Download - DOF ASA Annual Report 2014 - dofman.no ASA/IR/2015/DOF ASA... · DOF ASA Annual Report 2014

DOF ASA Annual Report

2014

Our vision

To be a world class integrated offshore company, delivering marine services and subsea solutions responsibly, balancing risk and opportunities in a sustainable way, together, every day.

the dof group vision

D O F A S A A n n ua l R e p o rt 2 014

4

The DOF Group - A global partner 7-9

Life of field services 10-11

DOF highlights 12-13

Key figures DOF Group 14-15

Words from CEO 16-17

This is DOF ASA 18-19

Sustainability 20-25

Human resources 26-29

Health, safety, environment & quality 30-33

Atlantic region 34-39

South America region 40-43

Asia Pacific region 44-47

North America region 48-51

The fleet 52-63

Market outlook 64-69

The Board of Directors 70-71

Shareholders information 72-73

Corporate Governance 74-81

Report of the Board of Directors 82-91

Financial Statements DOF Group 92-137

Financial Statements DOF ASA 138-155

Auditors report 156-157

Contact 158

Glossary 159

Index


Our valuesIntegrityThe very corner stone of our business. We behave ethically – always.

We are honest, fair and equitable in all our dealings. We are dedicated to good corporate governance.

We strive to do the right thing not because someone is checking, or looking, but purely because it is the right thing to do.

RespectUnderpins everything we do and every interaction we have. Respect for people: our colleagues, our customers, and our business partners.

As global citizens we are socially responsible, we respect the individual, the local customs and cultures of our various markets.

Acting with care and consideration is central to our wellbeing and safety and ensures we minimise our environmental impact.

TeamworkEverything we achieve is as a result of teamwork.

Each of us is responsible and open in our professional relationships, cooperative and collaborative, treating one another with dignity and respect.

We do not blame, we find and share solutions and we learn from mistakes. From this platform we build diverse and global teams and strive for free exchange of ideas, experience and knowledge, worldwide.

ExcellenceIn everything we do. We are resourceful and responsive to our customers’ needs; innovative in the solutions we apply to everyday problems.

We safeguard our individuality and the qualities that set us apart from our competitors, protecting our reputation and the professional trust we have built, we do not walk away from our commitments.

SAFEAbove all we are SAFE.

We are committed to protect the health and safety of our people and our environment.

the dof group values

6

⚫ Houston

NORTH AMERICA REGION

Subsea 4

The DOF Group – a global partnerDOF operates around the globe with major operations in our designated regions: Atlantic, South America, Asia Pacific and North America. Our expert staff includes: marine crew, subsea operators & technicians, onshore administrators and management

Subsea Projects Total 1,858

Marine Management Total 3,517

DOF Group Total 5,375

USA, CANADA

7

⚫ St. John’s

Bergen ⚫

Aberdeen ⚫

Luanda ⚫

⚫ Macaé

Cairo ⚫

⚫ Rio de Janeiro

⚫ Buenos Aires

Moscow ⚫

SOUTH AMERICA REGION

NORTH AMERICA REGION

Subsea 4

PSV 4

AHTS 11

Subsea 11

ATLANTIC REGION

PSV 21

AHTS 6

Subsea 13

NORWAY, UK, ANGOLA, RUSSIA, EGYPT

USA, CANADA

BRAZIL, ARGENTINA

Austevoll⚫


Perth ⚫

Darwin ⚫

Singapore ⚫

Jakarta ⚫

Bandar Seri Begawan ⚫

Manila ⚫

⚫

Melbourne

ASIA PACIFIC REGION

AHTS 4

Subsea 4

AUSTRALIA, SINGAPORE, PHILIPPINES

DOF from 1981 – Austevoll, Norway Founded in Austevoll in 1981, DOF was established to provide a modern fleet of offshore support vessels on long-term contracts in the North Sea. More than three decades since our founding, Austevoll remains our head office with regional offices and vessels in major oil and gas regions around the globe.

Photo: DOF ASA head office, Austevoll, Norway

9


Life of field servicesThe DOF Group assets, the vessels and subsea equipment, operate across the life of field services.

PSV 25

AHTS 21

Subsea 32

Total fleet 78

ROV/AUV 66

Engineering/ Construction & Mobilisation

Supply Services

Marine Operations


10

Decommissioning

Pipeline Survey

Wellhead Intervention

Pipelay

Geotechnical & Geophysical Surveys

ROV Services Diver AssistedIntervention


11

Q1 2014 FLEET

Sale of Skandi Bergen in January

DOF Subsea hired external Jones Act-vessels Chloe Candies and Ross Candies for a period of 1+1 yr each for its operations in the Gulf of Mexico

Q2 2014 FLEET

Skandi Urca delivered to Norskan and on contract in April

The newbuilding Normand Reach on-hire to DOF Subsea from June

DOF Highlights

700 MN

OK

New bond issued

CONTRACT AWARDS

Several subsea contracts in the Asia Pacific and Atlantic region

Skandi Waveney, 1+2x1 yr with Peterson den Helder

Skandi Marstein, 9+9 months contract with CNR International

Geosund, call-off 2014 and 2015 Statoil survey frame agreement

Skandi Copacabana, 4 yr with Petrobras from April

Skandi Paraty, 4 yr with Petrobras from delivery of the vessels in 2015

Project contracts Ross Candies and Chloe Candies in Gulf of Mexico

CONTRACT AWARDS

Skandi Seven 2 yr extension with Subsea 7, firm until March 2017

DOF Subsea awarded several project contracts in Atlantic, Asia Pacific, North America

Skandi Captain, 18 months (+6 months option) contract with Nexen Petroleum

Skandi Chieftain, 1 yr with Petrobras, firm until June 2015

Skandi Neptune, 1 yr extension with Subsea 7 firm until Q1 2016

FINANCE

In January DOF ASA issued a new bond MNOK 700

FINANCE

Long term financing signed for three newbuildings in Brazil

Repayment of DOFSUB04 in April (total MNOK 454)

highlights

Skandi Urca

Geosund


12

Q4 2014 FLEET

Skandi Skolten delivered to new owner (approx. MNOK 650 after redemption of debt)

Q3 2014 FLEET

Skandi Skolten agreed sold – delivery in Q4 2014

VESSELSAgreed sold in Brazil

CONTRACT AWARDS

Skandi Hav, 4 yr with Petrobras, firm until November 2018


Skandi Barra and Skandi Buchan, 3 yr (+ up to 2 yr options) with Total UK, firm until Feb 2018

Skandi Sotra, 1 yr + 4x6 months options with Chevron North Sea Ltd, firm until Dec 2015

CONTRACT AWARDS

Skandi Yare, 4 yr with Petrobras


Skandi Santos 5 yr extension with AKOFS Offshore/Petrobras firm until Q1 2020

Skandi Marstein, 10 months + up to 9 months options with CNR International (UK), firm until Oct 2015

Skandi Texel, 20 months + 1 yr option with BP Egypt, firm until Aug 2016

Skandi Møgster and Skandi Saigon, 1 yr option exercised by Total Argentina, firm until end Feb 2016

Skandi Giant and Skandi Atlantic, 150 days + options up to 5 wells for Origin Australia

Q1 2015 FLEET

Signed an agreement for sale of five vessels in Brazil

Skandi Aker sold to new owners in February

CONTRACT AWARDS

DOF Subsea awarded LOA for a 7+3 yr IRM contract for vessel Skandi Hawk

DOF Subsea awarded several project contracts in North America, Asia and Atlantic region

Skandi Caledonia, 6 months extension with Maersk UK, firm until Apr 2016

Skandi Gamma, 1 yr extension with Statoil, from Feb 2015

Skandi Vega incl. ROV, first option exercised with Statoil, firm until mid- May 2016

Skandi Salvador, extension of contract with Chevron for the remainder of 2015

Skandi Stord 120 days +60 days option with Sigurd Ross

DOF Subsea awarded 3 yr Master Service Agreement with Chevron for Skandi Protector Australia

FIV

E

Skandi Protector

Skandi Santos


13

Key figures DOF Group

Amounts in NOK million Management reporting Financial reporting

From the Comprehensive Income 2014 2013 2014 2013

Operating income 10 681 9 754 10 196 9 415Operating expenses -6 891 -6 642 -6 702 -6 550Operating profit/(loss) before depreciation and write downs - EBITDA 3 790 3 112 3 495 2 865Depreciation and write-downs -1 127 -1 193 -1 045 -1 115Operating profit/(loss) - EBIT 2 663 1 919 2 450 1 751Net finance costs -1 554 -1 332 -1 475 -1 244Unrealised gain/(loss) on currency -441 -606 -336 -570Net changes in gain/loss on derivatives -218 -5 -217 -6Profit/(loss) before taxes 450 -25 422 -69Tax expenses (income) 50 -27 78 17Profit/(loss) for the year 500 -52 500 -52Non-controlling interests 419 139 419 139

From the Balance Sheet

Vessels and other non-current assets 28 747 27 928 26 681 26 090 Current assets 5 800 4 817 5 650 4 645 Total assets 34 547 32 745 32 331 30 734 Interest free debt 2 678 2 006 2 226 1 894 Net financing of the entity 31 869 30 739 30 105 28 840 Interest bearing debt incl derivatives 25 003 24 393 23 239 22 494 Equity 6 866 6 346 6 866 6 346

Key figures

Net cash flow 1) 2 236 1 779 2 020 1 621 Current ratio 2) 0.73 1.00 0.73 1.01Equity ratio 3) 20 % 19 % 21 % 21 %Value adjusted equity ratio 4) 34 % 36 % 34 % 36 %Capex 5) 2 357 1 824 1 945 1 544

Operating margin 6) 35 % 32 % 34 % 30 %Return on equity 7) 7 % -1 % 7 % -1 %

Earnings per share 8) 0.73 -1.72 0.73 -1.72 Average number of shares 111 051 348 111 051 348 111 051 348 111 051 348 Outstanding number of shares 111 051 348 111 051 348 111 051 348 111 051 348

1) Profit/loss before taxes + depreciation and write downs +/- unrealised gain/loss on currency +/- net changes in gain/ loss on derivatives2) Current assets/Current liabilities3) Equity/Total assets4) Equity adjusted for excess value from broker valuation/Total assets adjusted for excess value from broker valution5) Capex, see note 146) Operating result before depreciation and write downs/Operating income7) Profit for the year/Booked equity8) Majority share of profit for the year/Average number of shares. See note 12


14

0

12.000

10.000

8.000

6.000

4.000

2.000

2009 2010 20122011 20142013

0%

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

NOK million

Operating Margin

Operating income

EBITDA

Operating margin

Revenue per segment

PSV 11%

AHTS 14%

CSV 75%

Operating Income per segment

PSV 12%

AHTS 18%

CSV 70%

0

25.000

20.000

15.000

10.000

5.000

2009 2010 20122011 20142013

0

NOK million

12

10

8

6

4

2

Interest bearing debt/EBITDA

Interest bearing debt

EBITDA

Interest bearing debt/EBITDA


15

Words from CEO

The DOF Group strive to improve our performance across all our worksites because we want our teams to go home safely. Tragically, on February 21st 2015, a member of our team suffered fatal injuries during operations on-board a DOF Group vessel. As an organisation guided by our values we have extended our support to his family and have established a trust fund. We are working closely with leading industry body, IMCA, and we will strive to ensure that a situation like this is never repeated on any vessel or any worksite, worldwide.

Safety is our Group’s core value and nothing is more important. With this incident we have encouraged our employees to think of their family and colleagues’ families when considering our company values, especially “Above all we are safe: We are committed to protect the health and safety of our people and our environment”. At DOF, we make no compromises when it comes to safety.

Group turnover (management reporting) in 2014 ended at NOK 10.7 billion compared to NOK 9.8 billion in 2013, with 2014 EBITDA of NOK 3.8 billon compared to NOK 3.1 billion in 2013, including gain on sale of assets. I am satisfied to see that we are able to continue to grow our earnings and operational results also in 2014.

Our sailing fleet counts 69 vessels by end 2014. This is the same number of vessels as by end 2013. If we include chartered in vessels and vessels owned with less than 50% the fleet operated by DOF are 75 vessels. This is an impressive number and positions DOF as one of the largest global players within the OSV segments.

We have seven vessels under construction, whereof five subsea vessels and two AHTS. Three of these are planned for delivery in 2015. All of our vessels under construction have long-term contracts commencing on delivery.

During 2014, and especially during second half and so far in 2015, we were awarded a record high number of contracts. The total backlog is at record high NOK 65.6 billion if we include the options and around NOK 30.9 billion excluding options. DOF has always been, and will continue to be, an industrial player with focus on long-term customer relations and long-term contracts. Today we have 80% firm contract coverage for 2015, and we expect that to grow higher in the next few months.

The recent drop in oil price has led to challenging markets with pressure on rates and utilisation. To balance the softer markets we have prioritised to strengthen our balance sheet and focus on securing a highest possible backlog. We delivered Skandi Skolten to new owners in November 2014, Skandi Aker to new owners in February 2015 and have signed agreements to sell five vessels working in Brazil during first half 2015. Together these sales will reduce our net debt with approxi-mately NOK 2.8 billion leaving approximately NOK 1.35 billion in cash after redemption of debt.

Due to the recent large drop in oil price our customers are focusing on reducing costs and activity levels. Overall we expect challenging markets in 2015 with pressure on rates and utilisation. As a consequence we are presently reviewing our costs and manning levels due to lower activity in some regions. This is a challenging task for all of us, especially when valued employees are made redundant due to lower activity level within part of our Group.

We are more than 5,000 people working for DOF, and I am thankful for their efforts and hard work in 2014. I expect 2015 will be a challenging year for all of us; however, I am certain that we have the competence, attitude and enthusiasm in the Group to meet these challenges.

The key to our success in 2015 remains unchanged – our employees.

Mons S. AaseCEO


16


17

This is DOF ASA

Ever since our beginning in Austevoll in 1981, when DOF was founded with three employees and one vessel to provide platform supply vessel services to the domestic offshore market, DOF has continued a proud tradition of delivering safe and quality services to our customers. As of January 1st 2015, DOF has a global workforce of over 5,300 employees and a fleet comprising of 78 vessels, including two vessels owned less than 50% and seven newbuilds.

The Group operates in three segments of the offshore services market, strategically defined by activities and vessel types: PSV (Platform Supply Vessels), AHTS (Anchor Handling Tug Supply vessels) and Subsea (Subsea vessels and Subsea engineering services).

DOF is positioned as a solid player in the industry with our investment in a state-of-the-art fleet, combined with a strong safety culture and a flexible business model. Leveraging the long-term charter business with the subsea project business, DOF has the flexibility to maximise their market position in each region of operation. During the last decade the company has invested in key regions such as the Atlantic, South America,

North America and Asia Pacific whilst continuing to grow in the North Sea and West Africa.

No matter where DOF operates in the world, safety is held as the highest priority. DOF strives to be the leader in the fields of health, safety, environment and quality (HSEQ) and systematically promotes these areas in the execution of all activities and operations.

OffshoreServices

MarineManagement

VesselChartering

Subsea ProjectsConstruction, IMR, SURF, Engineering, ROV services, Survey, etc.

(DOF Subsea subsidiaries)

Support Services (Non-Subsea)Supply, Tug, Anchor Handling

(DOF ASA)

Marine Management(DOF Management AS / Norskan O�shore SA)

Owned-asset Vessel ChartererPSV, AHTS, Subsea

(Parent Company DOF ASA / DOF Subsea AS / Partners)

Chartered-assetSubsea

Marine Management(3rd party)

(3rd party)

Long

-term

charter business

(rev

enue

appro

x. NOK 5 Billion)

(revenue approx. NOK 5

Billio

n)

Subsea project bus

ines

s

With the flexibility of moving assets between

business segments

OffshoreServices

MarineManagement

VesselChartering

Subsea ProjectsConstruction, IMR, SURF, Engineering, ROV services, Survey, etc.

(DOF Subsea subsidiaries)

Support Services (Non-Subsea)Supply, Tug, Anchor Handling

(DOF ASA)

Marine Management(DOF Management AS / Norskan O�shore SA)

Owned-asset Vessel ChartererPSV, AHTS, Subsea

(Parent Company DOF ASA / DOF Subsea AS / Partners)

Chartered-assetSubsea

Marine Management(3rd party)

(3rd party)

Long

-term

charter business

(rev

enue

appro

x. NOK 5 Billion)

(revenue approx. NOK 5

Billio

n)

Subsea project bus

ines

s

With the flexibility of moving assets between

business segments


18


19

Sustainability

Balancing environmental, social and economic performance has been integrated into our Business Management System (BMS) and the Group policies. It is a prerequisite for all Group employees to do business the right way, and it is vital for the Group to be recognised by our stakeholders as a dependable, reliable and competent partner. Early 2015 DOF established the role of Chief Sustainability Officer (CSO) to lead the organisation’s global improvement and compliance programs.


21

Global Reporting Initiative

In 2014 we took an important step towards more sustainable operations. To manage and develop the Group’s future performance in core areas of sustainability we started reporting in accordance with the Global Reporting Initiative (GRI) G4 guidelines. Sustainability encompasses three areas: social, economic and environmental. The GRI provides the world’s leading reporting standard within sustainability, and the framework is recommended by the UN’s Global Compact program.

Reporting according to GRI is a significant undertaking for the Group involving a highly structured preplanning and materiality phase. The process has been undertaken in consultation with DNV GL to ensure validity and accuracy for the assessment process and the subsequent data collected. The outcome is the ability to identify and measure meaningful and

globally comparable sustainability indicators specific to the Group’s business and which matter most to our stakeholders.

Evaluating our material aspects and measuring them to the GRI G4 standard creates a broader reporting mechanism. Through this process the Group ensures vital drivers of sustainable operations are factored into decision making and provides stakeholders with a view of organisational performance in more than financial terms alone.

Identifying material aspects and conducting a materiality assessment

To deliver more sustainable operations we need to be able to recognise and respond to the most material aspects of our activities. Within its Principles and Standard Disclosures the GRI lays out a universal approach for organisations, regardless of type, size, sector or location, to assess material aspects.

sustainability

ME

DIU

MH

IGH

STR

ATE

GIC

MEDIUM HIGH STRATEGIC

Important Material

Impo

rtan

t M

ater

ial

Materiality Matrix

GRI general disclosures with marteriality matrix and specific disclosures

General disclosures

Strategy and analysis

Organisational profile

Identified material aspectsand boundaries

Stakeholder engagement

Report profile

Governance

Ethics and integrity

*Key stakeholders: customers, employees, investors, suppliers, local communities

Frame agreementCorporate governance

CostCode of Business Conduct

WageFair price

Business integrity & ethics

HSEClimate change &

emissions to airCompliance to law

& industry standardsProduct realization

Risk & return

HSE condition(society)

Job securityPersonal development

Diversity

HSE condition (suppliers)

TransparencyCompliance with local

requirements

TaxLocal content

Contribution to local communities

Triple bottom line

Significance to the DOF Group

Sig

nific

ance

to k

ey s

take

hold

ers*


22

Our first step was to evaluate the Group’s significant economic, environmental and social impacts and those which matter most to our key stakeholders. An accurate materiality matrix was produced by mapping material aspects by importance to the organisation and stakeholders.

Our key stakeholders

Key stakeholder groups were identified and engaged through the GRI materiality process. The Group’s key stakeholders are customers, employees, investors, suppliers and local communities. After a series of stakeholder engagement workshops and consultation with DNV GL the validity of the materiality matrix was confirmed and the critical material aspects identified as:

• Risk and return/tax

• Climate change

• Employment practices

• Business integrity & ethics

• Compliance to law

• Impact to local communities

To respond to these aspects reliable data is gathered, measured and monitored. The results allow us to measure performance, set targets and better focus management to improve our performance.

Climate change

The DOF ASA board has the responsibility for climate change within the DOF Group. Defining and measuring environmental sustainability risks associated with our business activities is an important activity for the Group.

The Group has reported environmental performance through the Carbon Disclosure Project (CDP) since 2010. Over this time reporting has directly influenced the development of our

sustainability

Business Management System and the programs established to manage our environmental performance. The CDP and the GRI G4 specific standard disclosures criteria for energy, emissions and compliance are closely aligned. In terms of GRI reporting for this material aspect our data has been public and predates the 2014 GRI start date.

Participating among 260 Nordic companies in the CDP, the Group achieved a score of 89 C in the reporting year 2013. This is a significant positive shift of 37% improvement on the previous score of 65 D reported in 2012. Our efforts toward achieving an improved score have increased our internal competence level and awareness on environmental issues.

The Environmental Impact Policy sets out clear aspirations for ensuring that our operations have a minimal impact on the environment. Our Environmental Management System (EMS) ensures that the Group effectively manages our operations and strives for continual improvement of our environmental performance. There have been no severe spills to the external environment recorded during the Group’s history.

The Group has a modern fleet and several of the vessels are fitted with technology reducing fuel consumption and emissions. The diesel electric hybrid propulsion system allows greater operational flexibility and reduces energy consumption, CO2 emissions and maintenance costs. This propulsion system is ideal for the Group’s combined anchor handlers and offshore construction vessels. Improvements, particularly on hull design, have been made through close industrial cooperation with main suppliers. This experience transfer is vital in continuing enhancement of technology into the future.

A vital part of our EMS is the Ship Energy Efficiency Management Plan (SEEMP). Developed in partnership with DNV GL and aligned to the guidelines set out by the IMO marine environmental protection committee; SEEMP was implemented in 2012 for the entire Group’s fleet to plan, implement and monitor measures required to maximise vessel efficiency. Based on the experience from SEEMP, the Group will increase focus on competence building offshore to ensure efficient use of the technology implemented on board our vessels.

Through continued focus on technologically advanced vessels and an improved environmental culture on all levels of our organisation, we will achieve our objective of a reduction in CO2 emissions, through reduced fuel consumption.

The Global Reporting Initiative™

The Global Reporting Initiative (GRI) was established in 1997 in partnership with the United Nations’ Environment Program. Its G4 Guidelines offer a globally relevant framework for organisations to report economic, environmental, and social performance. The GRI’s standardised approach encourages the degree of transparency and consistency that is required to make information useful and credible to markets and society.


23

Ethics and integrity

The Group’s Code of Business Conduct has been in place since 2009. We review and communicate the principal policies and guidelines regularly. Central guidelines in the Code of Conduct include business integrity and ethics, equal rights and opportunities for employees.

Training is a key component to communicate expectations and guide behaviour within the Group. Four e-learning modules are mandatory and offered to all employees in the Group including ‘Business Ethics and the Code of Conduct’. These modules cover many issues regarding anti-bribery and anti-corruption policies. Additionally, all our executive and middle management receive regular training regarding anti-bribery and anti-corruption measures and disseminate the Group’s policies in the regions.

Since the launch in 2012 the Business Ethics and Code of Conduct e-learning module has been mandatory to complete bi-annually by all employees. Business integrity and ethics also forms part of the yearly individual performance appraisal process and an important opportunity for monitoring awareness and consciousness of the Group’s values.

During a global meeting at the Group’s headquarters in 2014, senior managers were engaged in ‘Dilemma training’ held by DNV GL. Participants were faced with challenging cases

regarding professional ethics and how to uphold integrity and ethical conduct on a daily basis. It was a good opportunity for the managers to practice ethical decision making based on our business integrity values and the Code of Conduct. Experience gained through this training has been transferred to the regions for further training needs on a local level.

During 2014, the reporting mechanism for compliance incidents has been actively used on both local and Group level. No corruption cases have been noted.

Local communities

Our commitment extends to the development and support of the communities where we work. We invest in training and career development in all regions and believe it is our responsibility to ensure future growth ethically and offer a fair return for stakeholders.

The Group sponsors many social projects in the locations where we operate, most of them related to education for children and young adults. A principle of our business model is to train and maintain a dedicated core crew on all our vessels. This creates value by retaining operational and vessel knowledge between charter or project crew changes and leads to a higher level of safety, efficiency and quality services, benefiting the Group, our clients and our workforce.

sustainability

Sustainability Initiatives

DOF was certified in accordance to the ISM Code and was awarded a Document of Compliance (DOC)

1995

Among the first offshore companies to be certified according to ISO 9001 & ISO 14001

2002

Established common policies and Code of Conduct

2009

Developed global Business Management System Global ISO 9001, ISO 14001, OHSAS 18001 certification by DNV-GL Carbon Disclosure Project reporting Established offshore competency scheme for diving, ROV & survey

2010


24

The Global Cadetship program in our ship management company has been operating for many years. It builds a skilled and sustainable workforce giving employees structured career paths. Around 90 maritime cadets, primarily from Norway, Philippines and the UK, participate in our training and career program annually.

The benefits are multi-layered as the program creates value for individuals, their families as well as local governments and society by creating jobs, assisting in enterprise development and technology transfer to local industries.

Approximately 25% of the ship management company’s maritime personnel are Philippine nationals - employed by the joint venture company “DOF OSM Marine Services”. Relevant industry training beyond mandatory requirements is provided, either by “Norwegian Training Centre - Manila” (NTC) established by the Norwegian Shipowner’s Association - or by the Group’s main manning agency provider in the Philippines. The Group has also established an ROV simulator training program to build local capability.

The NTC cadet program has been part of the Group’s strategy to continuously provide highly qualified officers to our fleet. The courses extend across the complete spectrum of vessel operations. The aim has always been to train seafarers to the

highest standard of safety and quality and promote excellence in maritime operations worldwide.

The Group joined other Norwegian shipowners who founded AEPM in Brazil to provide opportunities for young adults to start maritime careers via ordinary seamen courses. Community support is focused on promoting education, culture and sports through a number of specialist organisation’s structured programs which give underprivileged children and young Brazilians a chance for a better future. We sponsor Renascer foster institute, an organisation which cares for children of one to five years old, presenting them new life perspectives through sports, art and music, providing them a home, food and shelter.

Future GRI reports

Changes in conditions or situations may influence the Group’s approach. Stakeholders and the topics elected as important in 2014 may change in subsequent reports.

sustainability

Global HSEQ training system Establishing KPIs for reliable vessel and ROV operationsFirst global internal audit programmeEstablished Graduate Development Programme

2011

Established DOF Academy SEEMP implemented for entire fleetLaunched HSEQ training programme with accompa-nied workbook

2012

Began reporting in ac-cordance with the Global Reporting Initiative (GRI) G4 guidelineContinued with the Carbon Disclosure ProjectFounding member of AEPM, cultivating maritime careers in Brazil

2014

Launched Business ethics and Code of Conduct e-learn moduleEnhancement of anti- bribery and anti-corruption initiativesGlobal re-certification from DNV-GLISO 50001 evaluation by DNV-GLHuman Resource policyMarine labour convention (MLC) implemented on all NIS/NOR, BAH, Cyprus and IOM flagged vessels

2013


25

Human resources

Focus points from 2014:

• Successful manning and high employee utilisation

• High level of retention

• Standardisation of systems and processes

• In 2014 we produced another great year, utilising our offshore workforce and delivering high client-satisfaction. However, compared with 2013, the market was more challenging. To maintain our market position and continue the growth, we need a flexible organisation, ready to embrace change, work smarter, more efficiently and aligned with our business objectives.


27

Our people

Our employees are our most important resource and finding, attracting and retaining the right people are some of the main challenges we are faced with today.

Workforce development is a priority for DOF. We have grown substantially and have built workforce capability and expertise from 4,913 in 2013 to 5,375 employees in 2014.

DOF has systematically invested in employee initiatives to enable our strategic plans and concentrate on developing, attracting, recruiting and retaining talent. Recruiting is all about attracting the right people with the right skills at the right time. We have a fair recruitment process which focuses on capability, diversity and equal opportunity. Retaining committed, motivated, qualified employees helps our organisation achieve our goals.

Career development framework

The DOF Group “Human Resource policy” states that it is the expertise and competencies of our people that will determine DOF’s success. DOF shall be a great place to work and shall achieve this by encouraging and supporting all our employees to reach their full potential by focusing on our values; Respect, Integrity, Teamwork, Excellence and Safety.

The aspirational goal of DOF Academy is that it should represent an integral part of our employee development process, bringing together external and in house training initiatives, promoting informal learning events and facilitat-ing learning opportunities regionally and globally. When we introduced DOF Academy in 2013 we acknowledged that it was not a small undertaking, that success and maturity was something that would be progressive and developed in stages. 2014 saw us realising and implementing a significant evolution in the DOF Academy with the establishment of functionality via the DOF Portal. This provides a single point of access for our employees to review current and planned program offerings as well as access to the E-Learning center and our vast library of HSEQ learning modules and information.

The ongoing development and progress of the DOF Academy is truly a global effort. It is driven by a united commitment to succeed and deliver accessible, relevant and practical learning and development solutions that are aligned to our business objectives.

Diversity and inclusion

Diversity and inclusion has always been of high importance to DOF. Our Equal Employment Opportunities policy ensures a fair recruitment process. Our candidates are treated fairly, professionally and with respect. We employ the most competent person for a position based on their skills, knowledge and experience. Our focus in 2014 has been on gender balance which is quite challenging in our industry and especially on board our vessels.

Standardisation and alignment

The implementation of standardised Human Resource Systems for both marine and subsea will give us greater flexibility; there will be fewer physical restrictions to accessing information across the regions. Global, efficient HR processes will be required for the DOF Group to capitalise on growth opportunities and compete in a global marketplace. Practically, the HR system projects will support financial and risk management in our business and make HR processes familiar and interchangeable wherever we sit in the world.

Aligned to emerging trends

Responding to current trends and mitigating the Group’s exposure to risk is important to our sustainability. Two key areas where Human Resources have identified potential issues and developed solutions are Social Media and Workplace Harassment. The Group has introduced a Social Media Engagement Guideline and Dignity and Respect in the Workplace materials – both of which sit under our Code of Conduct.

human resources

Number of employees

2009

2010

2011

2012

2013

2014

1,000 2,000 3,000 4,000 5,000 6,000


28

Offshore communication

Teamwork plays a crucial role in our success and the subsea and marine management teams operate across business units and geographical borders. We work together to win and execute projects. Our expert’s within subsea transition projects from the onshore preparation and planning to the offshore opera-tional phases. Our dedicated teams partner with our clients to deliver safe, successful results.

Keeping everyone updated and informed in the Group is often technically challenging. We have made employee engagement a priority and will continue to do so in 2015. We are working to ensure we include and communicate well with all our employees regardless of whether they are working onshore or offshore.

Look ahead:

• Launching standardised HR systems for both subsea and marine personnel allow us to continue to build and brand DOF internally, locally and globally and is vital to our future plans building a flexible, responsive organisa-tion with the ability to adapt to market changes. Our focus will be to develop the programs needed to retain our top talents and maximise bottom-line results.

• Diversity is still an important part of our employment strategy and as always, we will employ the best candi-date for the position based on skills, competence and experience. The Group will continue to work on increasing female representation in our technical divisions and offshore positions.

• In 2015 we will focus more on employee involvement to ensure we include and communicate well with all our employees regardless of if they are working onshore or offshore.

• In line with our values and to support the ‘good to great’ goal we will develop our leadership principles to give greater clarity to the leadership role in our Group. We see our leadership principles gradually evolving from the model we have today to a more robust model moving forward.


29

Health, safety, environment & quality

Performance 2014

Man-hours: 10,227,671LTIs: 7Fatalities: 0Safety haz. obs.: 31,525Audits: 299Mgmt. visits: 162Lessons learned: 380

HSEQ is a constant deliverable. We strive to improve safety and environmental performance across all worksites, worldwide. In 2014 we passed the 10 million man-hours in exposure hours. Given this level of activity, the reduction in lost time incident frequency - to less than 0.7 – is testament to worldwide commitment to our core value “above all else we are Safe”.


31

Safety Culture

Our performance trend demonstrates a strong Safety Culture. However, our ambition is to be an incident free organisation. We work in a structured way to achieve this aim. We reinforce our Safety Culture by having robust, independently audited and certified systems in place; through regular training and safe-behaviour programs which support safe-work practices and mind sets, and by carefully monitoring performance to recognise and address any trends. The openness among our workforce to report observation either positive or formative is impressive. Almost 32,000 reports were submitted during the year.

First Alert

The valuable insights and knowledge gained are feedback and used to prevent incidents across the organisation. To strengthen learning and prevention strategies we launched the global incident notification system in Q2. A global knowledge management tool, the incident-share forum on the integrated management system is world-class and allows lessons learned to be embedded in our future work-practices. The system also allows all managers active involvement at the point of “First Alert” when an incident occurs.

Specialised AHTS project

An “AHTS Improvement Project” was established with a scope to evaluate and present solutions within three elements concerning anchor handling; Operational, Technical and Competence in order to operate in a safe and controlled way to reduce hazards, avoid harm to personnel and reduce the number and severity of technical break downs to a minimum. The project have a global approach and as such include operations in Brazil and Asia Pacific in order to ensure that best practice from all regions are captured and shared.

Business system developments

We have effectively enabled the high-level global alignment of our technical solutions and further development as a global company. DOF Global Engineering was established as an operational model in Q2 and the new global engineering manual was released. The implementation of a world-class document handling system in Q3 strengthened information management and project and process control. The best- practice oversight and controls the system provides has positioned the Group’s global project delivery for future

growth. Updated manuals in Finance and Asset Maintenance disciplines were also released.

Carbon Disclosure Project

Defining and measuring environmental sustainability risks associated with business activities is important for the DOF Group. Participating among 260 Nordic companies in the Carbon Disclosure Project (CDP), DOF has achieved a score of 89 C for the reporting year of 2013. This is a significant positive shift of 37 % improvement on the previous score of 65 D reported in 2012.

GRI – Global Reporting Initiative

The DOF Group operates an international business across a diverse geographic, ethnic, cultural, political and financial landscape, and we have a role to play in sustainable development through our actions. Sustainability is a key concept for us.

The GRI provides the world’s leading reporting standard in the sustainability field. The framework is recommended by the Norwegian Authorities and international bodies, such as the UN’s Global Compact program. Sustainability encompasses three separate areas: social, economic and environmental.

Besides reporting to the Carbon Disclosure Project, in 2015 the DOF Group will report in accordance to the Global Reporting Initiative, GRI for the first time. We acknowledge the importance of sustainable voluntary initiatives as the GRI as a way to reconcile our interests with the interests and expectations of our main stakeholders.

Through the engagement with our stakeholders, we have mapped five different areas that will be the core of our first Sustainability Report and that cover economic, environ-mental and social issues. The data for the GRI Report is collected via our Business Management System and with the collaboration of key persons in the regions where the Group operates.

We believe that reporting in accordance with the GRI framework will help us to improve our performance toward more sustainable operations in the years to come.

health, safety, environment & quality


32

Risk and Opportunities

Balancing Risk and Opportunity in a sustainable way is key driver for DOF. As the Group continues to grow within the global market it is essential risk exposure is identified and managed. A separate project has been initiated to help us understanding and cope with danger and uncertainty. Risk perception is how we, as individual, take in, feel, and apprehend the threat. DOF operates in various levels of project complexity and risk. Needed degree of mitigation efforts and controls varies. The aim of the project is to raise risk management understanding in the entire value chain, from business acquisition towards operations offshore on our vessels.

DOF will continue focusing on aligning process across the Group, ensuring that best practice is achieved as far as practical across the regions in order to achieve safe and cost efficient operations.

DOF’s Ten Life-Saving Rules

Nothing is more important than people’s safety. DOF’s Ten Life-Saving Rules campaign will launch in 2015 as part of the SAFE the RITE way awareness program. The ‘slogan’ integrates our core values – Respect, Integrity, Teamwork and Excellent. Above all we are Safe – with safe behaviours. Practically, DOF’s Ten Life-Saving Rules will help everyone plan, organise and assess activities before starting any task. They will help identify hazards, manage risks and put critical controls in place.

DOF’s 10 Life-Saving Rules campaign, which will involve our entire workforce, will put ‘hammer on the nail’. With these ten rules as our collective mantra (in ‘our backbone’) we should all be Safe.

health, safety, environment & quality

Continuous Improvement

Several improvement projects will continue in 2015. The Group has achieved a step change by launching improved processes within engineering, project execution and maintenance of its vessels and assets. A standardisation of reporting and analysing the economic performance has also been implemented where the focus has been on utilisation of the DOF Group’s resources. Focuses for 2015 is to streamline global operational processes within ROV and Anchor handling operations. New processes will be launch for the business as well as project execution phase to increase efficiency and project control.

1. Always carry out a risk assessment and ensure required safety precautions are implemented prior to starting any work

2. Work with a valid work permit where required and obtain authorisation before overriding or disabling safety critical equipment

3. Verify isolation before work begins and use the specified life protecting equipment

4. Never cross safety barriers or enter prohibited areas and follow safety signs

5. Keep work sites clean, tidy and obstruction-free

6. Always plan every lifting operation and never walk under a suspended load.

7. Obtain authorisation before entering a confined space and conduct gas tests when required

8. Use fall protection equipment when working at heights

9. No alcohol or illegal substances when performing activities for the DOF Group

10. Whilst driving always wear vehicle seat belts, never use mobile phones and do not exceed speed limits


33

ci-

d:_1_0D-

5991F-

40C09A918003B-

7CD0C1257CA9w

The DOF Group operation activities in the Atlantic region consist of both vessel operations and subsea projects, done via DOF Management (Marine Management) and DOF Subsea Atlantic (Subsea Projects).

Atlantic region

UKAberdeen AngolaLuanda

⚫ Houston

Perth ⚫

Darwin ⚫

Singapore ⚫

Jakarta ⚫

Bandar Seri Begawan ⚫

Manila ⚫

Melbourne ⚫

ASIA PACIFIC REGION

PSV 1

AHTS 3

Subsea 5

Vessels in the region

Luanda

Aberdeen

Bergen

PSV 21

AHTS 6

Subsea 13

Total fleet 40

Offices NorwayAustevollBergen

Leadership Anders Arve Waage, CEO, DOF Management AS Jan-Kristian Haukeland, EVP, DOF Subsea Norway AS

Austevoll


35

Operational highlights

Marine Management

• Several contract awards in the North Sea:

• Skandi Aukra 3 year with Apache • Skandi Waveney 1 year + 2 x 1 year option contract with Peterson • Skandi Captain 18 months + 6 x 1 months option with Nexen • Skandi Buchan and Skandi Barra 3 year with Total UK • Skandi Marstein 9 months with CNR UK • Skandi Sotra 1 year + 2 year options with Chevron North Sea Limited. • Skandi Texel 2 year + 1 year option BP Egypt

Subsea Projects

• Two vessels sold: Skandi Bergen in Q1 and Skandi Skolten in Q4

• Purchase Option for Skandi Aker declared by client

• Geoholm transferred to Brazil in Q1

• Installation of world’s largest fiber lines for Goliat FPSO

• Hook-up of Banff FPSO with risers, flowlines & mooring lines

• Change-out of mooring system on Chinguetti & Serept

• Hook-up of Knarr FPSO for Teekay and BG

• Change out of Mærsk Dunbarton flexible riser system

• Change out of Shell Corrib flexible flowlines

• Survey & light construction work for Statoil

• AUV survey work for Statoil from chartered vessel Libas

• Survey & Position services for Heerema, SHL and BP

• Taken delivery of Normand Reach beginning 2 year charter

• Conducted region’s first saturation diving operation

• Delivery IMR projects from Skandi Hugen for ConocoPhillips

• Win of 2015 survey call-off for Statoil

atlantic region

Skandi Skolten deploying suction anchor at Goliat, North Sea Skandi Skansen at Galoc, North Sea


36

Activitives

The Subsea activities in this region saw a growth in revenue of nearly 40% as compared to 2013 and achieved a result better than budgeted by 10%. This includes improved control in Angola and a organisational change of integrating DOF Survey and Positioning, into the subsea organisation. Further integrating the region the decision was made to build a new office that would house all DOF employees in Aberdeen with a target to be ready in fall 2015.

The region has had many milestone activities in 2014 and in this section we present a selected blend of these key achievements.

The first milestone was the completion of the Banff FPSO in UK. This project is the largest project the region has undertaken, both in terms of revenue and complexity. On this project we did the complete re-installation of the Banff FPSO including the subsea infrastructure. During this project we managed six major subcontractors, including trenching and saturation diving. The successful installation of the Goliat fiber lines is another example of a milestone project. The fiber lines on Goliat are the largest lines installed in the world.

The approval by IMCA is also a considerable milestone, as we now have the necessary certificate to conduct saturation diving in UK sector. On Skandi Singapore we conducted saturation diving in Angola and Congo for Saipem. This is the first time the region has performed saturation diving work. In July we conducted riser replacement for Mærsk on the Dunbarton field and in August we replaced flowlines on the Shell Corrib field. Both these projects are milestones as

it is the first time we are working for these clients, delivering complex subsea construction services.

The region also saw a significant improvement of HSE performance.

For the Subsea segment, the total recordable incident frequency saw improvements from 3.98 to 1.97 incidents per million man hours worked. The number of safety observations has been 50% better than target. One Lost Time Incident was recorded. Training was continued utilising the DOF Academy, including all leaders enrolled in HSEQ leadership training. Onboard our construction vessels there were an increase in management visits and the introduction of safety coaches for each vessel.

On the marine side we have achieved a high utilisation for the fleet on time charter contracts with an average utilisation of more than 90%. The marine operations are performed by DOF Management AS and its branch office in UK for both the TC fleet and the project fleet. On the AHTS and PSV segments only a few vessels have been exposed in the North Sea spot market and during 2014 we have secured a record high backlog into 2015 especially for the PSV. Lost Time Injury in DOF Management was in 2014, 0.91 incidents per million hours compared to 0.88 in 2013. The number of safety observation has been 36% better than target.

DOF Management is responsible for the Group’s vessels under construction which consist of seven newbuildings with delivery in the period from 2015-2017. One vessel, Skandi Urca, was delivered to Norskan in 2014 and was the first vessel in a series of three AHTS newbuildings. The next two vessels are scheduled for delivery in 2015.

Skandi Seven


37

In the UK Subsea there has been a reasonably high activity regarding new developments and also high activity in inspection, maintenance and repair (IMR) due to aging infrastructure. To access the IMR market an operator needs saturation diving capabilities. Similarly to the mixture of clients, there are several providers of subsea services.

The West African Subsea market has been dominated by a few international, large oil companies. New projects are typically large in scope (EPIC) and normally executed by companies like Saipem, Technip, Subsea 7 and Hereema (and often in joint ventures with each other). The IMR market is still structured in a manner where the operator takes a smaller construction vessel on a 3+ year charter and integrates ROV, survey services and other construction services themselves.

The Norwegian Subsea market is heavily dominated by Statoil, but there is an increase in presence of other operators. However, it will still take many years before we see the same amount of operators as we see in the UK sector. Statoil’s contracting strategy for developments of new fields is typically to make larger EPIC scopes of work.

The PSV market in 2014 was volatile where vessels had mixed utilisation and rates. Several vessels finished their term contracts and operated in the spot market for various lengths of time. At the end of the year most of the Group’s PSV’s were secured in term contracts and two vessels, Skandi Fjord and Skandi Falcon, were laid up.

The AHTS market was generally weak and the utilisation was low. Two of the AHTS were sent to the Mediterranean for medium- to long-term contracts in order to reduce the exposure for the weak North Sea spot market. Two AHTS were awarded contracts in Australia.

atlantic region

Skandi Nova, North Sea

These projects have been challenging due to several delays from the yard in Brazil, however quality has been acceptable and according to our standards. The next newbuilding is Skandi Africa, a subsea vessel that is planned for completion in August 2015. The progress on this newbuild has been good and the vessel sailed from the yard to the Netherlands early 2015 to be equipped with a 900 ton crane and a VLS tower. DOF is attending the project management of four PLSVs together with Technip. Two of these vessels will be constructed at Vard’s new yard in Brazil. The progress on these new buildings was according to plan in 2014.


38


39

The DOF Group operational activities in the South America region consist of both vessel operations and subsea projects, done via Norskan Offshore and DOF Management (Marine Management), and DOF Subsea Brasil (Subsea Projects).

South America region

Skandi Urca at sea trial

Bergen ⚫

Aberdeen ⚫

⚫ Houston

Luanda ⚫

Cairo ⚫

Moscow ⚫

MacaéRio de Janeiro

Buenos Aires

Offices BrazilRio de JaneiroMacaéArgentinaBuenos Aires

Leadership Gary Kennedy, CEO, Norskan Offshore Ltda Mario Fuzetti, EVP DOF Subsea Servicos Brasil LtdaGustavo Nordenstahl, Manager, DOF Management Argentina


PSV 4

AHTS 11

Subsea 11

Total fleet 26


41

Operational highlightsMarine Management

• Geoholm relocated to the region starting an 18 month contract with Petrobras

• Four vessels commenced new 4 + 4 year contracts: Skandi Fluminense, Skandi Ipanema, Skandi Copacabana and Skandi Rio

• Delivery of a new-build, Skandi Urca, which started an 8 year contract with Petrobras

• Skandi Admiral and Skandi Giant finished their 4 year campaigns and left the region

• Skandi Hav contract extension of 4 years

• Skandi Yare awarded contract with Petrobras

• Awarded Norskan’s 1st position on PEOTRAM, Petrobras Excellence in Operation and Transportation Program

• Skandi Møgster and Skandi Saigon started new contracts with Total Argentina in March

Subsea Projects

• Skandi Santos installed approx. half of the entire amount of christmas tree installations on the Brazilian coast

• Skandi Salvador performed two farm-outs in addition to current operations in Frade Field for Chevron

• Delivered seven new ROV projects utilising the following vessels: Geoholm, Skandi Iguaçu, Skandi Urca, Skandi Ipanema, Skandi Rio and 3rd party vessels CBO Chiara and BOS Turmalina

ActivitiesOur focus in the South America region has been to run safe and reliable operations, meeting Client’s demands and generating value for them. Our accomplishments in 2014 show a positive relationship with Petrobras, including the successful mooring campaigns in 2014 and the utilisation of all of our assets being engaged in top priority operations.

As a result of a program focusing on quality of personnel, maintenance of equipment and contract management, performance and operation of our five RSV’s have been constantly improving.

Throughout the year Norskan Offshore has built synergies with DOF Subsea strengthening the brand DOF Brasil in the country. Our cadet program was strengthened, reinforcing our profile and our branding within the naval schools and maritime industry.

Regarding the subsea projects activities, during 2014, Skandi Santos successfully installed 42 christmas trees for Petrobras and this accomplishment represents half of the total amount of christmas trees installed in 2014 along the Brazilian coast. The state of the art vessel, purpose-built to meet Petrobras’ needs, has a unique capability featuring the most advanced vessel-to-conduct installation, testing and maintenance of subsea modules, along with high safety levels and operation. The vessel has also executed well interventions, TCaps installation and maintenance, mostly in an average of 2,000 meters water depth.

With excellent performance and high cost efficiency over the year, Skandi Santos helped to increase DOF Brasil’s reputation and trust with Petrobras. The overall utilisation of the vessel during 2014 has been 98%.

Another important project in 2014 was the Skandi Salvador, which has worked for Chevron in the Frade Field (Campos Basin), executing subsea survey in the field fissure lines, mooring line inspections, installation of oil recovery Generation II CT’s on the seabed and SIMOPS with the FPSO Frade.

Regarding the supply and marine management activities, Norskan Offshore shared in the successes with DOF Subsea of the projects executed by Skandi Santos and Skandi Salvador.

Geosea

south america region


42

Notable AHTS operations include the performance from Skandi Iguaçu and Skandi Amazonas. The vessels have been performing FPSO’s mooring operations for the most important exploration projects of Petrobras to date including Ilha Bela, São Vicente and Mangaratiba.

2014 was another successful year regarding HSEQ. For the entire Brazilian operation there were no LTIs. Significant training investments were made including SIPAT, HSEQ- Workbook training sessions, ERT training with the Norwegian Hull Club and environmental education training for 100% of employees. Targets were achieved regarding the rate of First Aid Cases, garbage management planning, pre embark meetings were held on all vessels, and there was an overall increase of Safety Observations by 26% across the fleet.

Norskan Offshore was ranked 1st place in the Petrobras Excellence in Operation and Transportation program (PEOTRAM). As per the rules of the program, the 1st ranked company will gain a small commercial advantage when bidding on new market opportunities within Petrobras.

DOF Management Argentina has since 2000 been responsible for the Group’s fleet operating in Argentina. During 2014 this operation includes three vessels, one DSV and two AHTS, all of which are committed to Total at the Carina field and nearby areas.

Skandi Neptune: Bouy innstallation on Guarafileld, Santos Basin, Brazil


43

BruneiBandar Seri BegawanIndonesiaJakarta

The DOF Group operation activities in the Asia and Pacific region consist of both vessel operations and subsea projects, done via DOF Management (Marine Management) and DOF Subsea (Subsea Projects).

Asia Pacific region

Bergen ⚫

Aberdeen ⚫

Luanda ⚫

Cairo ⚫

⚫ Buenos Aires

Moscow ⚫

SingaporeSingaporeAustraliaPerthDarwinMelbourne

Manila

Bandar SeriBegawan

Singapore

JakartaDarwin

PerthMelbourne


AHTS 4

Subsea 4

Total fleet 8

Leadership John Loughridge, EVP and Regional Manager, DOF Subsea Australia and DOF Management Australia

Offices


45


Marine Management

• Four subsea vessels operating in the region; Skandi Hawk, Skandi Hercules, Skandi Singapore and Skandi Protector

• Three AHTS operated in the region: Skandi Atlantic, Skandi Emerald and Skandi Pacific

• PSV Skandi Falcon left the region

• AHTS Skandi Giant arrived in region early 2015

Subsea Projects

• Execution of diverse projects, ranging from large FPSO installation projects to smaller projects utilising our air dive systems to undertake inspection work

• Supplied significant management, planning, engineering and logistics support to clients

• All operations were conducted without any Lost Time Injuries being recorded in 2014

• Awarded seven year IMR contract with Shell Philippines Exploration (SPEX)

• Skandi Hawk to support SPEX contract

• Emergency contract execution including a Riser Repair in Brunei and a mooring system repair in Australia

• Expansion of office footprint in Singapore, building a dedicated Project Management and Engineering capability to further develop the Asian subsea market

Activities

Our focus in the Asia Pacific region was to continue to develop core capabilities, expand our regional footprint and capitalise on the changes in the regional market.

Regarding Subsea projects, we continued to build experience and reputation in the FPSO installation and repair segment. In 2014 we successfully executed projects for PTSC in Vietnam, Lundin and TLO in Malaysia and Santos and Modec in Australia. Skandi Hercules and Skandi Singapore are well suited to these operations and we have built a strong track record since the vessels began operating in 2011.

Throughout the year we undertook numerous inspection campaigns delivering valuable data to our clients for their monitoring and future planning needs.

DOF successfully executed projects for clients such as Chevron and Shell, in Australia and Indonesia, strengthening our reputation and ranking in the IMR subsea segment. Our track record, experience and our proven capability assisted us to win long term IMR contracts.

The diving support vessel Skandi Singapore was deployed in the Congo and Angola for a significant portion of the year for the Atlantic region. The cooperation with the asset and the knowledge sharing is an example of the geographical flexibility of the Group.

Some of our non-vessel assets continued to have good utilisation. The mobile saturation dive system – the D300 – was actively used by Woodside and our air dive systems were used on a number of UWILD (Underwater Inspection In Lieu of Dry-docking) inspections.

Regarding Marine Management, throughout 2014 DOF Management maintained a fleet of three AHTS’s with a fourth arriving in early 2015. Skandi Pacific and Skandi Emerald were involved in a longdrill rig support campaign in New Zealand for OMV and STOS and Skandi Atlantic was operating in Australia for Apache doing similar work. Skandi Giant, at the end of 2014, was in transit to Singapore to prepare for a campaign in Bass Strait in Australia.

Earlier in the year PSV Skandi Falcon left the region to return to the Atlantic region following a number of campaigns mainly in Australia.

asia pacific region


46

asia pacific region

Skandi Hercules at Bein Dong, Vietnam

In addition to providing marine management to the DOF vessels in the region, DOF Management also supports the Subsea project business through the operation and mainte-nance of Skandi Hawk, Skandi Hercules, Skandi Singapore and Skandi Protector.

The good HSE performance trend recorded at the end of 2013 continued throughout 2014. DOF Asia Pacific has supported many Group development activities with a focus on system, process and procedural improvements. For example, we have been heavily involved in the Business Management System (BMS) review and the harmonisation of our work practices and procedures.

The region piloted ‘Safe, the RITE Way’ program, which integrates our values with safe behaviours and is an example of the Group’s continuous commitment to HSEQ. The program combines organisational and safety cultures to become a single universal culture. As a part of the program we introduced DOF’s Ten Life Saving Rules package. The result is increased safety awareness, entire workforce and senior management involvement and support to embed the principles in the organisation.


47

The DOF Group operation activities in the North America region consist of subsea projects via DOF Subsea mainly in the Gulf of Mexico (GOM).

North America region

USAHoustonCanada St. John’s

St. John’s

Houston


Subsea 4

Total fleet 4

Leadership

Marco Sclocchi, EVP, DOF Subsea USA Inc.

Offices


49


Subsea Projects

• Completion of 1 year contract for the Skandi Inspector supporting Saipem Pipeline projects

• Installation of 3 subsea trees for respectively Stone Energy, Talos Energy and Freeport Mc Moran

• Complete 1st fully managed Subsea project in Canada with the Skandi Inspector and Super Mohawk ROV for Nalcor

• Complete 9 months project for Saipem SA in Brazil

• Secured 2 year IMR Frame agreement with Chevron (2015 and 2016)

Activities

Our operation had an increase of local Jones Act Compliance fleet from one to three vessels, taking market share in the IMR/Light construction vessel market in the GOM. We also established the first Ocean Observation department and equipment, with the Slocum Glider, which will be deployed in Mozambique for Anadarko on a 1-year contract.

Chloe Candies was contracted on March 1st and mobilised in Brazil on May 6th without any importation / local regulation problems. The Ross Candies was contracted on March 12th and mobilised on April 1st for the first subsea tree installation for Stone Energy. Skandi Inspector completed Saipem 1 year contract May 10th and mobilised to Canada for the Nalcor project on July 9th. The Yard was contracted on July 1st and four trees were tested in October. A new slab for jumper fabrication was installed at year-end with the first jumper planned for mid-January 2015.

A logistics base was set up in Port Fourchon to allow subsea tree testing, jumper fabrication, equipment storage and maintenance. We also establish master service agreements with more than 50% of the operators in the GOM, allowing call-out work for our vessels.

DOF Subsea’s Hugin 1000, an autonomous underwater vehicle (AUV)

Glider, a remotely Managed AUV, part of DOF Subsea’s Ocean Observation System

north america region


50

In our HSEQ reporting the region saw an increase in man-hours of 2.5 times in respect to the previous year without any recordables (approx. 850k man-hours). Client feedback has been extremely positive both during HSEQ audits and post job feedback.

Total staff at year end was 222, a 53% growth as compared to year end 2013. Employee development has included offshore personnel competence and training program established to comply with local SEMS program. One focus was on creating a stronger project management and engineering team. Leader- ship in Safety culture has been established and maintained with active participation through site visits, lessons learned and risk analysis reviews by the management team.

The market for DOF Subsea in the GOM and Canada predominately focused on the IMR and light-construction around short tie-backs to existing facilities. This is typically executed in water depths between 1,000 and 3,000 meters. This market continued to grow even with the recent oil price drop due to the fact it is less Capex dependent and allows the operators to maintain/increase production from the existing facilities, especially with the rig price drop.

The local government and US coast guard are imposing market restrictions based on the Jones Act. Moreover, DOF Subsea, with three Jones Act compliant vessels, has established itself as one of the leaders in the IMR and light construction.


51

Operations around the world

The DOF Group operates within three vessel segments in relation to strategic types of activi-ties and vessel types – Platform Supply Vessels (PSV), Anchor Handling Tug Supply Vessels (AHTS) and Construction Support Vessels (Subsea). In addition, the Group also owns and operates a fleet of highly sophisticated ROV.

The fleet

Skandi Africa during sea trials

PSV 25

AHTS 21

Subsea 32

Total fleet 78

ROV/AUV 66


53

Overview

The global DOF fleet is presently at 78 vessels, of which seven are newbuildings and two vessels owned less than 50%.

We took delivery of one vessel in 2014, i.e. Skandi Urca, a medium sized AHTS, on long term contract with Petrobras.

Operations

In operations our main focus has been to further improve our fleet technical performance.

We have defined key performance indicators & targets that we monitor closely, such as technical breakdown (offhire), fuel efficiency (optimise use of machinery to reduce consumption and emissions), preventive maintenance measures in addition to technical costs.

We have had a high focus on global maintenance standards, and further implemented tools in 2014 to globally monitor the condition of our vessels & equipment, e.g. we require all vessels to provide regular oil sampling and vibrations measurements on critical equipment, which are analysed by defined external company, and results collected in common fleet database and evaluated. This enables us to work out trends and improvement potentials on each vessel, fleet or region, and to take appropriate action in early phase, in order to avoid potential breakdown & offhire.

In tougher market conditions we need to be even more focused on achieving our targets, and in close cooperation with our people onboard the vessels, we intend to do that! We have established a good basis to further improve our performance in 2015.

New building

Our remaining newbuilding programme as follows;

• Skandi Angra and Skandi Paraty. Vard Niteroi Yno. 31 and 33. The vessels are secured 8 and 4 year contracts with Petrobras, both scheduled for delivery in 2015.

• Skandi Africa. Vard Søviknes Yno. 800. Combined OSCV & Pipelayer of Vard OSCV 12 design. Our largest and most advanced vessel in fleet, including an impressive 900 ton offshore crane and 650 ton VLS / lay system. Committed on long term contract with Technip. Planned delivery /completion July 2015.

• Vard Yno. 823 / 824. PLSV / Pipelayers – 650 ton tension. JV project with Technip. Pipe laying vessels being built at Vard Søviknes. Planned delivery in 2016. Committed on long-term chart with Petrobras.

• Vard EP Yno. 09/10. PLSV/Pipelayers - 300 ton tension. JV project with Technip. Pipe laying vessels built at the new Vard shipyard in Recife / Brazil. Planned delivery 2016 and 2017. Committed on long-term chart with Petrobras.

Skandi Africa during sea trials


54

Skandi Urca in Rio


55

PSVPlatform Supply Vessels are used to transport oil field products and supplies to offshore drilling and production facilities.

Skandi BarraSkandi Aukra ** Skandi Buchan

Skandi Falcon *Skandi Caledonia Skandi Captain

the fleet

Skandi Kvitsøy


56

Skandi Foula

Skandi Texel Skandi Waveney

Skandi Feistein

Skandi Gamma

Skandi Marstein

Skandi Flora

Skandi Fjord

Skandi Rona

Skandi Marøy Skandi Nova

Skandi Hugen

the fleet

* Vessel sold ** DOF ownership is less than 50%

Skandi Mongstad

Skandi Sotra

Skandi Leblon *

Skandi Stolmen *

Skandi Yare *

Skandi Flamengo *


57

Skandi BotafogoSkandi Angra Skandi Copacabana *

Skandi Admiral Skandi Amazonas Skandi Atlantic

AHTSAnchor Handling Tug Supply Vessel are used to set anchors for drilling rigs, tow mobile drilling rigs and equipment from one location to another.

the fleet

Skandi Iceman **


58

Skandi Møgster

Skandi Peregrino

Skandi Giant

Skandi Stord

the fleet

Skandi Iguaçu

Skandi Pacific Skandi Paraty

Skandi Urca

Skandi Rio

Skandi Ipanema

Skandi Vega

Skandi Saigon

Skandi FluminenseSkandi Emerald

* Vessel sold ** DOF ownership is less than 50%


59

Geograph Geoholm

Skandi Achiever

Geosea

SubseaSubsea vessels are the most sophisticated vessels in the DOF fleet, and are utilised for a wide range of subsea services and projects.

Skandi AcergyGeosund

Skandi Hercules


60

Skandi Carla

Skandi Inspector

Skandi Aker *

Skandi Hawk

Skandi Arctic

Skandi Constructor

Skandi Hav

Skandi Neptune

Skandi CommanderSkandi Chieftain

Skandi Patagonia Skandi Protector

Skandi SevenSkandi Santos

Skandi OlympiaSkandi Niteroi

Skandi Salvador

Skandi Singapore* Vessel sold ** DOF ownership is less than 50%


61

Skandi Africa (NB-800) Skandi Olinda (NB-823)

Skandi Acu (EP-9)Skandi Recife (NB-824) Skandi Buzios (EP-10)

Skandi Skansen

Skandi Vitoria


62


63

Market outlook

Mons S. Aase

A global player


65

DOF have a strong presence in Asia Pacific, South America and in the North Sea. In North America we have ramped up our activities during 2013 and 2014 resulting in a growing market share in the region within IRM and light construction. West Africa is an important region for our type of services, but our market share in this region is low.

Our supply vessels (AHTS and PSV) support fields in production as well as development and exploration activi-ties. However, the majority of the supply fleet is servicing fields in production. Our subsea activities are mainly within inspection, repair and maintenance (IRM) of existing infrastructure and smaller development projects.

Due to the recent large drop in oil price our customers are focusing on reducing costs and activity levels. Overall we expect challenging markets in 2015 with pressure on rates and utilisation. To balance this expected downturn in the market DOF have already secured firm contract coverage of approximately 80% for 2015.

North Sea

The North Sea spot market has had a weak start in 2015. Especially for PSVs the market balance looks negative and rate levels have been very low so far in 2015. For AHTS vessels the market has been volatile, with decent earnings in some periods, but on average utilisation and rates have not been on a satisfactory level. We do not foresee many and large campaigns absorbing vessels from the spot market during summer 2015. We therefore expect the weak market to continue throughout the year.

The PSV fleet will grow as a result of a large number of newbuild deliveries. The global activity level and demand therefore needs to grow before we can expect a good balance in the PSV market. With the present low oil price we do not expect demand growth, and as such expect a weak market until we see a recovery in the oil price.

The number of high-end AHTS vessels under construction is lower compared to PSVs. But with expected less drilling activity and vessel demand we also expect the AHTS market to be challenging.

market outlook

180.000

160.000

140.000

120.000

100.000

80.000

60.000

40.000

20.000

GBP50

45

40

35

30

25

20

15

10

5

0 0

Q3-13 Q4-13 Q2-14 Q3-14 Q4-14Q1-14 Q2-15Q1-15

Fixtures

Spot rates vs fixtures NSEAAHTS

20.000 +

16 - 19.999 BHP

Fixtures

45.000

40.000

35.000

30.000

25.000

20.000

15.000

10.000

5.000

GBP45

40

35

30

25

20

15

10

5

Fixtures

0 0

Q3-13 Q4-13 Q2-14 Q3-14 Q4-14Q1-14 Q2-15Q1-15

Spot rates vs fixtures NSEAPSV

900 + m2

500 - 899 m2

Fixtures


66

market outlook

All graphs source: RS Platou ASA

45.000

40.000

35.000

30.000

25.000

20.000

15.000

10.000

5.000

GBP

0

05 06 07 08 09 10 11 12 13 14 15

Term Rates NSEAAHTS

10 - 15.999 BHP

16 - 19.999 BHP

20.000 + BHP

30.000

25.000

20.000

15.000

10.000

5.000

GBP

0

05 06 07 08 09 10 11 12 13 14 15

Term Rates NSEAPSV

500 - 749 m2

750 - 899 m2

900 m2

For our North Sea subsea activity, we expect to see a weaker market ahead of us as the operators are in progress reducing their cost and investments and hence a lower activity. However, we still expect medium/high activity in West Africa, both for new projects and Field Support Vessels (typical 3 years frame agreements). Despite the uncertainty, we are still seeing high bidding activity from UK clients.

Our focus is to stay competitive on the work available in the North Sea and increase our effort to develop our position in Africa. However, our expectation overall is a reduced number of projects and overcapacity of vessels and services which will put margins under pressure.

Asia Pacific

Many of the major construction projects in Australia are now near completion, and not being replaced by new projects. However, the current construction projects are now shifting to the production phase therefore the down-turn in construction projects is partly offset by an increase in the IMR activities. The size and specification of our regional vessel assets and the people we employ are ideally suited for these IMR contracts.

The Asian market appears to have reacted quicker to the market downturn with the result that the level of construc-tion activity in Asia has dropped faster than in Australia - and is not being replaced by IMR projects. However, our success in The Philippines has helped maintain our position in Asia.

A number of competitor vessels will depart the region in 2015. This coincides with a forecast reduction in demand for some classes of vessels. We expect major investment decisions in the region to be deferred as operators focus on cost.

Across the region we are well positioned for a number of IMR, LWI, commissioning, and brownfield opportunities. We will continue developing our core capabilities and regional footprint, ready for longer term demand when market conditions improve.

For our supply activity in the region we experience a stable activity level with downward pressure on rates.


67

South America

The local market is forecasting a challenging period as industry investment is cautious and projects are expected to be delayed. Some fleet reduction is also likely due to Petrobras revaluation. There is some uncertainty over the new Brazilian blocks con- cession regulatory framework as well as other global competi-tion, such as recent opening of the Mexican market to private and foreign operators, creating a new dynamic in the region.

However, opportunities are still expected to be driven by the pre-salt discoveries. The challenges of ultra-deep waters and greater distances from the shore require more engineered solutions and advanced subsea technologies. In this context, DOF Subsea’s technical and human assets are well placed to respond. Positive events include the drilling license granted to Chevron by ANP for the next drilling campaign in Frade Field and the sanction of Statoil` Peregrino Field Phase II development.

North America

The market for DOF Subsea in the Gulf of Mexico is predom-inantly focused on the IMR and light construction activities around short tie-back to existing facilities in water depth between 1,000 and 3,000 meters. This market, - including subsea wells and tieback – is still growing and is suited to the assets and service DOF Subsea provides which maintain or increase production. It is also less capex dependent as it allows operators to maintain or increase production from existing facilities.

Additionally, there are a number of development projects progressing in 2015 and 2016. DOF Subsea’s growth over the last two years puts the region on a stronger platform for 2015.

S&P business

The market for Survey and Positioning services on third party clients’ vessels in 2015 may be considered stable. New field developments, such as exploration may be limited, however midstream projects (such as construction, and IRM) remain committed. DOF Subsea Survey and Positioning has the benefit of key long term Master Service Agreements with EPIC companies to deliver stability.

Key long term growth areas for the S&P business include Brazil, South East Asia and Caspian; these markets are currently being explored hand-in-hand with DOF’s commit-ment to deliver new survey technology to the market.

market outlook

700

600

500

400

300

200

100

Estimated E&P spending (bn USD, real)

070 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

140

120

100

80

60

40

20

Oil prices (USD, Real)

0

E&P-spending has historically trailed oil price closely. If current oil prices sustain, E&P-spending is set to drop significantly.

E&P (real)

Oil Price (real)


68

market outlook


69

1 2

3 4

board of directors


70

The Board

Karoline Møgster 5Board member

Born 1980. Karoline Møgster is educated as a lawyer at the University of Bergen and she holds a master degree in accounting and auditing (MRR) from NHH. Mrs Møgster has many years’ experience as a lawyer with the law firm Thommessen AS, and is now employed as a lawyer in Møgster Management AS. She holds board positions in Laco AS and several companies within the Laco Group.

Born 1966. Mons S. Aase has been part of the management team since 1998, he served as CFO and Deputy Managing Director in the company before becoming CEO of DOF ASA from 2005. Mr Aase holds a MSc from the Norwegian Institute of Technology, and a Cand. Merc. from NHH in Bergen. Mr Aase has various experiences from financing and ship broking industries. He chairs and serves on numerous Boards of Directors.

Mons S. Aase 6CEO

Born 1953. Helge Møgster is one of the main owners in the Møgster family’s holding company, Laco AS. Mr. Møgster has extensive experience from the offshore service sector and all aspects of the fisheries sector. He chairs and serves on numerous Boards of Directors, including being the Chairman of the Board of DOF Subsea AS.

Helge Møgster 1Chairman

Born 1944. Oddvar Stangeland holds a degree in Marine Engineering and Naval Architecture (MSc) from the Norwegian Institute of Technology (NTH). Mr Stangeland has experience as project manager in various international shipping companies and started his career with DOF in 1982 as Technical manager. He was CEO in DOF ASA from 1985 – 2005. Mr Stangeland holds board positions in various companies.

Oddvar Stangeland 3Board member

Born 1963. Helge Singelstad is CEO in Laco AS. Mr Singelstad holds a degree in computer engineering from Bergen Ingeniørskole, a degree in Business Administration from the Norwegian School of Economics and Administration (NHH) and a 1st degree of law from the University of Bergen. He chairs and serves on numerous Boards of Directors, including being the Chairman of the Board in Austevoll Seafood ASA and Lerøy Seafood Group ASA. Mr Singelstad has extensive experience from various types of businesses such as oil & gas and seafood sector.

Helge Singelstad 2Deputy Chairman

Born 1962. Wenche Kjølås is the CEO of Grieg Maturitas since 2009. Mrs Kjølås holds a Master in Economics and Business Administration from NHH. She has experience from various industries in Norway and international, incl. shipping, seismic, seafood, food and retail. Mrs Kjølås has Board experience from different listed companies, and serves today on the Board of Grieg Seafood ASA and Chair in Flytoget AS, in addition to several other companies.

Wenche Kjølås 4Board member 5

6


71

Shareholders information

Shareholder policy

DOF ASA shall at all times provide its shareholders, the Oslo Stock Exchange and the finance market in general (through the Oslo Stock Exchange information system) timely and exact information. Such information will be given in the form of annual reports, quarterly reports, press releases, stock exchange notifications and investor presentations, as appropriate. The Company will strive to clarify its long-term potential, including strategy, value drivers and risk factors. The Company will have an open and active policy in its approach to investor relations and will make regular presentations in connection with annual and preliminary results.

In general, DOF will present all inside information. In any event, the Company will provide information about individual events, such as resolutions adopted by the Board and the Ordinary General Meeting concerning dividends, mergers / demergers or changes in share capital, the issue of subscription rights, convertible loans and all agreements of significance between Group companies or related parties.

The Chairman and the other Board members shall be available for discussions with major shareholders in order to achieve a balanced understanding of these shareholders’ viewpoints and focus, but under due care of the regulations in the Norwegian Public Limited Company Act, the Securi-ties Trading Act and the Stock-Exchange Regulations. The Chairman shall ensure that the shareholders’ views are communicated to the entire Board. The Board shall consider the interests of all shareholders and treat all shareholders equitably.

All transactions that are not of minor significance between the Company and a shareholder, a Board member or a senior employee (or related parties) shall be subject to value assessment by an independent third party. If the considera-tion exceed 5% of DOF’s share capital, such transactions shall be subject to the approval of the shareholders at the ordinary General Meeting, in so far as this is required by the Norwegian Public Limited Company Act, Section 3-8.

Board members and senior employees shall inform the Board if they have any significant interest in a transaction to which the Company is a party.

No. shares Shareholding Voting shares

Møgster offshore AS 56 876 050 51.22 % 51.22 %

Pareto Aksje Norge 6 678 673 6.01 % 6.01 %

Skagen Vekst 5 762 213 5.19 % 5.19 %

Pareto Aktiv 2 794 356 2.52 % 2.52 %

Odin Offshore 2 750 000 2.48 % 2.48 %

Mp Pensjon Pk 2 085 503 1.88 % 1.88 %

Pareto Verdi 1 334 436 1.20 % 1.20 %

Moco AS 1 094 184 0.99 % 0.99 %

Vesterfjord AS 1 027 650 0.93 % 0.93 %

Kanabus AS 1 004 684 0.90 % 0.90 %

Forsvarets Personellservice 812 800 0.73 % 0.73 %

The Northern Trust Co. 809 814 0.73 % 0.73 %

Verdipapirfondet DNB SMB 772 852 0.70 % 0.70 %

Verdipapirfondet Alfred Berg Norge 606 758 0.55 % 0.55 %

Verdipapirfondet Eika Norge 583 612 0.53 % 0.53 %

BCEE Lux - SICAV Lux 582 899 0.52 % 0.52 %

Citibank, N.A. 563 923 0.51 % 0.51 %

Momentum Investments Inc 500 000 0.45 % 0.45 %

Mustad Industrier AS 500 000 0.45 % 0.45 %

Bkk Pensjonskasse 478 000 0.43 % 0.43 %

Total 87 618 407 78.90 % 78.90 %

Total other shareholders 23 432 941 21.10 % 21.10 %

Total no of shares 111 051 348 100 % 100 %

Share capital and shareholders

Largest shareholders as of 31.12.2014

Date Event

20 May 2015 1st quarter 2015

22 May 2015 Ordinary General Meeting

13 August 2015 2nd quarter 2015

13 November 2015 3rd quarter 2015

Mid February 2016 4th quarter 2015/Result 2015

The dates are subject to change.

Financial calendar 2015

Preliminary dates for the publishing of the company’s results are:


72

There are no restrictions in the trade of shares in DOF, and DOF shall not establish mechanisms designed to prevent or repel takeover bids, unless this has been approved by the General Meeting with a two thirds majority (of votes cast and of the share capital represented). However, in the event of a takeover bid, the Board may take steps that are clearly in the best interest of the shareholders, for example by offering the shareholders advice on the offer, or, where relevant, by finding an alternative buyer (”white knight”).

Dividend Policy

DOF’s objective is to provide a competitive return on the shareholders’ invested capital through payment of a dividend and appreciation of the share price. In considering the scope of the dividend, the Board emphasises the Company’s capacity to pay dividend, the need to have a healthy level of equity, and to have adequate financial resources for future growth and investments.

Power of Attorney to the Board of Directors Increase of the share Capital

In the General Meeting 23 May 2014, the Directors were given a Power of Attorney to increase the Company’s share capital up by up to NOK 55,500,000 through the issue of up to 27,750,000 shares, each with a nominal value of NOK 2. The Power of Attorney is valid until the ordinary General Meeting in 2015. No later however than 30 June 2015.

The Power of Attorney includes a right to deviate from the shareholders preemptive right by law to subscribe for new shares. Further, the Power of Attorney includes a right to increase the Company’s share capital in return for non-cash

contributions. The Power of Attorney does not include a decision on a merger pursuant to the Norwegian Public Limited Companies Act, Section 13-5.

Acquisition of own shares

In the General Meeting 23 May 2014, the Directors were given a Power of Attorney to acquire up to 10% of the Company’s shares, pursuant to the provisions of chapter 9. II in the Norwegian Public Limited Companies Act.

The highest nominal value of shares that may be acquired pursuant to this Power of Attorney is NOK 22,210,269. The lowest amount that can be paid is NOK 20 per share and the highest amount NOK 100 per share.

Within the limits of the law, the Board of Directors are granted Power of Attorney to decide the manner in which the purchase and sale of own shares can take place, taking due account of the principle of equanimity whereby no-one shall derive particular or special advantage from such acquisitions.

The Power of Attorney is valid until the ordinary General Meeting in 2015, no later however than 30 June 2015.

The justification for the proposal is that it may be financially advantageous for the Company to possess own shares. The possession of own shares can generate a profit through own-account trading, and the shares can be used in payment for possible acquisitions of other companies and for similar purposes.

shareholders information

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

-60%

Price

-70%

1/14 3/14 5/14 7/14 9/14 11/14 1/15

14.95

2/14 4/14 6/14 8/14 10/14 12/15

Share price developments as of 31.12.2014

Oslo Børs OBX Oil Service IndexOslo Børs Benchmark IndexDOF 14.95


73

2014 Corporate Governance

1. Introduction1.1 Background

DOF ASA (“DOF” or the “Company”), is the parent company in DOF’s group of companies (”The Group”). It is established and registered in Norway and subject to Norwegian law, hereunder corporate and other laws and regulations.

In 2006 the Company adopted its first formal Corporate Governance Policy. The Company is at all times obliged to act in compliance with laws and regulations as applicable from time to time in respect of handling and control of insider trading rules and information to the shareholders and the market. The latest revision to the Corporate Governance guidelines was published by Norwegian Committee for Corporate Governance (NUES) on 30 October 2014, and the Company’s current Corporate Governance Policy is effective as of that date. This fully reflects the Board’s approval of these guidelines without reservation.

1.2 Objective

The Corporate Governance Policy of the Company is a governing document containing measures which are continuously implemented to secure efficient management and control of the activities of the Company. The main objective is to establish and maintain systems for communi-cation, surveillance and incentives which will increase and maximise the financial results of the Company, its long term soundness and overall success, and investment return for its shareholders. The development and improvement of the Company’s Corporate Governance is a continuous and important process, on which the Board of Directors and the Executive Management keep a keen focus.

1.3 Rules and regulations

As a Norwegian public limited company listed on the Oslo Stock Exchange, the Company is subject to corporate governance regulations contained in the Public Limited Companies Act 1997 (asal.), the Securities Trading Act 2007 (vhpl.), the Stock Exchange Act with regulations (børsreg.) and other applicable legislation and regulations, including the NUES recommendations.

1.4 Management of the Company

Management of and control over the Company is divided between the shareholders, represented through the General Meeting of the shareholders, the Board of Directors and the Managing Director (CEO) in accordance with applicable legislation. The Company has an external and independent auditor.

1.5 Implementation and reporting on Corporate Governance

The Board of Directors observes and ensures that the Company implements sound Corporate Governance.

The Board of Directors is obliged to provide a report on the Company’s Corporate Governance in the Directors’ report or in a document that is referred to in the Directors’ report. The report on the Company’s Corporate Governance must cover sectional items of the Corporate Governance Code of Practice and provide an explanation of the reason for any deviation and what alternative solution it has selected.

The Group has drawn up a separate policy for Corporate Governance, and the Board of Directors has decided to follow the Norwegian Recommendation for Corporate Governance without reservation.

2. BusinessThe Company’s business is defined in its Articles of Associa-tion.

The Company aims at securing and developing the Compa-ny’s position as a leading participator within its business activities, to the benefit of its owners, and based on strategies founded on ethical behaviour within applicable laws and regulations.

The objective of the Company is to be engaged in trading and shipping business and other offshore related activity, including participation in other companies with the same or similar objects. This statement of objective appears in §2 of the Company’s Articles of Association.


74

3. Equity and dividendsThe Company has an equity capital at a level appropriate to its objectives, strategy and risk profile.

The aim of the Company is to produce a competitive return on the investment of its shareholders, through distribution of dividends and increase in share prices. The Board of Directors, is in its assessment of the scope and volumes of dividend, emphasises security, predictability and stability, dividend capacity of the Company, the requirement for healthy and optimal equity as well as adequate financial resources to create a basis for future growth and investment, and considering the wish to minimise capital costs.

The background to any proposal for the Board of Directors to be given a mandate to approve the distribution of dividends will be explained.

Mandates granted to the Board of Directors to increase the Company’s share capital are subject to defined purposes and frames and are limited in time to no later than the date of the next annual General Meeting. If a General Meeting is to consider mandates to the Board of Directors for the issue of shares for different purposes, each mandate will be considered separately by the meeting. This also applies to mandates granted to the Board of Directors for the Company to purchase own shares.

Equity:

The Board of Directors considers the Company’s consolidated equity to be satisfactory. The Company’s need for financial strength is considered at any time in the light of its objective, strategy and risk profile.

Current Capital Increase Mandate:

The Board of Directors has been given authority, in time until the ordinary General Meeting in 2015, to increase the share capital by issuing up to 27 750 000 new shares.

Current Mandate for purchase of treasury shares:

The Board of Directors has been given authority, in time until the ordinary General Meeting in 2015, to purchase treasury shares in the Company, limited to 10% of the Company’s

share capital. Shares may not be purchased for less than NOK 20 per share, and no more than NOK 100 per share. At 31 December 2014, the Group owned no treasury shares.

4. Equal treatment of shareholders and transactions with close associatesThe Company has only one class of shares.

Any decision to waive the pre-emption right of existing shareholders to subscribe for shares in the event of an increase in share capital must be properly justified.

Any transactions the Company carries out in its own shares must be carried out either through the stock exchange or at prevailing stock exchange prices if carried out in any other way. In the event of any not immaterial transactions between the Company and shareholders, members of the Board of Directors, members of the Executive personnel or close associates of any such parties, the Board shall arrange for valuation to be obtained from an independent third party. This will not apply if the transaction requires the approval of the General Meeting pursuant to the requirements of the Public Limited Companies Act. Independent valuation will also be arranged in respect of transactions between compa-nies in the same group where any of the companies involved has minority shareholders.

Members of the Board of Directors and the Executive personnel are obliged to notify the Board if they have any material direct or indirect interest in any transaction entered into by the Company.

Voting Rights:

The Company’s Articles of Associations place no restrictions on voting rights. All shares are equal.

Trading in treasury shares:

The Board’s authorisation to acquire treasury shares is based on the assumption that any acquisition will take place in the open market. Acquired shares may be disposed in the market or used as payment for acquisitions.

corporate governance


75

Transactions between related parties:

See note 28 for related party transactions.

5. Freely negotiable sharesNo restrictions on negotiability of the Company’s shares are included in the Company’s Articles of Association.

6. General meetingsExercising rights

The Board of Directors takes steps to ensure that as many shareholders as possible may exercise their rights by participating in General Meetings of the Company, and that General Meetings are an effective forum for the views of shareholders and the Board. Such steps include:

• making available on the Company’s website no later than 21 days prior to the date of the General Meeting the notice of meeting including supporting information on resolutions to be considered at the meeting and recommendations of the Board of Directors and the Nomination committee

• ensuring that the resolutions and supporting information distributed are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting

• setting a deadline as close to the date of the meeting as possible for shareholders to give notice of their intention to attend the meeting, and in compliance with the Articles of Association

• if the General Meeting is to consider mandates to the Board of Directors for the issue of shares for different purposes, each mandate will be considered separately by the meeting

• ensuring that the members of the Board of Directors and the Nomination committee and the Company’s auditor are present at the General Meeting

• providing shareholders who cannot attend the meeting in person with the opportunity to vote, by giving information on the procedure and form for representation at the meeting by proxy

• nominating a person who will be available to vote on behalf of shareholders as their proxy

• preparing a form for appointment of a proxy, which allows separate voting instructions to be given for each matter to be considered by the meeting and for each of the candidates nominated for election

The Company, at the earliest possible opportunity, makes available on its website:

• information on the right of shareholders to propose matters to be considered by the General Meeting

• proposals for resolutions to be considered by the General Meeting, alternatively comments on matters where no resolution is proposed

• a form for appointing a proxy

By virtue of the annual General Meeting, the shareholders are guaranteed participation in the Group’s supreme governing body. The following matters are discussed and resolved at all annual General Meetings:

• adoption of the annual financial statement and the annual report for the previous year, including distribution of dividends

• any other matters which by virtue of law or the Articles of Association pertain to the General Meeting

Notification:

The annual General Meeting is held each year no later than six months after the end of each financial year. The 2015 annual General Meeting is scheduled for 22 May. Notification will be sent out within the deadlines in the Code of practice, and relevant documentation will be available on the Group’s website at least 21 days prior to the General Meeting. The Financial Calendar is published on the internet and through a notification to Oslo Stock Exchange.

Participation:

It is possible to register by post, telefax or e-mail. Shareholders who cannot attend the meeting can authorise a proxy, and the system facilitates the use of proxies on each individual item for discussion.



76

7. Nomination committeeThe Nomination committee has contact with shareholders, the Board of Directors and the Company’s Executive personnel as part of its work on proposing candidates for election to the Board.

The appointment and election of the Nomination committee is imbedded in the Company’s Articles of Association.

The selection of members of the Nomination committee takes into account the interest of shareholders in general. The majority of the committee are independent of the Board of Directors and the Executive personnel. No more than one member of the Nomination committee may be a member of the Board of Directors, and such member may not offer him /herself for re-election. Neither the Company’s CEO nor any other member of the Company’s Executive personnel is a member of the Nomination committee.

The Nomination committee proposes candidates for election to the Board of Directors and proposes remuneration to be paid to members of the Board of Directors.

The Nomination committee is obliged to submit arguments for its recommendations.

The Company provides information on the membership of the Nomination committee and provides suitable arrangements for shareholders to submit proposals to the committee for candidates for election.

The Nomination committee consists of three members. The members are elected by the General Meeting for terms of two years at a time. The General Meeting determines the remuneration of the committee’s members.

The current Nomination committee, with the exception of Mr Roy Reite who has been elected for the period ending in 2015, was re-elected in the annual General Meeting held on 23 May, 2014 for a period of two years and consists of:

Kristine Herrebrøden. Mrs Herrebrøden currently serves in the position of attorney with the Bergen Municipal Attorney’s Office. She has extensive experience in financial and corporate transactions and in dispute resolution from private law firm practice.

Harald Eikesdal. Mr Eikesdal is a lawyer in private practice in Haugesund.

Roy Reite. Mr Reite is CEO & Executive Director of Vard Holdings Ltd. He has served as CEO of VARD since 2001.

All three members of the Nomination committee are independent of DOF’s main shareholder(s) and the Executive personnel.

8. Board of Directors: composition and independenceThe composition of the Board of Directors ensures that it can attend to the common interests of all shareholders and meets the Company’s need for expertise, capacity and diversity. Attention is paid to ensuring that the Board of Directors can function effectively as a collegiate body.

The composition of the Board of Directors ensures that it can operate independently of any special interest. The majority of the shareholder-elected members of the Board of Direc-tors shall be independent of the Company’s Executive personnel and material business contacts. At least two of the members of the Board of Directors elected by shareholders shall at all times be independent of the Company’s main shareholder(s). In the assessment of independency among other factors the following criteria are considered:

• whether the relevant person has been employed in an executive position with the Company during the foregoing five years

• whether the relevant person has received or is receiving other kinds of remuneration from the Company other than the annual remuneration to Directors awarded through the annual General Meeting or pension benefits, or participates in a share option program or result based remuneration arrangement

• whether the relevant person has or represents business relations with the Company

The Board of Directors does not include representatives of the Company’s Executive personnel. With a view to effective group management, representatives from the Executive personnel may however serve as Directors in group subsidi-aries.

The Chairman of the Board of Directors is elected by the General Meeting.

Members of the Board of Directors are not elected for more than two years at a time.



77

The annual report provides information on participation in the meetings of the Board of Directors and information to illustrate the expertise and capacity of the members of the Board of Directors and identify which members are consid-ered to be independent.

Members of the Board of Directors are encouraged to own shares in the Company.

Composition of Board of Directors:

According to the Articles of Association § 5 The Company’s Board of Directors shall consist of four to seven directors elected by the shareholders. The Company endeavours to adapt Directors’ backgrounds, competence, capacity and affiliation to the Group’s business activities and its need for diversity.

The Board of Directors consists of the following persons:

Helge Møgster, Chairman. Mr Møgster was appointed to the Board in 2000. He is one of the main owners of Møgster Offshore AS, the main shareholder of DOF ASA, and of Laco AS, the main shareholder of Austevoll Seafood ASA. Mr Møgster has extensive experience over the years from both the offshore shipping activities and fishing industry. He holds board positions in several companies, including being the Chairman of the Board of DOF Subsea AS.

Helge Singelstad, Deputy Chairman. Mr Singelstad was appointed to the Board in 2008. He is CEO of Laco AS and Chairman of the Board of Austevoll Seafood ASA and Lerøy Seafood Group ASA. Mr Singelstad holds a degree in engineering from Bergen Engineering College, he is a business school graduate from the Norwegian School of Economics and Business Administration (NHH), and he has a first year degree from the law school at the University of Bergen (UiB). Mr Singelstad has extensive experience from various types of businesses such as oil & gas and seafood sector.

Wenche Kjølås, Mrs Kjølås was appointed to the Board in 2006. She is CEO in Grieg Maturitas since 2009. Mrs Kjølås holds a Master in Economics and Business Administration from NHH. She has experience from various industries in Norway and international, incl. shipping, seismic, seafood, food and retail. Mrs Kjølås has Board experience from different listed companies, and serves today on the Board of Grieg Seafood ASA, Innovation Norway AS and Chair in Flytoget AS, in addition to several other companies.

Oddvar Stangeland, Mr Stangeland was appointed to the Board in 2004. He started his career with DOF in 1982 as Technical Manager. He was CEO in DOF ASA from 1985 – 2005. Mr Stangeland holds a degree in Marine Engineering

and Naval Architecture (MSc) from the Norwegian Institute of Technology (NTH) in Trondheim. He holds board positions in various companies.

Karoline Møgster, Mrs Møgster was appointed to the Board in 2012. She is a lawyer from the University of Bergen (Candidata Juris) and in addition holds a master degree in accounting and auditing (MRR) from Norwegian School of Economics (NHH). She has many years’ experience as a lawyer with the law firm Thommessen AS, and is now employed as a lawyer in Møgster Management AS. She holds board positions in Laco AS and several companies within the Laco Group.

The Boards autonomy:

Except for the Chairman Helge Møgster, the Deputy Chairman Helge Singelstad and Karoline Møgster, the members of the Board of Directors are independent of the Company’s major shareholders and the Company’s main business relations. All members of the Board are independent of Company’s Executive personnel. There are no conflicts of interest between any duties to the Company of the members of the Board of Directors or the Company’s management, and their private interests or other duties. No members of the management team of the DOF Group are Directors.

Directors are elected by the annual General Meeting for a term of two years.

Directors’ ownership of shares directly and indirectly:

No of Shares

Share- holding

Board of Directors

Helge Møgster* Chairman 11 910 281 10.73 %

Helge Singelstad Deputy Chairman 12 000 0.01 %

Karoline Møgster* Board member 2 769 281 2.49 %

Oddvar Stangeland Board member 1 024 684 0.92 %

Wenche Kjølås Board member 3 000 0.00 %


* Via Laco AS, the Møgster family, including Helge Møgster and Karoline Møgster, have indirect control of 99.53% of the shares in Møgster Offshore AS, which owns 51.22% of the shares in DOF ASA.


78

9. The work of the Board of DirectorsThe Board of Directors agrees on an annual schedule for its work, with particular emphasis on objectives, strategy and implementation.

The Board of Directors from time to time issues instructions for its own work as well as for the Executive personnel with particular emphasis on clear internal allocation of responsi-bilities and duties. The Chief Executive Officer / Managing Director (CEO), the Chief Financial Officer (CFO) and the Director of Legal Affairs are obliged and authorised to participate in the meetings of the Board of Directors so long as nothing to the contrary has been decided.

In total six ordinary Board meetings have been arranged during 2014. Helge Singelstad and Oddvar Stangeland have attended all meetings and the rest of the Board have attended five Board meetings each this year.

In order to ensure a more independent consideration of matters of a material character in which the Chairman of the Board is, or has been, personally involved, the Board of Directors’ consideration of such matters, if any, is chaired by another member of the Board.

The Company has an Audit committee. The majority of the members of the committee are independent of the Company’s executive personnel and material business contacts.

The Board of Directors evaluates its performance and expertise annually.

Board responsibilities:

Norwegian law regulates the tasks and responsibilities of the Board of Directors. These include overall management and supervision of the Company. Towards the end of each year the Board adopts a detailed plan for the subsequent financial year. This plan covers the monitoring of the Company’s operations, internal control, strategy development and other issues. The Company complies with the deadlines published by the Oslo Stock Exchange with regards to interim reports.

Instructions to the Board of Directors:

The Board’s instructions are extensive and were last revised on 28.03.2008. The instructions cover the following points: the Board’s responsibilities and obligations, the guidelines and instructions for the CEO’s information and reporting to the Board and the Board’s procedures.

Board committees:

The appointment and election of a Nomination committee is regulated by the Company’s Articles of Association.

The Audit committee has responsibilities related to financial reporting, the independent auditor and risk management, and prepares issues for consideration by the Board of Directors.

The two committees are solely responsible to the full Board of Directors and their authority is limited to making recommendations to the Board. The independent auditor usually attends the meetings of the Audit committee. The CEO and other Directors are entitled to attend if they so desire.

Current members of the Audit committee are Helge Singelstad, Wenche Kjølås and Karoline Møgster.

The Board of Directors’ self-evaluation:

Each year, a special Board meeting is organised on topics related to the Group’s operations and the Board of Directors’ duties and working methods. The Board’s working methods and interaction are discussed on an ongoing basis.

10. Risk management and internal controlThe Board of Directors ensures that the Company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the Company’s activities. Internal control and the systems also encompass the Company’s corporate values and ethical guidelines.

The Board of Directors carries out an annual review of the Company’s most important areas of exposure to risk and its internal control arrangements.

The Board of Directors regularly receives reports that cover financial status and important Key Performance Indicators for the operating companies within the Group.

The quarterly financial statements and management reports are also subject to review at quarterly meetings of the Board of Directors.

The Board holds an annual meeting with the Company’s auditor where the auditor gives an assessment on important internal control areas. The Directors present a review of the Company’s financial status in the annual report.



79

11. Remuneration of the Board of DirectorsThe remuneration of the Board of Directors shall at all times reflect the Board’s responsibility, expertise, time commitment and the complexity of the Company’s activities.

The remuneration of the Board of Directors is not linked to the Company’s performance. The Company shall not grant share options to members of the Board of Directors. Members of the Board of Directors and / or companies with which they are associated will normally not take on or be given specific assignments for the Company. If they nevertheless are requested to take on such assignments this will be disclosed to and discussed by the full Board. The remuneration for such additional duties must in any case be approved by the Board.

The annual report provides information on remuneration paid to each member of the Board of Directors. Remuneration, if any, in addition to normal directors’ fees will be specifically identified.

The directors’ fees are decided by the annual General Meeting. The directors’ fees are not linked to the Company’s performance.

None of the members of the Board have during 2014 received remuneration from the Company in addition to being directors.

12. Remuneration of the Executive personnelThe Board of Directors is required by law to establish guidelines for the remuneration of the members of the Executive personnel. These guidelines are communicated to and approved by the annual General Meeting. The Board of Directors’ statement on the remuneration of Executive personnel is a separate appendix to the agenda for the General Meeting. It will in each case be made clear which aspects of the guidelines are advisory and which, if any, are binding. The General Meeting vote separately on each of these aspects of the guidelines.

The guidelines for the remuneration of the Executive personnel set out the main principles applied in determining the salary and other remuneration of the Executive personnel.

The guidelines help ensure convergence of the financial interests of the Executive personnel and the shareholders.

Performance-related remuneration of the Executive personnel in the form of bonus programmes or the like are linked to value creation for shareholders or the Company’s earnings performance over time. Such arrangements emphasise performance and are based on quantifiable factors over which the employee in question can have influence. See note 29 in respect of guidelines for remuneration to Executive personnel.

The existing remuneration policy, approved on the 2014 annual General Meeting, allows performance related remuneration. The Executive personnel currently have no performance-related remuneration or share option pro-grammes.

13. Information and communication

The Board of Directors has established guidelines for the Company’s reporting of financial and other information based on openness and taking into account the requirement for equal treatment of all participants in the securities market.

The Company each year publishes an overview of the dates for major events, such as its annual General Meeting, publication of interim reports, public presentations, dividend payment date if appropriate etc. A calendar of most important dates is published on the Oslo Stock Exchange and the Company’s website.

All information distributed to the Company’s shareholders is published on the Oslo Stock Exchange and on the Company’s web site simultaneously with distributions to shareholders.

14. Take-oversThe Board of Directors adheres to generally accepted and approved Corporate Governance principles for how it will act in the event of a take-over bid.

During the course of a take-over process, the Boards of Directors and management of both the party making an offer and the target company, have an independent responsibility to help ensure that shareholders in the target company are



80

treated equally, and that the target company’s business activities are not disrupted unnecessarily. The Board of the target company has a particular responsibility to ensure that shareholders are given sufficient information and time to form view of the offer.

The Board of Directors will not seek to hinder or obstruct take-over bids for the Company’s activities or shares.

In the event of a take-over bid for the Company’s shares, the Company’s Board of Directors will not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by the general meeting following announcement of the bid.

If an offer is made for a Company’s shares, the Company’s Board of Directors will issue a statement evaluating the offer and making a recommendation as to whether shareholders should or should not accept the offer. If the Board finds itself unable to give a recommendation to shareholders on whether or not to accept the offer, it will explain the background for not making such a recommendation. The Board’s statement on a bid will make it clear whether the views expressed are unanimous, and if this is not the case it will explain the basis on which specific members of the Board have excluded themselves from the Board’s statement. The Board will consider whether to arrange a valuation from an independent expert. If any member of the Board or Executive personnel, or close associates of such individuals, or anyone who has recently held such position, is either the bidder or has a particular personal interest in the bid, the Board will arrange an independent valuation in any case. This also applies if the bidder is a major shareholder. Any such valuation will be either appended to the Board’s statement, reproduced in the statement or referred to in the statement.

Any transaction that is in effect a disposal of the Company’s activities will be decided by a general meeting of shareholders.

The Company’s Articles of Association contain no limitations with regard to share acquisitions. The shares are freely transferable. Transparency and equal treatment of share-holders is a fundamental policy. If and when a bid is made for the Company, the Board of Directors will make a well-founded evaluation of the bid.

15. AuditorThe Company’s auditor submits the main features of the plan for the annual audit of the Company to the Audit committee.

The auditors participate in meetings of the Board of Directors that deal with the annual accounts. At these meetings the auditor reviews any material changes in the Company’s accounting principles, comments on material estimated accounting figures and reports material matters on which there has been disagreement between the auditor and the Executive personnel of the Company.

The auditor once a year presents to the Audit committee a review of the Company’s internal control procedures, including identified weaknesses and proposals for improvement. In addition the auditor attends all the meetings in the Audit committee.

The Board of Directors holds a meeting with the auditor at least once a year at which neither the CEO nor any other member of the Executive personnel is present.

The Board of Directors reviews guidelines in respect of the use of the auditor by the Company’s Executive personnel for services other than the audit of the Company.

The Board of Directors reports the remuneration paid to the auditor at each annual General Meeting, including details of the fee paid for audit work and any fees paid for other specific assignments, provided such information is available at the time of the annual General Meeting.

The auditor each autumn prepares a plan for auditing activities in the subsequent year.

In addition to ordinary audit, the auditing company has provided consultancy services related to accounting.

Reference is made to the notes to the consolidated financial statements.



81

Report of the Board of Directors

Operating segmentsDOF ASA (“the Company”) is the parent company of an international corporation involved in the ownership and operation of a fleet with activities within three main segments: PSV (platform supply vessels), AHTS (anchor handling tug support vessels) and Subsea (construction and subsea vessels). The Subsea segment is also a service provider to the subsea project market. All of the DOF Group’s (“the Group”) PSVs and the majority of the AHTS fleet are owned via wholly- owned subsidiaries in Norway and in Brazil. The main share of the subsea fleet and all service activities are owned via the subsidiary DOF Subsea AS.

The Group has a modern fleet of offshore vessels with an average age of nine years. The Group also owns a modern fleet of ROVs (Remote Operated Vehicles).

At 31 December 2014, the Group had 75 vessels in operation, of which four were on hire from external ship owners and two were owned by companies in which the Company has a minority interest. The Group has seven wholly/partly-owned vessels under construction, with scheduled delivery in the period 2015-2017. Long-term contracts have been secured for all the newbuildings after delivery.

The Group’s wholly and partly owned fleet, including newbuildings, had the following composition at year-end:

• 25 platform supply vessels (PSV)

• 21 anchor handling tug supply vessels (AHTS)

• 32 subsea / construction vessels (CSV)

• 64 ROVs and 2 AUVs

The Group has offices on all five continents and is the main /part owner of six service / engineering companies with specialised expertise related to subsea operations.

The head office is located in Storebø, Austevoll municipality.

The Group’s business concept is to engage in long-term and industrial offshore business. The Group is an international supplier of offshore services and follows a main strategy of investing in advanced offshore vessels combined with highly qualified personnel. The Group operates with a contract strategy which focuses on long-term contract coverage for

the main share of its fleet. The nominal value of the Group’s contracts was approximately NOK 65.6 billion as of February 2015, of which NOK 30.9 billion represents the value of options.

Group activities in 2014The PSV segment

The PSV fleet is mainly owned by the subsidiaries DOF Rederi AS (DOF Supply) and Norskan Offshore SA (Norskan), which own 19 and five vessels respectively. In 2014, the PSV fleet comprised 25 vessels, 21 of which have mainly operated in the North Sea, whereas the remaining vessels have been operating on fixed contracts in Brazil. The PSV fleet has had an average utilisation of 90% throughout the year. During 2014, five of DOF’s vessels have wholly or partly operated in the North Sea spot market, however through the autumn of 2014, DOF Supply secured several firm contracts for this part of the fleet, and by the end of the year had only one vessel exposed to the spot market. Two vessels, Skandi Fjord (built in 1983) and Skandi Falcon (built in 1990) were laid up in December after completion of two contracts in Venezuela. The Company owns a minority interest (15%) in one PSV, Skandi Aukra, which had operations in West Africa for part of the year, then moved to the North Sea for a fixed contract.

Norskan’s PSV fleet comprises five vessels, four of which have operated on firm contracts in Brazil and the fifth on a contract in the North Sea. A rebuilding of one of the vessels, Skandi Yare, started at the end of the year to prepare the vessel for a new four-year contract with Petrobras.

AHTS

At 31 December 2014, the AHTS fleet comprised 21 vessels, including two newbuildings scheduled for delivery in 2015. The fleet is owned by Norskan (12 vessels), DOF Supply (three vessels) and DOF Deepwater AS (five vessels). DOF Deepwater is a joint venture, owned 50 / 50 by the Company and Akastor ASA. Ten of the vessels in the Norskan fleet are Brazilian built vessels, including the two vessels under construction. In 2014, this part of the fleet has operated exclusively on firm contracts with Petrobras as the main client. In April 2014, Norskan took delivery of one newbuilding, which was the first vessel in a series of three. After delivery, the vessel started on an eight-year contract for Petrobras. Norskan owns additionally two vessels with


82

international flags and these have operated on firm contracts in Brazil and in Argentina in 2014. One of these vessels completed its contract with Petrobras in September, and sailed to Europe to dry-dock for classification. She subsequently sailed to Singapore to mobilise for a firm contract in Australia.

DOF Supply owns three vessels, two of which have partly operated in the spot market throughout 2014. Skandi Stord started the year in the North Sea spot market, but was awarded a firm contract in the Mediterranean during third quarter. Skandi Admiral operated in Brazil on a firm contract until September, then sailed to Europe to dry-dock for classifica-tion and arrived in the North Sea in December.

DOF Deepwater’s fleet has mainly been on firm contracts throughout the year in South America and in Asia Pacific. Skandi Saigon together with Skandi Møgster started on a one-year contract for Total in Argentina at the start of the year. In addition, DOF Deepwater’s fleet comprises one vessel that has operated on a firm contract in Brazil and three vessels operating in Australia and New Zealand. One of the vessels completed a firm contract in August and then operated on the spot market in Asia Pacific. Towards the end of the year, this vessel was awarded a firm contract in Australia.

The Company owns a minority interest in Skandi Iceman, delivered in 2013. Since delivery, the vessel has operated in the North Sea and the Mediterranean.

Maritime operations

The Group’s management activities are performed by the subsidiaries DOF Management AS, DOF UK Ltd. and Norskan Offshore Ltda. DOF Management AS / DOF UK Ltd. are responsible for the marine operation of the Group’s fleet situated outside of Brazil, and for the project management of all newbuildings and conversion-/and docking projects in the Group. DOF Management AS has subsidiaries in Norway, Singapore, Australia and Argentina. Norskan Offshore Ltda is responsible for marine operations for the Group’s fleet operating in Brazil.

Subsea

At the end of December 2014, the Group partly or wholly owned 32 subsea vessels, of which five were newbuildings with scheduled delivery between 2015 and 2017. The Company owns 51% of the shares in DOF Subsea Holding AS, of which

the main share of the fleet and the project-related activities are owned via DOF Subsea AS (DOFSUB). DOFSUB has also hired four vessels from external owners to fulfil the company’s subsea project activities in the North Sea and the Gulf of Mexico. DOFSUB owns and operates 64 ROVs and two AUVs, including vehicles under construction.

DOFSUB owns and manages six subsea service companies and has expertise in surveying, diving services, ROV operations, construction and IRM (Inspection, Repair & Maintenance) etc. DOFSUB’s subsea service operation comprises a global operation with offices on every continent and a staff of approx. 1,850 at year-end 2014.

In 2014, DOFSUB sold two vessels to new owners: Skandi Bergen (CSV / ROV) and Skandi Skolten (AHTS / Subsea vessel). Aker Oilfield Services exercised its purchase option for Skandi Aker in February 2014, with delivery scheduled for February 2015.

DOFSUB’s fleet is a combination of vessels on firm contracts and vessels utilised for subsea project activities. The number of vessels utilised for project activities has seen an increase in 2014, up to 11 vessels by December, four of which were hired in from external owners. The Group’s subsea project business represented approximately 53% of total revenues in 2014, and project business is categorised according to the following geographic regions: Atlantic region (North Sea, Mediterranean and West Africa), North America region (Gulf of Mexico and Canada), Asia Pacific and Brazil. There has been a high level of project-related activity in 2014, with the most significant increase recorded in North America where project revenues doubled. Three of the hired vessels operate in the Gulf of Mexico and comply with “Jones Act” requirements. Project- related business in the other regions has been satisfactory throughout the year, although a decline was registered in the Atlantic region towards the end of the year.

The Group’s subsea fleet on firm contracts during 2014 comprised 20 vessels. This part of the fleet reported an average utilisation rate of 95% in 2014. The Group has seven vessels on firm contracts in Brazil, and renewed several contracts in this region throughout the year. In December 2014, one vessel was redelivered to DOF Subsea after having operated on a bare boat contract for the Australian Customs and Border Control for four years. As of 2015, this vessel will be included in DOF Subsea’s project fleet in Asia.

report of the board of directors


83

Three of the partly owned vessels in operation are 50% owned by DOFSUB via a joint venture with Technip; one diving vessel in Norway and two pipe-laying vessels in Brazil. All three vessels operate on long-term contracts.

Newbuildings

The Group has seven vessels under construction with scheduled delivery in the period from 2015 to 2017.

Norskan has two AHTS vessels under construction (Vard AH11) which are part of a series of three vessels, the first of which was delivered in 2014. Construction is taking place at the Vard shipyard in Brazil, and delivery of the two newbuildings is scheduled during first and second half 2015. Both vessels have been secured contracts with Petrobras after delivery, with a respective duration of eight and four years. Long-term financing agreements have been signed for both newbuildings.

DOFSUB has one construction vessel (Vard OSV12) under construction at Vard’s shipyard in Norway. The vessel has a length of 161 metres, beam of 32 metres and will be fitted with a 900-ton crane and a 650-ton pipe-laying tower for flexible pipes. The vessel was delivered from the yard in March and has sailed to the Netherlands to install the crane and VLS tower. Completion of fitting work is scheduled for the second half of 2015, and the vessel has been assigned a five-year contract with Technip. DOFSUB has secured long-term financing for the newbuilding.

DOFSUB has signed a joint venture with Technip for 50/50 ownership of four pipe laying vessels (Vard 305/316) currently under construction, two of which are being built in Norway and two in Brazil. The vessels contracted in Norway will be equipped with a 650-ton pipe-laying tower and will be the largest pipe-laying vessels built within this segment. The vessels to be built in Brazil will be equipped with a 350-ton pipe-laying tower. The vessels are scheduled for delivery in 2016 and 2017, and are all secured eight-year contracts with Petrobras after delivery.

The marketThe market in the North Sea has been weaker in 2014 when compared with the previous year. Continuing the trend from previous years, the spot market has displayed seasonal fluctuations, but showed very weak development towards the end of the year – a trend which has been sustained in 2015. Low oil prices and an increased focus on costs among the oil

companies have caused postponement of several projects and a generally lower level of activity within all OSV segments. The average number of vessels in the North Sea has remained stable throughout the year, i.e. approximately 300 vessels in total, of which approximately 100 vessels with operations on the spot market. The outlook among market players in this region is negative, and the rates for firm contracts are also under significant pressure. The number of firm contracts allocated in this region has been low since Q3 2014.

The Brazilian market is also facing severe competition with and correspondingly downward trend in rates. The corruption scandal in Petrobras has to an extent caused a delay in the decision-making processes, which has in turn generated larger uncertainty with respect to entering into contracts in Brazil.

The majority of oil companies have signalled significant cuts in costs and investments, resulting in reductions in exploration activities and postponement of scheduled projects/field developments. Not only is there a lower requirement for tonnage, these changes have also resulted in extended decision- making processes related to contract awards and contract renewals.

Quality, health, safety and the environment

The Group continued to invest in Health, Safety, the Environment and Quality (HSEQ) in 2014, according to the goals to prevent occupational injuries and illness, to maintain a good and safe working environment, to maintain a focus on environmental aspects, and to sustain regular operations.

All companies in the Group employ the same management systems. A principal HSEQ plan has been compiled for the entire Group, along with joint objectives and focus areas. The Group now has ISO certification within three subsidiaries: Norskan, DOF Subsea and DOF Management.

There is currently a predominant trend in the industry to make savings, but the Group will not allow this to limit its focus on continual improvements to safety. The industry is also impacted by a culture market by constant introduction of new requirements on documents and procedures, a time-consuming process that does not necessarily bring improvements to safety. The Group aims to focus on simplifying processes for both vessel crews and the onshore organisation, by implementing time-saving solutions that will require much less time spent on reports and more time for planning, risk analysis and safe management of operations.



84

The Group reported a reduction in the total recordable case frequency of personnel injuries (TRFC) in comparison with 2013, i.e. 1.80 in 2014 and 1.89 in 2013. Lost time injury (LTIF) showed a marginal increase, with 0.68 in 2014 and 0.66 in 2013.

The calculation formula used to measure personnel injuries and lost time injuries is the number of incidents times 1 million per working hour.

Taking the different Group companies individually, Norskan and DOFSUB reported an improvement in frequency of personnel injuries while DOF Management had a slightly higher frequency.

DOF Management

DOF Management is responsible for marine operation of the Group’s fleet, with the exception of Brazil. Since 1995, DOF Management has had certification in accordance with the ISM code, and ISO 9001 and ISO 14001 certificates since 2002.

In 2015, DOF Management will require recertification for the above-mentioned standards.

Several of the HSEQ measures implemented in recent years have produced positive results in loss time injury (LTIF). By comparison with other Norwegian offshore shipowners, DOF Management can report a positive frequency of personnel injuries.

Norskan

Norskan is responsible for marine operation of the Group’s fleet in Brazil. Since 2004, Norskan has had certification in accordance with the ISM code, ISO 9001, ISO 14001 and OHSAS 18001.

Norskan has implemented its “Safe Behaviour Programme” for the majority of employees in Brazil. Training in HSEQ management and safety culture will continue in 2015.

Over the past eight years, Norskan has been ranked among the best marine companies working on contracts for Petrobras - Peotram. In 2014, Norskan was ranked number 1.

DOF Subsea

DOF Subsea has achieved certification from DNV GL in accordance with the following standards: IS0 9001:2008, ISO 14001:2004 and OHSAS 18001. In 2014, the company reported in excess of 5 million working hours and had a personnel injury frequency of less than 0.2 per million working hours.

In the past year, the company has maintained a strong focus on training and improvements to working procedures both onshore and offshore. No recordable discharges to the external environment were registered in 2014.

External environment

The Group owns the newest and most modern fleet on the market. All Group companies have ISO 14001 certificates issued by DNV GL. In 2014, the Group carried out a GAP analysis targeting global certification in accordance with ISO 50001. The Group also participates in the Carbon Disclosure Project (CDP) and the report issued for 2014 shows an improvement of 37% since 2013.

The Group’s standard is to employ environmentally friendly technical solutions on all its newbuildings. Operational measures such as route planning, hull cleaning, polishing propellers and optimising propulsion systems are also under continuous evaluation. Improved systems for monitoring oil consumption were also installed on vessels in 2014.

The significant environmental aspect of the companies’ operations is regularly reviewed in order to ensure compliance with new international environmental requirements and to maintain a focus on the environment within the different organisations.

Personnel resources and working environment The strength of the Group is represented by its employees and the way they work together as a global company irrespective of regions and national borders. At year-end, the number of employees and hired-in personnel totalled 5,375, an increase of approximately 460 persons compared with 2013. The increase in personnel is evenly distributed between maritime operations (DOF Management/Norskan) and DOFSUB. The low level of activity in the North Sea towards the end of 2014 required DOFSUB to introduce temporary redundancies so the company could adapt to the market situation.

Sickness absence rates in 2014 were at an acceptable level and within the defined targets set for most regions. The rates were 3.9% for DOF Sjø (Scandinavian maritime employees), 2.6% for DOF Management (onshore employees) and 3.3% for Norskan. DOFSUB’s sickness absence rate is lower than the KPI of 4%. There has been a notable reduction in sickness



85

absence for maritime personnel, and the Group aims to sustain its proactive approach towards reducing sickness absence in 2015, including investments in measures to promote health.

The Group regularly carries out employee surveys in order to chart the working environment, and has established a system for whistleblowing. The Board of Directors evaluates the working environment and verifies their evaluation via the results of investigations. The Board of Directors has no knowledge of any employees experiencing discrimination in any form due to gender, ethnic background or other factors.

Availability of manpower and development of our employeesThe Group has placed a significant focus in 2014 on training maritime personnel and developing expertise in connection with STCW 2010. All the Group companies follow a Group-wide strategy for further development of expertise within the different segments, including management development, training in simulators and in anchor handling.

Personnel turnover in the maritime segments of the Group is down, with a particular reduction during the second half of 2014 for DOF Management / DOF Sjø. Turnover in Norskan in Brazil remains high. The supply of maritime expertise has increased, probably due to the market situation in the North Sea. The Group has also witnessed an improvement in availability of qualified crew in Brazil towards the end of 2014. Availability of qualified crew in Australia and in Argentina remains a major challenge. Turnover in 2014 for DOFSUB was below 2%.

In order to ensure efficient control and planning for all regions, both segments – maritime operations and subsea operations – have implemented projects to introduce joint personnel systems across all regions.

The Group aims to provide all employees with a safe working environment where they can advance their careers, develop their expertise and have a flexible working day. Our focus on our fundamental values – respect, integrity, team work, performance and safety – has resulted in an improvement in individual efficiency and productive attitudes among our employees. The Group has a long-term plan for training and development of its employees. As part of this plan, DOFSUB has completed a number of courses for employees during 2014, via DOF Academy.

Working standards and equal opportunitiesThe Group aims for comprehensive management of diversity at all levels of the organisation. Systems are established in the personnel policy to promote equal opportunities and prevent discrimination on the basis of ethnicity, origin, religion and philosophy. Due to its global reach and strong rate of growth, the Group’s employees comprise an international group of employees both onshore and offshore. The Group has always pursued a strategy of recruiting the most qualified candidates based on expertise, qualifications and personal qualities.

The Group’s active approach to recruitment and management of diversity will continue in the years to come and has solid roots within the corporate management as one of the main driving forces for the Group’s HR and crewing departments. As in previous years, the Group has implemented measures in 2014 to encourage more women to apply for technical vacancies. In 2014, the ratio of women to men onshore in Norway was the same as in 2013 with 42% women and 58% men.

The Group follows a practice which conforms to interna-tional standards for human rights, and Group operations are managed in accordance with fundamental labour standards. Our guidelines and standards are based on the ILO Conven-tion that prohibits all use of forced labour or child labour. The Group recognises and respects the employees’ right of association, organisation and collective bargaining, and the Group’s guidelines conform to the labour regulations stipulated by all local authorities.

Code of Business Conduct and anti-corruptionThe Group’s definition of its social responsibility is to achieve good commercial profitability in a sustainable manner in line with fundamental ethical values, respect for humans, the environment and society.

The Code of Business Conduct has now been valid for several years and the principal policies and guidelines are regularly reviewed and communicated both internally and to external parties. Central guidelines in the Code cover business integrity and ethics, equal rights and opportunities for employees/new recruits. The process to establish joint systems has continued in 2014 and the Group companies have now established joint manuals, standards and procedures for all employees.



86

The Group practises zero tolerance of bribery and corruption. The Group has developed an electronic training module for ethical guidelines and commercial conduct that is available to and obligatory for all employees, and is also available on the Group’s website: www.dof.no.

Risk management and internal control

The Group’s risk management and internal control are based on principles in the latest revision to the Norwegian recommendation for corporate governance dated 30 October 2014, ref. www.nues.no.

The Group management is responsible for ensuring satisfactory monitoring of risk and internal control, including a focus on full exploitation of business opportunities and establishing cost-efficient solutions, in addition to a focus on ensuring good and reliable financial reporting which will allow for correct decision-making.

The Group carries out thorough and detailed budgeting processes at all levels and on an annual basis in order to prepare for the next year’s budget, which is submitted to the corporate Board of Directors for approval. Procedures have been established for weekly and monthly reporting on operations, investments, financing and liquidity. The Board of Directors receives monthly and quarterly operating reports, including status for HSEQ and HR, and information on the market. The Board of Directors considers the Group’s reporting procedures to be satisfactory and in compliance with the requirements on risk management and internal control.

The work involving establishment of global standards and system solutions is a continuous process. The Group makes use of a joint, global accounting / operating system (ERP system) and is currently implementing global HR systems, to go live in 2015. A financial manual is implemented via the Group’s joint Business Management System (BMS) which implies joint guidelines for internal control, joint policies, defined requirements and distribution of responsibility for the different departments and regions in the Group. The Group has implemented a joint financial management system (treasury system) for financial reporting and control.

The Group’s BMS is available to all employees with the intention to help the Group reach its goals, including operational factors, quality, safety and the environment. The purpose of the BMS is to introduce and provide guidance relating to the Group’s visions and values, with a focus on

the following areas: management and commitment, policies and strategic decision-making, responsibility within the organisation and exploitation of resources, assessment and management of risk, planning, implementation and monitoring, audits and improvement measures.

Salary and other remuneration of the executive managementThe Chairman of the Board is authorised by the Board of Directors to stipulate the salary paid to the CEO. Pursuant to Norwegian company legislation, the Board of Directors has compiled a personal statement regarding salary and other remuneration to executive management which will be presented and discussed during the ordinary General Meeting. We refer to the notes to the accounts for more detailed information on remuneration to executive management.

ShareholdersThe Company is listed on the Oslo Stock Exchange. At 31 December 2014, the Group had 3,048 shareholders. The largest shareholder is Møgster Offshore AS with control of 51.2% of the share capital.

The Annual General Meeting in May 2014 gave the Board of Directors authorisation to issue up to 27,750,000 shares. The Company’s Board of Directors also have authorisation to purchase up to 10% of the Company’s shares at a highest value of NOK 100 per share and lowest value of NOK 20 per share. The authorisations have not been utilised in 2014. There will be a proposal put forward to the Annual General Meeting 2015 to renew the authorisation.

Consolidated financial statementsIn accordance with IFRS 11, the Group has amended its accounting of entities that jointly control an arrangement ( joint venture) with effect from 1 January 2014. Historically, joint ventures have been accounted for according to the proportionate consolidation method. As of 1 January 2014, these investments must be reported according to the equity method. The Group’s Board of Directors and management are of the opinion that the proportionate consolidation method provides a more reliable platform on which to evaluate historical earnings and risk exposure when compared with the equity method. For more detailed information, please refer to notes 5 and 6 on management and segment reporting.



87

Group income in 2014 totalled NOK 10,196 million (NOK 9,415 million). The increase in operating income is mainly attributed to the higher rate of activity within subsea projects. The Group took delivery of one new vessel and sold two vessels in 2014. The total gain from these sales was NOK 468 million (NOK 8 million). The Group owns three joint ventures and the net profit generated by this business was NOK 77 million (NOK 67 million) in 2014.

Operating profit before depreciation (EBITDA) amounted to NOK 3,495 million (NOK 2,865 million), with an operating profit (EBIT) of NOK 2,450 million (NOK 1,751 million).

Net financial items in 2014 were NOK - 2,028 million (NOK - 1,820 million), of which an unrealised loss on foreign exchange relating to long-term debt and interest/currency derivatives totalled NOK 553 million (NOK - 576 million). There have been substantial fluctuations in foreign exchange rates throughout the year, particularly as the NOK weakened against the USD, having a considerable impact on the last quarter of 2014.

With effect from Q4 2013, the Group introduced hedge accounting for part of the revenues related to the Brazil operation, as this business is exclusively based on long-term charter contracts in USD, secured with debt in corresponding currency.

Pre-tax profit for the year amounted to NOK 422 million (NOK - 69 million) and the profit figure after tax was NOK 500 million (NOK - 52 million).

The tax cost reflects the different tax regimes, including taxation for shipping companies in Norway and Great Britain. The tax costs return a positive result of NOK 78 million (NOK 17 million) and include repayment of NOK 40 million in tax to the subsidiary DOF Rederi, subsequent to a successful court case against the Central Office Foreign Tax Affairs involving tonnage tax.

The consolidated balance sheet at year-end 2014 totalled NOK 32,331 million (NOK 30,734 million). The increase in balance sheet total is mainly attributed to increased activity in the Group and foreign exchange rate fluctuations. Non-current assets – in principle ships, equipment and instalments paid for newbuildings – saw a marginal change in relation to 2013. During the course of the year, the Group sold two vessels and took delivery of one vessel. The ROV/AUV fleet are increased by seven units in 2014.

The Group has a net interest-bearing debt of NOK 20,609 million as of 31 December 2014 (NOK 20,181 million). Net interest-bearing debt, taking into account unemployed capital

(advance payments for vessels under construction) amounted to NOK 20,126 million. The current interest bearing liabilities due for payment in 2015 totals NOK 5,625 million (NOK 2,854 million), ref. note 21, of which NOK 1,039 million represents bond loans and NOK 2,575 million is so-called balloon payments on long-term mortgage loans. The remaining part is in principal normal amortization on long-term debt and overdraft facilities.

Net cash flow from operating activities including interest payments was NOK 1,255 million (NOK 1,338 million). Net cash flow from investing activities was negative at NOK 81 million (negative figure of NOK 1,478 million) and cash flow from financing activities was negative at NOK 866 million (NOK 397 million).

Cash and cash equivalents for the Group at 31 December 2014 was NOK 2,609 million (NOK 2,219 million).

Parent company accountsThe parent company accounts show income of NOK 239 million (NOK 305 million) and an operating profit of NOK 95 million (NOK 112 million).

The net financial result is NOK - 185 million (NOK 42 million). Profit after tax totalled NOK -43 million (NOK 166 million).

The parent company’s balance sheet as of 31 December 2014 amounted to NOK 9,396 million (NOK 9,312 million), of which book equity totalled NOK 4,820 million (NOK 4,864 million).

Financing and capital structureThe Group’s operations are mainly financed through long-term loans secured with vessel and equipment mortgages in addition to unsecured bond loans which represent approximately 22% of the total external financing. Export credits mainly in Norway and Brazil constitute a substantial share of the Group’s long- term mortgage debt.

The Group has been active on the Norwegian High Yield bond market since 2004, both with issues and repurchasing loans. In Q1 2014, the Group issued a new bond loan of NOK 700 million with a term of four years, of which NOK 235 million was utilised for repurchase. The Group aims to reduce future financial expenses by reducing the bond loan exposure. The Group therefore plan to redeem the three bond loans maturing in 2015 and 2016. The loan maturing in March 2015 (approx. NOK 340 million) is repaid.



88

The Group’s vessels built in Brazil are financed via BNDES, where a long-term tenor of up to 18 years has been secured with fixed interest rates throughout the period. The vessels built in Norway are partly financed by Export Credit Norway, with a maturity of 12 years and GIEK and commercial banks providing guarantees and via ordinary bank loans secured by mortgages.

The Group’s remaining contractual obligations related to newbuildings at year-end totals approx. USD 1,200 million. This constitutes three wholly-owned vessels and four vessels owned 50/50 with Technip. Firm contracts with Petrobras have been secured for six of the newbuildings, and one newbuilding has a firm contract with Technip. Long-term financing has been established for the three vessels due for delivery in 2015. The construction contracts with the shipyard are based on fixed prices and with instalments of up to 20% throughout the construction period with the remaining amount paid on delivery. The last four vessels are scheduled for delivery in 2016 - 2017, and financing is expected to be sourced via export credits in Norway and Brazil. The process to source financing for these newbuildings is in progress, of which the Brazilian part of is about to be signed.

Vessels and equipment constitute 74% of the Group’s total assets. Broker valuations of the Group’s fleet have remained stable throughout the year, and the strength of the USD has contributed to the fact that the broker estimates in NOK has not marked down despite weaker markets. In total, broker valuations constitute significant added value in relation to book assets as of 31 December 2014. The Group’s significant covenants for prevailing loan agreements are based on a minimum value-adjusted equity of 30%, or 20% if contract coverage is higher than 70%, and minimum unrestricted cash and cash equivalents of NOK 500 million. Value adjusted equity as of 31 December 2014 was 34%. The Group’s contract coverage over the next 12 months was 79% at year-end, and unrestricted cash and cash equivalents totalled NOK 1,971 million.

The Group’s current interest bearing liabilities totalled NOK 5,625 million at year-end. The current interest bearing debt comprises balloon instalments, bond loans, and revolving credit facilities. The Group has year to date 2015 redeemed or re-financed approximately NOK 1,800 million of in total NOK 3,614 million in balloon payments and bond loans maturing in 2015. The refinancing of the remaining part of the balloon instalments is included in the ordinary course of business and is planned refinanced through secured bank financing. Refinancing of further approximately NOK 1,200 million is secured, and is planned to be completed during

the first half 2015. The remaining bond debt of NOK 700 million in addition to ordinary instalments will be paid throughout the year at maturity.

RiskFinancial and liquidity risk

The Group is exposed to financial and liquidity risk repre-sented by the continuous requirement for refinancing and securing long-term financing of newbuildings. Among the Group’s vessels under construction, four of the vessels, owned by DOFSUB and Technip, have not secured long-term financing. The vessels are scheduled for delivery in 2016 and beyond, and have access to funding via export credits in Norway and in Brazil.

Since 2006 the Group has affected a substantial newbuilding programme and, despite the periods of unrest on the financial markets during this time, has achieved satisfactory new long- term financing for the newbuildings and refinancing of the Group’s existing fleet. This is mainly due to the stable market value of the Group’s fleet and high contract coverage. The Group has a modern and advanced fleet, and gives high priority to achieving a balanced gearing of the fleet to contract coverage and fleet age. Continued weak oil price may have a negative impact on pricing and the accomplishment of refinancing in the years to come.

Currency risk

The Group is exposed to fluctuations in exchange rates as the Group’s income is mainly generated in currencies other than NOK. Financial risk management is provided by a central economy and treasury department which has been charged with the objective of minimising any negative impact on the Group’s cash flow and financial results. Financial derivatives are utilised when suitable to hedge such exposure. Alterna-tively, the Group’s long-term debt is adapted to earnings in the same currency. The Group has implemented hedge accounting for parts of its activities, aiming to minimise volatility for the Group’s operating and financial results in the future.

The Group’s newbuilding programme is currency-neutral in that commitments to shipyards, charter contracts and long- term financing are all in the same currency.

Interest risk

The Group is exposed to changes in interest rates as parts of the Group’s liabilities have a floating rate of interest. The Group has reduced its interest rate exposure by entering into interest rate swap agreements. Moreover, all vessels with financing



89

via BNDES in Brazil are guaranteed a fixed rate of interest throughout the term of the loan, this source of financing represents 21% of the Group’s total interest bearing debt.

Of the Group’s total long-term debt, approximately 60% has a fixed rate of interest, including financing via BNDES and Export Credit Norway.

Credit risk

The Group’s credit risk is considered to be low as the Group’s customers traditionally have good financial capability to meet their obligations and have high credit ratings. Historically, the Group has had a limited level of bad debts. The sustained low oil prices and difficult market situation may result in changes to the credit ratings for the Group’s customers, which in turn will increase the Group’s credit risk.

Market and price risk

The Group is exposed to cost increases in general, including prices on newbuilding and delayed delivery of newbuildings. All the Group’s building contracts are based on fixed prices, with scheduled down payments during the construction period. The Group seeks to reduce price risk by signing contracts with suppliers with the necessary financial strength and expertise to complete projects in accordance with agreements.

The Group is exposed to market fluctuations which may result in a lower utilisation rate and reduced earnings for the Group’s fleet and services. Attempts are made to reduce this risk by entering into contracts that secure long-term charters for the main part of the fleet.

The market is expected to be weaker during 2015 compared to last year. There is a considerable backlog on the newbuilding side within the PSV segment, and the challenging market year to date has resulted in several deliveries being postponed to 2016. The impact of the oil companies’ decisions to reduce their activity is expected to enhance throughout the year. There is therefore a reason to believe that 2016 will be a challenging year.

The Group has secured a high back-log for 2015. However the market has developed negative during 2nd half 2014 and first part of 2015, hence there is an increased risk regarding utilisation of the Group’s fleet after end of contracts.

Going concernThe Group has today a satisfactory economic and financial position which provides the grounds for continued operations.

The Group aims to sustain its strategy for securing long-term utilisation for the major part of its fleet. Both the consolidated financial statements and the parent company’s accounts are submitted on a going concern assumption, cf. section 3-3a of the Norwegian Accounting Act.

Allocation of annual resultThe parent company financial statements have returned a loss of NOK -43 million. The Board of Directors proposes allocating this figure to other reserves.

The consolidated financial statements have returned a profit of NOK 500 million, of which NOK 419 million is allocated to minority interests and NOK 81 million is allocated to other reserves.

Events after balance sheet dateThe Group reported a serious incident in February 2015, when a seaman onboard Skandi Skansen died at work while at shore in Stavanger. The accident occurred during work while changing one of the gypsies for the vessel’s anchor handling winch system. The vessel’s first-aid team and the emergency services from Stavanger hospital were called immediately, but the injured seaman was pronounced dead shortly after the accident. An investigation team has been put together to examine all the factors related to the accident. The Group has also established an action to monitor and implement measurements to develop and strengthen the safety culture in the Group and to review all relevant organisational factors in order to ensure such an accident will not happen again.

In February, Norskan signed an agreement for the sale of five vessels – four PSVs and one AHTS vessel. The buyer is a Brazilian equity fund managed by Mantiq Investimentos and Mare Investimentos, located in Rio de Janeiro and Sao Paulo. The vessels are delivered to new owner and the settlement is received. Under the agreement, Norskan shall continue to operate the vessels and at the latest until the current contracts have been concluded. Norskan has a market risk on two of the vessels related to renewal of the contracts in 2015.

DOFSUB delivered Skandi Aker to new owners in February.

DOFSUB has signed a 7+3 year contract for Skandi Hawk in the Philippines. Based on this contract, DOFSUB has purchased Skandi Hawk from DOF Rederi (wholly-owned by the Company).



90

Karoline Møgster Board member

Helge Møgster Chairman

Storebø, 27 April 2015The Board of Directors for DOF ASA

Oddvar Stangeland Board member

Helge SingelstadDeputy Chairman

Mons S. AaseCEO

Wenche Kjølås Board member

DOFSUB has signed an IRM contract with Chevron for three years and with a two-year option for Skandi Protector (former Ocean Protector) in Australia.

OutlookFollowing the sale of vessels in 2015, the Group wholly/partly owns 71 vessels, of which 64 vessels are in operation as of today. The main part of the Group’s fleet, all newbuildings included, is secured on firm contracts. The Group has as such secured a good utilisation for its vessels in 2015.

The Group remains loyal to its strategy for long-term utilisation of its fleet, and is working hard to secure and

increase firm utilisation of the fleet to the greatest extent possible. The number of DOF Subsea’s vessels on firm contracts compared to the vessels in the project market is assumed to remain stable in 2015. The heavy fall in oil prices intensify the oil companies’ focus on cost reductions and capital rationalisation. In the opinion of the Board of Directors, this implies lower activity, rates under pressure and more unpredictable market prospects than normal.Based on the Group’s high contract backlog, the Board of Directors expects today an operational EBITDA in line with, or somewhat weaker than last year.



91

A n n ua l R e p o rt 2 014

92

Financial Statements DOF Group


dof group

93

Consolidated Income Statement

Amounts in NOK million Note 2014 2013

Operating income 7, 15 10 196 9 415

Payroll expenses 8, 29 -4 077 -3 927

Other operating expenses 9, 15, 28, 29 -3 170 -2 698

Share of income of associates and joint venture 30, 31 77 67

Net gain (loss) on sale of tangible assets 468 8

Operating expenses -6 702 -6 550

Operating profit before depreciation and impairment - EBITDA 3 495 2 865

Depreciation and impairment 4, 13, 14 -1 045 -1 115

Operating profit - EBIT 2 450 1 751

Finance income 10 82 76

Finance costs 10 -1 355 -1 357

Realised gain/loss on currencies 10 -203 37

Unrealised gain/loss on currencies 10 -336 -570

Net change in unrealised gain/loss on derivatives 10 -217 -6

Net financial items -2 028 -1 820

Profit (loss) before taxes 422 -69

Tax expense (income) 11 78 17

Profit (loss) for the year 500 -52

Attributable to Non-controlling interest 419 139

Controlling interest 81 -191

Earnings and diluted earnings per share (NOK) 12 0,73 -1,72

Consolidated Statement of Comprehensive Income

Profit (loss) for the year 500 -52

Other comprehensive income net of tax

Items that may be subsequently reclassified to profit or loss

Currency translation differences 381 -26

Cash flow hedge 11, 25, 26 -332 -94 Share of other comprehensive income of joint ventures and associates 31 -21 -103 Total 28 -223

Items that not will be reclassified to profit or loss

Defined benefit plan actuarial gains / losses 8 -2 1

Total -2 1

Total other comprehensive income for the year net of tax 27 -221

Total comprehensive income for the year net of tax 527 -274

Total comprehensive income attributable to Non-controlling interest 495 495

Controlling interest 31 -769

See note 36 for restated financial statement for 2013.The notes on pages 98 to 137 are an integral part of these consolidated financial statements.


dof group

94

Consolidated Statement of Financial Position

Amounts in NOK million Note 31.12.2014 31.12.2013 01.01.2013

Assets

Deferred tax assets 11 638 327 249

Goodwill 13 418 403 392

Intangible assets 1 056 730 641

Vessels 14, 21 21 887 22 187 21 965

ROV 14, 21 1 002 817 886

Newbuildings 14 483 406 423

Machinery and other operating equipment 14, 21 494 478 442

Tangible assets 14, 21 23 866 23 888 23 716

Investments in associated companies and joint-ventures 30, 31 1 246 1 188 909

Investments in shares and units 26 5 5 5

Other non-current receivables 16, 26 507 278 610

Non-current financial assets 1 759 1 471 1 524

Total non-current assets 26 681 26 090 25 882

Fuel reserves and other inventory 84 70 54

Trade receivables 17, 26 2 331 1 832 1 346

Other receivables 18, 25, 26 626 524 455

Current assets 2 957 2 356 1 801

Restricted deposits 639 734 895

Cash and cash equivalents 1 971 1 484 1 045

Cash and cash equivalents included restricted deposits 19, 26 2 609 2 219 1 940

Total current assets 5 650 4 645 3 796

Total assets 32 331 30 734 29 678



dof group

95

Amounts in NOK million Note 31.12.2014 31.12.2013 01.01.2013

Equity and liabilities

Share capital 20 222 222 222

Share premium 1 230 1 230 1 230

Other equity 1 957 1 929 2 318

Non-controlling interests 3 458 2 965 2 950

Total equity 20 6 866 6 346 6 720

Deferred tax 11 49 78 103

Pensions 8 53 48 35

Non-current provisions for commitments 103 126 138

Bond loan 21, 26 4 124 4 722 4 164

Debt to credit institutions 21, 26 13 091 14 527 14 793

Non-current derivatives 25, 26 384 356 375

Other non-current liabilities 21, 26 32 47 251

Non-current financial liabilities 17 631 19 652 19 583

Current portion of bond loan and debt to credit institution 21, 26 5 840 3 080 2 135

Accounts payable 22, 26 1 192 1 040 603

Tax payable 11, 26 190 107 90

Public duties payable 26 101 92 86

Other current liabilities 23, 25, 26 409 290 323

Current liabilities 7 732 4 610 3 237

Total liabilities 25 465 24 388 22 958

Total equity and liabilities 32 331 30 734 29 678



Karoline MøgsterBoard member


Storebø, 27 April 2015The Board of Directors DOF ASA


Helge Singelstad Deputy Chairman

Mons S. AaseCEO



dof group

96

Consolidated Statement of Changes in Equity

Amounts in NOK millionShare

capital

Sharepremium

fund

Other equity - Retained

earnings

Other equity - Currency translation

differences Total

Non- controlling

interestTotal

equity

Balance at 01.01.2014 222 1 230 2 051 -122 3 381 2 965 6 346

Profit (loss) for the year 81 81 419 500

Currency translations differences - 304 304 77 381

Cash flow hedge -342 - -342 10 -332

Pensions -2 -2 1 -2

Other comprehensive income -11 -11 -10 -21

Total comprehensive income for the year -273 304 31 495 527

Changes in non-controlling interests -4 -4 -3 -7

Total transactions with owners - - -4 - -4 -3 -7

Balance at 31.12.2014 222 1 230 1 774 182 3 408 3 458 6 866

Balance at 01.01.2013 222 1 230 2 409 -92 3 769 2 950 6 720

Profit (loss) for the year -191 -191 139 -52

Currency translations differences -31 -31 4 -27

Cash flow hedge -93 -93 - -94

Pensions 2 2 -1 1

Other comprehensive income -53 -53 -51 -103

Total comprehensive income for the year -242 -124 -365 91 -275

Changes in non-controlling interests -23 -23 -76 -99


Balance at 31.12.2013 222 1 230 2 144 -215 3 381 2 965 6 346

Effect of IFRS 11

Balance at 31.12.2013 restated 222 1 230 2 144 -215 3 381 2 965 6 346



dof group

97

Consolidated Statement of Cash flows


Profit (loss) before taxes 422 -69

Profit/loss on disposal of tangible assets -468 -8

Depreciation and impairment 13, 14 1 045 1 115

Net interest cost 10 1 273 1 233

Foreign exchange losses/gains 806 625

Share of loss/profit from associates 31 -78 -67

Change in trade receivables 17 -499 -486

Change in accounts payable 22 151 437

Change in other working capital items not specified above -108 -171

Cash from operating activities 2 544 2 609

Net interest paid -1 283 -1 240

Tax paid -6 -32

Net cash generated from operating activities 1 255 1 338

Payments received for sale of tangible assets 13 2 082 87

Purchase of tangible assets 13 -2 001 -1 455

Purchase of shares -6 -29

Payments received on long-term receivables -156 -81

Net cash used in investing activities -81 -1 478

Proceeds from borrowings 4 036 3 186

Repayment of borrowings -4 895 -2 690

Non-controlling interest 32 -7 -99

Net cash flow from financing activities -866 397

Net changes in cash and cash equivalents 307 257

Cash included restricted cash at the start of the period 19 2 219 1 940

Exchange gain/loss on cash and cash equivalents 83 22

Cash included restricted cash at the end of the period 19 2 609 2 219



dof group

98

Notes to the Consolidated Financial Statements

Note Page

1 General 99

2 Summary of significant accounting principles 99-105

3 Financial risk management 105-106

4 Accounting estimates and assessments 107-108

5 Impact implementation of IFRS 11 109

6 Segment information 110

7 Operating income 111

8 Payroll expenses 111

9 Other operating expenses 111

10 Financial income and expenses 112

11 Tax 112-113

12 Earning per share 114

13 Goodwill 114

14 Tangible assets 115-116

15 Lease 117

16 Non-current receivables 117

17 Trade receivable 118

18 Other current receivables 118

19 Cash and cash equivalents 118

20 Share capital and share information 119

21 Interest bearing liabilities 120-121

22 Accounts payable 122

23 Other current liabilities 122

24 Fair value estimation 122

25 Hedging activities 123-124

26 Financial assets and liabilities: Information on the balance sheet 125-126

27 Guarantee 127

28 Related parties 127

29 Remuneration to executives, Board of Directors and auditor 128

30 Companies within the Group 129

31 Investments in jointly controlled companies and associated companies 130-132

32 Significant acquisitions in the year 133

33 Contingencies 133

34 Subsequent events 133

35 Foreign exchange rates 133

36 Transition note IFRS 11 133

Confirmation from the Board of Directors and CEO 155


dof group

99

1 General

DOF ASA is a public limited company registered in Norway. The head office is located at Storebø in the municipality of Austevoll, Norway.

DOF is involved in business of industrial offshore activities as owner and operator of modern offshore vessels.

DOF ASA is the parent company of a number of companies, as specified in note 30.

The Group’s activities comprise three segments, as specified in note 6.

The Annual Accounts were approved for publication by the Board of Directors on 27 April 2015.

The financial report is divided in the Group consolidated and the parent company accounts. The report starts with the Group accounts.

If not stated otherwise, all amounts in the notes are in NOK million.

2 Summary of significant accounting principlesThe consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the EU.

The consolidated financial statements have been prepared in accordance with the historical cost convention with the following exceptions: financial instruments at fair value through profit or loss and non- derivative financial instruments designated as hedging instruments are subsequently carried at fair value.

Going concernThe Group has a satisfactory economical and financial position which provides the basis for the going concern assumption in accordance with the Norwegian Accounting Act 3-3a.

Consolidation principlesSubsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities assumed and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the carrying value of previously held equity interest is re-measured to fair value at the acquisition date; any gain or loss arising from such re-measurement is recognised in the income statement.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to

the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in the income statement or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within consolidated statement of changes in equity.

Goodwill is measured as excess of consideration transferred plus the amount of non-controlling interest over the fair value of the identifiable net assets acquired in the business combination. Per IFRS 3, where a business combination is achieved in stages, the amount of previously held equity interests is remeasured to fair value as at the acquisition date. The goodwill calculation now becomes the excess of purchase consideration, the fair value of previously held equity interests and the amount of non-controlling interest over the fair value of identifiable net assets acquired. Where ‘negative’ goodwill arises from this calculation, the difference is recorded directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated when necessary amounts reported by subsidiaries have been adjusted to conform to the Group’s accounting policies.

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in the consolidated statement of changes in equity. Gains or losses on disposals to non-controlling interests are also recorded in the consolidated statement of changes in equity.

Joint arrangementsEffective from 1st of January 2014, the Group applied IFRS 11 to all jointly controlled arrangements. Under IFRS 11 investments in jointly controlled companies are classified as either joint operations or joint ventures depending on the contractual rights and obligations for each investor. DOF Group has assessed the nature of its jointly controlled companies and determined them to be joint ventures. Joint ventures are accounted for using the equity method. The Group has historically applied the proportionate consolidation method when accounting for joint ventures. For comparative purposes, the Group has restated 2013 financial statements, see note 36.

Under the equity method of accounting, interests in joint ventures are initially recognized at cost and adjusted thereafter to recognize the Group’s share of post-acquisition profits or losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investments in the joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

AssociatesAssociates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted

Notes to the Consolidated Financial Statements


dof group

100

for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition. The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to the income statement where appropriate.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate has been impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, recognising the amount in the income statement adjacent to ‘share of net income of associates’ in the income statement.

Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognised in the income statement.

Segment reportingThe Group’s primary reporting format is determined by business segment, and the Group operates within three business segments:

1) PSV (Platform Supply vessel)

2) AHTS (Anchor Handling Tug Supply Vessel)

3) CSV (Construction Supply Vessel)

The Group’s business is reported in the main geographical areas where the customers are located.

Conversion of foreign currencya) Foreign currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The functional currency is mainly NOK, USD and BRL (Brazilian real). The consolidat-ed financial statements are presented in Norwegian Kroner (NOK).

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transactions date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the conversion at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised as financial income or costs. Where assets and liabilities are settled at period end, this will give rise to a realized exchange gain or loss which will be carried to the income statement. Where accounting balances are reassessed at the period end but not settled, this will give rise to an unrealized exchange gain or loss also taken to the income statement.

c) Group companies

The results and financial position of all the Group entities that have a functional currency which differs from the presentation currency are converted into the presentation currency as follows:

I. assets and liabilities presented at consolidation are converted to presentation currency at the foreign exchange rate on the date of the consolidated statement of financial position,

II. income and expenses are converted using the average rate of exchange, and

III. all resulting exchange differences are recognised in other compre-hensive income and specified separately in consolidated statement of changes in equity as a separate post.

When the entire interest in a foreign entity is disposed of or control is lost, the cumulative exchange differences relating to that foreign entity are reclassified to the income statement.

Classification of assets and liabilitiesAssets are classified as current assets when:

• the asset forms part of the entity’s service cycle, and is expected to be realised or consumed over the course of the entity’s normal operations; or

• the asset is held for trading; or

• the asset is expected to be realised within 12 months of consolidated statement of financial position date

All other assets are classified as non-current assets.

Liabilities are classified as short-term when:

• the liability forms part of the entity’s service cycle, and is expected to be settled in the course of normal production time; or

• the liability is held for trading; or

• settlement of the liability has been agreed upon within 12 months of the consolidated statement of financial position date; or

• the entity does not have an unconditional right to postpone settlement of the liability until at least 12 months after the consolidated statement of financial position date.

All other liabilities are classified as non-current liabilities.

Cash and cash equivalentsCash and cash equivalents include cash on hand and deposits held at call with banks. Restricted deposits are classified separate from unrestricted bank deposits under cash and cash equivalents. Restricted deposits include deposits with restriction past 12 months.

Trade receivablesTrade receivables are amounts due from customers for services performed in the ordinary course of business. If collection is expected within one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Accrued, not invoiced revenues are classified as trade receivables. Work in progress is presented as part of accrued uninvoiced revenue.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost. Discounting is ignored if insignificant. A provision for impairment of trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s carrying value and the estimated recoverable value, which is the present value of estimated future cash flows, discounted at the original effective interest rate. Changes to this provision are recognised in the income statement.


dof group

101

Tangible AssetsTangible assets are recognised at cost less accumulated depreciation and accumulated impairment losses. The cost of property, plant and equipment comprises its purchase price, borrowing costs and any directly attributable costs of bringing the asset to working condition. If significant, the total expenditure is separated into separate components which have different expected useful lives.

Depreciation is calculated on a straight-line basis over the useful life of the asset. Depreciable amount equals historical cost less residual value.

Depreciation commences when the asset is ready for use. The useful lifes of property, plant and equipment and the depreciation method are reviewed periodically in order to ensure that the method and period of depreciation are consistent with the expected pattern of financial benefits expected to be derived from the assets.

When property, plant and equipment are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are derecognised and any gain or loss resulting from their disposal is included in the income statement.

For vessels, residual value is determined based on estimated fair value at the end of their useful lifes.

Ordinary contract costs and ordinary costs related to mobilization are capitalised and amortised on a systematic basis consistent with the contract period. Contract period is based on best estimates taken into consideration normally initial agreed period and probability for optional periods. A probability judgment is performed in assessing whether the option period shall be included in the contract period.

Assets under constructionAssets under construction are capitalised as tangible assets during construction as installments are paid to the yard. Building costs include contractual costs and costs related to monitoring the project during the construction period. Borrowing costs directly attributable to the construction of qualifying vessels, are added to the cost of those vessels. The capitalization of borrowing costs will cease when the vessels are substantially ready for their intended use. Assets under construction are not depreciated before the tangible asset is in use.

Impairment of assetsAll assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the income statement.

The recoverable amount is the higher of an asset’s net selling price and value in use, see note 4 for discussion on calculation.

Periodic maintenanceOrdinary repairs and maintenance costs of assets are charged to the income statement during the financial period in which as they are incurred.

The cost of major modernization, upgrading and replacement of parts of property, plant and equipment are included in the asset’s carrying amount however when it is probable that the Group will derive future financial benefits from upgrading the assets. See note 4 for further discussion of periodic maintenance.

LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The Group leases in external vessels on operating leases. At the same time, the Group leases out own vessels on bareboat and time charter contracts.

Where the Group retains substantially all the risks and rewards of ownership, the leases are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments The Group’s assets held under finance leases include several ROVs. Each lease payment is allocated between the liability and finance charges. The corresponding lease obligations, net of finance charges, are included in other non-current payables. The interest element is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.

GoodwillGoodwill arises on the acquisition of subsidiaries and represents the excess of the purchase consideration transferred plus the amount of non-controlling interest over the fair value of identifiable net assets acquired. Goodwill comprises the difference between nominal and discounted amounts in terms of deferred tax, synergy effects, organisa-tional value and key personnel and their expertise.

Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment.

Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

DebtDebt is recognised initially at fair value, net of transaction costs incurred. Debt is subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Fees paid on the establishment of debt are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Interest expenses related to the borrowing are recognised as part of cost of an asset when the borrowing costs accrue during the construction period of a qualifying asset. Borrowing costs are capitalised until the time the fixed asset has been delivered and is ready for its intended use.


dof group

102

Debt is classified as current liability unless the borrowing involves an unconditional right to postpone payment of the liabilities for more than 12 months from consolidated statement of financial position date. The short-term portion of such debt includes undiscounted instalments due in the next 12 months.

ProvisionsProvisions are recognised when, and only when, the Group faces an obligation (legal or constructive) as a result of a past event and it is probable (more than 50%) that a settlement will be required for the obligation, and that a reliable estimate can be made of the amount of the obligation.

Provisions are reviewed at each consolidated statement of financial position date and adjusted to the best estimate. When timing is significant for the amount of the obligation, it is recognised at the present value. Subsequent increases in the amount of the obligation due to interest accretion are reported as interest costs.

Contingent liabilities:Contingent liabilities are defined as:

I. possible liabilities resulting from past events, but where their existence relies on future events;

II. liabilities which are not reported on the accounts because it is improbable that the commitment will result in an outflow of resources;

III. liabilities which cannot be measured to a sufficient degree of reliability.

Contingent liabilities are not reported in the accounts, with the exception of contingent liabilities which originate from business combinations. Significant contingent liabilities are presented in the notes to the accounts, except for contingent liabilities with a very low probability of settlement.

Contingent asset is not recognised in the accounts, but is disclosed in the notes to the accounts if there is a certain degree of probability that the Group will benefit economically.

EquityOrdinary shares are classified as equity. Transaction costs related to equity transactions, including tax effect of transaction costs, are directly charged against equity.

Transactions with non-controlling interestsThe Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of the non-con-trolling interests is recorded in consolidated statement of changes in equity. Gains or losses on disposals to non-controlling interests are also recorded in consolidated statement of changes in equity.

Revenue recognitionThe Group recognises income when it is probable that future economic benefits will flow to the entity and when the amount of income can be reliably measured. Sales income is shown net of discounts, value-added tax and other taxes on gross rates.

a) Chartering of vessels

The Group’s operational vessels are mainly leased out on charter parties; that is bareboat charter or time charter. On the time-charter contracts, customers lease the vessels with crew included. The charterer determines (within the contractual limits) how the vessel is to be

utilised. There is no time charter revenue when the vessels are off-hire, for example during periodic maintenance.

In addition to the lease of vessels, the company has a number of agreements for lease of beds on vessels (hotel), provisions, extra crews and other relevant services.

Lease income related to the vessels is recorded on a linear basis over the lease period. The lease period starts from the time the vessels is made available to the customer and expires on the agreed return date. Crew rental and compensation for coverage of other operating costs are recorded over the contract period on a linear basis.

b) Subsea projects

Some contracts are based on daily rates while others are lump sum/fixed price contracts. Lump sum contract income is recognized in accordance with the stage of completion of the contract, see note 4.

Income on projects may increase or decrease based on variations to the original contract. These variations will be recognized based on signed purchase/variation orders.

c) Dividend income

Dividend income is recognised when the right to receive payment is established.

d) Interest income

Interest income is recognised using the effective interest method.

Current and deferred income taxThe current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the consolidated statement of financial position date in the countries where the Company’s subsidiar-ies and associated companies operate and generate taxable income. Permanent establishment of the operation will be dependent of the Group’s vessels amount operating in the period. Tax is calculated in accordance with the legal framework in those countries in which the Group’s subsidiaries, associated companies or vessels with permanent establishment operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated accounts. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is Settled, see note 4.

Deferred income tax assets are recognised on the balance sheet to the extent it is probable that the future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax is calculated on the basis of temporary differences related to investments in subsidiaries and associated companies, except when the company has control of the timing of the reversal of the temporary differences, and it is probable that reversal will not take place in the foreseeable future.

Both tax payable and deferred tax are recognised directly in equity, to the extent they relate to items recognised directly in equity. Similarly any tax related to items reported as other comprehensive income is presented together with the underlying item.


dof group

103

Companies under the shipping company tax regimeThe Group is organised in compliance with the tax regime for shipping companies in Norway. This scheme entails no tax on profits or tax on dividends from companies within the scheme. Net finance, allowed for some special regulations, will continue to be taxed on an ongoing basis at a rate of 27%. In addition tonnage tax is payable, which is determined based on the vessel’s net weight. This tonnage tax is presented as an operating expense.

Employee benefitsThe Group operates various post-employment schemes, including both defined benefit and defined contribution pension plans.

(a) Defined contribution plans

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Defined benefit plans

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

Past-service costs are recognised immediately in the income statement.

Financial assets The Group classifies its financial assets in the following categories: financial instruments at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of profiting from short-term price fluctua-tions. Derivatives are also categorised as held for trading unless they are designated for hedge accounting. Assets in this category are classified as current assets.

b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the consolidated statement of financial position date. Loans and receivables are classified as “accounts receivable’’ and ‘’other receivables”, and as ‘’cash and cash equivalents’’ in the consolidated statement of financial position. Those exceeding 12 months are classified as financial assets. Loans and receivables are carried at amortized cost.

Regular purchases and sales of financial assets are recognised on the trade date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.

Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category, including interest income and dividends, are presented in the income statement within financial income or financial loss in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statement as part of financial income when the Group’s right to receive payments is established. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques.

The Group assesses at consolidated statement of financial position date whether there is objective evidence that a financial asset or a Group of financial assets is impaired. See separate paragraph in the note regarding trade receivable.

Derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured on a continuous basis at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group has various types of hedging relationships that are not documented as hedge accounting and measured at their fair value with the resulting gain or loss recognised immediately in the income statement. The Group designates certain derivatives and non-derivative financial instruments as hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).

The fair values of various derivative instruments used for hedging purposes are disclosed in note 25. Movements on the hedging reserve in other comprehensive income are shown in the consolidated statement of changes in equity.

The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity is less than 12 months. Trading derivatives are classified as a current asset or liability.


dof group

104

The Group currently applies hedge accounting on two types of cash flow hedges;

a. the hedging of interest rate risk on long term debt; and

b. the hedging of USD/BRL spot exchange rate risk arising from highly probable income denominated in USD.

At the inception of the transaction, the Group documents the relation-ship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts accumulated in equity are reclassified to income statement when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate debt is recognised in the the income statement within ‘finance income/expenses’.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Events after the Consolidated statement of financial position dateNew information regarding the Group’s financial position at the consolidated statement of financial position date is included in the accounts. Events occurring after the consolidated statement of financial position date, which do not impact the Group’s financial position, but which have a significant impact on future periods, are presented in the notes to the accounts.

Use of estimatesThe preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4. Changes in accounting estimates are recognised for the period in which they occurred. If the changes also apply to future periods, the effect of the change is distributed over current and future periods.

Consolidated statement of cash flows The statement of cash flows is prepared in accordance with the indirect model.

Government grantsThe Group recognises grants when it is reasonably secured that it will comply with the required conditions for the grant and the grant will be received. Government grants are presented as a deduction in the Payroll expenses in the Income Statement and Statement of Comprehensive income.

New standards, amendments and interpretations adopted by the Group The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2014 and have a material impact on the Group: IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The amend-ment did not have a significant effect on the Group financial statements.

IFRS 11, ‘Joint arrangements’ focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. DOF has assessed their joint arrangements as being joint ventures, thereby accounting for them under the equity method as stipulated in IFRS 11. See note 36 for the impact of adoption on the financial statements.

IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles.

Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial liabilities. This amendment clarifies that the right of offsetting must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the Group financial statements.

Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets. This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13.

Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014 are not material to the Group.

New standards, amendments and interpretations not yet adoptedA number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these consolidated financial statements. None of these standards are expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:

IFRS 9, ‘Financial instruments’, addresses the classification, measure-ment and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through OCI and fair value through comprehensive income.

IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relation-ship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes.


dof group

105

Documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. The Group is yet to assess IFRS 9’s full impact.

IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpreta-tions. The standard is effective for annual periods beginning on or after 1 January 2017 and earlier application is permitted. The Group is assessing the impact of IFRS 15.

3 Financial risk management

Financial risk factorsThe Group is exposed to a variety of financial risks: Market risk (including currency risk and price risk), interest risk, credit and liquidity risk and capital structure risk. The Group’s overall risk management seeks to minimise potential adverse effects of the Group’s financial performance.

The financial risk management program for the Group is carried out by the Treasury department under policies approved by the Board of Directors. Treasury identifies, evaluates and hedges financial risks in co-operation with the various operating units within the Group. The Board approves the principles of overall risk management as well as policies covering specific areas, such as currency exchange risk, interest risk and credit risk.

Market riskForeign exchange riskThe Group operates globally and is exposed to foreign exchange risk arising from various currency exposures, basically with respect to USD, NOK, BRL, GBP and AUD. Foreign exchange risk arises from future commercial transactions, contractual obligations (assets), liabilities and investments in foreign operations.

The Group’s reporting currency is NOK and the parent companies functional currency is NOK. Foreign exchange risk arises when future commercial transactions, contractual obligations (assets) and liabilities are denominated in a currency which is not functional currency. The Group aims to achieve a natural hedge between cash inflows and cash outflows and manages remaining foreign exchange risk arising from commercial transactions, assets and liabilities through forward contracts and similar instruments as appropriate.

Hedging of foreign exchange exposure is executed on a gross basis and foreign exchange contracts with third parties are generated at Group level. The Group’s risk management policy is to hedge anticipated transactions in each major currency.

The Group has implemented hedge accounting for parts of the revenues with the objective to reduce the volatility in the operational and financial result due to foreign exchange risk.

Currency changes in receivables, liabilities and currency swaps are recognised as a financial income/expense in the profit and loss statement. Fluctuation in foreign exchange rates will therefore have an effect on the future results and balances.

The table below shows the impact on the Group’s statement of financial posititon at year end 2014 if there had been a appreciation/depreciation of NOK against USD, GBP and BRL of 5%. The base case is the currency rate stated at 31.12.2014, see note 35. At year end a 5% appreciation would increase market-to-market of financial instruments (1) and increase (decrease) profit (loss). Financial instruments directly to equity (2) would not affect profit&loss, but decrease the amount booked to other comprehensive income. Debt to credit institutions (3) would have increased/decreased profit and loss by NOK 180,0 million.

A strenghten USD to NOK will on long term have a positive impact on the Group’s future earnings and cash in NOK, still the Group aims to achieve a natural hedge between cash inflows and cash outflows on company level. Current receivables and liabilities are often in the same currency and are normally due within 30 days. Changes in foreign currency rates against subsidiary with other functional currency than NOK, will have limited effect on the Group consolidated statement of comprehensive income.

Price riskThe Group is exposed to price risk at two main levels:

• The costs of construction of new assets and replacements of assets are sensitive to changes in market prices.

• The demand for the Group’s vessels is sensitive to changes to oil price developments, exploration results and general activity within the oil-industry. This can effect both the pricing and the utilisation of the Group’s assets.

The Group aims to reduce the price risk by having the majority of its vessels on long term charter contracts. To mitigate the price and performance risk on subsea project contracts the Group aims to base the majority of these contracts on day rates rather than lump sum. The building contracts with the yards and related suppliers are based on fixed prices and payment terms of the assets.

Credit and liquidity riskCredit and liquidity risk arises from cash and cash equivalents, derivatives, financial instruments and deposit with banks as well as credit exposures to clients. The Group has as policy to limit the amount of credit exposure to any single financial institution and bank and has limited concentration of credit risk towards single financial institutions.

The Group’s credit exposure is mainly towards customers who historically have had good financial capability to meet their obligations and high credit rating. The Group’s credit risk to clients is considered as low, however a recent decrease in oil-price and weaker markets could increase this risk and impact the clients rating going forward.

Liquidity risk management implies maintaining sufficient cash and marketable securities, the available funding through committed credit facilities and the ability to close market positions. The Group aims to maintain flexibility in its liquidity by keeping committed credit lines available.

5% appreciation 5% depreciation

Derivative financial instruments 1) 110 -112

Financial instruments directly to equity 2) 323 -237

Debt to credit institutions 180 -180

1) The change in MTM (market-to- market) recognised in financial derivatives2) The change in gain/loss recognised in other comprehensive income through hedge accounting


dof group

106

Repayments for loans and derivatives 2015 2016 2017 2018 2019-> Total

Interest bearing liabilities 5 625 3 976 2 289 3 266 7 684 22 839 Interest 1 040 802 650 510 1 256 4 258

Derivatives 83 79 60 55 101 379

Total 6 748 4 858 2 999 3 831 9 041 27 476

Amounts in NOK million+100BPS -100BPS

USD GBP NOK USD GBP NOK

Interest rate swaps 23 3 143 -22 -1 -129

Financial instruments directly to equity 16 - 1 -5 - -1

The Group’s business is capital intensive and the Group may need to raise additional funds through public or private debt or equity financing to execute the Group’s growth strategy and to fund capital expenditures. On the other hand the Group’s assets are new and the potential to increase the cash position through refinancing is good.

The Group’s loan agreements includes terms, conditions and covenants, see note 21.

The Group has routines to report cash flow forecasts on a weekly basis and 5 years cash forecast on a quarterly basis.

Interest riskThe Group’s existing debt arrangements are long term loans both with floating and fixed interest rates. Movements in interest rates will have effects on the Group’s cash flow and financial condition. The Group’s policy is to maintain parts of its debt at fixed interest rates.

The Group manages its cash flow interest risk by using floating-to-fixed interest rate swaps. Such interest swaps have the economic effect of conversion from floating interest rates to fixed interest rates. Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals the difference between fixed interest rates and floating interest rates calculated by reference to the agreed amounts.

The long funding for the Group’s vessels built in Brazil are secured at fixed interest rates for the entire duration of the loans. The duration of these loans are usually between 18 to 20 years. By year-end 60% of the Group’s long term debt was secured at fixed interest.

The Group has an interest risk in the change in value for the interest rates swaps. In accordance with IFRS, the Group provides information about the potential risk with a sensitivity analysis. The table below shows the change in MTM on interest swaps at year end with an increase and decrease of 100 bps in 2014. Interest rates are not reduced to less then zero.

When interest rates increase, equity (liability) will increase (decrease) and profit (loss) will increase (decrease) unless hedge accounting is applied, which only applies to equity.

Capital structure and equityThe main objectives of the Group’s management of its capital structure is to ensure that the Group is able to sustain a good credit rating and thereby achieve good terms and conditions for long term funding which are suitable for the Group’s operation and growth. The Group manages its own capital structure and carries out all necessary amendments to the capital structure, based on continuous assessments of the economic conditions under which the operations take place and the short and medium to long term outlook.

The Group has established standard financial covenants on all long term funding which imply minimum consolidated cash and minimum value adjusted equity for the Group on a consolidated basis. See note 21.

The Group monitors its capital structure by evaluating the debt ratio, which is defined as net interest bearing debt divided by equity plus net interest bearing debt. The Group policy is to maintain debt financing corresponding to 75-80% funding of the new vessels and to continue to have high contractual coverage of the entire fleet.

Tax riskAs a number of our vessels are operating within the special offshore taxation regimes around the world, there is a risk that changes in bilateral tax treaties and local tax regulations might have a negative effect on the Group’s cash flows and financial condition. Further, Transfer Pricing regulations in the various jurisdictions might impose a tax risk for the Group. Different jurisdictions can have a different view on how a particular Group internal transaction shall be priced, and there is always the risk that the tax authorities will question the Group`s Transfer pricing principles and documentation. There is also a risk that the Group`s historical tax compliance might be questioned in tax audits performed by local tax authorities, imposing a risk of supplementary taxation.

Debt ratio 2014 2013

Interest-bearing debt 22 839 22 104

Restricted deposits 639 735

Cash 1 971 1 579

Other interest bearing asset (+)/debt (-) -379 -299

Net debt 20 609 20 088

Total equity 6 866 6 346

Total equity and net debt 27 475 26 435

Debt ratio 75 % 76 %


dof group

107

4 Accounting estimates and assessments

When preparing the annual accounts in accordance with IFRS, the company management has applied estimates based on best judgement and premises considered to be realistic. Situations or changes may occur in the markets which may result in changes to the estimates, thereby impacting the company’s assets, liabilities, equity and result.

Assessments, estimates and assumptions which have a significant effect on the accounts are summarised below:

Vessels:The carrying amount of the Group’s vessels represents 74% of the total statement of financial position. Consequently, policies and estimates linked to the vessels have a significant impact on the Group’s financial statements. In the current market the total fair value of the Group’s vessels is significantly higher than the carrying amount. Depreciation is calculated on a straight-line basis over the useful life of the asset. Depreciable amount equals historical cost less residual value.

Useful life of vesselsThe level of depreciation depends on the vessels estimated useful lives. Estimated useful life is based on strategy, past experience and knowledge of the types of vessels the Groups owns. Useful life of older vessels is individually assessed. There will always be a certain risk of events like breakdown, obsolescence e.g. with older vessels, which may result in a shorter useful life than anticipated.

Residual value of vesselsThe level of depreciation depends on the calculated residual value at the statement of financial position date. Assumptions concerning residual value are made on the basis of knowledge of the market for used vessels. The estimate of residual value is based on a market value of a charter free vessel, and today’s fair value forms a basis for the estimate. Fair values are adjusted to reflect the value of the vessels as if it had been of an age and in the condition expected at the end of the useful life.

Useful life of investments related to periodical maintance Periodic maintenance is related to major inspections and overhaul costs which occurs at regular intervals over the life of an asset. The expendi-ture is capitalised and depreciated until the vessel enters the next periodical maintenance. Estimated life of each periodical maintance program is 5 years. When new vessels are acquired, a portion of the cost price is classified as periodic maintenance based on best estimates.

Impairment of assetsAll assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognised in the statement of comprehensive income.

The recoverable amount is the higher of an asset’s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction less the costs of disposal, while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash-generating unit.

Impairment assessment have been carried out for all vessels and newbuildings as of 31 December. Recoverable amounts are estimated for individual assets . Recoverable amounts may both be net sales value and value in use. The value in use is determined on the basis of the total estimated discounted cash flow, excluding financing expenses and taxes. The management has made material judgments and estimates to determine whether the discounted cash flows generated by those assets are less than their carrying values, including determining the appropriate discount rate to use. The data necessary for the execution of the impairment test are based on management’s estimates of future cash flows, which require estimates to be made for e.g. future day rates, utilisation rates and profit margins. The assumptions used in these cash flows are consistent with internal forecasts. The calcutation of net sales value is based on market valuations of vessels provided by independent third parties. The broker valuations are adjusted to reflect the fair value of time charter and bare boat contracts. These adjustments are based on projected future earnings, cost levels and discount rates. The discount rate (WACC - weighted average cost of capital) used in the impairment tests is in the range of 4.6 % - 7.9 %.

Goodwill is not depreciated, but the Group performs an annual impairment test to determine any impairment requirements. To test for impairment, goodwill is allocated to the Group’s CGU identified according to the operating segment.

The Group has estimated recoverable amount as value in use of the CGU’s by discounting expected cash flow from operations with the weighted average cost of capital. Cash flows are based on budgets presented to the Board covering five years, and do not include any investments unless the investment is committed. Cash flows beyond the budget period is expected to grow in line with inflation rates – estimated to 2%. Management determined budgeted gross margin based on past performance, its expectations of market development and the utilisation of the vessels.

If the test shows that the carrying amount of the unit exceeds the recoverable amount of the unit, the Group recognises an impairment loss.

The impairment loss is allocated against the carrying amount of the assets in the CGU in the following order:

first, reduce the carrying amount of any goodwill allocated to the CGU;

and then,

reduce the carrying amount of other assets of the CGU on a pro rata basis.

Where there is an indication that impairment recognised in previous years no longer exists or has decreased, the reversals of impairment can be recorded in the consolidated statement of comprehensive income, except on goodwill.


dof group

108

Projects income and costsLump sum projects, contract revenue and expenses are recognised in accordance with the stage of completion of a contract as set out in IAS 11. The stage of completion method is calculated by dividing contract costs incurred to date by total estimated contract costs. Revenue earned to date can then be calculated by allocating the percentage of completion based on cost to total contract revenue.

Contract revenue comprises the set amount of revenue agreed by the client in the contract plus variation orders where applicable. Variation orders will only be included in contract revenue to the extent they will likely result in revenue, they are capable of being reliably measured and they have been reviewed and approved by the client.

Cost forecasts are reviewed on a continuous basis and the project accounts are updated monthly as a result of these reviews.

As contract revenue, costs and the resulting profit are recognised as the work is performed, costs incurred relating to future activities are deferred and recognised as an asset in the consolidated statement of financial position. Conversely, where revenue is received in advance of costs being incurred, a deferred liability is recognised in the consolidatec statement of financial position.

Where the outcome of a project cannot be reliably measured, revenue will be recognised only to the extent that costs are recoverable. Where it is probable that contract costs will not be recovered, it is only costs incurred that are recognised in the consolidated statement of comprehensive income.

In the event that it is probable total contract costs will exceed contract revenue, the anticipated loss is immediately recognised as an expense in the consolidated statement of comprehensive income. Expected losses are determined by reference to the latest estimate of project results at completion.

ProvisionsA provision is recognised when there is a legal or constructive obligation arising from past events, or in cases of doubt as to the existence of an obligation, when it is more likely than not that a legal or constructive obligation has arisen from a past event and the amount can be estimated reliably.

The amount recognised as a provision is the best estimate of the expenditure to be incurred. The best estimate of the expenditure required to settle the present obligation is the amount that rationally will have to be paid to settle the obligation at the statement of financial position date or to transfer it to a third party at that time.

Deferred tax assetsDeferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated accounts per IAS 12.

Deferred tax assets are recorded in the consolidated statement of financial position on the basis of unused tax losses carried forward or deductible temporary differences to the extent that it is probable there will be sufficient furture earnings available against which the loss or deductible can be utilised.

Deferred income tax is calculated on temporary differences related to investments in subsidiaries and associated companies, except when the company has control of the timing of the reversal of the temporary differences, and it is probable that reversal will not take place in the foreseeable future.


dof group

109

5 Impact implementation of IFRS 11

Effective from 1 January 2014, the Group changed its accounting of jointly controlled companies to the equity method, based on the implementation of IFRS 11.

Historically, jointly controlled companies have been consolidated proportionally, but from 1 January 2014, investments in jointly controlled companies are consolidated using the equity method. In the opinion of the Board of Directors and management the proportional consolidation method gives a better comprehension of the Groups historical earnings and risk exposure compared to the equity method.

The reporting below is presented according to internal management reporting, based on the proportionate consolidation method of accounting of jointly controlled companies. The bridge between the management reporting and the figures reported in the financial statement is presented below.

Income Statement 2014 2013

Amount in NOK million Management

reporting IFRS Impact 2014 Management

reporting IFRS Impact 2013

Operating income 10 681 -485 10 196 9 754 -339 9 415

Operating expenses -7 350 103 -7 247 -6 651 26 -6 625

Net profit from associated and joint ventures -9 87 77 1 66 67

Net gain on sale of tangible assets 468 - 468 8 - 8

Operating profit before depreciation EBITDA 3 790 -295 3 495 3 112 -247 2 865

Depreciation and impairment -1 127 82 -1 045 -1 193 79 -1 115

Operating profit - EBIT 2 663 -213 2 450 1 919 -168 1 751

Financial income 77 5 82 62 13 76

Financial costs -1 420 65 -1 355 -1 434 77 -1 357

Net realised gain/loss on currencies -212 9 -203 39 -2 37

Net unrealised gain/loss on currencies -441 105 -336 -606 37 -570

Net changes in fair value of financial instruments -218 1 -217 -5 -1 -6

Net financial costs -2 213 185 -2 028 -1 944 124 -1 820

Profit (loss) before taxes 450 -28 422 -25 -44 -69

Taxes 50 28 78 -27 44 17

Profit (loss) 500 - 500 -52 - -52

Financial Position 31.12.2014 31.12.2013

Amount in NOK million Management

reporting IFRS Impact 31.12.2014 Management

reporting IFRS Impact 31.12.2013

ASSETS

Intangible assets 1 103 -47 1 056 781 -51 730

Tangible assets 27 280 -3 413 23 866 26 890 -3 001 23 888

Non-current financial assets 365 1 394 1 759 258 1 214 1 471

Total non-current assets 28 747 -2 066 26 681 27 928 -1 838 26 090

Fuel reserves and other inventory 86 -3 84 70 -1 70

Receivables 3 018 -61 2 957 2 433 -76 2 356

Cash and cash equivalents 2 696 -86 2 609 2 314 -96 2 219

Total current assets 5 800 -150 5 650 4 817 -172 4 645

Total assets 34 547 -2 216 32 331 32 745 -2 011 30 734

EQUITY AND LIABILITIES

Equity 6 866 - 6 866 6 346 - 6 346

Non-current provisions and commitments 133 -30 103 155 -29 126

Non-current liabilities 19 599 -1 968 17 631 21 421 -1 769 19 652

Current liabilities 7 949 -217 7 732 4 822 -213 4 610

Total liabilities 27 681 -2 216 25 465 26 399 -2 011 24 388

Total equity and liabilities 34 547 -2 216 32 331 32 745 -2 011 30 734


dof group

110

6 Segment information

The Group has from 1 January 2014 and in accordance with IFRS 11 changed the principles of accounting for jointly controlled companies. Historically, jointly controlled companies have been consolidated proportionally, but from 1 January 2014, investments in jointly controlled companies are consolidated using the equity method. In the opinion of the Board of Directors and management the proportional consolidation method give a better comprehension of the Groups historical earnings and risk exposure compared to the equity method.

The segment reporing is therefore based on proportional consolidation (management reporting).

Business segmentThe DOF Group operates within three business segments in terms of strategic areas of operation and vessel types. The three different business segments are: PSV (Platform Supply Vessel), AHTS (Anchor Handling Tug Supply Vessel) and CSV (Construction Support Vessel). The subsidiary DOF Subsea is represented as part of the CSV segment.

Geographical areasThe Group’s main geographical areas are in the Atlantic region, Brazil and Asia Pacific. See note 7 Operating income divided on countries.

DOF ASA has not reported the carrying amount of assets by geographical areas as vessels are owned and controlled via Norway and other countries but are utilised worldwide. DOF ASA is therefore of the opinion that the distribution of assets according to geographical areas would not provide meaningful information.

Segment information (management reporting)

Business segment 2014

PSV AHTS CSV TotalEffect of IFRS 11 2014

Operating income 1 205 1 459 8 017 10 681 -485 10 196

EBITDA 452 686 2 652 3 790 -295 3 495

Depreciation and impairment -185 -228 -714 -1 127 82 -1 045

EBIT 267 458 1 938 2 663 -213 2 450

Net financial items -349 -675 -1 190 -2 213 185 -2 028

Profit before taxes -81 -217 748 450 -28 422

Balance

Assets 5 617 8 002 17 454 31 073 12 31 085

Jointly controlled companies 0 931 2 543 3 474 -2 228 1 246

Total assets 5 617 8 933 19 997 34 547 -2 216 32 331

Additions 98 911 1 348 2 357 -412 1 945

Liabilities 4 360 8 440 14 881 27 681 -2 216 25 465

Business segment 2013

PSV AHTS CSV TotalEffect of IFRS 11 2013

Operating income 1 113 1 322 7 319 9 754 -339 9 415

EBITDA 452 619 2 040 3 111 -246 2 865

Depreciation and impairment -148 -217 -827 -1 192 77 -1 115

EBIT 304 402 1 213 1 919 -168 1 751

Net financial items -334 -466 -1 144 -1 944 124 -1 820

Profit before taxes -30 -64 70 -25 -44 -69

Balance

Assets 5 437 6 285 18 847 30 570 -1 024 29 546

Jointly controlled companies 0 923 1 252 2 175 -987 1 188

Total assets 5 437 7 208 20 100 32 745 -2 011 30 734

Additions 440 84 1 301 1 825 -281 1 544

Liabilities 4 527 6 332 15 540 26 399 -2 011 24 388


dof group

111

2014 2013Turnover: NOK Ratio % NOK Ratio %

Norway 2 920 29 % 2 356 25 %

Brazil 2 519 25 % 2 142 23 %

United Kingdom 1 610 16 % 1 860 20 %

Australia 722 7 % 875 9 %

United States 595 6 % 496 5 %

Singapore 212 2 % 154 2 %

Other 1 618 16 % 1 532 16 %

Total 10 196 100 % 9 415 100 %

7 Operating income

8 Payroll expenses

2014 2013

Salary and holiday pay -2 534 -2 253

Hired personnel -782 -1 028

Employer's national insurance contributions -292 -236

Pensions costs -91 -71

Other personnel costs -377 -338

Total -4 077 -3 927

No. man-years employed in financial year 5 035 4 588

Government grants related to the net salary scheme for vessels are reported as a reduction in payroll costs of NOK 60 million (NOK 61 million).

Pension cost above include defined benefit pension plan and defined contribution pension plan. Both the benefit pension plan and the contribution plan are with an external life insurance company.

Defined benefit pension DOF Group has a company pension scheme with life insurance companies. As of 31 December 2014, the Group defined pension benefit plan covered total 796 (787) active members and 41 (47) pensions.

The pension funds are placed in a portfolio of investments by insurance companies. The insurance company managers all transactions related to the pension scheme. Estimated return of pension funds is based on market prices on balance sheet date and projected development during the period in which the pension scheme is valid.

The calculation of pension liabilities is based on assumptions in line with the recommendations. Actuarial gains and losses are expensed as incurred.

The Group’s cost of defined pension plan in 2014 was NOK 28 million (NOK 43 million). Pension obligation as of 31 December 2014 was NOK 53 million (NOK 48 million).

9 Other operating expenses

2014 2013

Technical costs vessel -870 -787

Vessel hire -841 -459

Bunkers -215 -292

Equipment rental -558 -573

Other operating expenses -685 -587

Total -3 170 -2 698


dof group

112

10 Financial income and expenses

2014 2013

Interest income 63 67

Other financial income 19 8

Financial income 82 76

Interest costs -1 297 -1 300

Capitalisation of interest 8 -

Other financial costs -66 -56

Financial costs -1 355 -1 357

Net gain/(loss) on currency derivatives -187 1

Net gain/(loss) on non-current debt -89 3

Net gain/(loss) on operational capital 73 33

Net realised gain/loss on currencies -203 37

Net unrealised gain/(loss) on non-current debt -365 -576

Net unrealised gain/(loss) on operational capital 29 7

Net unrealised gain/loss on currencies -336 -570

Net change in unrealised gain/loss on interest swap -72 15

Net change in unrealised gain/loss on currency derivatives -145 -22

Net change in unrealised gain/loss on derivatives -217 -6

Total -2 028 -1 820

In 2014 realisation of interest rate swap is included in interest costs with a net loss of NOK 145 million (2013; loss NOK 112 million). In 2014 a loss of NOK 27 million out of NOK 145 million relates to instruments which are recognised as hedge accounting according to IFRS, note 25.

In 2014, interest costs of NOK 8 million was capitalised as newbuilds (2013; NOK 0 million), ref note 14.

The income tax expense comprises; 2014 2013Tax payable, ordinary taxation Norway -9 -3

Tax payable, foreign activities -78 -48

Change in deferred taxes 131 61

Adjustments in respect of prior years 35 11

Effect from change in Norwegian tax rate from 28% to 27% - -3

Income tax expense 78 17

Reconciliation of nominal and effective tax rate

Profit before tax 422 -69

Tax calculated at domestic tax rates applicable to profits in the respective countries *) -113 37

Deviation between actual and estimated tax cost -192 20

Reason for difference between actual tax cost and estimated tax cost

Tax effect on non-deductible expenses -7 -23

Tax effect of tax exemption method (sale of shares) 1 -5

Tax effect on items not included in deferred tax -8 -47

Effect of tonnage tax 207 36

Estimate deviations from previous years -15 22

Won tax case regarding 2008 40

Discharge of losses carried forward -27 -

Effect from change in Norwegian tax rate from 28% to 27% - -3

Deviation from estimated tax cost 192 -20

* Domestic tax rates applicable to the Group varies between 27% to 35%

11 Tax


dof group

113

The gross movement on the deferred income tax account is as follows;

2014 2013At 1 January restated -249 -146

Exchange differerences -32 7

Income statement charge -131 -61

Tax charge/(credit) relating to components of other comprehensive income -176 -50

At 31 December 2014 -589 -249

Basis of deferred tax 2014 2013Fixed assets 109 1 372

Current assets 3 40

Other differences (deferred capital gain etc) 302 764

Liabilities 148 -802

Total temporary differences 562 1 373

Loss carried forward -3 222 -2 880

- hereof tax deficit not included in basis for calculation of deferred tax/deferred tax assets 636 604

Basis for calculation of deferred tax (-) / deferred tax assets -3 296 -2 110

Total deferred tax (-) / deferred tax assets -589 -249

Gross deferred tax 49 78

Gross deferred tax asset -638 -327

Total deferred tax/deferred tax assets (-) recognised in balance sheet -589 -249

DOF Rederi AS, a subsidiary of DOF ASA has won a court case against the Norwegian Central Tax office (Sentralskattekontoret) regarding extra correction tax for 2008, which has been found in contravention of the legislation for the current tax year. The lawsuit has a certain connection to the earlier constitutional conflict related to the Norwegian Tonnage tax regime. After DOF Rederi won the lawsuit in the District Court and in the Appelate Court, the Supreme Court has on 2 October rejected the final appeal from the Norwegian Central Tax Office. Hence the case is final and in favour of DOF Rederi. The company has been reimbursed with approximately NOK 40 million in taxes.

2014 Before tax Tax (charge)/ credit After tax Cash flow hedges -508 176 -333

Remeasurements of post employment benefit liabilities -2 1 -2

Other comprehensive income -511 176 -334

2013Cash flow hedges -143 50 -94

Remeasurements of post employment benefit liabilities -3 1 -2

Other comprehensive income -146 50 -96

11 Tax continued

The tax (charge)/credit relating to components of other comprehensive income is as follows;


dof group

114

12 Earnings per share

Ordinary earning per share are calculated based on the annual result payable as the relationship between the annual result for the year to the shareholders and the weighted average of outstanding ordinary shares throughout the financial year. There are no instrument that allow the possibility of dilution.

13 Goodwill

Goodwill relates to the acquisition of subsidiaries. Goodwill comprises the difference between nominal and discounted amounts in terms of deferred tax, synergy effects, organisational value, brandname and key personnel and their expertise. The Group has defined the different entities as separate Cash Generating Units (CGU). Goodwill classified under the CSV segment above is attributable to the DOF Subsea AS Group.

Goodwill is not depreciated, but the Group performs annually impairment tests to determine any write-down requirement. The Group has estimated recoverable amount as value in use of the cash generating unit. The value in use is expected cash flows from operations discounted with a weighted average cost of capital (WAAC 5,6% - 9,0%, real after tax). Cash flows are based on budgets approved by the Board covering five years, and does not include any investments unless the investments is committed. Cash flows beyond the budget period is expected to grow in line with inflation rates - estimated to 2%. Manangement determined budgeted gross margin based on past performance and its expectations of market developement and the utilisation of the vessels.

Discount rates The WACC model is applied. Geographical differences in interest and inflation are taken into account. The WACC is calculated on the basis of a weighted average of required rates of return for the Group’s equity and borrowed capital, based on the capital value model.

In 2014 there was an impairment of goodwill related to acquisition of Project Excellence in the CSV segment. Project Excellence was a UK based engineering company acquired in 2012 as part of the growth strategy in CSV segment.

Basis for calculation of earning per share 2014 2013

Profit (loss) for the year after non-controlling interest (NOK million) 81 -191

Earnings per share for parent company shareholders (NOK) 0,73 -1,72

Number of shares 01.01 111 051 348 111 051 348

Number of shares 31.12 111 051 348 111 051 348

Average number of shares 111 051 348 111 051 348

2014 2013

PSV AHTS CSV Total PSV AHTS CSV Total

Acquisition cost at 01.01 3 3 452 458 3 3 452 458

Additions - - - -

Disposals - - - -

Conversion differences - - - -

Acquisition cost at 31.12 3 3 452 458 3 3 452 458

Adjustment at 01.01 - - -56 -56 -66 -66

Impairment loss for the year -16 -16 - -

Accumulated conversion differences 31 31 11 11

Adjustment 31.12 - - -40 -40 - - -56 -56

Book value 31.12 3 3 412 418 3 3 397 403


dof group

115

14 Tangible assets

The tangible assets is pledged against debt to credit institution, see note 21.

*) Residual value vesselThe level of depreciation depends on the calculated residual value at the balance sheet date. Assumptions concerning residual value are made on the basis of knowledge of the market for used vessels. Basis for residual value is fair value assessment of charter free vessel. Fair values are adjusted to reflect the value of the vessels as if it had been of an age and in the condition expected at the end of the useful life.

2014 VesselsPeriodic

maintenance ROV Newbuildings Operating equipment Total

Acquisition cost as of 01.01.2014 26 292 1 378 1 156 406 838 30 070

Additions 292 256 346 861 190 1 945

Reallocation 917 7 -19 -806 -99 -

Disposals 1 696 3 52 - 6 1 757

Currency translation differences 742 60 20 22 41 885


Depreciation as of 01.01.2014 4 533 807 338 - 360 6 038

Depreciation for the year 552 255 132 90 1 029

Reallocation 22 -9 -19 6 -

Depreciation on disposals for the year 153 2 10 2 168

Currency translation differences 176 41 7 17 241

Depreciation 31.12.2014 5 130 1 091 448 - 470 7 139

Impairment 01.01.2014 144 - - - - 144

Impairment reclassification -7 -7

Impairment/reversals for the year - -

Impairment 31.12.2014 137 - - - - 137

Book value 31.12.2014 21 280 607 1 002 483 494 23 866

Depreciation period 30-35 years 30-60 months 5-12 years 5-15 years

Depreciation method *) Linear Linear Linear

2013 VesselsPeriodic

maintenance ROV Newbuildings Operating equipment

Restated Total


Additions 113 229 55 1 074 92 1 563

Reallocation 1 048 17 -18 -1 074 27 -

Disposals 41 15 22 - 13 91

Currency translation differences -195 -11 -8 -18 - -232

Acquisition cost at 31.12.2013 26 292 1 378 1 156 406 838 30 070

Depreciation at 01.01.2013 * 3 854 562 262 - 291 4 969

Depreciation for the year 713 252 81 69 1 115

Depreciation on disposals in the year 12 - 1 -1 12

Currency translation differences -22 -8 -4 -1 -34

Depreciation at 31.12.2013 4 533 807 338 - 360 6 038

Impairment 01.01.2013 144 - - - - 144

Impairment reclassification -

Impairment/reversals for the year -

Impairment 31.12.2013 144 - - - - 144

Book value at 31.12.2013 21 616 571 817 406 478 23 888

Depreciation period 30-35 years 30-60 months 5-12 years 5-15 years

Depreciation method *) Linear Linear Linear


dof group

116

14 Tangible assets continued

DisposalsThe Group sold two vessels in 2014; Skandi Bergen and Skandi Skolten. Profit from sale of non-current assets in the consolidated income statement is mainly related to sale of the two vessels.

Capitalised interest costs In 2014, interest costs of NOK 8 million has been capitalised (NOK 0 million). These interest costs were related to payments incurred during the constructions of newbuildings, based on general financing as appropriate.

Finance leases of tangible assets - the Group as lessee: The Group’s assets held under finance leases include several ROVs and IT equipment. In addition to the lease payments, the Group is also committed to maintaining and insuring the assets. Net value recognised in the statement of financial position as of year end 2014 was NOK 356 million (2013; NOK 60 million). Additions during the year amounted to NOK 314 million (2013; NOK 14 million); no disposal in 2014 (2013; NOK 14 million). Annual depreciation was NOK 18 million (2013; NOK 6 million).

Newbuilding

The Group has seven vessels under constructions as of 31 December 2014, representative remaining obligation of in total approx. USD 1.2 billion. Four vessels are owned through a 50/50 joint venture between DOF Subsea and Technip. Joint ventures are accounted according to equity method, thus these newbuilds are not included in the status below. See note 31 for further information.

Vessel under construction as of 31.12.2014 are listed below:

Design vessel No vessels Completion

STX AH 11 Skandi Angra, Paraty 2 2015

STX OCSV 12 Skandi Africa 1 2015


dof group

117

15 Lease

Lease inOperational lease In 2014 the Group leases in four vessels on term contracts: Harvey Deep Sea, Chloe Candies, Ross Candies and Normand Reach. In addition the Group leases other external vessels on short-term contracts based on operational requirements. The leased in vessels operate in the subsea projects segment. Harvey Deep Sea, Chloe Candies, Ross Candies are utilised in the Gulf of Mexico and Normand Reach is utilised in the North Sea.

The main office is leased from an affiliated company owned by Laco AS. See note 28. DOF Subsea AS leases premises located at Marineholmen in Bergen.

Lease out Operational lease agreements - leasing of vessels Parts of the Group’s operational fleet are leased out on time charter. The Group has concluded that a time charter (TC) represents the lease of an asset and consequently is covered by IAS 17. Lease income from lease of vessels is therefore reported to the profit and loss account on a straight line basis for the duration of the lease period. The lease period starts from the time the vessel is put at the disposal of the lessee and terminates on the agreed date for return of the vessel.

The table below shows the minimum future lease payments related to non-terminable operational lease agreements (TC contracts). The amounts are nominal and stated in NOK million. These amounts include lease of vessels.

2014 Within 1 year 2-5 years After 5 years Total

Minimum operating lease revenue 4 890 11 106 2 631 18 627

Minimum operating lease revenue including joint ventures 5 417 14 394 8 315 28 127

Total future minimum operating lease revenues include firm contracts from DOF Group vessels and the Group’s share of vessels in the joint ventures. Joint ventures are consolidated using equity method, see notes 5, 6 and 31 for further information.

16 Non-current receivables

Note 2014 2013

Non-current receivables from joint ventures 422 198

Non-current derivatives 25 20 30

Other non-current receivables 65 50

Total 507 278

Overview of future minimum lease: 2015 2016 - 2019 Vessels 497 351

Lease of head office 17 77

Lease of IT equipment 3 4

Total 517 431


dof group

118

17 Trade receivable

2014 2013

Trade receivable at nominal value 1 511 1 274

Earned, not invoice income 865 593

Provision for bad debts -45 -35

Total 2 331 1 832 The Group’s credit exposure is mainly towards customers who historically have had good financial capability to meet their obligations and high credit rating. The company’s credit risk to clients is considered low, however a recent decrease in oil-price and weaker markets could increase the risk and impact the clients rating going forward.

As of 31.12, the Group had the following accounts receivable which had matured, but not been paid.

Total Not matured <30 d 30-60d 60-90d >90d

2014 2 331 1 974 147 79 28 104

2013 1 832 1 543 187 40 27 35 Trade receivable divided on currencies:

2014 2013 Currency NOK Ratio % Currency NOK Ratio %

USD 121 899 39 % 87 529 29 %

GBP 23 269 12 % 39 389 21 %

BRL 132 368 16 % 126 324 18 %

NOK 494 21 % 344 19 %

Other currencies - mainly AUD 301 13 % 247 13 %

Total 2 331 100 % 1 832 100 %

18 Other current receivables

Note 2014 2013

Pre-paid expenses 146 170

Accrued interest income 14 13

Government taxes (VAT) 217 194

Current derivatives 25 1 6

Other current receivables 249 142

Total 626 524

19 Cash and cash equivalents

2014 2013

Restricted deposits * 639 735

Bank deposits 1 971 1 484

Cash and cash equivalents at 31.12. 2 609 2 219

* A long term loan has been provided by Eksportfinans and is invested as a restricted deposit in DNB. The repayment terms on the loan from Eksportfinans is equivalent with the reduction on the deposit. The loan is fully repaid in 2021. The cash deposit is included in Restricted deposits with a total of NOK 582 million (2013; NOK 683 million).


dof group

119

20 Share capital and share information

Share capital: The share capital in DOF ASA as of 31.12.2014 was NOK 222,102,696 distributed between 111,051,348 shares, each with a nominal value of NOK 2.00.

Share issue authorisation: The Annual General Meeting has allocated authorisation to the Board of Directors for a capital increase of up to 27 750 000 shares at a nominal value of NOK 2.00. The authorisation expires at the Annual General Meeting in 2015.

Share issues in 2014: There has not been any share issues in 2014.

Shareholders: The 20 largest shareholders of DOF ASA and shares owned by management and board members including shareholdings held by closely related persons and companies at 31 December 2014 were as follows:

2014 2013Shareholders at 31.12.2014 No of shares Shareholding No of shares Shareholding

MØGSTER OFFSHORE AS 56 876 050 51,22 % 56 876 050 51,22 %

PARETO AKSJE NORGE 6 678 673 6,01 % 6 598 270 5,94 %

SKAGEN VEKST 5 762 213 5,19 % 5 762 213 5,19 %

PARETO AKTIV 2 794 356 2,52 % 2 784 451 2,51 %

ODIN OFFSHORE 2 750 000 2,48 % 2 820 553 2,54 %

MP PENSJON PK 2 085 503 1,88 % 2 312 629 2,08 %

PARETO VERDI 1 334 436 1,20 % 1 298 090 1,17 %

MOCO AS 1 094 184 0,99 % 1 094 184 0,99 %

VESTERFJORD AS 1 027 650 0,93 % 1 027 650 0,93 %

KANABUS AS 1 004 684 0,90 % 1 004 684 0,90 %

FORSVARETS PERSONELLSERVICE 812 800 0,73 % 890 000 0,80 %

THE NORTHERN TRUST CO. 809 814 0,73 % 796 369 0,72 %

VERDIPAPIRFONDET DNB SMB 772 852 0,70 % 720 000 0,65 %

VERDIPAPIRFONDET ALFRED BERG NORGE 606 758 0,55 % - 0,00 %

VERDIPAPIRFONDET EIKA NORGE 583 612 0,53 % - 0,00 %

BCEE LUX - SICAV LUX 582 899 0,52 % - 0,00 %

CITIBANK, N.A. 563 923 0,51 % 558 494 0,50 %

MOMENTUM INVESTMENTS INC 500 000 0,45 % 500 000 0,45 %

MUSTAD INDUSTRIER AS 500 000 0,45 % 500 000 0,45 %

BKK PENSJONSKASSE 478 000 0,43 % 478 000 0,43 %

ODIN MARITIM 0 0,00 % 765 247 0,69 %

VERDIPAPIRFONDET WARRENWICKLUND NO 0 0,00 % 583 612 0,53 %

PACTUM AS 0 0,00 % 450 000 0,41 %

Total 87 618 407 78,90 % 87 820 496 79,08 %

Other shareholders 23 432 941 21,10 % 23 230 852 20,92 %

Total 111 051 348 100,00 % 111 051 348 100,00 %

Shares controlled directly and indirectly by Board of Directors and Management

2014 2013No of shares Shareholding No of shares Shareholding

Board of Directors

Helge Møgster (Laco AS) Chairman of the Board 11 910 281 10,73 % 11 910 281 10,73 %

Helge Singelstad Deputy Chairman 12 000 0,01 % 12 000 0,01 %

Karoline Møgster (Laco AS) Board member 2 769 281 2,49 % 2 769 281 2,49 %

Oddvar Stangeland (Kanabus AS) Board member 1 024 684 0,92 % 1 024 684 0,92 %

Wenche Kjølås (Jawendel AS) Board member 3 000 0,00 % 3 000 0,00 %

Via Laco AS, the Møgster family, including Helge Møgster and Karoline Møgster, have indirect control of 99.53% of the shares in Møgster Offshore AS, the main shareholder of DOF ASA.

Management Group

Mons S. Aase (Moco AS) CEO 1 094 184 0,99 % 1 094 184 0,99 %

Hilde Drønen (Djupedalen AS) CFO 76 675 0,07 % 76 675 0,07 %

Total 16 890 105 15,21 % 16 890 105 15,21 %


dof group

120

21 Interest bearing liabilities

Bond loan DOF ASA and DOF Subsea AS have seven bond loans which mature in 2015-2019. See figures next page. The trustee for the bond loan owners is Norsk Tillitsmann ASA, and Nordea Bank Norge ASA is the account operator. The terms and conditions for the bond loans comprise a floating rate of interest, 3 month NIBOR + (475bp – 725bp). Quarterly interest rate regulations are carried out for all the bond loans. DOF ASA and DOF Subsea AS is free to purchase its own bonds.

Non-current liabilities to credit institutions The main share of the Group’s fleet is financed via mortgage loans. A set of standard covenants has been established for the mortgage loans in DOF ASA and DOF Subsea AS.

For DOF ASA, the most important financial covenants are as follows:

Value-adjusted equity to value-adjusted assets shall be higher than 30% or higher than 20% if contractual coverage of the Group’s fleet of vessels is higher than 70%. The Group shall at all times have free cash reserves of NOK 500 million and requirements to working capital (excluding current portion of non-current interest bearing liabilities) applies on certain credit facilities.

The most important financial covenants for DOF Subsea AS’ fleet are as follows:

The Group shall at all times have free cash reserves of NOK 400 million. The Group shall at all times have equity of at least NOK 3 000 million. The Group shall have value adjusted equity to value adjusted assets varying from 25-30%.

In addition to the above-mentioned financial covenants, the following terms and conditions also apply to a number of loan agreements:

* Full insurance for the Group’s assets.

* No changes of classification, management or ownership of the vessels without prior written consent from the banks.

* DOF ASA shall own minimum 50% of the shares in DOF Subsea Holding AS, and Møgster Offshore AS shall own minimum 34% of the shares in DOF ASA.

* DOF ASA shall be listed on the Oslo Stock Exchange.

In addition, the normal terms and conditions for this type of loan apply.

The Group is in compliance with it’s financial covenants as of 31 December 2014.

Non current interest bearing liabilities Note 2014 2013

Bond loans 4 124 4 722

Debt to credit institutions 13 091 14 527

Total non current interest bearing liabilities 17 215 19 249

Current interest bearing liabilities

Bond loans 1 039 454

12 month installment non-current debt 4 131 2 035

Overdraft facilities 455 366

Total current interest bearing liabilities *) 5 625 2 854

Total non-current and current interest bearing liabilities 22 839 22 104

Net interest-bearing liabilities

Cash and cash equivalents 19 2 609 2 219

Net interest bearing derivatives **) 25 -379 -354

Other interest-bearing assets - non-current - 58

Net Interest-bearing debt 20 609 20 181

*) Current interest bearing debt in the statement of financial position includes accrued interest expenses. Accrued interest expenses are excluded in the figures above. **) Net interest bearing derivates includes interest swaps.

Instalment, balloon and interest profile 2015 2016 2017 2018 2019 Subsequent Total

Bond loans 1 039 741 692 1 993 698 - 5 163

Debt to credit institutions 4 131 3 235 1 597 1 273 2 574 4 413 17 222

Overdraft facilities 455 - - - - - 455

Total instalments and balloon 5 625 3 976 2 289 3 266 3 272 4 413 22 839

Calculated interest profile 1 040 802 650 510 345 910 4 258

Net interest bearing derivaties 83 79 60 55 54 47 379

Total instalments, balloon and interest 6 748 4 858 2 999 3 831 3 671 5 370 27 476


dof group

121

21 Interest bearing liabilities continued

Out of current liabilities to credit institutions of NOK 4 131 million, the balloon payments amounts to NOK 2 575 million.

The Group has year to date 2015 redeemed or re-financed approximately NOK 1,800 million of in total NOK 3,614 million in balloon payments and bond loans maturing in 2015. The refinancing of the remaining part of the balloon instalments is included in the ordinary course of business and is planned refinanced through secured bank financing. Refinancing of further approx. NOK 1,200 million is secured, and is planned to be completed during the first half of the year. The remaining bond debt of NOK 700 million in addition to ordinary instalments, will be paid throughout the year at maturity.

Interest repayment is based on current repayment profile and the yield curve for the underlying interests from Reuters as of December 2014.

Repayment profile for debt to credit institutions includes repayment of financial lease debt. Total liability on financial lease debt amounts to NOK 295 million as of 31 December 2014. Financial lease is repaid on a monthly basis with maturity from 3 to 10 years. The short portion of financial lease debt as of 31 December 2014 is NOK 58 million.

Liabilities secured by mortgage 2014 2013

Liabilities to credit institutions incl current debt 17 222 16 562

Total liabilities 17 222 16 562

Assets provided as security

Tangible assets 23 384 23 483

Total assets provided as security 23 384 23 483

Average rate of interest 5,99 % 5,64 %

For loans issued directly to ship-owning subsidiaries of DOF ASA and DOF Subsea AS, a parent company guarantee has been issued for the nominal amount of the loans in addition to interest accrued at any given time.

2014 2013Interest-bearing liabilities, divided by currency: Currency NOK Ratio % Currency NOK Ratio %

USD 1 052 7 817 34 % 964 5 863 27 %

GBP 48 556 2 % 54 546 2 %

NOK 14 467 63 % 15 695 71 %

Total 22 839 100 % 22 104 100 %

Fair value of non-current loans

The price of the company’s seven bond loans at 31.12.2014 was as follows:

Loan Due date Margin (bp) Price

31.12.2014 Outstanding amount

31.12.2014 Initial amount 31.12.2014

Price 31.12.2013

Outstanding amount 31.12.2013

Initial amount 31.12.2013

DOFSUB04 14.04.14 700 - - 101,64 454 750

DOF08 09.03.15 610 100,56 339 600 103,25 600 600

DOFSUB06 15.10.15 625 100,93 700 700 104,25 700 700

DOFSUB05 29.04.16 550 102,00 750 750 103,05 750 750

DOF09 07.02.17 725 103,50 700 700 105,00 700 700

DOF11 07.02.18 475 91,00 700 700

DOFSUB07 22.05.18 500 98,00 1 300 1 300 100,50 1 300 1 300

DOF10 12.09.19 700 94,50 700 700 103,50 700 700

Total 5 189 5 450 5 204 5 500 Other non-current liabilities, with the exception of non-current loans, have nominal value equivalent to fair value of the liability.


dof group

122

22 Accounts payable

2014 2013

Accounts payable 1 192 1 040

Total 1 192 1 040

Accounts payable has the following split on currency;

2014 2013Currency NOK Ratio % Currency NOK Ratio %

USD 67 499 42 % 52 316 30 %

GBP 13 145 12 % 23 233 22 %

BRL 47 130 11 % 31 80 8 %

NOK 308 26 % 283 283 27 %

Other currencies 110 9 % 21 128 12 %

Total 1 192 100 % 1 040 100 %

23 Other current liabilities

Note 2014 2013

Prepayments from customers 33 99

Fair value forward contracts 25 183 34

Other current liabilities 194 158

Total 409 290

24 Fair value estimation

Total measurement level 1Quoted, unadjusted prices in active markets for identical assets and liabilities.

Fair value of interest-bearing debt is disclosed face value of the bank loans and market value of bonds.

Total measurement level 2 Quoted techniques for which all inputs which have significant effect on the recorded fair value are observable, directly and indirectly.

The fair value of forward exchange contracts is determined using the forward exchange rate at the balance sheet date. The forward exchange rate is based on the relevant currency’s interest rate curve. The fair value of currency swaps is determined by the present value of future cash flows, which is also dependent on the interest curves.

Total measurement level 3

Techniques which use inputs which have significant effect on the recorded fair value that are not based on observable markeds data.


dof group

123

25 Hedging activities

As of 31 December 2014, the Group had 48 forward contracts and 44 options to hedge future sales to customers in USD and GBP, and the purchase of USD and BRL. Forward contracts are utilised to hedge currency risk related to projected future sales. The Group has not applied hedge accounting for any of the interest rate swap agreements entered into in 2014, but has applied hedge accounting for some of the interest rate swaps entered into in prior years.

The Group use cash flow hedge accounting related to foreign exchange rate risk on expected highly probable income in USD, using a non derivative financial hedging instrument. This hedging relationship is described below.

The table below displays the fair value of derivative financial instruments as of 31 December 2014.

2014 2013Measurement level Assets Liabilities Assets Liabilities

Interest rate swaps 2 20 368 30 307

Interest rate swaps - cash flow hedges 2 - 31 - 56

Foreign exchange contracts 2 1 168 6 27

Total 21 567 36 390

Non-current portion

Interest rate swaps 2 20 384 30 307

Interest rate swaps - cash flow hedges 2 - - - 49

Non-current portion 20 384 30 356

Current portion 1 183 6 34

Derivatives are classified as an asset or liability. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.

As of 31.12 the Group held the following interest rate derivative contracts.

Instrument Fixed rate Floating rate Notional amount Effective from Maturity date

31.12.2014

Interest rate swaps/swaptions - USD 1,15 % - 2,70 % Libor 3m - 6m 181 2011-2012 2016-2017

Interest rate swaps/swaptions - NOK 1,61 % - 4,67 % Nibor 3m - 6m 5 266 2011-2014 2015-2020

Interest rate swaps/swaptions - GBP 0,81 % Libor 3m 14 2013 2017

Interest rate swaps/swaptions- cash flow hegdes USD 1,93 % - 2,70 % Libor 3m 74 2011 2016

Interest rate swaps/swaptions- cash flow hegdes NOK 4,10 % - 4,56 % Nibor 3m - 6m 779 2010-2011 2015

31.12.2013

Interest rate swaps/swaptions - USD 1,13 % - 2,70 % Libor 3m 184 2011-2012 2015-2017

Interest rate swaps/swaptions - NOK 4,10 % - 4,56 % Nibor 3m - 6m 4 505 2010-2014 2015-2019

Interest rate swaps/swaptions - GBP 0,81 % Libor 3m 15 2013 2017

Interest rate swaps/swaptions- cash flow hegdes USD 1,67 % -1,87 % Libor 3m 83 2011 2016

Interest rate swaps/swaptions- cash flow hegdes NOK 2,99 % - 3,42 % Nibor 3m - 6m 1 331 2010-2011 2016-2018


dof group

124

25 Hedging activities continued

As of 31.12. the Group held the following foreign exchange rate derivatives, not qualified for hedge accounting;

Committed

Instrument Received Amount Remaining term to maturity

31.12.2014

Foreign exchange forwards, buy NOK NOK 1 467 <1 year

Foreign exchange options, buy NOK NOK 455 <1 year

31.12.2013

Foreign exchange forwards, buy BRL BRL 6 <1 year

Foreign exchange forwards, buy NOK NOK 1 396 <1 year


The Group has entered into forward options contracts with barrier, with a commitment to sell USD against NOK above a barrier level at certain settlement dates.

Derivatives are expected to settle at various dates during the next 12 months. Gains and losses recognised in the forward foreign exchange contracts and interest rates swaps as of 31 December 2014 are recognised in the income statement in the period or periods during which the transaction affects the income statement.

Hedging instrumentHedge items

Nature of the risk Maturity

Carrying amount of the hedging

instrument

Non-Derivative Financial InstrumentsPortion of expected monthly

Highly Probable Revenue in USD.

BRL/USD spot exchange-rate risk

January 2015- June 2027 4 776

Cash flow hedge involving future highly probable revenueThe cash flow hedges hedge a portion of the foreign currency risk arising from highly probable revenue in USD relating to time charter contracts on vessels owned by Norskan Offshore Ltda. The present value of the hedge items as at 31.12.2014 was NOK 4 707 million including fixed and option periods.

The hedging instruments are portions of the companies’ long term debt denominated in USD. The risk being hedged in each hedging relationship is the spot element of the forward currency rate of USD/BRL. The future highly probable revenue has a significant exposure to the spot element as the spot element is the main part of the forward rate. The long term debt is translated from USD to BRL at spot rate on the balance sheet date every reporting period.

The effective portion of changes in fair value of the instruments that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Cash flow hedges

Effective portion of cash flow hedges recognised in other

comprehensive income

Gains (losses) reclassified from accumulated other comprehensive

income to income statement

2014 2013 2014 2013

Interest rate derivatives, pre-tax 31 56 - -

Non derivative financial instruments, pre-tax 550 140 -17 -

There was not identified ineffectivity in cash flow hedging for interest rate derivatives and non derivative financial instruments, both prospective and retroprospective.

Gains (losses) to be reclassified from accumulated other comprehensive income to income statement as follows:

2015 2016 2017 2018 After

Non derivative financial instruments, pre-tax -97 -95 -93 -86 -314


dof group

125

26 Financial assets and liabilities: Information on the balance sheet

This note gives an overview of the carrying and fair value of the Group’s financial instruments and the accounting treatment of these instruments. The table is the basis for further information regarding the Group’s financial risk. The table also shows the level of objectivity in the measurement hierarchy of each method of measuring the fair value of the Group’s financial instruments.

31.12.2014

Financial instruments at fair

value through income statement

Financial instruments as

cash flow hedging instruments

Financial liabilities at

amortised costLoans and

receivables Total

Of this interest bearing

Fair value

Assets

Investments in shares and units 5 5 5Non-current derivatives 20 20 20 20Other non-current receivables 65 65 - 65Current derivatives 1 1 1 1Accounts receivable and other current receivables 2 810 2 810 2 810Restricted deposits 639 639 639 639Cash and cash equivalents 1 971 1 971 1 971 1 971Total financial assets 26 - - 5 485 5 511 2 630 5 511

LiabilitiesNon-current bond loans and debt to credit institution 17 215 17 215 17 215 17 135Current bond loans and debt to credit institution 5 840 5 840 5 625 5 840Non-current derivatives 328 56 - 384 384 384Other non-current liabilities 32 32 32Current derivatives 183 - 183 16 183Accounts payable and other current liabilities 1 676 1 676 1 676Total financial liabilities 511 56 24 763 - 25 330 23 239 25 250

Total financial instruments -485 -56 -24 763 5 485 -19 819 -20 609 -19 739


dof group

126

26 Financial assets and liabilities: Information on the balance sheet continued

31.12.2013

Financial instruments at fair

value through income statement

Financial instruments as

cash flow hedging

Financial liabilities at

amortised costLoans and

receivablesRestated

Total

Of this interest bearing

Fair value

Assets

Investments in shares and units 5 5 5Non-current derivatives 30 30 30 30Other non-current receivables 50 50 58 50Current derivatives 6 6 6 6Accounts receivable and other current receivables 2 181 2 181 2 181Restricted deposits 734 734 734 734Cash and cash equivalents 1 484 1 484 1 484 1 484Total financial assets 41 - - 4 449 4 490 2 313 4 490

LiabilitiesNon-current bond loans and debt to credit institution 19 249 19 249 19 249 19 179Current bond loans and debt to credit institution 3 080 3 080 2 854 3 080Non-current derivatives 307 49 356 356 356Other non-current liabilities 47 47 47Current derivatives 27 7 34 34 34Accounts payable and other current liabilities 1 449 1 449 1 449Total financial liabilities 334 56 23 825 - 24 215 22 494 24 145

Total financial instruments -293 -56 -23 825 4 449 -19 725 -20 181 -19 655

Prepayments and non-financial liabilities are excluded from the disclosures above.

The following of the Group’s financial instruments are measured at amortised cost: cash and cash equivalents, trade receivables, other current receivables, overdraft facilities and all interest bearing debt.

The carrying amount of cash and cash equivalents and overdraft facilities is approximately equal to fair value since these instruments have a short term to maturity. Similarly, the carrying amount of trade receivables and trade payables is approximately equal to fair value since they are entered into “normal” terms and conditions.

The fair value of the interest-bearing debt is the disclosed face value of the bank loans and market value of bonds.


dof group

127

27 Guarantee

The Group has provided guarantees to clients to ensure proper performance of construction contracts. These commitments are mainly guarantees from DOF Subsea AS to its subsidiaries or counter guarantees given by bank. The guarantees are limited to fulfillment of the contract and are in general released after delivery of the project.

Furthermore, guarantees to suppliers are given for fulfillment of payments for deliveries of goods and services including vessels.

The Group has issued pre-delivery guarantees in relation to construction of newbuildings. See note 14 for guarantees on delivery of newbuildings in the Group and note 31 for future commitments related to newbuildings as part of joint venture with Technip.

DOF ASA has issued a guarantee in the amount of NOK 485 million plus any accured interest on behalf of Iceman AS in favour of DNB ASA. Vard Group AS has a counter guaranteed 50% of the commitment.

28 Related parties

Operating costs 2014 2013

Møgster Management AS 11 8

Total 11 8

In addition to the board members and parent company management at DOF ASA, other companies in the Group, their board members and management will be regarded as related parties. Transactions with related parties are governed by market terms and conditions in accordance with the “arm’s length principle”.

Below is a detailed description of significant transactions between related parties:

Long-term agreements: Møgster Offshore AS owns 51.22% of the shares in DOF ASA. Laco AS is the main shareholder of Møgster Offshore AS. Møgster Management AS provides administrative intragroup services to DOF ASA. Møgster Management AS is owned by Laco AS.

Austevoll Eiendom AS is a subsidiary of Austevoll Seafood ASA, which in turn is a subsidiary of Laco. DOF ASA leases premises from Austevoll Eiendom AS. Reference is made to note 15.

DOF Subsea AS leases two holiday homes from Mons Aase, CEO and board member in DOF Subsea AS and CEO of DOF ASA. The lease cost in 2014 totalled NOK 0,3 mill.

Individual transactions: The Group uses the shipyard Fitjar Mekaniske Verksted AS to do maintenance and repairs on the vessels. Total costs in 2014 are NOK 1,8 million (NOK 0,3 million) and was at market terms. Fitjar Mekaniske Verksted AS is owned by Laco AS.

Loans to joint venturesLoans are given to joint ventures to finance the joint venture newbuildings program with NOK 348 million and other activity with NOK 74 million. DOF Subsea AS also guaranteed for 40% of the purchase price of each new vessel to the yard. For further information on joint ventures see note 31.

GuaranteeDOF ASA has issued a guarantee in the maximum amount of NOK 485 million on behalf of Iceman AS in favor of DNB ASA. Guarantee income in 2014 was NOK 9 million (NOK 2 million). Iceman AS is owned with 40% by DOF Iceman AS. DOF ASA and Vard Group ASA are owners with 50% each in DOF Iceman AS.


dof group

128

29 Remuneration to executives, Board of Directors and auditor

Total payments for salary, pension premium and other remuneration to CEO and CFO;

Amount in TNOK

Year 2014 Year 2013 CEO CFO Total CEO CFO Total

Salary incl bonus 9 201 2 935 12 136 9 520 3 284 12 805

Pension premium 201 264 465 155 212 367

Other remuneration 25 132 156 23 136 159

Total 9 426 3 330 12 757 9 698 3 633 13 331

CEO = Mons Aase, CFO = Hilde Drønen

No loans or guarantees have been provided to the CEO, board members, members of the Group management or their related parties.

The CEO has the right to a bonus payment of 0.5% of the Group’s annual result. In addition the CEO can be granted a discretionary bonus. The term of notice for the CEO is 6 months. If the CEO resigns from his position, he has the right to an extra compensation corresponding to 12 months’ salary. Retirement age is 67 years with a pension of up to 70% of salary (12 times the National Insurance base amount) upon retirement.

Board fees in 2014 totalled NOK 1 175 000 (NOK 1 225 000). Board fees were granted on the General annual meeting as of 24th of May 2014. This comprises NOK 300 000 (NOK 300 000) to the Chairman of the Board and NOK 175 000 (NOK 175 000) each to the board members. In addition compensation for meetings have been paid to the Audit Committee (NOK 100 000) and the Election Committee (NOK 75 000).

Specification of auditor’s fee (amount in TNOK): 2014 2013

Audit 13 535 13 084

Fee for other confirmatory services 253 96

Tax consultation 1 033 481

Fee for other services 1 477 1 789

Total 16 299 15 450

All amounts in the table are excl VAT.

Guidelines for determination of salary and other remuneration to the CEO and senior employees of DOF in 2014The guiding principle of DOF ASA’s senior management salary policy is to offer senior employees terms of employment that are competitive in relation to salary, benefits in kind, bonus and pension scheme, taken together. The company shall offer a salary level that is comparable with corresponding companies and activities, and taking account of the company’s need to have well qualified personnel at all levels.

The determination of salary and other remuneration to senior employees at any given time shall be in accordance with the above guiding principle.

Senior employees shall only receive remuneration in addition to the basic salary in the form of a bonus. The amount of any bonus to the CEO shall be set by the Chairman of the Board. The bonus to other senior employees shall be set by the CEO in consultation with the Chairman of the Board.

DOF ASA has no schemes for the allocation of options for the purchase of shares in the company.

The senior employees are members of the company’s Group pension schemes which guarantee pension benefits not exceeding 12 times the national insurance base amount per year.

Senior employees have agreements whereby they are entitled to a free car and free business telephone. Apart from this, there are no other benefits in kind.

Where the employment of senior employees is terminated by the company, they have no agreements entitling them to severance pay except for salary in the period of notice for the number of months provided for in the Working Environment Act. The contract of employment of 2005 for the CEO contains provisions providing for severance pay.


dof group

129

30 Companies within the Group

Investments in subsidiaries Owner Registered office Nationality Ownership and

voting share

DOF Subsea Holding AS DOF ASA Bergen Norway 51.0 %DOF Rederi AS DOF ASA Austevoll Norway 100 %DOF UK Ltd DOF ASA Aberdeen UK 100 %DOF Egypt DOF ASA Cairo Egypt 100 %Norskan AS DOF ASA Austevoll Norway 100 %DOF Management AS DOF ASA/DOF Subsea AS Austevoll Norway 100 %Marin IT AS DOF ASA/DOF Subsea AS Austevoll Norway 75 %DOF Subsea Holding II AS DOF Subsea Holding AS Bergen Norway 100 %DOF Subsea AS DOF Subsea Holding II AS Bergen Norway 100 %DOF Subsea Chartering AS DOF Subsea AS Bergen Norway 100 %DOF Subsea ROV Holding AS DOF Subsea AS Bergen Norway 100 %DOF Subsea Rederi AS DOF Subsea AS Bergen Norway 100 %DOF Subsea Rederi II AS DOF Subsea AS Bergen Norway 100 %DOF Subsea Norway AS DOF Subsea AS Bergen Norway 100 %DOF Subsea Atlantic AS DOF Subsea AS Bergen Norway 100 %DOF Subsea ROV AS DOF Subsea ROV Holding AS Bergen Norway 100 %DOF Installer ASA DOF Subsea AS Austevoll Norway 83.7 %Semar AS DOF Subsea AS Oslo Norway 50 %DOF Subsea US Inc DOF Subsea AS Houston US 100 %DOF Subsea Brasil Servicos Ltda DOF Subsea AS Macaè Brazil 100 %DOF Subsea UK Holding Ltd DOF Subsea AS Aberdeen UK 100 %DOF Subsea UK Ltd DOF Subsea AS Aberdeen UK 100 %DOF Subsea S& P UK Ltd DOF Subsea AS Aberdeen UK 100 %DOF Subsea Angola Lda DOF Subsea AS Luanda Angola 100 %DOF Subsea Arctic DOF Subsea Norway AS Moscow Russia 100 %DOF Subsea Asia Pacific Pte. Ltd. DOF Subsea AS Singapore Singapore 100 %PT DOF Subsea Indonesia DOF Subsea Asia Pacific Pte Singapore Singapore 95 %DOF Subsea Australian Pty. DOF Subsea Asia Pacific Pte Perth Australia 100 %DOF Subsea Labuan (L) Bhd DOF Subsea Asia Pacific Pte Malaysia Malaysia 100 %DOF Subsea Malaysia Sdn Bhd DOF Subsea Asia Pacific Pte Malaysia Malaysia 100 %DOF Subsea Canada Corp DOF Subsea US Inc. St. Johns Canada 100 %DOF Subsea S&P US LLP DOF Subsea US Inc. Houston US 100 %NEXUS Energy Recruitment Services Ltd DOF Subsea UK Holding Ltd. Aberdeen UK 100 %CSL UK Ltd DOF Subsea UK Holding Ltd. Aberdeen UK 100 %CSL Norge AS DOF Subsea UK Holding Ltd. Bergen Norway 100 %Norskan Offshore SA Norskan AS Rio Brazil 100 %Norskan Offshore Ltda. Norskan SA Rio Brazil 100 %Norskan GmpH Norskan SA Vienna Austria 100 %Norskan Two GmpH Norskan GmpH Vienna Austria 100 %Norskan Norway AS Norskan Two Gmph Austevoll Norway 100 %DOF Rederi II AS Norskan Two Gmph Austevoll Norway 100 %Norskan Holding AS DOF ASA Austevoll Norway 100 %Waveney AS Norskan Holding AS Austevoll Norway 100 %Waveney IS Norskan Holding AS/Waveney AS Austevoll Norway 100 %DOF Argentina DOF Management AS Buenos Aires Argentina 100 %DOF Sjø AS DOF Management AS Austevoll Norway 100 %DOF Management Pte. DOF Management AS Singapore Singapore 100 %DOF Management Australia Pty DOF Management AS Perth Australia 100 %DOF Holding Pte. DOF ASA Singapore Singapore 100 %PSV Invest I AS DOF ASA Oslo Norway 100 %PSV Invest I IS DOF ASA/Norskan Holding AS Oslo Norway 100 %PSV Invest II AS DOF ASA Oslo Norway 100 %DOF Subsea Congo SA DOF ASA /DOF Subsea AS Congo Congo 100 %

DOF Subsea Holding AS is a private limited company incorporated in Norway where the minority owner First Reserve Corporation owns the remaining 49%. The Company has a shareholders’ agreement with First Reserve Corporation regarding the ownership in DOF Subsea Holding AS. Distribution of dividends from DOF Subsea Holding AS is contingent upon consensus between DOF ASA and First Reserve as a minority shareholder.


dof group

130

31 Investments in jointly controlled companies and associated companies

2014DOFCON

Brasil GroupDOFTECH

DADOF

Deepwater AS Associates Total

Booked value of investments 01.01. 502 331 269 86 1 188 Addition - - - 5 5 Profit / loss for the period 90 39 -40 -11 77 Other comprehensive income -21 - - - -21 Divident received - - - -3 -3 Booked value of investments 31.12. 571 370 228 77 1 246

2013Booked value of investments 01.01. 441 306 89 73 909 Addition 103 - 200 12 315 Profit / loss for the period 62 26 -20 1 69 Other comprehensive income -105 -0 - - -105 Booked value of investments 31.12. 502 331 269 86 1 188

Name of entityPlace of business/country

of incorporation% of ownership

interestNature of the

relationshipMeasurement

method

DOFCON Brasil Group Norway 50 % Note 1 Equity

DOFTech DA Norway 50 % Note 2 Equity

DOF Deepwater AS Norway 50 % Note 3 Equity

DOF Iceman AS Norway 50 % Note 4 Equity

PSV Invest II IS Norway 15 % Note 4 Equity

Master & Commander Norway 20 % Note 4 Equity

DOF OSM Marine Services AS Norway 50 % Note 4 Equity

Note 1 DOFCON Brasil AS is a holding company jointly owned by DOF Subsea AS and Technip Coflexip Norge AS with 50% each. The company owns TechDOF Brasil AS and controls DOFCON Navegacao Ltda. The Group owns two vessels and has four vessels under construction. DOFCON Navegacao Ltda owns and operates Skandi Niteroi and Skandi Vitoria. TechDOF Brasil AS is a company building two new pipeline support vessels (PLSVs) in Norway. Two other PLSVs are under construction in Brazil with high national content. All four PLSVs are contracted with Petrobras and expected delivery for the vessels is 2016 and 2017.

Design vessel No vessels Completion

305* NB 823 and 824 2 2016

316* EP-09 and EP-10 2 2016-2017

DOF Subsea AS has guaranteed for 40% of the purchase price of each vessel to the yard, see also note 27.

DOFCON Brasil Group is not involved in any disputes or ongoing legal matters involving potential losses, and therefore no provision has been made for possible claims arising from same.

Note 2 DOFTech DA is owned by DOF Subsea AS and Technip Norge AS where each party owns 50% each of the liable capital. The company is engaged in a long-term timecharter hire of Skandi Arctic vessel with Technip UK, an affiliated company with Technip Norge AS.

There are no contingent liabilities relating to the Group’s interest in the joint venture. DOFTech DA is not involved in any disputes or ongoing legal matters involving potential losses, and therefore no provision has been made for possible claims arising from same.

Note 3 DOF Deepwater AS is owned by DOF ASA and Akastor ASA where each party owns 50% each of the liable capital. The company owns five AHTS vessels which operate in Brasil, Argentina, and Asia Pacific.

There are no contingent liabilities relating to the Group’s interest in the joint venture. DOF Deepwater AS is not involved in any disputes or ongoing legal matters involving potential losses, and therefore no provision has been made for possible claims arising from same.

Note 4 a) DOF Iceman is owned by DOF ASA and Vard Group ASA where each part owns 50% each of the liable capital. DOF Iceman AS owns 40% in Iceman IS.

b) PSV Invest II IS; DOF ASA is shareholder with 15%.

c) Master & Commander AS; DOF Subsea AS is shareholders with 20%.

d) OSM Marine Services AS; DOF Management is shareholder with 50%.

e) Other associated companies includes investments in DOF Subsea Australia Pty, Semar AS and Simsea AS.


dof group

131

31 Investments in jointly controlled companies and associated companies continued

Jointly controlled companies

DOFCON Brasil Group

DOFTECH DA

DOF Deepwater AS

DOFCON Brasil Group

DOFTECH DA

DOF Deepwater AS

Statement of comprehensive income 2014 2014 2014 2013 2013 2013

Operating income 503 192 246 393 188 230

Operating costs -33 -58 -87 -34 -53 -98

Operating result before depreciation (EBITDA) 470 134 159 359 135 132

Depreciation -40 -49 -58 -55 -40 -54

Operating result (EBIT) 430 85 101 304 95 78

Net financial result -151 -34 -180 -88 -39 -118

Result before tax 279 51 -79 216 56 -40

Tax -91 - -2 -83 - -

Result 188 51 -81 133 56 -40

Other comprehensive income, net of tax -44 - - -209 - -

Total result 144 51 -81 -76 56 -40

Statement of financial information 31.12.2014 31.12.2014 31.12.2014 31.12.2013 31.12.2013 31.12.2013

Intangible assets 86 - - 133 - -

Tangible assets 3 663 1 163 1 705 2 786 1 176 1 738

Financial assets -3 - - - - -

Total non-current assets 3 746 1 163 1 705 2 920 1 176 1 738

Current receivables 145 14 116 119 10 78

Cash and cash equivalents 97 41 35 100 62 29

Total current assets 241 54 151 219 71 108

Total assets 3 987 1 217 1 857 3 139 1 247 1 846

Total equity 1 012 630 457 866 578 537

Provisions and commitments - - - - - -

Non-current liabilities 2 902 470 1 157 2 031 552 1 175

Current liabilities 72 117 243 241 117 133

Total liabilities 2 975 588 1 400 2 273 670 1 308

Total equity and liabilities 3 987 1 217 1 857 3 139 1 247 1 846

Financial statements of the joint ventures are not audited and based on figures consolidated in the DOF Group at year-end. The figures for DOFTech DA above reflect the amounts presented in the financial statements of the joint venture adjusted for differences in accounting policies between the Group and the joint ventures. The depreciation in the DOFTech DA accounts is based on Technip depreciation rules which differ from the depreciation applied by the DOF Group.

DOFCON Brasil Group

DOFTECH DA

DOF Deepwater AS

DOFCON Brasil Group

DOFTECH DA

DOF Deepwater AS

Reconciliation of summarised financial information 31.12.2014 31.12.2014 31.12.2014 31.12.2013 31.12.2013 31.12.2013

Group's interest in the joint venture at 50% 506 315 228 433 289 269

Excess values booked in DOF Group 65 55 69 42

Group's carrying amount of the investment 571 370 228 502 331 269

Excess values recognised in the DOF Group are identified based on purchase price allocation and are related to vessels, goodwill and deferred tax.


dof group

132

31 Investments in jointly controlled companies and associated companies continued

Associated companies

2014Master and

Commander AS PSV Invest II IS DOF Iceman ASDOF OSM

Marine Services AS Other Total

Carrying amount 01.01.2014 59 16 8 3 86Additions/disposals - - 4 1 4Share of result -12 3 -5 4 - -11Dividend -2 - - -1 - -3Carrying amount 31.12.2014 45 19 6 2 4 77

Carrying amount 01.01.2013 56 15 3 73Additions/disposals - 1 10 1 12Share of result 3 - -2 - 1Carrying amount 31.12.2013 59 16 8 - 3 86

Summarise financial information for associates (100%):

Name Registered office Ownership Assets Liabilities Turnover Result

2014Master & Commander AS* Oslo 20.0 % 117 78 12PSV Invest II IS Oslo 15.0 % 336 248 69 -21Iceman IS Oslo 20.0 % 776 500 104 -11

2013Master & Commander AS* Oslo 20.0 % 648 440 94 -48PSV Invest II IS Oslo 15.0 % 346 237 62 -8Iceman IS Oslo 20.0 % 795 533 15 -8

On the consolidated accounts, jointly controlled companies and associated companies are recognised according to the equity method.


dof group

133

32 Significant acquisitions in the year

2014 Transactions The Group has not had any significant acquisitions in 2014.

2013 Transactions with non-controlling interest PSV Invest I IS: DOF Group has acquried 48% in PSV Invest I IS at 31 December 2013 and the Group now holds 100% of PSV Invest I IS. The acquistion was based on a put option from 2012 and the purchase price was NOK 99 mill. The carrying amount of the non-controlling interest at the date of acquisitions was NOK 76 mill. Excess value NOK 23 mill is charged to retained earnings.

33 Contingencies

The Group and its subsidiaries are not involved in any ongoing court cases as of 31 December 2014.

Tax assessment BrazilThe Group has in the period from 2009 until 2014 received notices of assessment of customs penalty from the Brazilian Tax Authorities regarding importation of vessel and equipment to Brazil. The Group has disputed the assessments and has based on legal opinions from a reputable law firm, decided not to make any additional provision in the accounts for 2014.

34 Subsequent events

Sale of vesselDOF Subsea has delivered Skandi Aker to new owner in February 2015.

A Brazilian subsidiary of DOF has in February 2015 signed an agreement to sell five vessels in Brasil, four PSV vessels and one AHTS vessel. The vessels are planned delivered to new owner in the period from February to April. Norskan Offshore Ltda. will for now and latest until the current charter contracts are terminated, be responsible for the operation of the ships. Two of the vessels, Skandi Leblon and Skandi Flamengo have firm contracts up for renewal in 2015. DOF has a market risk related to renewal of these two charter contracts. The sale has released approx. NOK 500 million of free liquidity to the shipowning companies on redemption of loans.

DOF’s subsidiary, DOF Rederi AS, has sold its vessel Skandi Falcon to a foreign new owner. The Vessel has been laid up since year end 2014. Skandi Falcon is a PSV (UT 705) built in 1990. The ship will be delivered ultimo April.

Agreement for hire of vessel DOF Subsea was awarded a Letter of Award (LOA) with a major international oil company in the Asia Pacific Region. The LOA is for a 7+3 years IRM contract. As part of the contract award, the vessel Skandi Hawk will be sold from DOF Rederi AS to DOF Subsea Rederi AS.

DOF Subsea has signed a IRM contract wiht Chevron for a 3+2 years contract for Skandi Protector (earlier Ocean Protector) in Australia.

NewbuildsNewbuild Vard OSV12 was delivered from the yard in March and has sailed to the Netherlands to install the crane and VLS tower.

FinancingThe Group has year to date 2015 redeemed or re-financed approximately NOK 1,800 million of in total NOK 3,614 million in balloon payments and bond loans maturing in 2015. The refinancing of the remaining part of the balloon instalments is included in the ordinary course of business

and is planned refinanced through secured bank financing. Refinancing of further approx. NOK 1,200 million is secured, and is planned to be completed during the first half of the year. The remaining bond debt of NOK 700 million in addition to ordinary instalments, will be paid throughout the year at maturity.

35 Foreign exchange rates

DOF ASA bases its accounting on the reference exchange rates applied by Norges Bank.

As of 31.12, the following exchange rates were applied:

2014 2013US Dollar 7.4322 6.0837

Euro 9.0365 8.3825

GBP 11.5710 10.0530

AUD Dollar 6.0881 5.4261

Brazilian Real 2.7971 2.5755

Singapore dollar, SGD 5.6218 4.8089

36 Transition note IFRS 11

Effect of implementation of IFRS 11, joint arrangements, on consolidated financial statements Effective from 1 January 2014, the Group implemented changes in IFRS 11. IFRS 11 focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, income and expenses. Joint ventures arise where an investor has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.

The Group has joint ventures with Technip: DOFCON Brasil Group and DOFTech DA, with Akastor ASA; DOF Deepwater AS and with Vard Group ASA; DOF Iceman AS. For more information on joint ventures see note 30 and 31.

The Group has historically applied the proportional consolidation method when accounting for joint ventures. As a consequence of the new standard, the Group has changed their accounting of joint ventures to the equity method. For comparison purposes, the Group has restated 2013 financial statements.

The Group recognised its investment in joint ventures at the beginning of the restated period (1 January 2013), as the total of the carrying amounts of assets and liabilities previously proportionally consolidated by the Group. This is the deemed cost of the Group’s investment in the joint ventures for applying equity accounting.

Share of net income of associates and joint venture has been presented separately in the statement of comprehensive income as part of EBITDA for 2013. Share of net income from associates was previously presented as part of the financial results.

Effect of implementation of IFRS 11, joint arrangements, on consolidated statement of comprehensive income, statement of financial position, statement of changes in equity and statement of cash flows is presented on the following pages.


dof group

134

Consolidated Income Statement

Previously stated Effect of FRS 11 Restated

Amounts in NOK million 2013 2013 2013

Operating income 9 754 -339 9 415

Payroll expenses -3 969 42 -3 927

Other operating expenses -2 682 -16 -2 698

Share of income of associates and joint venture 1 66 67

Net gain (loss) on sale of tangible assets 8 - 8

Operating expenses -6 642 92 -6 550

Operating profit/(loss) before depreciation - EBITDA 3 112 -247 2 865

Depreciation -1 193 79 -1 115

Operating profit - EBIT 1 919 -168 1 751


Finance costs -1 434 77 -1 357

Realisied gain/loss on currencies 39 -2 37

Unrealised gain/loss on currencies -606 37 -570

Net change in unrealised gain/loss on derivatives -5 -1 -6

Net financial items -1 944 124 -1 820

Profit (loss) before taxes -25 -44 -69

Tax expense (income) -27 44 17

Profit (loss) for the year -52 - -52

Consolidated Statement of Comprehensive Income

Previously stated Effect of FRS 11 Restated


Profit (loss) for the year -52 - -52

Other comprehensive income, net of tax

Items that may be subsequently reclassified to profit or loss

Currency translation differences -44 19 -26

Cash flow hedge -178 85 -94

Share of other comprehensive income of joint ventures and associates - -103 -103

Total -223 - -223

Items that not will be reclassified to profit or loss

Defined benefit plan actuarial gains/losses 1 - 1

Total 1 - 1

Total other comprehensive income for the year, net of tax -221 - -221

Total comprehensive income for the year, net of tax -274 - -274


dof group

135

Previously stated

Effect of IFRS 11 Restated

Previously stated


Amounts in NOK million 31.12.2013 31.12.2013 31.12.2013 31.12.2012 31.12.2012 31.12.2012

Assets

Deferred tax assets 363 -35 327 295 -46 249

Goodwill 418 -15 403 409 -16 392

Intangible assets 781 -51 730 704 -63 641

Vessels 24 898 -2 712 22 187 24 794 -2 829 21 965

ROV 866 -48 817 941 -55 886

Newbuildings 646 -240 406 423 - 423

Machinery and other operating equipment 480 -1 478 443 -1 442

Tangible assets 26 890 -3 001 23 888 26 602 -2 886 23 716

Investments in associated companies and joint-ventures 131 1 057 1 188 73 835 909

Investments in shares and units 5 - 5 5 - 5

Other non-current receivables 122 157 278 309 302 610

Non-current financial assets 258 1 214 1 471 387 1 137 1 524

Total non-current assets 27 928 -1 838 26 090 27 693 -1 812 25 882

Fuel reserves and other inventory 70 -1 70 56 -2 54

Trade receivable 1 867 -35 1 832 1 393 -47 1 346

Other receivables 566 -42 524 466 -11 455

Current assets 2 433 -76 2 356 1 859 -58 1 801

Restricted deposits 735 - 734 895 - 895

Cash and cash equivalents 1 579 -95 1 484 1 250 -205 1 045

Cash and cash equivalents included restricted deposits 2 314 -96 2 219 2 145 -205 1 940

Current assets 4 817 -172 4 645 4 060 -264 3 796

Total assets 32 745 -2 011 30 734 31 754 -2 076 29 678



dof group

136

Previously stated


Previously stated


Amounts in NOK million 31.12.2013 31.12.2013 31.12.2013 31.12.2012 31.12.2012 31.12.2012


Share capital 222 - 222 222 - 222

Share premium fund 1 230 - 1 230 1 230 - 1 230

Other equity 1 929 - 1 929 2 318 - 2 318

Non-controlling interests 2 965 - 2 965 2 950 - 2 950

Total equity 6 346 - 6 346 6 720 - 6 720

Deferred tax 107 -29 78 161 -58 103

Pensions 48 - 48 35 - 35

Non-current provisions for commitments 155 -29 126 196 -58 138

Bond loan 4 722 - 4 722 4 164 - 4 164

Debt to credit institutions 16 265 -1 738 14 527 16 592 -1 799 14 793

Non-current derivatives 359 -3 356 378 -3 375

Other non-current liabilities 75 -28 47 271 -20 251

Non-current financial liabilities 21 421 -1 769 19 652 21 405 -1 822 19 583

Current bond loan and debt to credit institution 3 248 -168 3 080 2 247 -112 2 135

Accounts payable 1 058 -18 1 040 683 -80 603

Tax payable 143 -36 107 122 -32 90

Public duties payable 92 - 92 86 - 86

Other current liabilities 280 10 290 295 28 323

Current liabilities 4 822 -213 4 610 3 433 -196 3 237

Total liabilities 26 399 -2 011 24 388 25 034 -2 076 22 958

Total equity and liabilities 32 745 -2 011 30 734 31 754 -2 076 29 678



dof group

137

Consolidated Statement of Changes in Equity

Amounts in NOK million Share capital Share

premium fund

Other equity - Retained

earnings

Other equity - Currency translation

differences Total

Non-con-trolling

interest Total equity

Balance at 01.01.2013 222 1 230 2 409 -92 3 769 2 950 6 720

Profit (loss) for the year - - -191 - -191 139 -52

Currency translations differences - - - -31 -31 4 -27

Cash flow hedge - - - -93 -93 - -94

Pensions - - 2 - 2 -1 1

Other comprehensive income - - -53 - -53 -51 -103

Total comprehensive income for the year - - -242 -124 -365 91 -275

Changes in non-controlling interests - - -23 - -23 -76 -99


Balance at 31.12.2013 previously stated 222 1 230 2 144 -215 3 381 2 965 6 346

Effect of IFRS 11

Balance at 31.12.2013 restated 222 1 230 2 144 -215 3 381 2 965 6 346

Consolidated Statement of Cash flows

Previously stated Effect of IFRS 11 Restated


Profit (loss) before taxes -25 -44 -69 Profit/loss on disposal of tangible assets -8 - -8 Depreciation 1 193 -79 1 115 Net interest cost 1 331 -98 1 233 Change in trade receivables -474 -12 -486 Change in accounts payable 376 61 437 Foreign exchange losses/gains 592 33 625 Change in other working capital items not specified above -175 4 -171 Share of loss/profit from associates -1 -66 -67 Cash from operating activities 2 809 -200 2 609

Net interest paid -1 342 103 -1 240 Tax paid -48 16 -32 Net cash generated from operating activities 1 419 -82 1 338

Payments received for sale of tangible assets 87 - 87 Purchase of tangible assets -1 616 161 -1 455 Purchase of shares -29 - -29 Payments received on long-term receivables 40 -121 -81 Net cash used in investing activities -1 518 40 -1 478

Proceeds from borrowings 3 186 - 3 186 Repayment of borrowings -2 844 155 -2 690 Non-controlling interest -99 - -99 Net cash flow from financing activities 242 155 397

Net changes in cash and cash equivalents 144 113 257

Cash and cash equivalents at the start of the period 2 145 -205 1 940

Exchange gain/loss on cash and cash equivalents 25 -3 22

Cash and cash equivalents at the end of the period 2 314 -96 2 219


138

Financial Statements DOF ASA


dof asa

139

Statement of Comprehensive Income


Sales income 239 305

Operating income 2, 8 239 305

Payroll expenses 3 -52 -39

Other operating expenses 4, 17, 19 -76 -136

Operating expenses -128 -175

Operating profit/(loss) before depreciation - EBITDA 111 130

Depreciation 7 -16 -18

Operating profit - EBIT 95 112


Finance costs 5 -371 -291

Realised gain/loss on currencies 5 -7 -17

Unrealised gain/loss on currencies 5 -28 6

Net change in unrealised gain/loss on derivatives 5 -16 -1

Net financial items 5 -185 42

Profit (loss) before taxes -90 154

Tax expense (income) 6 46 12

Profit (loss) for the year -43 166

Other comprehensive income

Other income and costs - -

Other comprehensive income - -

Total comprehensive income for the year -43 166


dof asa

140

Statement of Financial Position

Amounts in NOK million Note 31.12.2014 31.12.2013

Vessels 7 854 868

Machinery and other operating equipment 7 - 1

Tangible assets 854 869

Investments in subsidiaries 9 6 675 6 634

Investments in associated companies and joint-ventures 10 367 363

Other investments 16 5 5

Intragroup non-current receivables 16 952 1 200

Other non-current receivables 16 6 5

Financial assets 8 005 8 207

Non-current assets 8 859 9 076

Trade receivable 11, 16 69 114

Current receivables Group companies 16 288 -

Other receivables 12, 16 48 49

Current assets 405 163

Restricted deposits 1 1

Cash and cash equivalents 130 72

Cash and cash equivalents included restricted deposits 16 131 73

Current assets 536 236

Total assets 9 396 9 312


dof asa

141

Amounts in NOK million Note 31.12.2014 31.12.2013


Share capital 222 222

Share premium fund 1 230 1 230

Other equity 3 369 3 412

Equity 4 820 4 864

Deferred tax 6 9 55

Non-current provisions for commitments 9 55

Bond loan 13, 16 2 084 1 983

Debt to credit institutions 13, 16 1 074 1 585

Non-current derivatives 15, 16 57 43

Non-current liabilities 3 215 3 610

Bond loan and debt to credit institutions 13, 16 1 317 588

Accounts payable 16 27 9

Public duties payable 16 1 1

Debt to Group companies 16 - 179

Other current liabilities 14, 16 6 5

Current liabilities 1 351 783

Total liabilities 4 575 4 448

Total equity and liabilities 9 396 9 312

Statement of Financial Position






Mons S. AaseCEO



dof asa

142

Statement of Changes in Equity

Amounts in NOK millionShare

capitalShare

premium fundRetainedearnings

Totalequity

Balance at 01.01.2014 222 1 230 3 412 4 864

Profit/loss for the year - - -43 -43

Total comprehensive income for the year - - -43 -43

Share issues - - -

Total transactions with owners - - - -

Balance at 31.12.2014 222 1 230 3 369 4 820

Balance at 01.01.2013 222 1 230 3 246 4 698

Profit/loss for the year - - 166 166

Total comprehensive income for the year - - 166 166

Share issues - - - -

Total transactions with owners - - - -

Balance at 31.12.2013 222 1 230 3 412 4 864


dof asa

143

Statement of Cash flows


Profit before taxes -90 154

Depreciation of tangible assets 7 16 18

Impairment financial asset 46 -

Net interest cost 199 148

Change in trade receivables 45 15

Change in trade payable -3 1

Foreign exchange losses/gains 32 -15

Change in other working capital items not specified above 18 30

Cash from operating activities 263 350

Net interest paid -190 -143

Tax paid - -

Net cash from operating activities 73 207

Payments received on non-current receivables 187 -

Purchase of tangible assets 7 -2 -13

Purchase of share -4 -570

Net change in non-currrent intragroup balances -13 -8

Payments on non-current receivables - -

Net cash used in investing activities 168 -591

Proceeds from borrowings 753 337

Repayment of borrowings -472 -256

Net change intragoup balances “cash pool” -467 179

Net cash flow from financing activities -186 260

Net changes in cash and cash equivalents 55 -124

Cash and cash equivalents at the start of the period 73 195

Exchange gain/loss on cash and cash equivalents 4 2

Cash and cash equivalents at the end of the period 131 73


dof asa

144

Notes to the Financial Statements

Note Page

1 Accounting principles 145

2 Operating income 145

3 Payroll and number of employees 145

4 Other operating expenses 145

5 Financial income and costs 146

6 Tax 147

7 Tangible assets 148

8 Lease 148

9 Investments in subsidiaries 149

10 Investments in joint venture and associated companies 149

11 Trade receivable 150

12 Other current receivables 150

13 Interest bearing liabilities 150-151

14 Other current liabilities 152

15 Hedging activities 152

16 Financial assets and liabilities: Information on the balance sheet 153

17 Remuneration to auditor 154

18 Guarantee commitments 154

19 Related parties 154

20 Contingencies 154

21 Post-balance sheet events 154


dof asa

145

1 Accounting principles

The financial statements for DOF ASA have been prepared and presented in accordance with simplified IFRS pursuant of the Norwegian Accounting Act and are based on the same accounting principles as the Group statement with the following exeptions:

Investments in subsidiaries, joint venture and associatesInvestments are based on the cost method.

DividendsDividends and Group contributions are accounted for according to good accounting practice as an exemption from IFRS.

For further information, reference is made to the consolidated accounts.

2 Operating income

2014 2013

Sales income 203 268

Other operating income 36 37

Total 239 305

3 Payroll and number of employees

Notes to the Financial Statements

2014 2013

Salary and holiday pay -22 -24

Hired personnel -28 -18

Employer's national insurance contribution -2 -2

Reinvoices salary costs 6 8

Pension costs - -

Other personnel costs -5 -3

Total -52 -39

No man-years employed in financial year 57 36

Government grants related to the net salary scheme for vessels are reported as a reduction in payroll costs of NOK 8 million (NOK 8 million in 2013).

4 Other operating expenses

2014 2013

Technical costs vessel -30 -42

Vessel hire -26 -81

Other operating expenses -20 -14

Total -76 -136


dof asa

146

5 Financial income and costs

2014 2013

Dividends from subsidiaries 121 201

Other interest income 108 143

Other financial income 9 2

Financial income 238 345

Interest costs -307 -291

Impairment financial asset -46 -

Other financial costs -18 -

Financial costs -371 -291

Net gain/(loss) on currency derivatives -6 -1

Net gain/(loss) on non-current debt 8 -18

Net gain/(loss) on operational capital -9 1

Realised foreign exchange gain -7 -17

Net unrealised gain/(loss) on non-current debt -27 6

Net unrealised gain/(loss) on operational capital -1 -

Unrealised foreign exchange gain -28 6

Net change in unrealised gain/loss on interest swap -17 2

Net change in unrealised gain/loss on currency derivatives 1 -3

Net gain/loss on currency forwards contracts -16 -1

Total -185 42


dof asa

147

6 Tax

Tax consists of: 2014 2013Tax payable, ordinary taxation Norway - -

Tax payable in foreign activity - 1

Change in deferred tax 46 10

Tax cost/income 46 12

Reconciliation of nominal and effective tax rate

Profit before tax -90 154

Estimated tax cost (27%) 24 - 43

Deviation between actual and estimated tax cost 22 55

Reason for difference between actual tax cost and estimated tax cost

Tax effect of non-taxable income and non tax-deductible costs -22 -58

Tax effect of associtated companies - 2

Tax effect of other items - 3

Changes in tax rate from 28% to 27% - -2

Deviation from estimated tax cost -22 -55

Basis of deferred tax 2014 2013Fixed assets 544 400

Other differences (deferred capital gain etc) 115 264

Total temporary differences 660 663

Loss carried forward -627 -458

Basis for calculation of deferred tax / deferred tax assets (-) 33 205

Total deferred tax / deferred tax assets (-) 9 55

Gross deferred tax -9 -55


dof asa

148

8 Lease

Lease out Operational lease The company’s vessels are leased out on time charter. The company has concluded that a time charter (TC) represents the lease of an asset and consequently is covered by IAS 17. Lease income from lease of vessels is therefore reported to the profit and loss account on a straight line basis for the duration of the lease period. The lease period starts from the time the vessel is put at the disposal of the lessee and terminates on the agreed date for return of the vessel.

The table below shows the minimum future lease payments related to non-terminable operational lease agreements (TC contracts). These amounts include lease of vessels.

2014 2013Operational lease income 1 year 170 178

Receivable between 2 and 5 years 57 86

Receivable later than 5 years - -

Total 228 264

7 Tangible assets

*) Residual value vesselThe level of depreciation depends on the calculated residual value at the balance sheet date. Assumptions concerning residual value are made on the basis of knowledge of the market for used vessels. Basis for residual value is fair value assessment of charter free vessel. Fair values are adjusted to reflect the value of the vessels as if it had been of an age and in the condition expected at the end of the useful life.

2014 Vessels Periodic maintenance Operating equipment Total

Acquisition cost as of 01.01.2014 977 26 3 1 006

Additions - 2 - 2

Disposals - - -

Acquisition cost as of 31.12.2014 977 27 3 1 008

Depreciation as of 01.01.2014 122 13 3 138

Depreciation for the year 12 3 1 16

Depreciation on disposals for the year - - -

Depreciation 31.12.2014 134 16 3 153

Book value 31.12.2014 843 12 - 854

Depreciation period 30-35 years 30-60 months 5-15 years

Depreciation method *) Straight line Straight line

2013 Vessels Periodic maintenance Operating equipment Total

Acquisition cost as of 01.01.2013 976 12 3 992

Additions - 13 - 13

Disposals - -

Acquisition cost at 31.12.2013 977 26 3 1 006

Depreciation at 01.01.2013 109 8 2 120

Depreciation for the year 13 4 1 18

Depreciation on disposals in the year - -

Depreciation at 31.12.2013 122 13 3 137

Book value at 31.12.2013 855 13 1 869

Depreciation period 30-35 years 30-60 months 5-15 years

Depreciation method *) Straight line Straight line


dof asa

149

9 Investments in subsidiaries

Directly owned subsidiaries Main business Nationality Registered

office Share capital

Ownership and voting

share

Result for the year (100%)

Equity 31.12

(100%) Acquisition

cost

DOF Subsea Holding AS Shipowning/subsea eng. Norway Austevoll 184 51,0 % - 6 023 2 977 DOF Rederi AS Shipowning Norway Austevoll 169 100 % -16 1 331 842

DOF Management AS Management Norway Austevoll 38 66 % 21 124 58

DOF UK Ltd. Shipowning/management Scotland Aberdeen - 100 % 16 195 145

DOF Egypt Management Egypt Cairo 3 100 % -2 8 3

Norskan AS Shipowning/management Norway Austevoll 805 100 % -11 2 838 2 452 Norskan Holding AS Shipowning/Holding Norway Austevoll 1 100 % -19 119 119

Marin IT AS IT services Norway Austevoll 16 40 % 2 24 6

PSV Invest I AS Shipowning Norway Oslo - 100 % - - -

PSV Invest I IS Shipowning Norway Oslo 138 52 % 9 159 71

PSV Invest II AS Shipowning Norway Oslo - 100 % - - -

Total acquisition cost of subsidiaries 6 675

10 Investments in joint venture and associated companies

Joint ventures

Joint venture Main business Nationality Registered



share Result

for the year

Equity 31.12

(100%) Acquisition

cost

DOF Deepwater AS Shipowning Norway Austevoll 0,3 50 % -81 457 336

DOF Iceman AS Shipowning Norway Austevoll 24 50 % -4 20 12

Total 348

Associated companies

Associated companies Main business Nationality Registered



share Result

for the year

Equity 31.12

(100%) Acquisition

cost

PSV Invest II IS Shipowning Norway Oslo 108 14 % -21 88 15

Waveney IS Shipowning Norway Austevoll 36 8 % -12 56 4

Total 19

Total joint ventures and associates 367


dof asa

150

11 Trade receivable

2014 2013

Trade receivable 39 55

Trade receivable to intragroup 30 59

Total 69 114 The company’s credit exposure is mainly towards customers who historically have had good financial capability to meet their obligations and high credit rating. The company’s credit risk to clients is considered low, however a recent decrease in oil-price and weaker markets could increase the risk and impact the clients rating going forward.

As of 31.12, the company had the following accounts receivable which had matured, but not been paid.

Total Not matured <30 d 30-60d 60-90d >90d

Total 69 45 8 1 1 14

12 Other current receivables

2014 2013

Intragroup receivables 32 33

Pre-paid expenses 2 1

Accrual of income 2 2

Current derivatives - 1

Other current receivables 13 13

Total 48 49

13 Interest bearing liabilities

Bond loans

DOF ASA has four bond loans which mature in 2015-2019. See figures below. The trustee for the bond loan owners is Norsk Tillitsmann ASA and Nordea Bank Norge ASA is the account operator. The terms and conditions for the bond loans comprise a floating rate of interest, 3 month NIBOR + (475bp – 725bp). Quarterly interest rate regulations are carried out for all the bond loans. DOF ASA is free to purchase its own bonds.

Non-current liabilities to credit institutions The company’s liabilities to credit institutions are secured with mortgage on vessels owned by DOF ASA and subsidiaries. A standard set of covenants are established for these mortgage loans.

The most important financial covenants are as follows: Value-adjusted equity to value-adjusted assets shall be higher than 30% or higher than 20% if contractual coverage of the Group’s fleet of vessels is higher than 70%. The Group shall at all times have cash reserves of NOK 500 million and requirements to working capital (excluding current portion of non-current interest bearing liabilities) applies on certain credit facilities.

In addition to the above-mentioned financial covenants, the following terms and conditions also apply to a number of loan agreements:

* Full insurance for the Group’s assets.

* No changes to classification, management or ownership of the vessels without prior written consent from the banks.

* Møgster Offshore AS shall own minimum 34% of the shares in DOF ASA.

* DOF ASA shall be listed on the Oslo Stock Exchange.

In addition, the normal terms and conditions for this type of loan apply.

DOF ASA is in compliance with it’s financial covenants as of 31 December 2014.


dof asa

151

13 Interest bearing liabilities continued

Non current interest bearing liabilities 2014 2013Bond loans 2 084 1 983 Debt to credit institutions 1 074 1 585 Total non current interest bearing liabilities 3 158 3 568

Bond loans 339 - Debt to credit institutions 547 214 Overdraft facilities 390 337 Total current interest bearing liabilities *) 1 275 552

Total interest bearing liabilities 4 433 4 119

*) Accrued interest is not included in interest bearing liabilities

Instalment, balloons and interest profile 2015 2016 2017 2018 2019 Subsequent Total Bond loans 339 - 690 696 698 - 2 423 Debt to credit institutions 547 664 70 156 53 131 1 621 Overdraft facilities 390 - - - - - 390 Total instalments and balloons 1 275 664 760 852 751 131 4 433 Calculated interest profile 289 227 170 105 41 5 838 Net interest bearing derivaties 19 16 10 8 7 - 60 Total instalments, balloons and interest 1 583 907 940 965 799 137 5 331

Liabilities secured by mortgage 2014 2013

Bond loan - - Debt to credit institutions 1 621 1 799 Total liabilities secured by mortgage 1 621 1 799

Tangible assets 854 868 Total assets provided as security 854 868

Average rate of interest 8,04 % 7,28 %

Fair value of non-current loans

The price of the company’s three bond loans at 31.12.2014 was as follows:

Loan Due date Margin

(bp) Price

31.12.2014 Outstanding amount

31.12.2014 Initial amount 31.12.2014

Price 31.12.2013

Outstanding amount 31.12.2013

DOF ASA 08 09.03.15 610 100,56 339 600 103,25 600 DOF ASA 09 07.02.17 725 103,50 700 700 105,00 700 DOF ASA 11 07.02.18 475 91,00 700 700 - - DOF ASA 10 12.09.19 700 94,50 700 700 103,50 700 Total 2 439 2 700 2 000 Other non-current liabilities, with the exception of non-current loans, have nominal value equivalent to fair value of the liability.


dof asa

152

14 Other current liabilities

2014 2013

Current derivatives 5 4

Other current liabilities 1 1

Total 6 5

15 Hedging activities

As of 31 December 2014, DOF ASA had 6 interest rate swaps to hedge interest risk on interest bearing liabilities and 12 options to hedge future sales to customers in USD. The table below displays the fair value of obligations and rights as of 31 December 2014.

2014 2013

Assets Liabilities Assets Liabilities

Interest rate swaps - 57 - 43

Foreign exchange contracts - 5 1 4

Total - 62 1 46

Non-current portion

Interest rate swaps - 57 - 43

Non-current portion - 57 - 43

Current portion - 5 1 4

Derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.

As of 31.12 the Company held the following interest rate derivative contracts.

Instrument Fixed rate Floating rate Notional amount Effective from Maturity date

31.12.2014

Interest rate swap - NOK 1,62 % - 4,58 % Nibor 3m - 6m 1 100 2011-2014 2015-2019

Interest rate swap - USD 1,15 % Libor 6m 31 2012 2017

31.12.2013

Interest rate swap - NOK 2,93 % - 4,80 % Nibor 3m - 6m 800 2011-2013 2015-2019

Interest rate swap - USD 1,15 % Libor 6m 209 2012 2017

As of 31.12 the Company held the following foreign exchange rate derivatives, not qualified for hedge accounting

Committed

Instrument Received Amount Remaining term to maturity

31.12.2014


The company has entered into forward options contracts with barrier, with a commitment to sell USD against NOK above a barrier level at certain settlement dates.

Derivatives are expected to occur at various dates during the next 12 months. Gains and losses recognised in the hedging reserve interest rates swaps as of 31 December 2014 are recognised in the income statement in the period or periods during which the hedged forecast transaction affects the income statement.


dof asa

153

16 Financial assets and liabilities: Information on the balance sheet

This note gives an overview of the carrying and fair value of DOF ASA’s financial instruments and the accounting treatment of these instruments. The table is the basis for further information regarding DOF ASA’s financial risk. The table also shows the level of objectivity in the measurement hierarchy of each method of measuring the fair value of DOF ASA’s financial instruments.

31.12.2014

Financial instruments at fair value through

income statement

Financial liabilities measured at

amortised costDeposits and

receivables Total

AssetsFinancial investments 5 5Intragroup non-current receivables 952 952Other non-current receivables 6 6Trade receivable 69 69Current receivables Group companies 288 288Current derivatives - -Other current receivables 46 46Cash and cash equivalents 131 131Total financial assets 5 - 1 493 1 498

LiabilitiesNon-current bond loans and debt to credit institution 3 158 3 158Current bond loans and debt to credit institution 1 317 1 317Non-current derivatives 57 57Current derivatives - -Accounts payable and other current liabilities 31 31Total financial liabilities 57 4 506 - 4 563

Total financial instruments -52 -4 506 1 493 -3 066


31.12.2013

Financial instruments at fair value through

income statement

Financial liabilities measured at

amortised costDeposits and

receivables Total

AssetsFinancial investments 5 5Intragroup non-current receivables 1 200 1 200Other non-current receivables 5 5Trade receivable 113 113Current derivatives 1 1Other current receivables 48 48Cash and cash equivalents 73 73Total financial assets 6 - 1 440 1 446

LiabilitiesNon-current bond loans and debt to credit institution 3 568 3 568Current bond loans and debt to credit institution 588 588Non-current derivatives 43 43Current derivatives 4 4Accounts payable and other current liabilities 190 190Total financial liabilities 46 4 347 - 4 393

Total financial instruments -40 -4 347 1 440 -2 947



dof asa

154

17 Remuneration to auditor

Specification of auditor’s fee (amount in TNOK): 2014 2013

Audit 2 154 2 148

Tax consultation - 16

Fee for other services 368 168

Total 2 522 2 332

All amounts in the table are excl VAT.

18 Guarantee commitments

On a general basis DOF ASA has issued guarantees to financial institutions on behalf of its wholly owned subsidiaries on maritime mortgages/loans.

DOF ASA has to some extent issued guarantees on behalf of partly owned subsidiaries. On behalf of DOF Deepwater AS, DOF ASA’s guarantee commit-ment in favor of financial institutions totals NOK 582 million as of 31.12.2014. On behalf of Iceman AS, total commitment is NOK 485.3 million per end of 2014, of which 50% is counter guaranteed by Vard Group AS. DOF ASA has issued a guarantee of NOK 30 million towards SG Finans for the obligations of Marin IT AS.

DOF ASA has guaranteed for the obligations of DOFCON Navegacao Ltda., (a company owned 50% by DOF Subsea AS and 50% by Technip Coflexip Norge AS) towards BNDES. Total amount as per 31.12.2014 is USD 148.2 million. The guarantee is counter-guaranteed by DOF Subsea AS. DOF ASA has also guaranteed for certain obligations of DOF Subsea Brasil Servicos Ltda. in favor of BNDES.

19 Related parties

Operating costs 2014 2013

Møgster Management AS 5 2

Total 5 2

Transactions with related parties are governed by market terms and conditions in accordance with the “arm’s length principle”.

Below is a detailed description of significant transactions between related parties:

Long-term agreements: Møgster Offshore AS owns 51.22% of the shares in DOF ASA. Laco AS is the main shareholder of Møgster Offshore AS. Møgster Management AS provides administrative intragroup services to DOF ASA. Møgster Management AS is owned by Laco AS.

Individual transactions: DOF ASA has issued a guarantee in the maximum amount of NOK 485 million on behalf of Iceman AS in favor of DNB ASA. Guarantee income in 2014 was NOK 9 million (NOK 2 million). Iceman AS is owned with 40% by DOF Iceman AS. DOF ASA and Vard Group ASA are owners with 50% each in DOF Iceman AS.

Loans to joint ventureDOF ASA has given loans to joint ventures in the amount of MNOK 74 million.

Information about transactions with related parties do not include transactions with companies in the DOF Group.

20 Contingencies

DOF ASA is not involved in any ongoing court cases as of 31 December 2014.

21 Post-balance sheet events

DOF ASA has repaid outstanding bond loan in the amount of NOK 339 million in March 2015.


dof asa

155

We confirm, to the best of our knowledge, that the financial statements for the period from 1 January to 31 December 2014 has been prepared in accordance with approved accounting standards, and gives a true and fair view of the Company’s consolidated assets, liabilities, financial position and result of operations and that the Report of the Board of Directors provides a true and fair view of the development and performance of the business and the position of the Group and the Company together with a description of the key risks and uncertainty factors that the company is facing.

Confirmation from the Board of Directors and CEO






Mons S. AaseCEO



156

PricewaterhouseCoopers AS, Sandviksbodene 2A, Postboks 3984 - Sandviken, NO-5835 BergenT: 02316, org. no.: 987 009 713 MVA, www.pwc.noStatsautoriserte revisorer, medlemmer av Den norske Revisorforening og autorisert regnskapsførerselskap

To the Annual Shareholders' Meeting of DOF ASA

Independent auditor’s report

Report on the Financial Statements

We have audited the accompanying financial statements of DOF ASA, which comprise the financialstatements of the parent company and the financial statements of the group. The financial statementsof the parent company comprise the statement of financial position as at 31 December 2014, statementof the comprehensive income, statement of changes in equity and statement of cash flows for the yearthen ended, and a summary of significant accounting policies and other explanatory information. Thefinancial statements of the group comprise the consolidated statement of financial position as at 31December 2014, consolidated income statement, consolidated statement of comprehensive income,consolidated statement of changes in equity, and consolidated cash flow for the year then ended, and asummary of significant accounting policies and other explanatory information.

The Board of Directors and the Managing Director’s Responsibility for the Financial Statements

The Board of Directors and the Managing Director are responsible for the preparation and fairpresentation of the financial statements of the parent company in accordance with simplifiedapplication of international accounting standards according to § 3-9 of the Norwegian Accounting Actand for the preparation and fair presentation of the financial statements of the group in accordancewith International Financial Reporting Standards as adopted by EU and for such internal control asthe Board of Directors and the Managing Director determine is necessary to enable the preparation offinancial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with laws, regulations, and auditing standards and practicesgenerally accepted in Norway, including International Standards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by management, aswell as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.


157

Independent auditor's report - 2014 - DOF ASA, page 2

(2)

Opinion on the financial statements of the parent company

In our opinion, the financial statements of the parent company are prepared in accordance with thelaw and regulations and present fairly, in all material respects, the financial position of DOF ASA as at31 December 2014, and its financial performance and its cash flows for the year then ended inaccordance with simplified application of international accounting standards according to § 3-9 of theNorwegian Accounting Act.

Opinion on the financial statements of the group

In our opinion, the financial statements of the group are prepared in accordance with the law andregulations and present fairly, in all material respects, the financial position of the group DOF ASA asat 31 December 2014, and its financial performance and its cash flows for the year then ended inaccordance with International Financial Reporting Standards as adopted by EU.

Report on Other Legal and Regulatory Requirements

Opinion on the Board of Directors' report and the statements on Corporate Governance andCorporate Social Responsibility

Based on our audit of the financial statements as described above, it is our opinion that theinformation presented in the Board of Directors report and in the statements on CorporateGovernance and Corporate Social Responsibility concerning the financial statements, the goingconcern assumption and the proposal for coverage of the loss is consistent with the financialstatements and complies with the law and regulations.

Opinion on Registration and Documentation

Based on our audit of the financial statements as described above, and control procedures we haveconsidered necessary in accordance with the International Standard on Assurance Engagements ISAE3000 “Assurance Engagements Other than Audits or Reviews of Historical Financial Information”, it isour opinion that management has fulfilled its duty to produce a proper and clearly set out registrationand documentation of the company’s accounting information in accordance with the law andbookkeeping standards and practices generally accepted in Norway.

Bergen, 27 April 2015PricewaterhouseCoopers AS

Hallvard AarøState Authorised Public Accountant (Norway)

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

Norway

DOF Subsea ASThormøhlensgate 53 C5006 Bergen NORWAYPhone: +47 55 25 22 00Fax: +47 55 25 22 [email protected]

DOF Subsea Norway ASThormøhlensgate 53 C5006 BergenNORWAYPhone: +47 55 25 22 00Fax: +47 55 25 22 [email protected]

DOF Management ASAlfabygget5392 Storebø NORWAY Phone: +47 56 18 10 00Fax: +47 56 18 10 [email protected]

Angola

DOF Subsea AngolaRua Ndumduma 56/58Caixa postal 2469, MiramarLuandaREPUBLIC OF ANGOLAPhone: +244 222 43 28 58Fax: +244 222 44 40 68Mobile: +244 227 28 00 96 +244 277 28 00 [email protected]

Argentina

DOF Management Argentina S.A.Peron 315, piso 1, Oficina 6-b1038 - Buenos AiresARGENTINAPhone: +5411 4342 [email protected]

Australia

DOF Subsea Australia Pty Ltd5th Floor, 181 St. Georges TcePerth WA 6000AUSTRALIAPhone: +61 8 9278 8700Fax: +61 8 9278 [email protected]

DOF Management AustraliaLevel 1, 441 South Road,Bentleigh, Vic. 3204AUSTRALIAPhone: +61 3 9556 5478Mobile: +61 418 430 939

Brazil

NorSkan Offshore LtdaRua Lauro Müller, 116 Salas 2802 a 2805Torre do Rio Sul22290-160, BotafogoRio de Janeiro, R.J. BRAZILRua A1, número 35Vale Encantado27910-000, MacaéRio de Janeiro, R.J.BRAZILPhone: +55 21 21 03 57 00Fax: +55 21 21 03 57 [email protected]

DOF Subsea Brasil Serviços LtdaRua A1, número 35Vale Encantado27910-000, MacaéRio de Janeiro, R.J.BRAZILRua Lauro Müller, 116 Salas 2802 a 2805Torre do Rio Sul22290-160, BotafogoRio de Janeiro, R.J. BRAZILPhone: +55 22 21 23 01 [email protected]

Singapore

DOF Management Pte Ltd460 Alexandra Road# 15-02PSA Building, 119963SINGAPOREPhone: +65 6868 1001Fax: +65 6561 2431

DOF Subsea Asia Pacific Pte Ltd460 Alexandra Road # 15-02PSA Building, 119963SINGAPOREPhone: +65 6561 2780Fax: +65 6561 [email protected]

UK

DOF (UK) LtdVoyager House, 75 Waterloo QuayAberdeen AB11 5 DE UNITED KINGDOMPhone: +44 1224 586 644Fax: +44 1224 586 [email protected]

DOF Subsea UK LtdExchange No.1, 62 Market St.Aberdeen, AB11 5PJ UNITED KINGDOMPhone: +44 1224 614 000Fax: +44 1224 614 [email protected]

USA

DOF Subsea USA Inc5365 W. Sam Houston Parkway N Suite 400Houston Texas 77041USAPhone: +1 713 896 2500Fax: +1 713 984 [email protected]

DOF ASAAlfabygget5392 StorebøNORWAYPhone: +47 56 18 10 00Fax: +47 56 18 10 [email protected]


ColophonPublicationDOF ASA Annual Report 2014

Editing and Control ConsistencyCorporate Finance & Control Corporate Communications

Art DirectionMK Norway

PhotographyFront page: ©Morten Mjånes Hellevik/MK Norway Harald M. Valderhaug, Øystein Klakegg, John Burnham, Christian Romberg, Håkon Sunde

Print and ProductionHaugesund Bok & Offset Cover: Arctic Volume Highwhite, 250 g. Book: Arctic Volume Highwhite, 115 g.

Glossary

AUV: Autonomous Underwater Vehicle

CAGR: Compound Annual Growth Rate

CAPEX: Capital Expenditure

DNV-GL: Det Norske Veritas. Classification company. Controlling and approving the vessels technical condition, security and quality according to the company’s own rules and the national laws

DP: Dynamic Positioning

EBIT: Operating Profit

EBITDA: Operating Profit before Depreciation

E&P: Exploration & Production

EPIC: Engineering, Procurement, Installation & Commissioning

FPSO: Floating Production Storage and Offloading

GOM: Gulf of Mexico

GRI: Global Reporting Initiative

HR: Human Resources

HSEQ: Health, Safety, Environment and Quality

IFRS: International Financial Reporting Standards

IMCA: International Marine Contractors Association

IMR: Inspection, Maintenance and Repair

IOC: International Offshore Company

ISM: International Safety Management Code

ISO: International Standards Organisation

ISPS: International Ship and Port Facility Security Code. International framework to detect/ assess security threats and take preventive measures against security incidents affecting ships or port facilities used in international trade

LNG: Liquefied Natural Gas

MLC: Maritime Labour Convention

NIBOR: Norwegian Interbank Offered Rate

NIS: Norwegian International Ship Register

NOR: Norwegian Ordinary Ship Register

OHSAS: Occupational Health & Safety Advisory Services

OSCV: Offshore Subsea Construction Vessel

PLSV: Pipelaying Support Vessel

ROV: Remote Operated Vehicle

SEMS: Safety and Environmental Management Systems

STCW: Standards of Training, Certification and Watch keeping

SURF: Subsea, Umbilicals, Risers & Flowlines

T&I: Transportation & Installation

Time Charter Party (TC): Contract for Chartering a Vessel

VAE: Value Adjusted Equity

MILJØMERKET

241

Trykksak

600

DOF ASAAlfabygget

5392 StorebøNORWAY

www.dof.no

Download - DOF ASA Annual Report 2014 - dofman.no ASA/IR/2015/DOF ASA... · DOF ASA Annual Report 2014

Top Related