2
DOF Subsea I Annual Report 2011
DOF Subsea
2011
Annual Report
DOF Subsea I Annual Report 2011
3
4
DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
5
INDEX
DOF subsea Global offices
8-9
Life of field services
10-11
2011 Highlights
12-13
CEO'S STATEMENt
14-15
This is dof Subsea
16-17
Dof subsea at a glance
18-19
HSEQ
20-21
The Team
22-23
the subsea market
24-25
the Brazil region
26-31
the asia pacific region
32-35
The atlantic region
36-39
Naming ceremonies
40-41
the corporate team
42-43
financial market
44-45
the fleet
46-51
the board 2011
52
report of the board of directors dof Subsea
53-57
2011 corporate governance
58-63
Accounts: DOF Subsea Group
64-101
Accounts: DOF Subsea AS
102-121
Confirmation from the board
122
Auditor's report
124-125
CONTACT
126
Cover photo
Skandi Skolten, by Tom Gulbransen.
Design by
Maritimecolours.no
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DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
7
DOF Subsea Global Offices
HEAD OFFICE
BERGEN
Aberdeen
Moscow
st. john's
Cairo
atlantic
region
houston
Point-Noire
Luanda
MacaÉ
rio de janeiro
buenos aires
Supporting
Save the Children
Norway
since 2008
8
DOF Subsea I Annual Report 2011
Brazil
region
DOF Subsea’s vision
is to be the preferred
integrated subsea
service provider
worldwide.
MANILA
Singapore
asia
Pacific
region
BRUNEI
jakarta
darwin
Perth
melbourne
DOF Subsea I Annual Report 2011
9
Life of field services
EngINeeRING / Construction
and mobilization
MARINE Operations
Supply Services
Vessels,Vessel Management, Operations
and Supply services
Integrated subsea solutions across
Life-of-Field
• A crew of highly skilled professionals both onshore
and offshore
Field development phase
• A technically diversified fleet of innovative and
specialized vessels
• Subsea Construction and Installation
• A fleet of high-end ROVs
Production phase
• Front-end engineering, design, survey
• Inspection, Repair and Maintenance
• Field Enhancement
Field abandonment/decommissioning
• Removal and disposal
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DOF Subsea I Annual Report 2011
Decomissioning
Geotechnical and
geophysical surveyS
Pipeline Survey
DIVERLESS INTERVENTION
Diver assisted
intervention
DOF Subsea I Annual Report 2011
11
2011 Highlights
2011
HIGHLIGHTS
1st
Quarter
2Nd
Quarter
3RD
Quarter
Contracts:
Contracts:
Contracts:
•Geograph started on a 5-year contract
with Petrobras.
•Skandi Commander arrived in Brazil
and started a contract with Petrobras.
Fleet:
Fleet:
•Delivery of the Skandi Niteroi (PLSV)
in January. The Brazil-built vessel has
been upgraded with pipe-laying equipment in Norway during 2011.
•3 vessels were upgraded during the
quarter.
•DOF Subsea signed an agreement for
the purchase of Sarah (renamed to
Skandi Constructor).
•Geosounder was sold.
•Skandi Hercules commenced its first
job in Vietnam. •DOF Subsea entered into contract with
Tullow Oil, and a contract with ENI for
Goliat marine operations.
•Skandi Singapore and Skandi Hercules
– secured several new contracts in Asia
and Australia.
•Skandi Constructor secured a 3 + 2
months contract with DONG during
the winter season.
•Skandi Niteroi secured a 4 + 4 yrs contract with Petrobras.
Finance:
•DOF Subsea issued an unsecured
5-year bond loan of NOK 750 million,
of which NOK 200 million is owned
on the company's accounts.
•NOK 200 million private placement
in DOF Installer ASA. DOF Subsea AS
owns approx. 84% of the company.
•Skandi Constructor was financed.
Fleet:
•Skandi Skansen was delivered.
•Skandi Singapore was delivered.
•Skandi Niteroi arrived in Brazil for completion as a PLSV.
•Geosea was transferred to Norway for
an upgrade to a RSV vessel.
Finance:
•Skandi Niteroi, Skandi Skansen and
Skandi Singapore were financed.
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DOF Subsea I Annual Report 2011
4th
Quarter
2012: Events after balance date
Contracts:
Contracts:
•Skandi Niteroi went onhire to Petrobras.
•New 4 year frame contract on Skandi
Skansen with Subsea 7. The contract
will commence in February 2012.
•1 year contract on Skandi Inspector
with ISS. The contract will commence
in April 2012.
•Skandi Constructor was awarded a
contract with Shell. Commencement
is scheduled for second quarter 2012.
•Frame Agreement with Statoil.
•Call of Geosund on Frame Agreement
with Statoil. •DOF Subsea Asia Pacific has secured multiple contracts awards in Asia and Australia with a total contract value of abt. USD 30 million.
•New contracts on Skandi Hawk.
•Several new vessel contracts and subsea contracts with a value of NOK 520 million.
Fleet:
•DOF Subsea Rederi purchased a newbuilding contract. Fleet:
•Chartering of Skandi Hawk from DOF ASA. The vessel will be operating in the Asia Pacific region.
•Purchased 6 new Triton XLX ROVS with LARS from Perry Slingsby for delivery during 2012.
•Sale of Skandi Bergen to Commonwealth of Australia and ordering of new vessel with delivery in 2013.
Finance:
•Established a drawing facility of NOK 300 million.
•Sold NOK 200 million in DOFSUB05 bond.
•Bought back NOK 100 million in DOFSUB03 bond.
•Issued new bond DOFSUB06NOK 700 million, holding NOK 200 million on own account.
•Bought back NOK 87.5 million in DOFSUB03.
•Bought back NOK 149 million in DOFSUB04.
•Net financing effect of NOK 363.5 million.
Finance:
•Geosea and Geosund were refinanced.
DOF Subsea I Annual Report 2011
13
CEO's Statement
CEO'S
statement
The key to our success in 2012 remains unchanged
– our employees.
For DOF Subsea, the key events in 2011 have been delivery of several key assets leaving us with only one vessel under construction at year end. We have secured several new contracts giving a high contract coverage for our fleet in 2012 and
onwards. The strong growth in the fleet together with an upturn
in the market resulted in a stronger second half for us. I expect
the positive trend from last part of 2011 to continue in 2012
and expect 2012 to be the best year ever in DOF Subsea’s relatively short history. DOF Subsea is still a young company. In 2005, DOF carried
out the acquisition of the company Geoconsult in Bergen. This was followed by acquisitions in the UK, USA and Australia.
Moreover, investments have been made in new vessels, ROVs
and other subsea equipment. At the same time, the company
has maintained a focus on developing a global organization.
We aim to continue to develop expertise within the company
in 2012. We are actively involved in recruitment so we can
offer our customers greater expertise to handle more complex
operations. Our strategy is to be a global supplier of services
related to survey, IRM, construction support and smaller construction projects. The Group owns three of the world’s
most advanced construction support and anchor handling vessels, via DOF Installer. With the acquisition of SWG and
our ownership in SEMAR, we have a high level of expertise
related to mooring and anchoring of ships and rigs. We aim to invest more resources in this area and continue to win new
contracts in this market niche. 14
DOF Subsea I Annual Report 2011
We have developed a group of companies with offices in all
parts of the world, each staffed by expert personnel. We are all
currently facing significant challenges and opportunities for
the future. Our employees are our most important resource.
Our team of skilled employees, both at sea and on land, helps
DOF Subsea achieve the required level of progress.
Today we deliver services to our Customers on a global basis.
We expect market growth in all regions. I believe 2012 will be
a year where we will continue on our current positive trend. I also believe that we will emerge from 2012 in a much stronger
position. The key to our success in 2012 remains unchanged –
our employees.
Best regards
Mons S. Aase
CEO, DOF Subsea AS
DOF Subsea I Annual Report 2011
15
This is DOF Subsea
THIS IS
DOF SUBSEA
DOF Subsea is globally placed to match our industry's growing
footprint. We anticipate the changing operational and technical
needs of our market and will provide future-proofed technology
that keep us and our clients ready for the challenges as we
move towards a future of subsea and deep water development.
We routinely deliver subsea projects, on time, within budget,
to satisfied clients. Every day we combine the skills, knowledge
and global experience that lie at the heart of safe, successful
life-of-field project delivery. We do it with a world class fleet of offshore vessels, ROVs and subsea systems. Our track record
extends across the full range of ‘field life cycle stages’ – from
Front End Concept Engineering, Design, Construction and
Installation, IRM to Field Abandonment and Decommissioning.
Our working environment is demanding and subsea operations complex - we know offshore conditions, test people and
equipment. Our response to the obvious challenges is to have
a dedicated team of talented professionals in place, across all
disciplines, on- and offshore. People, their experience, enthusiasm, and energy drive our business forward.
We build diverse and global teams and always strive for a free
exchange of ideas, experience, and knowledge, worldwide. We promote resourcefulness and responsiveness so we can
continuously deliver integrated subsea solutions.
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DOF Subsea I Annual Report 2011
As our new build program matures, our high specification fleet
expands. Currently it stands at 25 vessels, has an average age
of 6.5 years and is supported by 47 Work Class ROVs. Matching
the challenges of the offshore sector, the latest additions to the fleet represent a new generation of high power and environmentally friendly vessels, designed for operations
across a wide range of water depths and environmental conditions.
We continue to set the benchmark for reliability and environmental performance, incorporating the latest design features
to assure safe and efficient offshore operations. It is our team’s ability to match services, expertise, and equipment to the requirements of each individual operation that
underpins our reputation for safe, efficient and cost effective
project delivery. Ultimately, it is our outstanding team and
modern fleet that allow us to generate the highest possible
return on our shareholders' investments.
DOF Subsea I Annual Report 2011
17
DOF Subsea at a Glance
DOF SUBSEA AT
A GLANCE
DOF Subsea provides integrated project managed and engineered subsea solutions to the offshore oil and gas industry.
We offer modern, high specification assets and quality services dedicated to the major oil and gas producing regions
around the world.
Our core business is the execution of complex subsea operations, down to depths of 4000 metres, using owned and
operated world-class, purpose built vessels, ROVs and subsea
equipment.
Our presence in the North Atlantic, Gulf of Mexico, Brazil,
Asia, and West Africa allows us to capture the full range of
opportunities around the globe.
We employ 1,500 skilled subsea engineers and a marine
crew of 1,000 sailors worldwide, 25 offshore vessels, 1 near-shore vessel, 46 ROV systems, 1 AUV/IIV system and 11 diving spreads.
We currently own the largest fleet of high-end construction
vessels (including new builds) in the world.
We focus on workforce engagement through recruitment,
retention, training and development of our employees.
Our commitment to provide an incident free environment
across all our worksites is applied via our management systems
and procedures, including our safe and environmentally
friendly working practices, from our comprehensive HSEQ
systems and procedures.
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DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
19
HSEQ
HSEQ
Our safety culture: keeping people safe across all
our worksites is our priority.
HSEQ is not an end-game but a constant in the business as we
strive for greater understanding through continuous review
and improvement of our systems. Training and development
featured strongly in 2011, building competence and confidence
in our teams, empowering people and keeping safety top of mind.
Our unwavering commitment to Safety Leadership received
formal recognition in 2011 as our global systems were recertified towards International Standard ISO 9001:2008, ISO
14001:2004 and OHSAS 18001 certification. The introduction
of a unified, global Business Management System and other
targeted HSEQ initiatives strengthened the Group’s position
to meet future challenges and progress towards our Safety
Leadership goals and objectives.
Harmonizing our systems across the Group has been a major
focus. As our clients respond to an international climate of
greater regulation, in what is recognized as the post-Macondo
period, we have been proactively building our own robust
Business Management Systems to a global standard. Making
vessels and integrated subsea services interchangeable around
the globe, whilst maintaining a standard of excellence and
high safety performance, ensures our quality of project execution worldwide.
97%
UPTIME FOR OFFSHORE
VESSELS, OPERATIONS
ON VESSELS AND
ROV OPERATIONS
The advantages of capturing knowledge and working in a best
practice environment are apparent for all. In 2011 we made
substantial progress promoting rigorous but intuitive systems,
simultaneously applicable for complex or more routine projects, to support people in their work. Training and
develop­ment extended comprehension, giving our people,
partners and subcontractors greater clarity and the tools to
act in line with our key values of ethical behaviour and ensuring
a safe working environment.
Our trend has been towards an ever-improving safety achievement. However, despite proactive initiatives, the company
sustained three lost time injuries at the beginning of the year
resulting in a LTIF frequency of 0.9 and a TRCF frequency
of 3.0 per million man hours. No injured parties suffered any
permanent disability and all returned to work. In response, to build competence in the workforce in the most
immediate and accessible way, the Global Training System,
Safety E-Learning, has been introduced to the organization.
Encouragingly, a score of over 93% correct answers was
achieved on the overall test of the participants.
MOST UTILIZED E-LEARN MODULES IN 2011.
DOF SUBSEA DOCMAP
246
259
ENVIRONMENTAL
337
FIRE SAFETY INTERACTIVE
INDUCTION SAFETY
MANUAL HANDLING
OFFICE SAFETY
WORKING AT HEIGHT
DOF Subsea I Annual Report 2011
154
DSE INTERACTIVE
RISK ASSESSMENT
20
280
COSHH INTERACTIVE
160
263
161
304
117
ENVIRONMENTAL PERFORMANCE
QUALITY ASSURANCE and QUALITY CONTROL
Our offshore teams work in remote locations, often exposed to
extreme conditions and surrounded by diverse and fragile ecosystems. Identifying and managing hazards and environmental impacts are and will remain, a vital part of DOF Subsea’s
Management System. Considerable progress has been made as
we integrate environmental performance within our broader
strategic and business planning processes to address potential
issues.
DOF Subsea delivers consistently quality products and services safely. The combination of expertise and experience in
quality assurance, and dedicated resources to this function, are
key to our success. To ensure customer satisfaction we have set
ambitious key performance indicators (KPIs) for future deliveries. In 2011, we reached 97% uptime for offshore vessel and
ROV operations.
Our focus is the identification of significant environmental
aspects of our business and the operational controls to minimize our impact on the environment. During the year all DOF
Subsea’s activities, offshore as well onshore, underwent a
global environmental aspect and impact assessment. These
processes are rated to be world class by DnV during the global
ISO 14001 re-certification award.
DOF Subsea I Annual Report 2011
21
The Team
NUMBER OF EMPLOYEES
THE TEAM
897
1014
2008
2009
DOF Subsea’s sustained six year growth is a success story
driven by people – their expertise, knowledge, and commitment.
On- and offshore, our team of talented professionals makes
the difference in every region, in every functional area - companywide. Application and engagement is the key, these
are undoubtedly the attributes that harness individual enthusiasm, capability and competence which together create the
collaborative culture and operational excellence of which we
are so proud.
2010
2011
ATTRACTION AND RETENTION
As a growing organization covering the different dimensions
of both mature and developing markets, retention remains
a key concern. Last year we saw planned growth in several
regions with increasing employee numbers and rationalization
in the Atlantic region as we reorganized our business to be in
the best position to move forward in 2012.
Our team is responsible for the planning, innovation and market
insight that has built our world class Subsea project management
and engineering capability, as well as the purpose built fleet
which enables them. Our team is responsible for the systems
that capture knowledge, ensuring the safety of colleagues
and safeguarding our environment. In addition our team is
responsible for executing safe and successful subsea projects,
adeptly managing every stage of the process with an approach
that has moved us steadily towards our vision to become a preferred subsea provider globally.
The Skills for Leaders program was introduced in 2011 in
Asia Pacific and will continue in 2012 for the rest of the global
organization. Over 50 leaders had undertaken the course by
the end of 31.12.2011. Ensuring our professional experts have
the tools and knowledge to engage and lead their teams is a
key success factor for our strategic achievement.
It’s a team attitude that has earned us a reputation for
straightforward business relationships which, in turn, allow
us to be effective partners in our project delivery. As offshore
conditions, our dealings are conducted with professional clarity.
People, their expertise, enthusiasm, and energy, are the power
within our business.
2011 saw significant investment in the design and development of a global graduate program. Unifying our current individual
regional arrangements to create a cohesive and global
approach is another key focus area. Our goal is to identify and
attract the industry’s next generation of high potentials and
best possible candidates, by offering inter-company development
opportunities and career advancement. We have increased
attendance at graduate fairs and expos, increased links with
universities and industry forums, to create improved graduate
networks in preparation for a 2012 roll out for the DOF Subsea
Group.
We work in a market where a shortage of skilled professionals
consistently ranks in the top five industry challenges and
is acknowledged as a global issue. It is compounded by the
retirement of professional engineers and managers resulting
in the loss of available skills, knowledge and, hardest to replicate,
experience. Consequently, this constitutes one of the major
barriers to growth for our sector, making our workforce planning - development, attraction and retention strategies – an ongoing
priority for sustainability, productivity and shareholder
returns.
Given our operating environment, Recruitment, Retention,
Training and Development as well as Diversity and Inclusion
are key areas of continued organizational development. Collectively they form the basis of our KPIs and are analyzed
quarterly.
22
1246 1492
DOF Subsea I Annual Report 2011
GRADUATE DEVELOPMENT AND MENTORING
PROGRAM
GLOBAL GRADUATE PROGRAM
Attracting graduates is only half the picture. Our mentoring
program (currently under trial in Asia Pacific prior to global
application and roll out in 2012) ensures the opportunity
for our graduates to grow. With expert guidance graduates
are able to develop knowledge, skills and experience in DOF
Subsea’s core activities. We ensure we build competence and
understanding of management systems and procedures. Our
industry requires specialist knowledge so we encourage our
employees in studies and training, fostering a strong team of
high-potential, high-performing individuals.
FIGURE, EMPLOYED WOMEN ON- AND OFFSHORE
10
4
2010
2011
175
38
3
2
2009
2008
45
W omen
O ffshore
32
INTRA-OFFICE EXCHANGE PROGRAM
TRAINING AND DEVELOPMENT
Closely linked to the development phase of our Graduate Program is the introduction of an intra-office exchange program.
Aiming to promote expertise and knowledge to build global
teams, high potential junior participants from Brazil are relocated to Corporate HQ (Bergen) for 12 months to gain
a deeper understanding of the organization and to propagate
best industry practices across the Group. Inter–company links and association are important to company development.
Workforce continuity and development dovetails with
improved HSEQ performance particularly for our offshore
worksites. The enhanced focus on training and development
aims to have a positive impact overall, and on Return on
Investment, by increasing the skill and motivation levels
throughout our workforce. The result is enhanced productivity,
decreased absenteeism, decreased staff turnover and with
respect to HSEQ training initiatives, decreased accident
frequency.
DIVERISTY AND INCLUSION
As these are key areas of development for DOF Subsea, we
have active strategies to include and upskill local populations
in developing economies, for example building language and
technical competence as well as social programs and support
for extended families in Brazil. We also participate in a number
of Indigenous trainee cadetships in regional locations to build
skills and career opportunities.
W omen
O nshore
FEEDBACK STRUCTURES AND CAREER PLANNING
Performance review and competence mapping are the tools we
have been using to run gap analysis for training and to help us
increase competence. The Group has been working towards
creating individual career plans for all employees and performance review has been one of our KPIs in 2011.
We increased female representation in our technical employee
numbers to address gender imbalance in our industry. We will
continue this focus in 2012.
DOF Subsea I Annual Report 2011
23
The Subsea market
the subsea
market
After a difficult period during which the oil and gas
industry has been hit hard by the uncertainties and
constraints that followed the financial crisis, the
fundamental indicators and analysis for the subsea E&P market have never been more optimistic
about growth in the forthcoming years.
After a difficult period during which the oil and gas industry
has been hit hard by the uncertainties and constraints that
followed the financial crisis, the fundamental indicators and
analysis for the subsea E&P market have never been more
optimistic about growth in the forthcoming years.
Forecasted global demand will require exploitation of the
most challenging oil and gas reserves situated in deepwater,
harsh environments or marginal developments. Projected
production from offshore fields is expected to double within
the coming decade.
The capital commitments from E&P operators reached an all
time high in 2011 and this will translate into subsea operations
to construct these offshore fields within the coming two-five
years. Exploration continues to yield positive surprises and
particularly Brazil and Norway had in excess of two thirds of
the total global discoveries in 2011. Human resources capacity
and shortage of skilled professionals to deliver these projects
is the primary concern and is likely to be the bottleneck to
realizing ambitious growth throughout the industry. The ability
to attract, develop and retain people will be central to the success of companies throughout the industry. Being in a position to draw on skilled people internationally is a key
strength within DOF Subsea.
BRAZIL AND NORWAY HAD IN EXCESS
OF TWO THIRDS OF THE TOTAL GLOBAL
DISCOVERIES IN 2011.
Consolidation of companies has been another significant factor
which affects the overall market, the contractor service role
which DOF Subsea provides to the major SURF contractors
is an important market and the partnerships and relationship
we hold with them is positive in a market where their order
books reach an all-time high on large subsea developments.
Floating Production Units will be the key vehicle to meet
demands in offshore field development and specifically FPSO
(Floating Production Storage and Offloading) vessels are
favoured for deep, harsh or marginal fields. In the past decade
the number of FPSO has doubled to 250 units globally. In the
coming five years there are 134 new FPSO development projects
planned to be operational. In the last year the number of firm
FPSO projects has risen from 67 to 91.
24
DOF Subsea I Annual Report 2011
These developments create one of the foundations for business
for DOF Subsea as they require assets and services for flexible
riser installation, mooring and tow-out in particular. In Brazil
alone, Petrobras plan to commit to long-term charter of a further
seven PLSVs (Pipe-Lay Support Vessel), similar to Skandi Niteroi
and Skandi Vitoria, to meet their fleet demand for flexible
pipe-lay services. DOF Subsea Installer Class ships are ideally
suited to service these developments especially where mooring
requirements are complicated and pre-installed as permanent
installations requiring engineering and careful planning.
Globally we are seeing that the oversupply of commodity ships
identified previously has evolved to be an operator reluctance
to use older tonnage that is less reliable, unable to meet technical requirements and failing to live up to the ever increasing
standards of the operators and regulatory bodies. DOF Subsea
strategy to operate a modern fleet of ships will differentiate our
business. Within Asia Pacific we operate in a market where
our assets, allocated to the region, represent the most modern
and high specification ships available. Particularly in Australia
clients are demanding standards of safety, performance and
comfort that is eroding the viability of old assets that were
traditionally accepted.
We see IRM (Inspection, Repair and Maintenance) of subsea
assets as a strategic business area which will grow in coming
years. The Atlantic region is the hotspot for this business with
service provided to major operators predominantly through
long-term Frame Agreements. The US is the largest IRM market,
followed by the UK, Norway, Angola and Brazil. Fundamental increase in the quantity and complexity of subsea
hardware will mean that this market will grow substantially
and mature globally within APAC. The IRM and survey market
is expected to increase by eight percent per annum towards
2016. Survey activity for DOF Subsea extends from inspection
through to development, pre-survey, and positioning support.
This market is seen to be steadily growing and is frequently
being awarded through frame agreement as opposed to spot
market.
Overall we predict that the high market activity will require
a higher degree of forward planning to secure resources and
assets. From operators and other primary clients we are
already seeing a commitment to ensure that they can secure
the services required which will provide a welcome opportunity
for DOF Subsea to build backlog and regularity of our operations.
DOF Subsea I Annual Report 2011
25
DOF Subsea Offices
Brazil - Rio De Janeiro, Macrae
THE BRAZIL
REGION
DOF Subsea Brasil continues to be the fastest
growing region in the Group. In the six years since
we established a dedicated presence in Brazil we
have grown, securing seven long-term contracts
and employing over 300 personnel.
Text: Eirik Tørressen, CEO,
DOF Subsea Brasil & Norskan Offshore SA
26
DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
27
THE BRAzil
REGION
DOF Subsea Brasil
In 2011 we continued to build capacity, strengthening our
position in this strategically significant offshore oil and gas
region. We had great success in both the long-term contracts
sector and in changing our organization from an ROV service
provider to a project oriented organization, meeting our clients'
expectations for services.
We focus on delivering a full range of project related services
to our clients in accordance with their needs and in line with
their corporate HSEQ philosophies and work scopes. We aim
to deliver these services within agreed schedules and budgets to the full satisfaction of the client. All projects are performed
according to the standards and policies of DOF Subsea Group
and monitored to provide positive performance indicators
upon which we can build and improve our performance and
services.
28
DOF Subsea I Annual Report 2011
The market in Brazil is fast growing, particularly in deep and
ultra deep water. The region is forecasted to double its current
fleet of 250 by 2020 as a result of the demand for offshore vessels. The harsh conditions of deep and ultra deep water development, as well as more remote locations and longer distances from
shore, means there is a greater demand for larger, highly
advanced vessels which utilize the latest technology.
Our existing fleet and subsea equipment is closely matched to
the challenges of the offshore market as it consists of state-ofthe-art world-class vessels. Our high-quality subsea equipment
employs the latest technology in order to operate in very harsh
environments down to water depths of 4000m.
In Q1 the second Brazilian built pipe-lay vessel, Skandi Niteroi,
was delivered to DOF Subsea. The vessel was finalized in Norway and France during Q2 and Q3. Together with her sister ship
the Skandi Vitoria, delivered in 2010, they are the most
advanced vessels ever built in Brazil. Not only are they rated
0
5000 m
as two of the most advanced, flexible pipe-lay vessels in the
world, but both are successfully working on long-term contracts
with Petrobras and are owned 50/50 in a joint venture with
Technip.
1000 m
We also secured long-term contracts with Petrobras for the
multipurpose vessel Geosea. In addition, we worked with several
other international companies, such as Chevron and Shell - to
solve their requirements for short and long term ROV, Survey
and Construction vessel related projects. Our vessel Skandi
Skolten has been selected to undertake the subsea challenges
on the BC-10 project for Shell.
Our success in Brazil is closely linked to the good relationship
with our sister company Norskan. Together, we continue to
ensure that we take maximum advantage of synergies between
the two companies in relation to personnel, vessel operations
and onshore bases. This has proven to be both operationally
and financially beneficial.
We leverage the complementary core competencies of DOF
Subsea and Norskan, providing a seamless vessel and subsea
service operation, utilizing seven high quality DOF owned and
operated vessels. This allows us flexibility, on the one hand
providing long-term ROV contracts onboard Norskan Vessels,
as with Botafogo and Fluminence for Petrobras, and likewise,
onboard Skandi Santos for AKOFS. On the other hand, providing
both vessel and subsea services, with three RSV contracts on
Skandi Chieftain, Geograph and Skandi Commander (also for
Petrobras) and one long-term construction vessel contract on
Skandi Salvador for Chevron, providing subsea support services
for the installation and commissioning support for the Frade
subsea developments.
DOF Subsea and Norskan are strong brands, known for high
quality vessels, subsea equipment and personnel.
1500 m
OUR HIGH-QUALITY
SUBSEA EQUIPMENT
EMPLOYS THE LATEST
TECHNOLOGY
IN ORDER TO OPERATE
IN VERY HARSH
ENVIRONMENTS
DOWN TO WATER
DEPTHS OF 4000M.
2000 m
2500 m
Our long-term goal is to become the leading supplier of project
services, related to survey, IMR and construction support, in
Brazil. In 2011, we took several steps toward reaching our
goal. The excellent customer feedback we received on our project deliveries demonstrates our success to date. »
3000 m
DOF Subsea I Annual Report 2011
29
THE BRAZil
REGION
People have and will always be the most valuable resource in
DOF Subsea. The company’s success is indebted to our people,
who have the knowledge, skills and expertise, as well as the
energy and enthusiasm as they enjoy working for the company.
We face a challenge in the coming years: the lack of qualified
subsea personnel available in Brazil. To address this situation
we have established and implemented comprehensive training
programs for onshore and offshore personnel. We aim to
retain and also attract people. To achieve this we reinforce
the DOF Subsea culture which is based on ensuring a safe
work place, competitive salary, good working environment,
career opportunities, training and job security.
By doing this and remaining committed to our values, integrity,
respect, teamwork, excellence and safety we believe we will be
successful in retaining our personnel and attracting the best
qualified people available.
INTEGRITY
The very corner stone of our business.
We behave ethically – always.
RESPECT
Respect for people: our colleagues,
our customers, our business partners
and our environment.
TEAMWORK
Each of us is responsible and open
in our professional relationships. We build
diverse and global teams and strive for
free exchange of ideas, experience and
knowledge, worldwide.
EXCELLENCE
In everything we do. We are resourceful
and responsive to our customers’ needs:
innovative in the solutions we apply
to everyday problems.
SAFETY
We are committed to protect the health and
safety of our people and our environment.
30
DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
31
DOF Subsea Offices
Australia - Perth, Darwin and Melbourne
Singapore - Singapore
Borneo - Brunei
Philippines - Manila
Indonesia - Jakarta
The ASIA PACIFIC
Region
2011 marked a transition year for DOF Subsea
Asia Pacific with the introduction of two worldclass construction support vessels. We also
expanded our project management organization
in order to successfully undertake a wider range
of projects.
Text: EVP, Steve Brown, DOF Subsea AS
32
DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
33
The ASIA PACIFIC
REGION
The introduction of two ‘game changing’ vessels to the market, the Skandi Hercules (Installer Class construction vessel)
and the Skandi Singapore (diving support vessel) contributed
in large part to the shift in our competitive position in the
region. The vessels were introduced into service in Q2 and Q3
2011 respectively with immediate effect.
2011 also saw the departure of the Geosea from the region for a
long-term assignment for Petrobras in Brazil. The Geosea was
the foundation of our Asian business and she will be missed
by all. However, the Geosea’s departure signals a major shift in
our regional focus.
Over the last six years, DOF Subsea has been organically growing both with respect to subsea and construction services. In
December 2011 the region employed a core project management and engineering group of 180 dedicated and competent
employees in Perth, Australia.
Through a highly targeted investment program with the
Skandi Hercules and Skandi Singapore the company now has
both the tools and the core human resources to take a major
position in the regional market.
The combination of our project management capability and
high specification vessels, designed for the widest possible
regional operating envelope, has enabled the successful completion of projects ranging from FPSO Installation in Vietnam
through to the replacement of deep water flexible flow-line in
Australia. Inspection, repair and maintenance activities continued as core activities and end-of-life field decommissioning
continued to grow as an area of high competence.
34
DOF Subsea I Annual Report 2011
Growth in the offshore oil and gas sector has been forecast in
Asia Pacific for the last decade. Although we have seen some
investment decisions postponed, and development schedules
stretched, as a result of the post GFC environment, the forecast trend for offshore CAPEX is upward to 2016. Australia is
set to become a world power in LNG production with a large
number of LNG developments underway or approaching final
investment decision approval.
We are ideally positioned to capitalize on these growing markets having completed the groundwork over the last six years.
We have the expertise, purpose built fleet and equipment in
place and have established the requisite track record. Our
experience and success executing technically complex construction and installation projects over the last 18 months is
significant. We have expanded operations to geographically
important territories, earmarked for growth.
2012 will see us further expand our subsea execution capacity to match the wider and changing operational needs of our
clients. The arrival of the Skandi Hawk in Q2 2012 brings a
modern ROVSV into the regional fleet to complement our
larger assets.
OUR FLEET ALLOWS FOR FLEXIBILITY
IN APPLICATION, FROM NEAR-SHORE
TO DEEPWATER PROJECT EXECUTION.
Our high specification vessels are highly marketable and provide us with a clear differentiator in the market. However, it
is people, their expertise and professionalism that are the key
to harnessing the operational range of our vessels and subsea
equipment.
DOF Subsea I Annual Report 2011
35
DOF Subsea Offices
Norway - Bergen
UK - Aberdeen
USA - Houston
Canada - St. John’s
Egypt - Cairo
Russia - Moscow
Angola - Luanda
THE ATLANTIC
REGION
The Atlantic region had a good operational performance in 2011 in a highly competitive environment. The combination of state-of- the-art assets
and a highly skilled workforce both onshore and
offshore enabled us to maintain our position in
the market as a specialist provider of integrated
subsea services.
Text: EVP, Jan Kristian Haukeland, DOF Subsea AS
36
DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
37
THE ATLANTIC
REGION
Our operational success, however, was not reflected in the
financial results. As a consequence we reviewed and ultimately
restructured our business early in August. With a strong
emphasis on reducing our cost base and strengthening our
business acquisition and project management and engineering
organization, the aim is to build a longer term and robust
backlog of work.
We have already started to see the positive results from the
restructuring program and together with a strong subsea
market we believe the region is well positioned to deliver both
strong operational and financial performance.
One of our major focus areas was creating a ‘client-facing
culture’ throughout the region. We worked to align the whole
organization with our primary business acquisition objective
- to win new projects and create a robust backlog of work. The
role our teams play and the value they create in the delivery
of our core services was reinforced in the business. We believe
these are important steps in the right direction and we have
seen successes through the year having won a number of key
contracts:
We were awarded a five-year Frame Agreement in Q1 by Conoco
-Phillips for both Norway and the UK. A contract which enables
us to provide our integrated subsea services as a prime vendor
to ConocoPhillips.
38
DOF Subsea I Annual Report 2011
Later, in Q2/Q3, we won the largest contract ever awarded to
DOF Subsea on a global project basis, the Goliat mooring project.
The work scope is broad as we are responsible for providing
and installing the mooring system including final hook-up of
the Goliat FPSO, but it also has strategic importance. Adding
to our track record and experience will position us to win and
execute more of the increasing FPSO installation market in
the region. The North Sea alone is scheduled to see more than
20 FPSO units installed between 2013 and 2015.
The Total four- year Frame Agreement for the North Sea was
awarded in Q3, creating the opportunity for us to work with
Total on the development of new subsea architecture, modifications or maintenance of existing subsea infrastructure. We
reached an agreement with Shell UK for the Skandi Constructor in November for accommodation and subsea services commencing Q1 2012. This project will utilize the vessel and the
related project services from end of March until October.
In Q4 we won the Statoil survey four-year Frame Agreement
(with two one-year options) for survey and light construction
services worldwide. Again, working closely with our prime
customer in the North Sea, Statoil, we will deliver project services from the Geosund in 2012.
ENHANCING OUR PROJECT ORGANIZATION
MARKET outlook
Another key initiative has been to further enhance our project
management and engineering organization. Using a combination
of organic growth strategies and recruitment, and by fostering
closer cooperation with sister engineering companies Semar
AS and CSL ltd, we have established a significant engineering
resource. Our core project team manages resources from the
wider organization to deliver the right solution to our clients.
As a part of the enhancement, we built a strong body of specialist
subsea project engineers.
We saw a significant increase in demand in the market in Q4
and a high level of bidding activity, particularly in West Africa
and the North Sea for projects in 2012 and 2013. We will continue to expand our project capacity and capabilities, balancing growth with cost efficiency to capture this increasing
market.
We will continue to strengthen our human capital in terms of
engineers and project execution personnel, both onshore and
offshore and we aim to be an employer of choice.
Today we have a project engineering team of close to 80 engineers in the region. We aim to raise this to over 100 before the
end of 2012.
SURVEY & POSITIONING
Our discrete survey & positioning business line, which provides
survey and positioning services on third party vessels, has
seen steady growth in 2011. We have built close relationships
with our clients and experience a high level of repeat business. We believe there are opportunities to further enhance
this business and have therefore structured it as a service with
a clearer profit responsibility in the organization. Using our
equipment, personnel and reputation we believe we are positioned
to capitalize on growing global demand for this service.
DOF Subsea I Annual Report 2011
39
Naming Ceremonies
In 2011 we named the Skandi Niteroi, Skandi Singapore and Skandi Skansen. In addition we
bought the vessel Skandi Constructor. The latest
additions to our fleet represent next generation
technology; they are high power vessels designed
for operations across a wide range of water depths
and environmental conditions.
Naming
ceremonies
SKANDI NITEROI
SKANDI SINGAPORE
Naming ceremony: Brazil, January 2011
Delivered from: STX OSV Promar yard, Brazil
Lady sponsor: Veronic Delormel
Location: Brazil Region
Naming ceremony: Singapore, June 2011
Delivered: STM yard, Singapore
Lady sponsor: Fiona Brown
Location: Asia Pacific Region
Skandi Niteroi is one of the most advanced and flexible pipe-lay
vessels ever built in Brazil. The vessel is the second Brazilian
pipe-lay vessel delivered to DOF Subsea and a “sister” vessel
of the Skandi Vitoria (delivered 2010).
Skandi Singapore is a high specification, AKER 06 design DSV.
The vessel represents one of the most modern and capable
construction DSVs in the Asia Pacific market and is ideally
matched to construction programs as well as large IRM operations.
Skandi Niteroi’s environmentally friendly design has low
resistance hull lines, low fuel consumption, and comfort
onboard as well as good sea keeping performance. The vessels
capabilities include a 400 t + 100 T SWL Offshore crane, an
under deck carousel of 24m diameter and total load of 3500 t. Other features include: two ROV moonpools and two ROV
moonpool launch and recovery systems.
The vessel is owned 50/50 in a joint venture with Technip and
is successfully working on a long-term contract with Petrobras.
40
DOF Subsea I Annual Report 2011
Skandi Singapore’s operating capabilities include a 140 t crane,
an 18-man saturation diving system and two in built Triton
XLX work class ROVs. The state-of-the-art heavy duty work
class ROV system is able to cope with the most demanding
offshore situations. Ultimately the vessel is designed and
equipped for the widest possible regional operating envelope.
BUILT TO MEET
FUTURE ENVIRONMENTAL
STANDARDS:
Our vessels are leading edge: fuel efficient, clean class, comfort
class and designed for worldwide operations. They are operationally flexible and capable of working in most of the world’s
offshore oil and gas regions.
We match our vessels and subsea equipment to the future
challenges of the subsea sector.
SKANDI SKANSEN
SKANDI CONSTRUCTOR
Naming ceremony: Norway, July 2011
Delivered: Aker Aukra, Norway
Lady sponsor: Emma McNeill
Location: Atlantic Region
Skandi Constructor is an environmentally friendly vessel in all
respects, designed for well intervention services, subsea construction and equipment installation, IRM and ROV services
across a wide range of water depths and environmental conditions.
Skandi Skansen is a multipurpose high powered anchor handling
vessel, ideally suited to deepwater mooring and field installation
operations. At a 109 m in length, the vessel is one of the largest
AHTSs in the market and has been built to meet future environmental standards.
The vessel has a 250 t crane; optimal stern mounted A frame,
which has a 350 t capacity and two auxiliary cranes. There are
also two Rolls Royce Marine Safe Deck AH-handling cranes,
which are mounted on cargo rails. State-of-the-art in-built
heavy duty work Schilling UHD class ROV is able to handle the most demanding offshore applications.
The vessel was acquired in 2011 as she met the rigorous design
and build design standards applied to our fleet. Offering
exceptional performances with regard to fuel consumption,
sea keeping, station keeping, speed and cargo capacity, Skandi
Constructor is equipped with a 150 t offshore crane and a module
handling tower for performing subsea riserless well intervention
services.
DOF Subsea I Annual Report 2011
41
The Corporate Team
The Corporate
Team
The Future
Our continued success, improvements,
growth and overall performance
is grounded in the spirit of teamwork.
HEAD OFFICE, CORPORATE TEAM
In 2010 the Board of Directors asked the CEO in DOF Subsea to strengthen the corporate functions and the
corporate services for the Group. A review of the wider industry drivers, emerging challenges and opportunities
had shown this to be a key enabler for the company’s three-year strategic growth plans. Building our corporate
functions has been an ongoing process since then.
In 2011 the process continued. Today our corporate team of 27 experts covers the core disciplines: Administration, Business Acquisition/Chartering, Accounting, Finance/ Treasury, HR, HSEQ, Legal and Technical/
Asset Management. As a result of the focus given to our organizational development over the last two years,
we are proud to say DOF Subsea has today one of the most ambitious, skilled, and motivated corporate
teams in the industry.
The corporate team, together with our colleagues in the regions, have made significant progress in the
standardization and harmonizing of procedures across the Group as well as improvements to our reporting
and performance measurement systems. The teams have contributed substantially to the development of
our Integrated Management System.
Building robust work processes is a strategic imperative for the business. Through this endeavour we gain
greater transparency, improve our ability to manage risk and identify individual accountability: our driver
is to improve earnings. Just as we have gained ground building our systems and streamlining our operation
in 2011, our workforce planning activities - development, attraction and retention strategies – are an ongoing
priority for our sustainability, productivity and shareholder returns.
42
DOF Subsea I Annual Report 2011
Our HR team focused on reinforcing our values and corporate
culture, introducing development and training opportunities
for our employees. We established a Leadership Program,
Graduate and Mentoring program, an Intra-office program
and several other development programs. Our motivation is to
encourage our people, and through them our organization, to
reach its full potential. Our driver for the investment is recognition that our people are our most valuable resource.
Our HSEQ team has achieved impressive results in 2011.
We are extremely proud that in testimony to the continuous
improvement accomplished in this critical area of our business,
in some areas our HSEQ standards have been rated ‘world
class’ by DnV.
2011 has seen our Finance and Legal team’s optimal performance:
managing and financing three new-builds, acquiring a high
specification second-hand vessel in keeping with our ‘modern
fleet’ philosophy, and refinancing three vessels. In addition to
this, a new bond loan was established in 2011. One of the major
achievements for our finance and legal team was the successful
and operationally seamless reorganization of our vesselowning activities. In which we managed 12 internal vessel
sales and performed seven mergers. The reorganization will
continue into 2012 with the alignment of two vessel sales and
a further five mergers.
Our Business Process team gained substantial ground and in
further developing our ERP system, designing reports, control
systems, standardization business processes and integration
of systems and applications. This culminated in the second
half of 2011 as the team supported the implementation of
Agresso as the common ERP System in the DOF Group, which
has immense value for common reporting, forecasting and
budgeting functions.
Overall, 2011 has been a busy and successful year for the team
and we are proud of our achievements to date. We expect to
continue to improve the corporate services in 2012. Our continued success, improvements, growth and overall performance, is grounded in the spirit of teamwork.
Global Business Management System (BMS)
Asset Management System (TM)
Daily Project Reporting (wwDPR)
Crisis Management System (CMA)
HR System (OCS)
Global Training System (E-learn)
ERP System (Agresso)
Treasury System (IT2)
Consolidation Tool (Cognos)
I take this opportunity to thank our teams for the support they
have shown one another, onshore and offshore.
Jan Nore,
EVP/CFO DOF Subsea AS
DOF Subsea I Annual Report 2011
43
Financial Market
Financial
Market
FX RATES
INTEREST RATES
2011 has been another volatile year in the FX market. The US
dollar started the year at an exchange rate of 5.83 against NOK
and depreciated to a level of 5.38 during the first half of the
year. During the second half the US dollar strengthened as a
result of increased turbulence in the financial markets and
stronger than expected figures from the US economy. The US
dollar ended the year at a rate of 6.00 against NOK. During
2012 the US dollar has depreciated against NOK, trading at an
exchange rate of 5.80 in mid-April 2012.
During 2011 the US and Norwegian interest swap rates dropped
significantly. The five-year NOK swap rate started the year at
3.80% and dropped to 3.14% at the end of the year. In the same
period the five-year USD swap rate dropped to 1.23% from
a level of 2.16% at the start of January. While the swap rates
have dropped, the short-term money market rates have picked
up; the result has been a flattening of the yield curve for both
USD and NOK.
The British pound started the year at an exchange rate of 9.03
and ended at 9.28 against NOK. During 2011 the GBP/NOK
exchange rate has been highly correlated to the USD/NOK
exchange rate. During 2012 the GBP has depreciated against
NOK, trading at an exchange rate of 9.18 in mid-April 2012.
The Australian dollar strengthened against NOK during 2011,
especially during the fourth quarter. From an exchange rate
of 5.77 in the start of the year the AUD ended the year at a rate
of 6.09 against NOK. During 2012 the AUD has depreciated
slightly against NOK to an exchange rate of 6.0 in mid-April
2012.
The Brazilian real depreciated slightly against NOK during
the first half of 2011 from an exchange rate of 3.52 to 3.44. This
development continued during the second half and the BRL/
NOK exchange rate ended the year at 3.20. In 2012 the BRL
has depreciated against NOK and was trading at an exchange
rate of 3.15 in mid-April 2012.
44
DOF Subsea I Annual Report 2011
So far in 2012 the interest rates in both Norway and the US
have been trading sideways.
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DOF Subsea I Annual Report 2011
45
The
46
DOF Subsea I Annual Report 2011
Fl
eet
DOF Subsea I Annual Report 2011
47
VESSELS
Vessels
48
Skandi Acergy
Skandi Achiever
Skandi Aker
Skandi Arctic
Skandi Carla
Skandi Constructor
Skandi Hercules
Skandi Inspector
Skandi Neptune
Skandi Niteroi Delivered 2011
Skandi Patagonia
Skandi Salvador
DOF Subsea I Annual Report 2011
Skandi Santos
Skandi Seven
Skandi Singapore Delivered 2011
Skandi Skansen Delivered 2011
Skandi Skolten
Skandi Vitoria
Ocean Protector
Geobay
Geograph
Geoholm
Geosea
Geosund
Skandi Bergen Delivery 2013
DOF Subsea I Annual Report 2011
49
ROVs
ROVs
50
Triton MRV04
UHD (6 ex)
Mohican (3 ex)
Sea Eye Marine Tiger
Triton XL37
Hugin AUV
Triton XLX150 (18 ex)
Focus-2 ROTV
Cougar XT
Supporter 12
DOF Subsea I Annual Report 2011
Triton XLS 150 (8 ex)
Scorpion 16
Observation Class ROVs:
OBS ROV’s features both pure observation and observation
with payload capabilities.
Light Work Class ROVs:
Triton XL14
Light Work Class ROVs incorporate a fully electric system,
with additional power sources to allow the use of hydraulic
power unit for running tools and work skids for support
intervention tasks.
Hugin 3000 AUV:
An Autonomous Underwater Vehicle (“AUV”) is a specialized
robotic vehicle used to map the seabed in great detail.
Work Class ROVs:
Comanche Electric
The Work Class ROV system has up to 200hp and is designed
for the toughest deepwater tasks at depths from splash zone
and down to 4000m.
Focus II ROTV:
The FOCUS II ROTV (Remote Operated Towed Vehicle)
enables a very stable and accurate work platform for seabed
surveys and pipeline inspection.
DOF Subsea I Annual Report 2011
51
The Board 2011
Helge Møgster
Helge Singelstad
Mons Svendal Aase
Hilde Drønen
Chairman
Board member
Board member / CEO
Board member
Helge Møgster is the majority owner of
LACO AS, the main share-holder of DOF
ASA and Austevoll Seafood ASA. He has
long experience from both the offshore
supply and fishing industry, and is holding board positions in several companies,
including being a Chairman of DOF ASA.
Helge Singelstad attained his engineering
degree from Bergen Ingeniørskole, MSc
from the Norwegian School of Economics,
and he has a degree in law. He has experience from different types of businesses: oil
companies, ship equipment and the seafood
sector. He is now the Chairman of Austevoll
Seafood ASA and Lerøy Seafood Group
ASA, Managing Director of LACO AS, and
has several board positions including board
member in DOF ASA.
Mons Aase joined DOF ASA in 1998 and
became CEO in 2005 having held a number
of positions including CFO and Deputy
Managing Director. He was previously
Chairman of DOF Subsea and sits on the
board of a number of DOF companies.
Mons holds a MSc from the Norwegian
Institute of Technology, and a Cand. Merc
from the Norwegian School of Economics
and Business Administration in Bergen.
Hilde Drøen has worked as CFO in DOF
ASA since 2004. Her previous experience
includes acting as Director of Finance with
Bergen Yards AS from 2003 to 2004 and
Group Controller for the Møgster Group
from 1995 to 2003. She holds a Business
of Management degree and Business of
Administration degree from the Norwegian School of Management (BI) She is also
on the board of Sevan Marine ASA.
Alex Townsend Krueger
Neil Hartley
John Mogford
James Brooks
Board member
Board member
Board member
Board member
Alex T. Krueger is a Managing Director and
joined First Reserve in 1999. He is involved
in investments activities in all areas of
the worldwide energy industry and he is
the Chairman of the Firm’s Development
Committee. He has worked in the Energy
group of Donaldson, Lufkin & Jenrette in
Houston and holds two B.S degrees from
the University of Pennsylvania, one in
Chemical Engineering and one in Finance
and Statistics from the Wharton School.
Neil Hartley joined First Reserve in 2006
and is a Director. He has background in
Investment Banking with Simmons &
Company International, as a Director,
where he focused on corporate finance
advisory work in the energy sector, a
Management Consultant at McKinsey &
Company, Inc and with Schlumberger, as a
Field Service Manager and Field Engineer.
He holds a M.A degree in Engineering, Economics, and Management from Worcester
College, University of Oxford and a M.B.A
from Harvard Business School.
John Mogford was appointed non-executive director in June 2008 in the Weir
Group. He is currently advising private
equity on the energy sector. He was formerly an Executive Vice President of BP
pic having been with BP for over 30 years,
initially in their exploration division and
progressively rising to Executive Vice President. He held numerous positions in every
area of BP Operations from gas and renewable to upstream and downstream oil. He
is a fellow of the Institution of Mechanical
Engineers.
James Brooks, Vice President, joined First
Reserve in 2011. His responsibilities range
from deal origination and structuring to
due diligence, execution and monitoring,
with particular focus on the equipment,
manufacturing and services sector. Prior
to joining First Reserve, Mr. Brooks was a
Director at Advent International Corporation. Mr. Brooks holds an MPhys in Physics
from Oxford University.
52
DOF Subsea I Annual Report 2011
Report of the Board
of Directors DOF Subsea
DOF Subsea AS (the Company) was founded in the spring of
2005. Since its inception, the Company, its subsidiaries and
affiliates (the Group), has developed into a worldwide supplier
of subsea services, present in all of the major offshore hubs of
the world.
Business concept and vision
The Group’s core business segments are vessel chartering,
project management, engineering, survey, construction and
construction support and diving operations, provided to the
global oil and oil-service companies. Our vision is to be the
preferred integrated subsea service provider worldwide.
The Group owns a large, modern fleet of vessels that enables
us to offer a wide range of services that create a solid base for
long-term relationships with our clients, enhancing service
delivery and reducing overall risk.
DOF Subsea subsidiaries are located in Bergen, Oslo, Aberdeen,
Houston, St. Johns, Perth, Singapore and Rio de Janeiro. The
Group is also represented in Russia, Macaé (Brazil), Indonesia,
The Philippines, Brunei, Congo and Angola. Group’s headquarters are located in Bergen, Norway.
As a part of the DOF ASA Group, DOF Subsea Group is bound
by the Corporate Governance Policy implemented and
approved by the DOF ASA Board of Directors.
Going concern
In accordance with the Accounting Act § 3-3a, we confirm
that the financial statements have been prepared under the
assumption of going concern. This assumption is based on
profit forecasts for the year 2012 and the Group’s long-term
contracts. The Group’s economic and financial position is solid
and improving.
Activities in 2011
In 2011 DOF Subsea added four vessels to its fleet. Skandi Niteroi, a PLSV, was delivered from the STX OSV Promar in February. The vessel sailed to Norway for upgrading before she
sailed back to Brazil in July for final commissioning and mobi-
lization for a contract with Petrobras. In May, DOF Subsea
acquired the Well Intervention vessel MS Sarah, which was
subsequently renamed the Skandi Contstructor after delivery.
In July the OCV Skandi Skansen was delivered from STX OSV
Aukra. After mobilization and testing, she entered into a oneyear contract with DOF Subsea Atlantic. In September the
DSV Skandi Singapore was delivered from STM, Singapore.
In the project segment the Company faced a significant
increase in activities during 2011 where more vessels were
employed and the project staff was increased.
In May, DOF Installer ASA, a subsidiary of DOF Subsea, made
a share issue of NOK 200 million in order to take delivery of
the Skandi Skansen. After the share issue DOF Subsea owns
83.7% of the shares in DOF Installer ASA.
During the first quarter, the Group finalized the refinancing of
four vessels the Skandi Neptune, Geograph, Skandi Patagonia
and Geoholm. In the second quarter, the company issued a
five-year unsecured bond loan of NOK 750 million, of which
NOK 200 million was kept on own book and NOK 144,5 million was used to buy back part of the outstanding bond loan,
DOFSUB03. During the second quarter, DOF Subsea financed
the vessels: Skandi Constructor, Skandi Niteroi and the Skandi
Skansen. In the third quarter the Company financed the vessel
Skandi Singapore. During the fourth quarter, DOF Subsea AS
refinanced the vessels Geosea and Geosund.
Shareholders
The Company is owned 100% by DOF Subsea Holding 2 AS,
which is owned by DOF ASA (51%) and funds managed by
First Reserve Corporation (49%). There have not been any
changes to the ownership structure of the Company during 2012.
Health, Safety, Environment and Quality
The Group sets high standards for Quality, Health, Safety and
Environment initiatives. The key targets are: avoiding personal injuries and occupational illnesses, having a good working environment, awareness and control of environmental
aspects and a high level of regularity in operations. The focus
is on reporting incidents, actions and behaviours which are
unsafe, in order for corrective and preventive measures to be
DOF Subsea I Annual Report 2011
53
Report of
the board
of directors
DOF Subsea
implemented. The Group has invested in a good administrative system for managing this effectively.
The Company operates according to a global management system that is certified according to ISO 9001: 2008.
The Group’s focus is the identification of the significant
environmental aspects of our business and the operational
controls to minimize our impact on the environment. In 2011,
all DOF Subsea’s activities, offshore as well onshore, underwent a global environmental aspect and impact assessment.
These processes are summarized in the global ISO 14001 certification award. The Company’s environmental protection
strategies are highlighted by the record of zero incidence of
‘emergency spills into the external environment’ performance.
DOF Subsea’s Safety Culture covers the complete spectrum of HSEQ performance and encourages general well-being within our workforce. An initiative to enhance everyone’s
health and working environment was implemented in 2011.
The new Global Working Environment and Occupational
Health handbook was issued. The handbook clearly outlines
the systematic approach to enhancing a safe and sound working environment for all DOF Subsea activities. The Company
received OHSAS 18001 accreditation early in 2011.
The lost-time frequency rate for per million man-hours was
0.3 for 2011. No environmental spill to the natural environment has been reported.
Human resources
In 2011 the Group has been working on key strategic issues,
such as communication, recruitment, retention, training,
development, policies and practices. Common systems and
policies have been implemented to ensure organizational efficiency and growth within the Group. The long-term focus
on training and development of the Company’s employees will continue with the same commitment from the Board of
Directors in 2012.
The Group has experienced some difficulties in recruiting
qualified personnel, due to a high level of competition in the
labour markets, particularly in Australia and Brazil.
54
DOF Subsea I Annual Report 2011
The number of employees by year end was 1,483, including
hired contractors. The permanent workforce offshore was
491 employees, compared with 477 onshore employees. These
numbers do not include marine crew onboard the vessels that
are hired from DOF Sjø AS and Norskan Offshore Ltd.
Absence due to sickness has been closely monitored and was
below the Group’s KPI of 4% in 2011.
Management
During the year, the Company has further strengthened the
corporate management team. In addition the Company has
continued its investments into several new systems, enabling
the Company to improve the control, the reporting, and risk
monitoring.
Equal opportunities and anti-discrimination
The Company has had a high focus on diversity and inclusion
in 2011. From 2010 to 2011 the Company increased female representation in the workforce from 35 to 180 employees.
The Board supports the promotion of diversity among the
Company’s employees and has a clear goal of employing the
best employees based on their skills and competence.
The Group strives to create equal opportunities for all employees, regardless of their ethnic background, nationality, descent,
colour, language, religion, lifestyle or gender. The Company has
a zero-tolerance policy for workplace harassment.
Market
The market has been variable during 2011, with significant
differences between the geographical markets. In the first
quarter of 2011, the Group saw a weaker level of activity, parti­
cularly in the North Sea. The activity level improved during
the year and the Group saw healthy levels during the second
half of 2011. The activity level in Brazil remained strong
throughout the year.
Changes of estimates on residual value
of vessels
DOF Subsea Group, as a part of DOF ASA, has an intention
that the Group not shall own vessels that are more than
twenty years old. Hence DOF Subsea Group has to calculate
a residual value after the estimated useful life of the vessel
within the DOF Subsea Group. During the three first quarters
in 2011 the residual value was estimated at 50% of the original
cost of the vessel. DOF ASA has, during the second half of 2011,
had a discussion with the Financial Supervisory Authority in
Norway for establishing the basis for residual value.
DOF Subsea AS has agreed that the basis for residual value
should be the market valuation of a charter-free vessel. However, such market values have to be adjusted to reflect the
market value of the vessels if it had been of an age, and in the
condition expected, at the end of its useful life. To estimate the
residual value DOF Subsea Group has applied a linear model
depending on the age of the vessel, increasing from 50% (on
a new-build) to 100% (of a 20-year-old vessel) of the received
market valuation. The total effect of a changed estimate of
residual value is a reduction of depreciations of approx NOK 70 million in 2011.
Consolidated financial statements
The consolidated financial statements of the Group, for the fiscal year 2011, have been prepared in accordance with IFRS
and interpretations set by the International Accounting
Standards Board as adopted by the EU. The accounts are prepared under the going concern assumption.
The 2010 figures are not directly comparable with 2011. For
more information see note 5 and 34 in notes to the accounts
for 2011.
For 2011, the Group achieved operating revenue of NOK 4 285
million compared with operating revenue of NOK 3 025 million for 2010. Operating profit before depreciation was NOK 1 341 million (NOK 886 million) and operating profit
after depreciation was NOK 746 million (NOK 272 million).
Net financial result was NOK -1 173 million (NOK -372 million), whereas NOK 465 million of the negative financial result
was unrealized currency loss. The pre-tax profit was NOK -426 million (NOK -99 million) and the result after tax for the
year was NOK -315 million compared with NOK -149 million
in 2010.
The total assets were NOK 19 248 million (NOK 17 528 million)
where non-current assets amounted to NOK 16 409 million
(NOK 14 192 million) including NOK 581 million (NOK 533 million) in intangible fixed assets. The total current assets
were NOK 2 839 million (NOK 3 335 million) of which NOK 1 362 million (NOK 1,988 million) were cash and cash
equivalent. This included restricted cash with 795 million
(NOK 885 million).
Total Equity was 4 816 million (NOK 5 206 million); the number includes minority interests of NOK 191 million (NOK 203 million). Long-term liabilities, including provision
for commitments, were NOK 11 807 million (NOK 10 152 million). Total short-term liabilities were NOK 2 624 million (NOK 2 169 million). As at 31.12.2011, the net interest-bearing
debt was NOK 11 387 million (NOK 8 940 million).
Cash flow from the operational activities during the year
was NOK 508 million (NOK 596 million). Cash flow from the
investment activities during the year was NOK -2 670 million
(NOK -3 822 million), while the cash flow from financing activities was NOK 1 509 million (NOK 3 693 million).
The liquidity in the Group was satisfactory at year end. The
total balance of cash and cash equivalents, including restricted
cash, was NOK 1 362 million. During the year, the Company
has financed four new-builds, refinanced six vessels and
issued a bond loan. The gross volume financed and refinanced
amounted to approximately NOK 4 300 million (NOK 6 900
million), where the majority of the financing was done with
international shipping and offshore banks.
The Group has an acceptable financial position, which provides a good foundation for its continued operations, future
development and growth. The Board of Directors, to the best
of its knowledge, considers that the information contained in
the Annual Report, provides an accurate presentation of the
Group’s assets, liabilities, financial position and results.
DOF Subsea I Annual Report 2011
55
Report of
the board
of directors
DOF Subsea
DOF Subsea`s Board of Directors actively adheres to good
Corporate Governance standards. The Corporate Governance standard code covers fifteen topics. The board statement
describes the foundation and principles for DOF Subsea's
Corporate Governance structure. The statement from the
Board of Directors is provided as a separate report, a part of
the Annual Report 2011.
parent company Financial statement
As a part of internal restructuring of the DOF Subsea Group,
DOF Subsea AS was the acquiring part to a number of mergers in 2011. The mergers were effective as of 01.01.2011. After
mergers, DOF Subsea AS sold all merged vessels to a subsidiary
in the second part of 2011. In addition, to be an investment and
a management company, DOF Subsea AS has, in some part of
2011, been a vessel-operating entity. The 2011financial statements will reflect these transactions, explaining the changes
from fiscal year 2010 to fiscal year 2011.
In 2011, the Company`s total operating income was NOK 626
million (NOK 75 million). The total wages were NOK 97 million (NOK 27 million), while the operating expenses were
NOK 209 million (NOK 67 million). The operating profit was NOK 101 million (NOK -27 million). Net financial results
were NOK -359 million (NOK 54 million). The net result for
the year was NOK -151 million (NOK 49 million).
The total assets were NOK 7 599 million (NOK 7 090 million)
where non-current assets amounted to NOK 6 240 million
(NOK 6 094 million) including NOK 133 million (NOK 92 million) in intangible fixed assets. The total current assets were
NOK 1 358 million (NOK 996 million) of which NOK 984 million (NOK 211 million) were cash and cash equivalent. This
included restricted cash with 728 million (NOK 885 million).
Total Equity was NOK 3 397 million (NOK 4 212 million).
Long-term liabilities, including provision for commitments,
were NOK 3 467 million (NOK 2 183 million). Total shortterm liabilities were NOK 732 million (NOK 693 million). The
Company`s equity ratio was 45% at the end of the year.
Financial market risk
A large portion of the Group’s income in 2011 was denominated in foreign currencies. The Norwegian kroner (NOK) has
been volatile during the year against the major income currencies, such as USD, GBP and AUD. NOK depreciated against
USD and GBP toward the mid-year 2011 and appreciated
towards the year end. On average the USD/NOK exchange rate
was 5,60 while the GBP/NOK exchange rate was 8,98. USD/NOK was 5,99 and GBP/NOK was 9,28 by year end. The AUD/NOK traded sideways during the year. The average
exchange rate of AUD/NOK was 5,78 and 6,09 at year end. The Group aims to match the costs towards the currency of
the relevant income (natural hedging). However, a significant
portion of financial costs are payable in NOK.
The Group is exposed to fluctuations in interest rates. During 2011 the Company has increased the secured part of the
interest rate exposure through the use of derivatives. Interest
periods for the floating interests are from one to six months.
The fixing of interest rates for longer periods or changing of
loan currency is continuously evaluated. The Group use hedge
accounting in accordance with IAS 39 for some of the interest
swaps related to hedging of interest cost on long-term debt.
The Group has limited financial exposure to the changes in the
raw materials market for such products as oil and refined-oil
products. The oil price is important for the global demand for
the vessels within our industry. The rising price of crude oil
that we have seen over the last year has a positive impact on
our industry through increase of the investments into Exploration and Production.
The Group’s accounts receivable are primarily with the large
international oil companies and other large international subsea contractors. The portion of receivables that were uncollectable has historically been low and the Group evaluates that our customers have the financial strength to
meet their obligations. There are established guidelines for
the follow up, and for the collection of, accounts receivable.
A part of the Group's fleet operates in Brazil; therefore the
Group is exposed to extra taxation and import duties in Brazil.
56
DOF Subsea I Annual Report 2011
Allocation of profits
Outlook
The parent company’s annual accounts’ net result was NOK
-151 million. The Board recommends that the net result should
be allocated to other equity. The Group has no distributable
equity as of 31.12.11.
The Board of Directors expects growth in both revenue and
profitability during 2012. The growth will come due to more
vessels in operation and improved margins on the charter
contracts. The Board of Directors also expects that the project
market will improve during 2012 with an increase in demand
for subsea services. All future expectations are best estimates
and therefore present some uncertainties related to their realization. This information should hence be treated thereafter.
Bergen, 27. April 2012
The Board of DOF Subsea AS
Helge Møgster
Chairman
Alex Townsend Krueger
Board member
Helge Singelstad
Board member
Neil John Hartley
Board member
Mons S. Aase
CEO/Board member
Hilde Drønen
Board member
James Brooks
Board member
John Mogford
Board member
DOF Subsea I Annual Report 2011
57
2011 Corporate Governance
2011
Corporate
Governance
INTRODUCTION
1.1 Background
Our parent company, DOF ASA, has as a listed public limited
company approved and adopted a Corporate Governance
Policy as a governing document. In the preamble to the CGP
it is stated that the document shall also be applicable for subsidiaries as may be appropriate. DOF Subsea AS expresses that
the company endorses and adopts the current CGP in DOF
ASA, with such exceptions as are natural given the company's
organization and activities.
DOF ASA (“DOF” or the “Company”), is the parent company
in DOF’s group of companies (”The Group”), is established and
registered in Norway and subject to Norwegian law, hereunder
corporate and other laws and regulations. The Company’s aim
is to observe all relevant laws and regulations, and the Norwegian
recommendation for corporate governance. This also applies
for all other companies within the Group, and consequently
this document applies to the extent reasonable for all companies
therein. The Company’s Board of Directors originally adopted in 2006
a document which largely and in principle adhered to the then
applicable Corporate Governance standard, with a few deviations. The Board of Directors has later examined all revised
recommendations of the Corporate Governance standard,
published by the Norwegian Committee for Corporate Governance (NUES). The Company’s later revised and adopted
Corporate Governance Policy reflects the will of DOF ASA to
fully comply with the current corporate governance standards recommendations from NUES. The Company will 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. On
21 October, 2010, new Corporate Governance guidelines from
NUES were published, and latest on 20 October 2011 NUES
has resolved to make some minor changes and clarifications in
these guidelines. This document reflects fully the recommendations and guidelines published in the current Corporate
Governance guidelines from NUES with amendments of 20
October 2011, and shall from this date constitute the Company’s
new Corporate Governance Policy document. 58
DOF Subsea I Annual Report 2011
1.2 Objective
This governing document contains measures which have been
and will be implemented to secure efficient management and
control of the activities of the Company. The main objective is
to establish and maintain systems for communication, surveillance and incentives which will increase and maximize 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 which the
Board of Directors and the Executive Management keep a keen
focus on. 1.3 Rules and regulations
The Company is a Norwegian public limited company listed
on the Oslo Stock Exchange.
In that respect the Company is subject to the 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.
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 must ensure that the Company implements sound corporate governance.
The Board of Directors must 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 every section of
the Corporate Governance Code of Practice. If the Company
does not fully comply with this Code of Practice, the Company
must provide an explanation of the reason for the deviation
and what alternative solution it has selected.
The Board of Directors should define the Company’s basic
corporate values and formulate guidelines for ethics and social
responsibility.
2. THE COMPANY’S BUSINESS
The Company’s business shall be clarified in its Articles of
Association.
Within the framework of its Articles of Association, the Company
shall have clear goals and strategies.
The annual report should include the main objectives provisions from the Articles of Association and contain descriptions of the Company’s principal objectives and strategies.
3. EQUITY AND DIVIDENDS
The company shall have an equity capital at a level appropriate
to its objectives, strategy and risk profile.
The Company’s Board of Directors shall develop a clear and
predictable dividend policy as grounds for proposals for dividends proposed to the General Meeting of shareholders. The
Company’s dividend policy shall be made known. Mandates granted to the Board of Directors to increase the
Company’s share capital shall be subject to defined purposes
and shall be limited in time to no later than the date of the next annual General Meeting. If the General Meeting is to consider
mandates to the
Board of Directors for the issue of shares for different purposes, each mandate should be considered separately by the
meeting. This should also apply to mandates granted to theBoard for the Company to purchase own shares.
4. EQUAL TREATMENT OF SHAREHOLDERS AND
TRANSACTIONS WITH CLOSE ASSOCIATES
The Company shall only have 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 justified. If the Board of Directors decide
on a share capital increase, including a deviation from the
principle of equal preference among the shareholders, and
based on a mandate from the General Meeting, the grounds
shall be made public in a Stock Exchange announcement in
connection with the increase of the share capital.
Any transactions the Company carries out in its own shares
shall be carried out either through the stock exchange or at
prevailing stock exchange prices if carried out in any other
way. If there is limited liquidity in the shares, the principle
of equal treatment shall be considered safeguarded by other
means.
In the event of any not immaterial transactions between the
Company and shareholders, members of the Board of Directors, members of the Executive Management 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 should also be
arranged in respect of transactions between companies in the
same group where any of the companies involved have minority shareholders.
The Company shall adopt guidelines to ensure that the Members of the Board of Directors and the Executive Management
notify the Board if they have any material direct or indirect
interest in any transaction entered into by the Company.
5. FREELY NEGOTIABLE SHARES
Shares in listed companies must, in principle, be freely negotiable. Therefore, no form of restriction on negotiability of the
Company’s shares shall be included in the Company’s Articles
of Association.
DOF Subsea I Annual Report 2011
59
2011
Corporate
Governance
6. GENERAL MEETINGS
Exercising rights.
The Board of Directors should take 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 should include:
• making the notice calling the meeting and the support
information on the resolutions to be considered at the general
meeting, including the recommendations of the nomination
committee, available on the company’s website no later
than 21 days prior to the date of the general meeting.
• 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 any deadline for shareholders to give notice of their
intention to attend the meeting as close to the date of the
meeting as possible
• If the general meeting is to consider mandates to the Board
of Directors for the issue of shares for different purposes,
each mandate should be considered separately by the
meeting.
• ensuring that the members of the Board of Directors and
the nomination committee and the auditor are present at
the general meeting
• making arrangements to ensure an independent chairman
for the general meeting
• Shareholders who cannot attend the meeting in person
should be given the opportunity to vote. The Company
shall provide information on the procedure for representation at the meeting through a proxy, including a form to
appoint a proxy
60
• The Company should, at the earliest possible opportunity,
make 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
7. NOMINATION COMMITTEE
The Company shall have a nomination committee, and the
general meeting should elect the chairperson and members of
the nomination committee and should determine the committee’s remuneration.
The nomination committee shall be included in the Company’s
Articles of Association. The General Meeting of Shareholders
shall adopt guidelines for the Nomination Committee.
The members of the nomination committee should be selected
to take into account the interest of shareholders in general.
The majority of the committee should be independent of the
Board of
Directors and the Executive Management. No more than one
member of the nomination
committee should be a member of the Board of Directors, and
any such member should not offer him/herself for re-election.
The nomination committee should not include the Company’s
CEO or any other member of the Company’s Executive Management.
The nomination committee’s duties are to propose candidates
for election to the Board of Directors and to propose remuneration to be paid to members of these bodies.
• nominate a person who will be available to vote on behalf
of shareholders as their proxy
The nominations committee shall give arguments for its recommendations.
• to the extent possible prepare a form for the 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 should provide information on the membership
of the committee and any deadlines for submitting proposals
to the committee.
DOF Subsea I Annual Report 2011
8. BOARD OF DIRECTORS: COMPOSITION AND
INDEPENDENCE
Members of the Board of Directors shall be encouraged to own
shares in the Company.
The composition of the Board of Directors shall ensure that
the Board can attend to the common interests of all shareholders and meets the Company’s need for expertise, capacity
and diversity. Attention should be paid to ensuring that the
Board can function effectively as a collegiate body.
9. THE WORK OF THE BOARD OF DIRECTORS
The composition of the Board of Directors should ensure
that it can operate independently of any special interest. The
majority of the shareholder-elected members of the Board of
Directors should be independent of the Company’s Executive
Management and material business contacts. At least two of
the members of the Board of Directors elected by shareholders
should be independent of the Company’s main shareholder(s).
In the assessment of independency the following criteria shall
be considered:
The Board of Directors shall from time to time issue instructions for its own work as well as for the Executive Management with particular emphasis on clear internal allocation
of responsibilities and duties. The CEO, CFO and Director of
Legal Affairs/Counsel of the Company shall have an obligation and a right to participate in the meetings of the Board of
Directors as long as anything to the contrary has been decided.
• whether the relevant person has been employed with the
Company during the foregoing three years
• whether the relevant person has received or is receiving
other kinds of remuneration from the Company other than
the Director’s remuneration, or participates in a share
option program or result based remuneration arrangement • whether the relevant person has had major business relation with the Company over the three foregoing years.
• The Board of Directors shall not include representatives
of the Company’s Executive Management. With a view to
effective group management, representatives from the
Executive Management may however serve as Directors in
group subsidiaries.
The Chairman of the Board of Directors shall be elected by the
general meeting. Members of the Board of Directors shall not be elected for
more than two years at a time.
The annual report shall provide information on participation
in the meetings of the Board of Directors and on issues which
may illustrate the competence of the members of the Board of
Directors. In addition, information shall be provided on which
members are considered to be independent.
The Board of Directors shall produce an annual schedule for
its work, with particular emphasis on objectives, strategy and
implementation.
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 should be chaired by some
other member of the Board.
A deputy chairman should be elected for the purpose of chairing the Board in the event that the chairman cannot or should
not lead the work of the Board.
The Company shall have an audit committee. The entire board
of directors should not act as audit committee. The majority of
the members of the committee shall be independent.
The Board of Directors should also consider appointing a
remuneration committee in order to help ensure thorough
and independent preparation of matters relating to compensation paid to the executive personnel. Membership of such a
committee should be restricted to members of the Board who
are independent of the Company’s executive personnel.
The Board of Directors shall provide details in the annual
report of any board committees appointed.
The Board of Directors shall evaluate its performance and
expertise annually.
DOF Subsea I Annual Report 2011
61
2011
Corporate
Governance
10. RISK MANAGEMENT AND INTERNAL CONTROL
The Board of Directors must ensure 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 should
also encompass the Company’s corporate values and guidelines
for ethics and social responsibility.
The Board of Directors should carry out an annual review of
the Company’s most important areas of exposure to risk and
its internal control arrangements.
The Board of Directors should provide an account in the
annual report of the main features of the Company’s internal
control and risk management systems as they relate to the
Company’s financial reporting.
11. REMUNERATION OF THE BOARD OF DIRECTORS
The remuneration of the Board of Directors shall reflect the
Board’s responsibility, expertise, time commitment and the
complexity of the Company’s activities.
The remuneration of the Board of Directors should not be
linked to the Company’s performance. The Company should
not grant share options to members of its Board.
Members of the Board of Directors and/or companies with
which they are associated should not take on specific assignments for the company in addition to their appointment as
a member of the Board. If they do nonetheless take on such
assignments this should be disclosed to the full Board. The
remuneration for such additional duties should be approved
by the Board.
The annual report should provide information on all remuneration paid to each member of the Board of Directors. Any
remuneration in addition to normal directors’ fees should be
specifically identified.
62
DOF Subsea I Annual Report 2011
12. REMUNERATION OF THE EXECUTIVE
MANAGEMENT
The Board of Directors shall compose guidelines for the remuneration of the members of the Executive Management. These
guidelines shall be communicated to the annual meeting.
The guidelines for the remuneration of the Executive Management shall set out the main principles applied in determining
the salary and other remuneration of the Executive Management. The guidelines should help to ensure convergence of
the financial interests of the Executive Management and the
shareholders.
Performance-related remuneration of the Executive Management in the form of share options, bonus program or the like
should be linked to value creation for shareholders or the
Company’s earnings performance over time. Such arrangements, including share option arrangements, should incentivize performance and be based on quantifiable factors over
which the employee in question can have influence. Performance related remuneration should be capped.
13.
INFORMATION AND COMMUNICATION
The Board of Directors shall establish 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 should publish an overview each year of the
dates for major events such as its annual general meeting,
publication of interim reports, public presentations, dividend
payment date if appropriate etc.
All information distributed to the company’s shareholders
should be published on the Company’s web site at the same
time as it is sent to shareholders.
The Board of Directors should establish guidelines for the
Company’s contact with shareholders other than through general meetings.
14. TAKE-OVERS
15. AUDITOR
The Board of Directors should establish guiding principles for
how it will act in the event of a take-over bid.
The auditor should submit the main features of the plan for
the audit of the company to the audit committee annually.
During the course of a take-over process, the Board of Directors and Management of both party making the offer and the
target company have an independent responsibility to help
ensure that shareholders in the target company are 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 auditors should participate in meetings of the Board of
Directors that deal with the annual accounts. At these meetings the auditor should review any material changes in the
Company’s account principles, comment on any material estimated accounting figures and report all material matters on
which there has been disagreement between the auditor and
the Executive Management of the Company.
The Board of Directors should not seek to hinder or obstruct
take-over bids for the Company’s activities or shares unless
there are particular reasons for this.
In the event of a take-over bid for the Company’s shares, the
Company’s Board of Directors should 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 shall issue a statement evaluating the offer
and making a recommendation as to whether shareholders
should or should not accept the offer. The Board’s statement
on a bid should make it clear whether the views expressed
are unanimous, and if this is not the case it should explain the
basis on which specific members of the Board have excluded
themselves from the Board’s statement. The Board shall
arrange a valuation from an independent expert. The valuation shall be substantiated and made public latest simultaneously with the statement from the Board of Directors.
The auditor should at least once a year present to the audit
committee a review of the Company’s internal control procedures, including identified weaknesses and proposals for
improvement.
The Board of Directors shall hold a meeting with the auditor
at least once a year at which neither the CEO nor any other
member of the Executive Management is present.
The Board of Directors shall establish guidelines in respect of
the use of the auditor by the Company’s Executive Management for services other than the audit.
The Board of Directors must report the remuneration paid to
the auditor at the 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 general meeting.
Any transaction that is in effect a disposal of the Company’s
activities should be decided by a general meeting.
DOF Subsea I Annual Report 2011
63
Accounts
64
DOF Subsea I Annual Report 2011
Statement of Comprehensive income
Amounts in NOK 1000
DOF Subsea GROUP
Amounts in TNOK
Note
2011
2010
Operating income
Profit from sale of non-current assets
Total operating income
6, 12
6
5
4 285 571
-306
4 285 265
3 009 189
16 409
3 025 598
Wages and salaries
Operating expenses
Total operating expenses
7, 28
13
5
1 012 443
1 931 194
2 943 637
700 430
1 438 580
2 139 010
1 341 628
886 588
588 003
6 650
746 975
613 805
272 783
-19 785
45 231
-731 063
-2 804
-465 223
-1 173 644
-4 870
73 139
-509 340
-5 184
74 156
-372 100
-426 669
111 564
-99 316
-49 732
-315 105
-149 048
-51 277
-30 456
-81 733
-12 200
-12 200
Result including other comprehensive income
-396 838
-161 248
Result attributable to:
Non-controlling interests
Owners of the parents
4 949
-320 054
2 033
-151 081
Result including comprehensive income:
Non-controlling interests
Owners of the parents
3 269
-400 107
2 033
-163 281
-2,67
-2,67
-1,26
-1,26
Operating profit before depreciation/write down - EBITDA
Depreciation
Write down
Operating profit - EBIT
12
12
Income / loss from investments
Financial income
Financial expenses
Realized gain/loss on financial instruments
Unrealized gain/loss on financial instruments
Net financial income/loss
30
8
8
8
8
Pre-tax profit
Income Tax
9
Result for the period
Currency translation difference (CTA)
Cash flow hedges
Total other comprehensive income
Earnings per share (NOK)
Earnings per share diluted (NOK)
10, 19
10, 19
DOF Subsea I Annual Report 2011
65
Statement of financial Position Balance
Amounts in NOK 1000
DOF Subsea GROUP
Amounts in TNOK
Assets
Deferred tax benefit
Goodwill
Intangible assets
Vessels
ROVs
Machinery and other equipment
Newbuilds
Tangible Assets
Investment in associates
Other non-current receivables
Financial assets
Note
2011
2010
9
11
139 060
442 803
581 864
13 564
519 912
533 476
12, 13
12, 13
12
12
14 180 358
748 840
562 217
66 383
15 557 797
11 218 527
650 918
804 421
776 347
13 450 212
30
63 335
206 308
269 643
78 738
130 343
209 082
16 409 304
14 192 770
Non-current assets
Fuel reserves and other inventory
17
40 928
21 026
Trade receivables
Short-term receivables from group companies
Short-term receivables
Financial current assets
Current assets
15
634 430
133 187
625 155
43 088
1 435 860
579 089
203 323
492 174
51 450
1 326 036
795 124
567 265
1 362 389
885 265
1 103 361
1 988 626
2 839 177
3 335 688
19 248 481
17 528 458
Restricted cash
Unrestricted cash and cash equivalents
Cash and cash equivalents
Total current assets
Total assets
66
DOF Subsea I Annual Report 2011
16
23
18
18
18
Statement of financial Position Balance
Amounts in NOK 1000
DOF Subsea GROUP
Amounts in TNOK
Note
2011
2010
19
1 197 337
2 130 486
741 438
4 069 262
1 197 337
2 130 486
741 438
4 069 262
555 552
932 944
191 730
4 816 544
203 983
5 206 189
47 832
7 236
226 252
281 320
165 522
9 841
175 363
20, 24
20, 24
20, 24
20, 24
1 294 035
9 819 879
100 000
312 078
11 525 992
1 250 000
8 262 550
140 000
324 539
9 977 089
20
1 408 873
22 401
294 982
147 144
28 955
22 989
51 320
647 962
2 624 626
1 177 176
45 782
268 253
77 880
47 091
22 433
531 201
2 169 817
Total liabilities
14 431 938
12 322 269
Total equity and liabilities
19 248 481
17 528 458
Equity and liabilities
Share capital
Other paid-in capital
Share premium fund
Subscripted equity
Retained earnings
Non-controlling interests
Total equity
9
28
23
Deferred taxes
Pensions
Derivatives financial instruments
Non-current provisions for commitments
Bond loans
Debt to credit institutions
Long term debt to group companies
Other non-current liabilities
Non-current liabilities
12 month installments of long-term debt
Short term debt to credit institutions
Trade payables
Short term liabilities to group companies
Tax payable
Public duties payable
Derivatives financial liabilities
Other current liabilities
Current liabilities
21
9
23
22
Bergen, 27. April 2012
The Board of DOF Subsea AS
Helge Møgster
Chairman
Alex Townsend Krueger
Board member
Helge Singelstad
Board member
Neil John Hartley
Board member
Mons S. Aase
CEO/Board member
Hilde Drønen
Board member
James Brooks
Board member
John Mogford
Board member
DOF Subsea I Annual Report 2011
67
Statment of Shareholder's Equity
Amounts in NOK 1000
DOF Subsea GROUP
Changes in equity - GROUP
Equity at 01.01.2010
Corrections of prior years error (reclassification of debt)
Equity at 01.01.2010 after corrections
Comprehensive income
Profit for the year
Currency translation differences
Total comprehensive income for the year
Amounts in TNOK
Noncontrolling
Total interests
Share
capital
Other
reserves
598 669
163 356
2 130 486
2 892 511
934 674
3 827 185
6 571
598 669
163 356
2 130 486
2 892 511
112 493
1 047 167
112 493
3 939 678
112 493
6 571 3 946 248
-151 081
-12 200
-163 281
-151 081
-12 200
-163 281
49 058
195 379
244 437
476 751
700 000
1 421 188
Transactions with owners
Non-controlling interests part of sales
& acquisitions
Equity issue 30.08.2010
Equity issue 07.12.2010
Total transactions with owners
119 734
478 935
598 669
357 017
221 065
578 082
Equity at 31.12.2010
1 197 337
741 438
1 197 337
741 438
Equity at 01.01.2011
Total
paid-in Retained
capital earnings
Share
premium
fund
2 130 486
2 033
2 033
3 833 755
-149 048
-12 200
-161 248
476 751
700 000
1 176 751
49 058
49 058
476 751
700 000
1 225 809
4 069 262
932 944
5 002 206
203 983
5 206 189
932 944 5 002 206
203 983
5 206 189
4 949
2 130 486 4 069 262
Comprehensive income
Profit for the year
Currency translation differences
Cash flow hedges
Total comprehensive income for the year
195 379
Total
equity
-320 054
-51 277
-28 776
-400 107
-320 054
-51 277
-28 776
-400 107
-1 680
3 269
-315 105
-51 277
-30 456
-396 838
Transactions with owners
Non-controlling interests part of sales &
acquisitions
22 715
22 715
-15 522
7 193
Total transactions with owners
22 715
22 715
-15 522
7 193
555 552
4 624 813
191 730
4 816 544
Equity at 31.12.2011
68
DOF Subsea I Annual Report 2011
1 197 337
741 438
2 130 486 4 069 262
Group Statment Of Cash Flow
Amounts in NOK 1000
DOF Subsea GROUP
(NOK 1000)
2011
2010
Profit before tax
Depreciation
Write down
Gain/loss sold vessel
Share gain/loss from associated companies
Change in bunkers and provisions
Change in accounts receivables
Change in accounts payables
Change in pension liabilities
Changes in other accruals Unrealized gain/loss financial assets
Unrealized foreign exchange gain/loss
Cash flow from operating activities
(426 669)
588 002
6 650
305
19 785
(19 902)
(15 421)
26 728
(2 605)
(128 432)
209 925
228 413
486 779
(99 316)
613 805
(16 409)
4 870
(5 964)
253 360
136 252
2 743
(198 749)
(51 450)
(63 800)
575 342
Interest income/cost
Interest received
Interest paid
Tax paid
Net cash from operating activities (1)
638 863
46 183
(608 895)
(54 416)
508 514
411 594
61 414
(441 174)
(10 603)
596 573
Sale of tangible assets
Purchase of tangible assets
Sale of intangible assets
Purchases of intangible assets
Sale of shares
Investments in shares
Change in intercompany receivables/debt
Change in other long term receivables
Cash flow from investing activities (2)
41 425
(2 795 251)
5 669 954
(9 407 992)
131 023
(85 545)
2 109 305
(2 109 305)
(47 475)
(82 868)
(3 822 903)
Proceeds from non-current liabilities
Installments on non-current liabilities
Proceeds from current liabilities to credit institutions
Installments on current liabilities to credit institutions
Change in intercompany debt
Paid-in capital
Minority interest
Cash flow from financing activities (3)
(2 716)
129 854
(44 140)
(2 670 828)
7 193
1 509 185
7 237 875
(4 463 834)
1 222 957
(859 809)
(864 743)
1 176 750
244 363
3 693 559
Net change in cash and cash equivalents
(653 129)
467 229
Cash and cash equivalents at the beginning of the period
1 988 626
1 521 397
26 892
- 1 362 389
1 988 626
Exchange rate gain/loss on cash and cash equivalents
Cash and cash equivalents at the end of the period
3 276 539
(1 982 861)
1 431 272
(1 222 958)
DOF Subsea I Annual Report 2011
69
Notes to accounts DOF Subsea GROUP
Page 69
NOTE 1 Corporate information
Page 69-75
NOTE 2 Accounting policies
Page 76-77
NOTE 3 Financial risk management
Page 77
NOTE 4 Accounting estimates and assessments
Page 78-79
NOTE 5 Segment information
Page 79
NOTE 6 Total operating income
Page 79
NOTE 7 Salaries, fees, number of employees, etc
Page 80
NOTE 8 Financial income and expenses
Page 80-81
NOTE 9 Tax
Page 81
NOTE 10 Earnings per share
Page 81-82
NOTE 11 Intangible assets
Page 83-84
NOTE 12 Tangible assets (incl. commitments)
Page 85
NOTE 13 Leases
Page 85
NOTE 14 Other non-current receivables
Page 85
NOTE 15 Trade receivables
Page 85
NOTE 16 Other current receivables
Page 85
NOTE 17 Fuel reserves and other inventory
Page 86
NOTE 18 Cash and cash equivalents
Page 86
NOTE 19 Share capital and share information
Page 87-88
NOTE 20 Non-current liabilities
Page 88
NOTE 21 Trade payables
Page 89
NOTE 22 Other current liabilities
Page 89
NOTE 23 Financial instruments – hedging
Page 90
NOTE 24 Financial instruments – fair value
Page 91
NOTE 25 Financial instruments – balance
Page 92
NOTE 26 Related parties
Page 92-93
NOTE 27 Remuneration to executives, Board of Directors and auditor
Page 93-95
NOTE 28 Pensions
Page 95
NOTE 29Investments in subsidiaries
Page 96-97
NOTE 30 Investments in associated and jointly controlled companies
Page 97
NOTE 31 Contingencies
Page 97-98
NOTE 32 Events occurring after the balance sheet date
Page 98
NOTE 33 Exchange rates used
Page 98-99
NOTE 34 Business combinations
70
DOF Subsea I Annual Report 2011
Amounts in NOK 1000
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Consolidation principles
1 Corporate information
DOF Subsea is a limited liability company registered in Norway. The
Company’s head office is located at Thormøhlensgate 53 C, 5006 Bergen,
Norway.
The Company is owned by DOF Subsea Holding 2 AS, a company jointly
owned by DOF ASA and First Reserve Corporation, through DOF Subsea
Holding AS. DOF ASA holds 51% ownership stake, and First Reserve Corporation holds 49% ownership stake, and the Company is considered as a
subsidiary of DOF ASA.
DOF Subsea Group provides vessel chartering, survey, subsea construction
and engineering to the global oil- and oil-service companies. The core
business is project management, engineering, vessel chartering, survey
and diving operations.
The Group owns a large, modern fleet that enables us to offer differentiated
services to our clients and create long term relationships, which enhance
service delivery and reduce overall risk.
The Board of Directors approved the financial statements for publication
on 27 April 2012.
The financial report is divided in the Groups account and the parent company
account.
2 Accounting policies
Summary of significant accounting principles
The 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: available-for-sale financial assets and financial instruments at fair value
through profit or loss are subsequently carried at fair value.
The accounting year is the same as the calendar year.
Going concern
The Group has a satisfactory economical and financial position which
provides the basis for the going concern assumption in accordance with
the Accounting Act 3-3a.
Changes in accounting principles and errors
The effects of changes in accounting principles and correction of significant errors in previous annual accounts are reported directly
against equity. Comparative figures are revised accordingly if applicable.
Changes in classification
The Group has changed classification of finance income and cost and lease
debt. Comparable figures from 2010 are restated accordingly.
The consolidated accounts include DOF Subsea AS and companies of
which DOF Subsea AS has a controlling interest. A controlling interest
is normally achieved when the group owns, either directly or indirectly,
more than 50% of the shares in the company, and the group has the capacity
to exercise actual control over the company. Non - controlling interest is
included in the group’s equity. Subsidiaries are consolidated from the date
upon which control is transferred to the group. Consolidation ends on the
date upon which the Group no longer has control.
The Group uses the acquisition method of accounting to account for business combinations. The consideration for the acquisition of a subsidiary
is the fair values of the assets transferred, the liabilities incurred and
the equity interests issued by the Group. The consideration transferred
includes the initial fair value of any asset or liability resulting from a
contingent consideration arrangement. Acquisition-related costs are
expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. On an acquisition-
by-acquisition basis, the Group recognizes any non-controlling interest
in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
Intragroup transactions and intragroup balances, including internal profit
and unrealized gain and loss are eliminated. Unrealized gain generated
from transactions with associated companies is eliminated in proportion
to the Group’s holding in the associated company. Unrealized loss is eliminated in the same manner, but on the condition that there is no
indication of impairment of the asset sold within the Group. The consolidated accounts are prepared using uniform accounting principles to similar transactions and events. The accounts of subsidiaries are adjusted if
necessary to bring them in line with the accounting policies of the Group
Jointly controlled companies
Jointly controlled companies are economic activities regulated by an
agreement between two or more parties, so that these parties have joint
control over the activities. Participation in jointly controlled companies
is recognized using proportionate consolidation (line by line). According
to this method, each participant reports in their accounts their share of
income, costs, assets and liabilities.
Associated companies
Associated companies are entities over which the Group has significant influence but not control, generally accompanying a shareholding
between 20% and 50% of the voting rights. Investments in associated
companies are accounted for using the equity method of accounting and
are initially recognized at cost. The Group’s investment in associated
companies includes goodwill identified on acquisition, net of any subsequent write-downs. The Group’s share of profit or loss from associated companies is recognized on the profit & loss account along with the balance sheet value of
the investments and the share of changes to equity not recognized in the
profit & loss account. The Group does not recognize its share of losses
when this would result in a negative balance sheet value for the investment (including unsecured receivables for the entity), unless the group
has taken on a commitment or issued guarantees for the obligations of the
associated company. DOF Subsea I Annual Report 2011
71
Notes to accounts DOF Subsea GROUP
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as
the board of directors that makes strategic decisions.
The Group’s primary reporting format is determined by business segment,
and the group operates within three business segments:
a) Subsea Engineering
b) Time Charter
c) Projects
The Group’s business is reported in the following geographical areas: The
North Sea, Mediterranean/South-East Asia, West Africa and America.
Conversion of foreign currency
a) 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 consolidated
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 dates of the transactions. 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 recognized in the
income statement as financial income or costs. 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:
assets and liabilities presented at consolidation are converted to presentation currency at the foreign exchange rate on the date of the balance
sheet,income and expenses are converted using the average rate of
exchange, and all resulting exchange differences are recognized in other
comprehensive income and specified separately 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
is reclassified to the income statement.
Classification of assets and liabilities
Assets are classified as current assets when:
• the asset forms part of the entity’s service cycle, and is expected to be
realized 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 realized within 12 months of balance sheet
date; or
• 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
72
DOF Subsea I Annual Report 2011
Amounts in NOK 1000
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
balance sheet date; or
• the entity does not have an unconditional right to postpone settlement
of the liability until at least 12 months after balance sheet date.
All other liabilities are classified as long-term.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks, other short-term highly liquid investments with original maturities of three months or less. Restricted deposits are classified separate from
unrestricted bank deposits under cash and cash equivalents. Restricted
deposits include deposits with restriction past twelve months.
Trade receivables
Trade 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 noncurrent assets. Accrued, not invoiced revenues are classified as trade
receivables.
Trade receivables are recognized initially at fair value and subsequently
measured at amortized cost. Discounting is ignored if insignificant. A provision for loss 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. Significant financial difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial reorganization, and default
or delinquency in payments are considered indicators that the accounts
receivable are impaired. The amount of the provision is the difference
between the asset’s nominal value and the recoverable value, which is the
present value of estimated future cash flows, discounted at the original
effective interest rate. Changes to this provision are recognized under
other operating costs.
When a trade receivable is uncollectible, it is written off against the provision
for trade receivables.
Tangible assets
Tangible assets are measured at cost less accumulated depreciation and
write-down. Cost for the tangible assets is the purchase price including
duties/tax (inclusive import tax) and direct purchasing costs associate
with the acquisition of the tangible asset.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the group
and the cost of the item can be measured reliably. The carrying amount
of the replaced part is derecognized. All other repairs and maintenance
are charged to the income statement during the financial period in which
they are incurred.
When assets are sold or disposed of, the cost price and accumulated
depreciation are derecognized and any loss or gain from the disposal
reported in the profit and loss account.
Depreciation of assets is calculated using the straight-line method based
Notes to accounts DOF Subsea GROUP
Provisions
Provisions are recognized when, and only when, a company 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 balance sheet date and adjusted to the
best estimate. When timing is insignificant, the liability is reported at the
estimated cost of release from the liability.
Otherwise, when timing is significant for the amount of the obligation, it
is recognized at present value. Subsequent increase in the amount of the
obligation due to interest accretion is 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.
A contingent asset is not recognized 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.
Equity
Ordinary shares are classified as equity.
Transaction costs related to equity transactions, including tax effect of
transaction costs, are directly charged against equity. Only transaction
costs which are directly related to equity transactions are charged to
equity.
Transactions with non-controlling interests
The 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-controlling interests is
recorded in equity. Gains or losses on disposals tonon-controlling interests are also recorded in equity.
Revenue recognition
The Group recognizes income when it is probable that future economic
benefits will flow to the entity and when the amount of income can be reliably
measured.
Income from the rental of ships is recorded on a linear basis over the lease
period. The rental period starts from the time the ship is made available
to the customer and expires on the agreed return date. Crew rental and
compensation for coverage of other operating costs, is recorded over the
contract period on a linear basis.
Amounts in NOK 1000
Sales income is shown net of discounts, value-added tax and other taxes
on gross rates.
a) Sale of services
The Group’s operational vessels are leased out on charter parties. Customers lease vessels, crew inclusive. The charterer determines (within the contractual limits) how the vessel is to be utilized. 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 room on vessels (hotel), provisions and extra crews.
b) Dividend income
Dividend income is recognized when the right to receive payment is
established.
c) Interest income
Interest income is recognized using the effective interest method.
Current and deferred income tax
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the balance sheet date in the countries
where the company’s subsidiaries 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 realized or the
deferred income tax liability is settled.
Deferred income tax assets are recognized 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 utilized.
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 recognized directly in equity, to the
extent they relate to items recognized directly in equity. Similarly any tax
related to items reported as other comprehensive income is presented
together with the underlying item.
Companies under the shipping company tax regime
The Group is organized in compliance with the tax regime for shipping
companies in Norway. This scheme entails no tax on profits or tax on diviDOF Subsea I Annual Report 2011
73
Notes to accounts DOF Subsea GROUP
on their estimated useful lives and residual value. Each part of a tangible
asset which has a significant value of the total cost price is depreciated
separately using the straight-line method over their estimated useful lives. Components with similar useful lives are depreciated as one
component. Estimated useful life for a tangible asset and the method of
depreciation are reviewed on an annual basis to ensure that the method
and period applied are in accordance with the economic reality for the
tangible asset. The same applies to residual value.
The Group has an intention that they not shall own vessel which is older
than 20 years. Hence the Group has to calculate a residual value after
the estimated useful life of the vessel within the Group. During 2011 the
Group had a discussion with the Financial Supervisory Authority in Norway
for establishing the basis for residual value. The Group has agreed that
the basis for residual value should be market valuation of charter free vessel.
However such market values have to be adjusted to reflect the market
value of the vessels if it had been of an age and in the condition expected
at the end of the useful life. To estimate the residual value the Group has
applied a linear model depending on the age of the vessel increasing from
50% (on a new build) to 100% (of a 20 year old vessel) of the received market
valuation. The change in residual value has been applied as of January 1,
2011.
Capitalized costs on vessels that is directly related to the negotiations and
arrangements of a contract is depreciated over the contract period.
The company monitors sales transactions for similar vessels in the market
and carries out an annual re-assessment of residual value at the end of the
useful life of its fleet of vessels.
Vessels under construction are classified as tangible assets and are
recognized in accordance with payments of installments. Vessels under construction are not depreciated before the tangible asset is in use.
Tangible assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value
in use. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash in-flows
(cash-generating units). Non-financial assets other than goodwill that
previously has suffered an impairment loss are reviewed for possible
reversal of the impairment when there are indicators of a recovery of the
value.
Periodic maintenance
Periodic maintenance is reported on the balance sheet as a part of the vessel,
and straight line depreciated over the period until the next periodic maintenance, normally after 30-60 months. On the purchase of new vessels, a portion of the cost price is classified as periodic maintenance.
Leases
Leases 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.
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DOF Subsea I Annual Report 2011
Amounts in NOK 1000
The Group leases certain vessels and equipment. Leases of property,
plant and equipment where the Group has substantially all the risks and
rewards of ownership, 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.
Each lease payment is allocated between the liability and finance charges.
The corresponding rental obligations, net of finance charges, are included
in other long-term payables. The interest element of the finance cost 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 is depreciated over the shorter of the useful life of the asset and the
lease term.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group’s share of the net identifiable assets of the acquired
subsidiary at the date of acquisition. 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. Gains
and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
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.
Borrowings
Borrowings are recognized initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortized cost; any
difference between the proceeds (net of transaction costs) and the
redemption value is recognized in the profit and loss over the period of
the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognized 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 capitalized as
a pre-payment for liquidity services and amortized over the period of the
facility to which it relates.
Interest expenses related to the borrowing are recognized as part of cost
of an asset when the borrowing costs accrue during the construction period
of a qualifying asset. Borrowing costs are capitalized until the time the
fixed asset has been delivered and is ready for its intended use.
Borrowing is classified as short-term liabilities unless the borrowing
involves an unconditional right to postpone payment of the liabilities for
more than 12 months from balance sheet date.
Notes to accounts DOF Subsea GROUP
dends 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 28%. 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 benefits
a) Pensions and pension obligations
Group companies operate various pension schemes. The schemes are
generally funded through payments to insurance companies or trusteeadministered funds, determined by periodic actuarial calculations. The
Group has both defined benefit and defined contribution plans. A defined
contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. 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.
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 salary.
The liability recognized in the balance sheet in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the
balance sheet date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains and losses and past service costs.
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 for government bonds that are
denominated in the currency in which the benefits will be paid and that
have terms to maturity similar to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions in excess of the greater of 10% of the
value of plan assets or 10% of the defined benefit obligation are charged
or credited to income over the employees’ expected average remaining
working lives.
Past-service costs are recognized immediately in income, unless the
changes to the pension plan are conditional on the employees remaining
in service for a specified period of time (the contribution period). In this
case, the past-service costs are amortized on a straight-line basis over the
contribution period.
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 further payment obligations
once the contributions have been paid. The contributions are recognized
as salary costs when they are due. Prepaid contributions are recognized as
an asset to the extent that a cash refund or a reduction in the future payments is available.
b) Bonus plans and severance pay
Certain contracts of employment include the right to receive a bonus in
relation to the fulfillment of defined financial criteria and agreements
which provide the right for severance pay upon termination of the working
Amounts in NOK 1000
relationship.
Provisions are made in those cases where the company has a commitment
to make payment of such and are immediately charged through profit and
loss.
Financial assets
The Group classifies its financial assets in the following categories: 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 fluctuations. Derivatives are also categorized 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 balance sheet date. These are classified as fixed assets. Loans and
receivables are classified as “accounts receivable and other receivables”,
and as cash and cash equivalents in the balance sheet.
c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either
designated in this category or not classified in any of the other categories.
They are included in non- current assets unless management intends to
dispose of the investment within 12 months of the balance sheet date.
Regular purchases and sales of financial assets are recognized on the
trade date – the date on which the group commits to purchase or sell the
asset. Investments are initially recognized 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
recognized at fair value and transaction costs are expensed in the profit &
loss account. Financial assets are derecognized 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.
Loans and receivables are carried at amortized cost.
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 profit & loss account 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
recognized on the profit & loss account 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.
DOF Subsea I Annual Report 2011
75
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
The group assesses at each balance sheet 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 accounts receivable.
The fair values of various derivative instruments used for hedging purposes are disclosed in note 25.
Derivative financial instruments and hedging activities
Before a hedging transaction is carried out the Group’s finance department assesses whether a derivative (or possibly another financial instrument in the case of a currency hedge) is to be used to a) Hedge the fair value of a recognized asset or liability or a firm commitment, b) hedge a future cash flow from a recognized asset, obligation, identified
very probable future transaction or, in the case of a currency risk, a firm
commitment or
c) hedge a net investment in a foreign operation.
The Group has only recognized hedge accounting of future cash flow
related to interests on long term debt.
Events after the balance sheet date
New information regarding the group’s financial standing on the balance
sheet date is included in the accounts. Events occurring after balance
sheet date, which do not impact the group’s financial standing on balance
sheet date, but which have a significant impact on future periods, are presented in the notes to the accounts.
The Group’s criteria for classifying a derivative or other financial instrument as a hedging instrument are as follows: the hedge is expected to be effective in that it counteracts changes in
the fair value of or cash flows to an identified asset - a hedging efficiency
of 80-125% is expected, the effectiveness of the hedge can be reliably
measured, there is adequate documentation when the hedge is entered
into that the hedge is effective, among other things, for cash-flow hedges,
the forthcoming transaction must be highly probable, and the hedge is
evaluated regularly and determined actually to have been highly effective
throughout the financial reporting periods for which the hedge was designated.
Cash-flow hedges
The effective part of changes in the fair value of a hedging instrument is
recognized in other comprehensive income. The ineffective part of the
hedging instrument is recognized directly in the income statement within
financial instruments as part of net financial result.
Amounts accumulated in equity are reclassified to profit or loss in the
periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate
borrowings is recognized in the income statement within financial items.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset, the gains and losses previously deferred
in equity are transferred from equity and included in the initial measurement of the cost of the asset.
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 recognized when the
forecast transaction is ultimately recognized 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 within financial instruments as part of net financial
result.
Financial derivatives that are not recognized as hedging instruments are
assessed at their fair value. Changes in the fair value are recognized in
the statement of comprehensive income as they arise. They are classified
within Net financial results.
76
DOF Subsea I Annual Report 2011
Use of estimates
The 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 recognized 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.
Statement of cash flows
The statement of cash flow is prepared in accordance with the indirect
model.
Government grants
The Group recognizes grants when it is reasonably secured that it will
comply with the required conditions for the grant and the grant will be
received. Investments grants are presented as deduction in the asset’s
carrying amount on the balance sheet.
New standards and amendments
Below is a list of standards/interpretations that have been issued and are
effective for periods starting on or after 1 January 2011.
Amendment to IAS 32
‘Financial instruments: Presentation – Classification of rights issues’
Amended to allow rights, options or warrants to acquire a fixed number
of the entity’s own equity instruments for a fixed amount of any currency
to be classified as equity instruments provided the entity offers the rights,
options or warrants pro rata to all of its existing owners of the same class
of its own non-derivative equity instruments. Effective date: 1 February
2010
IAS 24, ‘Related party disclosures’ (revised 2009)
Amends the definition of a related party and modifies certain relatedparty disclosure requirements for government-related entities. Effective
date: 1 January 2011
Amendment to IFRIC 14,‘IAS 19 – The limit on a defined benefit
assets, minimum funding requirements and their interaction’
Removes unintended consequences arising from the treatment of prepayments where there is a minimum funding requirement. Results in
pre-payments of contributions in certain circumstances being recognized
as an asset rather than an expense. Effective date: 1 January 2011
Notes to accounts DOF Subsea GROUP
Improvements to IFRSs 2010
The amendments are applicable for annual periods beginning after 1
January 2011 unless otherwise stated
IFRS 3, ‘Business combinations’
(a) Transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised
IFRS Clarifies that the amendments to IFRS 7, ‘Financial instruments:
Disclosures’, IAS 32, ‘Financial instruments: Presentation’, and IAS 39,
‘Financial instruments: Recognition and measurement’, that eliminate
the exemption for contingent consideration, do not apply to contingent
consideration that arose from business combinations whose acquisition
dates precede the application of IFRS 3 (as revised in 2008). Effective
date: Applicable to annual periods beginning on or after 1 July 2010.
Applied retrospectively.
(b) Measurement of non- controlling interests
The choice of measuring non-controlling interests at fair value or at the
proportionate share of the acquiree’s net assets applies only to instruments that represent present ownership interests and entitle their holders to a proportionate share of the net assets in the event of liquidation.
All other components of non-controlling interest are measured at fair
value unless another measurement basis is required by IFRS. Effective
date: Applicable to annual periods beginning on or after 1 July 2010.
Applied prospectively from the date the entity applies IFRS 3.
(c) Un-replaced and voluntarily replaced share- based payment awards
The application guidance in IFRS 3 applies to all sharebased payment
transactions that are part of a business combination, including unreplaced and voluntarily replaced share-based payment awards. Effective
date: Applicable to annual periods beginning on or after 1 July 2010.
Applied prospectively.
IFRS 7, ‘Financial instruments’
Emphasizes the interaction between quantitative and qualitative disclosures about the nature and extent of risks associated with financial instruments. Effective date: 1 January 2011. Applied retrospectively.
IAS 1, ‘Presentation of financial statements’
Clarifies that an entity will present an analysis of other comprehensive
income for each component of equity, either in the statement of changes
in equity or in the notes to the financial statements. Effective date: 1
January 2011. Applied retrospectively.
IAS 27, ‘Consolidated and separate financial statements’
Clarifies that the consequential amendments from IAS 27 made to IAS 21,
‘The effect of changes in foreign exchange rates’, IAS 28, ‘Investments in
associates’, and IAS 31, ‘Interests in joint ventures’, apply prospectively
for annual periods beginning on or after 1 July 2009, or earlier when IAS
27 is applied earlier. Effective date: Applicable to annual periods beginning on or after 1 July 2010. Applied retrospectively.
Amendments to IFRS 7, ‘Financial instruments: Disclosures’ on
derecognition
This amendment will promote transparency in the reporting of transfer
transactions and improve users’ understanding of the risk exposures
relating to transfers of financial assets and the effect of those risks on an
entity’s financial position, particularly those involving securitization of
financial assets. Earlier application subject to EU endorsement is permit-
Amounts in NOK 1000
ted. Effective date: 1 July 2011.
Amendment to IAS 1,‘Financial statement presentation’
regarding other comprehensive income
The main change resulting from these amendments is a requirement for
entities to group items presented in ‘other comprehensive income’ (OCI)
on the basis of whether they are potentially reclassifiable to profit or loss
subsequently (reclassification adjustments). The amendments do not
address which items are presented in OCI. Effective date: 1 July 2012.
Amendment to IAS 19, ‘Employee benefits’
These amendments eliminate the corridor approach and calculate finance
costs on a net funding basis. Effective date: 1 January 2013.
IFRS 9, ‘Financial instruments’
IFRS 9 is the first standard issued as part of a wider project to replace
IAS 39. IFRS 9 retains but simplifies the mixed measurement model and
establishes two primary measurement categories for) financial assets:
amortized cost and fair value. The basis of classification depends on the
entity’s business model and the contractual cash flow characteristics of
the financial asset. The guidance in IAS 39 on impairment of financial
assets and hedge accounting continues to apply. Effective date: 1 January
2013.
IFRS 10, ‘Consolidated financial statements’
The objective of IFRS 10 is to establish principles for the presentation and
preparation of consolidated financial statements when an entity controls
one or more other entity (an entity that controls one or more other entities) to present consolidated financial statements. Defines the principle
of control, and establishes controls as the basis for consolidation. Set
out how to apply the principle of control to identify whether an investor
controls an investee and therefore must consolidate the investee. Sets out
the accounting requirements for the preparation of consolidated financial
statements. Effective date: 1 January 2013.
IFRS 11, ‘Joint arrangements’
IFRS 11 is a more realistic reflection of joint arrangements by focusing on
the rights and obligations of 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 hence accounts for its
interest in assets, liabilities, revenue and expenses. Joint ventures arishere the joint operator has rights to the net assets of the arrangement and
hence equity accounts for its interest. Proportional consolidation of joint
ventures is no longer allowed. Effective date: 1 January 2013.
IFRS 12, ‘Disclosures of interests in other entities’
IFRS 12 includes the disclosure requirements for all forms of interests in
other entities, including joint arrangements, associates, special purpose
vehicles and other off balance sheet vehicles. Effective date: 1 January
2013.
IAS 28 (revised 2011), ‘Associates and joint ventures’
IAS 28 (revised 2011) includes the requirements for joint ventures, as well
as associates, to be equity accounted following the issue of IFRS 11. Effective
date: 1 January 2013.
DOF Subsea I Annual Report 2011
77
Notes to accounts DOF Subsea GROUP
3 Financial risk management
The Group's activities entail various kinds of financial risk: market risk
(including foreign exchange risk, actual interest rate risk, floating rate
risk and price risk), credit risk and liquidity risk. The Group's governing
risk management strategy focuses on the predictability of the capital markets and seeks to minimize the potential negative effects of the Group's
financial results. The Group uses financial derivatives to hedge against
certain types of risk. The Group's risk management is exercised in line
with guidelines approved by the Board of Directors. Accordingly, financial
risk is identified, evaluated and hedged. The Board issues written principles for the governing risk management strategy and sets out written
guidelines for specific areas such as the foreign exchange risk, interest
risk, credit risk, use of financial derivatives and other financial instruments, as well as investment of surplus liquidity. The Group does not have
any direct exposure to changes in raw material prices.
Financial instruments
The Group is exposed to fluctuations in interest rates and currency fluctuations. To some extent the Group use financial instruments to reduce
these risks. The Group does not use financial instruments linked to
ordinary activities such as trade receivables, trade payables and similar.
Neither does the Group use financial instruments to manage the financial
risk relating to long-term financing, with the exception of some of the
Group’s loans being denominated in foreign currencies.
Foreign exchange risk
As a result of its international operations, the Group is exposed to
changes in exchange rates. The Group’s overall objective is to protect the
economic NOK value of its free cash flow from adverse developments in
future currency rates. This is handled by means of natural hedging and
the use of foreign exchange derivatives. When implementing the foreign
exchange hedging the Group differentiates between committed and
uncommitted exposure by having a higher hedge ratio on what is considered committed exposure. The majority of the Group’s turnover is in foreign currencies, and mainly
relates to USD, GBP and to some extent also AUD and BRL. A substantial
portion of expenses are in the same currency as revenues, but a greater
proportion of expenses payable is denominated in NOK.
By focusing on natural hedging the Group seeks to reduce its exposure to
changes in exchange rates naturally by achieving the best possible balance between ingoing and outgoing payments in the same currency. This
also implies that efforts are made to match revenues in one particular
currency with financing in the same currency. The remaining exposure is
addressed by means of forward contracts at acceptable exchange rates.
Interest risk
Of the Group’s total debt portfolio 50% are subject to a fixed interest rate.
This implies that the Group is taking advantage of the global low interest
rate regime, but at the same time the Group is exposed to future interest
rate changes. Approximately 80% of the Group’s debt is denominated in
NOK, whereas the rest mainly relates to debt in USD and to some extent GBP. 78
DOF Subsea I Annual Report 2011
Amounts in NOK 1000
The Group evaluates the mix of funding currencies and the ratio of fixed
versus. floating rate debt on an ongoing basis.
The Group has no interest earning assets of significance, expect for bank
deposits.
For some of the fixed interest rate contracts hedge accounting is applied
(note 23).
Credit risk
Maximum credit exposure arises on the values of financial assets recognized in the balance sheet. The Group’s trade receivables are mainly
related to major international oil companies and other major international players. The Group has guidelines for monitoring and recovering
trade receivables.
Historically, losses on trade receivables have been extremely small, and
credit risk is considered low.
The forward contracts are entered into with banks, and the risk associated with these is considered negligible. The same applies to bank deposits.
Accordingly, the value of trade receivables recognized in the balance sheet
is considered to represent the maximum credit risk.
Liquidity risk
The Group’s strategy is to have sufficient cash or credit facilities available at all times, not only to finance ongoing operations and planned
investments, but also to be able to make rapid purchases/acquisitions of
vessels/businesses. The Group considers it likely that it will continue to
renew existing loan agreements as they fall due, or negotiate alternative
financing solutions. Surplus liquidity is deposited in banks at the best possible terms.
Fair values
Fair value of forward exchange contracts is calculated based on the midpoint of the relevant yield curve.
Liabilities to credit institutions, trade payables, other current/noncurrent liabilities, trade receivables and other bank deposits, cash and
similar are calculated using the exchange rate prevailing at the balance
sheet date.
Price risk
The Group is exposed to price risk at two main levels:
• The costs of construction of new assets, 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 affect both the pricing and the utilization of the
Group’s assets.
The Group aims to reduce any price risk and has the main part of its vessels on long-term charter contracts. All new-build contracts are based on
fixed prices of the assets.
Notes to accounts DOF Subsea GROUP
Tax risk
Changes in tax regimes and taxation may adversely affect the Group’s
cash flows and financial condition certain companies in the Group are
subject to the special tax rules for ship owners in the Taxation Act (§ 8-10
- § 8-20). There has been, and still is, political discussion to modify these
tax rules. Further, such special tax rules stipulate certain requirements
which will have to be met in order to qualify for taxation pursuant to such
rules. No assurance can be given that the Group will meet such requirements in the future. A failure to meet such requirements may have an
adverse effect on the effective tax rate of the Group.
4 Accounting estimates and assessments
Valuations, estimates and assumptions with a significant effect on the
financial statements are summarized below:
Vessels:
The carrying amount of the Group’s ships represents 74% of the balance
sheet total. Policies and estimates linked to the ships have a significant
impact on the Group’s financial statements. The DOF Subsea Group has
an intention that the Group not shall own a vessel more than 20 years old.
In the current market the fair value of the Group’s vessels is significantly
higher than the carrying amount. Depreciation is estimated based on
market value of the residual value of vessels. In a period with significant increase in market value there will be a difference between booked value
of vessels and marked value. Depreciation is based on market value and
will limit the gap between market value and booked value in these circumstances .
Useful life of vessels
The level of depreciation depends on the ships’ estimated useful lives.
Estimated useful life is based on strategy, past experience and knowledge
of the types of ship the company owns. Useful life of older ships is individually assessed. There will always be a certain risk of events like breakdown, obsoleteness e.g. with older ships, which may result in a shorter
useful life than estimated. From time to time the company might own vessels more than 20 years old, the depreciation rate will then be estimated
individually.
Residual value of vessels
The 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 market valuation of a charter-free vessel. Market value is adjusted
to reflect the market value of the vessel if it had been of an age and in the
condition expected at the end of its useful life. To estimate the residual
value DOF Subsea Group has applied a linear model depending on the age
of the vessel increasing from 50% (on a new-build) to 100% (of a 20-yearold vessel) of the received market valuation.
Useful life of investments related to periodical maintenance
Periodic maintenance is related to major inspections and overhaul costs.
Component accounting for inspection or overhaul costs is intended to be
used only for major expenditure that occurs at regular intervals over the
life of an asset. Investments made in connection with periodical maintenance are depreciated until the vessel is entered into next periodical
maintenance. Intervals are calculated on the basis of past experience
Amounts in NOK 1000
and best estimates for when future periodical maintenance will be done. There will be two types of docking program at the same time. Estimated
life of each periodical maintance program is five years.
On the purchase of new vessels, a portion of the cost price is classified
as periodic maintenance based on best estimates. Component accounting for inspection or overhaul costs is intended to be used only for major
expenditure that occurs at regular intervals over the life of an asset.
Contract costs and mobilization costs for TC vessels
Ordinary contract costs and ordinary costs related to mobilization are
capitalized and amortized on a systematic basis consistent with the contract period. Contract costs and mobilization costs are capitalized and
depreciated over the contract period. Contract period is based on best
estimates taken into consideration, normally an 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. The probability of whether the customer will utilize the option
period will be based on past experience with the client, nature of the contract and marked condition in general.
Projects income and and costs/provisions
Contract revenue and expenses are recognized in accordance with the
stage of completion of the contract. Under the stage of completion method, contract costs, revenue and the resulting profit are recognized in the
period that the work is performed. Contract costs incurred that relate to
future activities are deferred and recognized as an asset in the balance
sheet. Basis for estimations is monthly updated forecasts for projects. Revenue in projects may increase or decrease based on variations to the
original contract. These variation will be recognized based on purchase
order/variation order if it is probable they will result in revenue and they
can be reliably measured.
A provision is recognized 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 recognized for 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 has to be paid to settle the obligation at the
balance sheet date or to transfer it to a third party at that time
Indication of impairment
Assessments are made to determine whether the need for a write-down
is indicated. If there are such indications, the recoverable amount is
estimated and the booked value is brought into line with the recoverable
amount (note 11 and 12) .
Deferred tax assets
Deferred tax assets are recognized in the balance sheet on the basis of utilization of tax-loss carry-forwards by reversing tax-increasing temporary
differences and future earnings. See also Note 9.
DOF Subsea I Annual Report 2011
79
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
5 Segment information
Members of the Board of Directors together with CEO and CFO is the groups chief operating decision - maker. Management has determined the operating
segments based on the information given to the groups operating decision-maker for the purposes of allocating resources and assessing performance.
In 2011 the Group has changed internal segment reporting to its chief operating decision-maker. The segment Subsea Construction Support has been
divided into "Time Charter" (TC) segment and "Projects" segment. Vessels on Time Charter contracts are reported in its own segments. The Projects segments
cover the Groups integrated service activities in survey, subsea construction and inspection, repair and maintenance services (IRM) and use of vessels.
Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. Presentation of segments includes information sorted by segments that are being reported to the chief operating decision-maker on
regular basis.
Information regarding the Group’s reportable segments is presented below . Amounts reported for the prior year have been restated to conform to the
requirements of IFRS 8. 2010 figures are figures based on proforma figures. Proforma figures include also the "Brazilian IPO group". This group was not a
part of the consolidated group in the period April to September 2010.
The operating segments' reporting has no reporting of tax sorted in differente segments due to the fact that vessels in the Group are a part of the Norwegian
tonnage tax system which have no taxation of net operating income. Net financial result, based on tax rules, are taxable. Normally taxable net financial
result will not be positive for the Group.
The Group divides its business activities in three geographical regions, based on the location of customers: Europe/West Africa, Australasia and Americas.
As the clients’ locations are offshore and the operating equipment and employees used to service the various geographical regions are often the same, no
data is given on assets, liabilities, investments and employees as this would not provide any meaningful information.
Profit and Loss Accounts
FY11
Operating income
Operating expenses before depreciation
Operating profits before depreciation (EBITDA)
Time charter
1 234 398
-326 635
907 763
Projects
2 831 850
-2 404 904
426 946
Subsea
Engineering
219 017
-212 098
6 919
Total
4 285 571
-2 943 637
1 341 628
FY10 - Profoma
Sales revenues
Time charter
1 278 655
Projects
2 111 379
Subsea
Engineering
216 158
Total
3 606 192
Operating expenses before depreciation
Operating profits before depreciation (EBITDA)
-502 654
776 001
-1 800 237
311 142
-208 196
7 962
-2 511 087
1 095 105
FY10
Sales revenues
Operating expenses before depreciation
Operating profits before depreciation (EBITDA)
Time charter
1 103 691
-453 159
650 532
Projects
1 705 749
-1 477 655
228 094
Subsea
Engineering
216 158
-208 196
7 962
Total
3 025 598
-2 139 010
886 588
FY10 and FY10 - Proforma
FY10 shows figures without the Brazilian companies that where a part of the "IPO group". The IPO Group is in included in FY10 Proforma above. For 6 months in 2010 a part of the Group (“IPO Group”) was out of DOF Subsea Group due to the process of listing these companies at the BOVESPA
Stock exchange in Sao Paulo. The plan was postponed and the Group was taken back in September 2010.
80
DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Region
FY11
Operating revenues
Europe /
West Africa
2 294 645
Americas
798 290
Australasia
1 192 330
Total
4 285 265
FY10
Operating revenues
Europe /
West Africa
1 823 634
Americas
371 790
Australasia
830 174
Total
3 025 598
FY10 operating revenues
There has been lower revenues in the Americas region in this period. Some vessels in the Americas region have not been part of the group in the period
April to September 2010 due to IPO process in Brazil.
6 Total operating income
Sales revenues comprise of:
Sales of services, including hire of ships
Freight revenues - TC
Total sales revenues
Gain (-loss) sold vessels
Total revenues
Distribution of sales revenues 2011
Distribution of sales revenue external
2011
3 051 173
1 234 398
4 285 571
-306
4 285 265
2010
2 008 436
1 000 753
3 009 189
16 409
3 025 598
NOK
834 862
AUD
707 585
USD
1 406 509
GBP
600 713
OTHER*
735 597
TOTAL
4 285 265
NOK
579 286
AUD
645 639
USD
786 428
GBP
711 291
OTHER
302 954
TOTAL
3 025 598
Note
27
2011
566 989
339 218
66 994
16 396
22 846
1 012 443
1482
2010
373 078
251 029
42 908
19 743
13 672
700 430
1183
* Here of BRL 508 493
Distribution of sales revenues 2010
Distribution of sales revenue external
7
Salaries, fees, number of employees, etc
Wages and salaries
Salaries and holiday pay
Contract labour Employer’s contributions
Pension costs
Other staff costs
Total
Average number of employees
28
Salaries and wages related to contractors are included in the other operating expenses. There has been an increase in total salaries compared with last
year. Part of the reason for that is that some companies have not been part of the Group in the period April to September 2010 due to IPO process in Brazil.
DOF Subsea I Annual Report 2011
81
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
8 Financial income and expenses
Financial income and expenses
Income/loss from investments
Interest income
Other financial income
Financial Income
Interest expenses
Interest expenses payable to Group Companies
Other financial expenses
Financial Expenses
Realized gain/loss on deriviative financial instruments
Realized gain/loss on currencies
Realized gain/loss on financial instruments
Unrealized gain/loss on derivative financial instruments
Unrealized gain/loss on currencies
Unrealized gain/loss on financial instruments
Net financial items
Note
30
2011
-19 785
2010
-4 870
44 582
649
45 231
66 000
7 139
73 139
-660 408
-23 037
-47 618
-731 063
-428 168
-27 988
-53 184
-509 340
48 146
-50 950
-2 804
-23 659
18 475
-5 184
-209 918
-255 305
-465 223
45 616
28 540
74 156
-1 173 644
-372 100
Realization of interest rate swap is included in realized gain/loss on derivative financial instruments with a net gain of NOK 5 573. A gain of NOK 9 107
is related to instruments which are recognized as hedge accounting according to IFRS (note 23). All other gain/loss on derivative financial instruments is
related to instruments held to maturity. Capitalization of interest expenses on qualifying assets amounts to NOK 7 939 and is included in tangible assets (note 12).
9 Tax
The income tax expense comprises:
Tax payable, Norway
Tax payable due to exit tonnage tax regime (1/3)
Tax payable, other countries
Change in deferred tax
Changes related to tonnage tax 2011
Change in deferred tax due to exit tonnage tax regime 2010 (2/3)
Income tax expense
Reconciliation of nominal and effective tax rate
Profit before tax
Expected income tax expense (28%)
Difference between actual and expected income tax expense
Explanation of why the actual and expected income tax expense differ
Tax effect of non-deductible expenses
Tax effect of write down financial assets
Tax effect from tax exemtion method ( sale of shares)
Estimation differences, previous years Effect of shipping company taxation
Tax effect from items not included in deferred tax
Difference between foreign and Norwegian tax rates
Difference from expected income tax expense
82
DOF Subsea I Annual Report 2011
2011
(4 090)
- (34 860)
76 179
74 336
2010
(2 445)
(16 627)
(17 473)
20 068
111 564
(33 254)
(49 732)
(426 669)
119 467
(7 903)
(99 316)
(27 809)
77 540
(36)
(1 531)
9 999
6 405
(22 741)
(7 903)
(6 575)
- 44 095
- (111 474)
(3 587)
(77 540)
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Deferred tax
The table below specifies the temporary differences between accounting and tax values, and calculation of deferred tax/ tax assets at yearend. The Group
assumes that all tax-loss carry-forwards will be used to offset taxable income within the next few years.
Basis for deferred tax
Non-current assets
Current assets Liabilities
Exit tonnage tax regime (2/3)
Gain/loss account
Differances related to partisipation interest
Other differences
Total temporary differences
Deferred tax (-) / tax asset (28-30%)
Tax-loss carry-forward
Basis for calculating deferred tax (-) / tax asset
Tax-loss not included as deferred tax asset
Total deferred tax / tax asset (-)
Deferred tax Deferred tax asset
Total deferred tax / tax asset (-) recognised in balance sheet
Total deferred tax / tax asset (-) to be recovered after more than 12 months
Total deferred tax / tax asset (-) to be recovered within 12 months
2011
2010
275 848
1 958 433
(11 548)
131 501
(128 922)
(12 681)
- 118 766
348 735
155 853
161 139
95 487
12 574
41 249
657 826 2 488 608
197 903
708 114
(1 049 129) (2 042 961)
(391 303)
445 648
25 459
66 305
(91 229)
151 957
47 832
165 521
139 060
-13 564
(91 229)
151 957
(77 932)
(13 296)
136 761
15 196
In 2011 the Group entered into the Norwegian tonnage tax system for most of the vessels in the Group . These changes resulted in tax effect which are
included in the line "Changes related to tonnage tax 2011". 10 Earnings per share
Group: Basis for calculating earnings per share
Result including other comprehensive income attributable to shareholders of the parent company
Weighted average number of outstanding shares
Weighted average number of outstanding shares, diluted
Earnings per share
Earnings per share, diluted
2011
2010
(400 107)
(163 281)
119 733 714 119 733 714
119 733 714 119 733 714
(3,34)
(1,36)
(3,34)
(1,36)
11 Intangible assets
Goodwill relates to the acquisition of subsidiaries. Goodwill comprises the difference between nominal and discounted amounts in terms of deferred tax,
synergy effects, organizational value and key personnel and their expertise. Goodwill is allocated to the Group`s cash-generating units (CGUs) identified
according to the operating segment .
There are three segments: Time Charter, Projects, and Subsea Engineering. In 2011 the Group has changed internal segment reporting to the Board of Directors. The segment Subsea Construction Support has been divided into
"Time Charter" (TC) segment and "Projects" segment. See segment note for further information. Changes in internal monitoring and reporting are a
result of how development of the Group has been and is expected to be. This has also made it necessary to look into the mechanism which are driving this development. Based on these changes, the Group has reallocated goodwill within the Group. Reallocation of goodwill into Engineering, TC and
Project segments is based on IAS 36 para 87. During 2011 the Group moved a lot of vessels into the Norwegian tonnage tax system. This has resulted in a
change of goodwill related to deferred tax. Opening balances 01.01.2011 is reallocated below.
DOF Subsea I Annual Report 2011
83
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Engineering Construction
Support
support
Book value at 31.12.2010
96 389
423 523
Reallocation 01.01.2011
(96 389)
(423 523)
Time
Charter
Project
Deferred
tax
Total
519 912
Booked Value at 01.01.2011
Cost at 01.01
Acquisitions during the year Disposals
Cost at 31.12
Impairment charge at 01.01 Depreciation of excess values
Accumulated currency translation differences
Total adjustments at 31.12
Book value at 31.12
236 684
185 966
97 262
236 684
185 966
97 262
519 912
275 922
- - 275 922
(40 700)
- 2 880
(37 820)
239 642
216 795
- - 216 795
(31 978)
- 2 343
(29 635)
185 620
107 688
- (75 054)
32 634
(10 426)
(4 667)
- (15 093)
17 541
600 405
- (75 054)
525 351
(83 104)
(4 667)
5 223
(82 548)
442 803
Sensitivity analysis
Goodwill is not depreciated, but the Group performs an annual impairment test to determine any writedown requirement. The Group has estimated
recoverable amount as value in use of the cash generating unit, discounting expected cash flows from operations with a weighted average cost of capital
(WACC). Cash flows are based on budgets approved by the Board covering five years, and does 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 2.5%. Management determined the budgeted gross margin based on past performance and its expectations of market development and the utilization of the vessels.
Based on the impairment test, no impairment is required. EBITDA margin *)
Growth rate **)
WACC
Time Charter
30-40%
2,5 %
8,5 %
Project
10-20%
2,5 %
7,5 %
14,0 %
1,8 %
18,0 %
1,6 %
Negative changes in key assumptions which could result in impairment for the goodwill:
Changes in EBITDA margin
Changes in WACC
*) Budgeted EBITDA- margin. The margin varies in the budget period
**) Average growth rate used to extrapolate cash flows beyond the budget period
84
DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
12 Tangible assets (incl. committments)
2011
Cost at 01.01
Additions
Disposals
Reallocation
Currency translation differences
Cost at 31.12
Depreciation at 01.01
Accumulated writedowns at 01.01
Writedowns for the year
Depreciation for the year
Depreciation eliminated on disposals
Reallocation
Currency translation differences
Depreciation at 31.12
Book value at 31.12
Asset lifetime (years)
Depreciation schedule
2010
Cost at 01.01
Additions
Disposals
Reallocation
Currency translation differences
Cost at 31.12
Depreciation at 01.01
Accumulated writedowns at 01.01
Writedowns for the year
Depreciation for the year
Depreciation eliminated on disposals
Reallocation
Currency translation differences
Depreciation at 31.12
Book value at 31.12
Asset lifetime (years)
Depreciation schedule
Vessels
11 264 893
897 160
(179 634)
2 695 216
(137 815)
14 539 821
122 821
- 6 650
414 158
(13 388)
- (3 998)
526 244
14 013 577
20
*)
Vessels
6 893 782
5 435 785
(4 414 852)
3 812 838
47 198
11 774 751
810 910
- - 447 917
(624 360)
- (535)
633 932
11 140 819
20
*)
Periodic
maintenance
110 917
135 974
(20 467)
28 746
33
255 202
34 462
- 54 398
(230)
- (209)
88 422
166 781
2,5-5
Linear Periodic
maintenance
168 027
104 561
(89 554)
4 944
412
188 390
94 062
- - 62 870
(45 895)
- (355)
110 682
77 708
2,5-5
Linear ROV’s
683 494
38 926
(30 179)
145 863
(8 569)
829 535
32 576
- Machinery
& other
equipments
853 004
23 344
(2 131)
(194 759)
(7 591)
671 867
48 583
- Newbuilds
776 347
1 954 160
- (2 675 066)
10 942
66 383
- - 57 808
(9 375)
- (314)
80 695
748 840
15
Linear 61 638
(1 120)
- 549
109 650
562 216
5-15
Linear - - - - 66 383
Not applicable ROV’s
880 529
377 418
(374 361)
(124 937)
6 016
764 665
108 339
- - 37 212
(31 804)
- - 113 747
650 918
15
Linear Machinery
& other
equipments
667 645
240 461
(217 769)
226 539
22 709
939 585
116 951
- - 65 806
(47 261)
- (332)
135 164
804 421
5-15
Linear Newbuilds
2 745 566
3 217 060
(1 306 337)
(3 886 676)
6 734
776 347
- - - - - - - 776 347
Not applicable *) residual value is recalculated every year and will varies based on market valuation of the vessel
Total
13 688 655
3 049 564
(232 411)
(142 999)
16 362 808
238 442
- 6 650
588 003
(24 113)
- (3 971)
805 011
15 557 797
Total
11 355 549
9 375 285
(6 402 873)
32 708
83 069
14 443 738
1 130 262
- - 613 805
(749 320)
- (1 222)
993 525
13 450 213
Depreciable amount, depreciation period and residual value:
DOF Subsea, as a part of DOF ASA Group, has an intention that the Group not shall own vessel which is older than 20 years. Hence The Group has to calculate a residual value after the estimated useful life of the vessel. During the three first quarters in 2011 the residual value was estimated to 50% of the
original cost of the vessel. The DOF ASA Group has during the second half of 2011 had a discussion with the Financial Supervisory Authority in Norway
for establishing the basis for residual value. The Group has agreed that the basis for residual value should be market valuation of charter free vessel. However such market values have to be adjusted to reflect the market value of the vessels if it had been of an age and in the condition expected at the end of the
useful life. To estimate the residual value the Group has applied a linear model depending on the age of the vessel increasing from 50% (on a newbuild)
to 100% (of a 20 year old vessel) of the received market valuation. The total effect of the changed estimate of the residual value is reduced depreciation of
approx NOK 70 mill.
DOF Subsea I Annual Report 2011
85
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Decomposition:
Cost of vessel decomposition into periodical maintenance and vessel. If ROVs are permanently installed on vessels, the cost of this investment is included
as part of the cost of the vessel. Newbuilds are not depreciated before vessels are delivered and commenced with operations.
Impairment assessment
Write-down assessments have been carried out for all vessels and newbuildings as of 31 December 2010. The Group has independent broker valuations
and adjusted these to include estimated added/decreased value in timecharter and bareboat contracts. In instances where the book value has been higher
than the broker valuations, taking into account the estimated current value of contracts, a write-down has been carried out. The current value calculations are based on projected future earnings, cost levels and discount rate. There is a certain level of uncertainty connected with these estimates. Changes
in parameters will result in amended results for the write-down assessment. A WACC (weighted average cost of capital) of 6,9% was applied as discount
rate in the calculations. Each vessel is considered as a separate unit capable of generating cash flow.
Capitalized interests
In 2011, total interest of NOK 7,9 millions were capitalized as property, plant and equipment.
Newbuild program - vessels
At year end the Group has contract on delivery of one new vessel. The vessel is expected to be delivered in May 2012. This vessel is sold and has expected
handover to the new owner in May 2012. See also note 32 for contracts after balance sheet date.
New build program – ROVs
The Group will take delivery of 6 new ROVs in 2012. See also note 32 for contracts after balance sheet date. 13 Leases
Operating leases of tangible assets - the Group as lessee:
The Group does not have any significant agreements concerning leasing of property, plant and equipment which are not recognised in the balance sheet.
The lease on the head office is described in note 26.
Finance leases of tangible assets - the Group as lessee:
The Group’s assets held under finance leases include several ROVs . In addition to the lease payments, the Group is also committed to maintaining and
insuring the assets. The assets held under finance leases are as follows.
Finance leases
ROVs
Total cost
Accumulated depreciation at 01.01
Depreciation for the year
Net value recognised in the balance sheet
Overview of future minimum leases
Minimum lease amounts falling due in the periods
Of which current liabilities
Of which non-current liabilities
Within 1 year
14 059
14 059
2011
78 903
2010
78 903
78 903
2 489
3 432
72 982
78 903
1 123
1 366
76 414
2-5 years
42 763
Total
56 822
14 059
42 763
42 763
Financial leases:
Total cost, depreciations and net value of leased ROVs is included in balance sheet and profit and loss and is a part of note 12, tangible assets.
Lease revenue - the group as lessor:
Overview of future minimum leases revenue
Within 1 year
2-5 years
Total
Minimum operating lease revenue amounts falling due in the periods
3 077 585
4 100 743
7 178 328
Minimum lease revenue is based on contracts on vessels at year end 2011 . Vessel on operational lease is recognized as tangible fixed asset (note 12).
At year end 23 of 24 vessels available for operation are on operational leases.
86
DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
14 Other non-current receivables
Other non-current receivables
Intragroup non-current recievables
Other non-current recievables
Sum other non-current receivables at 31.12
2011
2010
45 590
160 718
206 308
47 475
82 868
130 343
2011
645 353
-10 923
634 430
210
591 471
-12 382
579 089
15 Trade receivable
Trade receivables at nominal value
Provision for bad debts
Trade receivables at 31.12
As of 31.12, the group had the following trade receivables that had matured but not been paid.
Accounting item at
31.12.2011
Trade receivables
Total
634,430
NOK
294 176
USD
160 437
GBP
69 181
OTHER
110 636
TOTAL
634 430
Not matured
440,067
< 30 d
130,115
30-60 d
10,188
60-90d
16,343
> 90 d
37,717
Group trade recievables are mainly to major international oil companies and major subsea entreprenuers. The Group has an historically low level of bad
debts, and the credit risk is considered to be minor. For 2010 recieavbles against DOF ASA companies and receivables not invoiced were classified as other
receivables. 16 Other current receivables
Other current receivables
Government taxes receivable
Loan to employees
Prepaid expenses
Accrued interest income
Accrued income
Other current receivables
Sum other current receivables at 31.12
2011
36 941
51 290
14 641
401 976
120 307
625 155
2010
51 395
1 930
32 378
16 235
202 807
187 429
492 174
2011
27 625
2010
11 422
13 303
40 928
9 604
21 026
17 Fuel reserves and other inventory
Bunker fuel
Provisions onboard vessels etc.
Fuel reserves and other inventory 31.12.
DOF Subsea I Annual Report 2011
87
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
18 Cash and cash equivalents
2011
108
795 124
567 156
1 362 389
Cash
Restricted deposits*
Bank deposits
Cash and cash equivalents including restricted deposits
2010
713
885 265
1 102 648
1 988 626
* A long term loan has been provided by Eksportfinans and is invested as a restricted deposit in DnBNOR. The repayment terms on the loan and interests
from Eksportfinans is equivalent with the reduction on the deposit and interests. The loan will be fully repaid in 2020. The cash deposit is included in
Restricted deposits with MNOK 727 (note 20). 19 Share capital and share information
Share capital:
The share capital in the Company at 31.12.2011 was NOK 1 197 million comprising 119,733,714 shares, each with a nominal value of NOK 10.00.
Shareholder overview:
At 31 December 2011 the shareholders in the Company: (no shares owned by senior executives or board members, including share ownership via close
relatives and companies) were as follows:
Shareholders at 31.12.2011/31.12.2010
DOF Subsea Holding 2 AS
Total
No. of shares
119 733 714
119 733 714
Proportion of ownership
100,00 %
100,00 %
Board of directors
Helge Arvid Møgster
Helge Singelstad
Mons Svendal Aase
Hilde Drønen
Alex Townsend Krueger
Neil John Hartley
James William Brooks
John Mogford
Title
Chairman
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Management group
Mons Svendal Aase
Jan Nore
Title
CEO
CFO/EVP
The Company is a part of the DOF ASA Group. The annual report is published at www.dof.no. Please refer to the DOF ASA annual report for shares held in
DOF ASA by management and board of directors.
Share capital
Share capital 01.01.2011
Share capital 31.12.2011
88
DOF Subsea I Annual Report 2011
No. of shares
119 733 714
Share capital
1 197 337
119 733 714
1 197 337
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
20 Non-current liabilities
New bond loan in 2011 (ISIN NO 0010607377)
On 29 April 2011, the Group issued a new bond (non-convertible) of NOK 750 million, all of which falls due on 29 April 2016. The trustee on behalf of
the bond holders is Norsk Tillitsmann ASA, while the account manager is Nordea Bank Norge ASA. The bond loan has a floating interest rate, 3 month's
NBOR + 550 BP, subject to rate adjustment on 29 January, 29 April, 29 July and 29 October. Interests fall due for payment on the interest adjustment
dates. At 31 December 2011, the rate of interest was 8.63%, No particular security has been provided for the loan. The Group is free to acquire its own
bonds.
Non-current liabilities to credit institutions
The Group's long-term financing agreements include the following covenants:
- The Group shall have available cash of at least NOK 400-500 million at all times. After balance sheet date, available cash is reduced to NOK 400 million.
- The Group shall have value adjusted equity to value adjusted assets of at least 25-30%
- The Group shall have equity of at least NOK 3.000 million at all times. - The Group shall have positive working capital at all times.
- The fair value of the Group's ships shall always be at least 100-125% of the outstanding amount.
In addition to the above-mentioned financial covenants, the loan agreements are also subject to the following conditions:
- The Group's assets shall be fully insured.
- There shall not be any change to classification, management or ownership of the ships without the prior written approval of the banks. - DOF ASA shall be the principal shareholder in DOF Subsea AS, and own a minimum of 50% of the shares.
- DOF Subsea AS shall not merge, demerge or divest activities without the prior written approval of the banks.
- DOF Subsea AS shall report financial information to the banks and Oslo Stock Exchange on a regular basis.
- The Group's ships shall be operated in accordance with current laws and regulations.
The Group has complied with the loan terms set by the banks throughout the term of the loan.
Non-current liabilities
Bond loan, floating rate
Loan from parent company
Mortgage debt
Lease debt
Other non-current liabilities
Total non-current liabilities
First year's repayment of non-current liabilities
Effective interest rate
31.12.2011
10,55 %
3,67 %
5,94 %
4,87 %
0,00 %
31.12.11
1 649 535
100 000
10 916 241
50 647
218 442
12 934 865
1 408 873
31.12.10
1 546 500
140 000
9 028 335
63 920
375 510
11 154 265
1 177 176
Non-current liabilities excluding first year's repayments
11 525 992
9 977 089
Mortgage debt
Liabilities to credit institutions, incl. leases
Book value of assets pledged as security for book debt
31.12.11
10 966 888
14 180 358
31.12.10
9 092 255
11 218 527
Parent company guarantees
Guarantees to clients
Total
31.12.11
60 003
60 003
31.12.10
40 712
40 712
The Group has provided guarantees to clients and suppliers in connection with procurements and services.
Other non-current liabilities includes negative MTM on derivatives of TNOK 33 710 , TNOK 6 468 related to the acquisition of the vessel Skandi Nep-
DOF Subsea I Annual Report 2011
89
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
tune, and the valuation of the Charter Party included in the acquisition and TNOK 157 266 in client payment on Skandi Aker. The provision is reversed
through the income statement for the duration of the Charter Party.
Bond loans
Repayments
Balloon
Total bond loans
Loan from parent company
Repayments
Total Loan from parent company
Mortgage loans
Repayments
Balloon
Total mortgage loans
Lease debts
Repayments
Total lease debts
Other long term liabilities
Repayments
Total other long term liabilities
Currency distribution
Bond loans
Liabilities to credit institiutions
Loan from parent company
Lease debt
Taxes payable
Other non-current liabilities
2012
2013
355 500
355 500
2014
2015
750 000
750 000
2016
Thereafter
544 035
544 035
Total
1 649 535
1 649 535
2012
2013
100 000
100 000
2014
2015
2016
Thereafter
Total
100 000
100 000
2012
1 041 967
2013
1 002 068
1 002 068
2015
794 890
1 361 883
2 156 774
2016
700 760
924 858
1 625 617
Thereafter
3 795 230
1 041 967
2014
987 086
307 500
1 294 586
3 795 230
Total
8 322 000
2 594 241
10 916 241
2012
11 406
11 406
2013
11 759
11 759
2014
10 674
10 674
2015
7 667
7 667
2016
7 842
7 842
Thereafter
1 300
1 300
Total
50 647
50 647
2012
2013
76 491
76 491
2014
76 491
76 491
2015
10 765
10 765
2016
Thereafter
54 696
54 696
Total
218 442
218 442
NOK
1 649 535
7 871 113
100 000
50 647
USD
GBP
OTHER
3 004 547
40 581
213 130
5 312
TOTAL
1 649 535
10 916 241
100 000
50 647
218 442
A mortage loan of NOK 727 millions is secured by a cash deposit (note 18). Interest rate and derivative instrument on the cash deposite cover the debt
repayment on the loan.
21 Trade payable
Accounting item at 31.12
Trade payables
90
DOF Subsea I Annual Report 2011
NOK
43 341
USD
79 509
GBP
138 356
OTHER
33 776
TOTAL
294 982
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
22 Other current liabilities
Specification of other current liabilities
Prepaid income
Accrued expenses and prepaid income
Accrued interest expenses
Short term part, non-interest bearing debt
Other current liabilities
Current liabilities at 31.12
2011
56 702
222 046
187 052
104 175
77 988
647 962
2010
52 697
261 607
128 221
88 676
531 201
23 Financial instruments - hedging Forward contracts at fair value over
Profit/Loss
FX Forward
FX Forward
FX Forward
Total FX Forward
Currency option
Bought put option
Bought put option
Bought put option
Sold call option
Sold call option
Sold call option
Total currency option
Interest swap at fair fail as hedge accounting and
over Profit/Loss
Interest swap
Interest swap
Interest swap
Total interest swap
Interest options
Interest swaption
Interest swaption
Total interest option
Amounts in
TNOK
16 048
122 873
59 135
198 056
283 128
659 197
29 964
283 128
659 197
29 963
1 944 578
Due date
2012
2012
2012
Currency
purchased Currency sold
BRL
USD
NOK
GBP
NOK
USD
Fair market
value
-461
-1 106
-812
-2 380
2012
2012
2012
2012
2012
2012
NOK
NOK
BRL
NOK
NOK
BRL
GBP
USD
USD
GBP
USD
USD
Due date
Currency
Swap to
2 736 250
1 202 285
3 938 535
2014-2016
2016
NOK
USD
Fixed
Fixed
-77 495
-49 071
-126 566
1 250 000
299 635
1 549 635
2013
2012
NOK
USD
Fixed
Fixed
-57 101
-9 091
-66 192
Amounts in
TNOK
4 894
12 583
395
-8 364
-14 535
-612
-5 637
Fair market
value
Here of classified as financial current assets
Here of classified as financial non-current assets
Here of classified as provisions for commitments
Here of classified as current liabilities
43 088
33 710
226 252
51 320
Financial derivatives and cash flow hedging against equity:
Effect on equity, loss on interest swap contracts:
42 299
Fair market value of derivatives related to hedge accounting is presented and classified as part of the amount in "provision for commitments" and amount in interest swap above.
DOF Subsea I Annual Report 2011
91
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
24 Financial instruments - fair value
The fair value of financial assets classified as "held to maturity" and "financial assets at fair value through profit or loss” is determined by reference to
published price quotations in an active market. For unquoted financial assets the fair value has been estimated using a valuation technique based on
assumptions that are not supported by observable market prices.
The fair value of forward exchange contracts is determined using the forward exchange rate at the balance sheet date. The fair value of currency swaps
is determined by the present value of future cash flows. The fair value of options is determined using option pricing models. For all the above mentioned
derivatives, the fair value is confirmed by the financial institution with which the Group has entered into the contracts.
The following of the Group’s financial instruments are not measured at fair value: cash and cash equivalents, trade receivables, other current receivables,
overdraft facilities and long-term debts.
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.
Fair value of interest-bearing debt is disclosed face value of the bank loans and nominal value of bonds.
Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments.
2011
Financial assets
Cash and cash equivalents (incl. restricted deposits)
Trade receivables
Other non-current assets
Derivatives
Financial liabilities
Trade and other payables
Derivatives
Interest bearing loans and borrowing
Bank loan and other interest bearing loan
Obligations under finance leases and hire purchase contracts
92
DOF Subsea I Annual Report 2011
2010
Book value
Fair value
Book value
Fair value
1 362 389
634 430
206 308
76 797
1 362 389
634 430
206 308
76 797
1 988 626
579 089
130 343
51 450
1 988 626
579 089
130 343
51 450
294 982
277 571
294 982
277 571
268 253
268 253
12 665 775
50 647
12 607 586
50 647
10 875 508
53 204
10 913 425
53 204
Notes to accounts DOF Subsea GROUP
25 Financial instruments - balance
31.12.11
Assets
Financial assets
Accounts receivable
Other current assets
Derivatives
Cash and cash equivalents (incl. restricted
deposits)
Total Financial assets
Liabilities
Long-term financial liabilities int. bearing
Financial leasing
Provisions
Short term financial liabilities int. bearing
Derivatives
Accounts payable
Other current financial liabilities
Total financial liabilities
31.12.10
Assets
Financial assets
Accounts receivable
Other current assets
Cash and cash equivalents(incl. restricted
deposits)
Total financial liabilities
Liabilities
Long-term financial liabilities incl.
interest-bearing
Financial leasing
Provisions
Short term financial liabilities incl.
interest-bearing
Derivatives
Accounts payable
Total Financial assets
Derivatives
used for
hedging
Amounts in NOK 1000
Held for
trading in
accordance
with IAS39
Held to
maturity
Financial liabiliLoans ties measured
at amortized
and
cost
Receivables
172 599
634 430
842 729
172 599
634 430
842 729
76 797
1 362 389
3 012 146
1 362 389
3 088 944
76 797
11 268 309
39 241
218 442
1 431 274
42 299
294 982
717 119
13 969 366
11 268 309
39 241
218 442
1 431 274
277 571
294 982
717 119
13 969 366
Financial liabiliLoans ties measured
at amortized
and
cost
Receivables
Total
235 452
Held for
trading in
accordance
with IAS39
Held to
maturity
Total
51 450
130 343
579 089
695 497
130 343
579 089
746 947
51 450
1 988 626
3 393 555
1 988 626
3 445 005
9 652 550
53 204
175 363
9 652 550
53 204
175 363
1 222 958
1 222 958
268 253
11 372 328
268 253
11 372 328
Derivatives used for hedging
These are all related to interest rate swaps on NOK loan (NOK 3 600 million) and USD loan (NOK 3 200 million). Gains and losses recognized in the
hedging reserve in equity (note 23) on interest rate swap contracts as of 31 December 2011 will be continuously released to the income statement within
finance cost until the repayment of the bank borrowings (note 20).
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. There is no ineffectiveness to be recorded in profit and loss in 2011 related to hedging derivatives.
DOF Subsea I Annual Report 2011
93
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
26 Related parties
Detailed description of related parties and the Group’s relationship to these:
DOF ASA is the majority shareholder in DOF Subsea Holding AS with a 51% holding at year end. DOF Subsea AS is 100% owned by DOF Subsea Holding 2 AS, in turn owned 100% by DOF Subsea Holding AS. First Reserve Corporation holds the minority share of 49 % in DOF Subsea Holding AS.
Norskan OffshoreDOF Subsea Brasil Services ltda.
DOF Subsea Brasil Services ltda purchases management services from Norskan Offshore Ltda in Brazil. Norskan Offshore Ltda. is 100% owned by DOF
ASA. DOF Subsea Brasil Services Ltda also hires out crew and equipment to Norskan Offshore Ltda.
Purchase of management services:
The Group purchases management services from DOF Management AS for its entire fleet. The average management fee this year is NOK 3.5 million per
vessel and included technical operation, crewing, freighting and management accountancy. DOF Management AS is owned 66% by DOF ASA and 34% by
DOF Subsea AS.
Rental of office space.
Part of the office space located at Thormøhlensgate 53 C, 5006 Bergen, rented by DOF Subsea AS, is used by DOF Management AS. The rental fee allocated to DOF Management AS, to be paid to the Company is determined at NOK 0.45 million per quarter. Leasing of premises
The Group leases two cottages from Moco Eiendom AS, a company 100% owned by CEO Mons S. Aase. The total leasing cost in 2011 has been NOK 0,3 million
Loan financing
The Group has borrowed MNOK 100 million from DOF ASA. This contract is subject to standard terms. Guarantee Agreement between DOF ASA and the Group
In 2010 the Group entered into a guarantee agreement with DOF ASA. DOF ASA provide a parent company guarantee for obligations of DOFCON Navegacao Ltda,a joint venture company of DOF Subsea AS. The guarantee is limited to MUSD 404. The contract is subject to standard terms
Anoma AS and DOF Subsea Angola
As a part of the Angola engagement the Group has taken over shares in Anoma AS and DOF Subsea Angola from DOF ASA. These transactions are
carried out at market conditions.
27 Remuneration to executives, board of directors and auditor
2011
Salaries
Directors' fees
Other payments
Payment from DOF Subsea
CEO
-
EVP
3 112
138
3 250
2010
SUM
3 112
138
3 250
CEO
-
EVP
2 235
158
2 393
SUM
2 235
158
2 393
EVP=Jan Nore, CEO=Mons Aase
Other payments include company phone and car, etc. Senior executives are included in the general group pension plan, cf. Note 28.
For 2011 the EVP Jan Nore held the position as EVP and CFO for DOF Subsea AS. The Group is part of the DOF ASA Group, cf. Note 19, and the CEO is entitled to a bonus of 0.5% of DOF ASA’s profit for the year. The contract with the
CEO includes a six month termination period and twelve months termination compensation. The CEO’s retirement compensation is based on 70% salary
and the retirement age is set at 67 years. Cost related to CEO Mons Aase is included with NOK 3 570 thousand in the management fee between DOF ASA
and DOF Subsea AS for 2011. Please refer to the DOF ASA annual report for further information of salary to CEO Mons Aase.
EVP Jan Nore is entitled to a bonus based on the result of the company and personal performance.
No loans have been given to or any security provided for the CEO/EVP, members of the Board of Directors, members of Group Management or other
employees or close relatives of the same group.
The Board of Directors received no fees, nor compensation in fees in 2011.
94
DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea GROUP
Specification of auditor's fee (ex VAT)
Fee for audit of financial statements
Fee for other attestation services
Fee for other tax consultancy Fee for other services
Total
Amounts in NOK 1000
2011
3 522
391
1 903
758
6 574
2010
4 830
152
1 347
304
6 633
The Board has drawn up the following statement:
The Board of Directors prepares annualy a separate statement regarding the remuneration of executives in accordance with the Norwegian Public Limited Companies Act, Almennaksjeloven § 6-16a. The following guideline is presented at the Annual General Meeting in May.
The Board has established a Compensation Committee. The responsibilities and duties of the Committee are as follows:
Statement on guidelines for setting salaries and other payments for the CEO and other senior executives of DOF Subsea ASA.
The following functions shall be the common recurring activities of the Committee in carrying out its responsibilities for establishing and reviewing
the overall compensation philosophy of the corporation. These functions should serve as a guide with the understanding that the Committee may carry
out additional functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal
or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board of Directors from time to time
related to the purposes of the Committee outlined in Section I of this Charter.
The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems
appropriate and shall have the sole authority to retain outside counsel or other experts for this purpose, including the authority to approve the fees payable to such counsel or experts and any other terms of retention.
The main principles guiding the Group’s executive remuneration policy is that senior executives shall be offered terms which are competitive in terms
of salary, benefits in kind, bonus and pension plan taken as a whole. The company offers a salary level which reflects a comparable level in equivalent companies and businesses, taking into account the company’s need for well-qualified staff in all parts of the business.
When it comes to setting salaries and other payments for senior executives, this must be in line with the principles outlined above at all times. Payments
to senior executives over and above the basic salary shall be restricted to bonuses. Any bonus to the CEO is set by the Chairman of the Board. Bonuses
to other senior executives are set by the CEO in conjunction with the Chairman of the Board. DOF Subsea ASA does not have any schemes for granting
options to purchase shares in the company or in other companies within the Group. Senior executives are members of the Group pension plan, which provides pension benefits not exceeding 12 G (G = national insurance basic amount) per year. Senior executives may have agreements concerning company cars and phones, but do not receive any other benefits in kind. In the event of termination by the company, there is no provision for senior executives to receive pay after termination of employment in excess of payment of salary for the period of notice equivalent to the number of months set down in the provisions of the Working Environment Act.
28 Pensions
As of January 1 2011, the company could no longer have two open pension solutions for their onshore and offshore staff. DOF Subsea AS made the decision to terminate its defined benefit pension plan for all employees under 52 years and substituted it with the defined contribution pension plan. All
employees, age 52 and above, actively employed on the date when the change took place, will remain a part of the defined benefit plan, whereas no new
members can be added to this pension scheme going forward. Personnel employed from 01.01.2011, will be enrolled in the new defined contribution plan,
that DOF Subsea established for its employees. As of 31 December 2011, the Group pension scheme covered a total of 206 persons. The Group’s secured
pension plan is invested with an insurance company, which manages the plan assets. The Group also has an unsecured pension plan for two former offshore and one onshore employees, which is financed via the company’s operations.The Company cost of defined contribution plan for 2011 was NOK 2 million.
DOF Subsea I Annual Report 2011
95
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Pensions, defined benefit plan
Other pension liabilities
Pension liabilities according to balance sheet
2011
7 054
182
7 236
2010
8 473
1 368
9 841
Net pension cost
Present value of pensions accrued in the period
Capital cost of previously accrued pensions
Expected return on plan assets Administrative expenses
Estimation differences recognised in income statement
Employer’s contributions for the period
Net pension cost incl. employer’s contributions for the year
3 698
732
-739
110
-2 628
421
1 594
6 829
1 163
-1 061
300
81
977
8 290
Specification of pension obligations
Estimated pension obligations
Estimated plan assets
Estimation differences not recognised in income statement
Accrued employer’s contributions
Net pension obligations at 31.12
26 885
-15 518
-5 916
1 603
7 054
35 795
-20 318
-9 186
2 182
8 473
Financial assumptions
Discount rate Expected return on plan assets Annual salary increase
Rate of pension increase
Annual adjustment to national insurance basic amount
Turnover Employer’s contributions
3,30 %
4,80 %
4,00 %
1,20 %
3,75 %
0,00 %
14,10 %
3,20 %
4,60 %
4,00 %
0,50 %
3,75 %
3,00 %
14,10 %
Net pension obligations recognised in balance sheet on 1.1 incl.employer’s contributions
Estimate differences offset against shareholders’ equity
Net pension cost for the year incl. employer’s contributions
Pension payments, unsecured, incl. employer’s contributions
Investment in plan assets, etc., incl. employer’s contributions
8 473
1 594
-3 0 13
7 304
8 290
-7 120
Net pension obligation recognised in balance sheet at 31.12 incl.employer’s contributions
7 054
8 473
35 795
4 644
-26
-13 528
26 885
26 438
7 993
-3
1 368
35 795
Reconciliation of incoming and outgoing payments
Reconciliation of pension obligations (incoming payments - outgoing payments):
Present value of accrued pension obligations at 01.01 (PBO)
Gross pension cost
Payments
Differences (changes in assumptions/experiences)
Estimated present value of accrued pension obligations at 31.12
96
DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Reconciliation of plan assets (incoming payments - outgoing payments):
Plan assets at 01.01
Expected return on plan assets
Administrative expenses
Payments
Investment in plan assets, etc.
Differences (changes in assumptions/experiences)
Estimated present value of accrued plan assets at 31.12
2011
20 318
739
-110
-26
-1 506
-3 897
15 518
Storebrand Livs Asset Mix
Property
Money Markets and similar
Bonds
Equity
Other
Total financial assets
2010
17 096
1 061
-263
-3
6 240
-3 813
20 319
31.12.11
16 %
26 %
23 %
18 %
17 %
100 %
29 Investments in subsidiaries
Subsidiary
DOF Subsea Brasil Ltda
DOF Subsea Chartering AS
DOF Subsea Pte
DOF Subsea Rederi II
DOF Subsea UK
DOF Subsea UK Holding Ltd
Geo Rederi AS
Semar AS
Anoma AS
DOF Subsea ROV Holding AS
DOF Subsea Rederi AS
DOF Subsea Norway AS
DOF Subsea ROV AS
Skandi Neptun AS
DOF Installer ASA
Geosund AS
DOF Subsea Asia/Pacific Pte
PT DOF Subsea Indonesia
DOF Subsea Australia PTY
SWG Offshore Pty Ltd
DOF Subsea Canada Corp.
DOF Subsea US Inc
CSL Ltd
CSL Norge AS
NEXUS Energy Recruitment Services Ltd
Owner
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
Geo Rederi AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
Geo Rederi AS
DOF Subsea Pte
DOF Subsea Pte
DOF Subsea Pte
DOF Subsea Pte
DOF Subsea UK
DOF Subsea UK
DOF Subsea UK Holding Ltd
DOF Subsea UK Holding Ltd
DOF Subsea UK Holding Ltd
Registered
office
Rio de Janeiro, Brasil
Bergen
Singapore
Bergen
Aberdeen, UK
Aberdeen, UK
Bergen
Oslo
Austevoll
Bergen
Bergen
Bergen
Bergen
Bergen
Austevoll
Bergen
Singapore
Singapore
Perth, Australia
Perth, Australia
St. Johns, Canada
Houston, USA
Aberdeen, UK
Bergen
Aberdeen, UK
Company's
share capital
461 924
100
100
10 335
22 403
17 400
117
2 400
100
1 405 102
112
26 400
787
33 931
100
7
6
9
100
Proportion of
ownership and votes
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
84%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
DOF Subsea I Annual Report 2011
97
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
30 Investments in associated and jointly controlled companies
2011
78 738
-19 785
4 382
63 335
2010
83 052
-4 314
Profit/loss
(-) for
the year
Sales
Booked
value of
investment
Booked value 01.01 of investments in associates
Share of profit
Other Equity movments (changes in investments, dividens, etc)
Booked value 31.12 of investments in associates
Entity
Share-holders’
Proportion
equity at
of ownership
Assets at
Liabilities at
31.12. 31.12 (100%) 31.12 (100%) 31.12 (100%)
78 738
31.12.11
Jointly controlled companies:
Doftech DA
Tecdof DA
Dofcon Brasil AS
Dofcon Navegacao Ltda
50 %
50 %
50 %
50 %
1 272 634
1 371 483
677 182
3 209 126
870 440
343 791
78 850
2 558 467
402 194
1 027 692
598 332
650 659
199 398
- - 203 472
18 544
(54 056)
(609)
(111 827)
Associated companies
DOF Subsea Angola
50 %
31 290
54 252
(22 962)
24 395
(8 044)
(18 600)
55 %
34 %
34 %
35 %
20 %
576
169 512
105 740
58 141
696 632
6 770
82 052
87 297
41 367
495 151
(6 198)
87 460
18 443
16 774
200 480
- 199 446
2 494
110 030
70 916
- 3 107
3 285
552
(8 207)
(4 300)
30 233
50 %
50 %
50 %
50 %
1 338 409
1 487 764
598 941
2 202 261
954 759
433 860
- 1 472 806
383 649
1 049 400
598 941
729 454
182 686
- - 39 404
9 224
(39 700)
9 361
77 130
34 %
34 %
20 %
45 %
250 127
95 919
555 911
90
69 156
80 671
393 898
23 967
38 316
100
149 255
600
142 465
2 241
132 802
1 021
71
1 562
(9 999)
(1 013)
DOF Subsea Congo
DOF Management
DOF Sjø*
Marin IT
Master & Commander **)
Other
5 739
49 855
408
63 335
31.12.10
Jointly controlled companies:
Doftech DA
Tecdof DA
Dofcon Brasil AS
Dofcon Navegacao Ltda
Associated companies
DOF Management
DOF Sjø*
Master & Commander
Anoma
Other
28 058
51 054
(1 127)
753
78 738
*) Value of DOF Sjø in "Value in DOF Subsea Group", is included in figures for DOF Management
**) Is based on Q2 2011(Balance) and forcast for 2011. All 50% owned companies are jointly controlled companies, except DOF Subsea Angola. All other companies in the statement above, are accoiciated companies, including DOF Subsea Angola. Booked value of investment is only relevant for associated companies. Joint venture is recognized using proportionate consolidation (note 2).
98
DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Doftech DA:
The Group is a jointly controlled company together with Technip Norge AS. Assets at 31.12 are connected to operation of the vessel Skandi Arctic. Skandi
Artic is operated by DOF Management AS.
Techdof DA, Dofcon Brasil AS, Dofcon Nacegacao Ltda
The company is a jointly controlled company with Technip Coflexip AS. Tecdof DA is 100% owner of Dofcon Brasil AS which owns 100% of Dofcon Navegacao Ltda. Dofcon Navegacao Ltda owns and operates Skandi Niteroi and Skandi Vitoira. Both vessels are on long-term contract with Petrobras in Brazil.
Skandi Niteroi went on contract with Petrobras in fourth quarter of 2011.
Dof Subsea Angola and DOF Subsea Congo
The Group is in a development phase and runs operations in Angola. DOF Subsea Group is in acquistion negotiation. Based on the situation the Group
has considered this as an investment in an associated company. As a part of DOF Subsea Angola the Group has ownership in DOF Subsea Congo. This
company is in progress to be liquidated. There are no activities in this company. The Group has no intention to run any business in this company and this
company is recognized as an investment in an associated company.
DOF Management AS And DOF Sjø AS
These are ship management companies which also delivers managment services to companies in DOF Subsea Group.(note 26).
Marin IT AS
Marin IT AS delivers IT support. DOF Subsea Group is a also a customer of Marin IT AS. The rest of the shares are owned by DOF ASA Group and Austevoll Seafood ASA.
Master & Commander AS:
The company was established on 28 of December 2006, and the company owns two vessels Oceanic Phoenix and Geowave Commander.
Figures presented are from official financial statement where Norwegian NOK is the functional currency. It is the opinion of DOF Subsea AS’ that functional currency should be USD, and for the purpose of DOF Subsea AS consolidated accounts, the financial statement has been reassessed with USD as
functional currency.
31 Contingencies
The 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 the same. 32 Events occurring after the balance sheet date
Bond loan and drawing facility
In January the Group sold NOK 200 million of the DOFSUB05 bond with maturity April 2016 and bought back bonds with a value of NOK 100 million
in DOFSUB03 with maturity July 2012. In February a new bond DOFSUB06 of NOK 700 million was issued, the Group bought back bonds with value
of NOK 87 million in DOFSUB03 with maturity July 2012 and bonds with value NOK 149 million in DOFSUB04 with maturity April 2014. The Group
established also a drawing facility of NOK 300 million with its main bank. New contracts with clients
Geosea went into a five-years contract with Petrobras 16 February 2012. DOF Subsea Pte, a company in DOF Subsea Group, entered into a one-year bareboat contract with DOF Rederi II AS for Skandi Hawk from April 2012.
The vessel has already been awarded a 70 -day job in the region.
Sale of vessel under contruction - Skandi Bergen
DOF Subsea Rederi AS, a subsidiary of DOF Subsea AS , has sold a vessel under construction, new-build bnr. 771 at STX OSV AS, to the Commonwealth
of Australia (COA). The vessel will be delivered to COA during the first part of May 2012. DOF Subsea I Annual Report 2011
99
Notes to accounts DOF Subsea GROUP
Amounts in NOK 1000
Purchase of newbuild from STX OSV
DOF Subsea Rederi AS has entered into a new-build contract with STX OSV for a Subsea Construction vessel, new-build bnr. 776 at STX OSV AS. The vessel
will be delivered 31 May 2013.
Purchase of six new ROV
The Group has entered into a contract for six new ROVs. These ROVs will be delivered in the period of March to October 2012.
33 Exchange rates used
Specification of exchange rates used
US Dollar
Euro
GBP
AUS Dollar
Brazilian Real
2011
5,9927
7,754
9,2829
6,0945
3,2096
2010
5,8361
7,8333
9,0634
5,9401
3,5026
34 Business combinations
2011 Busniess combinations
In 2011 there have been no business combinations.
2010 Busniess combinations
In April 2010 the Group made a contribution in kind toward Norskan SA with the shares in DOF Subsea Rederi AS and DOF Subsea Brasil Ltda (“IPO
Group”) and received an ownership share of 38 % in Norskan SA. The contribution was based on fair market values. The contribution was given as a plan
of listing Norskan SA on the BOVESPA Stock exchange in Sao Paulo. In September the planned listing was postponed and the asset the Group had given
as a contribution was reversed. Reversal of this transaction is an acquisition for DOF Subsea Group in 2010. The acquisition was based on fair market
values and resulted in a goodwill of MNOK 49. For the period April to September 2010, the part given as a contribution in Norskan SA (“IPO Group”) is
not a part of the consolidated number for DOF Subsea AS Group. The acquired business had revenues of MNOK 775 and net profit of MNOK 50 for 2010. Results of the group including “IPO Group” is shown in proforma figures for this group – see below. This part of the Group is included in the balance sheet
for 2010.
Reversed shares are 100% controlled by DOF Subsea Group and these companies is consolidated in DOF Subsea at 31.12.2010. The ownership is in the
process of being transferred to DOF Subsea by 31.12.2010.
In June 2010 the Group acquired 66.87 % of the shares in DOF Installer ASA from the parent company DOF Subsea Holding 2 AS. The acquisition was
based on fair market values. Based on the PPA no excess values were identified. The acquired business contributed revenues of MNOK 58 and net profit
of MNOK -1 to the Group for the period June to December 2010. At 31 December total assets from DOF Installer ASA amounted to NOK 2 309 million,
Where fixed assets amounted to NOK 2 010 million. Total liabilities to credit institutions amounted to NOK 1 283 million.
The Group has purchased 100% of SWG Offshore Pty. Ltd 1.7.2010. The company provides engineering and maintenance services to the resources and
energy sectors in Australia, the South East Asia and Africa. The company was founded in 1995 and is based in Perth, Australia with an additional office in
Singapore. The purchase price is estimated to AUD 6.4 million, whereof AUD 4 million is contingent on future performance criteria. Net assets identified
in the purchase price allocation of the company amounted to AUD 103,036. Goodwill is attributed to the employees of the company.
100 DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea GROUP
The Group`s profroma consolidated profit and loss
Operating revenue
Profit from sale of non-current assets
Total operating income
Amounts in NOK 1000
2010
3 589 959
16 409
3 606 368
Time charter vessel
Time charter vessel
Wages and salaries
Other operating expenses
Total operating expenses
- 846 394
1 665 288
2 511 682
EBITDA
1 094 687
Depreciation
Operating profit
702 590
392 097
Interest income from subsidiaries
Share of loss from associated companies
Other interest income
Other financial income
Unrealized profit on currencies
Other interest expenses
Other financial expenses
Net financial result
Pre-tax profit
Income Tax
4 870
56 280
257 773
112 861
483 796
356 762
-418 514
-26 417
28 075
Result
-54 492
DOF Subsea I Annual Report 2011
101
102 DOF Subsea I Annual Report 2011
STATEMENT OF COMPREHENSIVE INCOME
Amounts in NOK 1000
DOF Subsea AS
Operating income
Total operating income
Wages and salaries
Loss from sale of non-current assets
Operating expenses
Total operating expenses
Note
2011
2010
3,6
750 101
750 101
75 147
75 147
7, 25
11
3
97 024
123 860
209 048
429 932
27 327
67 279
94 607
320 169
-19 459
11
218 338
101 831
8 189
-27 648
8
8
8
158 270
441 297
-958 964
-359 397
500
387 468
-333 539
54 429
26 781
-22 648
49 428
Operating profit (loss) before depreciation
Depreciation
Operating profit
Income / loss from investments
Financial income
Financial expenses
Net financial income/loss
Pre-tax profit
Income Tax
9
-257 566
-105 586
Result for the period
5
-151 981
DOF Subsea I Annual Report 2011
103
STATEMENT OF FINANCIAL POSITION BALANCE
Amounts in NOK 1000
DOF Subsea AS
Note
2011
2010
9
133 945
133 945
92 434
92 434
3,11
3,11
11
11
- 16 049
31 194
- 47 244
- - 33 870
71 367
105 237
26
27
13
13
3 786 082
764 460
1 477 973
31 059
6 059 575
4 701 640
29 906
1 165 426
- 5 896 972
6 240 764
6 094 643
9 346
267 849
35 357
61 629
374 181
1 190
734 808
48 536
- 784 533
728 663
255 988
984 651
1 555
210 040
211 595
Total current assets
1 358 832
996 128
Total assets
7 599 596
7 090 771
Assets
Deferred tax benefit
Intangible assets
Vessels
ROVs
Machinery and other equipment
Newbuilds
Tangible Assets
Investments in subsidiaries
Investment in associates
Receivables from group companies
Other long term receivables
Financial assets
Total fixed assets
Trade receivables
Short-term receivables from group companies
Short-term receivables
Financial current assets
Total receivables
Restricted cash
Unrestricted cash and cash equivalents
Cash and cash equivalents
104 DOF Subsea I Annual Report 2011
14
20
15,20
15,20
16
STATEMENT OF FINANCIAL POSITION BALANCE
Amounts in NOK 1000
DOF Subsea AS
Equity and liabilities
Share capital
Other paid-in capital
Share premium fund
Paid-in capital
Note
2011
2010
10
1 197 337
2 130 486
741 438
4 069 262
1 197 337
2 130 486
741 438
4 069 262
-672 111
143 125
3 397 151
4 212 386
Retained earnings
Total equity
Pensions
Total provisions for commitments
25
2 094
2 094
1 326
1 326
Bond loans
Debt to credit institutions
Long term debt to group companies
Other long term liabilities
Total long term liabilities
18
18
18
1 294 035
632 871
1 260 000
280 944
3 467 849
1 250 000
925 000
8 762
2 183 762
12 months installments of long-term debt
Trade payables
Short term liabilities to group companies
Public duties payable
Other short term liabilities
Total short term liabilities
18
442 117
6 513
194 550
1 899
87 425
732 503
296 500
1 252
344 532
1 773
49 240
693 297
Total liabilities
4 202 446
2 878 385
Total equity and liabilities
7 599 596
7 090 771
19
Bergen, 27. April 2012
The Board of DOF Subsea AS
Helge Møgster
Chairman
Alex Townsend Krueger
Board member
Helge Singelstad
Board member
Neil John Hartley
Board member
Mons S. Aase
CEO/Board member
Hilde Drønen
Board member
James Brooks
Board member
John Mogford
Board member
DOF Subsea I Annual Report 2011
105
STATEMENT OF SHAREHOLDER'S EQUITY
Amounts in NOK 1000
DOF Subsea AS
Changes
in equity
Share
capital
Share
premium
fund
Equity at 01.01.2010
Equity issue 30.08.2010
Equity issue 07.12.2010
Profit for the year
598 669
119 734
478 935
163 356
357 017
221 065
Equity at 31.12.2010
1 197 337
741 438
Other reserves
2 130 486
2 130 486
Total
paid-in
capital
2 892 511
476 751
700 000
4 069 262
Mergers 01.01.2011
Equity at 01.01.2011
1 197 337
741 438
2 130 486
4 069 262
Hedge accounting
Profit/Loss for the year
Equity at 31.12.2011
1 197 337
741 438
2 130 486
4 069 262
Retained
earnings
93 697
Total equity
49 428
2 986 208
476 751
700 000
49 428
143 125
4 212 386
-631 265
-631 265
-488 140
3 581 121
-31 991
-151 981
-31 991
-151 981
-672 111
3 397 151
The company has merged with its subsidiaries DOFCON AS, DOF Subsea Rederi III AS, DOF Subsea Shipowning AS and Geoconsult AS with effect from 1.1.2011. DOF Subsea AS has been the acquiring company. The comparative figures have not been prepared. The cost related to the merger has been charged against profit/loss.
106 DOF Subsea I Annual Report 2011
STATEMENT OF CASHFLOW
Amounts in NOK 1000
DOF Subsea AS
2011
(257 567)
- 218 338
50 081
123 860
- 3 287
160 578
(44 848)
768
43 034
(183 713)
(1 413)
112 405
2010
26 781
72
8 189
- (112 085)
- 1 496
(3 361)
695
(51 305)
(31 893)
(3 587)
(164 998)
5 781 754
(1 701 561)
- 454 310
(1 612 615)
609 771
- 3 531 659
6 297
- (53 912)
1 189 579
(2 583 167)
(673 466)
678 656
(1 436 013)
- - 1 265 258
(4 992 298)
223 982
- (3 503 058)
750 000
(717 945)
296 500
(205 500)
308 406
1 176 750
1 608 211
Net change in cash and cash equivalents
141 006
7 200
Cash and cash equivalents at the beginning of the period
211 596
204 395
Cash and Cash equivalents, merger effect
632 049
-
Cash and cash equivalents at the end of the period
984 651
211 595
Profit before tax
Taxes paid in the period
Depreciation
Write down
Gain/loss sold vessel
Gain/loss sold shares Change in bunkers and provisions
Change in accounts receivables
Change in accounts payables
Change in pension liabilities
Changes in other accruals Unrealized gain/loss financial assets
Unrealized foreign exchange gain/loss
Cash from operating activities
Sale of tangible assets
Purchase of tangible assets
Purchases of intangible assets
Proceeds from sale of shares
Investments in shares
Change in intercompany receivables/debt
Change in other long term receivables
Cash from investing activities
Proceeds from non-current liabilities
Installments on non-current liabilities
Proceeds from current liabilities to credit institutions
Installments on current liabilities to credit institutions
Change in intercompany debt
Paid-in capital
Cash from financing activities
DOF Subsea I Annual Report 2011
107
Notes to accounts DOF Subsea AS
1 Corporate information
DOF Subsea AS (the Company) is a limited liability company registered in
Norway. The Company’s head office is located at Thormøhlensgate 53 C,
5006 Bergen, Norway.
The Company is owned by DOF Subsea Holding 2 AS, a company jointly
owned by DOF ASA and First Reserve Corporation, through DOF Subsea
Holding AS. DOF ASA holds 51% ownership stake, and First Reserve Corporation holds 49% ownership stake, and the Company is still considered
as a subsidiary of DOF ASA.
The Company and its subsidiaries (The Group) provides vessel chartering, survey, subsea construction and engineering to the global oil and
oil-service companies. The core business is project management, engineering, vessel chartering, survey and diving operations.
The Company, through its subsidiaries, owns a large, modern fleet that
enables us to offer differentiated services to our clients and create long
term relationships, which enhance service delivery and reduce overall
risk.
The Board of Directors approved the financial statements for publication
on 27th of April , 2012.
As of January 1st, 2011, four subsidiaries of DOF Subsea Group were
merged into DOF Subsea AS. Further information on the mergers is disclosed in Note 3. The Company's operations are described in Note 4.
2 Accounting policies Summary of significant accounting principles
The financial statements of the Company have been prepared in accordance with the Norwegian accounting act § 3-9 and Finance Ministry’s
prescribed regulations from January 21, 2008 on simplified IFRS. Principally this means that recognition and measurement complies with
International accounting standards (IFRS) and presentation and note
disclosures are in accordance with the Norwegian accounting act and
generally accepted accounting principles. The financial statements have
been prepared in accordance with the historical cost convention with
the following exceptions: available-for-sale financial assets and financial
instruments at fair value through profit or loss are subsequently carried
at fair value.
The fiscal year is the same as the calendar year.
Investments in subsidiaries, joint venture and associates
Investments are based on the cost method. Dividends
Dividends and Group contributions are accounted for according to good
accounting practice as an excemption from IFRS. Segment reporting
The Company’s primary reporting format is determined by business segment, and the Company operates within two business segments:
108 DOF Subsea I Annual Report 2011
Amounts in NOK 1000
1) Vessel Chartering
2) Management and other services
The Company’s business is reported in the following geographical areas:
Europe/West Africa, Australia and Asia and America.
For further information, reference is made to the consolidated accounts.
3 Merger information
In 2011 the company has merged with its subsidiaries DOFCON AS, DOF
Subsea Rederi III AS, DOF Subsea Shipowning AS and Geoconsult AS
with effect from 1.1.2011, and DOF Subsea AS has been the acquiring
company. The merger has been carried out with the accounting and fiscal
corporate continuity. See also note 1. The company became a shipowning
company as of January 1st, which effected operation and financial revenues
and expenses. All vessels and related equipment were sold to subsidiaries
in the course of 2011. As a part of settlement, related to the sales of the
vessels, the debt, primarily related to the vessels, was transferred to vessel
buying company, DOF Subsea Rederi AS. See Note 6, 8 and 11 for details
on profit and loss effects from the mergers.
4 Financial risk management
The company's activities entail various kinds of financial risk: market risk
(including foreign exchange risk, actual interest rate risk, floating rate risk and price risk), credit risk and liquidity risk. The company's governing
risk management strategy focuses on the predictability of the capital markets and seeks to minimize the potential negative effects of the company's
financial results. The company uses financial derivatives to hedge against
certain types of risk. The company's risk management is exercised in line
with guidelines approved by the Board of Directors. Accordingly, financial
risk is identified, evaluated and hedged. The board issues written principles for the governing risk management strategy and sets out written
guidelines for specific areas such as the foreign exchange risk, interest
risk, credit risk, use of financial derivatives and other financial instruments, as well as investment of surplus liquidity. The Company does not
have any direct exposure to changes in raw material prices.
Financial instruments
The Company does not use financial instruments linked to ordinary activities such as trade receivables, trade payables and similar. Neither does
the Company use financial instruments to manage the financial risk relating to long-term financing, with the exception of some of the Company’s
loans being denominated in foreign currencies.
Foreign exchange risk
As a result of its international operations, the Company is exposed to
changes in exchange rates. The Company’s overall objective is to protect
the economic NOK value of its free cash flow from adverse developments
in future currency rates. This is handled by means of natural hedging and
the use of foreign exchange derivatives. When implementing the foreign
exchange hedging the Company differentiates between committed and
uncommitted exposure by having a higher hedge ratio on what is considered
committed exposure. Notes to accounts DOF Subsea AS
The majority of the Company’s turnover is in foreign currencies, and
mainly relates to USD, GBP and to some extent also AUD. A substantial
portion of expenses are in the same currency as revenues, but a greater
proportion of expenses payable is denominated in NOK. By focusing on natural hedging the Company seeks to reduce its exposure
to changes in exchange rates naturally by achieving the best possible balance between ingoing and outgoing payments in the same currency. This
also implies that efforts are made to match revenues in one particular
currency with financing in the same currency. The remaining exposure is
addressed by means of forward contracts at acceptable exchange rates.
Interest risk
The Company’s debt portfolio is a subject to the fixed interest rate . This
implies that the Company is taking advantage of the global low interest
rate regime, but at the same time the Company is exposed to future interest
rate changes. The Company’s debt is denominated in NOK. The Company evaluates the mix of fixed vs. floating rate debt on an ongoing basis. The Company has no interest earning assets of significance.
Credit risk
Maximum credit exposure arises on the values of financial assets recognized in the balance sheet. The Company’s trade receivables mainly
relate to major international oil companies and other major international
players. The Company has guidelines for monitoring and recovering trade
receivables. The counterparty for pension plan assets is a Norwegian
insurance company. Historically, losses on trade receivables have been extremely small, and
credit risk is considered low. The forward contracts are entered into with banks, and the risk associated
with these is considered negligible. The same applies to bank deposits.
Accordingly, the value of trade receivables recognized in the balance sheet
is considered to represent the maximum credit risk. Liquidity risk
The Company’s strategy is to have sufficient cash or credit facilities available at all times, not only to finance ongoing operations and planned
investments but also to be able to make rapid purchases/acquisitions of
vessels/businesses. The Company considers it likely that it will continue
to renew existing loan agreements as they fall due, or negotiate alternative financing solutions. Surplus liquidity is deposited in banks at the best
possible terms.
Fair values
Fair value of forward exchange contracts is calculated based on the midpoint
of the relevant yield curve.
Amounts in NOK 1000
5 Accounting estimates and assessments
Valuations, estimates and assumptions with a significant effect on the
financial statements are summarized below:
Vessels
The carrying amount of the Group’s ships represents 68% of the balance
sheet total. Policies and estimates linked to the ships have a significant
impact on the Group’s financial statements. In the current market the
fair value of the Group’s vessels is significantly higher than the carrying
amount. Irrespective of fair value, the vessels are depreciated according
to a fixed depreciation schedule.
Useful life of vessels
The level of depreciation depends on the ships’ estimated useful lives.
Estimated useful life is based on strategy, past experience and knowledge
of the types of ship the company owns. Useful life of older ships is individually assessed. There will always be a certain risk of events like breakdown, obsoleteness e.g. with older ships, which may result in a shorter
useful life than estimated. From time to time the company may own older
vessels, the depreciation rate will then be estimated individually.
Residual value of vessels
The level of depreciation also 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 and scrap values.
Market developments will determine prices for used vessels, the price of
steel and disposal costs will determine the future scrap value. In 2010 the
estimated residual value of vessels is 50% of the hull’s historic cost.
Useful life of investments at time of going into dock
Investments made in connection with periodic maintenance are depreciated until the vessel next goes into dock. The interval until the vessel next
goes into dock is estimated and used to calculate depreciation. Intervals
are calculated on the basis of past experience.
Indication of impairment
Assessments are made to determine whether the need for a write-down is
indicated. If there are such indications, recoverable amount is estimated
and the booked value is brought into line with the recoverable amount.
See Note 7.
Deferred tax assets
Deferred tax assets are recognized in the balance sheet on the basis of utilization of tax-loss carry-forwards by reversing tax-increasing temporary
differences and future earnings. See also Note 15.
Liabilities to credit institutions, trade payables, other current/non-current
liabilities, trade receivables and other bank deposits, cash and similar
trade receivables are calculated using the exchange rate prevailing at the
balance sheet date.
DOF Subsea I Annual Report 2011
109
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
6 Revenue and Segment information
The Company has divided its activities in two, Vessel Chartering and Group management and other services. The company became a shipowning company as of January 1st, as the companies DOFCON AS, DOF Subsea Rederi III AS, DOF Subsea Shipowning AS and Geoconsult AS were merged into the Company. All vessels were sold to subsidiaries during the year. Revenues related to Vessel Chartering is thus referring to revenues earned from January 1st until time of disposal.
For segmentation of revenues on geographical areas reference is made to the Group accounts.
Operating Revenues
Vessel chartering
Group management and other services
Total Revenues
2011
687 310
62 791
750 101
2010
0
75 147
75 147
2011
23 451
63 639
3 931
2 123
3 881
97 024
24
2010
18 085
4 496
2 195
2 551
27 327
22
7 Salaries and number of employees
Wages and salaries
Salaries and holiday pay
Contract labour Employer’s contributions
Pension costs
Other staff costs
Total
Average number of employees
Number of employees is calculated based on average number of full time employee equivalents. The number of employees does not include the vessel
related personnel which is a part of contract labour.
As the company has operations within vessel chartering during the year, personnel related expenses has been charged as contract labour expenses. Refer
to the table above.
8 Financial income and expenses
Financial income and expenses
Income on investments in subsidiaries
Income on investments in associated companies
Interest income group companies
Other interest income
Other financial income
Financial income
2011
155 386
2 884
123 748
144 558
172 991
599 567
2010
500
49 084
11 768
326 616
387 968
Interest expenses
Interest expenses payable to Group Companies, incl. DOF ASA Group
Write-down investments in subsidiaries
Changes in market value of derivatives
Other financial expenses
Financial expenses
-484 295
-71 923
-44 198
-186 390
-172 157
-958 964
-123 913
-65 973
28 313
-171 965
-333 539
Net financial items
-359 397
54 429
110 DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
9 Tax
The income tax expense comprises:
Tax payable, Norway
Prior year adjustments
Tax payable do to changes to the taxation of Norwegian shipping companies
Tax payable, other countries
Change in deferred tax, Norway
Change in deferred tax, other countries
Income tax expense
(105 586)
2010
- - - 442
(23 090)
- (22 648)
(257 567)
(72 119)
(33 467)
26 871
7 499
(30 147)
Explanation of why the actual and expected income tax expense differ
Tax effect of non-deductible expenses
Tax effect of write-down financial assets
Tax effect from tax exemption method (sale of shares)
Tax effect from items not included in deferred tax
Estimation differences, previous years
Effect of shipping company taxation
Difference between foreign and Norwegian tax rates
Difference from expected income tax expense
30
12 376
(46 593)
- 720
- - (33 467)
10
- 30 578
- 72
- (513)
30 147
Basis for deferred tax:
Non-current assets
Current assets
Liabilities
Gain/loss account
Differences related to participation interest
Other differences
Total temporary differences
389
(181 389)
(35 641)
228 092
161 138
15 771
188 360
47 547
26 010
(1 326)
- - - 72 231
52 741
(666 736)
(478 376)
(133 945)
20 225
(402 351)
(330 120)
(92 434)
2011
(135 718)
119 733 714
119 733 714
(1,13)
(1,13)
2010
(149 049)
119 733 714
119 733 714
(1,24)
(1,24)
Reconciliation of nominal and effective tax rate:
Profit before tax
Expected income tax expense (28%)
Difference between actual and expected income tax expense
Deferred tax (-) / tax assets (28-30%)
Tax-loss carry-forward
Basis for calculating deferred tax (-) / tax assets
Total deferred tax / tax assets (-)
2011
- - - - (105 586)
10 Earnings per share
Group: Basis for calculating earnings per share
Profit for the year attributable to shareholders of the parent company
Weighted average number of outstanding shares
Weighted average number of outstanding shares, diluted
Earnings per share
Earnings per share, diluted
DOF Subsea I Annual Report 2011
111
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
11 Tangible assets
2011
Cost at 31.12 prior year
Merged companies
Cost at 01.01
Additions
Disposals
Reallocation
Cost at 31.12
Depreciation at 31.12 prior year
Merged companies
Depreciation at 01.01
Depreciation for the year
Depreciation eliminated on disposals
Depreciation at 31.12
Book value at 31.12
Asset lifetime (years)
Depreciation schedule
Vessels
Periodical
maintenance
ROV's
4 459 083
4 459 083
1 535 587
(6 014 647)
19 977
260 964
260 964
188 771
(449 735)
20
*)
31 613
31 613
18
(31 631)
- 12 102
12 102
6 320
(18 421)
2,5-5
Linear 7 666
7 666
84 581
(92 247)
16 049
16 049
367
367
2 045
(2 412)
16 049
15
Linear Machinery
& other
equipments
49 105
169 490
218 595
32 920
(193 648)
223
58 090
15 235
11 968
27 203
21 202
(21 509)
26 896
31 195
5-15
Linear Newbuilds
71 367
14 714
86 081
48 455
(98 287)
(36 249)
- - - Not applicable Total
120 472
4 682 565
4 803 037
1 701 562
(6 430 459)
- 74 139
15 235
285 400
300 635
218 338
(492 078)
26 896
47 244
Machinery
& other
equipments
47 410
8 368
(6 673)
49 105
7 422
8 189
(376)
15 235
33 870
5-15
Linear Newbuilds
25 822
45 545
- 71 367
- - 71 367
Not applicable Total
73 232
53 913
(6 673)
120 472
7 422
8 189
(376)
15 235
105 237
*) residual value varies based on market valuation of the vessel
2010
Cost at 01.01
Additions
Disposals
Cost at 31.12
Depreciation at 01.01
Depreciation for the year
Depreciation eliminated on disposals
Depreciation at 31.12
Book value at 31.12
Asset lifetime (years)
Depreciation schedule
Periodical
maintenance
- - Vessels
- - -
- - 20
*)
ROV's
- - -
- - 2,5-5
Linear - - 15
Linear *) residual value varies based on market valuation of the vessel
12 Leases
Operating leases:
The Company does not have any significant agreements concerning leasing of property, plant and equipment which are not recognized in the balance
sheet. The lease on the head office is discussed in Note 24 Related parties.
Finance leases:
The Company’s assets held under finance leases are ROVs, that have been sold in January 2012 to DOF Subsea ROV AS. The transaction was carried out at
the market price. The assets held under finance leases are as follows:
Finance leases
ROVs
Total cost
112 DOF Subsea I Annual Report 2011
2011
16 048
16 048
2010
16 048
16 048
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
13 Other non-current receivables
Intra-group non-current receivables
Other non-current receivables
Non-current receivables at 31.12
2011
1 477 973
31 059
1 509 032
2010
1 165 426
- 1 165 426
2011
9 099
248
9 346
2010
1 190
- 1 190
2011
19 875
- 801
14 587
61 629
95
96 986
2010
7 884
1 930
364
- 31 893
6 465
48 536
2011
728 663
255 988
984 651
2010
1 555
210 040
211 595
14 Trade receivable
Trade receivables at nominal value
Provision for bad debts
Trade receivables at 31.12
15 Other current receivables
Government taxes receivable
Loan to employees
Prepaid expenses
Accrued interest income
Financial instruments
Other current receivables
Other current receivables at 31.12
16 Cash and cash equivalents
Restricted deposits*
Bank deposits
Cash and cash equivalents including restricted deposits at 31.12
* A long-term loan has been provided by Eksportfinans and is invested as a restricted deposit in DnBNOR. The repayment terms on the loan and interests
from Eksportfinans is equivalent with the reduction on the deposit and interests. The loan will be fully repaid in 2020. The cash deposit is included in
Restricted deposits with MNOK 727. 17 Share capital and share information
Share capital:
The share capital in the Company at 31.12.2011 was NOK 1 197 million comprising 119,733,714 shares, each with a nominal value of NOK 10.00.
There has not been any changes in Share capital during 2011.
Shareholder overview: At 31 December 2011 the shareholders in the Company (no shares owned by senior executives or board members, including
share ownership via close relatives and companies) were as follows:
DOF Subsea I Annual Report 2011
113
Notes to accounts DOF Subsea AS
Shareholders at 31.12.2011/31.12.2010
DOF Subsea Holding 2 AS
Total
Amounts in NOK 1000
No. of shares
119 733 714
119 733 714
Board of directors
Helge Møgster
Helge Singelstad
Mons S. Aase
Hilde Drønen
Alex Townsend Krueger
Neil John Hartley
William Brown
Proportion of
ownership
100,00 %
100,00 %
Title
Chairman
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Management group
Mons Svendal Aase
Jan Nore
Share capital
Share capital 01.01.2011
Share capital 31.12.2011
Title
CEO
CFO/EVP
No. of shares
119 733 714
Share capital
1 197 337
119 733 714
1 197 337
18 Non-current liabilities
Bond loan (ISIN NO 0010607377)
On 29 April 2011, the Company issued a new bond (non-convertible) of NOK 750m, all of which falls due on 29 April 2016. The trustee on behalf of the
bond holders is Norsk Tillitsmann ASA, while the account manager is Nordea Bank Norge ASA. The bond loan has a floating interest rate, three months
NIBOR + 550 bp, subject to rate adjustment on 29 January, 29 April, 29 July and 29 October. Interests fall due for payment on the interest adjustment
dates. At 31 December 2011, the rate of interest was 8.63%. No particular security has been provided for the loan. The Company is free to acquire its own
bonds.
Non-current liabilities to credit institutions
The Group's long-term financing agreements include the following covenants:
- The Group shall have available cash of at least MNOK 400-500 at all times.
- The Group shall have value adjusted equity to value adjusted assets of at least 25-30%.
- The Group shall have equity of at least MNOK 3000 at all times. - The Group shall have positive working capital at all times.
- The fair value of the Group's ships shall always be at least 100% of the outstanding amount.
In addition to the above-mentioned financial covenants, the loan agreements are also subject to the following conditions:
- The Group's assets shall be fully insured.
- There shall not be any change to classification, management or ownership of the ships without the prior written approval of the banks. - DOF ASA shall be the principal shareholder in DOF Subsea AS, and own a minimum of 50% of the shares.
- DOF Subsea AS shall not merge, demerge or divest activities without the prior written approval of the banks.
- DOF Subsea AS shall report financial information to the banks on a regular basis.
- The Group's ships shall be operated in accordance with current laws and regulations.
The Group has complied with the loan terms set by the banks throughout the term of the loan.
114 DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
Non-current liabilities
Bond loan, floating rate
Unsecured loan, floating rate
Loan from associated subsidiaries and parents
Mortgage debt
Lease debt
Taxes payable
Other non-current liabilities
Total non-current liabilities
First year's repayment of non-current liabilities
Non-current liabilities excluding first year's repayements
Bond loans
Repayments
Balloon
Total bond loans
Loan from associated
subsidiaries and parents
Repayments
Debt to financial institutions
Repayments
Balloon
Total
Lease debts
Repayments
Balloon
Total
Effective
interest rate
31.12.2011
10,55 %
31.12.11
1 649 535
31.12.10
1 529 910
5,12 %
4,45 %
3,89 %
1 260 000
717 254
6 276
925 000
8 425
0,00 %
276 902
3 909 966
442 117
3 467 849
337
2 463 672
296 500
2 167 172
2012
2013
2014
2015
2016
Thereafter
Total
355 500
355 500
-
750 000
750 000
-
544 035
544 035
-
1 649 535
1 649 535
2012
-
2013
100 000
2014
1 160 000
2015
-
2016
-
Thereafter
-
Total
1 260 000
2012
84 383
2013
84 383
2014
84 383
2015
84 383
2016
84 383
Thereafter
295 337
Total
717 254
84 383
84 383
84 383
84 383
84 383
295 337
717 254
2012
2 234
2013
2 322
2014
1 720
2015
-
2016
-
Thereafter
-
Total
6 276
2 234
2 322
1 720
-
-
-
6 276
2011
19 955
49 118
13 476
4 875
87 425
2010
2 574
46 613
52
49 240
19 Other current liabilities
Specification of other current liabilities
Accrued expenses and prepaid income
Accrued interest expenses
Current liabilities to group companies
Short term part, non-interest bearing
Other current liabilities
Current liabilities at 31.12
DOF Subsea I Annual Report 2011
115
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
20 Categories of financial assets and financial liabilities
31.12.11
Assets
Financial assets
Accounts receivable
Other current assets
Derivatives
Cash and cash equivalents (incl. restricted deposits)
Total Financial assets
Held for
trading in
accordance with
IAS39
Loans and Receivables
Loans and Receivables
6 059 575
10 772
292 434
6 059 575
10 772
292 434
61 629
984 651
7 409 061
61 629
61 629
984 651
7 347 432
Liabilities
Long-term financial liabilities int. bearing
Financial leasing
Provisions
Short-term financial liabilities int. bearing
Derivatives
Accounts payable
Other current financial liabilities
Total Financial liabilities
Total
3 186 905
4 042
33 884
442 117
243 018
6 684
275 494
4 192 145
3 186 905
4 042
33 884
442 117
243 018
6 684
275 494
4 192 145
21 Determination of fair value
The fair value of financial assets classified as "available for sale” and "financial assets at fair value through profit or loss” is determined by reference to
published price quotations in an active market. For unquoted financial assets the fair value has been estimated using a valuation technique based on
assumptions that are not supported by observable market prices.
The fair value of forward exchange contracts is determined using the forward exchange rate at the balance sheet date. The fair value of currency swaps
is determined by the present value of future cash flows. The fair value of options is determined using option pricing models. For all the above mentioned
derivatives, the fair value is confirmed by the financial institution with which the Company has entered into the contracts.
The following of the Company's financial instruments are not measured at fair value: cash and cash equivalents, trade receivables, other current receivables, overdraft facilities, long-term debts and “hold-to-maturity” investments.
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.
Fair value of interest-bearing debt is disclosed face value of the bank loans and nominal value of bonds.
Set out below is a comparison by category of carrying amounts and fair values of all of the Company's financial instruments.
116 DOF Subsea I Annual Report 2011
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
2011
2010
Book value
Fair value
Book value
Fair value
984 651
10 772
5 368 496
61 629
984 651
10 772
5 368 496
61 629
211 595
1 190
6 468 720
31 893
211 595
1 190
6 468 720
31 893
87 629
243 018
87 629
243 018
52 265
1 044
52 265
1 044
3 626 788
6 276
3 568 599
6 276
2 471 500
8 395
2 471 500
8 395
Amounts
in TNOK
16 048
122 873
59 135
Due date
2012
2012
2012
Currency
purchased
BRL
NOK
NOK
Currency sold
USD
GBP
USD
Fair market
value
-461
-1 106
-812
283 128
659 197
29 964
283 128
659 197
29 963
2012
2012
2012
2012
2012
2012
NOK
NOK
BRL
NOK
NOK
BRL
GBP
USD
USD
GBP
USD
USD
4 894
12 583
395
-8 364
-15 409
-612
Amounts
in TNOK
Due date
Currency
Swap to
Fair market
value
2 486 250
1 202 285
2014-2016
2016
NOK
USD
Fixed
Fixed
-68 982
-49 071
1 000 000
299 635
2013
2012
NOK
USD
Fixed
Fixed
-45 354
-9 091
Financial assets
Cash and cash equivalents (incl. restricted deposits)
Trade receivables
Other non-current assets including shares
Derivatives
Financial liabilities
Trade and other payables
Derivatives
Interest bearing loans and borrowing
Bank loan and other interest bearing loan
Obligations under finance leases and hire purchase contracts
22 Hedging activities Forward contracts at fair value over result
FX Forward
FX Forward
FX Forward
Currency option
Bought put option
Bought put option
Bought put option
Sold call option
Sold call option
Sold call option
Interest swap
Interest swap
Interest swap
Interest options
Interest swaption
Interest swaption
Here of classified as financial current assets
Here of classified as provisions for commitments
61 629
243 018
DOF Subsea I Annual Report 2011
117
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
23 Related parties
Detailed description of related parties and the Group’s relationship to these.
DOF ASA is the majority shareholder in DOF Subsea Holding AS with a 51% holding at year end. DOF Subsea AS is 100% owned by DOF Subsea Holding
2 AS, in turn owned 100% by DOF Subsea Holding AS. First Reserve Corporation holds the minority share of 49 % in DOF Subsea Holding AS.
Purchase of management services.
DOF Subsea AS purchased management services from DOF Management AS for its entire fleet. The average management fee this year is NOK 3.5 million
per vessel and included technical operation, crewing, freighting and management accountancy. DOF Management AS is owned 66% by DOF ASA and 34%
by DOF Subsea AS.
Rental of office space.
Part of the office space located at Thormøhlensgate 53 C, 5006 Bergen, rented by DOF Subsea AS, is used by DOF Management AS. The rental fee allocated to DOF Management AS, to be paid to the Company is determined at NOK 0.45 m per quarter.
Leasing of premises.
The Company leases two cottages from Moco Eiendom AS, a company 100% owned by CEO Mons S. Aase. The total leasing cost in 2011 has been NOK 0,3
million.
Loan financing.
The Company has borrowed MNOK 100 from DOF ASA. This contract is subject to standard terms. Guarantee Agreement between DOF ASA and the Company.
Debt Guarantee for subsidiaries. DOF Subsea AS, as a parent company, entered into guarantee agreements with its subsidiaries. The Company provides parent guarantees for the long term obligation of its subsidiaries to the credit institutions. The Company has in June 2010 entered into a guarantee agreement with DOF ASA. DOF ASA has provided a parent company guarantee for obligations of DOFCON Navegacao Ltda, a joint venture company of DOF
Subsea AS. The guarantee is limited to MUSD 404. The contract is subject to standard terms.
Anoma AS and DOF Subsea Angola.
AS a part of the Angola engagement , the Company has taken over shares in Anoma AS and DOF Subsea Angola from DOF ASA. These transactions are
carried out at market conditions.
24 Remuneration to executives, board of directors and auditor
The Company is part of the DOF ASA Group, and the CEO is entitled to a bonus of 0.5% of DOF ASA’s profit for the year. The contract with the CEO
includes a 6 month termination period and 12 months termination compensation. The CEO’s retirement compensation is based on 70% salary and the
retirement age is set at 67 years. Cost related to CEO Mons Aase is included in the management fee between DOF ASA and DOF Subsea AS.
Please refer to the DOF ASA annual report for further information of salary to CEO Mons Aase.
EVP Jan Nore is entitled to a bonus based on the result of the company and personal performance.
No loans have been given to or any security provided for the CEO, members of the Board of Directors, members of Group Management or other employees or
close relatives of the same.
The Board of Directors received no fees, nor compensation in fees in 2011.
Specification of auditor's fee
Fee for audit of financial statements
Fee for other attestation services
Fee for other tax consultancy Fee for other services
118 DOF Subsea I Annual Report 2011
2011
1 333
175
62
68
2010
1 383
80
273
92
Notes to accounts DOF Subsea AS
Total
Amounts in NOK 1000
1 638
1 828
25 Pensions
As of January 1, 2011, the Company could no longer have two open pension solutions for their onshore and offshore staff. DOF Subsea AS made the decision to terminate its defined benefit pension plan for all employees under 52 years and substituted it with the defined contribution pension plan.
All employees, age 52 and above, actively employed on the date when the change took place, will remain a part of the defined benefit plan, whereas no
new members can be added to this pension scheme going forward. Personnel employed from 01.01.2011, will be enrolled in the new defined contribution
plan, that DOF Subsea established for its employees. As of December 31, 2011, the company pension scheme covered a total of 24 persons. The company’s
secured pension plan is invested with an insurance company, which manages the plan assets. The company also has an unsecured pension plan for one
former offshore and one onshore employee, which is financed via the company’s operations. The company cost of defined contribution plan for 2011 was TNOK 1248.
2011
2 094
2010
1 326
2 094
1 326
Net pension cost
Present value of pensions accrued in the period
Capital cost of previously accrued pensions
Expected return on plan assets Administrative expenses
Estimation differences recognized in income statement
Employer’s contributions for the period
Net pension cost incl. employer’s contributions for the year
2011
1 143
86
-76
-326
48
875
2010
2 112
115
-124
33
29
297
2 462
Specification of pension obligations:
Estimated pension obligations
Estimated plan assets
Estimation differences not recognized in income statement
Accrued employer’s contributions
Net pension obligations at 31.12
2011
3 780
-1 631
-358
303
2 094
2010
4 473
-2 618
-791
262
1 326
2011
3,30 %
4,80 %
4,00 %
1,20 %
3,75 %
0,00 %
14,10 %
2010
3,20 %
4,60 %
4,00 %
0,50 %
3,75 %
3,00 %
14,10 %
2011
1 326
877
-109
2010
846
2 462
-404
-1 578
Pension, defined benefit plan
Other pension liabilities
Pension liabilities according to balance sheet
Financial assumptions:
Discount rate Expected return on plan assets Annual salary increase
Rate of pension increase
Annual adjustment to national insurance basic amount
Turnover Employer’s contributions
Reconciliation of incoming and outgoing payments
Net pension obligations recognized in balance sheet on 1.1 incl.employer’s contributions
Estimate differences offset against shareholders’ equity
Net pension cost for the year incl. employer’s contributions
Pension payments, unsecured, incl. employer’s contributions
Investment in plan assets, etc., incl. employer’s contributions
DOF Subsea I Annual Report 2011
119
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
Net pension obligation recognized in balance sheet at 31.12 incl.employer’s contributions
2 094
1 326
Reconciliation of pension obligations (incoming payments - outgoing payments):
Present value of accrued pension obligations at 01.01 (PBO)
Gross pension cost
Payments
Differences (changes in assumptions/experiences)
Estimated present value of accrued pension obligations at 31.12
2011
4 735
1 278
96
-2 026
4 083
2010
3 446
2 227
-1 200
4 473
Reconciliation of plan assets (incoming payments - outgoing payments):
Plan assets at 01.01
Expected return on plan assets
Administrative expenses
Payments
Investment in plan assets, etc.
Differences (changes in assumptions/experiences)
Estimated present value of accrued plan assets at 31.12
2011
2 618
76
96
-1 039
-119
1 632
2010
1 980
124
-29
1 383
-839
2 618
Storebrand Livs Asset Mix
Money Markets
Bonds
Property
Equity
Other
Total financial assets
2011
26 %
23 %
16 %
18 %
17 %
100 %
2010
19 %
50 %
16 %
15 %
0%
100 %
26 Investments in subsidiaries
Subsidiary
DOF Subsea Brasil Ltda
DOF Subsea Chartering AS
DOF Subsea Pte
DOF Subsea Rederi II
DOF Subsea UK
DOF Subsea UK Holding Ltd
Geo Rederi AS
Semar AS
Anoma AS
DOF Subsea ROV Holding AS
DOF Subsea Rederi AS
DOF Subsea Norway AS
DOF Subsea ROV AS
Skandi Neptun AS
DOF Installer ASA
120 DOF Subsea I Annual Report 2011
Owner
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
DOF Subsea AS
Registered office
Rio de Janeiro, Brasil
Bergen
Singapore
Bergen
Aberdeen, UK
Aberdeen, UK
Bergen
Oslo
Austevoll
Bergen
Bergen
Bergen
Bergen
Bergen
Austevoll
Company's share capital
461 924
100
- 100
10 335
22 403
17 400
117
2 400
100
1 405 102
112
26 400
787
33 931
Proportion of
ownership and votes
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
84%
Notes to accounts DOF Subsea AS
Amounts in NOK 1000
27 Investments in associated and jointly controlled companies
Entity
Proportion
of ownership
31.12.
Assets at
31.12 (100%)
50 %
50 %
34 %
34 %
35 %
20 %
1 272 634
1 371 483
169 512
105 740
58 141
696 632
31.12.11
Doftech DA
Tecdof DA
DOF Management
DOF Sjø
Marin IT
Master & Commander
Share-holders’
Liabilities at equity at 31.12
(100%)
31.12 (100%)
870 440
343 791
82 052
87 297
41 367
495 151
402 194
1 027 692
87 460
18 443
16 774
200 480
Sales
Profit/loss
Booked value of
investment
199 398
- 199 446
2 494
110 030
70 916
18 544
(54 056)
3 107
3 285
552
(8 207)
175 000
538 308
15 770
- 5 600
29 783
Total
764 461
28 Contingencies
The Company 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 the same. 29 Events occurring after the balance sheet date
Bond loan and drawing facility
In January the company sold NOK 200 million of the DOFSUB05 bond with maturity April 2016 and bought back bonds with value of NOK 100 million
in DOFSUB03 with maturity July 2012. In February a new bond DOFSUB06 of NOK 700 million was issued, the company bought back bonds with value
of NOK 87 million in DOFSUB03 with maturity July 2012 and bonds with value NOK 149 million in DOFSUB04 with maturity April 2014. The company
established also a drawing facility of NOK 300 million with its main bank. 30 Exchange rates used
Specification of exchange rates used
US Dollar
Euro
2011
5,9927
7,754
2010
5,8361
7,8333
GBP
AUS Dollar
9,2829
6,0945
3,2096
9,0634
5,9401
3,5026
DOF Subsea I Annual Report 2011
121
Confirmation from The Board of Directors and CEO
We confirm, to the best of our knowledge, that the financial statements for the period from
1 January to 31 December 2011 have been prepared in accordance with approved accounting
standards, and give 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.
Bergen, 27. April 2012
The Board of DOF Subsea AS
Helge Møgster
Chairman
Alex Townsend Krueger
Board member
122 DOF Subsea I Annual Report 2011
Helge Singelstad
Board member
Neil John Hartley
Board member
Mons S. Aase
CEO/Board member
Hilde Drønen
Board member
James Brooks
Board member
John Mogford
Board member
DOF Subsea I Annual Report 2011
123
124 DOF Subsea I Annual Report 2011
DOF Subsea I Annual Report 2011
125
NORWAY:
UNITED KINGDOM:
BRAzIL:
DOF Subsea AS
DOF (UK) Ltd
NorSkan Offshore Ltda
Phone: +47 55 25 22 00
Fax: +47 55 25 22 01
Email: info@dofsubsea.com
Phone: +44 12 24 58 66 44
Fax: +44 12 24 58 65 55
Email: info@dofman.co.uk
Phone: +55 21 21 03 57 00
Fax: +55 21 21 03 57 07
Email: office@norskan.com.br
Address: Thormøhlensgate 53 C
5006 Bergen, NORWAY
Address: Voyager House, 75 Waterloo Quay
Aberdeen AB11 5 DE, UNITED KINGDOM
DOF Subsea Norway AS
DOF Subsea UK Ltd
Address: Rua Lauro Müller, 116 - Salas 2802 a 2805
Torre do Rio Sul
22290-160 Botafogo
Rio de Janeiro, R.J. BRAZIL
Phone: +47 55 25 22 00
Fax: +47 55 25 22 01
Email: info@dofsubsea.com
Phone: +44 1224 614 000
Fax: +44 1224 614 001
Email: uk@dofsubsea.com
Address: Thormøhlensgate 53 C
5006 Bergen, NORWAY
Address: Exchange No.1, 62 Market St.
Aberdeen, AB11 5PJ, UNITED KINGDOM
DOF Management AS
AUSTRALIA:
Address: Rua A1, número 35
Vale Encantado
27910-000
Macae - Rio de Janeiro, BRAZIL
DOF Subsea Australia Pty Ltd
DOF Subsea Brasil Serviços Ltda
Phone: +61 8 9278 8700
Fax: +61 8 9278 8799
Email: asia-pacific@dofsubsea.com
Phone: +55 21 2103 5700
Fax: +55 21 2103 5707
Email: brasil@dofsubsea.com
Address: 5th Floor, 181 St. Georges Tce
Perth WA 6000, Australia
Address: Rua Lauro Müller 116 - Salas 2802 a 2805
Torre do Rio Sul - Botafogo
22290-160
Rio de Janeiro, R.J., BRAZIL
Phone: +47 56 18 10 00
Fax: +47 56 18 10 06
Email: management@dof.no
Austevoll Address: Alfabygget
5392 Storebø, NORWAY
Bergen Address: Thormøhlensgate 53 C
5006 Bergen, NORWAY
SINGAPORE:
DOF Management Australia
DOF Management Pte Ltd
Phone: +61 3 9556 5478
Mobile: +61 418 430 939
Phone: +65 6868 1001
Fax: +65 6561 2431
Address: Level 1, 441 South Road,
Bentleigh, Vic. 3204, Australia
Address: 460 Alexandra Road# 15-02
PSA Building,119963, Singapore
USA:
DOF Subsea Asia Pacific Pte Ltd
DOF Subsea USA Inc
Phone: +65 6561 2780
Fax: +65 6561 2431
Email: asia-pacific@dofsubsea.com
Phone: +1 713 896 2500
Fax: +1 713 984 1612
E-mail: info@dofsubsea.us
Address: 460 Alexandra Road# 15-02
PSA Building, 119963, Singapore
Address: 5335 W. Sam Houston Parkway N
Suite 390, Houston Texas, 77041 USA
DOF Subsea Brasil Serviços Ltda
Phone: +55 22 21 23 01 01
Email: brasil@dofsubsea.com
ANGOLA:
DOF Subsea Angola
Phone/Fax: +244 222 43 28 58
Mobile: +244 924 40 76 79/ 924 10 34 87
Email: angola@dofsubsea.com
Address: Rua Ndumduma 56/58
Caixa postal 2469, Miramar
Luanda, Republic of Angola
www.dofman.no
www.dofsubsea.com
www.norskan.com.br
126 DOF Subsea I Annual Report 2011