Awilco Drilling PLC

Annual Report • Jun 7, 2022

Online iXBRL Viewer Generating iXBRL Preview Read me Awilco Drilling PLC 213800GETNUFDN7CEI51 2021-01-01 2021-12-31 213800GETNUFDN7CEI51 2020-01-01 2020-12-31 213800GETNUFDN7CEI51 2021-12-31 213800GETNUFDN7CEI51 2020-12-31 213800GETNUFDN7CEI51 2019-12-31 213800GETNUFDN7CEI51 2020-01-01 2020-12-31 ifrs-full:RetainedEarningsMember 213800GETNUFDN7CEI51 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 213800GETNUFDN7CEI51 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 213800GETNUFDN7CEI51 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 213800GETNUFDN7CEI51 2019-12-31 ifrs-full:IssuedCapitalMember 213800GETNUFDN7CEI51 2019-12-31 ifrs-full:SharePremiumMember 213800GETNUFDN7CEI51 2019-12-31 ifrs-full:RetainedEarningsMember 213800GETNUFDN7CEI51 2020-12-31 ifrs-full:IssuedCapitalMember 213800GETNUFDN7CEI51 2020-12-31 ifrs-full:SharePremiumMember 213800GETNUFDN7CEI51 2020-12-31 ifrs-full:RetainedEarningsMember 213800GETNUFDN7CEI51 2021-12-31 ifrs-full:IssuedCapitalMember 213800GETNUFDN7CEI51 2021-12-31 ifrs-full:SharePremiumMember 213800GETNUFDN7CEI51 2021-12-31 ifrs-full:RetainedEarningsMember iso4217:USD iso4217:USD xbrli:shares Awilco Drilling PLC Report and Financial Statements 31 December 2021 Awilco Drilling PLC 1 Directors Sigurd Thor vildsen Henrik Fou gner Daniel Gold John Simpso n S ynne Syrrist Secretary Burness Paull LLP, 50 Lothian Road Festival Square Edinburgh EH3 9WJ Auditors Ernst & You ng LLP 4 th Floor 2 Marischal Squ are Broad Street Aberdeen AB10 1BL Bankers DNB Bank ASA 8 th Floor The Walbroo k Building 25 Walbrook London EC4N 8AF Registered Off ice 3 rd Floor 11 - 12 St James’s Square London SW1Y 4LB Awilco Drilling PLC 2 Strategic report Corporate Stra tegy and business model Awilco Drilling PLC ( ‘ the Comp any ’ ) ’s strategy is to crea te value through the provision of a quality, reliab le and customer focused service to the mobile d rilling rig mar ket. T he management te am shall s afely, efficiently and effectively deliver a high-quality service to customers, with a v iew to securin g the most lucrative d ay rate contracts in conjunction with the highest achievab le r ig utilisation. The Company shall continue to ev aluate opportunities which best complement it s financial and operational aspiration s. During the year, the Compan y own ed and operated two semi-sub mersible drilling rigs, the WilPhoenix and WilHunter, b oth stand ardised rigs used in the drilling of oil a nd gas wells and P&A work in the UK sector of the North Sea. The WilHunter has not worked since July 2015 and has been cold stacked in Invergordon since October 2016. The WilPhoen ix completed a contract in October 2021 and has since been warm stacked in Inver gordon prior to the sale of the rig. Going Concern Following the contractual arrangem ents to sell both rigs dur i ng Q2 2022, the Co mpany is currently no longer performing operational ac tiviti es. As a result of this, the financial statements have been prepared on a basis other than go ing concern. Cost saving measures h ave been init iated including reduction in hea dcount. Principal activ ity The principal activity of the Company and its subsidiaries (‘the Group’) prior to year-end was to operate the drilling r igs. During the year, the WilPhoenix was in drilling op erations for its clients , Serica E nergy and Ithaca Oil and Gas E nergy. As noted above, since contractual arrangemen t to sell b oth rigs d uring Q2 2022, the princip al activity of the Group is to continue the arb itrati on process es with Kepp el FELS shipyard. Business revie w and future deve lopments Following the disposal of b oth of the C ompany’s drilling rigs, the Company is currently no l onger performing operational activities. Although the main focus in th e short term will be on the arbitra tion process es , minimising costs and ther eby maximising returns to th e shareholders , the Company shall also continue to evaluate new investment o pportunities. If an attractive opportunity arises, which complement s t he Compan y’s financial and operation al aspirations, operations will resu me once again . Performance The G roup’s f inancial performance during the year was as follows: 20 21 2020 US$000 US$000 Revenue 33,077 25,602 Operating loss (61,264 ) (167,916) Loss for the year attributable to equity shareho lders (72,229 ) (167,857) Operating lo ss margin % (1 85 %) (656%) Number of em ployees and contractors at year end 107 137 The total r evenue for the year relates to contract income received from drilling operations. The in crea se is due to higher utilisation for t he WilPhoenix compared with the prior year. The Gr oup had rig operating expenses of US$ 27 .6 million ( 2020 : US$ 23.3 million) relating to r ig operating c osts included i n cost of sales , which includes an impairment o f onboard inven tory of US$ 3 .0 million. General and administration expenses wer e US$ 12. 2 million ( 20 20 : US$ 14.9 million ). There was an impairment expense of US$ 48.1 million ( 20 20 : US$ 145.2 million). US$ 47.3 million was rig impairment (in cluding fleet capital spar es) , and US$ 0 .8 million in respect of right o f use assets. During the year, the key performance in dicators (KPIs) set out below were reviewe d on a regular basis by managemen t and pe rformance against them subsequently repor ted to the B oard of Directors. Targets for the KPIs are set and, if pe rformance falls short, the appropriate corrective action was im plemented by managemen t. Awilco Drilling PLC 3 Strategic report (continued) Business revie w and future deve lopments (co ntinued) The Company’s main financial KPIs were: Revenue efficien cy Revenue efficiency is actual contract r evenue earned in the period that active rig s are working, compared with the maximum d aily contract reven ue availab le, multiplied by the number of days work ed in the contracted period . For the year ended 31 December 2021, the revenue efficiency was 92.9 % (20 20 : 80.6 %) . Operating marg in Operating margin is tot al revenu e less o perating costs. For the year ended 31 December 2 021, operating margin was 185% lo ss . ( 20 20 : 656 % loss). The improvement in margin is due to the in crease in revenue during the year , de crease in general and administration expense s and the prior year included an im pairment of new build assets . The Company also has a number of o perational KPIs that were used to manage the business on a day to day basis, some of which are detailed below: Quality, Health , Safety and Environment (QHSE) Total recor dable incident rate (TRIR) Number of incidents ( lost time incident, restricted work case, medical treatment o nly) x 200,000 / Total number of man h ours in the review period. Measured on a rolling 12 -month basis. Unplanned discharges Items that have been discharged to sea not covered under PON 1 5 which relate to allowab le item s. Some examples are Blow out Preve ntor ( BOP) control fluid and hydraulic oil that are r eportable under PON 1. (PON - Petroleu m Operations Notices) Operations Uptime Total hours th e rigs are working i.e. no t on unplanned downtime / on contract time f or the period. Human Resou rces (HR) Personnel turnov er Employee initiated leavers in the period as a percentage o f total headcount (onsho re and offshore) on a rolling 12 -m onth basis. Following the disposal of b oth of the C ompany’s drilling rigs, the Company is currently no l onger performing operational activities. In f uture, the principal KPIs will be in resp ect o f m aintaining an adequate cash buffer to meet the ongoing obligation s of the C ompany. Should the Company enter into new business such that op erating activities recommence, KPIs wil l be set app ropriate to that activity . Principal risks and uncertainties The Com pany’s primary r isks during th e year were those that impact u tilisation rates for each of the rigs, QHSE issues associated with o perations and exposure to liquidity , credit, and legal risk. Subsequent to y ear end, following the d isposal of the r igs and no ongoing rig operations , the principal risks are now in respect of liquidity and legal risks. QHSE (Quality, Health, Safety, Environment) To mitig ate any risk with regards to QHSE , the Gro up has in place a QHSE management plan which seeks to ensure t hat all oper ations are con ducted within norm al indus try standards a nd procedures. The Group also seeks to ensure safe an d efficient operations, with no accidents, injuries, environmental incidents or d amage to assets. During the current Cov id-19 outbreak, the Gr oup is following industry guid eli nes to ensu re the safety of the workforce. Awilco Drilling PLC 4 Strategic report (continued) Principal risks and uncertainties (con tinued) QHSE (Quality, Health, Safety, Environment) (continued) The Group achieved a high level of safety with no injuries or fatalities. T here has been continued low frequency of d ropped ob ject and h igh potential incid ents. The Cor porate Annual QHSE ob jectives are implemented in dep artmental action plans. The zero tot al recordable incid ent rate (TRIR) reported in 2020 has been successfully maintained throughout 2021. Ther e were no LTI incidents in 2021 and only a single first aid case. Our commitment to safe and r eliable op erations has seen this improvement and we co nt inue to learn and improve. Post transfer of t he rigs and termination of offshore personnel, this ris k, in relation to operational activity, will no longer be considered relevant. Liquidity As described in Note 26 to the financial statements, the G roup ’s o bjective is to maintain suff icient liquidity in order to support the n eeds of the busines s and m eet liabilities as th ey fall due. The Group curren tly has no debt obligations and has obtained a shareholder loan facility to ensure an appropriate lev el of ca sh is available in the short to medium term . Further funding may be req uired in order to suppor t the ongoing arbitration proce ss. Tax risks The Company is committed to operating i n a manner consistent with good industry p ractice and in accordance with all leg islative req uirements that are applicable in the different areas o f jurisdiction in which it conducts b usiness. The Compan y has subsidiaries in o ther countries. Tax laws a nd regulations are hig hly complex and subject to in terpretation. Consequen t ly, th e Compan y is s ubject to chang ing tax laws, treaties and regulations in and between countries in which it operates. The Company’s tax expense is based up on its interpr etation of the tax laws in effect in these countries at the time that the ex pense was incurred. A chan ge in these tax laws, treaties or regulations or in the interpretation thereof, which is b eyond the Company’s control, co uld result in a ma terially higher tax expense or a higher effective tax rate on the Company’ s e arnings. For 2021, the effective tax rate (“ ETR ”) for the Company was neg ative 14.7% ( 2020 : 0.1% negative ). The current and prior yea r are negative figure due to the loss before tax. There was a tax charge in the year as a result of the current year movement in unrecognised deferred tax asset, reversal of a prior d eferred tax asset and recognition of a tax liability of the subsidiary, WilHunter (UK) Ltd of US$ 9.2 million. This was following an unsuccessful tax tribunal appeal. WilHunter (UK) Ltd does n ot have su fficient f unds to meet this liability an d the subsidiary co mpany is currently undergoing a creditors voluntary liquidation. G oing forward, with limited anticipated rev enue, the tax risk will be significantly redu ced. Legal risks The Gr oup values its reputation and aims to carry out bu siness in a fair and open manner. Despite this the Group may become subject to claim s during the cour se of its business. In the previous year, the vessel construction con tracts for two s emi- submersible drilling rigs being built in Singapo re, were terminated , see Note 23 . The Gro up’s subsidiary co mpanies have entered into arbitration with the rig construction co mpany. The rig construction contracts wer e en tered into o n a non -recourse basis to the parent company or wid er group. In or der to mitigate any possible risk of cash outflo w, the Group has established a dedicated team and has engag ed specialist legal advisors to support the actions tak en. Awilco Drilling PLC 5 Strategic report (continued) Corporate Social Respon sibility The Company recognises its duty to stakeholders to operate the business in an ethical and responsible manner. It is committed to dev eloping its Corporate Social Respon sibility (CSR) ag enda, rec ognising that it can play a major part in its operatio ns. This report does not contain informatio n about any policies of the Company in relatio n to social co mmunity and human rights issues since it is not consider ed necessary for an understanding of the development, performance or position of the Comp any’s business activities. During the year, when operational activities were b eing performed, the following core values were applicab le: Core Values Simple is Best – Our systems and procedures shall be clear, concise and effective, ensu ri ng we deliver on our promises. Engagement – We will be a company of choice, valuing our work force, listenin g and responding to employees, clien ts and partners. Efficiency – We will consistently m eet our clients ’ expec tat ions by pro viding competent people, reliable equipmen t and smart systems. Flexibility – We will e ncourage challenge and creativity in order to deliver optimised performance and continuous imp rovement. Performance – We will get it right first time; consistently deliver ing success. Anti-bribery and corruption The Company requires its employees to o bserve the highest s tandards of business and personal ethics in the conduct of their duties and r es ponsibilities. The C ompany has a specif ic Anti -Bribery and Corruption policy to ensure compliance with all applicable anti-br ibery and corruption regulations and to en sure the Company’s business is conducted in a socially responsible manner. A risk assessment is undertaken by th e senior memb ers of the Company as part of the quarterly review of the Company’s risk registe r. Policy The Company’s employment p olicies and procedures are described in detail in the Staff Handbook , which is available to all em ployees via the Business M anagement System (BMS) . T he Co mpany’s Code of Conduct – Values and E thics document sets out the b asic principles to gu ide all employ ees and officers of the Company on ho w they must con duct themselves to seek to avoid ev en the app earance of improper behaviour. To help ensure complian ce, the Company requires that emp l oyees, officers and directors review the policy and acknowledge their understanding and adh erence in writing on an annual basis. Equal opportunities and diversity The Company is committed to equal opportunities and treats all emp loyees with respect and dignity and ensures that decisions are taken without reference to irrelevant or discriminatory criteria . The Company does not toler ate any f orm of unlawful discrimination and is comm itted to promoting equality o f oppo rtunity and diversity f or all personnel an d will addr ess any unlawful discrimination in every aspec t o f its operations. As at 31 Decemb er 2021, the numb er of directors and em ployees was as follows: Male Female Directors 4 1 Senior Manag ers 3 - Other staff – onshore 10 8 Other staff – offshore 86 - Awilco Drilling PLC 6 Strategic report (continued) Health and Wellbeing It is importan t to the Company that it supports its emp loyees in their health and wellbeing. The Company operates a flexible ben efit scheme that is available to all members of staff and includ es ben efits such as leisure club membership, private medical and dental insurance, a health screening service and an Employee Assistance Programme. The Comp any has also achieved the Silver Healthy Working Li ves Award. During the Covid -19 pandemic, wh ere po ssible, all onshor e employees were requ i red to work from home in accordance with government guidance. Employees were encouraged to ensure they had adequate resources available, an d support was offered wh ere necessary. Absence Management The Grou p h as an established absen ce management procedure , to support em ployees during periods o f sickness absence wh ilst ensuring the efficient and ef fective running of the organisation. 20 21 2020 Group sick leave (as a perc entage of tota l hours work ed) 2.0% 1.7% Health, Safety and Environment The Company recognises that it is has a corporate responsibility to carry out its operations in an ethical and responsible man ner whilst min imising its imp act on the environment. The Comp any upholds th e r elevant standards and retains its ISO14001 cer tificatio n. ISO1 4001 is an internationally recogn ised environmental managemen t system (EMS) st andard, providing a model for companies to follow to create and achieve their policy. Focusing on th e issues that really m atter, it i s designed to h elp companies achieve consistent environmental regulatory comp liance whilst embedding the concep t of contin uous improvements in environmental performance. ISO14001 is a widespr ead benchmark for thousands of organisations ar ound the wor ld that want to communicate to the publi c and stakeholders that they are en vironmentally respon sible. Additionally, the Company has achieved I SO 45001 certification following on from its previous BS O HSAS 18001 cer tification. This is an internationally ap plied Standard for occupatio nal health and saf ety managemen t systems. It exists to help o rganisations p ut in place demonstrab l y sound b est prac tices by providing a framework for procedures and controls needed by the Company to ac hieve the best possible working conditions and workplace health and safety by eliminating hazards and minimize health and safety risks. Section 172 The Board of Directors have taken account of stakeholder views when making key decisions that impact th e company and its stakeholders. The fo llowing matr i x provides some e xamples of h ow, dur ing the year, consideration was given to k ey stakeholder s, b eing employees, investors, customer s, suppliers, regulators and society in general. In the future, if activity is not increased ag ain, many of these issues may no long er be relevan t. Stakeholder Strategic Issue Engagement Outcome Key Decision Employees Fair compen sation and benefits package for employees Market analysis is performed to ensure compensation levels are competitive in prevailing market. See also commitment expressed by the Board in respect of “Health and Wellbeing” of employees on this page. Pay levels for existing and new employees wer e considered to be fair and competitive within the industry. Changes in compensation levels are proposed by the Remuneration Committee to the Board. Awilco Drilling PLC 7 Strategic report (continued) Section 172 (con tinued ) Stakeholder Strategic Issue Engagement Outcome Key Decision Investors Continue to seek growth opportunities that offer attractiv e returns to investors Information is shared with investors in the form of quarterly and annual financial reports and press release disclosures are required. Additionally, quarterly presentations h eld and availab le on the Compan y website. Regular one to one investor meetin gs are also held. No new ou tcomes in respect of investment opportunities at this time. Quarterly and annual financial reports are reviewed and approved by the Board. Termination of new build programme and cost savings initiated in respect of Norwegian shorebase. WilPhoenix rig was warm stacked in Invergordon whilst future options for the rig were considered. This result ed in headcount cost reduction. WilHunter recycling process was commenced. Customers Customer Satisfaction As part of th e company’s procedures to ensure custom ers are satisfied with performance and delivery of services contracted, the customers are requested to provide feedback on a variety o f areas to ensure the company is performing in accordance with, or better than, customer expectations. Customer surveys feedback is par t of the compan y KPIs and scoring in this area has been more than satisfactory dur ing the course of the year. Directors agree key performance indicators with Managemen t and monitor performan ce against KPIs during the course of the year. Results impact employee bonus awards at year end. Awilco Drilling PLC 8 Strategic report (continued) Section 172 (con tinued ) Stakeholder Strategic Issue Engagement Outcome Key Decision Suppliers Selection of k ey suppliers and high-lev el purchases. En sure that vendors are paid on a timely manner. Suppliers invited to tender and purchasing procedures req uire fair and transparent selection of vendors. Refer also paragraph on Investment Appraisal" on page 19 of the an nual report. Policies, procedures and scrutiny by t he Board ensures vendor selection criteria is a rob ust process. Board invo l ved in selection of key vendors and Board approv e the approval matrix on a regular basis. Any approv als above the matrix levels requir e Board approv al. A Board memb er and chair of the Audit Committee approves the published payment practices report filed ev ery six months. Regulators Accreditation an d compliance with regulatory standards. Details of standards achieved ar e detailed und er "Health, Safety and Environmen t" on page 6 of the annual repor t. Achievemen t and continued certification of compliance through external HSE audits ensures comp any operates at, o r above, the standards req uired by the regulat ory bodies that g overn the indu stry. The Board approves the direction followed by the CEO an d managemen t in pursuit of necessary accreditation and standards. Society Minimising har m to the environment in operational performance of the fleet. KPIs are established to measure if an y adverse consequen ce to the environmen t within the con trol of the company. Achievemen t and compliance with environmental sustainability. Operational KPI s are also reviewe d on a regular basis by the Board. By order of th e Board of Directors Sigurd Thor vildsen 25 May 20 22 Awilco Drilling PLC 9 D irectors’ report Registered No. 7114 196 The Directors presen t their report and financial statemen ts for the year ended 31 December 2021 . These financial statements have been prepared under UK-adopted International Accounting Standards (UK- adopted IAS) an d International Finan cial Repo rting Standards as adopted by the European Union ( EU adopted IFRS) as it app lies to annual periods beginn ing 1 January 2021 . Results and div idends The loss after taxation for the year am ounted to US$ 72.2 m i llion (20 20 : US$ 167.9 million loss) . There wer e no dividends paid during the year. ( 20 20 : nil ) Future developmen ts See Strategic Repor t pages 2-8. Directors The director s who served the Company during the year were as follows: Sigurd Thor vildsen Henrik Fou gner Daniel Gold J ohn Simpson Synne Syrr ist Financial instrument s The Group’s fin ancial risk management objectives and policies are discu ssed further in Note 2 6 on page s 71-73 of t he financial statemen ts. Directors ’ liabi lity The Company insures its directors and officers again st liab ility in respect of proceeding s brough t b y third parties, subject to the conditions set out in the UK Compan i es Act 2006. Directors and their interests None of the d irectors listed above had any direct intere st in the Company’s shares. Major interest in sh ares The Compan y has been n otified of the following interest s representing 3% or m ore o f the issued or dinary share capital o f the Company as at 25 May 20 22. No of shares Percentage h olding Awilhelmsen Offsho re AS 20,240,814 37.1% Pershing LLC 11,089,012 20.3% Akastor AS 3,049,673 5.6% Euroclear Ban k S.A. / N.V. 2,141,616 3.9% Skandinav iska Enskilda Banken 2,000,000 3.7% Citibank N.A. 1,834,536 3.4% QVT Financial LP with affiliated and related parties owned 5,369 ,401 shares at 2 5 May 20 22, a to tal of 9.8 % of the Company’s share capital. FVP Master Fund LP with affiliated and related parties owned 10 ,817,52 7 shares at 25 May 20 22 a total of 19.8% of the Company’s share capital and has not notified t he Company of any c hanges of ownership up to the date of signing the report and financial statements. Awilco Drilling PLC 10 Directors ’ rep ort (continued) Corporate governan ce The information given in the corporate governance statemen t is set out on pages 14 -20. Going concern As noted in the Strategic report, the Group is currently no longer performing operational activities. Accordingly, th e financial statements have been p repared on a basis other than going concern. Asset impairmen t consideration Managemen t h as per formed an imp airment test wh ich resulted in an impairment of US$ 47.3 million at year end. The valuation of the rig is based upon the fair value less cost to sell, an d the final agreed selling price between bo th parties . Greenhouse gas e missions The Company’s greenho use gas emissions are categorised between two categories: direc t em issions (f rom rig power generation a nd l oss of refrigerants) and indirect e missions (from purchased electricity for onshore offices). All f igures reported are in relation to energy consumed in the United Kingdom and o ffshore area. All emissions from the facilities over which the Company has direct operational control were in cluded. The Companies Act 2 006 requires reporting on the f ollowing greenhouse gases: • Carbon dioxide ("CO2"); • Methane ("CH4") ; • Nitrous Oxide ( "N2O"); • Hydrofluoro carbons ("HFCs"); • Perfluorocarbo ns ("PFCs"); and • Sulphur Hex afluoride ("SF6"). PFCs and SF6 are not emitted, and therefore no t considered in this report. Greenhou se gas emissions are repor ted in tonnes (t) carbon diox ide equivalents ("CO2e"). Calculatio ns are performed using the emission factors and global warming potential for each chemical compound, which are in acco rdance with the current g uidance from the UK Government GHG Conversion Factors for Company Reporting 20 21. The 2021 annual CO2e emitted from operations was 6, 977 t. For the year ended 31 December 2021 , the estimated carbon dioxide equivalent (“CO2e”) gas emissions were 6, 489 tonnes as compar e d to 5 , 651 tonnes for the year en ded 31 December 20 20 . When expressed as an intensity measure of to nne s of CO2e gas emiss ions per days o f contr act from op erations, the intensity measure for 31 December 2021 was 18.5 tonnes, changes in the p revious y ear’s disclosures is due to the changes o f the operational context o f the unit. Reduction in ind irect emissions is largely due to reduced occupancy o f the office due to the global pandemic. There were 35 kg of accumulated ref rigerant losses during 202 1 equivalent to 102.0 tonnes of CO2e. Awilco Drilling PLC 11 Directors ’ rep ort (continued) Greenhouse gas e missions (continued) Greenhouse Gas Emis sions 20 21 2020 Direct emissions (own ed rigs) 6,849 5,651 Indirect emission s (onshore offices) 26 31 Refrigerant em issions (offshore only) 102.0 230.5 Total emissions (CO2c) 6,977 5,912.5 Direct CH 4 emissions ( owned rigs) 1.7 1.4 Direct N 2 O emissions (owned rigs) 91.2 76.1 The Company’s aim is to work on improving environmental sustainability by reducing the carbon footprint, eliminating waste, recycling and using alternative energy s ources where possible. As the Company holds an ISO 140 01 accredited En vironmental Managements Syste m (EMS) th is has already identified the risks to biodiversity the Company’s ac tivities may pose. The disposal o f drill cutting was identified as the mos t significant risk to biodiversity. Durin g 202 1, zero drill cuttings were disposed to the environment from operations. Assessment of C limate Chang e Impact As a result of rig d isposals, the Company is currently no longer performing operational activities so has no significant climate ch ange impact to consider. The responsibility for minimising e nvironmental impact in relation to th e disposal of rigs has passed to the buyer . Stakeholder re lationships The Directors r ecognise that business relationships with all s takeholders is ben e ficial to the well -b eing of the organisation. Feedback in terms of relationsh ips with suppliers, customers, inv estors is discussed with managemen t at board meetings. Disclosure of in formati on to the auditors So far as each person who was a dir ector at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor i n connection with preparing it s report, of whic h the auditor is unaware. Having made enquiries of fellow directors and the Company ’s auditor, each director has taken all the steps that t he y are obliged to take as a director in o rder to mak e themselves aware of an y relevant au dit information and to establish th at the auditor is aware of th at information. Responsibility statement The directo rs confirm, to the best of their k nowledge: • That the co nsolidated finan cial statements, prepared under UK -adopted In ternational Accountin g Standards (UK-adopted IAS) and Inte rnational Financial Reporting Standards as adopted by the European Union (EU ad opted IFRS) as it ap plies to annual period s beginn i ng 1 January 2021 , give a true and fair view of the assets, liabilities, finan cial po sition, and profit of the paren t company and undertak i ng included in the consolidation taken as a whole; • That the annual report, including t he strategic report, includes a fai r rev iew of the dev elopment an d performance of th e business, and th e position of th e company and undertakings include d in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face : and. • That th ey consider the annual report, taken as a whole, is fair, balanced and understandable and provides the information necess ary for shareholders to asse ss the company ’s po sition, pe rformance, business model an d strategy. Awilco Drilling PLC 12 Directors ’ rep ort (continued) Subsequent events During Mar ch, th e subsidiary com pany WilHun ter (UK) Ltd was placed into liquidation. The affairs, business an d property of th e Company are b eing managed by the Joint Liquidato rs , Geof f Jacobs and Blair Nimmo of Interpath Advisory. During March, the Company sign ed a Sale an d Purchase Agreement with Rota Shipping Inc to recycle the WilHunter at the Aliaga Shipyar d in Turkey. The s ale is expected to be co ncluded no later th an 15 June 2022. During May, the Company signed a Memorandu m of Agreemen t (MOA) f or the s ale of the WilPhoenix to Well-Safe Solutions Ltd fo r an agreed purchase price of USD 15.5 million. Expected d elivery time of the rig is on or aroun d 1 June 2022. During May 2022, the Company signed a short -term shareholder loan with Awilhelm sen Offshore AS and QVT Family Office Fun d L P. Th e loan is for a t otal of up to USD 4 million, structured as a draw -down facility, with interest rate o f 10 percent p er annum on the ag gregated outstandin g principal amou nt. In addition, ther e is an ar rangement fee of 2 percent on the total amoun t. Ma turity date for the loan is 1 July 2022. The lo an shall be used for general working cap ital purposes. As a result of the ag reements to dispose of both rigs after t he y ear end, it is co nsidered that the Group is currently no longer perform i ng operational activities and the financial statements have been prepared on a basis other than going c oncern. However, the Board shall continue to consider future opportunities an d take the necessary ac tion as required. Auditors A resolution to reappoint Ernst & Young LLP as auditors will be put to the members at the Annual General Meeting. By order of th e Board of Directors Sigurd Thor vildsen 25 May 20 22 Awilco Drilling PLC 13 Statement of dir ectors’ responsibilities The directors are responsible for preparing the annual report and the financial statement in accordance with applicable Un ited Kingdom law and regulation . Company Law requires the directors to prepare financial statements for each fi nancial year. Under t hat law, the directo rs have prepared the Group finan cial statements in accordance with UK adopted international accounting standards ( UK -adopted IAS) and Intern ational Financial Reporting Standards (IFRS) as adopted by the Eu ropean Union and hav e p repared the Company financial statem ents in accordance with UK - adopted IAS, as ap plied in accordance with section 408 of the Companies Act 2006. Under Comp any law, the directors must not appro ve the financial statements unless they ar e satisfied th at they give a true and fair view of the state of affairs of the gr oup and the company and of t he profit or loss of the group and th e company for that period. In preparing the se financial statements, the directors are required to : • select suitable ac counting policies in accordan ce with IAS 8 Acco unting Po licies, Changes in Accounting Estimates and Errors and then apply them consistently; • make judgements and estimates that are rea sonable and prudent; • present information, including ac counting policies, in a manner that provides relevant, reliab le, comparab le and understandable information; • prov ide additional disclosures when complian ce with the specific req uirements in IFRS i s insufficient to enable users to under stand the impact of p articular transactions, other events and conditions on th e group’s financial position and fin ancial performance; • in resp ect of the group financial statemen ts, state whether UK adopted international accounting standards (UK-adopted IAS) and International Financial Repo rting Stand ards ( IFRS) as adopted by th e Eu ropean Union have b een f ollowed, subject to any material dep artures disclosed and explained in the financial statements; • in respect of the p arent company financial statements, UK -adopted IAS, as applied in accordance with section 40 8 of the Companies Act 200 6 h ave been followed, sub ject to any mater ial departures disclosed and explained in the financial statements; and • prep are the financial statem ents on the g oing concer n basis un less it is inappropriate to presume that the co mpany and / or the group will c ontinue in business. The directors are responsible for keeping adequate accounting records that a re sufficient to show and explain the co mpa ny’s and group’s transactions and disclose with reaso nable accuracy at any time the financial position of the group and the co mpany and enable them to ensure th at its financial statements com ply with the Companies Ac t 2006. They are also responsible for safeguarding the assets of the group and parent company a nd group and hence for taking reaso nable steps for the prevention and d etection of fraud and other irregularities. Under applicable law and regulations, the d irectors are also respon sib le for p reparing a strategic rep ort, directors’ report, directors’ remuneration report and co rporate gover nance statemen t that comply with that law and th ose reg ulations. The directors are responsible for the main tenance and in tegrity of the corporate an d financial info rmation included on the company’s web site. Awilco Drilling PLC 14 Corporate governance Awilco Drilling PLC is co mmitted to maintaining high standards of corporate governance. The Company is listed on the Oslo Bors stock exchan ge. The Company has ad opted the Norwegian Code of Practice for Corporate Governance of 14 October 2 0 21 ( ‘ the Code ’ ). A copy of the code can be found at www.nues.no Adherence to the Code is based on a “comply or exp lain” prin ciple, whereby co mpanies ar e ex pected to comply with the recommendations or explain why t hey h ave chosen an altern ative approach. Below is a summary of the departures from th e Code with an explanation of how the Company ’s actual prac tices contribute to good corporate governance. Code of Pract ice Compliance The Company is required to state ho w it h as applied the prin ciples set out in Section 1 of the Code and which relate to its directors, remuner ation, accountability and audit and r elations with shareholders. As of the date of this report, the Company is in compliance w ith the Code, ex cept in relation to the following matters: • Business – the Company ’s Ar ticles of Association do not specifically define the C ompany ’s business. The Company is incorp orated in Eng land & Wales and th is is in line with standard practice for a UK registered c ompany. An overview of the Com pany ’s business ca n be found in this report. • Equity an d dividend s – the authorisation giv en to undertake share capital in creases has not b een restricted to def ined purposes, d ue to th e sco pe of the Company ’s b usiness. Th is is n ormal practice for a UK registered company. • Auditor – the Auditor is not present during the Board m eeti ng th at consider s the an nual accou nts; but th e Auditor attends all Audit Committee mee tings includin g discussions related to the A nnu a l Report and financial statements. • Corporate Assembly – the Company does n ot have a Corporate Assembly. Business During th e year, the Company ’s principal business was to own of fshore drilling rigs for u se in offshore drilling oper ations, and to provide drilling s ervices for oil and g as companies using these rigs. This was a n intricate business which involved complex assets and high value equipment, and which required specialised and trained per sonnel to operate them efficiently and safely. Further information about the Company ’s vision, m ission and strategy statements is av ailable in the Strategic Report. Equity and dividen ds Full details of the shares issued ar e detailed in Note 24. Th e Company considers its equity to be at a level appropriate to the Company ’s objectiv es, strategies, cash flow projection s and risk profile. As the Company is curren tly no longer perfo rming operational activities, there will be no dividends distributed arising from operational activity . Awilco Drilling PLC Corporate governance (continued) 15 Equal treatment of shareho lders All issued shares of t he Company are vested with equal shareholder rights in all respects. There is only one class of shares. The Articles o f Association place no restri ctions o n voting ri ghts. Each share represents one vote at th e Company ’s General Meeting s . Equal opportun ities an d diversity The Company is committed to en suring that all emplo yees are treated with respect and dignity and to ensure that decisions are taken without reference to irrelevant o r discriminatory criter i a. The Company will not tolerate any form o f unlawful discrimination and is co mmitted to promoting equality of op portunity and address unlawful discrimination in every aspect of its operations. Th e Com pany takes every possible step to ensure that decisions on rec ruitment, selection, training, conditions of wor k, pay and benefits, promotion, career, man a gement, and every other aspect of employment are justifiable and based solely on objective criteria. Du ring the year, there have been no in cidents of non -compliance with this po licy. Transactions with close asso ciates The Company has entered into the agreem ents lis ted below with the following parties: • A management agreem ent with Awilhelmsen Management AS (AWM) for corporate services; • Management- for-hire contracts f or personnel from the Awilhelmsen Gro up. Awilhelmsen Off shore AS owns 3 7.1% of the ordinary shares in Awilco Drilling PLC. Freely negotiab le shares The shares of the Company are freely negotiable. Going concern The Board regularly review the Company’s financial projections to ensure resources are available to m eet operational requirements an d takes appro priate action if judged nec essary. The Board shall co ntinue to consider future opportun ities and take th e nec essary action as required. However, at this current time, following the cessation of operational activity, th ese financial statemen ts have been prepared on a basis other than go ing concern. General Meetings All sh areholders of the Company are entitled to attend the general mee tings of the Company . The Annual General Meeting (AGM) is to be held no later than 30 June each year. Notification for meetings are sent out at least 21 days in advance. The notice includes a reference to the Company ’s website where the notice for the General Meeting and other supporting documents requ ired to allow shareholders to form a view on all matters to be considered at the meeting are made available. The deadline for registration is normally set t wo work ing days before the Gen eral Meeting, to ensure sharehold e rs have as much time as p ossible to register. If a shareholder cannot attend a meeting in person i t is possible to vo te through proxy. The minutes f rom the General Meetings are published o n the Compan y ’s website www.awilco drilling.com The next AGM is scheduled for 22 June 202 2. Awilco Drilling PLC Corporate governance (continued) 16 The Board of D irectors The Board considers that it is v ital to ensure th at there is an appropriate range of skills, kno wledge and experience among its members, and that the objectivity and i ntegrity of mem bers should be exem plary. The Board cu rrently consists of f i ve non -executive Director s in cluding t he Chair man. The Board believ es that the structure and size of th e Board is appropriate and that no single individual or group do minates th e decision making process. The names, skills, experience and expertise o f each Director a re shown in the Board of Dir ectors section of the Com pany ’s website at www.awilco drilling.com The main r esponsibilities of the Board include but are not limited to: • providing strategic dir ection for the Com pany; • overseeing the Com pany ’s systems of internal con trol, governance and risk managemen t ; • evaluating the performan ce of executive management; and • monitoring and facilitating th e activities of the Audit and Remuner ation Committees. Managemen t is delegated the task of the detailed p lanning and implementation of t he Company ’s strategy. Directors receive timely, regular and appropriate man agement in formation to enable them to fulfil their duties and have acce ss to the advice of the Company Secretary . The Board has agreed g uidelines for Directors to ob tain independent professional advice , if they seek it, at the Company ’s ex pense. The Company has in place directors’ an d officers’ liability insuran ce. The Board includes two independen t n on-executive directors (J ohn Simpson a nd S ynne Syrrist) and three non -independent non-executive directors (Sigurd Thorvildsen, Henrik Fougner and D aniel Gold) . A ll th e non -executive Boar d members are viewed as bein g f ree f rom any r elationship with the ex ecu tive managemen t wh ich could result in any conflict o r af fect their judgement. None o f the non -exec utive directors participates in the share option schemes o r long-term incentive plan operated by the Company, and none ar e dependent on the fees received fro m the Company as their primary source of income. Board Performance The Board completes a n annual p rocess to evaluate the effectiveness of Board C ommittees and individual directors and has confirmed that it is satisfied that it an d its Com mittees are operating effe ctively. The per formance of th e Chief Exec utive Officer ( “ CEO ”) is rev iewed annually b y the Remu neration Committee in co njunction with h is annual pay review and the payment of bonuses. Directors are elected by shareholders at the fir st annual general meeting af ter their appointment and , after that, offer them selves for re-election b y a vote of shar eholders at least once every two yea rs. Awilco Drilling PLC Corporate governance (continued) 17 The Board of D irectors (continued ) Meetings and attendance Board meetings are sched uled to be held at least fiv e times a year, linked to key even ts in the Company ’s corporate rep orting calendar. Add itional ad-hoc meetings are held when deemed necessary . It is expected that all d irectors attend Board and relevant committee meeting s, un less th ey are prevented from doing so by prior co mmitments or travel restrictio ns. If directors are unable to attend meetin gs, they are given t he opportunity to b e consulted and comment in a dvance of th e meeting. Board Committees The Board has established an Au dit Committee, Remuneration Co mmittee and a Nomination Com mittee . The Audit Committee and Nomination Committee have formal terms of refer ence gov erning their method of operation wh ich reflect the provisions of the Cod e and which have been approved by the Board. Audit Committee The Audit Committee was chaired during the year by John Si mpson an d the other m ember of the Committee is Henr ik Fougner. Only John Simp son is considered to b e independent by th e Board, which is acknowledg ed in the terms of reference of the Audit Committee. The Board is s atisfied that John Simpson has recent and relevant financial exper ience, as the former CEO of Den n orske Bank (now DNB Bank ) in London and Regional Direc tor fo r DNB’s Asia -Pacific oper ations. Mr . Simpson is curr ently a dir ector of Marine Capital Limited, as UK asset man ager and class ed a s an ap proved person by the UK FCA. He has chaired a udit committee s of UK listed co mpanies and public bodies since 1996. The role of the Audit Committee is to ensure the integrity of the financial statements of the Company , including its annual and quarterly reports, preliminary results’ announcem ents and any other formal announcemen ts relating to its financial performance. It is responsible for rev iewing t he Company ’s in ternal financial control and risk management systems, advising the Boar d on the appointment of external auditors, overseeing the relationship with extern al auditors, reviewing t he Company ’s wh istleblowing procedures an d considering t he need for a n internal audit fun ction. The Audit Committee monitors the r elationship with the C ompany ’s external auditors r elating to the provision of non- audit s ervices to ensure auditor objectivity and in dependence is safeguarded. The Company will award non-audit work to the firm wh ich provides the best commercial solution for the work in question taking into account the s kills and e xperience of the f irm involved and t he fees payab le for the work . In co nsidering wh ether to award such work to the external audito rs, atten tion is paid to the lev el of fees for non-audit services relative to the am ounts of the audi t fee and whether t here are safeguards in place to mitigate to an acceptab le level any threa t to objectivity and in dependence in the conduct of the au dit resulting from the provision of such ser vices. There is an opportunity at ea ch meeting for the Aud it Committee to discuss matter s privately with the external auditors without any memb ers of the ex ecutive manag ement team present. In addition, the Chairman of the Committe e is in regu lar contact with th e external audit par tner to discuss matters relevant to the Comp any. The Audit Comm ittee h ave also b een extensively i nvolved in en suring the appropriate disclosures regarding Going Conce rn have been included in the financial statements. Remuneration Committee The Remu neration C ommittee was ch aired during th e year by Sig urd Thorvildsen and th e other members of the Com mittee are Daniel Gold and Henrik Fougner . The role of the Remuneration Committee is to establi sh and dev elop the rem uneration po licy for the Company ’s ex ecu tives and key m anagement a nd to de ter mine a specific remuneration pac kage f or the CEO . No d irector or employee is involved in deciding their own remuner ation. The Committee also appr oves all employee pay review proposals. Details of the Company ’s policy on remuneration, service contracts and compensation payments are set out in the Directo r’s remuneration report. Awilco Drilling PLC Corporate governance (continued) 18 The Board of D irectors (continued ) Nomination Committee The memb e rs of the Nomination Committee are Hen rik Christensen and Tom Furulund. The r ole of the Nomination Committee is to pr esent a recommendation to the gen eral meetings concerning directors to be elected by shareholders and the level of directors ’ fees. The Nomin ation Committee shall also present recommendation s to the general meetings regarding nomination of members to the Nomination Committee and concerning fees for the members o f the Nomination Committee . The table belo w shows the frequency and attendan ce of d irectors and other members at Board and Committee meetin gs during 2021 . Board Meetings Remuneration Committee Audit Committee Nomination Committee No of meetings in year Sigurd Thor vildsen 9 - - Henrik Fou gner 10 3 - Daniel Gold 9 - - John Simpson 10 - 3 - Synne Syrr ist 10 - - - Henrik Christensen (1) - - - 4 Tom Furulund (1) - - - 4 (1) Not members of the Boa rd b ut members of the Nomination Committee only Internal contro ls and ri sk management The Board acknowledges its respon sibility for establishing and maintaining adequate internal controls and risk manag ement systems to safeguard shareholders ’ in vestments and the Company ’s assets and performs an annual review of these areas. Such systems can o nly be designed to m anage, and not to eliminate, the risk of failure to ac hieve business objectives. They ca n provide reasonable, but not a bsolute, assurance that the Comp any ’s assets are safeg uarded and that the f inan cial information used with in the business for external reporting is reliable. Operational and business activity risks The Company ’s oper ational and busin ess activity risks are contr olled and m itigated by the implementation and use of its Business Manag ement System (BMS). The Comp any ’s offshore activ it y risk is furth er controlled by t he implementation and u se of its Safety and E nvironmental Management System which is incorporated in the BMS . Information and financial reporting systems The Compan y ’s co mprehensive p lanning and financial reporting procedures inclu de annu al detailed operational budgets wh ich are reviewed and approved b y the B oard. Performance against budget is monitored throughout the y ear, through monthly reporting of m anagement accounts an d key p erformance indicators. The Board receives updated cash flow statements on a monthly basis and at eac h Board meeting and has clo se follow-up discussions with the management between meeting s as required. Awilco Drilling PLC Corporate governance (continued) 19 Internal contro ls and ri sk management (con tinued) With a centralised financial r eporting system, transactions and balances are recognised and measured in accordance with pres cribed accounting p olicies, and all relevant informatio n is appropriately reviewed and reconciled as p art of the reporting process. Investment appraisal There are clea rly defin ed evaluation an d app roval pro cesses for acquisitions and disposals, capital ite ms and major ex penditure. These in clude escalating levels of authority and post - completion reviews of all major projects to co mpare th e actual outcome with the original plan. Certain tr ansactions are reserv ed for approval by the Board and limits of deleg ated responsibility and areas of authority hav e been identified for employees. External audit The Audit Committee reports to the Bo ard on matters discussed with the aud itors during the course of the statutory aud it. Takeovers The Compan y has adopted guidelines in r elation to takeover bids. The guiding p rinciples of the Board in a take-over s ituation will be to seek the best value for and the equal treatment of all s hareholders. The Board recognises that the decision whether to accept or reject an offer li es with the s hareholder s an d will refrain fro m any actions which may deny shareholders th is choice. The Boar d will seek to provide shareholder s with a recomm endation as to whether shareholders should or should not accept an offer. This inclu des seeking ex ternal advice on valuation when appropriate. Any transaction that is in effect a disposal of the Company ’s activities will be subm itted to a Gen eral Meeting for its approv al. As the Com pany is incorporated in England and Wales and listed in Norway , any takeover bid for the Compan y would be governed by aspects of both English law and Norwegian law and regulations in accordance with t he EU Takeover Direc tive. Communication with shareho lders The Company is committed to maintain the highest of standards of d isclosure e nsuring that a ll investors and potential investors hav e the s ame access to h igh quality , relevant information in an ac ces sible an d timely manner to assist them in making informed decisions. The Investor Relations Department manages the flow of information to all investo rs and potential investors and regular presentations tak e place at the time of the quarterly results as well as during the rest of the year. Any concerns raised by a sha rehold er in relation to the C ompany and its affairs are co mmunicated to the Board. The Company maintains a website which provides u p- to -date, detailed information on the Company ’s operations, which includes a dedicated inv estor relations section. All Company an nouncements are available on the website, as are copies of slides u sed for presentations to investmen t analysts. Shareholder s will have the opportunity at the forthcoming A GM to put questions to the Board, including the Chairmen of the various Committee s. Remuneration o f the Board of Directors The Company operates in a highly competitive market a nd must attract, motivate and retain hig h quality directors capab le of achieving the Com pany ’s objectives and ther eby enhancing shareholder value. The n on -executive Board members receive annual remuneration, based on the Board ’s responsibilities, expertise, time inv ested an d the complexity of the business. Their remuneration is n ot lin ked to the Company ’s performance. The remun eration of the Board is disc losed in the Director’s Remuneration R eport on pa ges 21 -34 of this report. Non e of the Board members have had any additional assignment s for the Company and none of the non -executives particip ate in any incentive or share option program me. Awilco Drilling PLC Corporate governance (continued) 20 Remuneration o f executive person nel The Remun eration Committee rev iews and advises on proposals made by the CEO with regard to the remuneration pay able to executive personnel and pr esents them to the Board. The remuneration payable to executive p ersonnel is determined on the basis of competence, experience and achieved results. The Board decides the salary and other compensation for the C EO in a meeting. The remuneration a nd other compensation to th e CEO and other executive employees are disclosed in the no tes to the financial statements. Auditor In line with standard practice for a UK company, the auditor is not presen t during the Bo ard meeting that deals with the an nual accounts. The auditor attends all meetings of the Audit Committee and presents to the Committee review s o f the Company ’s accounting principles, r isk areas, internal control procedures, including identified weakn esses and propo sals for improvement. The auditor has a private meeting with the Audit Committee at the end of each of its meetings at which neither the CEO nor any other member fro m the management team is present . By order of th e Board of Directors Sigurd Thorv ildsen 25 May 20 22 Awilco Drilling PLC 21 Directors’ remu neration report Information no t subject to audi t Chairman of the Remuneration Comm ittee’s Annual Statement Dear Shareho lders, I am pleased to present the directors ’ rem uneration report for the financial year ended 3 1 December 20 21 , prepared in accordan ce with th e Schedule 8 to the L arge and Medium -sized Comp anies and Groups (Accounts an d Reports) Regulations 2008. This repo rt explains the Company’s remuner ation polic y and provides details of the remuneration paid to executive and n on -executive directors for ser vices to the Company during the year. There h ave bee n no significant chan ges to the remuneration policy this year. In determining remuneration levels, the Com mittee has taken account of market conditions, the performance of the Comp any, responsibility to shareholders an d good corporate governance. A resolution to approve the Directors remuneration report will be propo sed at the AGM which is scheduled to be held o n 22 June 2022. Sigurd Thorv ildsen Chairman, Remuneration Committee 25 May 20 22 Awilco Drilling PLC Directors’ remu neration report (continued) 22 Introduction The Company’s CEO is not an Executive Director of the Company but under UK co mpany law , ther e is a requirement for quoted companies to treat the Chief Executive Officer, for the purposes of certain remuneration -related requirements, as if that person were a director of that quoted company. The current CEO was appo inted f ollowing a proposal from the Board of Directors after the r esignation of the pr evious CEO, ac ting o n an interim basis. His services ar e pr ovided to the Company under a management o n hire agreement from a related party . The rates are p er t he management on hire agreement, which is currently NOK 2,7 51 per hou r, and billing is based on an hours wo rke d basis. This rate was not subject to r e view b y the renu meration committee or appr oval by shareholder s. T he following remuneration re port sets out the policy in r espect o f the components of remuner ation which a ny future CEO em ployed d irectly by the company wou ld receive. Process for setting the Remuneration Policy The Remuner ation Committee (the “Committee”) sets the remuneration policy based on the principles and framework ou tlined below. The Committee is briefed on and consider s prevailing market conditions, the competitive en vironments and the positioning and relativities of pay and employment co nditions across the wider Comp any workforce. Following each meeting of the Committee, the Chair pr ovides an up date to the Board. Although the Committee does not consult directly with employees on CEO or director remu neration, the Company conducts periodic employ ee eng agement surv eys that give employees an opportunity to provide feedback on a wide range of employ ee matters. As part of the Com pany’s commitment to good governance, the Committee also con siders shareh older views when setting the remuneration policy. Feedback f rom sh areholders an d inv estors is shared with, and use d as inp ut into decision-m aking by, the Board and Committee in respec t of the remuneration policy a nd its application. The Committee consider s that this approach provides a robust mechanism to ensure its members are aware of matters raised, have a good u nderstanding of current share holders views, and can determine th e Company’s remuneration policy and m ake decisions as appropriate. The remuneration policy is designed to avoid conflicts of interests between the Company and the in terests of shareholders. In setting the remuneration policy, Committee members are subject to provisions designed to avoid or ma nage conflicts of interest, which ar e do cumented separately in the Comp a ny’s compliance policies. None o f the d irecto rs or CEO makes a decision relating to their own remuneration. I ndividual directors leave the meeting when their own rem uneration is being discussed. Remuneration policy The Company operates in a highly competitive market and must attract, motivate and retain high quality directors an d senior executives capable o f achieving the Comp any ’s objectives and th ereb y enhancing shareholder value. A significant proportion o f the potential remuneration of th e CEO an d s enior executives is performance- related with appropriately stretching targets, thus aligning the ir interests with those of shareho lders and encouraging performance at the highest levels. The Committee h as considered wheth er there are any aspects o f the remun eration p olicy which could inadverten tly encourage the executives to take inappropriate risk and has conclud ed that t he policy remains appropriate in this regard. How the views of employees are taken into account As referr ed to ab ove, t he Company , in line with mark et pr actice, does n ot actively consult with employees on executive r emuneration. The Committee is made awa re of ov erall pay and employment co nditions in the wider wo rk force when it sets the executive remun eration policy. How the views of shareholders are taken into account As referred to above, t he Committee takes into acco unt the view of the sharehold ers through op en and transparent communication with shar eholders. If there are significan t changes proposed to the remuner ation policy, the Committee will consult with major shar eholders. Awilco Drilling PLC Directors’ remu neration report (continued) 23 Remuneration Policy Table – Executive Directors and CEO The table belo w summarises the remuneration po licy for any Execu tive Directors and any future CEO employed direc tly by the Company . Element Purpose Operation Opportunity Performance Measure Annual Salary To attract and retain key individuals and reflect their responsibilities, market value and expected performance level Reviewed annually or when a change in responsibility occurs There is no maximum salary opportunity Not applicable Benefits To provide a market competitive reward package to the employee Benefits to be provided to Executive Directors or the CEO will be determined by the Committee taking into account such factors as it determines to be necessary, with the aim of creating a competitive overall package. The provision of benefits would not be expected to be performance related. Benefits may include, but are not limited to: ➢ Car allowance ➢ Private health care ➢ Travel and housing allowance Benefits may also be provided to reflect the jurisdiction in which an Executive Director or the CEO is recruited or to which an Executive Director or CEO is relocated for business reasons, including relocation costs, tax equalisation arrangements and arrangements to take into account exchange rates. Benefits may also include participation in any broad-based incentive plan operated by the Company from time to time, up to the relevant limit for participation as applies to such arrangement Car allowance is a fixed annual amount. There is no maximum for health/dental insurance as it will depend on the value of premiums paid in the year Not applicable Awilco Drilling PLC Directors’ remu neration report (continued) 24 Element Purpose Operation Opportunity Performance Measure Performance- related bonus To provide an incentive for superior work and to motivate executives toward even higher achievement and business results, to tie their goals and interests to those of the Company and its shareholders and to enable the Company to attract and retain highly qualified executives Bonus payments are determined by the Remuneration Committee and awarded where justified by performance The amount of bonus increases with the level of performance achieved, up to a maximum of 100% of salary Annual bonuses will be determined by reference to performance, in the normal course measured over one financial year. The performance measures, weightings and targets for the annual bonus will be set by the Committee on an annual basis The Committee shall have discretion to determine the terms and level at which annual bonuses may be granted, including the minimum performance required for an annual bonus to be payable In respect of an Executive Directors' or CEO's participation in annual bonus arrangements in any year, the Committee w ill have power to amend performance measures and targets after they have been set if events happen that mean they are no longer a fair test of performance Awilco Drilling PLC Directors’ remu neration report (continued) 25 Element Purpose Operation Opportunity Performance Measure Pension To provide a market competitive long-term retirement benefit Eligibility to participate in a Defined Contribution scheme which has a maximum employer contribution of 12 % Up to 12 % of salary No t applicable Long Term Incentive Plan (LTIP) To motivate and incentivise executives to achieve key long- term incentives The Company has operated a historic LTIP arrangement for the former CEO with all awards being synthetic share options which are cash-settled In the event that the Company adopts a new long-term incentive plan (which may involve synthetic share options, cash or actual shares), the CEO would be eligible to participate in such plan, subject to the terms of, and the maximum levels of participation provided in, the rules of such plan. In respect of any performance-related long-term awards granted to the CEO, performance measures, weightings and targets would be set by the Committee Following grant of an award, the Committee would have power to amend performance measures and targets if events happen that mean they are no longer a fair test of performance The 2020 plan “vests” in 25% tranches linked to rig contract dates and expires after five years. Award of up to 100% of salary each calendar year The awards are made at the discretion of the Board of Directors and are not guaranteed to be awarded each year Notes to the Remuneration Policy Table In considering the appropriate measures to apply to any perf ormance -based awards, the Committee will seek to in centivise and reinforce delivery of the Company's stra tegic ob jectives achievin g a balance betwe en delivering a nnual returns to shareholders and ensuring long -term profitab ility and growth. The performance tar gets set would be stretching and ac hievable, taking into account the Company's strategic priorities and the economic environment in which the Company operates. Awilco Drilling PLC Directors’ remu neration report (continued) 26 Statement of consideration of employment conditions elsewhere in the Company The C ompany’s remuneration policies and practices are f o unded on a high degree o f alignment and consistency across the org anisation. Acc ordingly, r emuneration for senior management is determined taking into account the remuneration principles that apply to the CEO, and s imilar principles also form the basis of the remun eration arrangements for the wider workforce. The ap proach to salary reviews is con sistent across the Comp any, with consideration given to the scope of the role, responsibility, individual performan ce and pay levels in the selected p eer group. Retirem ent benefits, typically in the form of a pension, are provided based on local market practice. Other benefits provided to th e wider employee population reflect local market practice and legislative req uirements. A high proportion of the wider employee population are eligible to participate in annual bonus arrangemen ts. Opportunities and metrics which apply to these arrangements may vary by organisational level with functional perf ormance indicators incorporated wh e re appropriate. Senior managers are eligible to participate in the LTIP, with opportunities varying across levels with the most senior man agers having a bigger portion of their p ay delivered under the LTIP. The k ey difference b etween remuneration f or the CEO and the wid er employee po pulation is th e increased emphasis on long -term performance in respect of the C EO, with a greater percentage of their total remuneration b eing performance-related . The Committee is regularly upd ated on the pay principles and practices in oper ation across the Company, in order to tak e these into account in setting the remu neration policy. Other matters In addition to the above, the Company is obliged to honour any contractual entitlement to compensation or benefits, and any incentive awards, which ar e held by: (i) any current or former Executive Director or CEO on the effective date of this policy; or (ii) an employee or officer of t he Gro up on the date t hey are p romoted to th e role of Executive Director or CEO. Ap propriate disclosure will be made of an y com pen sation paid (or similar) to an Executive Director or CEO pursuan t to any such arrangements. The C ompany may reimburse all reasonable expenses incu rred by an Executive Director or CEO in connection with their ro le. This will include expenses in attendin g Board or Board-co mmittee meetings, o r the Company may alternatively provide a travel allowance for such purpose. This m ay also inclu de items which, for tax purposes, are treated as a taxable b enefit, and in which case the Company may also p ay any such tax o n behalf of the Executive Director or CEO. Approach to recruitment and promotions In recruitin g an Executive Director or CEO, including on promotion o f an employee or officer from with in the Group to th e role of CEO, the Committee will offer the recruit a remu neration pac kage that it believ es is appro priate, taking into account the skil ls and experience of the individual and the need to recruit, retain and mo tivate individuals of the appropriate calibre. The remuner ation package offer e d may include the components of remuneration described above in the Remuneration Policy Table. For extern al hires, the Committee m ay d etermine th at it would be appropr iate to buy -o ut any existing incentive awards held by the individ ual that are forfeited as a result of the individual leaving their former employer. The Committee may also determine that i t would be appropriate to grant recru itment- related awards. In the case of any buy-o ut o f an equity based award, or the g rant of any recruitment-r elated award, the awa rd would n ormally be subject to such v esting and/or performance conditions as the Commit tee determines to be appropriate, either under a one - off arrangem ent or under the terms of the Comp any’s incentive arrangements. In determining the terms of such awards, the Committee will take accoun t of th e vesting schedule and conditions attached to the forfeited awards (in the case of buy -out award s), but also other factors th at it d etermines to be relevant, including the need to incentivise suitably and retain the individual dur ing the initial years of their office. The max imum level of var iable remun eration (excluding a ny buy -out awards) that may be granted to an y new Executiv e Director or CEO is 250% per annu m of their salary. Awilco Drilling PLC Dire ctors’ remu neration report (continued) 27 Service contracts The employmen t contract of the CEO is not of a fixed duration an d therefore has no unexpired term s . The no tice period of the CEO's contract of employmen t is six months with the same notice per iod for the Company. The CEO's employmen t ca n be term inated in the six-mo nth probationary period without notice in the case of wilful misconduct or g ross negligence . In the event of termination by the Company, where the re is no basis for dismissal as a result of gross breach of duty or other material b reach of the em ployment contract by the CEO, o r as a result of mutual agreement, the CEO shall be en titled to twelve mon ths' severance pay. In the e vent of a c hange of c ontrol of the Comp any, the CEO can terminate the em ployment contract and would be e ntitled to twelve months' severance pay. The CEO's service co ntract is available for inspection at the Compan y’s registe red office during nor mal hours of bu siness. The non-ex ecutive directors do not have service contracts but instead have letters o f appointment. Loss of office payments Contractual en titlements A d eparting Exec utive Director’s or CEO's rig hts in respect of salary, retiremen t benefits and contractual benefits will be d etermined in accordance with his service contract. Incentive plans The terms of a departing Ex ecutive Director’s or CEO's particip atio n in any annual bonus or long -term incentive plan s will be governed by the terms of su c h arrangements. Corporate action s The treatment of incentive awar ds in the event of a corporate action affecting the Company will be determined in accordance with the term s of such awards. The Company may agree to pay reasonable legal fees on behalf of an Executive Director or CEO in respect of the effect of any corporate action on their personal po sition. Other The Company may enter into new contractual arrangements with a departing Executive Director or CEO in connection with the cessation of office or employment, includin g (bu t not limited to) i n respect of settlement of claims, co nfidentiality, restrictiv e covenan ts and/or consultancy arrangements, where the Committee determines it necessary or ap propriate to do so. The Company may pay reasonable legal fees on beh alf of an Ex ecutive Director or CEO in connection with their cessation of office and employmen t. The Company may agree to pro vide other ancillary or non -material benefits, paymen ts or similar to a departing Executive Director or CEO. Awilco Drilling PLC Directors’ remu neration report (continued) 28 Reward Scenarios The g raph below shows how the total pay o pportunities for any future CEO wo uld v ary under four performance scenarios. Th ese have been prepared on th e assumptions detailed below . Th e curr ent interim CEO is on a fixed rate in accordan ce with a managem ent on hire agreement and as a result no per formance scenarios are applicable. Below target = fix ed pay only (base salary, ben e fits and pension) On target = 50% p ayable of annual bonus, 0% LTIP a ward Maximum = 100% payable of annual bonus, 100% L TIP award Maximum 2 = 100% p a yable of ann ual bon us, 100 % LTIP award an d 50% share price in crease over t he performance period The chart illustrates the potential rewa rds availab le under th e remuneratio n policy on an annu alised basis for the financial year 2021 . The valu es (ot her than the Maximum 2 illustration) assume a constant share price an d do not tak e into account d ividend adjustments th at may be r eceived on the share awards. Th e potential awa rds available for "o n-target" p erformance under the an nual bonu s and LTIP are prov ided for illustration o nly and do n ot reflect formal policy d ecisio ns that these amounts will be received. Maximum 2 illustration assumes a share price increase o f 50% over the performan ce period but in all other r espects is the same as the Ma ximum illustration. Th e figures used in the chart are provided for illustration o nly based on a theoretical g rant over 100% of salary, being the maximum permitted under the policy table. The salary level (on which th e bonus an d LTIP elements of th e packag e are calculated) are based on th e previous salary level of GBP 3 25 ,000 based on the GBP/NOK year en d exchange rate . Awilco Drilling PLC Directors’ remu neration report (continued) 29 Remuneration policy table – non -executive directors The remuneratio n policy for non-ex ecutive directors is set out in the tab le below. No non-exec utive directors par ticipate in the Company’s incentive arrangements or p ension plan. Componen t Purpose Operation Fees The basic fee is a fixed annual fee agreed after taking external ad vice and making market comparison s, and relate to the service of th e directors in conn ection with the Company’s business. The ad ditional fees payable to the Chairman and members of the Board Com mittees reflects the add itional time commitment in preparing and atten ding additional meetings. The fees f or non-executive directors (includin g the Chairman) ar e reviewed annually and approved in aggregate at the annual general meeting. Th e current level of fees is detailed belo w. New appointments The same pr inciples as described ab ove will be applied in settin g the remuneration of a new non -executive director. Remuner ation will comprise fees only and be p ai d in accordance with the prevailing rate at the time of the appo intment. No variable remuner ation will be paid and there will be no compensation for any loss of remun eration in a previous employment. Letters of appointments The Non -executive Directors ’ Letters of Ap pointment are available for inspectio n at the Company’s registered of fice during normal hours of business. Other matters In addition to the above, the Company is entitled to honour any contractual entitlemen t to compensation or benefits, and any incentive awards, which are held by any current or former Non -Executive Director on the effective date of th is policy. App ropriate disclosure will be mad e of any compensation paid (or similar) to a Non-Ex ecutive Director pursuant to any such arrangemen ts. The Com pany may reimburse all reason able expen ses incurred by a Non -Executive Director in connection with their role. This will include expenses in attending Boar d or Board -co mmittee meetings, o r the Company may alter natively pr ovide a travel allowanc e for such purpose. This may also includ e items which, fo r tax purposes, are treated as a taxable ben efit, and in which case the Company may also pay any s uch tax on behalf of the Non -Executive Director. Fees for non-executive directors The current lev el of fees pa id for 20 20 and those propo sed for 20 21 are as follows: 20 21 2020 GBP GBP Chairman 46,375 46,375 Basic Fee 33,125 33,125 Chair of Aud it Committee 5,000 5,000 Member of Aud it, Remuneration or Nomination Committee 3,000 3,000 Fees to be paid in respect of 2021 will b e decided at the next AGM which is sched uled for 22 June 2022. Retirement and re-election of directors All directors wer e required, under the Articles o f Ass ociation of the Company, to retire at the first AGM. At each subsequ ent AGM, any directors who h ave been appointed by ordinary resolu tion or by the directors since th e last AGM or who were not a ppointed or reappointed a t on e of the preceding two AGMs must retire fro m office and may offer themselves f or reappointment by the members. Af ter recommendation by the Nomination Committee, all direc tor s were re-ap pointed at the AGM on 9 th June 2021 . Awilco Drilling PLC Directors’ remu neration report (continued) 30 Audited informa tion Directors' remuneration Single total figu re of remuneration table 20 21 Basic Salary and Fees Benefits (1) Pension related benefits (2) Total Fixed Remuneration Performance Related bonus Other (3) Total Variable Remuneration GBP GBP GBP GBP GBP GBP GBP Chief Executive Officer: J E O Berge (4) 27,083 1,290 3,296 31,669 - - - E D Jacobs (5) 170,337 - - 170,337 - - - 197,420 1,290 3,296 202,006 - - - Non-executive Directors: S E Thorv ildsen 49,375 - - 49,375 - - - H Fougner 39,125 - - 39,125 - - - D A Gold 36,125 - - 36,125 - - - J N Simpson 38,125 - - 38,125 - - - S Syrrist 33,125 - - 33,125 - - - 195,875 - - 195,875 - - - 2020 Basic Salary and Fees Benefits (1) Pension related benefits (2) Total Fixed Remuneration Performance Related bonus Other (3) Total Variable Remuneration GBP GBP GBP GBP GBP GBP GBP Chief Executive Officer: J E O Berge 325,000 15,789 39,552 380,341 - - - 325,000 15,789 39,552 380,241 Non-executive Directors: S E Thorv ildsen 49,375 - - 49,375 - - - H Fougner 39,125 - - 39,125 - - - D A Gold 36,125 - - 36,125 - - - J N Simpson 38,125 - - 38,125 - - - S Syrrist 33,125 - - 33,125 - - - 195,875 - - 195,875 (1) Includes non -cash benefits comprising car allo wance and private health and dental care (2) Contributions mad e during the year to the defined contribu ti on scheme (3) Cash-settled value of synthetic share options exercised d uri ng the year (4) Resigned 1 February 2021 (5) Interim CEO, not e mployed by Company but provided under a management on hire agreement from a related p arty Awilco Drilling PLC Directors’ remu neration report (continued) 31 Analysis of taxable benefits received The Chief E xecutive Officer received the following taxable benefits: 20 21 2020 GBP GBP J E O Berge (1) Car allowance 1,290 15,789 Total 1,290 15,789 (1) Resigned 1 Febr uary 2021 Annual bonus 2021 For the year un der review, there was no bonus awarded to the Ch ief Executive Of ficer . Annual bonus 2022 The cr iteria for the 2022 bonus has y et to b e finalised by the Remuneration Committee but it is considered unlikely that a bonus for 2022 will be awarded. Long Term Incentive Plan A long term incentive plan for the CEO and other key management personnel, with a total l imit of up to 4% of the Company’s issued share capital was approved at the Annual General Me eting on 2 6 June 2013. The awards for the years 2010 , 2012, 2014 and 201 6 ar e no w fully exercised . A further award was issued in 2020 and a to tal limit of up to 4,00 0,000 shares was approved at the general meeting on 1 1 Nov ember 2019. The 2020 p la n “v ests” in 25% tranches linked to rig contr act dates. Shares At 1 January 20 21 Shares Granted in the year Shares Exercised/Adjusted in the year Shares At 31 December 20 21 Expiry date Market price on date of award Interest vested in 2021 Market price on vesting date No. No. No. No. NOK No. NOK J E O Berge 600,000 - (600,000) - 31 Dec 2025 14.30 - - There are no other directors who have any interests in sh ares. Awilco Drilling PLC Directors’ remu neration re port (continued) 32 Information not subject t o audit: Relative importance of the spend on pay The graph b elow shows the relative importance of the spend on pay (for all employees) comp ared with the returns distribu ted to shareholders (Note no div idends paid in 20 20 or 202 1 ). Total shareholder return performance graph The graph below sh ows the total shareholder return in terms of change in value of an initial investment of £100 on 10 June 2011 (and assuming dividends are re - invested) in a holding of the Company’s shar es against the corresponding total sh areholder return in a hyp othetical holdin g of s hares in the OBX ( an ind ex on the Oslo Bors stock ex change). This was selected as it rep resents a b road equity market in dex in which th e Company is a co nstituent me mber. The graph is a reporting requirement , however, the LTIP awards that are made to the Executive Director are not based on share performance. Awilco Drilling PLC Directors’ remu neration report (continued) 33 Chief Executive Officer ( ‘ CEO ’ ) remuneration Five-year co mparison The table below summar ises the Chief Executive Officer (the Executive Direc tor)’s single total figure of remuneration, annu al and long -term variable performance -r elated remuneration (and the percentag e of the maximum oppor tunity that these represent) in relation to the past five years. Year Chief Executive Officer Single total figu re of remuneratio n Annual v ariable element (actual award versus o pportunity) GBP GBP % 2021 E Jacobs (4) 170,337 - - 2021 J E O Berge (3) 557,625 - - 2020 J E O Berge 380,341 - - 2019 J E O Berge (1) 417,591 162,500 50 % 2019 J O S Bryce (2) 719,207 - 0% 2018 J O S Bryce 383,030 82,800 31% 2017 J O S Bryce 350,062 50,000 19% (1) Appointed 1 May 2019 (2) Resigned 18 March 2019 (3) Resigned 1 February 2021 (4) Interim CEO, not employed by Company but provided under a management on hire agreem ent from a related party Comparison of CEO remuneration to employee remuneration 20 21 2020 Change % Employee remuneration change GBP GBP Salary and f ees 197,420 325,000 (39)% 4% Termination pay ment 529,252 - n/a n/a Taxable ben efits 1,290 15,789 (92)% 0% Annual v ariable performance related remuneration - - 0% ( 22 )% Total Annu al figure 727,962 380,341 Single total figu re of remuneration 727,962 380,341 The ab ove table shows the movement in remuneration for the Chief Executive Officer between the current and pr evious financial y ear com pared with m ovement of the av erage remu neration (per head) for all Company emplo yees. Comparison of Directors remuneration to employee remuneration 20 21 2020 201 9 201 8 201 7 Change % Change % Change % Change % Change % S E Thorv ildsen 0% 0% 0% 0% 0% H Fougner 0% 0% 0% 0% 0% D A Gold 0% 0% 0% 0% 0% J N Simpson 0% 0% 0% 0% 0% S Syrrist 0% 0% 0% 0% 0% Employees 1.5% 2% (3.8)% (1.5)% (2.8)% The above table sho ws the movement in remuneration for the Directors fo r the past five years compared with the aver age movement in remuneration (per h ead) for all Company employees. Awilco Drilling PLC Directors’ remu neration report (continued) 34 Implementation of remuneration policy for following financial year Base salaries Any future CEO’s base s alary will continue to be reviewed annually by th e Remuneration Committee, based on performance and curr ent market conditions. The Remuneration Committee will then make a recommendation to the Board of Directors. There is no change f rom the previous year. Pension and b enefits The CEO would be elig i ble to participate in a def ined contr ibution arrangement which the Company contributes a maximum of 12 % o f base salary. Additional benefits in clude private medical an d dental insurance and co mpany car allowance. Annual performan ce related remuneration The maximum bonus opportunity for the CEO would remain unchanged at 100% of base salary. The bonu s opp ortunity will be set by th e C ommittee with tar gets aligned with creating shareholder value. Statement of shareholder voting The table below sets ou t the votin g by the Compan y’s shar eholders on the resolu tion to appro ve th e Directors’ remu neration report a t the AGM held on 9 June 2021. Total numb er of votes % of votes cast For 24,299, 726 98.4% Total votes cast 24 ,704,241 100.0% The Remuner ation Committee is pleased to note that 98. 4% of shar eholders approved the 20 20 Directors ’ remuneration r eport. By order of th e Board of Directors Sigurd Thorv ildsen 25 May 20 22 35 Independent auditors’ repor t to the members of Awilco Drilling PLC Opinion In our opinion:  Awilco Drilling plc’ s group financial statements and parent company financial statemen ts (the “financial statemen ts”) give a true and fair v iew of the state of the group’s and of the par e nt company’s aff airs as at 31 December 2021 a nd of the group’s loss f or th e year then ended;  the group financial statements have been properly prepared in accordance with UK adop ted Internation al Accounting Standar ds and with I nternational Financial Repor ting Standards as adop ted by the European Union;  the parent comp any financial statements hav e been properly prepared in accordance with UK adopted intern ational accounting standards as applied in accordance with section 408 o f th e Companies Act; an d  the financial statem ents have been prepared in acco rdance with the requireme nts of the Companies Act 2006. We have aud ited the financial statements of Awilco Dr illing plc (the ‘parent c ompany’) and its subsidiaries (the ‘ group’) for the year ended 31 December 2021 which comprise: Group Parent com pany Group statemen t of financial position Company statem ent of financial position Group statement of comprehensive in come Company s tatement of changes in equity Group statement of changes in equity Company s tatement of cash flows Group statement of cash flows Related notes 1 to 28 to the financial statements includin g a summary of significant acco unting policies Related notes 1 to 28 to the financial statements, inclu ding a summary of sign ificant accounting policies The finan cial reporting framework that has b een applied in their p reparation is applicable law and UK adopted In ternational Accounting Stand ards and International Financial Reportin g Standards as adopted by the European Union and, as r egards to the parent co mpany financial statements, as applied in acc ordance with section 40 8 of the Companies Act 2006. Basis for opinion W e co nducted ou r audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law . Ou r responsibilities u nder tho se standards are further describ ed in the Audito r’ s responsibilities fo r the audit of the finan cial statements section of our report. W e ar e in dependent of the group and paren t company in accord ance with the ethical requiremen ts that are relevan t t o our audit of the financial statements in the UK, including t he FRC’ s Ethical Standard as applied to listed en tities, and we have fulfilled our other ethical responsibilities in acco rdance with these requirements. W e believ e that the audit eviden ce we have obtained is sufficient and appr opriate to provide a basis for our o pinion. Independent auditors’ repor t to the members of Aw ilco Drilling PLC 36 Emphasis of Matter - financi al statements prepar ed on a ba sis other than going concern We draw attention to Note 2 in the financial statements wh ich explains the Group are cu rrently no longe r performing operational activ i ties and th erefore do not co nsider it to b e ap propriate to adopt th e go i ng concern basis of acco unting in p reparing the f inancial statements. Accordin gly, the financial statements hav e been prepared on a basis other than g oing concern as d escribed in Note 2. Our opinion is not modified in respect of this m atter. Overview of our audit app roach Audit scope • We perfo rmed an audit of t he complete finan cial information of five components an d audit procedures on specific b alances for a further component. • The co mponents where we performed fu ll or specific audit procedures accounted for 100% of Loss before tax, 100% of Reven ue and 10 0% of Total assets. Key audit matters • Impair ment of drilling rigs and right of u se assets Materiality • Overall g roup materiality of $330k w hich represents 0.7 5% of Operating Costs. An overview o f the sco pe of the parent company and group aud its Tailoring the scope Our assessment of au dit risk, our evaluation of mater iality and our allocation of performance m ateriality determine our audit scope for each company with in the Group. Taken together, this enables us to fo rm an opinion on t he consolidated f i nancial stateme nts. We take into ac count size, risk profile, the organ isation of the group an d effectiveness of group -wide controls, changes in th e business environment and other factors when assessing the level of work to be perform ed at each comp any. In assessing the r isk of material misstatement to the Group financial statements, and to ensure we had adequate quan titative coverage of significan t accounts in the financial statements, o f the six reporting components of the Group, we selected six compon ents covering entit ies within Norway, Si ngapore and the United Kingd om which represent the principal business u nits within the Gro up. Of the six com ponents selected, we performed an audit of the complete financial informatio n of five components (“f ull scope components”) whic h were selected based on their size or risk characteristics. For the remainin g component (“specific scope componen ts”), we performed audit procedures on spec ific accounts within that component that we con sidered had the potential for the gr eatest impact on the significant acco unts in the financial statements either b ecause of the size of these acco unts or their risk profile. The reporting components where we performed aud it procedures accounted for 100% (2 02 0: 100%) of the Group’s Lo ss before tax, 100% (202 0: 100%) of the Group’s Revenue an d 100% (2020: 99%) of Independent auditors’ repor t to the members of Aw ilco Drilling PLC 37 Tailoring the scope (conti nued) the Group’s Total assets. For th e curr ent year , the full scope co mponents co ntributed 98% (2 020: 9 4%) of the Group’s Loss before tax, 100% (2020: 100%) of the Group’s Revenue and 100% (2020: 100%) of th e Group’s Total assets. The specific scope component contributed 2% ( 2020: 6%) of the Group’s Loss before tax, 0% (2020: 0%) of the Group’s Revenue and 0% ( 2020: 1%) of the Group’s Total as sets. The audit scope of these co mponents may no t have included testing of all significan t accou nts of the component but will have con tributed to the coverage of significan t accounts tested for the Group. The charts b elow illustrate the coverage obtain ed from the work perfor med by our audit team s . The charts below illustr ate the coverage obtained from the work performed by our audit teams. Changes from the prior year We have classified five entities as full scope and one as spec ific scope in the current year, compared to f our entities as full scope and two a s specific scope i n the prior year. This is as a result of reduced materiality for the group. Involvement with com ponent teams All audit work performed for the purposes of the a udit was undert ak en by the Group audit team. Loss before tax (or adjusted PBT measure used) 98% Full scope components 2% Specific scope components 0% Other procedures Revenue 100% Full scope components 0% Specific scope compone nts 0% Other procedures Total assets 100% Full scope components 0% Specific scope components 0% Other procedures Independent auditors’ repor t to the members of Aw ilco Drilling PLC 38 Key audit matte rs Key audit m atters are those matters that, in our professional judgment, were of most significance in our audit of th e financial statements of the current p eriod and include the most significant asses sed risks of material misstatement ( whether or not du e to fraud) that we identified . These matters included those wh ich had the greatest ef fect on: the overall audit strateg y, the allocation of resources in the audi t; and directin g the efforts of the engagement team. These matters were addressed in the co ntext of our audit of the financial statemen ts as a whole, and in our op inion thereon, and we do not provide a separate o pinion on these matters. Risk Our response to the risk Key observations communicated to the Audit Committee Impairment Refer to the; Accounting policies (pa ge 53 ); and Note 16 of the Consolid ated Financial Statements (pa ge 63) Under IAS 3 6, the group is required to assess annu ally whether an y impairment indicators ex ist at the year-end and if such conditions exist, an impairment a ssess ment is required. The risk has in creased in the current year due to no future work lined up for the rig, and subsequent a greement to sell the rig post yea r end. Under IAS 1 0, the group is required to consider whether events after th e reporting period should be adjusted in the financial statemen ts. The W ilHunter Rig is carried at nil NBV therefore there is no risk in relation to impairment. There is a risk th at other assets are over stated. Following the $47.3m impairment c har ge to the W ilPhoenix, we consider the carrying value of the drilling rig to be reason able and that appropriate d isclosures are made in the finan cial statements. Following the $0.8m impairment charge, we consider the carrying v alue of the right of use asset to be reaso nable and that appropriate disclosures are made in the finan cial statements. W e discussed with manag ement whether an y impairment triggers existed at year end and noted than no fu rther contracts had been agreed with customers for the post year end period, and that this should be considered an impairment tr igger . - As a result of impairment tr iggers we requested Man agement consider ob taining independent th ird-party brokers’ valuation s of the W ilPhoen ix Rig - W e assessed the competence of the brokers Subsequent to the year end Board approv al to sell the W ilPhoenix Rig to a third party was agr eed - W e obtained a copy of the post year end sale and purchase ag reement for the W ilPhoenix rig - W e discussed and confirmed with managemen t that the Independent auditors’ repor t to the members of Aw ilco Drilling PLC 39 Risk Our response to the risk Key observations communicated to the Audit Committee sale was not con sidered distressed - W e took into account all informatio n received post year end to determine wh ether managemen t were correct to r ecognise an additional imp airment following th e agreed sales price of th e W ilPhoenix Rig - W e challenged managemen t on whether the sales price could be deter mined as the fair valu e less cost to sell as at the year-en d date - W e discussed with the client whether it was appropriate to continue to recognise a valu e in the right of u se asset of the building in which the head office operates, giv en no future econo mic benefit as there was no future trade foreseea ble - W e have confirmed that the appropriate disclosures have been made in the consolidated financial statements. All procedures wer e performed by th e Group team. Independent auditors’ repor t to the members of Aw ilco Drilling PLC 40 Our application of materiality We apply the co ncept of m ateriality in plan ning and performing the audit, in ev aluating the ef fect of identified misstatemen ts on the audit and in forming o ur audit opinion. Materiality The magnitude of an omission or misstatement that, individually o r i n the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent o f our audit procedures. We deter mined materiality for the Group to be $330k ( 2020: $ 950k) which is 0.75% (2020: 1%) of Operating Costs (2020 : Equity). During 2021 the fu ture prospects of the Group d eclined due to a lack of secured work and utilisation of the rigs. Operating Costs wer e co nsidered a m ore a ppropriate materiality basis given the challenges faced by the group. We determined materiality for the Parent Company to be $2 .1m (2020: $3.3m), which is 5% (2020 : 3%) of Equity. During th e co urse of our audit, we reassessed init ial materiality and increased it due to the increase in Operating Costs. Performance mate riality The applica tion of materiality at the individua l account or balance level. It is set a t an amount to reduce to an approp riately low level the probability tha t the agg regate of uncorrected and und etected misstatements exceed s materiality. On the basis of our risk assessments, together with our assessment of the Group ’s overall control environment, our judgement was that performance mater iality was 75% (2020: 75% ) of our planning materiality, nam ely $240k (2020: $710k). We hav e set performance materiality at this percentage based on the history o f past misstatements and lack thereof, our ability to access the likelihoo d of misstatements and the effectiven ess of the internal control environment. The performance m ateriality set for each compon ent is based on the relative scale an d risk of the component to the Group as a whole and our assessment o f the risk of misstatement at that com ponent. In the current yea r, the range of performance materiality allocated to compon e nts was $72k t o $240k (2020: $98k to $710k). Reporting threshold An amount b elow which identified misstatements are conside red as being clea rly trivial. We agr eed with the Au dit Committee that we woul d report to them all uncorrected audit d ifferences in excess of $17k (2020: $4 0k), which is set at 5% of plan ning materiality, as well as differences belo w th at threshold that, in our view, warranted reporting on qu alitative grounds. We evaluate any uncorrected misstatements against b oth the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our op i nion. Other informat ion Independent auditors’ repor t to the members of Aw ilco Drilling PLC 41 The o ther information co mprises the info rmation included in the annual report set out on pages 2-12, other than the financial statemen ts and our auditor’s report thereon. The directors ar e responsible for the other information co ntained within annual report. Our op inion on the f inancial statements does no t cover the o ther information and, except to the exten t otherwise exp licitly stated in this report, we do not ex press any form of assurance conclusion thereon. Other informat ion (continued) Our respon sibility is to read the other information and, in doi ng so, consider whether the other information is materially incon sistent with the financial statemen ts or our knowledge obtained in the course of the audit or other wise appears to be materially misstated. If we identify such material inconsistencies o r apparent m aterial misstatements, we are requir e d to determine wheth er this gives rise to a material misstatement in the financial statements themselves. If, based on the work we hav e performed, we conclude t hat there is a m aterial misstatement of the other i nformation, we are r equired to report that fact. We have no thing to report in this regard. Opinions on othe r matt ers prescribed by the Compa nies Act 2006 In our opi nion, the p art of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006 . In our opinion, based on the work undertaken in the course of the audit: • the info rmation given in the strategic report and the directors’ rep ort fo r the finan cial year for which the financial statements are prepared is con sistent with the financial statements; and • the strategic rep ort an d directors’ report have bee n prepared in acco rdance with app li cable legal requirements. Matters on which we are required to report by exception In the ligh t of the knowledge and understanding of the group and the parent company and its environm e nt obtained in the course of the audit, we have not identified material misstatements in the strateg ic report or the director s’ report. We have no thing to report in respect of the following matters in relation to which the Compan ies Act 2006 requires us to report to you if, in our opinion: • adequate ac counting records have not been kept by the parent company, or returns adeq uate for our audit have no t been received from branches not v isited by us; or • the parent comp any financial statements and the part of the directors’ remuneration report to be audited are no t in agreement with the accoun ting records and returns; or • cert ain disclosur es of directors’ remuneration specified by law are not made; or • we have no t received all the information and explan ations we require for our audit Responsibilities of directors As explained more fully in the directors’ responsibilities statem ent set out on page 13 , t he directors are responsible fo r the preparation of the financial statem ents and for being satisfied that they give a true and Independent auditors’ repor t to the members of Aw ilco Drilling PLC 42 fair view, and for such internal contro l as the directors determine is necessary to enable the preparation of financial statemen ts that are free from material misstatemen t, whether due to fraud or error. In preparing the financial statements, the director s are responsible for assessing the gro up and parent company’s ab ility to continue as a going concern, d isclosing, as applicable, matters relate d to going concern and using the going concern basis of accounting un l ess the directors either intend to liquidate the group or the par ent company or t o cease operations, or have no realistic alternative but to do so. Auditor ’ s responsibiliti es for the audi t of the fina ncial statemen ts Our objectives are to o btain reasonable assurance about whether the financial s tatements as a whole are free from mater ial misstatement, whether due to fraud or error , and to issue an auditor ’ s r e port that includes o ur opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a mater ial misstatement wh en it exists. Misstatements can arise f rom fraud o r error and are co nsidered material i f, individually o r in the agg regate, they could reasonably be expec ted to in fluence the economic d ecisions of users taken on the basis of these fin ancial statements. Explanation as to what e xtent the audit was consid ered capable of detecting irregularities, including fraud Irregularities, includ ing fraud, are instances of non -compliance with laws a nd regulations. W e design procedures in lin e with our responsibilities, outlined abo ve, to detect irregularities, includ ing fraud. The risk of not detectin g a material misstatement due to fraud is higher than the risk of not detecting one resulting from er ror , as fraud may in volve deliberate concealment by , for example, forgery or intentional misrepresentation s, or through collusion. The extent to which our pr ocedures are capable o f detecting irregularities, inclu ding fraud is detailed below . However , the primary resp onsibility for the prevention and detection of fraud rests with both tho se charged with governance of the co mpany and management. • W e obtained an understanding of th e legal and regulatory frameworks th at are applicable to the group and deter mined that the most significant ar e those that relate to the reportin g framework (IFRS and the Com panies Act 2006) an d the relevant tax compliance r egulations in the jurisdictions in which A wilco operates. In addition , we concluded that there are certain significan t laws and regu lations that may have an effect on the determination o f the amounts and disclosures in the finan cial statements and those laws and regulations relating to h ealth and safety , employee matters, enviro nmental, and bribery and corrup tion practices; • W e under sto od how A wilco Drilling PLC is comp lying with those framewo rks by making enquiries of management and those responsible for leg al and compliance procedures. W e corroborated our enquiries through our review of Board min utes, papers p rovided to the Audit Committee and correspondence received from regulato ry bodies and noted that there was no contradicto ry evidence; • W e assessed the su sceptibility of the group’ s financial statements to material misstatement, including how fraud might occur by consider ing the risk of fraud through management o verride and, in respon se, we carried out procedures such as testing of transactions back t o source information, wh ich were designed to pro vide reasonable assurance that th e financial statements were free from fraud or error; • Based on this understanding we designed our audit procedures to identify non -c ompliance with such laws and r egulations. Our procedures involved jo urnal entry testing, with a focus on journals meeting our d efined risk criteria based on our und erstanding of the business. Independent auditors’ repor t to the members of Aw ilco Drilling PLC 43 A further descrip tion of our responsibilities for the au dit of the financial statements is located on the Financial Reportin g Council’s websi te at h ttps://www.frc.org.uk/auditor sresponsibilities. This description forms part of our auditor’s report. Use of our report This report is m ade solely to the company’ s members, as a body , in accordance with Ch apter 3 of Part 16 of the Comp anies Act 2006 . Our audit wo rk has been undertaken so that we m i ght state to the co mpany’ s members tho se matters we are required to state to th em in an auditor ’ s report an d for no other purpose. T o the fullest exten t permitted by law , we do not accept or assume resp onsibility to anyone other than the company an d the company’ s member s as a body , for our audit work, for th is report, or for the opinions we have formed . Jamie Dixon ( Senior Statutory Auditor) For and on b ehalf of Ernst & Young LLP (Statutory Auditor) Manchester 25 May 202 2 Notes: 1. The maintenance and integrity of the Awilco Drilling PLC web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, according l y, the auditors acce pt n o responsibility for any changes that may hav e occurred to the financial statemen ts since they were initially p resented on the web site. 2. Legislation in the Un ited Kin gdom gov erning the p reparation and dissemi nation of financial statements may d iffer from legislation in other j urisdictions. Awilco Drilling PLC 44 Group statement of co mprehensive income for the year ended 31 December 2021 20 21 2020 Notes US$000 US$000 Revenue 5 33,077 25,602 Cost of sales (33,986) (33,460) Impairmen t 15, 16, 22 (48,120) (145,171) Gross Loss (49,029) (153,029) General and administrative expenses (12,235) (14,887) Operating Loss 6 (61,264) (167,916) Finance incom e 9 - 386 Finance exp ense 10 (1,441) (35) Other expen se (4) - Net loss on for eign exchange transactions 11 (254) (131) Loss before taxation (62,963) (167,696) Income tax ex pense 12 (9,266) (161) Loss for the year attributable to equity shareholders (72,229) (167,857) There is no c omprehensive in come other than the results for the yea r. Basic and diluted loss per share (US$ p er share) 13 (1.32) (3.08) Total compr ehensive income for the year is attributable to the owners o f the Company, as there is no minority interest. Awilco Drilling PLC 45 Group statement of fina ncial position as at 31 Decemb er 2021 20 21 2020 Notes US$000 US$000 Non-current assets Property, plan t and equipment 15 15,764 66,800 Right- of -use asset 22 - 1,096 Deferred tax asset 12 - 16 15,764 67,912 Current assets Inventory 115 3,026 Trade and oth er receivables 18 662 6,411 Cash and cash eq uivalents 19 9,685 14,738 10,462 24,175 Total assets 26,226 92,087 Current liabilities Trade and oth er payables 20 4,550 6,294 Provisions 21 1,100 1,573 Current tax p ayable 9,251 66 14,901 7,933 Non-current liabilities Trade and o ther payables 20 426 1,026 426 1,026 Total liabilities 15,327 8,959 Net Assets 10,899 83,128 Shareholders’ Equity Called up share capital 24 525 525 Share prem ium account 24 218,381 218,381 Retained (def icit) / earnings (208,007) (135,778) Total Shareholders’ equity 10,899 83,128 Signed on behalf of the Board of Directo rs Sigurd Thor vildsen Director 25 May 202 2 Awilco Drilling PLC 46 Company state ment of financial position as at 31 Decemb er 2021 20 21 2020 Notes US$000 US$000 Non-current assets Property, plan t and equipment 15 419 489 Right of use assets 22 - 1,096 Investment in subsidiaries 17 75 279 Amount due f rom subsidiary undertakings 25 15,245 92,728 Deferred tax - 16 15, 739 94, 608 Current assets Trade and oth er receivables 18 2,305 3,830 Cash and cash eq uivalents 19 9,346 13,961 11,651 17,791 Total assets 27, 390 112, 399 Current liabilities Trade and oth er payables 20 2,435 3,414 Non-current liabilities Trade and oth er payables 20 426 748 Total liabilities 2,861 4,162 Net assets 24, 529 108,237 Shareholders’ Equity Called up share capital 24 525 525 Share prem ium account 24 218,381 218,381 Retained (def icit) / earnings (194,377) (110,669) Total Shareholders’ equity 24,529 108,237 The loss recorded by the Company fo r the year was US$ 83. 7 million (20 20 : US$ 114.0 million loss ). Signed on behalf of the Board of Directors Sigurd Thorv ildsen Director 25 May 202 2 Awilco Drilling PLC 47 Group statement of cha nges in equity for the year ended 31 December 2021 Called Up Share Capital Share Premium account Retained Earnings/(deficit) Total shareholders equity US$000 US$000 US$000 US$000 At 1 January 2 0 20 525 218,381 32,079 250,985 Total compr ehensive loss for the year (167,857) (167,857) At 31 Decem ber 2020 525 218,381 (135,778) 83,128 Total compr ehensive loss for the year - - (72,229) (72,229) At 31 Decem ber 2021 525 218,381 (208,007) 10,899 Awilco Drilling PLC 48 Company state ment of changes in equity for the year ended 31 December 2021 Called Up Share capital Share Premium account Retained Earnings/ (d eficit) Total shareholders equity US$000 US$000 US$000 US$000 At 1 January 2 0 20 525 218,381 3,367 222,273 Total compr ehensive profit for the y ear - - (114,037) (114,037) At 31 Decem ber 2020 525 218,381 (110,669) 108,237 Total compr ehensive loss for the yea r - - ( 83, 708) ( 83, 708) At 31 Decem ber 2021 525 218,381 ( 194,377 ) 24,529 Awilco Drilling PLC 49 Group statement of cash flows for the year ended 31 December 2021 Restated 20 21 2020 Notes US$000 US$000 Operating activities Loss before taxation (62,963) (167,696) Adjustments to rec oncile profit befo re tax to net cash flows: Depreciation of fixed assets and right of use assets 15, 22 6,241 10,302 Impairment o f fixed assets and right of use assets 15, 22 48,120 145,171 Inventory write off 3,026 1,620 Net finance expense /(income) 1,441 (351) Share-based payment (114) (532) Working cap ital adjustments: Decrease in trad e receivables 3,486 5,385 (Increase)/ Decrease in inventory (115) 300 Decrease / (incr ease) in prepayments an d other receivables 2,249 (2,058) (D ecrease) / increa se in trade and other payables (3,605) 878 Interest paid 10 (53) (35) Interest received 9 - 386 Taxation p aid (65) (74) Net cash flows used in operating activities (2,352) (6,704) Investing activities Purchase of pro perty, plant and equipment 15 (2,229) (19,316) Disposal of pro perty, plant and equipment - 29 Net cash flow used in investing activities (2,229) (19,287) Financing activities Payment of principal portion of lease liabilities 22 (472) (520) Net cash flows generated (used in)/from financing activities (472) (520) Net decrease in cash and cash equivalents (5,053) (26,380) Net foreign exchange difference - (131) Cash and cash equivalents at beginning of year 14,738 41,249 Cash and cash equivalents at end of year 19 9,685 14,738 We have restated the movemen t in inv entory, as was erroneously reported as a wo rking capital adjustment at 31 December 2020. This has now been reclassified correctly to non -cash movemen ts in the cashflow statement. Awilco Drilling PLC 50 Company state ment of cash flows for the year ended 31 December 2021 20 21 2020 Notes US$000 US$000 Operating activities Loss before taxation ( 83, 692) (113,945) Adjustments to rec oncile (loss)/profit before tax to net cash flows: Depreciation of fixed assets and right of use assets 15, 22 390 384 Impairment o f fixed assets and investments 17, 22 979 - Net finance in come (1,907) (357) Share based p ayment (114) (532) Working capital adjustments: (Increase) / Decrease in prepayments ( 25 ) 110 Decrease in tr ade and subsidiary receivables 25 80,968 86,760 (Decrease) / in crease in trade and other payables ( 833 ) 312 Interest paid (41) (27) Interest receiv ed - 385 Net cash flows used in operating activities (4,275) (26,910) Investing activities Purchase of pro perty, plant and equipment 15 - (21) Disposal of pro perty, plant and equipment 15 - 29 Net cash flows generated from /(used in) investing activities - 8 Financing activities Payment of principal portion of lease liabilities 22 (3 40 ) (340) Net cash flows generated from/(used in) financing activities (3 40 ) (340) Net increase/(dec rease) in cash an d cash equivalents (4,615) (27,242) Cash and cash equivalents at beginning of year 13,961 41,203 Cash and cash equivalents at end of year 19 9,346 13,961 Awilco Drilling PLC 51 Notes to the financial s tatements At 31 December 20 21 1. General informat ion The G roup and Company financial statemen ts of Awilco Drilling PLC for the year ended 31 Dec ember 2021 were au thorised for issue by t he Board of Directors on 25 May 20 22. The Com pany is a p ublic company limited by shares, incorporated in the United Kingdom (Englan d and Wales) under the Companies Act 2006 and listed on the Oslo Bors stock exchange. Th e Company’s registered number is 7114196 and the address of the registered office is given on page 1. The principal place of the business is 2 Kingshill Park , Westhill, Aberdeenshire, AB32 6FL . The nature of the G roup’s o perations an d its principal activities are set out in the Strategic report. 2. Basis of prepa ration Statement of compliance The Group financial statements have been pr epared in accord ance with UK -adop ted International Accounting Standards (UK -adopted IAS) and International Financial Reporting Standards as ad opted b y the European Unio n (EU adopted IFRS) as it applies to ann ual periods beginning 1 Janu ary 2021 . The Company finan cial state ments are prepa red in accordance with UK -ad opted International Accounting Standards (UK -adopted IAS) as applied in accordance with section 408 of the Companies Act 2006 . Basis other than going concern It is the responsibility of the directo rs to prepar e the finan cial statements on a going concern basis unless it is inapprop riate to presume the Group will continue in business. The Gr oup is currently no longer performing operational activities. Acc ordingly, they adopt the basis o ther than going concern in preparing these financial statements. There have bee n no departures from IFRS, and no adj ustments to carrying values as a result of the basis of preparation. Basis of consolidation The Group financial statements incorporate the financial stat ements of the Company and entities controlled by the Company. Under IFRS 10, control exists where the investor has: (a) power over the inv estee; (b) exposure, or rights, to variable returns from its invol vem ent with the investee; an d (c) the ability to use its power over th e investee to affect the amount of the investor’s returns. The finan cial statements of the subsidiar ies are prepared for th e same reporting period as the Company , using consistent accou nting policies and prepared on a historical cost basis . The Gr oup has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Company income statement. The loss reco rded by the Company for the year was US$ 8 3. 7 million (20 20 : US$114.0 million loss ). 3. Significant accounting judgemen ts, estimates and assumptions Key sources of estimation uncertainty The key assumptions co ncerning the future, and other k ey sources of estimation un certainty at the balance sheet date, that have a significant risk of causing a m aterial adjustmen t to the carrying amounts of the assets and liabilities within the next financial year, are discussed below. Impairment The carrying amount of t he Gr oup’s rigs are reviewed at eac h balance s heet date to determine whether there is any indication of impairment, or more fr equently if ev ents or changes in circumstance s indicate they might be impaired. Impairm ent indi cators were i dentified at the year-en d in respect of the W il Phoenix rig, and as a result, ma nagement perfor med an impairment test to assess the asset’s recov erable amount. As a sale of the rig has been agreed post year end this has been assessed as providing a n accu rate recoverable amount based on fair v alue, less cost to sell. T his re sulted in an impair ment o f US$ 47.3 million at year end. As there is an ag reed price, there are n o sensitives on the impairment calcu lation. Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 52 3. Significant accounting judgemen ts, est imates and assu mptions (con tinued) Contingent Liabilities As detailed in Note 23, there is one item that is considered as a co ntingent liability. This is in connection with claims that have been submitted by Keppel FELS shipyard in respect of amounts it c on siders recoverable due to termination provisions in the contracts for Nordic W inter and Nordic Spr ing. The Group has applied ju dgement in evaluating them as contingent liabilities only an d no provision has been mad e. 4. Account ing policie s New standards and interpretations There were various stan dards effective for annual pe riods beginning on or after 1 January 202 1 however none had any imp act on these financial s tatements. The Group h as not early adopted an y other stan dard, interpretation or amendment that has been issued but is not yet effective. New standards and interpretations - not yet adopted The following standards and amendments and interpretations to existing s tandards have been published a nd are mandato ry for the Group’s accounting per i od beginnin g on or after 1 Jan uary 20 22 or later period s, but the Group has n ot early adopted them: • Reference to the Conceptual Framewo rk – Amen dments to IFRS 3 • Proper ty, Plant and Equipment: Proceed s before Intended Use – Amendmen ts to IAS 16 • Onero us Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37 • AIP IFRS 9 Finan cial Instruments – Fees in the ’10 per cent’ test for d erecognition of fin ancial liabilities • IFRS 17 In surance contracts It is not anticipated th at the application o f th ese standards and amendm ents will have an y material impact on the Group ’s financial statements . Cash and cash equivalents Cash and cash equivalents in the statem ent of financial position comprise cash at bank . Property, plant and equipment Rigs an d equipmen t ar e stated at cost less depreciation and impairmen t losses. The cost of an asset comprises its purchase price and directly attributable cost of bringing the asset to its working condition. When it can be clearly demonstrated that subsequen t exp e nditures have resulted in an increase in fu ture econ omic benefits expected to be obtained from the use of the assets beyond their originally assessed standard of performance, the expenditure is capitali sed as an add itional cost of the asset. A component of an asset with a cost that is sign ificant in relation to the total cost of the asset is dep reciated separately . Components with a similar deprec iation method and useful lif e are grouped together. Depreciation is calculated using the straight-lin e meth od for each asset, after taking i nto accoun t the estimated residual v alue, over its expected usefu l lives as fo l lows: Semi-submersib le drilling rigs – 20 years Special purp ose surveys – 5 years Other fixtur es and equipment – 3-5 years Special purp ose surveys are a five-y early thorough inspection an d r ecertification of the hull an d main machinery componen ts of the rig, which also include class and flag state renewal and verification. The carrying values o f plant and equipment ar e reviewed for impairm ent if carrying value m ay not be recoverable, an d are written down immediately to their recoverable amount. Awilco Drilling PLC Notes to the fin ancial statements At 31 December 202 1 53 4. Account ing policie s (continued) Property, plant and equipment (continued) Useful lives and residual v alues are reviewed annually and where adjustments are required , these ar e made prospectively . An item of property, p lant and equipment is derec ognised upon disposal o r when no future economic b enefits are expected to ar ise from t he continued use o f the asset. Any gain o r loss arising on the derecognition of th e asset is inclu ded in the statement of comprehen sive incom e in the perio d of derecognition. Assets under construction Assets un der constru ction are costs d irectly associate d with constructing an asset. While th e asset is b eing constructed, no depreciatio n is applied . On ce an asset is ready for use, all associated co s ts are transferred to the relevan t asset category and depreciated accord ingly. Inventories Inventories of d rilling equipment and spares for future integrated drillin g service wells are s tated at the lo wer of co st incurred and net realisable value. These inventory items inclu de spare par ts and supp lies relating to the operation o f the semi-submersible dr illing rigs. Revenue recognition Revenue der ived from ch arter-hire contrac ts or o ther service con tracts is reco gnised in the p eriod that services are rendered at r ates established in the relevant contracts. Certain contracts include mobili sation fees payable at the start of the contract. In cases where th e fee covers a general up grade of a rig or equipment which in creases the valu e of the rig or equipmen t beyond the co ntract period, th e fee is rec ogni sed as reven ue over the firm c ontract period whereas the investmen t is depreciated over the remaining lifetime of the asset. In cases where the fee covers specific upgrades or equipment specific to the contrac t, the mobilisation fees are recognised as revenue over the firm contract period. Cost of sales Cost of sales includ es rig operating costs and the depreciation cost for the two r igs. Taxation Current income tax Current tax assets and liabilities are measured at the amount exp ected to be recovered f ro m or paid to the taxation authorities, based on tax rates and laws th at are en acted or substan tively enacted by the balance sheet date. Income tax is c harged or cred it ed directly to eq uity if it relates to items that are credited or c harged to equity. Otherwise incom e tax is recognised in the statem ent of comprehensive income. Deferred income tax Deferred tax is provided using the liability metho d on temporary differences between th e tax bases of assets and liabilities an d their carrying amounts for financial reporting purposes at the reporting d ate. Deferred tax liabilities are recognised for all taxable temporary d ifferences, except: • When th e deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a tran saction that is not a business combinatio n and, at the time of the transaction , affects neither the accounting profit nor taxable profit or loss • In resp ect of taxable temporary differ ences associated with investments in sub sidiaries, associates and interests in jo int arrangements, when the tim ing of the revers al of the temporary differences can be contro lled and it is probable that the temporary differences will not reverse in the foreseeable fu ture. Deferred tax assets are r ecognised for all deductible t emporary differences, the carry forward of unused tax credits and a ny unused tax losses. Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 54 4. Accounting polic ies (continued ) Taxation (continued) Deferred tax assets are recognised to the extent that it is pr obable that taxable profit will be available against which the deductible tempo rary differences, and t he carry forward of unused tax cr edits and unused tax losses can be utilised, except: • When th e deferred tax asset relatin g to the dedu ctible temporary differences arises fro m the initial recognition of an asset or liability in a transaction that is not a b u siness com bination an d, at the time of the tr a nsaction, aff ects neither the ac counting profit nor taxable profit or loss • In respect of deductib le temporary dif ferences associated with investments in subsidiaries, associates and interests in joint arrang ements, deferr ed tax assets are recognised only to the extent that it is probable that the temporary differences will rev erse in the foreseeable future and taxable profit will be available against which the tem porary differences can be utilised The carrying am ount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxab le profit will be available to allow all or part of the def erred tax asset to be utilised. Un reco gnised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that i t has beco me probable that future taxable profits will allow the defer red tax asset to be recov ered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the lia bility is settled, based on tax rates (and tax laws) that have b een enacted or substantively en acted at the reporting date. Foreign currency translation Functiona l and presentation currency Items inclu ded in the finan cial statements of each of the G r oup’s entities are measured using United States Dollars (US$) “the functional currency”. The Group financial statements are presented in US$, which is the Company’s fu nctional currency an d presen tation currency and all values are rounded to the n earest thou sand dollars (US$00 0) except when other wise indicated. Transactions a nd balances Foreign currency t ransactions are translated i nto t he functional currency using the e xchange rates prevailing at the date of the transactions. Foreign exchange gains an d losses resulting from the settlement of such transactions and from the translation at p eriod e nd exchange rates of m onetary assets an d liabi lities denominated in foreign currency ar e recogni sed in th e statement of comprehensive income. The principal foreign currencies used by the G roup are Po unds Sterling (£ or GBP ), Euro (€) and Norwegian Kroner (NOK). Earnings/(loss) per share Basic earn ings/(loss) per share amounts are calc ulated by dividing net profit for the period attributab le to ordinary equity holders of th e Compan y by the weighted a verage number of ordinary s hares outstanding during the y ear. Diluted ea rnings/(loss) per share amounts are calculated by dividing the net profit by the weighted average number of ordin ary shares outstanding d uring the period plus the weighted average number of ord inary shares that wou ld be issued on conversion of all the dilutive potential ordinary shares in to ordinary shar es. Leases The Gro up applies a single recogn ition and measurement ap proach for all leases, except fo r short -term leases and leases of low-value assets. The Group has taken the recognitio n exemption in resp e ct o f short-term leases and leases of low value assets, and instead recognises the expense associated with such leases in the income statemen t on a straight line basis. For all other leases, t he Group recognises lease liabilities rep resenting lease payments an d right- of -use asset s representing the right to use the underlying assets. Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 55 4. Accounting polic ies (continued ) Leases (continued) Right- of -use assets The Group recognises r ight- of -use assets at th e comm encement d ate of the lease and are measured at cost, less any accu mulated depreciation and impairment losses, ad justed for any re -measurement of lease liabilities. Th e cost of right- of -use assets in cludes the am ount o f lease liabilities recog nised, initial direct cost incurred, and lease payments made at or before the commencemen t date less an y i ncentives received. Right of use assets are depreciated on a straight-line basis over the remaining lease term. Lease liabilities At the com mencement date of the lease, the Group reco gnises lease liabilities at th e prese nt v alue of lease payments to be made over the lease te rm, using the interest rate implicit to the lease, and if not readily determinab le, at the incremental bo rrowing rate. The lease liabilities are in cluded in trade and other payables in No te 20. Financial assets Financial assets are recognised when the Group becomes party to the contracts that give rise to them and are classified as financial assets at fair valu e through profit or lo ss , amortised cost , or fair value thr ough other comprehensive income as appropriate. The Group determines th e classification of its finan cial assets at initial recogn ition and, where allowed an d appropr iate, re -evaluates this design ation at each financial year-end. When financial assets are recogn ised initially, th ey are mea sured at f air value, being the transaction price plus, in the case of financial asset n ot at fair valu e through profit or loss, directly attributable tran saction costs. Derecognition of financial assets A financial ass et (or, wher e applicable a part of a financial asset or part of a group of similar financial assets) is derecogn ised when: • the rights to receive cash f lows from the asset have expired; or • the Gr oup has transferred its righ ts to receive cash flows from the asset o r has assumed an obligatio n to pay the received cash flows in full without material delay to a third party under a ‘pa ss - thro ugh’ arrangem e nt; and either: • The Group has neither tr ansferred control nor retained substantially all the risks and rewards of the asset, but had transferred control of the asset, or • The Group has tr ansferred substantially all the risks and rewards of the asset. When the Group has transferred its rights to receive cash fl ows from a n ass et or h as entered into a pass- through arrangement, and has n either tr ansferred n or retain ed substantially all the r isks an d rewar ds of the asset nor transferr ed control of th e asset, the asset is recognised to the ex tent of the Group ’s continuin g involvement in the asset. In that case, the Group also recognises an associated liability. The transferred ass et and the associated liability are measu red on a basis that reflects the rights and obligations th at the Group has retained. Impairment of financial assets Further disclosu res relating to impairmen t of financial assets are also provided in Note 18. The Group recognises an allo wance f or expected cred it loss (ECL) f or all debt instruments not h eld at fair value th rough profit or lo ss. ECLs are based on the differe nce between the co n tractual cash flows d ue in accordance with the contract an d all the cash flows that the Group expects to receive, discounted at an approximation of the original effective inter est rate. The expec ted cash flows will include cash flows from the sale of co llateral held or other cred it enhancements that are integral to the con t ractual terms. Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 56 4. Accounting polic ies (continued ) Impairment of financial assets (continued) ECLs are recogn ised in two stages. For cred it exposures for which ther e has not been a significan t increase in credit risk since initial recognition, ECLs are provided for cr edit losses that result from default events that are possible within the nex t 1 2- months (a 12-mon t h ECL). For those credit exp osures for which there has been a significant increase in credit risk s ince initial rec ognition, a loss allo wance is required for credit losses expected over the remaining li fe of the e xposure, irrespective of the timing of the default ( a lifetime ECL).” Trade and other receivables Trade receiv ables an d amounts d ue from subsidiary undertakings , which generally have 60 -d ay ter ms, are recognised and subsequently car ried at the original invoiced value net of exp ected credit loss. Where the time value o f money is material, receivables are carrie d at amortised co st. Trade and other payables Trade pay ables are recognised initially at f air value and sub s equently m easured at amortised cost using the effective inter est method. Derecognition of financial liabilities A financial liability is derecogn ised when the obligation under the liability is discharged or cancelled or expires. Wh ere an existing f inancial liability is rep laced by another fro m the same lender on substantially different terms, or the terms of an ex isting liability ar e substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the rec ognition of a new liability, and the difference in the respective carrying amounts is recog nis ed in the statem ent of comprehensive incom e. Share-based payment The cost of cash-settled transactions is measured initially at fair value at the grant date using a Black -Scholes model , further d etails are give n in No te 2 6. This fair value is expensed over the period u ntil the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and i ncluding the settlement date, with chang es in fair value recognised in statement of comprehensive income f or the period. Pension The pension plan i n place is a defined contribution plan. Pen sion contributions are charged to the s tatement of comprehensive income as an expense in the period to which the contributions relate. Once the contributions hav e been paid, there are no further paym ent obligations. Government grants Government grants are recognised wh ere ther e is reasonable assurance that the gr ant will be received , and all attached conditions will be complied with. W hen the gra nt relates to an expense item, i t is recognised as a ded uction in reporting of the related expense, on a systematic basis over the p eriods that the related costs for which it is intended to compensate are ex pensed. 5. Revenue Revenue represents the invoiced amoun t of services pr ovided after the deduction of reb ates and retr ospective discounts. All items ar e stated net of value add ed tax. The G roup only h as one seg ment – providing d rilling serv ices in the UK. As a result, no furth er segmental information has b een provided. Information about major customers Annual rev enue from two major customer amounted to US$ 25 m illion and US$ 8 million arising f rom the provision of drilling services ( 2020 : US$ 14 million and US$ 11 million from two major customers). Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 57 6. Operating profit This is stated after ch arging 20 21 2020 US$000 US$000 Depreciation ( Note 15, 22) 6,241 10,307 Inventory r ecognised as an expense during the year 255 507 Write off of inven tory 3,026 1,620 7. Auditors’ remunera tion The Gr oup paid the following amounts to its auditors in respect of the audit of the fin ancial statements an d for other services provided to the Group . 20 21 2020 US$000 US$000 Audit of the financial statements 246 183 Local statutory audits of subsidiaries 23 52 Tax services - compliance 27 33 Tax services - advisory - 43 296 311 8. Staff costs 20 21 202 1 2020 2020 Group US$000 Company US$000 Group US$000 Company US$000 Wages and salaries 14,608 2,555 15,825 2,455 Directors Fees 277 277 282 282 Pension costs 649 120 921 110 Social security co sts 1,8 77 457 2,121 341 Long term incen tive plan (19) (19) (407) (407) 17,393 3,391 18,742 2,781 The Comp any makes con tributions to a def ined contribution scheme f or all eligible emplo yees up to a maximum of 9% of salary. Contribution s are charged to th e income statement as incurred. The average m onthly number of employees during the yea r was made up as follows: 20 21 2020 No. No. Onshore, in cluding management (Company) 22 20 Offshore 96 104 11 8 124 Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 58 9. Finance income 20 21 2020 US$000 US$000 Bank interest - 386 10. Finance expense 20 21 2020 US$000 US$000 Interest on lease liabilities 53 35 Interest on tax ation 1,388 - 11. Net (loss)/gain on fore ign exchange transaction s 20 21 2020 US$000 US$000 Gain on foreig n exchange transactions 14 214 (Loss) on foreig n exchange transactions (268) (345) Net (loss) on foreign exchange transactions (254) (131) 12. Income t ax Income tax on profit on ordinary activ ities 20 21 2020 US$000 US$000 Foreign tax on the profit for the year 98 66 Total curren t income tax 98 66 Amounts under provided in previous years 9,152 3 Tax credit av ailable to the UK - - Total curren t income tax 9,250 69 Deferred in come tax: Origination and reversal of temporary differences 16 92 Impact of changes in tax rates - - Total deferr ed income tax 16 92 Income tax charge in the Group statemen t of comprehensive income 9,266 161 Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 59 12. Income tax (con tinued) Reconciliation of the total income tax charge 20 21 2020 US$000 US$000 Loss from contin uing operations (62,963 ) (167,696) Tax calculated at UK standard rate of corporation tax of 19% (2019:19%) (11,963 ) (31,862) Expenses no t deductible/(income not tax able) for tax purposes 112 18,995 Effect of (lower) /higher taxes on overseas earnings 98 2,292 Unrecogn ised deferred tax asset 11, 867 10,742 Tax (over)/und er provided in previous years 9,152 3 Effect of tax rate differences - (9) Income tax charge in the Group statemen t of comprehensive income 9,266 161 The in come tax expen se above is co mputed at loss b efore taxation multiplied by the effective rate of corporation tax in the UK of 19 % (20 20 : 19% ). The co rporate tax mea sures announced in th e March 2021 Budget set out that corporation tax will increase from 19% to 25% f rom April 2023 for firms with annual profits gr eater than £250,000. Deferred in come tax The deferred income tax included in the statement of financial position is as follows: 20 21 2020 US$000 US$000 Deferred tax asset As at 1 January 16 108 Share-based payment (16) (92) As at 31 Decemb er - 16 Unrecogn ised deductible temporary diff erences The Group has total tax losses of US$ 82.1 million which aros e in the UK ( 2020 : US$ 69.3 million) that are available fo r offset again st f uture ded uctible profits that are not part of the bareb oat charter ring -fence arrangem e nts. Th ere are further d eductible temporary differences relating to f ixed assets of US$ 5 9.4 million and US$ 40. 6 million of unutilised capital allowances. Deferr ed tax assets have not bee n r ecognised in respect of these losses or difference s due to the uncertainty of future profits being at this level. Awilco Drilling PLC Notes to the financial s tatements At 31 Decemb er 2021 60 13. Los s per share The following r eflects the income and share data used in the basic and diluted loss p er share computations: 20 21 2020 US$000 US$000 Loss for the year attributable to equity share ho l ders (72,229 ) (167,857) 20 21 2020 No.000 No.000 Weighted aver age number of ordinary shares for basic and diluted earnings per share 54,582 54, 58 2 Total earnings and weig hted average number of shares outstanding during the year is the same as for diluted earnings per shar e. 14. Government grants 20 21 2020 US$000 US$000 At 1 January - - Received dur ing the year 14 310 Released to the statemen t of profit or loss (14) ( 310 ) At 31 Decemb er - - The above Government grants received were i n respect of the UK Coronavir us Job Retention Schem e. Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 61 15. Property, p lant and eq uipment Group Semi- submersible drilling rigs Assets under construction Special purpose surveys Other fixtures and equipment Total US$000 US$000 US$000 US$000 US$000 Cost: At 1 January 2 0 20 337,029 92,608 16,159 2,025 447,821 Additions 623 18,672 - 21 19,316 Disposals - - (29) (29) At 31 Decem ber 2020 337,652 111,280 16,159 2,017 467,108 Adjustment 247 - (247) - - Additions 722 - 1,507 - 2,229 At 31 Decem ber 2021 33 8,621 111,280 17,419 2,017 46 9,337 Depreciation and impairment: At 1 January 2 020 (232,952) - (11,486) (1,465) (245,903) Provided (6,566) - (3,117) (63) (9,746) Impairmen t (33,379) (111,280) - - (144,659) Disposals At 3 1 December 20 20 (272,897) (111,280) (14,603) (1,528) (400,308) Adjustment (578) 578 - Provided (4,295) - (1,555) (70) (5,920) Impairmen t (45,507 ) - (1,838) - (47,345 ) At 31 Decem ber 2021 (323,277) (111,280) (17,419 ) (1,598) (453,573) Net book valu e: At 31 Decem ber 20 21 15,345 - - 419 15,764 At 31 Decem ber 2020 64,755 - 1,556 489 66,800 Awilco Drilling PLC Notes to the fina ncial statements At 31 December 202 1 62 15. Property, p lant and eq uipment (cont inued) Company Other fixtures and equipment US$000 Cost: At 1 January 2 0 20 2,025 Additions 21 Disposals (29) At 3 1 December 20 20 2,017 Additions - Disposals - At 31 Decem ber 2021 2,017 Depreciation: At 1 January 2 0 20 (1,465) Provided (63) At 3 1 December 20 20 (1,528) Provided (70) At 31 Decem ber 2021 (1,598) Net book valu e: At 31 Decem ber 2021 419 At 31 Decem ber 20 20 489 16. Impairment The Group considers annually whether there are indicators of impairment of its property, plant and equipmen t, and at the year- en d identified that there were ind icators the WilPhoenix rig may be impaired. In particular it was noted that th ere was no secu red work for the rig, additional costs were expected to be needed t o main tain the rig an d the Group was contemplating dispo sing of the asset. As such, it was nec essary to estimate the recoverable amount. Recoverable amount was assessed based on the rig’s fair value less cost of disposal. Post year end, a sale of the rig was agreed, and therefore the agreed sale price has been used as the basis for determining the fair valu e less cost of disposal of the r i g. As a result, The Gr oup has r ecognised US$ 47.3 million as an impairment loss relatin g to the WilPhoenix rig. (2020: US$ 33.4 million relating to WilPhoenix and WilHunter rigs). The to tal impair ment cost in the year is US$ 48.1 million . This inclu des a current y ear impairment of US$ 0.8 million in resp ect of a right of use asset wh ich has been impaired in full due to lack of trading activities and the preparation of th e financial statements on a basis other than going conce rn . (2020 : US$ 1 44 .7 million, including US$111.3 million in respec t of assets u nder constru ction , follo wing the termination of the rig constructio n contracts) Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 63 17. Investments Company Company 20 21 2020 US$000 US$000 Company sh ares in subsidiary undertakin gs At 1 January 279 279 Impairmen t of investment in WilHunter (UK) Ltd (100) - Impairmen t of investment in Awilco Drilling Offshor e (UK) Ltd (100) - Impairmen t of investment in Awilco Drilling Norge AS (4) - At 31 Decemb er 75 279 Details of the ho ldings are as follows, all 1 00% shareholdings: Country of Incorporatio n Registered Address Name Awilco Drilling Off shore (UK) Ltd) United Kingd om 11 - 12 St James’s Square, London WilHunter (UK) Ltd – in liquidation United Kingd om 11 - 12 St James’s Square, London Awilco Drilling Pte. L td. Singapore 8 Wilkie Road, Singapore Awilco Rig 1 Pte. Ltd Singapore 8 Wilkie Road, Singapore Awilco Rig 2 Pte. Ltd Singapore 8 Wilkie Road, Singapore Awilco Rig 3 Pte. Ltd – dormant Singapore 8 Wilkie Road, Singapore Awilco Rig 4 Pte. Ltd - dormant Singapore 8 Wilkie Road, Singapore Awilco Drilling No rge AS – in liquid ation Norway Verksgata IA, 4013 Stavanger Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 64 18. Trade and o ther receiv ables Group Company Group Company 20 21 2021 2020 2020 US$000 US$000 US$000 US$000 Trade receiv ables 37 37 3,522 3,522 Prepaymen ts and other receivables 542 236 768 308 Accrued revenu e - - 2,121 - Accrued inter est - 1, 949 - - VAT receivable 83 83 - - 662 2,305 6,411 3,830 As at 31 Decemb er, the analysis of ageing of trade receiv ables is as follows: Group Neither past due nor impaired Past due bu t not impaired Total <60 days 60 - 90 da ys 90+ days US$000 US$000 US$000 US$000 2 02 1 37 37 - - Neither past due nor impaired Past due bu t not impaired Total <60 days 60-90 da ys 90 + days US$000 US$000 US$000 US$000 2020 3,522 3,522 - - Company Neither past due nor impaired Past due bu t not impaired Total <60 days 60-90 da ys 90+ days US$000 US$000 US$000 US$000 20 21 37 37 - - Neither past due nor impaired Past due bu t not impaired Total <60 days 60-90 da ys 90+ days US$000 US$000 US$000 US$000 2020 3,522 3,522 - - Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 65 19. Cash and cash equival ents Group Company Group Company 20 21 2021 2020 2020 US$000 US$000 US$000 US$000 Cash at bank 9,685 9,346 14,738 13,961 Cash at bank earns interest at floating rates based o n daily bank deposit rates. The Company has no restricted cash . (20 20 : nil) 20. Trade and othe r payables Group Company Group Company 20 21 2021 2020 2020 US$000 US$000 US$000 US$000 Trade and oth er payables: Lease Liabilities 315 315 616 327 Trade payables 885 763 1,257 1,744 Accruals and o ther liabilities 3,350 1,357 4,421 1,343 4,5 50 2,435 6,294 3,414 Non-curren t: Lease Liabilities 424 424 1,017 739 Other liabilities 2 2 9 9 Total 426 426 1,026 748 21. Provisions Redundancy Onerous Contract Total US$000 US$000 US$000 At 1 January 2021 640 933 1,573 Utilised (640) (933) (1,573) Arising during th e year 1,100 - 1,100 At 31 Decemb er 2021 1,100 - 1,100 The redundancy provision is in relation to Offshore personnel, which was subsequen tly settled post year end. 22. Leases The Group has a lease contract in place for t he office building at 2 Kingshill Park, Westhill, Aberdeenshire, AB32 6FL. During the year, the lease for the office building at 103 Løkkeveien, 4007 Stavanger, Norway was ter minated. Also during the year, the remaining right of use asset for the off ice bu ilding in Aberdeen was imp aired. Set out below is the carrying am ount of the right- of -use assets r ecognised and the movements during the p e riod: Office Building Office Building Group Company Group Company 2021 2021 2020 2020 US$000 US$000 US$000 US$000 As at 1 J anuary 1,096 1,096 1,417 1,417 Additions - - 747 - Depreciation E xpense (321) (321) (556) (321) Impairmen t (775) (775) (512) - As at 31 December - - 1,096 1,096 Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 66 22. Leases (continued ) Set out below are the carrying amounts of lease liabilities (included under trade and o ther payables) and the movem ents during the period: 2021 2021 2020 2020 Group Company Group Company US$000 US$000 US$000 US$000 As at 1 January 1,633 1,066 1,406 1,406 Additions - - 747 - Accretion of i nterest 53 41 35 28 Payments ( 505 ) (368) (555) (368) Remeasurement (442) - - - As at 31 Decemb er 739 739 1,633 1,066 Current 315 315 616 327 Non-curren t 424 424 1,017 739 The maturity analysis of lease liabilities i s disclosed in Note 2 6. The following ar e the amounts recognised in profit o r loss: 202 1 20 21 2020 2020 Group Company Group Company US$000 US$000 US$000 US$000 Depreciation ex pense of right- of -use assets 321 321 556 321 Interest exp ense on lease liabilities 53 41 35 28 Expense relatin g to leases of low-valu e assets (included in administrative ex penses) 3 3 6 6 Total amoun t recognised in profit or loss 377 365 597 355 The Group h as total cash outflows for leases of US$ 0.5 million (20 20 : US$ 0.6 million). 23. Commitmen ts and conting encies Capital commitments There were capital commitments of US$ 0. 9 million at 31 December 202 1 ( 2020 : US$ 0.1 million ). 20 21 2020 US$000 US$000 Amounts du e within one year 873 80 Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 67 23. Commitments and contingenc ies (cont inued) Contingent Liabilities It is recognised that Keppel FELS has submitted claims in respect of amounts it considers recoverable du e to terminatio n provisions in the contrac ts for both Nordic Winter and Nordic Spring. Statement of claims have been receiv ed from Keppel FELS in the am ount of Singapore Dollar s 562.75 million (US$ 424.9 million) for Awilco Rig 1 Pte. Ltd. and Singap ore Dollars 356.18 million (US$ 268.9 million) for Awilco Rig 2 Pte. Ltd. but these claims are stro ngly denied. Du e to the non-recou rse nature of the contracts, this is considered as a contingent liability only of the subsidiaries and not the parent co mpany. No provision has been made. It is ex pected that the final arbitration outcome for Awilco Rig 1 Pte Ltd, i ncluding any appeal process, will b e no earlier than Q4 2022. The arbitra tion process for Awilco Rig 2 Pte Ltd , was started six months later and also expected no earlier than Q 4 2022. Contingent Asset Following the termination of No rdic W inter and Nordic Spring, the subsidiary companies, Awilco Rig 1 Pte. Ltd and Awilco Rig 2 Pte. Ltd. have e ntered arbitration with KFELS in respect of deposit and variation order p ayments. A total amount of USD 9 7.7 million is considered to be reco verable and is therefore disclosed as a co ntingent asset. 24. Share capital Group and Comp any 20 21 2020 Authorised No. 000 No.000 Ordinary sh ares of £0.0065 each 54,582 54,582 Group and Comp any Allotted called up and fully paid 20 21 No.000 20 21 US$000 2020 No.000 2020 US$000 At 1 January 54,582 525 54,582 525 At 31 Decemb er 54,582 525 54,582 525 Group and Company 20 21 Share premium account 2020 Share premium account US$000 US$000 At 1 January 218,381 218,381 At 31 Decemb er 218,381 218,381 Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 68 25. Related party transacti ons During the year the G roup entered into transactions, in the ordinary course of b usiness, with A wilhelmsen Offshore AS, which is a major shareholder throug h its subsidiaries. Transactions en tered into and trading balances outstand ing at 31 December 20 21 with A wi lhelmsen AS and its subsidiar ies are as follows: 20 21 2020 US$000 US$000 Purchase of m anagement services 918 2,195 Share based p ayment - - Amounts owed to Awilhelmsen AS an d its subsidiaries (264) (236) Sales and purchases between related parties are made at no rmal market prices. Outstanding balances are unsecured, interest- free and cash settlement terms v ary between 30 and 90 days. The Company has no t provided or b enefitted from any guar antees for any related party receivables or payables. Included are the amounts in r espect of the interim CEO. Directors and other key management personnel The remuneratio n of directors and other key manag ement personnel of the Group is as fo ll ows 20 21 2020 US$000 US$000 Short-term employee benefits 1,437 1,759 Share-based payments (112) (534) Termination ben efits 529 - Other long -term benefits 82 126 Included in th e short-term employee benefits a re director’s emo luments of GBP 195,000 (20 20 : GBP 195 ,000). Five dir ectors received remuneration i n respect of their services to the Company d uring the year (20 20 : five ). The highest paid director was Sigurd Thorvildsen - please refer to the Directors’ remuneration report on page 30 for further details. Awilco Drilling PLC Notes to the financial s tatements At 31 December 2 021 69 25. Related party (continued ) Company The Company entered into the following transactions and had the following balan ces with its wholly owned sub sidiaries 20 21 2020 US$000 US$000 Transactions: Amounts inv oiced to Awilco Drilling Offshore (UK) Ltd in respect of services prov ided to the company 32,804 28,299 Amounts inv oiced on behalf of Awilco Drilling Offsh ore (U K) Ltd (36,384) (24,247) Invoiced to Awilco Drilling Pte. Ltd. 127 125 Transfer of funds to Awilco Drilling Pte. Ltd. 299 5,470 Amounts inv oiced to Awilco Rig 1 Pte. Ltd. in resp ect of services provided to the compan y - 12,335 Amounts inv oiced to Awilco Rig 2 Pte. Ltd. in resp ect of services provided to the compan y - 2,066 Amounts inv oiced to Awilco Drilling Norge AS in respect of services provided to th e company 3,431 8,030 Taxation p aid on behalf of subsidiaries 68 74 345 32,152 20 21 2020 Balance s: US$000 US$000 Amounts r eceivable from Awilco Drilling Offshore (UK) Ltd 86,674 90,254 Amounts p ayable to WilHunter (UK) Ltd (100) (100) Amounts receiv able from Awilco Drilling Pte. Ltd. 6,473 5,979 Amounts receiv able from Awilco Rig 1 Pte. Ltd 57,343 57,343 Amounts receiv able from Awilco Rig 2 Pte. Ltd 44,298 44,298 Amounts receiv able from Awilco Drilling Norg e AS 13,394 9,964 208,082 207,738 Allowance for expected credit loss (192,837) (115,010) 15,245 92,728 The balances receivable from the subsidiary companies are considered long term. There are long term loan agreements in place with Awilco Rig 1 Pte. Ltd. and Awilco Rig 2 Pte. Ltd. Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 70 25. Related party (continu ed) Set out below is the movement in the allowance for expected credit lo sses of intercompany receivab les: 202 1 2020 US$000 US$000 As at 1 January (115,010) (1,484) Provision fo r expected credit loss (71,199 ) (113,526) As at 31 Decemb er (192,837) (115,010) Expected credit loss triggered due to lack o f committed future contracting opportunities for the WilPhoen ix . Also du e to ex pected non recoverability of amounts due from Awilco Drilling No rge AS and provision for amounts du e from Awilco Drilling Pte. Ltd, Awilco Rig 1 Pte. Ltd. and Awilco Rig 2 Pte. Ltd. Entity with significant influence over the Group Awilhelmsen Off shore AS, owns 37. 1% of the ordinary shares in Awilco Dril ling PLC. 26. Capital manage ment, fina ncial risk manage ment object ives and pol icies The Gr oup’ s a nd the Comp an y ’s principal financial liab ilities comprise trade and other payables. The main purpose of these financial liabilities is to finance the Grou p’s operations. The Group has trad e and ot her receivables, and cash and cash equivalents that arrive directly from it s operations. Management has assessed the fair valu es of the financial instruments are approx imates to their carrying values. The Group an d the Company are ex posed to market risk, credit risk and liquidity risk. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises foreign currency risk. Financial instruments affected by market risk ar e trade and other pa yables and accr uals. Foreign currency risk Foreign currency risk is the risk that the f air value o r future cash flows of a financial instru ment will fluctu ate because of changes in foreign exchange rates. The Group’s and Company ’ s exposure to the risk of changes in f oreign exch ange rates relates pr imarily to the Gr oup’s and C ompany ’s operating activities ( when expenses are d enominated in a different currency from the Com pany ’s functional currency). Awilco Drilling PLC Notes to the financ ial statements At 31 December 202 1 71 26. Capital man agement, f inancial risk management objectives and po licies (continued) Foreign curren cy risk (continued) At the balance sheet date, the G roup held GBP 0.9 million in trade an d other p ayables ( 2020 : GBP 1. 3 million). A 5% strengthening or weakening of US$ to GB P would have an effect of US$ 0. 1 million on the Group 20 2 1 result ( 20 20 : US$0.1 million ). The Group has no other mater ial currency exposures. Credit risk Credit risk is the risk that a co unterparty will no t meet its obligatio ns un der a fin ancial instrumen t o r customer contract, le ading to a financial loss. Th e Group is expose d to cred it risk from its operating ac tivities (primarily for trade receivab les ). The Compan y has cred it risk due to its trade and other receivables from subsidiary under takings and from exter nal clients. Managemen t assess the cred it ratin g of n ew and existing clients and deter mine if any actio n is req uired to secure the fin ancial security in respect of work performed . Liquidity risk The G ro up’s objective is to maintain sufficien t liquidity in order to sup port the needs of the business and meet the repayments o f the debt an d commitments as they fall due. In order to achiev e this, the G roup also has the pro spect of issuing new equity or enter ing into new borrowing arrangements. The table below s ummaris es t he maturity profile o f th e G roup’s financial liabili ties based on contractual undiscoun ted payments. Group Less than 3 months 3 to 12 months 1-5 years Total Trade and oth er payables 5,335 - 2 5,337 Lease liabilities - 368 522 890 31 Decemb er 2021 5,335 368 524 6,227 Trade and oth er payables 4,853 825 9 5,687 Lease liabilities - 616 1,017 1,633 31 Decemb er 2020 4,853 1,441 1,026 7,320 The table below s ummarises the maturity profile of the Company ’s financial liabilities based o n contractual undiscoun ted payments. Company Less than 3 months 3 to 12 months 1-5 years Total Trade and oth er payables 2,120 - 2 2,122 Lease liabilities - 368 522 890 31 Decemb er 20 21 2,120 368 524 3,012 Trade and o ther payables 3,087 - 9 3,096 Lease liabilities - 327 739 1,066 31 Decemb er 2020 3,087 327 748 4,162 Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 72 26. Capital management, f inancial risk management ob jectives and p olicies (continued) Capital management Capital includes called up share capital, share premium and retained ea rnings / (deficit). As the Company is curren tly no longer perfo rming operational activities, there will b e n o dividends distributed arising from operational activity. The Company ’s capital is monitored at a Group level. The G roup monitors capital using a gearing ratio, which is net debt divided by t otal shareholders’ funds p lus net d ebt. Th e Group includes within net debt, bonds and lo ans less cash and cash equiv alents. Group Group 20 21 2020 US$000 US$000 Cash and cash eq uivalents (note 19) (9,685) (14,738) Net debt / ( funds) (9,685) (14,738) Capital 10,899 83,128 Capital and net debt 1,214 68,390 Gearing ratio n/a n/a 27. Share-based pay ments Long Term Incentive Plan A long term in centive plan for key management per sonnel, with a total limit of up to 4% of the Company ’s issued share capital was approved at the Annual Gen eral Meeting on 26 June 2013. The awards f or the years 2010 , 2012 , 2014-2016 are now fully e xercised. A fur ther award was iss ued in 2020, and a total limit of up to 4,000,000 sh ares was app roved at the general meeting on 11 November 2019. The 2020 plan “vests” in 25% tranches linked to ri g contract dates and expires after five years. The awards are option s with a strike price of NOK 30. All share optio ns and share awards are synthetic based and are cash settled. Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 73 27. Share-based pay ments (cont inued) The following tab le list the inputs to the model used for th es e valuation s (share prices are in NOK). Group and Company 2021 2020 2020 Plans 201 6 Plans 2020 Plans Exercise price 30.0 - 30.0 Year -end Share price 3.20 4.65 4.65 Expected life 0.56 years - 3.25 years Volatility 0.18 - 0.67 Risk free interest rate 0.34% - 0.42% Model used Black Scholes The following tab le illustrates the number and weig hted average exercise prices ( WAEP) of, and movemen ts in, share options and award s during the year. Group 20 21 20 21 2020 2020 No. WAEP (NOK) No. WAEP (NOK) Outstanding as a t 1 January 1,247,284 25.86 364,425 - Granted during the year - - 2,150,000 30.0 Exercised during the year (172,284) - (192,141) - Forfeited during the year (600,000) 30.0 - - Adjusted dur ing the year - - (1,075,000) 30.0 Outstanding at 31 December 475,000 30.0 1,247,284 25.86 Exercisable at 3 1 December - - 172,284 - Company 20 21 20 21 2020 2020 No. WAEP (NOK) No. WAEP (NOK) Outstanding as a t 1 January 1,247,284 25.86 364,425 - Granted during the year - - 2,150,000 30.0 Exercised during the year (172,284) - (192,141) - Forfeited during the year (600,000) 30.0 - - Adjusted dur ing the year - - (1,075,000) 30.0 Outstanding at 31 December 475,000 30.0 1,247,284 25.86 Exercisable at 3 1 December - - 172,284 - Awilco Drilling PLC Notes to the financial s tatements At 31 December 202 1 74 27. Share-based pay ments (cont inued) The estimated fair value of the gran ted share options and awards are reached on th e basis of the “Black - Scholes option pricing model”. The mo del is ap plied utilising a risk-free discou nt rate and also taking into account the terms and conditions upon whic h the options and awards are granted as well as the performance conditions that are required to be satisfied before vesting. The weighted average remaining contractu al life at 31 Dec ember 202 1 is 0 .56 years. The G roup total share o ption an d award cred it amounted to US$ 0. 1 million (20 20 : US$ 0.5 mi llion credit). The carrying amount of the liability relatin g to the cash -settled options at 31 Decem ber 20 21 is US$ 0.1 millio n (20 20 : US$ 0. 1 million). The table belo w summaries the carrying am ount of the liability at 31 December 2021 Group and Co mpany Less than 3 months 3 to 12 month s 1 – 5 years Total US$000 US$000 US$000 US$000 Share option s and awards 20 21 - - 2 2 The table belo w summaries the carrying amount o f the liability at 31 December 20 20 Group and Co mpany Less than 3 months 3 to 12 mo nths 1 – 5 years Total Share option s and awards 106 - 9 115 At 31 Decemb er 2019 106 - 9 115 28 . Subsequen t events During March 2 022, the subsidiary company WilHunter (UK) Ltd was placed into liquidation. The affair s, business an d property of th e Company are b eing managed by the Joint Liquidato rs, Geoff Jacobs and Blair Nimmo of Inter path Advisory. During March 2022, the Com pany signed a Sale and Purchase Agreement with Rota Ship ping Inc to recycle the WilHunter at the Aliaga Shipyard in Turkey. The sale is expected to be c oncluded no l ater than 15 June 2022. During May 2022, the Company signed a Mem orandum of Agreement (MOA) for t he sale o f the WilPhoenix to Well-Safe Solutions Ltd fo r an ag reed purchase p rice of USD 15 .5 million. Expected delivery time of the rig is on or around 1 June 2022. During May 2022, the Company signed a short -term shareholder loan with Awilhelm sen Off shore AS and QVT Family Office Fun d L P. Th e loan is for a t otal of up to USD 4 million, structured as a draw -down facility, with interest rate o f 10 percent p er annum on the ag gregated outstandin g principal amou nt. In addition, ther e is an ar rangement fee of 2 per cent on the total amount. Maturity d ate for th e loan is 1 July 2022. The lo an shall be used for general working cap ital purposes. As a result of the agreements to dispo se of both rigs after the year end, th e Grou p is currently no longer performing operational activities and the f inancial statements have been prepared on a basis o ther than going concern. 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