2005 Completed Design freeze End of September 2005 Completed Diesel generators delivered Mid December 2005 Refloat hull Mid January 2006 Generator black start operational Mid January 2006 Accommodation module ready to load on deck End of January 2006 Commissioning start Mid March 2006 Cantilever construction complete End of March 2006 Thule deliverables (drawings, manuals etc) End of May 2006 Jacking system in service End of May 2006 Mechanical completion Mid June 2006 Delivery Mid July 2006

The plan has been controlled and approved by Noble Denton, and the Company considers the plan to be realistic and achievable in relation to the resources of the QGM shipyard and its subcontractors.

Review of project by London Offshore Consultants

THULE DRILLING


10

London Offshore Consultants inspected the rig on February 8, 2005 at its present location at the yards premises and performed a condition survey of the rig and a feasibility study of the reconstruction of the rig.

LOC recommended that the unit should be brought ashore to conduct the reconstruction of the rig. The structure of the unit was found to be sound. The level of diminution due to corrosion appeared to be minimal and there was no evidence of cracking except in the damaged areas. Furthermore LOC recommended that full thickness gauging of the unit to be carried out to confirm the steel diminution, and that detailed fatigue analysis should be carried out to identify if there are any areas of concern. LOC concluded that the proposed project to rebuild the unit as a Cantilever Jack-up rig is technically feasible given the apparent existing condition of the structure and the facilities and skills available.

Review of project by Noble Denton Noble Denton have reviewed the specifications prepared by QGM, inspected the hull, reviewed the LOC report and made comments on proposed site and feasibility of the project. Noble Denton has concluded that the rebuilding of Thule Power (formerly AD 19) as a Cantilever jack-up rig is feasible.

1.6. Options to build 13 new jack up rigs at QGM yard

Thule Drilling has 13 separate option agreements with the QGM yard in Dubai for the construction of new jack-up drilling rigs. The option agreements are based upon a tentative outline specification of the relevant rig. The construction agreement for each rig will be agreed in connection with the exercise of the options. The exercise of all options is conditional upon Thule Drilling and QGM agreeing on construction contracts and detailed specifications for such rigs. Investors should be aware that none of the options agreements can be expected to be enforceable until construction contracts and specifications have been agreed with the yard. Please refer to section 5.2.8 in this regard.

The option agreements are also conditional upon Thule Drilling providing satisfactory evidence to QGM that it will be financially capable of meeting its obligation under the construction contracts. Thule Drilling assumes no obligations before any exercise of the options takes place. Thule may also sell one or more of the options to third parties if it does not wish to exercise the options.

Overview of the options:

Option number Maturity time of exercise 1 & 2 April 1, 2005

November 15, 2005 3 October 1, 2005 April 1, 2006 4 April 1, 2006 October 1, 2006 5 October 1, 2006 April 1, 2007 6 April 1, 2007 October 1, 2007 7 October 1, 2007 April 1, 2008 8 April 1, 2008 October 1, 2008 9 October 1, 2008 April 1, 2009 10 April 1, 2009 October 1, 2009 11 October 1, 2009 April 1, 2010 12 April 1, 2010 October 1, 2010 13 October 1, 2010 April 1, 2011

For the two first options Thule Drilling intends to build the MSC CJ-36 X90TD design, a new version of a well proven design. The construction cost of this rig design is presently being negotiated with QGM. The Company expects that the price to Thule Drilling for construction this rig design at QGM will be competitive compared with similar rigs under construction at yards in Singapore.

Thule Drilling has entered into a Commission Agreement with TECO Management regarding inter alia commission on sale of the options. TECO Management is a wholly owned subsidiary of TECO Invest AS, see section 2.3 below. If Thule Drilling sells any of its options as a result of contacts established through


11

TECO Management, TECO Management shall be entitled to a commission equal to 25% of the net proceeds of any net profits received by Thule Drilling from such sale up to MUSD 5 and 33% of any net profit in excess of MUSD 5 received by Thule Drilling upon such sale.

The Commission Agreement will be on the agenda for approval by Thule s shareholders in an extraordinary shareholders meeting scheduled for November 4, 2005. For a complete description of the Commission Agreement, see section 2.2.6.

1.7. Semi submersible rig

Thule Challenge (former Gulfdrill 7)

The Thule Challenge (previously named Gulfdrill 7 and Sedco 708) was built in 1976 by Kaiser Steel Corporation. The semi submersible drilling rig is of the Sedco 700 series design of which 14 have been built. The design has a proven record in the North Atlantic and the North Sea. The rig was owned and operated by Transocean in West Africa until 3 years ago, and was moved to anchorage offshore Dubai. The rig was classed in ABS, but the certificates have expired.

All equipment and machinery as a drilling rig are in place except drill pipes and tools, risers, top drive and BOP. Most of the remaining equipment needs to be reconditioned and overhauled. The hull and superstructure are in good condition apart from some renewal of steel plates on deck.

Thule Drilling plan to bring the unit to a shipyard in the Persian Gulf for repair and modifications to an accommodation platform for 400

600 persons. The cost of such repair and modification will to a large extent depend on the specifications to be applied for the modified unit. A conversion of the Thule Challenge to an accommodation rig with a capacity of 500 persons is estimated to cost MUSD 30.

Thule Challenge can not be utilized as a drilling rig until August 1, 2008 due to a ban set by the previous rig owners. The current drilling equipment including the derrick and drill floor will be kept for potentially bringing the rig back to drilling mode after the ban expires. If the rig is brought back to drilling mode, it will be considered to install a DP (Dynamic Positioning) system on the rig. The pontoons and the design otherwise, is well suited for the instalment of a DP system. Four thrusters are in place, and the pontoons are prepared for an additional 4 thrusters to be installed. Alternative usage of the rig will such as conversion to a service platform (in combination with accommodation), production platform or to a tender rig will also be considered

Thule is presently conducting engineering studies, preparing repair and upgrade specification for the yard, and has initiated the marketing of the rig for alternative usage. The company is assessing different alternatives for financing the upgrade and modification of the rig, but no decision has yet been made.

The table below sets forth the main technical specifications of Thule Challenge. Item Data Item Data

Water depth (as in anchored): 2,000 feet

Variable deck load, drilling: 3,000 ton

Length overall: 295 feet

Width overall: 245 feet

1.8. Semi submersible rig

Thule Phoenix

The Thule Phoenix (previously named Seascout) was built in 1974 by Bethlehem Steel Corp, Baltimore, USA. The semi submersible drilling rig is designed by Breit Engineering and four units have been built. The rig is presently laid up at Mobile Middle Bay Port, Alabama, USA and was moved to this location in July 2005. The rig was previously cold stacked in Pascagoula for four years, under the ownership of Atwood Oceanics Inc. Prior to this, the rig was 7 years in lay-up, and owned by Diamond Drilling. The rig was classed in ABS, but certificates have expired.

THULE DRILLING


12

The hull is basically a bare deck, with only limited marine equipment remaining, like anchors, winches and chains. Main engines remain onboard. The pontoons, columns and deck are in reasonably good condition.

Thule Phoenix has a ban from previous owners to prohibit it from being rebuilt to a drilling rig. Thule Drilling plan to bring the unit to a suitable shipyard where it can be repaired modified and gain full classification from ABS. The Company is considering several alternatives for the rig. A conversion of the rig to an accommodation rig is the most likely scenario, but the rig may also be converted to a tender barge, service platform or a production platform. A conversion to an accommodation rig with a capacity of 500 persons is estimated to cost MUSD 40

45. The cost of such repair and modification will to a large extent depend on the specifications to be applied for the modified unit.

Thule is presently conducting engineering studies, preparing repair and upgrade specification for the yard, and has initiated the marketing of the rig for alternative usage. The company is assessing different alternatives for financing the upgrade and modification of the rig, but no decision has yet been made.

The table below sets forth the main technical specifications of Thule Phoenix.

Item Data Item Data

Water depth (as in anchored): 1,000 feet

Variable deck load, drilling: 2,000 ton

Length overall: 214 feet

Width overall: 194 feet


13

2. Organisation, board and management

2.1. Legal structure

Thule Drilling ASA is a Norwegian public limited liability company incorporated on February 7, 2005. The Company was registered with the Norwegian Register of Business Enterprises on February 10, 2005, then as a limited liability company, under the registration number 987 859 377. In accordance with its articles of association, Thule Drilling ASA shall have its registered office in the municipality of Bærum. The registered address of Thule Drilling ASA is Lysaker Torg 8, 1326 Lysaker, Norway.

Thule Drilling currently has no subsidiaries or associated companies.

All documents referred to in this Information Memorandum are available at the Company s main office.

2.2. Company organization, Board of Directors, and Management

2.2.1. Organizational structure The chart below provides an overview of Thule Drilling s organizational structure as per the date of the Information Memorandum.

Thule Drilling has entered into a Management Agreement with TECO Management, an entity owned by TECO Invest. Under the Management Agreement, TECO Management will be responsible for providing various management services to Thule Drilling. The Management Agreement is further described in Section 2.2.5 below.

Board of Directors: Tore Enger, Chairman

Henrik A. Christensen, Johan Fr. Friis, Brita Eilertsen

Chief Executive Officer Kai Solberg-Hansen

SVP Technical & Operation

Tore O. Berg

Chief Financial Officer Peter Gjessing

Controller Sigurd Lange

Reconstruction Supervision (Owner s representative at Site in Dubai)

Noble Denton

Shipyard for Reconstruction QGM Group, Dubai

TECO Management AS Administrative Services, Finance &

Accounting

THULE DRILLING


14

Thule Drilling has entered into a Project Management Agreement with Noble Denton, a company in the Noble Denton Group. The Noble Denton Group is an association of companies offering an integrated range of consultancy services to the marine and offshore industry. Please refer to www.nobledenton.com

for further information.

Under the Project Management Agreement, Noble Denton shall inter alia be responsible for yard supervision. The Project Management Agreement is further described in section 2.2.6.

2.2.2. Management Thule Drilling s Management has the following members as per the date of this Information Memorandum:

Chief Executive Officer: Kai Solberg-Hansen (Age: 58) Mr. Solberg-Hansen has been engaged as the CEO of Thule Drilling since April 2005. Prior to joining Thule Drilling, he has been the CEO at Ocean Rig (2002-2005), CEO at Northern Offshore (1999-2002), (CFO 1998), finance manager at Kværner Maritime (1995-1998), CFO at Wilrig (1994-1995), CFO at Ross Offshore (1990-1994), finance manager at Seatec (1988-1990), finance manager at Dyvi Offshore 1980-1988) and finance manager at Jebsen Drilling (1974-1980). Mr Solberg-Hansen holds a Master in Business and Economics from the Norwegian School of Management (1971). Mr Solberg-Hansen resides in Drøbak, Norway. He owns 47,000 shares, 100,000 warrants and 0 options in Thule Drilling.

Chief Financial Officer: Peter Gjessing (Age: 40) Peter Gjessing has been appointed as Chief Financial Officer of Thule Drilling. He will act as CFO for Thule Drilling pursuant to the Management Agreement with TECO Management, by whom he will be employed. He has previously been Finance Manager at Lillestrømbanken (2004-05), Head of Accounting and Finance at Combined Cargo UAE LLC (2002-03), and Finance Manager (1997-2001) and Financial Analyst (1995-1997) at the Torvald Klaveness Group. Mr Gjessing is a Bachelor of Science in Business Administration from University of California and holds and MBA from the Wharton School, University of Pennsylvania. He holds no shares or options in Thule Drilling.

Technical Advisor: Tore Berg, (Age: 64) Tore Berg has been engaged as technical advisor through his wholly owned company InterRig AS since April 2005, ref section 5.2.8. Prior to this engagement, he has worked as an independent consultant within the offshore and shipping industry. His experience includes engagement as expert witness in connection with the arbitration regarding the drill ship Valentin Sashin (2004

dd.), owners representative for Prosafe ASA / Prosafe Offshore Ltd. in connection with the reconstruction of semi submersibles in Mexico, project director for the completion of Eirik Raude in Halifax, Canada, project director in Prosafe ASA (1998-2000), CEO of Tanker Navigation ASA (1997-1998), CEO of Discoverer ASA (1997-1998). Berg has comprehensive experience with technical management within offshore and shipping. Mr Berg has been a Board member in Ocean Rig ASA. Mr. Berg is a naval architect and marine engineer from the Norwegian University of Science and Technology (1965). Mr. Berg resides in Asker, Norway. He owns 10,000 shares, 100,000 warrants and 0 options in Thule Drilling.

2.2.3. Remuneration of CEO Kai Solberg-Hansen, the CEO, has a basic salary of MNOK 1.5 and a company car, but no other benefits.

2.2.4. Board of Directors Thule Drilling s Board of Directors has the following members as per the date of this Information Memorandum:

Chairman: Tore Enger (Age: 42) Mr. Enger is the chairman, founder and main shareholder of TECO Coating Services ASA, a public Norwegian shipping services company listed on Oslo Børs. He has 12 years experience from the shipping industry. Mr Enger resides in Oslo, Norway. He owns 0 shares, 0 warrant and 0 options in Thule Drilling. He owns 80 % of the shares in TECO Invest, which is the owner of 100 % of the shares in TECO Management. Teco Invest AS holds 500,000 shares and 1,300,000 warrants in Thule Drilling.

http://www.nobledenton.com


15

Board member: Henrik A. Christensen (Age: 43) Mr. Christensen is partner at the law firm Ro, Sommernes & Co (2004-dd.). He has been a partner at law firm Wiersholm Mellbye & Bech (1994-2004). Mr. Christensen has extensive experience from various board memberships. He holds a cand jur. from the University Of Oslo, Law School (1989). Mr Christensen resides in Oslo, Norway. Mr Christensen owns 100,000 shares, 60,000 warrants and 0 options in Thule Drilling. He owns 0 % of the shares in TECO Invest and 0% of the shares in TECO Management.

Board member: Johan Fr. Friis (Age: 48) Mr. Friis is a private investor. He has previously been CFO of Arcade Shipping AS (1989-1991), (Arcade Shipping founded Arcade Drilling) and CFO of Skaugen Petrotrans ASA (1991-1992). Mr. Friis has extensive experience from various board memberships. He holds a Master of Science Degree in Business from Université de Fribourg, Switzerland (1983). Mr Friis resides in Oslo, Norway. Mr Friis owns 20,000 shares, 40,000 warrant and 0 options in Thule Drilling. He owns 0 % of the shares in TECO Invest and 0 % of the shares in TECO Management.

Board member: Brita Eilertsen (Age: 43) Mrs. Eilertsen is a private investor and holds a Master of Business and Economics degree ( siviløkonom ) from the Norwegian School of Economics and Business Administration (NHH) (1986) and an AFA degree (Authorised Financial Analyst) from NHH/NFF (1991). Mrs. Eilertsen has worked as an investment banker at Enskilda Securities Corporate Finance department (1994-2004) and has participated in a number of equity related transactions (such as IPO s, public and private placements, privatisations etc.) as well as M&A transactions within various business areas. Mrs. Eilertsen resides in Oslo, Norway. She owns 0 shares, 0 warrants and 0 options in Thule Drilling. She owns 0 % of the shares in TECO Invest and 0% of the shares in TECO Management.

Committees The Company does not currently have a corporate assembly, nomination committee or any Board committees such as remuneration and audit committees.

Board remuneration, allowances In accordance with Norwegian law, the remuneration of the Board of Directors will be determined by the general meeting of Thule Drilling. Thule Drilling s Board of Directors is expected to outline remuneration policies before the annual general meeting in 2006. At this point, except for the stock option scheme described below, no remuneration policy has been adopted, nor is the Thule Drilling bound by any agreements as to the size of the remuneration of the members of the Board of Directors. However, it is the Company s intention that the remuneration of the Board of Directors, as a whole or for individual Board members, shall reflect time, effort and level of engagement, and shall be in line with market practise for listed Norwegian companies.

At a general meeting on September 13, 2005, the shareholders approved the establishment of a stock option scheme for management and directors. Under the stock option scheme, the Board of Directors can issue up to 1,000,000 stock options to members of management and the Board of Directors. Half of these options can be exercised by September 1, 2006 at an exercise price of NOK 30 per share, while the other half of the options can be exercised by September 1, 2007 at an exercise price of NOK 35 per share. The stock options have not yet been allocated. An extraordinary general meeting of the Company will be held on November 4, 2005 inter alia for the purpose of considering a proposal for the following allocation of stock options under the stock option scheme:

THULE DRILLING


16

Name Title OptionsKai Solberg-Hansen CEO 200 000Tore Berg Technical advisor 150 000Tore Enger Chairman 100 000Henrik A. Christensen Vice-chairman 50 000Brita Eilertsen Board member 50 000Johan Fr. Friis Board member 50 000Sigurd Lange Financial controller 50 000Sum 650 000Unallocated 350 000Total no of options 1 000 000

The Company s annual report will provide information of all remuneration paid to members of the Board of Directors.

2.2.5. Management Agreement TECO Management provides management services for Thule Drilling in accordance with the Management Agreement entered into by the parties on August 31, 2005 (replacing a former agreement dated April 6, 2005).

TECO Management shall operate on behalf of Thule Drilling in accordance with relevant laws and legislation, sound rig management practise and Thule Drilling s corporate governance guidelines.

TECO Management shall provide administrative, accounting and financial functions for Thule Drilling, and shall provide information to the Oslo Stock Exchange, Thule Drilling s shareholders and other investors. TECO Management shall act according to the Norwegian Stock Exchange Regulations § 2-6. The Management Agreement also provides that the manager shall, subject to instructions from the CEO, be responsible for the day-to-day management of all assets, joint venture interests and other investments owned or managed by the company. The manager shall also provide M&A services.

The general administrative services TECO Management shall provide include:

Assist in organising board meetings and shareholders meetings and prepare and keep minutes of such meetings and ensure that Thule Drilling complies with all applicable securities laws.

Ensuring that the shareholder registry is kept up to date and assist in creating presentations to the investor market.

Report and provide budgets, quarterly financial and technical reports to the Management of Thule Drilling.

Be responsible for the Company s accounting function and keep all books and records on behalf of Thule Drilling, and assist Company s auditors. This also includes adequate input on IFRS competence.

Ensure that Thule Drilling complies with applicable laws and legislation.

Handle treasury function.

Organize insurances in accordance with rig market practice as requested by the Thule Management.

Provide office accommodation.

Compensation to be received by TECO Management TECO Management receives a monthly management fee of MNOK 0.3 starting from February 2005. In addition, TECO Management shall be compensated for all out of pocket expenses (such as legal assistance, external financial advisors, technical supervisors and travel expenses etc) incurred in relation to performing the management services


17

Duration of the Management Agreement Both TECO Management and Thule Drilling may terminate the Management Agreement upon six months prior written notice.

Terms and conditions In the opinion of the Board of Directors of Thule Drilling, the compensation of TECO Management under the Management Agreement is in accordance with market terms, and other terms and conditions under the Management Agreement are in line with market practice. The terms and conditions of the Management Agreement are to be approved by the shareholders of the Company on an extraordinary general meeting on November 4, 2005.

2.2.6. Commission Agreement Thule Drilling has entered into a Commission Agreement with TECO Management dated September 6, 2005, subject to the approval of an extraordinary general meeting to be held on November 4, 2005. Under this agreement, TECO Management will be entitled to commissions as follows:

(i) If Thule Drilling enters into a contract for the use of any of its rigs as result of a contract opportunity presented by TECO Management, TECO Management shall be entitled to a commission equal to 1.25% of the net payments received by Thule Drilling under such contract;

(ii) If Thule Drilling sells any of its rigs as a result of contacts established through TECO Management, TECO Management will be entitled to a commission equal to 1.25% of the net proceeds received by Thule Drilling from such sale;

(iii) If Thule Drilling sells any of its rig options as a result of contacts established through TECO Management, TECO Management will be entitled to a commission equal to 25% of any net profits received by Thule Drilling from such sale up to MUSD 5 and 33% of any net profit in excess of MUSD 5 received by Thule Drilling upon such sale.

The Commission Agreement can be terminated by either party upon three months notice. TECO Management will be entitled to commission in accordance with the above if Thule Drilling enters into contracts during the first six months after the termination which would have entitled TECO Management to a commission if they had been entered into prior to the termination. TECO Management s right to commission in this six months period is, however, only applicable if the Commission Agreement has been terminated by Thule Drilling.

The Board considers the terms of the Commission Agreement to be on market terms.

2.2.7. Project Management Agreement Noble Denton shall provide project management services for Thule Drilling as set forth in the Project Management Agreement entered into by the parties on March 17, 2005.

Noble Denton shall provide project management services related to the rebuilding of the Jack-up rig Thule Power, and will have a minimum of 4 experienced engineers assigned to the this project on a permanent basis at the shipyard throughout the reconstruction period with additional support when required from its Middle East, London and Houston offices. The London and Houston offices provide expert jack up engineering expertise.

The general project management services Noble Denton shall provide includes:

Perform a technical review of the Reconstruction Contract and rig specification.

Assume overall responsibility as owner s representatives for the supervision of the shipyard.

Monitor procurement and materials management, costs, man hours, project planning, construction schedules.

Verify the quality of completed work and make regular reports on progress, any problems, budget and variations.

THULE DRILLING


18

Ensure that the rig is fully commissioned for operations on completion of construction.

Provide in service support after the drilling unit commences operation.

Compensation to be received by Noble Denton Noble Denton shall receive a management fee based on amount of resources required. Total management fees to Noble Denton are estimated to constitute approximately MUSD 1.8 which corresponds to an average monthly fee of MUSD 0.128 during the contract period. The aggregate of the project management fees and reimbursable costs for the complete fulfilment of its obligation under the agreement shall not exceed MUSD 2.0 unless otherwise agreed in writing.

Duration of the Project Management Agreement The Project Management Agreement terminates immediately subsequent to the rebuilding of the Rig being completed, tests and trials successfully carried out and the rig being delivered to and accepted by the Company. Thule Drilling may terminate the Project Management Agreement at any time. Noble Denton may terminate the Project Management Agreement in the event of a material breach by Thule Drilling.

2.2.8. Agreement on technical assistance

Tore Berg has been engaged as technical advisor to the Company through a service agreement with his wholly owned company InterRig 1 AS, with compensation calculated on the basis of an hourly rate of NOK 1,000 per hour. The minimum period of the agreement is for the completion of reconstruction of Thule Power and can be terminated by either party by two months' notice. However, if the agreement is terminated as a result of a merger, buy out or other reasons other than termination solely by the Company, InterRig 1 AS will be entitled to continue to receive compensation (calculated on the basis of average monthly compensation prior to termination) under the agreement for a period of five months following the notice of termination. If the agreement is terminated by the Company prior to completion, InterRig 1 AS will be entitled to continue received compensation under the agreement for a period of two months following the notice of termination. After completion of the project, no termination compensation shall be payable.

2.2.9. Other compensation Thule Drilling has not entered into any other agreements regarding compensation of the Board of Directors, Noble Denton, TECO Management or the employees of TECO Management.

2.2.10. Loans or security pledges made to the Board of Directors or management Thule Drilling has not made any loans or provided any security on behalf of members of the Board of Directors, Noble Denton, TECO Management or the employees of Thule Drilling.

2.3. Related party issues, conflicts of interest

Thule Drilling has entered into a Management Agreement and a Commission Agreement with TECO Management, as described above in sections 2.2.5 and 2.2.6. TECO Management is a wholly owned subsidiary of TECO Invest AS which is controlled by Mr Tore Enger, who is the chairman of the Board of Directors of Thule Drilling. TECO Invest AS holds 500,000 shares and 1,300,000 warrants in Thule Drilling.

Pursuant to the Management Agreement, TECO Management shall receive a monthly fee of MNOK 0.3 and compensation for all out of pocket expenses. Pursuant to the Commission Agreement, TECO Management shall receive of commission calculated as a certain percentage of the value of certain transactions; see section 2.2.6 for a full description.

The engagement of Tore Berg as technical director has been made through a service agreement with his wholly owned company InterRig 1 AS, as described in section 2.2.8 above.


19

Thule Drilling has not entered into any other agreements with related parties.

THULE DRILLING


20

3. Financial information

3.1. General

Thule Drilling was founded on February 7, 2005 and hence has a limited financial history. There is also no reasonable basis for preparing pro-forma accounts for the period prior to the Company s foundation. As a consequence, the financial information set forth herein is limited to the period from February 7, 2005 to the end of the second quarter of 2005, with certain comments on subsequent events.

The Company has no subsidiaries or associated companies.

The Company s financial report for the second quarter of 2005 is enclosed as appendix 2 in this Information Memorandum. The quarterly report for Q2 2005 has been subject to a limited audit is enclosed as appendix 3 in this Information Memorandum.

3.2. Accounting policies as of June 30, 2005

The accounts for the first and second quarters of 2005 have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles in Norway (NGAAP). Set out below is a description of significant accounting policies applied in the preparation of the Company s accounts.

3.2.1. Sales revenues The Company will not have any regular sales revenues until employment has been secured for the rigs owned by the company. Revenues will be recognized as earned, based on contractual daily rates or on a fixed price basis.

3.2.2. Construction contracts Thule Power Construction contracts for Thule Power are reported net on the balance sheet (i.e. instalments paid to the yard) at the date of the payment as fixed assets. Construction costs are also reported on the balance sheet and classified as fixed assets. Construction costs include contractual costs and costs related to supervision during the construction period. Contractual costs include costs that are related to the project for the duration of the contract, i.e. from signing of the contract to final completion of the contractual work. Any costs incurred prior to the signing of the contract that relate to the procurement of a contract are regarding as purchase of contractual assistance and are included as contractual costs.

Costs related to debt financing are reported on the balance sheet as a reduction of the carrying amount of the debt.

Rigs and equipment will be stated at cost less accumulated depreciation and accumulated impairment loss, if any. The cost of an asset comprises its purchase price and directly attributable costs of bringing the asset to its working conditions. Components of new fixed assets with different economic useful life will have different depreciation time. Depreciation is calculated using the straight-line method to write off the cost, after taking into consideration the estimated residual value. The expected useful life for the rig is 20 years and the expected useful life of equipment is 15 years.

Docking expenses are regarded as a separate part of the rig with a different depreciation period than the rig.

All fixed assets are reviewed for impairment whenever events of changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If so an impairment loss is charged to the profit and loss account. The recoverable amount is the higher of an asset s net selling price and value in use.


21

3.2.3. Issue costs Costs related to issues are reported as a premium reduction that is assigned to the company s paid in surplus fund.

3.2.4. Receivables and Other Current Assets Receivables are reported on the balance sheet at nominal value after deduction for provision for expected losses. Provisions for loss are calculated on the basis of individual of the different receivables. Other current asses are carried at the lower of cost and market value.

3.2.5. Foreign currency Cash items in foreign currency are recorded according to the exchange rate at the balance sheet date. Instalments paid in foreign currency to the yard are reported in NOK using the exchange rate applicable at the time of the transaction.

3.2.6. Related parties Information regarding those persons and companies regarded as related parties by the Company is provided in note to the accounts. This note also describes agreements, transactions and balances with related parties. The transactions are based on estimated market value.

3.2.7. Taxation The tax cost reported on the profit and loss account compromises both taxes payable for the period and changes in deferred tax. Deferred tax is calculated at 28 percent on the basis of the provisional differences existing between accounting values and tax values, and any tax deficit to be brought forward at the financial year-end. Tax increasing and tax-reducing provisional differences that are reversed or can be reversed within the same period are offset. The Company currently does not hold a contract that ensures employment after delivery of the rig - therefore, the net deferred tax advantage is not reported on the balance sheet.

3.2.8. Cash flow statement The cash flow statement will be prepared according to the indirect method. The indirect method involves reporting gross cash flow from investment and financing activities, while the accounting result is reconciled with the net cash flow from operational activities. Cash in hand and cash equivalents comprise cash, bank deposits and other short-term, liquid investments which can immediately, and with insignificant exchange rate risk, be converted to know cash amounts and with due dates of less than three months from purchase date.

3.2.9. Financial Instruments The Company uses derivative financial instruments such as foreign currency contracts to hedge its risk associated with foreign currency fluctuations. Such derivative financial instruments are in the NGAAP accounts treated as off balance sheet items. However, when implementing IFRS at year end (as a listed company) the accounting principles will be as described below.

For the purpose of hedge accounting, hedges are classified as either fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; or cash flow hedges where they hedge exposure to variability in cash flow that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction.

In relation to fair value hedges which meet the conditions for special hedge accounting, any gain or loss from re-measuring the hedging instrument at fair value is recognised immediately in the income statement. Any gain or loss on the hedged item attributable to the hedged risk is adjusted against the carrying amount of the hedged item and recognised in the income statement. Where the adjustment is to the carrying amount of a hedged interest-bearing financial instrument, the adjustment is amortised to the net profit or loss such that it is fully amortised by maturity.

THULE DRILLING


22

In relation to cash flow hedges (forward foreign currency contracts) to hedge firm commitments which meet the conditions for special hedge accounting, the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity and the ineffective portion is recognised in net profit or loss

When the hedged firm commitment results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement of the acquisition, cost or other carrying amount of the asset or liability. For all other cash flow hedges, the gains or losses that are recognised in equity are transferred to the income statement in the same year in which the hedged firm commitment affects the net profit and loss, for example when the future sale actually occurs.

For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to net profit or loss for the year.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gains or losses on the hedging instrument recognised in equity is kept in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the year.

3.2.10. Pension The Company has currently no pension arrangements.

3.2.11. Share Based Compensation The Company does not have any share based compensations arrangements except for warrants. The fair value at the grant date of such compensation is expensed over the vesting period.

3.2.12. Long-term debt First year instalment of long-term debt is classified as current liabilities.

3.2.13. Leasing The Company distinguishes between operational leases and financial leases based on substance over form. Financial leases are capitalized as fixed assets and are stated as long-term debt in the balance sheet.

3.2.14. IFRS As an unlisted company without subsidiaries, the Company does not report in accordance with IFRS. Upon commencement of listing of the Company s shares on the Oslo Stock Exchange, the accounts will be prepared in accordance with IFRS.

Based on the accounting principles outlined above the Company does not expect any material differences between N GAAP and IFRS after delivery of the rig, except for the accounting treatment of financial instruments.

3.3. Selected financial statements

The selected financial information set forth herein has been derived from the accounts of Thule Drilling ASA for the period from February 7, 2005 to June 30, 2005.


23

3.3.1. Income statements The table below shows a condensed income statement for Thule Drilling ASA for the period from February 7, 2005 to June 30, 2005.

Amount in 1 000 NOK 2005 2005 2005Q2 Q1 H1

Operating Revenues - - - Cost of Goods sold (12) - (12) Other operating Expenses (5 273) (905) (6 177)

EBITDA (5 285)

(905)

(6 189)

Depreciation (3) - (3) Operating result (EBIT) (5 287)

(905)

(6 192)

Net finance + / (-) 416 (0) 416 Net currency + / (-) 692 - 692

Earnings before tax (4 178)

(905)

(5 083)

Estimated taxation on ordinary result - - - Net Profit (Loss) (4 178)

(905)

(5 083)

Earnings per share (NOK) (0,21) (1,81) (0,40) Diluted earnings per share (NOK) (0,21) (1,81) (0,41) Dividend per share (NOK) - - -

3.3.2. Balance sheets The table below shows the condensed balance sheet for Thule Drilling ASA per June 30, 2005.

Amount in 1 000 NOK 2005 200530.06 31.03

Intangible fixed assets - - Tangible fixed assets 62 506 150 Financial assets - - Total fixed assets 62 506

150

Inventories - - Current receivables 1 600 24 Cash and bank deposits 437 509 100 Total current assets 439 109

124

TOTAL ASSETS 501 615

273

Share capital 2 740 100 Other equity 229 171 (905) Total equity 231 911

(805)

Long term liabilities 243 173 - Current liabilities 26 530 1 078 Total liabilities 269 704

1 078

TOTAL EQUITY AND LIABILITIES 501 615

273

THULE DRILLING


24

3.3.3. Cash flow statements The table below shows the condensed cash flow statement period for Thule Drilling ASA for the period from February 7, 2005 to June 30, 2005.

Amount in 1 000 NOK 2005 2005Q2 Q1

Cash flow from operating activities (2 555) (0) Cash flow from investing activities (46 226) - Cash flow from financing activities 486 190 100

Net change in cash etc 437 409

100

Cash etc at the start of the period 100 - Cash etc at the end of the period 437 509

100

3.3.4. Notes to the accounts as per June 30, 2005 Accounting principles The accounts are issued in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP) in NOK. As the Company has no subsidiaries, the accounts are company only accounts.

Exchange Rates The exchange rate NOK/USD end June 2005 was 6.5461.

Drilling Rig ( Thule Power ) The drilling rig, under construction, is classified as fixed assets and stated to cost in accordance with progress payments. The company has capitalized interests and other direct related expenses. The depreciation, based on cost less estimated residual value, will commence at delivery (estimated delivery June, 2006). Book value end June 30, 2005 is MNOK 62.5 including capitalized interests amounting to MNOK 3.5.

The agreed cost price is in USD.

Hedging of currency risk The company has entered into currency hedge instruments, forwards and options. In fact about 50% of the currency exposure is covered through the forward contract (at rate of exchange NOK / USD 6.499) and the remaining is partly covered by options In the NGAAP accounts such derivatives are off balance sheet. In the IFRS accounts the Company believes the contracts will classify as a fair value hedge.

Bond loan (face value MNOK 250) The bond loan has certain warrants related to the loan (3,500,000 warrants, each giving a right to subscribe for one share in the Company at a price of NOK 23.75). The estimated value of the warrants at the date of issuance was MNOK 0.578 and the amount is recorded as a part of shareholders equity. The residual is classified as debt. The loan fees and expenses when issuing the loan, borrowing costs, are recorded as a reduction of the debt (MNOK 6.250) and the interest expenses (10%) are charged to profit and loss based on amortized cost.

Shareholders equity As of June 30, 2005, 13,700,000 shares are outstanding. In addition there are warrants outstanding; 3,500,000 warrants as described above and 1,650,000 warrants each giving right to subscribe for one share in the Company at a price of NOK 21.85. The latter warrants have been issued to members of management, consultants, and members of the board of directors. The profit and loss accounts were in the second quarter of 2005 charged with costs of MNOK 3.760 related to these warrants.

Subsequent events On September 13, 2005, an extraordinary general meeting of Thule Drilling approved an increase of the share capital by NOK 1,500,000 through the issuance of 7.5 million new shares. The new shares were


25

issued at a subscription price of NOK 26.50 per share in cash, corresponding to gross proceeds of MNOK 198,75. The proceeds have been used to purchase two bare-deck hulls, Gulfdrill 7 and Seascout .

3.3.5. Auditor s statement In connection with the financial statements set out above, the Company s auditors have issued a limited review report to the Board of Directors of the Company. The report is presented in Appendix 3.

3.4. Other financial information

3.4.1. Expected capital expenditure The table below sets forth the expected capital expenditure for the reconstruction of the Thule Power . Based on the expected capital expenditure, the Company expects to cover its payments from paid-in equity and existing debt facilities.

MUSD May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 SumTotal project cost 16,87 10,06 8,06 6,21 1,81 2,06 4,66 1,69 4,20 5,92 2,07 5,22 0,82 5,27 74,9

Month

3.4.2. Debt obligations Thule Drilling s debt financing consists of a MNOK 250 bond issue referred to as "10.00 per cent Thule Drilling ASA senior Secured Bond Issue 2005/2007 with Warrants". Norsk Tillitsmann ASA acts as trustee for the bondholders.

The bonds carry interest at a fixed rate of 10.00 per cent per annum, payable annually in arrears. The loan is repayable in its entirety on May 10, 2007.

The bonds are secured by a first priority mortgage over the Jack-up Rig and, until the completion of the Jack-up Rig, a floating charge over the Company s cash. Upon completion of the Jack-up Rig, this floating charge will be replaced by an assignment of earnings.

The loan agreement includes certain covenants on the Company, including a covenant not to incur any additional financial indebtedness unless subordinated to the bonds and a covenant not to sell, transfer ownership or grant security in Thule Power without the consent of the bondholders. Thule Drilling does not have any other long-term debt.

3.4.3. Currency exposure The Company has been funded in NOK although the majority of the Company s outstanding obligations are denominated in USD. The main cost elements that are denominated in NOK are interest costs and administrative costs, while virtually all of the costs related to the reconstruction of the Jack-up Rig are denominated in USD.

In order to secure its ability to have sufficient amounts of USD available during the period until expected delivery of the Jack-up Rig, the Company has entered into a forward term contract with Nordea Bank for a sum of MUSD 52.92. The Company is guaranteed a fixed exchange rate (NOK/USD 6.499) for an agreed amount every month. The company is required to purchase 50% of the amount at the guaranteed fixed rate, and has the option to purchase the residual 50% of the amount in the spot market at its own discretion.

3.4.4. Auditors Thule Drilling s independent financial auditor is Ernst & Young AS, Oslo Atrium, N-0051 Oslo. Ernst & Young AS has been the Company s auditor since the incorporation.

3.4.5. Subsequent events Subsequent to the end of the second quarter of 2005, the Company has acquired two bare-deck hulls for a total consideration of MUSD 27. The hulls can be constructed into various types of offshore rigs,

THULE DRILLING


26

including accommodation rigs or tender support rigs. No decision has yet been taken as to the actual reconstruction of the rigs. The actual reconstruction investment will depend on the designs applied and the choices of equipment, standard and usage.

The Company obtained funding for the acquisition of the hulls through an equity issue with gross proceeds of MNOK 198.75, which was approved by an extraordinary general meeting on September 13, 2005. The additional funds required to reconstruct the units have not been secured or committed.


27

4. Share capital and shareholder matters

4.1. Shares and other equity instruments

4.1.1. Share capital Thule Drilling s share capital is NOK 4,240,000, divided into 21,200,000 Shares, each with a par value of NOK 0.20. The share capital is fully paid up. All shares of the Company are of the same class and are equal in all respects. The Company s articles of association do not provide for shares of other classes.

Each share carries the right to one vote in shareholders meetings. The Company s articles of associations do not provide for limitations on the transferability or ownership of shares.

The development of the Company s share capital since the incorporation is set forth in the table below.

Change Nominal

After change

Time Event Shares Share capital

(NOK) Value (NOK)

Shares Share capital (NOK)

Feb. 7, 2005 Incorporation 10,000,000 100,000 0.01 10,000,000 100,000 Apr. 7, 2005 Reverse split 20:1 - - 0.20 500,000 100,000 Apr. 15, 2005 Share capital increase 13,200,000 2,640,000 0.20 13,700,000 2,740,000 Sep. 13, 2005 Share capital increase 7,500,000 1,500,000 0.20 21,200,000 4,240,000

The Company s shares are registered in VPS with Nordea Bank Norge ASA, Securities Service Department, as registrar. The shares are registered with ISIN NO 001 02630566.

4.1.2. Authorisations to issue new shares At an extraordinary general meeting of the Company on September 13, 2005, the shareholders granted the board of directors two separate authorizations to increase the Company s share capital:

(i) An authorization to increase the share capital by up to NOK 1,800,000 The authorization may not be used to issue shares at a subscription price lower than NOK 30 per share. It includes the right to set aside the pre-emptive rights of existing shareholders. It also includes share capital increases against contributions other than in cash, the right to incur special obligations for the company and resolutions on mergers in accordance with § 13-5 the Norwegian Public Limited Liability Companies Act. The authorization is valid until the annual general meeting in 2006, but in no event later than June 30, 2006.

(ii) An authorization to increase the share capital by up to NOK 200,000. The authorization can only be used to issue shares in connection with the exercise of options granted under the Company s share option scheme for management and directors, see section 2.2.4 of this Information Memorandum. The authorization includes the right to set aside the pre-emptive rights of existing shareholders. The authorization is valid until September 13, 2007.

Neither of these authorizations has been used as of the date of this Information Memorandum.

4.1.3. Other authorisations The Company does not hold any authorisations to issue convertible loans or to acquire own shares.

THULE DRILLING


28

4.1.4. Warrants The Company has issued 3,500,000 warrants, each giving the right to subscribe for one share in the Company at a price of NOK 23.75 (subject to customary adjustment mechanisms) at any time to May 2, 2007. The warrants are registered in VPS with ISIN NO 001 0269533. These warrants were originally issued to subscribers for the Company s bond loan and are freely transferable.

The Company has further issued 1,650,000 warrants, each giving the right to subscribe for one share in the Company at a price of NOK 21.85 (subject to customary adjustment mechanisms) at any time to May 2, 2007. The warrants are registered in VPS with ISIN NO 001 0269525. These warrants were issued to founders and key personnel. Although they are in principle freely transferable, the holders have entered into an agreement with First Securities and Fearnley Fonds under which the warrants cannot, without the prior consent of the First Securities and Fearnley Fonds, be exercised or transferred until the drilling rig Thule Power has been completed and delivered. The table below sets forward the warrants received by

the founders and key personnel.

Name Ownership No of warrants

TECO Invest Chairman of the Board, Tore Enger (80%) 1,300,000 InterRig AS Technical advisor, Tore Berg 100,000 KSH Consult & Invest AS CEO, Kai Solberg-Hansen 100,000 August AS Henrik A. Christiansen 60,000 Sigurd Lange Sigurd Lange 50,000 Friis & Friis AS Board member Johan Fr. Friis 40,000

If all the warrants are exercised, the Company will be required to issue a total of 5,150,000 new shares, which would increase the share capital by NOK 1,030,000.

4.1.5. Stock option scheme At general meeting on September 13, 2005, the shareholders approved the establishment of a stock option scheme for management and directors. Under the stock option scheme, the Board of Directors can issue up to 1,000,000 stock options to members of management and the Board of Directors. 500,000 of the options can be exercised by September 1, 2006 at an exercise price of NOK 35 per share, while the residual 500,000 options can be exercised by September 1, 2007 at an exercise price of NOK 40 per share. The stock options have not yet been allocated. The Board of Directors have the right to enter into option agreements with terms based on marked practice, including a right of immediate exercise in the event of a sale or merger of Thule Drilling. An extraordinary general meeting of the Company will be held on November 4, 2005 inter alia for the purpose of considering the allocation of stock options under the stock option scheme.

4.1.6. Other equity instruments With the exception of the instruments described above, there are no stock options, convertible bonds or other securities convertible into shares of the Company.

4.2. Shareholders and share trading

Shareholder structure Thule Drilling had 327 shareholders as per October 16, 2005. A total of 13,038,255 shares (61.5 percent) were held by non-Norwegian shareholders.

Top-20 shareholders The table below shows Thule Drilling s twenty largest shareholders as per October, 16 2005.


29

The company does not own any shares.

Prior trading of the Thule Drilling share The Thule Drilling-share has been traded on the Norwegian OTC-list from May 13, 2005 to the date of the Information Memorandum. The average daily trading volume from May 13, 2005 to October 17, 2005 equals 108,263 shares. The minimum closing price per Thule Drilling-share during this period equals NOK 16, while the maximum closing price per share equals NOK 70. The share-price performance during the period from May 13, 2005 to October 17, 2005 is set forth in the price-volume diagram below.

Shareprice development and volum 13.05.2005 - 17.10.2005

-

25,00

50,00

75,00

13.05.2005 28.06.2005 09.08.2005 20.09.2005

Sha

re p

rice

(NO

K)

0

200

400

600

800

1 000

1 200

1 400

1 600

Vol

um (

1000

sha

res)

Volume (right axis)

Share price (left axis)

Source: The Norwegian over-the-counter market, administered by the Association of Norwegian Stock broking Companies.

The Thule Drilling-shares have not been listed or traded on any stock exchange.

Shareholder Shares Percent of shares

Goldman Sachs & Co 2,343,000 11.05% Deutsche Bank AG London 1,747,900 8.25% Morgan Stanley and Co. Intl. limited 1,707,500 8.05% Deutsche Bank (SUISSE) S.A 1,535,000 7.24% Norinvest Ltd 1,467,500 6.92% Credit Suisse First Boston 1,218,500 5.75% Morgan Stanley & Co. Inc 789,000 3.72% VBI Corporation 751,500 3.54% Skandinaviske Enskilda Banken 696,500 3.29% Skagen Vekst 532,000 2.51% TECO Invest AS 500 000 2.36% Bank of New York, Brussels Branch 494,743 2.33% Goldman Saches International 385,700 1.82% Eagle AS 349,000 1.65% Tannlege Terje Mikkelsen AS 302,100 1.43% SEB Private Bank S.A. Luxembourg 300,600 1.42% MP Pensjon 275,500 1.30% Selvaag Invest 270,000 1.27% Carnegie Investment Bank AB 250,000 1.18% Torstein Tvenge 236,500 1.12% Other shareholders 5,045,457 23.80% Sum 21,200,000 100.00% Sum 20 largest shareholders 16,154,543 76.20 % Sum 21,200,000

100.00%

THULE DRILLING


30

It is however envisaged that the dividend policy will be reconsidered when the Jack-up Rig currently under reconstruction has been delivered and earnings are being generated. Any such dividends will be considered in light of the Company s financial position, its debt covenants, and capital requirements for additional investment.


31

5. Risk factors Prospective investors in the shares of the Company should carefully consider the following risk factors, in addition to the other information set forth in this Information Memorandum, prior to making an investment decisions. The risk factors listed below are not exhaustive, and risks that are not known or identified by the Company at the date of this Information Memorandum may occur.

5.1. Financial risks

5.1.1. Forward looking statements Forward looking statements or information appearing elsewhere in this Information Memorandum are based on the current beliefs of the Company s management and Board of Directors or assumptions based on information available to the Company at the present.

Please note that the forecast set forth herein is associated with uncertainty and that the actual future results of Thule Drilling may deviate significantly from this forecast. All potential investors and buyers of Thule Drilling Shares should conduct their own thorough review of the forecasts and assumptions set forth below and are urged to consult their own professional financial, tax and legal advisor prior to making a decision to buy or subscribe for Shares in Thule Drilling, and investors should not base their investments decisions on this forecast alone.

The Company does not intend, and does not assume any obligation, to update the forward-looking statements included in this Information Memorandum as at the date set forth on the cover.

5.1.2. Lack of historical financial information Thule Drilling was founded on February 7, 2005 and has limited operating history. The Company s financial statements for 2005 reflect five months of operation, with no operating income. The historical financial statements included herein may therefore not be useful in estimating the Company s future financial results. Potential investors are therefore urged to make their own assessment of the Company s future financial results, by comparing the Company with similar companies with a longer operating history.

5.1.3. Significant financial leverage Thule Drilling has issued a bond, whereby the Company borrow MNOK 250 to finance the construction of the Jack-up rig Thule Power. In addition, the Company has carried out two private placements with gross proceeds of approximately MNOK 449.

The repayment schedule of the Loan Facility is rather short (two years) and aggressive (100 percent is to be repaid at maturity). Thule Drilling may therefore be dependent on (i) securing contracts at attractive rates (higher than current rates), (ii) selling the Jack-up Rig Thule Power, or (iii) extending the repayment schedule or (iiii) refinancing of the bond issue in order to meet its obligations under the bond issue.

If Thule Drilling fails to repay or refinance the Loan Facility as described above, additional equity financing may be required. There can be no assurance that Thule Drilling will obtain such financing or, if obtained, at what terms such financing will be obtained

5.1.4. Limited financial resources The Company is a small rig company with one jack-up rig under construction, two semi submersible rigs recently acquired, limited financial history and no operating track record. The Company operates in a global industry, with fierce competition, dominated by companies with significantly greater financial resources than Thule Drilling s, and with larger rig fleet. This may have a negative effect on Thule Drilling s ability to compete with other rig owners.

THULE DRILLING


32

5.1.5. Interest rate and currency fluctuations The Company is exposed to changes in interest rates and currencies, which may impact the Company s financial results. Hedging instruments, to minimize interest rate and currency exposure, will be considered, but is presently not in place.

5.1.6. Risks related to debt obligations The Loan Agreement includes certain covenants on the Company that may impose restrictions on the operations of Thule Drilling, including covenants not to incur any additional financial indebtedness unless subordinated to the bonds and not to sell, transfer ownership or grant security in the Jack-up Rig without the consent of the bondholders. The Loan Agreement may therefore limit the Company s operational and financial flexibility.

5.2. Commercial risks

5.2.1. Dependence of external parties Thule Drilling is dependent on external parties for a range of management services to be provided to the Company. Such arrangement may reduce the control functions of the Company relative to other companies with other management arrangements. In addition, the Company may lose vital know-how or experience if TECO Management terminates the Management Agreement or Commission Agreement, or if Noble Denton terminates the Project Management Agreement.

Long-term agreements or contracts with external parties may also provide the Company with less flexibility in operational or organizational matters, for example if the need to reduce the cost base of the Company should arise, than if the Company had its own in-house staff or other management arrangements.

5.2.2. Risk related to the Management Agreement Thule Drilling has a very limited organization and is dependent on acquiring management services. Thule Drilling has signed a Management Agreement with TECO Management. The Management Agreement may be terminated by TECO Management and/or Thule Drilling upon six months prior written notice. If TECO Management were to terminate the Management Agreement, Thule Drilling would need to acquire management services from other sources. This could cause an interruption in its operations and could result in increased costs. This may adversely affect the operations and financial results of Thule Drilling. TECO Management has no previous experience in performing management services for rig companies. A failure by TECO Management to perform its management services satisfactorily could adversely affect the operations and financial results of Thule Drilling. In case of employment of any of its rigs as a result of a contract opportunity presented by TECO Management, the latter shall, pursuant to a separate Commission Agreement with TECO Management, receive commissions as further described in section 2.2.6. See also section 2.3 for related party issues.

5.2.3. Risk related to the dependence on Key Personnel Thule Drilling has a very limited organization. If Thule Drilling should be unable to retain key personnel, this could have material negative consequences for its operations and financial results.

5.2.4. Risk related to the Project Management Agreement Thule Drilling has a very limited organisation. Thule Drilling has signed a Project Management Agreement with Noble Denton. The services to be delivered by Noble Denton under the Project Management Agreement will be of key importance for the successful completion of the reconstruction of Thule Power. The Project Management Agreement may be terminated immediately by Noble Denton in the event of a material breach by Thule Drilling. If Noble Denton terminates the Project Management Agreement, or does not perform its services under the Project Management Agreement satisfactorily, this could have a material adverse effect on the operations and financial results of Thule Drilling.


33

5.2.5. Dependence on few assets Thule Drilling has only a limited number of assets: the Jack-up Rig Thule Power to be delivered around June 2006, two former semi-submersible rigs and thirteen options for the construction of additional jack up rigs. If Thule Drilling fails to obtain contracts or sell these units, if the reconstruction of the units is delayed, or if the reconstruction costs are higher than estimated or if the quality of the units, once reconstructed, is not satisfactory, Thule Drilling may incur significant financial losses. Thule Drilling is unlikely to have other income to offset any such losses.

5.2.6. Risks related to the reconstruction of Thule Power The schedule for the rebuilding of the rig is dependent on the various sub contractors ability to deliver on time. The most critical parts are the drilling equipment and the jacking gear.

QGM has previously worked on several onshore/offshore EPS projects ranging between MUSD 0.3 and 5.0, but it is the first time that it will be undertaking a project of this size and complexity.

A fire or flood while the unit is being rebuilt can have a major impact on project costs and schedule.

5.2.7. Risks related to the Reconstruction Contract and to relation with suppliers

The Company has entered into the Reconstruction Contract for QGM to build the Jack-up Rig. The Company has used its best endeavours to prepare proper rig specifications, including structure (hull), equipment and drilling equipment. The Reconstruction Contract stipulates the Delivery Date, the contract price for the work to be performed by QGM and an agreed cap. on costs for deliveries from suppliers. It also contains provisions regarding liquidated damages, guarantees and penalties in case of delays and quality problems. Despite these efforts and contractual provisions, delays, cost overruns and technical problems may occur, which could have a material adverse effect on the Company and its financial position. Furthermore, variation orders from the Company might lead to increases in the price paid for the reconstruction of Thule Power. TheReconstruction Contract is comprised of appendices and an Amendment Agreement layered onto a standard-form engineering contract, which could render it more difficult to interpret in the event of any dispute than a wholly bespoke contract

Thule Drilling will have to place direct orders for an amount of MUSD 35.852 with suppliers of various material and equipment. To the extent any claims are made by such suppliers under the various agreements governing these relationships in excess of estimated costs, Thule Drilling would be directly responsible. The agreements vary in terms of the liabilities accepted and scope of warranties provided by the various suppliers. The Amendment Agreement provides that QGM shall assume all responsibilities and liabilities as if the supplies were procured by it and that QGM s warranty will apply to the totality of the Jack-up Rig. QGM has also agreed to indemnify Thule Drilling in case sums due to suppliers exceed MUSD 35.852. The value of such assumptions of responsibility and indemnity depend upon QGM s financial strength, see section 5.2.9. Furthermore, any delays in deliveries from such suppliers could delay the completion of the Jack-up Rig. This could have a material adverse effect on Thule Drilling s results and financial position.

5.2.8. Risks related to the optional new-building contracts with QGM Thule Drilling has acquired 13 separate option agreements with the QGM Yard in Dubai for the construction of new rigs based on tentative specifications. A form of construction contract has not yet been agreed. The exercise of all options is conditional upon Thule Drilling and QGM agreeing on construction contracts and detailed specifications for such rigs. Investors should be aware that none of the option agreements can be expected to be enforceable until construction contracts and specifications have been agreed with the yard.

5.2.9. Risk related to QGM s limited financial resources Thule Drilling has entered into the Reconstruction Contract for the reconstruction of Thule Power. A successful completion of the reconstruction is of key importance to Thule Drilling.

THULE DRILLING


34

QGM has limited financial resource. There may be a risk that QGM will not have sufficient financial resources to complete the reconstruction of the Jack-up Rig. Furthermore, there may be a risk that QGM will not be able to pay any claims Thule Drilling may have against it under the Reconstruction Contract, including claims under the indemnity from QGM relating to possible claims from or cost-overruns relating to suppliers. A failure by QGM to complete the reconstruction of the Jack-up Rig in accordance with the Reconstruction Contract could result in significant delays, cost-overruns or technical problems for Thule Drilling, or potentially the non-completion of the reconstruction of the Jack-up Rig. This would have a material negative impact on Thule Drilling.

5.2.10. Risks related to the former Semi-Submersible Rigs Thule Drilling has acquired the two former semi-submersible rigs Seascout and Gulfdrill 7, now renamed Thule Phoenix and Thule Challenge, at an aggregate price of MUSD 27. These units are currently not in an operational state, and will need to be reconstructed before Thule Drilling will be able to obtain any revenues from them. Thule Drilling has not yet made a final decision as to how it will use these units, and no contracts have been entered into for their reconstruction. Consequently, both the costs of such reconstruction and the chances of a successful result of the reconstruction are currently uncertain. Thule Drilling has not secured financing for the reconstruction of the rigs, and there can be no assurance that it will be able to secure such financing at acceptable terms. Furthermore, Thule Drilling has not secured any contracts for the use of these units, and cannot be certain that it will secure such contracts when the units have been reconstructed. A failure to successfully reconstruct the units at acceptable cost, to obtain financing of such reconstruction, or to secure contracts for the units at satisfactory rates once reconstructed, could have a material negative impact on the results and financial condition of the Company.

5.2.11. Risks related to the History of the Company s Units Thule Power, Thule Challenge and Thule Phoenix, have all been acquired as hulls in need of significant reconstruction. All these units have a long history of use, of which Thule Drilling does not have a complete overview. Although Thule Drilling has obtained warranties from the sellers of the respective units that title is being transferred free of encumbrances, and although Thule Drilling has no indication that this is not the case, encumbrances on the rig could exist or arise by operation of law in various countries, for instance to secure costs incurred in connection with salvage of the units. If any claims were made against the units on the basis of such encumbrances, this could have a negative impact on the results and financial condition of the Company.

5.2.12. Service life and technical risks The service life of a modern rig is generally considered to exceed thirty years, but may ultimately depend on its efficiency and demand for such equipment. There can be no guarantees that Thule Drilling s rigs will have a long service life. Thule Power and Thule Drilling s other units may have particular unforeseen technical problems, or new technical solutions or rigs may be introduced that are more popular than Thule Drilling s units, causing less demand and use for these units. This could have a material adverse impact on the results and financial condition of the Company.

5.2.13. Drilling contracts Thule Drilling has no contract for the Jack-up Rig or for any of the former semi-submersible rigs. There can be no guarantee that Thule Drilling will be able to secure contracts at sufficient rates to achieve profitability. In addition, Thule Drilling may experience off-hire between contracts or fail to secure contracts at all. This could have a material adverse impact on the results and financial condition of the Company.

5.2.14. Possible liabilities Offshore drilling operations are associated with considerable risks and responsibilities, including technical, operational, commercial and political risks. In addition, drilling operations may be affected by harsh weather and other conditions beyond the Company s control. The Company intends to obtain insurances in line with good industry practise. It is, however, possible that such insurances will not cover all possible damages, incidents, risks and liabilities. Note also that the Company may not be insured for


35

gross negligence caused by the Company or its employees or rig personnel. If the Company is held liable for pollution or environmental damage, it may no be able to recover through insurance coverage.

5.2.15. Market risks Demand for drilling services in connection with exploration, development and production in the offshore oil & gas industry is particularly sensitive to oil & gas price fluctuations, low production levels and disappointing exploration results as well as possible political incidents. Demand for the Company s services and products may also be negatively impacted by increased supply of similar or other complementary rigs.

5.3. Other risks

5.3.1. Environmental Risks The Company s operations may involve the use and/or disposal of materials that may be classified as hazardous substances. The environmental laws and regulations of the countries in which the Company may operate expose the Company to liability for the conduct of, or for conditions caused by, others, or for acts of the Company that were in compliance with all applicable laws at the time such actions were taken. In the past several years, protection of the environment has become a higher and more visible priority of many governments throughout the world. Offshore drilling in certain areas has been opposed by environmental groups and, in some areas, has been legally restricted. The Company s operations could be restricted and its rigs could become more expensive to operate if new laws or legislation are enacted or other governmental actions are taken that prohibit or restrict offshore drilling or impose additional environmental protection requirements. Moreover, the Company may have no right to compensation from its customers if its costs are increased through such governmental actions, and its operating margins may fall as a result.

5.3.2. Risks related to the Shares The future share price development of Thule Drilling may be volatile due to various factors, including fluctuations in Thule Drilling s results and changes to the regulatory framework. The future share price development of the Thule Drilling share may fluctuate significantly as a result of quarterly fluctuations in Thule Drilling s operating results, negative business development, interest rate changes, changes in analyst ratings, announcements of technological changes or other developments by Thule Drilling or Thule Drilling s customers, suppliers, competitors, or others, changes to the regulatory environment affecting Thule Drilling s operations, or future sale of shares by Thule Drilling s largest shareholders. There is little history of trading in the Shares, since the Shares have not been listed on any stock exchange, and have only been listed on the Norwegian OTC-List for a limited period.

5.3.3. Political risks Thule Drilling s activities are largely situated outside of Norway. The reconstruction of the Jack-up Rig is taking place in the United Arab Emirates. The reconstruction of the former semi-submersible rigs is also expected to take place outside of Norway. Upon completion of the Jack-up Rig, it is expected that its assignments will be in the geographical areas listed in section 1.4. Several of these areas are politically volatile. The former semi-submersible rigs may also obtain employment in politically volatile regions. Changes in political regimes or other political changes could have a material adverse impact on the operations or financial results of the Company.

Furthermore, changes in the legislative and fiscal framework governing the activities of oil companies could have material impact on exploration and development activities, and may therefore affect demand for the Jack-up Rig and former semi-submersible rigs or the day rates at which it will be possible to get assignments for these units. Therefore, such changes could have a material adverse affect on the Company s financial results.

THULE DRILLING


36

6. Legal issues

6.1. The Reconstruction Contract Thule Power

Thule Drilling entered into a contract with QGM for the reconstruction of the Arabdrill 19 rig on March 17, 2005. Certain amendments to the Reconstruction Contract were agreed to through an amendment agreement dated September 8, 2005.

Under the Reconstruction Contract, QGM agrees to construct, launch, equip, test, complete and deliver to Thule Drilling the Jack-up Rig. The Reconstruction Contract stipulates that contract price to QGM is MUSD 25.5, excluding potential change orders, and that Thule Drilling will pay no more than MUSD 35.852 to suppliers under direct agreements they will enter into with such suppliers.

The MUSD 25.25 payable directly to QGM will only be payable as and to the extent QGM actually incurs costs in the performance of its work. If QGM s actual costs in performing its work are lower, the amount payable will be reduced accordingly. QGM will only be entitled to invoice Thule Drilling once Noble Denton has approved the invoices. Approved invoices must be paid within 30 days.

Up to MUSD 35.852 will be paid by Thule Drilling directly to suppliers under direct agreements between Thule Drilling and such suppliers. This has been done in order for Thule Drilling to have better financial control of the project as a whole, as well as to satisfy demands from suppliers as to creditworthiness. If for any reason the aggregate amounts actually payable to such suppliers should exceed MUSD 35.852, except as a result of change orders requested by Thule Drilling, QGM has agreed to indemnify Thule Drilling for the excess amount. QGM shall arrange for insurance of the work and materials on the basis of construction all risk insurance up to the amount of replacement value as well as general liability

insurance of minimum MUSD 2.0 and certain other insurances.

In addition to the contract price of MUSD 25.5, a success fee of MUSD 2.75 shall be paid to QGM on successful delivery of the Jack-up Rig (which is defined in the Reconstruction Contract).

Subject to permissible delays due to changes, suspension or force majeure, delivery of the Rig shall take place 14 months after Thule Drilling has issued a notice to proceed to Contractor. Notice has been given and the Amendment Agreement states that the scheduled completion date is July 9, 2006.

If delivery of the Jack-up Rig is delayed by more than 7 days beyond the contractual delivery date, and the delay is not due either to force majeure or other permissible delays, then QGM will have to pay liquidated damages of USD 50,000 for each day of delay after the 7 day grace period, up to a maximum amount of USD 750,000.

QGM provides a 12 month warranty for defects from functional acceptance of the Jack-up Rig or from the date the Contractor has performed any rectification work.

In case of termination for failure (including insolvency etc.) by QGM, Thule Drilling is entitled to damages for defects and other breaches of the Reconstruction Contract and any extra costs for using third parties to finalise the performance of the work. Both parties to the Reconstruction Contract have indemnified the other for consequential damages.

The Reconstruction Contract provides that title to the work under construction shall belong to Thule Drilling.

Under the Reconstruction Contract, the Company is entitled to require that QGM provides a performance bond of USD 757,500. Thule Drilling and QGM have agreed that until a satisfactory performance bond is provided, Thule Drilling will withhold USD 757,500 of the payments due to QGM under the Reconstruction Contract as security for claims Thule Drilling may have against QGM.


37

The Reconstruction Contract is governed by English law with use of independent expert or arbitration in London as agreed alternative dispute resolution mechanisms.

6.2. Other contractual relationships

The Company has acquired the rigs Gulf Drill 7

(now renamed Thule Challenge) and Seascout

(now

renamed Thule Phoenix) through agreements dated August 25, 2005 and August 30, 2005, respectively. Purchase price was MUSD 27 in total for the two units. The rigs have been classed with American Bureau of Shipping, however class certificates have expired. Delivery of the rigs shall take place as is, where is, and are subject to government approvals and to payment of the purchase price within the cancelling dates which are September 30, 2005 and November 1, 2005, respectively. See further section 1.7 and 1.8.

Thule Drilling has acquired 13 separate option agreements with the QGM Yard in Dubai for the construction of new rigs. All the options agreements are conditioned upon Thule Drilling and QGM agreeing on construction contracts and detailed specifications for such rigs. None of the option agreements can be expected to be enforceable until construction contracts and specifications have been agreed with the yard.

6.3. Litigation

There are no material claims, actions, suits, litigation or proceedings pending, expected or threatened against or affecting the Company or any of its assets before any court, arbitrator or any administrative body or governmental authority, nor is there any qualified basis for any such claim, action, suit, litigation or proceeding that has not been disclosed herein.

THULE DRILLING


38

I ARTICLES OF ASSOCIATION

Articles of Association for Thule Drilling ASA

(last amended on 13 September 2005)

Article 1 The name of the company is Thule Drilling ASA. The company is a public limited company.

Article 2 The company s registered office is in Lysaker in Bærum municipality in Norway. General meetings may be held in Bærum municipality or the city of Oslo in accordance with the Board of Directors decision.

Article 3 The company shall engage in investment business and other related activities.

Article 4 The share capital of the company is NOK 4,240,000 divided into 21,200,000 shares each with a nominal

value of NOK 0.20.

Article 5 The company s Board of Directors shall be composed of between three and seven members. Two members of the Board of Directors jointly sign for the company. The Board of Directors may grant

power of attorney. The company shall have a managing director.

Article 6 The company s shares are freely transferable.

Article 7 An ordinary general meeting shall be held each year by the end of June after the Board of Directors has issued a notice of the meeting at least 14 days in advance. An extraordinary general meeting is called in the same way when the terms and conditions of the Public Limited Companies Act have been met. The

ordinary general meeting shall decide on the following matters:

1. Adoption of profit and loss account and balance sheet. 2. Application of profit for the year or coverage of loss in accordance with the adopted

balance sheet and distribution of dividend. 3. Election of the Board of Directors. 4. Other matters that fall within the jurisdiction of the general meeting according to law

and the Articles of Association.

The extraordinary general meeting shall only decide on matters that are specified in the notice of the meeting.

Article 8

The shares of the company shall be registered in the Norwegian Central Securities Depository.

Article 9 Otherwise the provisions of the Public Limited Companies Act shall apply.


39

II QUARTERLY REPORT FOR Q2 2005

THULE DRILLING ASA

2ND QUARTER 2005

Thule Drilling are on schedule with the reconstruction of the jack-up drilling rig Thule Power , and has in addition decided to acquire two semi-submersibles.

Summary Thule Drilling was established in February 2005 as a private limited company, after locating the salvaged jack-up Arabdrill 19 in Sharjah, UAE.

In April 2005, Thule Drilling completed a MNOK 250 equity offering, and a MNOK 250 bond issue. The equity and bond issue secured the necessary funding for rebuilding the rig. At the same time the company was converted to a public limited company. Thule Drilling then completed the acquisition of the rig hull and renamed it Thule Power .

The rig will be reconstructed to a state of the art jack up rig, and enhanced to be able to operate on water depths of 250 ft. and drilling depths of 30 000 ft. The cost of reconstruction is estimated to be MUSD 61,3, and will be delivered in July 2006. The rig is being reconstructed at the facilities of QGM Group LLC at Hamriyah Free Zone Port in Sharjah, United Arab Emirates.

On 24 august Thule Drilling entered into a firm agreement to acquire the two former semi submersible drilling rigs Gulfdrill 7 , (Former Sedco 708) owned by Momentum Engineering, Dubai and the Seascout owned by Atwood Oceanic The two rigs can be converted to accommodation/service platforms, tender rigs or to floating production. The price for the two units is MUSD 27 in total. The financing of the acquisition will be done by a private placement of 7 500 000 shares at a price NOK 26.50. The equity offering was placed mainly to institutional and former investors on 23 August 2005. The share issue will be subject to approval by an Extraordinary Shareholders meeting due to be held on 15 September 2005.

Financial information The operating result for the 2nd quarter was a loss of MNOK 5.3 and MNOK 6.2 for the 1st

half year. The company has per 30.6. fixed assets of MNOK 62.5, which is all related to Thule Power. The total assets per 30.6.comes to MNOK 501.6.

The company has per 30.6 a total equity of MNOK 231.9 whereas MNOK 18.2 has been deducted as cost of share issue. Total liabilities per 30.6 were MNOK 269.7.

Market The rig-market has experienced a steady improvement in demand since 2001, and current status is characterized by firm markets in all key regions and segments.

The company is well in the process of marketing Thule Power, and expects the marketing of the two semi submersibles to begin shortly after the takeover. The company is confident that it is in a good position to secure employment for the three rigs.

Lysaker, 31.08.2005 The Board of Thule Drilling ASA

THULE DRILLING


40

Profits & Loss statementsAmount in 1 000 NOK 2005 2005 2005

Q2 Q1 H1Operating Revenues - - - Cost of Goods sold (12) - (12) Other operating Expenses (5 273) (905) (6 177)

EBITDA (5 285)

(905)

(6 189)

Depreciation (3) - (3)

Operating result (EBIT) (5 287)

(905)

(6 192)

Net finance + / (-) 416 (0) 416 Net currency + / (-) 692 - 692

Earnings before tax (4 178)

(905)

(5 083)

Estimated taxation on ordinary result - - - Net Profit (Loss) (4 178)

(905)

(5 083)

Average number of shares 20 218 492 500 000 12 719 911 Earnings per share (0,21) (1,81) (0,40) Diluted earnings per share (0,21) (1,81) (0,41) Dividend per share - - -

Balance SheetsAmount in 1 000 NOK 2005 2005

30.06 31.03

Intangible fixed assets - - Tangible fixed assets 62 506 150 Financial assets - - Total fixed assets 62 506

150

Inventories - - Current receivables 1 600 24 Cash and bank deposits 437 509 100 Total current assets 439 109

124

TOTAL ASSETS 501 615

273

Share capital 2 740 100 Other equity 229 171 (905) Total equity 231 911

(805)

Long term liabilities 243 173 - Current liabilities 26 530 1 078 Total liabilities 269 704

1 078

TOTAL EQUITY AND LIABILITIES 501 615

273

Cash Flow StatementAmount in 1 000 NOK 2005 2005

Q2 Q1Cash flow from operating activities (2 555) (0) Cash flow from investing activities (46 226) - Cash flow from financing activities 486 190 100

Net change in cash etc 437 409

100

Cash etc at the start of the period 100 - Cash etc at the end of the period 437 509

100

Changes in EquityAmount in 1 000 NOK 2005 2004

Q2 Q1Equity at the start of the period (805)

-

Net Profit (Loss) (4 178) (905) Share capital 2 640 100 Premium capital 252 498 - Cost of share issue (net tax) (18 244) Dividends - -

Equity at the end of the period 231 911

(805)

For more information, please contact:


41

Notes to the accounts as of June 30, 2005

Accounting principles The accounts are issued in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP) in NOK. As the Company has no subsidiaries, the accounts are company only accounts.

When Thule Drilling ASA is a listed company on Oslo Stock Exchange the Company will issue accounts in accordance with International Financial Reporting Standards (IFRS).

Exchange Rates Year to date average exchange rate NOK/USD end June 2005 6.5461.

Drilling Rig ( Thule Power ) The drilling rig, under construction, is classified as fixed assets and stated to cost in accordance with progress payments. The company has capitalized interests and other direct related expenses. The depreciation, based on cost less estimated residual value, will commence at delivery (estimated delivery June, 2006). Book value end June 30, 2005 is MNOK 62,5 including capitalized interests amounting to MNOK 3,5.

The agreed cost price is in USD.

Hedging of currency risk The company has entered into currency hedge instruments, forwards and options. In fact about 50% of the currency exposure is covered through the forward contract (at rate of exchange NOK / USD 6.499) and the remaining is partly covered by options In the NGAAP accounts such derivatives are off balance sheet. In the IFRS accounts the Company believes the contracts will classify as a fair value hedge.

Bond loan (face value 250 MNOK) The bond loan has certain warrants related to the loan (3.500.000 warrants, each giving a right to subscribe for one share in the Company at a price of NOK 23,75). The Company has used external experts to compute the estimated value of the warrants at the date of issuance (MNOK 0,578) and the amount is recorded as a part of shareholders equity. The residual is classified as debt. The loan fees and expenses when issuing the loan, borrowing costs, are recorded as a reduction of the debt (MNOK 6,250) and the interest expenses (10%) are charged to profit and loss based on amortized cost.

Shareholders equity As of June 30, 2005 13.700.000 shares are outstanding. In addition there are warrants outstanding; 3.500.000 warrants as described above and 1.650.000 (each giving right to subscribe for one share in the Company at a price of NOK 21,85). The latter warrants are to management, consultants, BOD-members etc. The profit and loss accounts are in the second quarter 2005 charged with MNOK 3,760 related to these warrants.

Subsequent events In August 2005 the Company has called for a shareholders meeting to approve an increase of the share capital by issuing approx. 7,5 million shares at NOK 26,50 each, total amounting to a placing of MNOK 200 gross. The fund is to be allocated to the acquisition of two rigs, Gulfdrill 7 and Seascout .

For more information, please contact: Kai Solberg-Hansen, Tel: +47 67 200 330, e-mail: [email protected]

THULE DRILLING


42

III STATEMENT FROM THE AUDITOR REGARDING THE REVIEW REPORT OF THE FINANCIAL STATEMENTS AT 30. JUNE 2005

information memorandum - thule drillingotc.nfmf.no/public/news/3580.pdf · information memorandum...

Documents