Awilco Drilling PLC

Annual Report • May 12, 2020

Awilco Drilling PLC

Report and Financial Statements

31 December 2019

Directors

Sigurd Thorvildsen Henrik Fougner Daniel Gold John Simpson Synne Syrrist

Secretary

Burness Paull LLP, 50 Lothian Road Festival Square Edinburgh EH3 9WJ

Auditors

Ernst & Young LLP Blenheim House Fountainhall Road Aberdeen AB15 4DT

Bankers

DNB Bank ASA 8th Floor The Walbrook Building 25 Walbrook London EC4N 8AF

Registered Office

3rd Floor 11-12 St James's Square London SW1Y 4LB

Strategic report

Corporate Strategy and business model

Awilco Drilling PLC ('the Company')'s strategy is to create shareholder value through the provision of a quality, reliable and customer focused service to the mobile drilling rig market. The management team shall safely, efficiently and effectively deliver a high-quality service to customers, with a view to securing the most lucrative day rate contracts in conjunction with the highest achievable rig utilisation. The Company shall evaluate growth opportunities which best complement its financial aspirations.

The Company owns and operates two semi-submersible drilling rigs, the WilPhoenix and WilHunter, both standardised rigs used in the drilling of oil and gas wells in the UK sector of the North Sea, although they can be used in other geographical locations.

Principal activity

The principal activity of the Company and its subsidiaries ('the Group') is to operate the drilling rigs as noted above. During the year, the WilPhoenix was in drilling operations for its client, Shell UK Ltd. The WilHunter is cold stacked and moored in Invergordon.

The Company has also ordered two new build rigs of Moss CS60 ECO MW design, equipped for drilling in harsh environments, including the Barents Sea. The rigs are being built by Keppel FELS shipyard in Singapore. During the year, work continued building the Norwegian shorebase organisation with the incorporation of Awilco Drilling Norge AS with the recruitment of key personnel.

Business review and future developments

The current low oil price and the concurrent impact of COVID-19 are expected to negatively impact rig demand across the North Sea for as long as these conditions prevail.

The Group have an excellent track record in terms of performance and positive customer relationships which is hoped will position the Group well for future drilling programmes which remain on track.

The new build program is ongoing with the expected delivery of two Moss CS60 rigs into the market late 2021 and 2022. As described in Note 3, there is potential uncertainty regarding the financing of the new build program. However, a forecast tighter rig supply/demand balance into a recovered commodity market in 2021 and 2022 is expected to provide the contract opportunities necessary in support of the funding requirements.

Performance

The Group's financial performance during the year was as follows:

	2019 2018
US\$000	US\$000
38.136 Revenue	56,522
(30,382) Operating loss	(18,275)
Loss for the year attributable to equity shareholders (30,592)	(22,864)
Operating loss margin %	(32%) (80%)
Number of employees and contractors at year end	142 141

The total revenue for the year relates to contract income received from drilling operations. The decrease is due to lower contract rates for the WilPhoenix compared with the prior year. The Group had rig operating expenses of US\$24.8 million (2018: US\$27.3 million) relating to rig operating costs, and general and administration expenses of US\$9.2 million (2018: US\$8.8 million). There was an impairment expense of US\$23 million (2018: US\$ 25 million for both rigs), relating to the WilHunter, due to the continued cold stack status and lack of visibility of contracting opportunities.

The key performance indicators (KPIs) set out below are reviewed on a regular basis by management and performance against them subsequently reported to the Board of Directors, Targets for the KPIs are set and, if performance falls short, the appropriate corrective action is implemented by management.

Business review and future developments (continued)

The Company's main financial KPIs are:

Revenue efficiency

Revenue efficiency is actual revenue for the period compared with the maximum contract revenue multiplied by the number of available days in the contracted period. For the year ended 31 December 2019, the revenue efficiency was 89.7% (2018: 97.3%).

Operating margin

Operating margin is total revenue less operating costs. For the year ended 31 December 2019, operating margin was a loss of 79.7%. (2018: 32.3% loss). The deterioration in margin is due to the decrease in revenue during the year, partially offset by the reduction in operating costs.

The Company also has a number of operational KPIs that are used to manage the business on a day to day basis, some of which are detailed below:

Quality, Health, Safety and Environment (QHSE)

Total recordable incident rate (TRIR)	Number of incidents (lost time incident, restricted work case, medical treatment only) x 200,000 / Total number of man hours in the review period. Measured on a rolling 12-month basis.
Unplanned discharges	Items that have been discharged to sea not covered under PON 15 which relate to allowable items. Some examples are Blow out Preventor (BOP) control fluid and hydraulic oil that are reportable under PON 1.
	(PON - Petroleum Operations Notices)
Operations
Uptime	Total hours the rigs are working i.e. not on unplanned downtime / on contract time for the period.
Human Resources (HR)
Personnel turnover	Employee initiated leavers in the period as a percentage of total headcount (onshore and offshore) on a rolling 12-month basis.

Principal risks and uncertainties

The Company's primary risks are that impact utilisation rates for each of the rigs, QHSE issues associated with operations and exposure to liquidity and credit risk. The Company has also entered into construction contracts for two new build rigs in Singapore which have a number of risks associated with projects of this magnitude.

New Build Rigs

The Company has entered into construction contracts for two new build rigs in Singapore, which have a number of risks associated with projects of this magnitude. These include failure to deliver the rigs on time and on budget, failure to obtain commercially attractive financing for the project cost and failure to obtain commercially attractive contracts with operators once the rigs have been delivered.

As described in Note 3, there is potential uncertainty that the Group may be unable to raise additional financing to meet the capital commitments as they fall due.

Business review and future developments (continued)

Utilisation rates for the rigs

The Company has a small fleet of only two rigs, one currently in operation and the other cold stacked, implying that downtime, failure or idle periods will have a relatively higher impact than if the Company had a larger and more diverse fleet. The risk to utilisation rates may arise through deferred commencement of drilling contracts either through delays incurred on shipyard project work or delays encountered by operators not able to commence drilling in accordance with plan. There is also the possibility of gaps and idle periods during the year due to the unpredictable nature of contract drilling operations and prevailing market conditions. This could also be significantly impacted by the effects of COVID-19 and the current low oil price, however there is no indication that the current contracts will not go ahead as planned. Additionally, there is a utilisation risk associated with the possibility of mechanical and weather down time. The Group mitigates this risk through its operating, marketing and pricing strategies.

QHSE (Quality, Health, Safety, Environment)

To mitigate any risk with regards to OHSE, the Group has in place a QHSE management plan which seeks to ensure that all operations are conducted within normal industry standards and procedures. The Group also seeks to ensure safe and efficient operations, with no accidents, injuries, environmental incidents or damage to assets. During the current COVID-19 outbreak, the Group is following industry guidelines to ensure the safety of the workforce.

The Group maintained a high level of safety with no fatalities. There has been continuous low frequency within dropped object and high potential incidents. The Corporate Annual QHSE objectives are implemented in departmental action plans. The total recordable incident rate (TRIR) has increased from 0.57 in 2018 to 1.07 in 2019. There were 2 LTI incidents in 2019 with potential for disability/fatality under slightly altered circumstances, causing 80 days away from work. None of the incidents resulted in permanent disability. Corrective and preventive mitigating actions have been initiated to improve the TRIR trend throughout the Group.

Liquidity

As described in Note 25 to the financial statements, the Group's objective is to maintain sufficient liquidity in order to support the needs of the business and meet debt repayments and other liabilities as they fall due. The Group currently has no debt obligations and has an appropriate level of cash. As described in Note 22, the Group will need to secure additional financing prior to the next scheduled capital commitment which falls due in June 2020 in respect of the new build rig. There is also the possible crystallisation of a contingent tax liability. These matters have been considered as part of the going concern assessment.

Credit

Management assess the credit rating of new and existing clients and determines if any action is required to secure payment in respect of work to be performed.

Tax risks

The Company has subsidiaries in other countries. Tax laws and regulations are highly complex and subject to interpretation. Consequently, the Company is subject to changing tax laws, treaties and regulations in and between countries in which it operates. The Company's tax expense is based upon its interpretation of the tax laws in effect in these countries at the time that the expense was incurred. A change in these tax laws, treaties or regulations or in the interpretation thereof, which is beyond the Company's control, could result in a materially higher tax expense or a higher effective tax rate on the Company's earnings.

For 2019, the effective tax rate ("ETR") for the Company was negative 1.4% (2018: 8% negative). The current and prior year are negative figure due to the loss before tax figure. 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 deferred tax asset and also an adjustment in respect of the prior period. In future years, it is expected that the ETR may continue to diverge from the statutory UK rate of corporation tax due to significant unrecognised deferred tax assets.

Business review and future developments (continued)

Volatility of the share price

The trading price of the Company's shares could fluctuate significantly in responses to quarterly variations in operating results, adverse business developments, interest rates, changes in financial estimates by securities analysts, matters announced in respect of major customers or competitors, changes to the regulatory environment in which the Company operates, or a variety of other factors outside the control of the Company.

Industry risk

The offshore contract drilling industry is cyclical and volatile. The Company's business depends on the level of activity of oil exploration, development, oil prices and production in the North Sea and internationally. The availability of quality drilling prospects, exploration success, relative production costs, the stage of reservoir development, political concerns and regulatory requirements all affect customers' levels of activity and drilling campaigns. Demand for the Company's services may be adversely affected by declines in exploration, development and production activity associated with depressed oil prices. Additionally, the perceived risk of depressed oil prices and changes in the UK North Sea tax regime often causes exploration and production companies to reduce their spending.

Commodity prices

The profitability and cash flow of the Company's operations will be dependent upon the market price of oil and gas, as the Company's customers are mainly oil companies. The price of oil and gas is known to fluctuate. Oil and gas prices are affected by numerous factors beyond the Company's control, including economic and political conditions, levels of supply and demand, the policies of the Organization of Petroleum Exporting Countries (OPEC), the level of production in non-OPEC countries, the cost of exploring for, developing, producing and delivering oil and gas, currency exchange rates and the availability of alternate energy sources and political and military conflicts in oil-producing and other countries.

If the price of oil and gas products should drop significantly, this could have a material adverse effect on the Company.

Brexit

Following the UK's exit from the European Union ("EU") on 31 January 2020, there remains continued uncertainty surrounding the future relationship of the UK with after the end of the transitional period ending on 1 January 2021. The Company has considered what impact this could potentially have on the business and after careful consideration, has concluded that any potential impact is low risk, however it will continue to monitor the situation closely.

Corporate Social Responsibility

The Company recognises its duty to stakeholders to operate the business in an ethical and responsible manner. It is committed to developing its Corporate Social Responsibility (CSR) agenda, recognising that it can play a major part in its operations. This report does not contain information about any policies of the Company in relation to social community and human rights issues since it is not considered necessary for an understanding of the development, performance or position of the Company's business activities.

Core Values

Simple is Best - Our systems and procedures shall be clear, concise and effective, ensuring we deliver on our promises.

Engagement - We will be a company of choice, valuing our work force, listening and responding to employees, clients and partners.

Efficiency - We will consistently meet our clients' expectations by providing competent people, reliable equipment and smart systems.

Corporate Social Responsibility (continued)

Core Values (continued)

Flexibility - We will encourage challenge and creativity in order to deliver optimised performance and continuous improvement.

Performance - We will get it right first time; consistently delivering success.

Anti-bribery and corruption

The Company requires its employees to observe the highest standards of business and personal ethics in the conduct of their duties and responsibilities. The Company has a specific Anti-Bribery and Corruption policy to ensure compliance with all applicable anti-bribery and corruption regulations and to ensure the Company's business is conducted in a socially responsible manner. A risk assessment is undertaken by the senior members of the Company as part of the quarterly review of the Company's risk register.

Policy

The Company's employment policies and procedures are described in the Staff Handbook, which is available to all employees via the Business Management System (BMS). The Company's Code of Conduct - Values and Ethics document sets out the basic principles to guide all employees and officers of the Company on how they must conduct themselves to seek to avoid even the appearance of improper behaviour. To help ensure compliance, the Company requires that employees, officers and directors review the policy and acknowledge their understanding and adherence in writing on an annual basis.

Equal opportunities and diversity

The Company is committed to equal opportunities and treats all employees with respect and dignity and ensures that decisions are taken without reference to irrelevant or discriminatory criteria. The Company does not tolerate any form of unlawful discrimination and is committed to promoting equality of opportunity and diversity for all personnel and will address any unlawful discrimination in every aspect of its operations.

As at 31 December 2019, the number of directors and employees was as follows:

	Male	Female
Directors	4
Senior Managers	3
Other staff - onshore	15	ರಿ
Other staff - offshore	112

Health and Wellbeing

It is important to the Company that it supports its employees in their health and wellbeing. The Company operates a flexible benefit scheme that is available to all members of staff and includes benefits such as leisure club membership, private medical and dental insurance, a health screening service and an Employee Assistance Programme. The Company has also achieved the Silver Healthy Working Lives Award.

Corporate Social Responsibility (continued)

Absence Management

The Group has an established absence management procedure, to support employees during periods of sickness absence whilst ensuring the efficient and effective running of the organisation.

	2019	2018
Group sick leave	4.3%	2.2%

as a percentage of total hours worked

Health, Safety and Environment

The Company recognises that it is has a corporate responsibility to carry out its operations in an ethical and responsible manner whilst minimising its impact on the environment. The Company upholds the relevant standards and retains its ISO14001 certification. ISO14001 is an internationally recognised environmental management system (EMS) standard, providing a model for companies to follow to create and achieve their policy. Focusing on the issues that really matter, it is designed to help companies achieve consistent environmental regulatory compliance whilst embedding the concept of continuous improvements in environmental performance. ISO14001 is a widespread benchmark for thousands of organisations around the world that want to communicate to the public and stakeholders that they are environmentally responsible. Additionally, the Company has achieved ISO 45001 certification following on from its previous BS OHSAS 18001 certification. This is an internationally applied Standard for occupational health and safety management systems. It exists to help organisations put in place demonstrably sound best practices by providing a framework for procedures and controls needed by the Company to achieve the best possible working conditions and workplace health and safety by eliminating hazards and minimize OH&S risks.

Section 172

Recent regulations have been implemented that introduce new requirements for the Board to explain how they have taken account of stakeholder views when making key decisions that impact the company and its stakeholders. The following matrix provides some examples of how consideration has been given to key stakeholders, being employees, investors, customers, suppliers, regulators and society in general.

Stakeholder	Strategic Issue	Engagement	Outcome	Key Decision
Employees	Fair compensation 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 page 6.	Pay levels for existing and new employees were considered to be fair and competitive within the industry. This was demonstrated by successful recruitment of personnel to support the ramp of the Norwegian shore base office	Changes in compensation levels are proposed by the Remuneration Committee to the Board. The Board approved a pay increase for both onshore and offshore employees during 2019

Section 172

Recent regulations have been implemented that introduce new requirements for the Board to explain how they have taken account of stakeholder views when making key decisions that impact the company and its stakeholders. The following matrix provides some examples of how consideration has been given to key stakeholders, being employees, investors, customers, suppliers, regulators and society in general.

Stakeholder	Strategic Issue	Engagement	Outcome	Key Decision
Investors	Continued growth of the company by order of second new build rig from Singapore shipyard, appointment of new CEO and establishing of Norwegian shore base office.	Support sought from key investors following detailed market review and intense negotiations with shipyard and suppliers. This enabled a successful private placement in March 2019. Additionally, information is shared with investors in the form of prospectus, quarterly and annual financial reports.	Contract for second new build entered into with shipyard in Singapore.	Detailed investment analysis reviewed by the Board and following several Board meetings and consultations the decision was taken to enter into the new build contract. Prospectus, quarterly and annual financial reports are reviewed and approved by the Board.
Customers	Customer Satisfaction	As part of the company's procedures to ensure customers are satisfied with performance and delivery of services contracted, the customers are requested to provide feedback on a variety of areas to ensure the company is performing in accordance with, or better than, customer expectations.	Customer surveys feedback is part of the company KPIs and scoring in this area has been more than satisfactory during the course of the year.	Directors agree key performance indicators with Management and monitor performance against KPIs during the course of the year. Results impact employee bonus awards at year end.

Stakeholder	Strategic Issue	Engagement	Outcome	Key Decision
Suppliers	Selection of key suppliers and high-level purchases. Ensure that vendors are paid on a timely manner.	Suppliers invited to tender and purchasing procedures require fair and transparent selection of vendors. Refer also paragraph on Investment Appraisal" on page 21 of the annual report.	Policies. procedures and scrutiny by the Board ensures vendor selection criteria is a robust process.	Board involved in selection of key vendors and Board approve the approval matrix on a regular basis. Any approvals above the matrix levels require Board approval. A Board member and chair of the Audit Committee approves the published payment practices report filed every six months.
Regulators	Accreditation and compliance with regulatory standards.	Details of standards achieved are detailed under "Health, Safety and Environment" on page 7 of the annual report.	Achievement and continued certification of compliance through external audit ensures company operates at, or above, the standards required by the regulatory bodies that govern the industry.	The Board approves the direction followed by the CEO and management in pursuit of necessary accreditation and standards.

Section 172 (continued)

Stakeholder	Strategic Issue	Engagement	Outcome	Key Decision
Society	Build and performance criteria for new build rigs. Especially in relation to minimising harm to the environment both in respect of the new build rigs and in operational performance of the current fleet.	The Directors have given extensive consideration to the nature and performance of the new build rigs in terms of minimising adverse impact on society and the environment. KPIs are established to measure if any adverse consequence to the environment within the control of the company.	The Group is in the process of constructing new high efficiency midwater semi- submersibles at Keppel FELS shipyard. The rigs are designed to establish a new standard within the harsh environment drilling segment and will be equipped with so far unique technology enabling the company to operate in a highly responsible and efficient manner. The one of a kind digital infrastructure meets future demands for smarter and safer drilling operations while the highly innovative energy management system will ensure emission levels substantially below any historic benchmarks. The rigs will be the first ever designed and built with batteries.	The Board regularly receive updates on progress of construction program and participate in all key decisions relating to the new build program. Operational KPIs are also reviewed on a regular basis by the Board.

Section 172 (continued)

By order of the Board of Directors

Sigurd Thorvildsen 12 May 2020

Directors' report

Registered No. 7114196

The Directors present their report and financial statements for the year ended 31 December 2019. These financial statements have been prepared under International Financial Reporting Standards as adopted by the European Union ("EU").

Results and dividends

The loss after taxation for the year amounted to US\$ 30.6 million (2018: US\$ 22.9 million loss). There were no dividends paid during the year. (2018: nil)

Future developments

See Strategic Report pages 2-10.

Directors

The directors who served the Company during the year were as follows:

Sigurd Thorvildsen Henrik Fougner Daniel Gold John Simpson Synne Syrrist Jon Bryce (resigned 18 March 2019)

Financial instruments

The Group's financial risk management objectives and policies are discussed further in Note 25 on pages 72-75 of the financial statements.

Directors liability

The Company insures its directors and officers against liability in respect of proceedings brought by third parties, subject to the conditions set out in the UK Companies Act 2006.

Directors and their interests

None of the directors listed above had any interest in the Company's shares.

Major interest in shares

The Company has been notified of the following interests representing 3% or more of the issued ordinary share capital of the Company as at 12 May 2020.

	No of shares	Percentage holding
Awilhelmsen Offshore AS	20.240.814	37.1%
UBS Securities LLC	9,672,216	17.7%
Akastor AS	3.049.673	5.6%
Euroclear Bank S.A	2.144.029	3.9%
Citibank N.A.	2,113,345	3.9%
SEB Prime Solutions	2.000.000	3.7%

QVT Financial LP with affiliated and related parties owned 4,665,895 shares at 12 May 2020, a total of 8.55% of the Company's share capital.

FVP Master Fund LP with affiliated and related parties owned 10,817,537 shares at 12 May 2020 a total of 19.82% of the Company's share capital and has not notified the Company of any changes of ownership up to the date of signing the report and financial statements.

Directors' report (continued)

Corporate governance

The information given in the corporate governance statement is set out on pages 16-22.

Material Uncertainties over Going concern

At 31 December, the Group had cash on hand of US\$ 41 million and no debt. Management has prepared cash flow forecasts covering a period of 18 months from the balance sheet date in order to assess whether the Group and Company are a going concern. The following significant assumptions have been considered within these forecasts:

• · A base case cash flow scenario assuming the Group secures work for the first of the new build rigs and successfully raises additional financing prior to the next schedule capital commitment payments in June 2020 (Note 22). There is material uncertainty as to whether the new work will be secured, and additional finance raised in order to meet the June 2020 payments.
• · An alternate cash flow scenario has been prepared assuming the Group is unable to raise additional financing and has not been able to agree with the shipyard a deferment / renegotiation of the payment terms, and / or the contractual terms and conditions of the new build rigs. In this scenario, it is recognised that the construction contracts with the shipyard are structured such that there is no recourse to the rest of the Group in the event of default by the contracting subsidiaries. This alternative scenario has been further stress tested to assume that no additional contractual work will be undertaken beyond that which is currently contracted. In that scenario there are sufficient mitigating actions available to ensure the going concern basis. This includes the potential cold stacking of the WilPhoenix upon completion of its current contracted work.
• · Consideration of the possible crystallisation of a contingent taxation liability (Note 22) and the mitigating actions available to the Company if a liability were due to become payable in the going concern period. In the event that this contingency was to crystallise, additional financing may need to be raised in order to settle the liability. This represents a material uncertainty.

Based on their assessment the directors have concluded that there are material uncertainties that could cast significant doubt upon the Group and Company's ability to continue as a going concern. The financial statements do not contain adjustments that would result if the Group and Company were unable to continue as a going concern.

Asset impairment consideration

Management has performed an impairment test which resulted in an impairment of US\$ 23 million at year end for the WilHunter semi-submersible rig, due to the continued cold stack status of the rig and lack of visibility of contracting opportunities. The impairment test was based on management's best estimate of forecast industry conditions and operations, expected utilisation, contract rates, operating expenses and capital requirements of the rigs. A pre-tax discount rate of 13.7% and post-tax discount rate of 10.1% has been applied.

Greenhouse gas emissions

The Company's greenhouse gas emissions are categorised between two categories: direct emissions (from rig power generation and loss of refrigerants) and indirect emissions (from purchased electricity for onshore offices).

All emissions from the facilities over which the Company has direct operational control were included. The Companies Act 2006 requires reporting on the following greenhouse gases:

• Carbon dioxide ("CO2");
• Methane ("CH4");
• Nitrous Oxide ("N2O");
• Hydrofluorocarbons ("HFCs");
• Perfluorocarbons ("PFCs"); and
• Sulphur Hexafluoride ("SF6").

PFCs and SF6 are not emitted, and therefore not considered in this report.

Directors' report (continued)

Greenhouse gas emissions (continued)

Greenhouse gas emissions are reported in tonnes (t) carbon dioxide equivalents ("CO2e"). Calculations are performed using the emission factors and global warming potential for each chemical compound, which are in accordance with the current guidance from the UK Government GHG Conversion Factors for Company Reporting 2019. The 2019 annual CO2e emitted from operations was 6579 t.

Greenhouse Gas Emissions	2019	2018
Direct emissions (owned rigs)	6,543	7,508
Indirect emissions (onshore offices)	36	37
Total emissions (CO2c)	6,579	7,545
Direct CH4 emissions (owned rigs)	1.9	1.7
Direct N2O emissions (owned rigs)	101	88
CO2e gas emissions / per days of contract from operations	15.6	24.6

There were no losses of HFC's during 2019

Disclosure of information to the auditors

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the Company's auditor, each director has taken all the steps that they are obliged to take as a director in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

Responsibility statement

Each of the directors listed on page 1 confirms that to the best of their knowledge:

• · The financial statements, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, give a true and fair view of the assets, liabilities, financial position, financial performance and cash flows of the Group and the undertakings included in the consolidation taken as a whole; and
• · The strategic report includes a fair review of the development and performance of the business, together with a description of the principal risks and uncertainties faced.

Subsequent events

During February, the Company paid US\$ 10.6 million as part of the second instalment for Rig 1 and agreed a revised delivery schedule for Rig 1 with a new contractual delivery in April 2021.

During March, the Company signed a contract with Petrofac Facilities Management Limited (Petrofac) for the provision of WilPhoenix for a three well Plug & Abandonment program on Rubie and Renee. The program has an estimated duration of 100 days and is scheduled to commence on 25 May 2020. For the period from 1 May to 24 May 2020, the Company will receive a daily fee of US\$ 65,000.

During May, the Company signed a contract with Serica Energy (UK) Limited for the provision of WilPhoenix for a one well workover on the Rhum field. The contract has an estimated duration of 70 days including preparatory works and is scheduled to commence around 15 September 2020.

The Directors recognise that the current market conditions are challenging. The COVID-19 pandemic has resulted in a reduction in economic activity across all markets, along with a low oil price. The impact of the COVID-19 and the recent reductions in oil prices is considered to be a non-adjusting post balance sheet event which is currently not possible to quantify, therefore the potential impairment of the carrying value of fixed assets has not been reflected in the Statement of Financial Position (See Note 3).

Directors' report (continued)

Auditors

A resolution to reappoint Ernst & Young LLP as auditors will be put to the members at the Annual General Meeting.

By order of the Board of Directors

Sigurd Thorvildsen 12 May 2020

Statement of directors' responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom company law and those IFRS as adopted by the EU.

Under UK Company Law the directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group and Company for that period. In preparing those financial statements the directors are required to:

• · select suitable accounting policies in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
• · present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• · provide additional disclosures when compliance with the specific requirements in IFRSs as adopted by the EU is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and the Company's financial position and financial performance;
• state that the Company and Group has complied with IFRSs as adopted by the EU, subject to any material departures disclosed and explained in the financial statements; and
• · make judgements and estimates that are reasonable and prudent.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the UK Companies Act 2006 and Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Corporate governance

Awilco Drilling PLC is committed to maintaining high standards of corporate governance.

The Company was previously listed on the Oslo Axess stock exchange, but transferred over to the Oslo Bors stock exchange on 4 September 2018. The Company has adopted the Norwegian Code of Practice for Corporate Governance of 17 October 2018 ('the Code'). A copy of the code can be found at www.nues.no

Adherence to the Code is based on a "comply or explain" principle, whereby companies are expected to comply with the recommendations or explain why they have chosen an alternative approach. Below is a summary of the departures from the Code with an explanation of how the Company's actual practices contribute to good corporate governance.

Code of Practice Compliance

The Company is required to state how it has applied the principles set out in Section 1 of the Code and which relate to its directors, remuneration, accountability and audit and relations with shareholders.

As of the date of this report, the Company is in compliance with the Code, except in relation to the following matters:

• · Business the Company's Articles of Association do not specifically define the Company's business. The Company is incorporated in England & Wales and this is in line with standard practice for a UK registered company. An overview of the Company's business can be found in this report.
• · Equity and dividends the authorisation given to undertake share capital increases has not been restricted to defined purposes, due to the scope of the Company's business. This is normal practice for a UK registered company.
• · Auditor the Auditor is not present during the Board meeting that deals with the annual accounts; but the Auditor attends Audit Committee meetings to discuss the Annual Report and financial statements.
• · Corporate Assembly the Company does not have a Corporate Assembly.

Business

The Company's principal business is to own offshore drilling rigs for use in offshore drilling operations, and to provide drilling services for oil and gas companies using these rigs. This is an intricate business which involves complex assets and high value equipment, and which requires specialised and trained personnel to operate them efficiently and safely.

The Company's vision is to be a partner of choice, consistently "delivering the difference" to its customers.

Further information about the Company's vision, mission and strategy statements is available in the Strategic Report.

Equity and dividends

Full details of the shares issued are detailed in Note 23. The Company considers its equity to be at a level appropriate to the Company's objectives, strategies, cash flow projections and risk profile.

The Company's intention is to pay dividends in support of its main objective to maximise returns to shareholders. All of the Company's free cash flow is intended to be distributed subject to maintaining a robust cash buffer to support operational working capital requirements and planned capital expenditure. Consideration is also given to future market prospects. With the ordering of two new-build high-end semisubmersible rigs, plus an agreement for a further two independent rig options, the Company is in a growth and investment phase. Dividend payments have been suspended and will resume when the Company again reaches an appropriate free cash flow situation.

Equal treatment of shareholders

All issued shares of the Company are vested with equal shareholder rights in all respects. There is only one class of shares. The Articles of Association place no restrictions on voting rights. Each share represents one vote at the Company's General Meetings.

Transactions with close associates

The Company has entered into the agreements listed below with the following parties:

• · A management agreement with Awilhelmsen Management AS (AWM) for corporate services;
• · Management-for-hire contracts for personnel from the Awilhelmsen Group.

A wilhelmsen Offshore AS owns 37.1% of the ordinary shares in Awilco Drilling PLC.

Freely negotiable 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 meet operational requirements, and takes appropriate action if judged necessary.

General Meetings

All shareholders of the Company are entitled to attend the general meetings 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 required 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 three working days before the General Meeting, to ensure shareholders have as much time as possible to register. If a shareholder cannot attend a meeting in person it is possible to vote through proxy.

The minutes from the General Meetings are published on the Company's website www.awilcodrilling.com

The next AGM is scheduled for 3 Iune 2020

The Board of Directors

The Board considers that it is vital to ensure that there is an appropriate range of skills, knowledge and experience among its members, and that the objectivity and integrity of members should be exemplary. The Board currently consists of five non-executive Directors including the Chairman. The Board believes that the structure and size of the Board is appropriate and that no single individual or group dominates the decision making process. The names, skills, experience and expertise of each Director are shown in the Board of Directors section of the Company's website at www.awilcodrilling.com

The main responsibilities of the Board include but are not limited to:

• · providing strategic direction for the Company;
• · overseeing the Company's systems of internal control, governance and risk management;
• · evaluating the performance of executive management; and
• · monitoring and facilitating the activities of the Audit and Remuneration Committees.

Management is delegated the task of the detailed planning and implementation of the Company's strategy.

Directors receive timely, regular and appropriate management information to fulfil their duties and have access to the advice of the Company Secretary. The Board has agreed guidelines for Directors to obtain independent professional advice, if they seek it, at the Company's expense.

The Company has in place directors' and officers' liability insurance.

The Board includes two independent non-executive directors (John Simpson and Synne Syrrist) and three non-independent non-executive directors (Sigurd Thorvildsen, Henrik Fougner and Daniel Gold). All the non-executive Board members are viewed as being free from any relationship with the executive management which could result in any conflict or affect their judgement. None of the non-executive directors participates in the share option schemes or long-term incentive plan operated by the Company and none are dependent on the fees received from the Company as their primary source of income.

Board Performance

The Board completes an annual process to evaluate the effectiveness of Board Committees and individual directors and has confirmed that it is satisfied that it and its Committees are operating effectively.

The performance of the Chief Executive Officer ("CEO") is reviewed annually by the Remuneration Committee in conjunction with his annual pay review and the payment of bonuses.

Directors are elected by shareholders at the first annual general meeting after their appointment and, after that, offer themselves for re-election by a vote of shareholders at least once every two years.

The Board of Directors (continued)

Meetings and attendance

Board meetings are scheduled to be held at least five times a year, linked to key events in the Company's corporate reporting calendar. Additional ad-hoc meetings may be held.

It is expected that all directors attend Board and relevant committee meetings, unless they are prevented from doing so by prior commitments or travel restrictions. If directors are unable to attend meetings, they are given the opportunity to be consulted and comment in advance of the meeting.

Board Committees

The Board has established an Audit Committee, Remuneration Committee and a Nomination Committee. The Audit Committee and Nomination Committee have formal terms of reference governing their method of operation which reflect the provisions of the Code and which have been approved by the Board.

Audit Committee

The Audit Committee was chaired during the year by John Simpson and the other member of the Committee is Henrik Fougner. Only John Simpson is considered to be independent by the Board, which is acknowledged in the terms of reference of the Audit Committee. The Board is satisfied that John Simpson has recent and relevant financial experience, as the former CEO of Den norske Bank (now DNB Bank) in London and Regional Director for DNB's Asia-Pacific operations. Mr. Simpson is also classed as an approved person by the UK FCA and has chaired audit committees of UK listed companies 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' announcements and any other formal announcements relating to its financial performance. It is responsible for reviewing the Company's internal financial control and risk management systems, advising the Board on the appointment of external auditors, overseeing the relationship with external auditors, reviewing the Company's whistleblowing procedures and considering the need for an internal audit function.

The Audit Committee monitors the relationship with the Company's external auditors relating to the provision of non-audit services to ensure auditor objectivity and independence is safeguarded. The Company will award non-audit work to the firm which provides the best commercial solution for the work in question taking into account the skills and experience of the firm involved and the fees payable for the work. In considering whether to award such work to the external auditors, attention is paid to the level of fees for non-audit services relative to the amounts of the audit fee and whether there are safeguards in place to mitigate to an acceptable level any threat to objectivity and independence in the audit resulting from the provision of such services.

There is an opportunity at each meeting for the Audit Committee to discuss matters privately with the external auditors without any members of the executive management team present. In addition, the Chairman of the Committee is in regular contact with the external audit partner to discuss matters relevant to the Company.

The Audit Committee have also been extensively involved in ensuring the appropriate disclosures regarding COVID-19 have been included in the financial statements.

Remuneration Committee

The Remuneration Committee was chaired during the year by Sigurd Thorvildsen and the other members of the Committee are Daniel Gold and Henrik Fougner.

The role of the Remuneration Committee is to establish and develop the remuneration policy for the Company's executives and key management and to determine a specific remuneration package for the CEO. No director or employee is involved in deciding their own remuneration. The Committee also approves all employee pay review proposals.

Details of the Company's policy on remuneration, service contracts and compensation payments are set out in the Director's remuneration report.

The Board of Directors (continued)

Nomination Committee

The members of the Nomination Committee are Henrik Christensen and Tom Furulund.

The role of the Nomination Committee is to present a recommendation to the general meetings concerning directors to be elected by shareholders and the level of directors' fees. The Nomination Committee shall also present recommendations to the general meetings regarding nomination of members to the Nomination Committee and concerning fees for the members of the Nomination Committee.

The table below shows the frequency and attendance of directors and other members at Board and Committee meetings during 2019.

	Board Meetings	Remuneration Committee	Audit Committee	Nomination Committee
No of meetings in year
Sigurd Thorvildsen	9	ર
Henrik Fougner	9	5	3
Daniel Gold	8	5
John Simpson	8		3
Synne Syrrist	8
Henrik Christensen (1)				1
Tom Furulund (1)

(1)

Internal controls and risk management

The Board acknowledges its responsibility for establishing and maintaining adequate internal controls and risk management systems to safeguard shareholders' investments and the Company's assets and performs an annual review of these areas. Such systems can only be designed to manage, and not to eliminate, the risk of failure to achieve busines. They can provide reasonable, but not absolute, assurance that the Company's assets are safeguarded and that the financial information used within the business for external reporting is reliable.

Operational and business activity risks

The Company's operational and business activity risks are controlled and mitigated by the implementation and use of its Business Management System (BMS). The Company's offshore activity risk is further controlled by the implementation and use of its Safety and Environmental Management System which is incorporated in the BMS.

Information and financial reporting systems

The Company's comprehensive planning and financial reporting procedures include annual detailed operational budgets which are reviewed and approved by the Board. Performance against budget is monitored throughout the year, through monthly reporting of management accounts and key performance indicators. The Board receives updated cash flow statements on a monthly basis and at each Board meeting and has close follow-up discussions with the management between meetings as required.

Internal controls and risk management (continued)

With a centralised financial reporting system, transactions and balances are recognised and measured in accordance with prescribed accounting policies, and all relevant is appropriately reviewed and reconciled as part of the reporting process.

Investment appraisal

There are clearly defined evaluation and approval processes for acquisitions and disposals, capital items and major expenditure. These include escalating levels of authority and post-completion reviews of all major projects to compare the actual outcome with the original plan. Certain transactions are reserved for approval by the Board and limits of delegated responsibility and areas of authority have been identified for employees.

External audit

The Audit Committee reports to the Board on matters discussed with the auditors during the course of the statutory audit.

Takeovers

The Company has adopted guidelines in relation to takeover bids. The guiding principles of the Board in a take-over situation will be to seek the best value for and the equal treatment of all shareholders. The Board recognises that the decision whether to accept or reject an offer lies with the shareholders, and will refrain from any actions which may deny shareholders this choice. The Board will seek to provide shareholders with a recommendation as to whether shareholders should not accept an offer. This includes seeking external advice on valuation when appropriate. Any transaction that is in effect a disposal of the Company's activities will be submitted to a General Meeting for its approval. As the Company is incorporated in England and Wales and listed in Norway, any takeover bid for the Company would be governed by aspects of both English law and Norwegian law and regulations in accordance with the EU Takeover Directive.

Communication with shareholders

The Company is committed to maintain the highest of standards of disclosure ensuring that all investors and potential investors have the same access to high quality, relevant information in an accessible and timely manner to assist them in making informed decisions. The Investor Relations Department manages the flow of information to all investors and potential investors and regular presentations take place at the time of the quarterly results as well as during the rest of the year.

Any concerns raised by a shareholder in relation to the Company and its affairs are communicated to the Board.

The Company maintains a website which provides up-to-date, detailed information on the Company's operations, which includes a dedicated investor relations section. All Company announcements are available on the website, as are copies of slides used for presentations to investment analysts.

Shareholders will have the opportunity at the forthcoming AGM to the Board, including the Chairmen of the various Committees.

Remuneration of the Board of Directors

The Company operates in a highly competitive market and must attract, motivate and retain high quality directors capable of achieving the Company's objectives and thereby enhancing shareholder value.

The non-executive Board members receive annual remuneration, based on the Board's responsibilities, expertise, time invested and the complexity of the business. Their remuneration is not linked to the Company's performance.

The remuneration of the Board is disclosed in the Director's Remuneration Report on pages 23-35 of this report. None of the Board members have had any additional assignments for the Company and none of the non-executives participate in any incentive or share option programme.

Corporate governance (continued) Remuneration of executive personnel

The Remuneration Committee reviews and advises on proposals made by the CEO with regard to the remuneration payable to executive personnel, and presents them to the Board. The remuneration payable to executive personnel is determined on the basis of competence and achieved results.

The Board decides the salary and other compensation for the CEO in a meeting. The remuneration and other compensation to the CEO and other executive employees are disclosed in the notes to the financial statements.

Auditor

In line with standard practice for a UK company, the auditor is not present during the Board meeting that deals with the annual accounts.

The auditor attends all meetings of the Audit Committee and presents to the Committee reviews of the Company's accounting principles, risk areas, internal control procedures, including identified weaknesses and proposals for improvement.

The auditor has a private meeting with the Audit Committee at the end of its meetings at which neither the CEO nor any other member from the management team is present.

By order of the Board of Directors

Sigurd Thorvildsen 12 May 2020

Directors' remuneration report

Information not subject to audit

Chairman of the Remuneration Committee's Annual Statement

Dear Shareholders,

I am pleased to present the directors' remuneration report for the financial year ended 31 December 2019, prepared in accordance with the Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

This report explains the Company's remuneration policy and provides details of the remuneration paid to executive and non-executive directors for services to the Company during the year. There have been no significant changes to the remuneration policy this year.

In determining remuneration levels, the Committee has taken account of market conditions, the performance of the Company, responsibility to shareholders and good corporate governance.

A resolution to approve the Directors remuneration report will be proposed at the AGM which is scheduled to be held on 3 June 2020.

Sigurd Thorvildsen Chairman, Remuneration Committee 12 May 2020

Introduction

The Company's CEO is not an Executive Director of the Company but under UK company law, there 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. As a result, the following sets out the policy in respect of the components of remuneration which the CEO currently receives.

Process for setting the Remuneration Policy

The Remuneration Committee (the "Committee") sets the remuneration policy based on the principles and framework outlined below. The Committee is briefed on and considers prevailing market conditions, the competitive environments and the positioning and relativities of pay and employment conditions across the wider Company workforce.

Following each meeting of the Committee, the Chair provides an update to the Board.

Although the Committee does not consult directly with employees on CEO or director remuneration, the Company conducts periodic employee engagement surveys that give employees an opportunity to provide feedback on a wide range of employee matters.

As part of the Company's commitment to good governance, the Committee also considers shareholder views when setting the remuneration policy. Feedback from shareholders and investors is shared with, and use as input into decision-making by, the Board and Committee in respect of the remuneration policy and its application. The Committee considers that this approach provides a robust mechanism to ensure its members are aware of matters raised, have a good understanding of current shareholders views, and can determine the Company's remuneration policy and make decisions as appropriate.

The remuneration policy is designed to avoid conflicts of interests between the Company and the interests of shareholders. In setting the remuneration policy, Committee members are subject to provisions designed to avoid or manage conflicts of interest, which are documented separately in the Company's compliance policies. None of the directors or CEO makes a decision relating to their own remuneration. Individual directors leave the meeting when their own remuneration is being discussed.

Remuneration policy

The Company operates in a highly competitive market and must attract, motivate and retain high quality directors and senior executives capable of achieving the Company's objectives and thereby enhancing shareholder value.

A significant proportion of the potential remuneration of the CEO and senior executives is performancerelated with appropriately stretching targets, thus aligning their interests with those of shareholders and encouraging performance at the highest levels.

The Committee has considered whether there are any aspects of the remuneration policy which could inadvertently encourage the executives to take inappropriate risk and has concluded that the policy remains appropriate in this regard.

How the views of employees are taken into account

As referred to above, the Company, in line with market practively consult with employees on executive remuneration. The Committee is made aware of overall pay and employment conditions in the wider work force when it sets the executive remuneration policy.

How the views of shareholders are taken into account

As referred to above, the Committee takes into account the view of the shareholders through open and transparent communication with shareholders. If there are significant changes proposed to the remuneration policy, the Committee will consult with major shareholders.

Directors' remuneration report (continued)

Remuneration Policy Table – Executive Directors and CEO

The table below summarises the remuneration policy for any Executive Directors and the CEO.

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.	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
		Benefits may include, but are not limited to:
		A Car allowance A Private health care A 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

	Directors' remuneration report (continued)
--	--------------------------------------------	--	--

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 will 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

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 8%	Up to 8% of salary	Not 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	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
		In the event that the Company adopts a new long-term incentive plan (which may involve synthetic share options, cash or actual shares), Executive Directors or 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 Executive Directors or 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

Notes to the Remuneration Policy Table

In considering the appropriate measures to apply to any performance-based awards, the Committee will seek to incentivise and reinforce delivery of the Company's strategic objectives achieving a balance between delivering annual returns to shareholders and ensuring long-term profitability and growth.

The performance targets set would be stretching and achievable, taking into account the Company's strategic priorities and the economic environment in which the Company operates.

Statement of consideration of employment conditions elsewhere in the Company

The Company's remuneration policies and practices are founded on a high degree of alignment and consistency across the organisation. Accordingly, remuneration for senior management is determined taking into account the remuneration principles that apply to the CEO, and similar principles also form the basis of the remuneration arrangements for the wider workforce.

The approach to salary reviews is consistent across the Company, with consideration given to the scope of the role, responsibility, individual performance and pay levels in the selected peer group. Retirement benefits, typically in the form of a pension, are provided based on local market practice. Other benefits provided to the wider employee population reflect local market practice and legislative requirements.

A high proportion of the wider employee population are eligible to participate in annual bonus arrangements. Opportunities and metrics which apply to these arrangements may vary by organisational level with functional performance indicators incorporated where appropriate.

Senior managers are eligible to participate in the LTIP, with opportunities varying across levels with the most senior managers having a bigger portion of their pay delivered under the LTIP.

The key difference between remuneration for the CEO and any executive director and the wider employee population is the increased emphasis on long-term performance in respect of the CEO and executive directors, with a greater percentage of their total remuneration being performance-related.

The Committee is regularly updated on the pay principles in operation across the Company, in order to take these into account in setting the remuneration policy.

Other matters

In addition to the above, the Company is entitled to honour any contractual entitlement to compensation or benefits, and any incentive awards, which are 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 the Group on the date they are promoted to the role of Executive Director or CEO. Appropriate disclosure will be made of any compensation paid (or similar) to an Executive Director or CEO pursuant to any such arrangements.

The Company may reimburse all reasonable expenses incurred by an Executive Director or CEO in connection with their role. This will include expenses in attending Board committee meetings, or the Company may alternatively provide a travel allowance for such purpose. This may also include items which, for tax purposes, are treated as a taxable benefit, and in which case the Company may also pay any such tax on behalf of the Executive Director or CEO.

Approach to recruitment and promotions

In recruiting an Executive Director or CEO, including on promotion of an employee or officer from within the Group to the role of Executive Director or CEO, the Committee will offer the recruit a remuneration package that it believes is appropriate, taking into account the skills and experience of the individual and the need to recruit, retain and motivate individuals of the appropriate calibre. The remuneration package offered may include the components of remuneration described above in the Remuneration Policy Table.

For external hires, the Committee may determine that it would be appropriate to buy-out any existing incentive awards held by the individual that are forfeited as a result of the individual leaving their former employer. The Committee may also determine that it would be appropriate to grant recruitment-related awards. In the case of any buy-out of an equity based award, or the grant of any recruitment-related award, the award would normally be subject to such vesting and/or performance conditions as the Committee determines to be appropriate, either under a one-off arrangement or under the terms of the Company's incentive arrangements. In determining the terms of such awards, the Committee will take account of the vesting schedule and conditions attached to the forfeited awards (in the case of buy-out awards), but also other factors that it determines to be relevant, including the need to suitably incentivise and retain the individual during the initial years of their office.

The maximum level of variable remuneration (excluding any buy-out awards) that may be granted to any new Executive Director or CEO is 250% per annum of their salary.

Service contracts

The employment contract of the CEO is not of a fixed duration and therefore has no unexpired terms.

The notice period of the CEO's contract of employment is six months with the same notice period for the Company. The CEO's employment can be terminated in the six month probationary period without notice in the case of wilful misconduct or gross negligence.

In the event of termination by the Company, where there is no basis for dismissal as a result of gross breach of duty or other material breach of the employment contract by the CEO, or as a result of mutual agreement, the CEO shall be entitled to twelve months' severance pay.

In the event of a change of control of the Company, the CEO can terminate the employment contract and would be entitled to twelve months' severance pay.

The CEO's service contract is available for inspection at the Company's registered office during normal hours of business.

The non-executive directors do not have service contracts but instead have letters of appointment.

Loss of office payments

Contractual entitlements

A departing Executive Director's or CEO's rights in respect of salary, retirement benefits and contractual benefits will be determined in accordance with his service contract.

Incentive plans

The terms of a departing Executive Director's or CEO's participation in any annual bonus or long-term incentive plans will be governed by the terms of such arrangements.

Corporate actions

The treatment of incentive awards in the event of a corporate action affecting the Company will be determined in accordance with the terms 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 position.

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, including (but not limited to) in respect of settlement of claims, confidentiality, restrictive covenants and/or consultancy arrangements, where the Committee determines it necessary or appropriate to do so. The Company may pay reasonable legal fees on behalf of an Executive Director or CEO in connection with their cessation of office and employment. The Company may agree to provide other ancillary or non-material benefits, payments or similar to a departing Executive Director or CEO.

Reward Scenarios

The graph below shows how the total pay opportunities for the CEO vary under four performance scenarios. These have been prepared on the assumptions detailed below.

Below target = fixed pay only (base salary, benefits and pension) On target = 50% payable of annual bonus, 0% LTIP award Maximum = 100% payable of annual bonus, 100% LTIP award Maximum 2 = 100% payable of annual bonus, 100% LTIP award and 50% share price increase over the performance period

The chart illustrates the potential rewards available under the remuneration policy on an annualised basis for the financial year 2019. The values (other than the Maximum 2 illustration) assume a constant share price and do not take into account dividend adjustments that may be received on the share awards. The potential awards available for "on-target" performance under the annual bonus and LTIP are provided for illustration only and do not reflect formal policy decisions that these amounts will be received. Maximum 2 illustration assumes a share price increase of 50% over the performance period but in all other respects is the same as the Maximum illustration. It should be noted that no LTIP award has yet been granted to the CEO for the financial year 2019. The figures used in the chart are provided for illustration only based on a theoretical grant over 100% of salary, being the maximum permitted under the policy table. The actual value of any LTIP award that may be granted to the CEO for the financial year 2019 may be lower than this. The salary level (on which the bonus and LTIP elements of the package are calculated) are based on current salary level of GBP 325,000 based on the GBP/NOK year end exchange rate.

Remuneration policy table - non-executive directors

The remuneration policy for non-executive directors is set out in the table below. No non-executive directors participate in the Company's incentive arrangements or pension plan.

Component	Purpose	Operation
Fees	The basic fee is a fixed annual fee agreed after taking external advice and making market comparisons, and relate to the service of the directors in connection with the Company's business. The additional fees payable to the Chairman and members of the Board Committees reflects the additional time commitment in preparing and attending additional meetings.	The fees for non-executive directors (including the Chairman) are reviewed annually and approved in aggregate at the annual general meeting. The current level of fees is detailed below.

New appointments

The same principles as described above will be applied in setting the remuneration of a new non-executive director. Remuneration will comprise fees only and be paid in accordance with the prevailing rate at the time of the appointment. No variable remuneration will be paid and there will be no compensation for any loss of remuneration in a previous employment.

Letters of appointments

The Non-executive Directors' Letters of Appointment are available for inspection at the Company's registered office during normal hours of business.

Other matters

In addition to the above, the Company is entitled to honour any contractual entitlement to compensation or benefits, and any incentive awards, which are held by any current or former Non-Executive Director on the effective date of this policy. Appropriate disclosure will be made of any compensation paid (or similar) to a Non-Executive Director pursuant to any such arrangements.

The Company may reimburse all reasonable expenses incurred by a Non-Executive Director in connection with their role. This will include expenses in attending Board or Board-committee meetings, or the Company may alternatively provide a travel allowance for such purpose. This may also include items which, for tax purposes, are treated as a taxable benefit, and in which case the Company may also pay any such tax on hehalf of the Non-Executive Director

Fees for non-executive directors

The current level of fees paid for 2018 and those proposed for 2019 are as follows:

	2019	2018
	GBP	GBP
Chairman	46.375	46.375
Basic Fee	33,125	33.125
Chair of Audit Committee	5,000	5.000
Member of Audit, Remuneration or Nomination Committee	3,000	3.000

Fees to be paid in respect of 2019 will be decided at the next AGM which is scheduled for 3 June 2020.

Retirement and re-election of directors

All directors are required, under the Articles of Association of the Company, to retire at the first AGM. At each subsequent AGM, any directors who have been appointed by ordinary resolution or by the directors since the last AGM or who were not appointed or reappointed at one of the preceding two AGMs must retire from office and may offer themselves for reappointment by the members. After recommendation by the Nomination Committee, all directors were re-appointed at the AGM on 13th June 2019.

Audited information

Directors' remuneration

Single total figure of remuneration table

2019	Basic Salary and Fees	Benefits (2)	Performance Related Bonus	Pension- related	Other (4)	Total
	GBP	GBP	GBP	benefits(3) GBP	GBP	GBP
Executive Director:
J O S Bryce (1)	66,250	2,845		5,963	644,150	719,208
Non-executive Directors:
S E Thorvildsen	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
	262,125	2,845		5,963	644,150	915,082
	Basic Salary	Benefits (2)	Performance	Pension-	Other (4)	Total
2019	and Fees		Related Bonus	related
				benefits(3) GBP	GBP	GBP
	GBP	GBP	GBP
Chief Executive Officer:
JE O Berge (5)	218,150	10,387	162,500	17,452		408,489
	218,150	10,387	162,500	17,452		408,489
	Basic Salary	Benefits (2)	Performance	Pension-	Other (4)	Total
	and Fees		Related Bonus	related
2018
				benefits(3)
	GBP	GBP	GBP	GBP	GBP	GBP
Executive Director:
J O S Bryce	265,000	11,380	82,800	23,850		383,030
Non-executive Directors:
S E Thorvildsen	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

(1) Resigned 18 March 2019

(2) Includes non-cash benefits comprising car allowance and private health and dental care

(3) Contributions made during the year to the defined contribution scheme

(4) Cash-settled value of synthetic share options exercised during the year

(5) Appointed 1 May 2019, does not hold position of Executive Director

Analysis of taxable benefits received

The Chief Executive Officer ('the Executive Director') received the following taxable benefits:

	2019	2018
	GBP	GBP
J O S Bryce
Car allowance	2.500	10.000
Private health insurance	345	1,380
Total	2,845	11,380

The Chief Executive Officer received the following taxable benefits:

	2019	2018
	GBP	GBP
JE O Berge
Car allowance	10,387
Total	10,387

Annual bonus 2019

For the year under review, the Chief Executive Officer's bonus was awarded subject to challenging strategic targets. The precise weightings are considered by the Commercially sensitive so are not specified in detail. The areas that have been considered were company performance and also performance improvement from the prior year, measured against the Company's financial and operational KPIs whilst also taking into account the current market conditions.

Annual bonus 2020

The criteria for the 2020 bonus has yet to be finalised by the Remuneration Committee but is expected to follow a similar format to the current year metrics.

Information not subject to audit:

Relative importance of the spend on pay

The graph below shows the relative importance of the spend on pay (for all employees) compared with the returns distributed to shareholders:

Total shareholder return performance graph

The graph below shows 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 shares against the corresponding total shareholder return in a hypothetical holding of shares in the OBX (an index on the Oslo Bors stock exchange). This was selected as it represents a broad equity market index in which the Company is a constituent member. The graph is a reporting requirement, however, the LTIP awards that are made to the Executive Director are not based on share performance.

Chief Executive Officer ('CEO') remuneration

Five-year comparison

The table below summarises the Chief Executive Officer (the Executive Director)'s single total figure of remuneration, annual and long-term variable performance-related remuneration (and the percentage of the maximum opportunity that these represent) in relation to the past five years.

Year	Chief Executive	Single total figure	Annual variable element (actual
	Officer	of remuneration	award versus opportunity)
		GBP	GBP	0/0
2019	JE O Berge (1)	408.490	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%
2016	J O S Bryce	647.750	78.440	30%
2015	J O S Bryce	370.022	69.960	26%
2014	J O S Bryce	2,196,775	159,000	60%

(1) Appointed 1 May 2019

(2) Resigned 18 March 2019

Comparison of CEO remuneration to employee remuneration

	2019	2018	Change 0/0	Employee remuneration change
	GBP	GBP
Salary and fees	325.000	265,000	23%	11%
Taxable benefits	15.475	11,380	36%	2%
Annual variable performance related remuneration	162,500	82,800	96%	3%
Total	502,975	326,212	54%
Single total figure of remuneration *	408,490	350,062	17%

*pro-rata figure for 2019

The above table shows the movement in remuneration for the Chief Executive Officer between the current and previous financial year compared with movement of the average remuneration (per head) for all Company employees.

Implementation of remuneration policy for following financial year

Base salaries

The CEO's base salary will continue to be reviewed annually by the Remuneration Committee, based on performance and current market conditions. The Remuneration Committee will then make a recommendation to the Board of Directors.

Pension and benefits

The CEO participates in a defined contribution arrangement which the Company contributes a maximum of 8% of base salary. Additional benefits include private medical insurance and company car allowance.

Annual performance related remuneration

The maximum bonus opportunity for the CEO will remain unchanged at 100% of base salary. The bonus opportunity will be set by the Committee with targets aligned with creating shareholder value.

Statement of shareholder voting

The table below sets out the voting by the Company's shareholders on the resolution to approve the Directors' remuneration report at the AGM held on 13 June 2019.

	Total number of votes	% of votes cast
For	38,505,008	100.0%
Total votes cast	38,505,008	100.0%

The Remuneration Committee is pleased to note that 100% of shareholders approved the 2018 Directors' remuneration report.

By order of the Board of Directors

Sigurd Thorvildsen 12 May 2020

to the members of Awilco Drilling PLC

Opinion

In our opinion:

• Awilco Drilling plc's group financial statements and parent company financial statements (the "financial statements") give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2019 and of the group's loss for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent company financial statements been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the group financial statements, Article 4 of the IAS Regulation.

Group	Parent company
Consolidated balance sheet as at 31 December 2019	Balance sheet as at 31 December 2019
Consolidated income statement for the year then ended 31 December 2019	Statement of changes in equity for the year then ended 31 December 2019
Consolidated statement of comprehensive income for the year then ended 31 December 2019	Statement of cash flows for the year then ended 31 December 2019
Consolidated statement of changes in equity for the year then ended 31 December 2019	Related notes ] to 28 to the financial statements including a summary of significant accounting policies
Consolidated statement of cash flows for the year then ended 31 December 2019
Related notes 1 to 28 to the financial statements, including a summary of significant accounting policies

We have audited the financial statements of Awilco Drilling plc which comprise:

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and; as regards to the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report below. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of

to the members of Awilco Drilling PLC

Basis for opinion (continued)

the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainties related to going concern

We draw attention to note 2 of the financial statements, which indicates that the ability of the Group and Company to continue as a going concern is subject to the following material uncertainties.

• · There is significant doubt over whether the Group can secure work for the first of the new build rigs and successfully raise additional financing prior to the next scheduled capital commitment payments in June 2020.
• · There is a possible crystallisation of a contingent taxation liability. If the liability were to become payable in the going concern period, additional financing may need to be raised in order to settle the liability.

As stated in note 2, these events or conditions, indicate that material uncertainties exist that may cast signifiacnt doubt on the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

We describe below how our audit responded to the risk relating to going concern:

• · The audit engagement partner increased his time directing and supervising the audit procedures on going concern to assist in assessing the going concern models and assumptions;
• · We obtained the cash flow forecasts and sensitivities prepared by management and tested for arithmetical accuracy of the models;
• · We challenged management's initial assessment of going concern by questioning the ability to raise finance in the current environment;
• · We obtained an alternate severe but plausible scenario, confirming the mathematical accuracy and subjected the cashflow to additional stress testing to consider future out flows of cash;
• · We inspected the construction contracts and the deed of amendment for the new build rigs to determine the payment schedules and options within, to ensure consistent with the cash flows provided by management;
• · We engaged with our inhouse legal and the Group's external legal advisors to understand the contract arrangements including the non-recourse nature of the new build rig contracts;
• · We substantiated revenue projections in the cashflows, by obtaining and agreeing to signed contracts for forthcoming work;
• . We substantiated the expenses projected to be incurred by reference to our year end audit work, ensuring consistency;
• · We obtained calculations for potential future cost reductions, assessing the reasonableness, scale and timing of the measures which can be taken to reduce costs;
• · We engaged with our tax subject matter experts to understand timings of possible cash out flows from the tax contingent liability which could crystallise in the future;
• · We obtained a legal opinion from the Group's legal advisors and their appointed QC on the merits of the HMRC appeal; and
• · We assessed the disclosures in the Financial Statements relating to Going Concern, including the material uncertainties, to ensure they were fair, balances and understandable in line with accounting standards.

to the members of Awilco Drilling PLC

Overview of our audit approach

Key audit matters	• Impairment of the drilling rigs
Audit scope	· We performed an audit of the complete financial information of three components and audit procedures on specific balances for a further two components.
	· The components where we performed full or specific audit procedures accounted for 100% of Loss before tax, 100% of Revenue and 100% of Total assets.
Materiality	· Overall group materiality of \$2m which represents 1% of Assets.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the material uncertainties related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

Risk	Our response to the risk	Key observations communicated to the Audit Committee
Impairment of drilling rigs (NBV: 2019: \$104m - WilPhoenix \$94m and WilHunter \$10m, 2018: \$167m) Refer to Accounting policies (page 51); Significant accounting estimates and assumptions (page 52) and Note	We evaluated management's impairment assessment by verifying the methodology and assumptions, along with the value in use and suitability of sensitivities considered by management within, specifically: We have confirmed the 0	The assessment is impacted by several factors and is sensitive to both future operating activities and discount rates. In our view the day rates and discount rate assumptions used by management are within reasonable ranges.
15 of the Consolidated Financial Statements (page 63) Under IAS 36, the group is required to assess annually whether any impairment indicators exist at the year-end and if such conditions exist, an impairment assessment is required.	mathematical accuracy of the impairment model; Future contract day rates - we have compared forecasted day rates to historic day rates and industry trends, ; · Rig Utilisation - we have compared forecast rig	Following the \$23m impairment charge (to WilHunter), we consider the carrying value of the semi-submersible drilling rigs to be reasonable and that appropriate disclosures are made in the financial statements. Any subsequent impairment to Fixed Assets as a result of the

to the members of Awilco Drilling PLC

The slow speed of recovery	utilisations to historic	COVID-19 pandemic and
within the oil and gas services sector from the oil price crash of 2015, coupled with the fact that one semi-submersible drilling rig (WilHunter) remains un-utilised (no change to the rig's cold stacked status) are considered indicators of a likely impairment Given the estimates and judgements involved in the impairment assessment, there is a risk of improper valuation of the semi-submersible drilling rigs. Events subsequent to the balance sheet date could indicate that a further assessment of impairment is required.	performance of the group and current market trends to confirm reasonableness of assumptions; Long term growth rate - we compared the forecast contracted daily rates applied by management to available external rates: Discount rates - we involved our valuations specialists in our evaluation of the discount rate to consider the appropriateness of the rates used. Our specialists performed a review of the methodology along with testing the inputs to the weighted average cost of capital to external sources including peer data; Operating costs -the forecast operating costs are in line with audited current and prior year expenditure; We have confirmed that 0 the appropriate disclosures have been made in the consolidated financial statements; Discussed with management events after the balance sheet date which would require disclosure, particularly the COVID -19 pandemic and the Russian/Saudi oil price dispute considering any impact to carrying values of Fixed Assets We have confirmed that the appropriate disclosures have been made in the consolidated financial statements.	Russian/ Saudi price dispute would be post balance sheet events and considered in future periods.

to the members of Awilco Drilling PLC

An overview of the scope of our audit

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other factors when assessing the level of work to be performed at each entity.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the six reporting components of the Group, we selected five components covering entities within Singapore and the United Kingdom, which represent the principal business units within the Group.

Of the five components selected, we performed an audit of the complete financial information of three components ("full scope components") which were selected based on their size or risk characteristics. For the remaining two components ("specific scope components"), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile.

The reporting components where we performed audit procedures accounted for 100% (2018: 100%) of the Group's before tax, 92% (2018: 100%) of the Group's Revenue and 100% (2018: 100%) of the Group's Total assets.

	Full scope components		Specific scope components
Financial vear	2019	2018	2019	2018
% of Group's loss before tax	92%	84%	0%	16%
% of Group's Revenue	100%	100%	0%	0%
% of Group's Total Assets	85%	83%	15%	17%

The audit scope of these components may not have included testing of all significant accounts of the component but will have contributed to the coverage of significant tested for the Group.

Involvement with component teams

All audit work performed for the purposes of the audit was undertaken by the Group audit team.

Our application of materiality

We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.

to the members of Awilco Drilling PLC

Materiality

The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined materiality for the Group to be \$2.0m (2018: \$2.6m), which is 1% of Total Assets. During 2019 and 2018 there was a significant reduction in profitability due to reduced activity levels, resulting in losses for both years. Total Assets was considered a more appropriate materiality basis given the significant carrying value of assets held.

We determined materiality for the Parent Company to be \$4.4m (2018: \$3.8m), which is 2% of Equity (2018: 2%).

During the course of the audit, we reassessed initial materiality and there has been a change following the booking of the impairment loss.

Performance materiality

The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group's overall control environment, our judgement was that performance materiality was 75% (2018: 75%) of our planning materiality, namely \$1.5m (2018: \$1.9m). We have set performance materiality at this percentage based on the history of past misstatements and lack thereof, our ability to access the likelihood of misstatements and the effectiveness of the internal control environment.

The performance materiality set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was \$30k to \$991m (2018) \$905k to \$1.4m).

Reporting threshold

An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of \$100k (2018: \$130k), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.

Other information

The other information comprises the information included in the annual report set out on pages 2 to 35, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other

to the members of Awilco Drilling PLC

Other information (continued)

information, if, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, the part 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 information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements and those reports have been prepared in accordance with applicable legal requirements; and

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

• · adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• · the parent company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
• · certain disclosures of directors' remuneration specified by law are not made; or
• · we have not received all the information and explanations we require for our audit

Responsibilities of directors

As explained more fully in the directors' responsibilities statement set out on page 13, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in

to the members of Awilco Drilling PLC

Auditor's responsibilities for the audit of the financial statements (continued)

accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the

Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Ernst & Vary LLP

Jamie Dixon (Senior Statutory Auditor) For and on behalf of Ernst & Young LLP (Statutory Auditor) Aberdeen 12 May 2020

Notes:

• I. 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, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.
• 1. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Group statement of comprehensive income

for the year ended 31 December 2019

		2019	2018
	Notes	US\$000	US\$000
Revenue	5	38,136	56,522
Cost of sales		(36,365)	(41,031)
Impairment	16	(23,000)	(25,000)
Gross Loss		(21,229)	(9,509)
General and administrative expenses		(9,153)	(8,766)
Operating Loss	6	(30,382)	(18,275)
Finance income	9	948	1,943
Finance expense	10	(14)	(4,671)
Other expense		(152)
Net (loss)/gain on foreign exchange transactions	11	(385)	5
Loss on forward contracts at fair value through profit and loss	28	(180)	(172)
Loss before taxation		(30,165)	(21,170)
Income tax expense	12	(427)	(1,694)
Loss for the year attributable to equity shareholders		(30,592)	(22,864)
There is no comprehensive income other than the results for the year.
Basic and diluted loss per share (US\$ per share)	13	(0.57)	(0.52)

Total comprehensive income for the year is attributable to the owners of the Company, as there is no minority interest.

Group statement of financial position

as at 31 December 2019

		2019	2018
	Notes	US\$000	US\$000
Non-current assets
Property, plant and equipment	ાં ર	201,918	186,761
Right-of-use asset	21	1,417
Deferred tax asset	12	108	461
		203,443	187,222
Current assets
Inventory		4,946	4,808
Trade and other receivables	18	9,724	11,938
Current tax receivable			340
Cash and cash equivalents	19	41,249	63,865
		55,919	80,951
Total assets		259,362	268,173
Current liabilities
Trade and other payables	20	7,240	6,284
Current tax payable		71	66
		7,311	6,350
Non-current liabilities
Trade and other payables	20	1,066	433
		1,066	433
Total liabilities		8,377	6,783
Net Assets		250,985	261,390
Shareholders' Equity
Called up share capital	23	રેડિયા સ્વિડિત દિવેલી તેમ જ દૂધની ડેરી જેવી સવલતો પ્રાપ્ય થયેલી છે. આ ગામનાં લોકોનો મુખ્ય વ્યવસાય ખેતી, ખેતમજૂરી તેમ જ પશુપાલન છે. આ ગામનાં મુખ્યત્વે ખેત	477
Share premium account	23	218,381	198,242
Retained earnings		32,079	62,671
Total Shareholders' equity		250,985	261,390

Signed on behalf of the Board of Directors

Sigurd Thorvildsen Director

Company statement of financial position

as at 31 December 2019

		2019	2018
	Notes	US\$000	US\$000
Non-current assets
Property, plant and equipment	15	560	504
Right of use assets	21	1.417
Investment in subsidiaries	17	279	277
Amount due from subsidiary undertakings	25	174.101	123,920
Deferred tax		108	461
		176,465	125,162
Current assets
Trade and other receivables	18	9,313	9,533
Current tax receivable			340
Cash and cash equivalents	19	41,203	63,307
		50,516	73,180
Total assets		226,981	198,342
Current liabilities
Trade and other payables	20	3,642	4,635
		3,642	4,635
Non-current liabilities
Trade and other payables	20	1,066	433
Total liabilities		4,708	5,068
Net assets		22,273	193,274
Shareholders' Equity Called up share capital	24	રેડિયા સ્વિડિત દિવેલા દિવેલા ગુજરાત રાજ્યના દિવેલા ગુજરાત રાજ્યના દિવેલા ગુજરાત રાજ્યના દિવસાય ખેતી, ખેતમજૂરી તેમ જ પશુપાલન છે. આ ગામનાં લોકોનો મુખ્ય વ્યવસાય ખેતી, ખે	477
Share premium account	24	218,381	198,242
Retained earnings/(deficit)		3,367	(5,445)
		222,273	193,274
Total Shareholders' equity

The profit recorded by the Company for the year was US\$8.8 million (2018: US\$7.1 million loss).

Signed on behalf of the Board of Directors

Sigurd Thorvildsen Director

Group statement of changes in equity

	Called Up	Share		Total
	Share	Premium	Retained	shareholders
	Capital	account	earnings	equity
	US\$000	US\$000	OS\$000	OS\$000
At 1 January 2018	304	129,837	101,068	231,209
Equity issue as at 27 March 2018	161	64,776		64,937
Equity issue costs as at 27 March 2018		(1,017)		(1,017)
Equity issue as at 22 June 2018	12	4,646		4,658
Total comprehensive loss for the year			(22,864)	(22,864)
Dividends paid		-	(15,533)	(15,533)
At 31 December 2018	477	198,242	62,671	261,390
Equity issue as at 13 March 2019	48	20,547		20,595
Equity issue costs as at 13 March 2019		(408)		(408)
Total comprehensive loss for the year			(30,592)	(30,592)
At 31 December 2019	રેટર	218,381	32,079	250,985

Company statement of changes in equity

	Called Up	Share		Total
	Share	Premium	Retained	shareholders
	capital	account	Earnings/Deficit	equity
	US\$000	US\$000	US\$000	OSS000
At 1 January 2018	304	129,837	17,221	147,362
Equity issue as at 27 March 2018	161	64,776	-	64,937
Equity issue costs as at 27 March 2018		(1,017)	-	(1,017)
Equity issue as at 22 June 2018	12	4,646		4,658
Total comprehensive loss for the year			(7,133)	(7,133)
Dividends paid			(15,533)	(15,533)
At 31 December 2018	477	198,242	(5,445)	193,274
Equity issue as at 13 March 2019	48	20,547		20,595
Equity issue costs as at 13 March 2019		(408)		(408)
Total comprehensive profit for the year	1		8,812	8,812
At 31 December 2019	રેટર	218,381	3,367	222,273

Group statement of cash flows

Notes US\$000
	US\$000
Operating activities
Loss before taxation (30,165)	(21,170)
Adjustments to reconcile profit before tax to net cash flows:
Depreciation 11,586	13,425
23,000 Impairment	25,000
(934) Net finance (income)/expense	2,728
Share-based payment (2,112)	(260)
Working capital adjustments:
Decrease in trade receivables 167	8,092
(138) Increase in inventory
Decrease in prepayments and other receivables 2,046	4,043
2,295 Increase/(decrease) in trade and other payables	(3,712)
Interest paid (14)	(4,671)
Interest received 949	1,943
Taxation paid (70)	(3,080)
340 Taxation refunded	5,574
6,950 Net cash flows generated from operating activities	27,912
Investing activities
Purchase of property, plant and equipment (49,421)	(46,378)
(49,421) Net cash flow used in investing activities	(46,378)
Financing activities
Proceeds from issue of share capital 20,595	69,595
(408) Equity issue costs	(1,017)
Payment of dividends	(15,533)
Repayment of loans and bonds 22	(90,000)
(332) Payment of principal portion of lease liabilities
Net cash flows generated from/(used in) financing 19,841 activities	(36,955)
Net decrease in cash and cash equivalents (22,616)	(55,421)
63,865 Cash and cash equivalents at beginning of year	119,286
41,249 19 Cash and cash equivalents at end of year	63,865

Company statement of cash flows

		2019	2018
	Notes	US\$000	US\$000
Operating activities
Profit/(Loss) before taxation		9.166	(5,367)
Adjustments to reconcile profit/(loss) before tax to net cash flows:
Depreciation		381	52
Net finance (income)/expense		(934)	2,728
Share based payment		(2,112)	(260)
Working capital adjustments:
Decrease in prepayments		52	324
Increase in trade receivables		(50,016)	(11,547)
Increase/(decrease) in trade and other payables		346	(1,908)
Interest paid		(14)	(4,671)
Interest received		948	1,943
Taxation refunded		340
Net cash flows used in operating activities		(41,843)	(18,706)
Investing activities
Purchase of property, plant and equipment		(116)	(22)
Net cash flows used in investing activities		(116)	(22)
Financing activities
Proceeds from issue of share capital		20,595	69,595
Equity issue costs		(408)	(1,017)
Dividends paid			(15,533)
Repayment of bonds	22		(90,000)
Payment of principal portion of lease liabilities		(332)
Net cash flows generated from/(used in) financing activities		19.855	(36,955)
Net increase/(decrease) in cash and cash equivalents		(22,104)	(55,683)
Cash and cash equivalents at beginning of year		63,307	118,990
Cash and cash equivalents at end of year	19	41,203	63,307

At 31 December 2019

General information 1.

The Group and Company financial statements of Awilco Drilling PLC for the year ended 31 December 2019 were authorised for issue by the Board of Directors on 11May 2020. The Company is incorporated in the United Kingdom under the Companies Act 2006 and listed on the Oslo Bors stock exchange. 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 Group's operations and its principal activities are set out in the Strategic report.

2. Basis of preparation

Statement of compliance

The financial statements have been prepared in accordance with IFRS as adopted by the EU as they apply to the financial statements of the Group and Company for the year ended 31 December 2019 and prepared in accordance with the provisions of the Companies Act 2006.

Basis of consolidation

The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The Group has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Company income statement. The profit recorded by the Company for the year was US\$8.8 million (2018: US\$7.1 million loss).

Material Uncertainties over Going concern

At 31 December, the Group had cash on hand of US\$ 41 million and no debt. Management has prepared cash flow forecasts covering a period of 18 months from the balance sheet date in order to assess whether the Group and Company are a going concern. The following significant assumptions have been considered within these forecasts:

• · A base case cash flow scenario assuming the Group secures work for the first of the new build rigs and successfully raises additional financing prior to the next schedule capital commitment payments in June 2020 (Note 22). There is material uncertainty as to whether the new work will be secured, and additional finance raised in order to meet the June 2020 payments.
• · An alternate cash flow scenario has been prepared assuming the Group is unable to raise additional financing and has not been able to agree with the shipyard a deferment / renegotiation of the payment terms, and / or the contractual terms and conditions of the new build rigs. In this scenario, it is recognised that the construction contracts with the shipyard are structured such that there is no recourse to the rest of the Group in the event of default by the contracting subsidiaries. This alternative scenario has been further stress tested to assume that no additional contractual work will be undertaken beyond that which is currently contracted. In that scenario there are sufficient mitigating actions available to ensure the going concern basis. This includes the potential cold stacking of the WilPhoenix upon completion of its current contracted work.
• · Consideration of the possible crystallisation of a contingent taxation liability (Note 22) and the mitigating actions available to the Company if a liability were due to become payable in the going concern period. In the event that this contingency was to crystallise, additional financing may need to be raised in order to settle the liability. This represents a material uncertainty.

Based on their assessment the directors have concluded that there are material uncertainties that could cast significant doubt upon the Group and Company's ability to continue as a going concern. The financial statements do not contain adjustments that would result if the Group and Company were unable to continue as a going concern.

At 31 December 2019

3. Significant accounting estimates and assumptions

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year, are discussed below.

3. Significant accounting estimates and assumptions (continued)

Impairment

The carrying amount of the Group's rigs are reviewed at each balance sheet date to determine whether there is any indication of impairment, or more frequently if events or circumstances indicate they might be impaired. The impairment test is based on management's best estimate of forecast industry conditions and operations, expected utilisation, contract rates, operating expenses and capital requirements of the rigs. See note 15 and 16 for further information on carrying amounts and sensitivity analysis.

Uncertainty

Should the Group be unable to raise additional financing to meet the capital commitments on the new build rigs, then they will be required to enter negotiations with the shipyard in order to defer / renegotiate payment terms and / or contractual terms and conditions. This could lead to a potential impairment of the carrying value of the asset values in the Statement of Financial Position.

4. Accounting policies

New standards and interpretations

The Group applied IFRS 16, Leases for the first time. The nature and effect of the changes as a result of adoption of this new accounting standard is described below.

Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the consolidated financial statements of the Group has not early adopted any standards, interpretations or amendments that have been issued, but are not yet effective.

IFRS 16 Leases

IFRS 16 Leases replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet.

Lessor accounting under IFRS 16 is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or finance leases under similar principles as in IAS 17. Therefore, IFRS 16 does not have an impact for leases where the Group is the lessor.

The Group adopted IFRS 16 using the modified transition method of adoption, with the date of initial application of 1 January 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard at the date of initial application. The Group elected to use the transition practical expedient to not reassess whether a contract is, or contains, a lease at 1 January 2019. Instead, the Group applied the standard only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (short-term leases), and lease contracts for which the underlying asset is of low value (low-value assets). Prior period amounts have not been adjusted and continue to be reflected in accordance with the historical accounting for leases.

At 31 December 2019

4. Accounting policies (continued)

New standards and interpretations (continued)

IFRS 16 Leases (continued)

The effect of adoption of IFRS 16 at 1 January 2019 (increase)) is, as follows:

	Uppuvu
Assets
Right-of-use assets	1,738
Total assets	1,738
Liabilities
Trade and other payables	1,738
Total liabilities	1.738

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases for which it is the lessee, except for short-term leases of low-value assets. The Group recognised lease liabilities to make lease payments and right of use assets representing the right to use the underlying assets.

The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:

	US\$000
Operating lease commitments as at 31 December 2018	1.818
Increase in rent payments	। રેરે
Impact of discounting as at 1 January 2019 *	(235)
Lease liabilities as at 1 January 2019	1.738
*The weighted average incremental borrowing rate applied was 4%

IFRIC Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically address the following:

• · Whether an entity considers uncertain tax treatments separately
• · The assumptions an entity makes about the examination of tax treatments by taxation authorities
• · How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates
• · How an entity considers change in facts and circumstances

The Company has been in regular contact with HMRC over the classification of an element of income booked in 2015. The Company has maintained its position that the income was such that accumulated losses could be utilised against the income resulting in a reduction in its tax liability for the year. HMRC have disagreed with the Company's position and issued a notice of amendment indicating additional tax and interest due. The Company are of the opinion that HMRC are incorrect in their assessment of the facts and an appeal has been submitted the outcome of which remains uncertain. There is no material impact on this assessment of the uncertain tax position.

1 ICCOON

At 31 December 2019

4. Accounting policies (continued)

New standards and interpretations - not yet adopted

The following standards and amendments and interpretations to existing standards have been published and are mandatory for the Group's accounting period beginning on or after 1 January 2020 or later periods, but the Group has not early adopted them:

• · Amendments to IFRS 3: Definition of a Business
• · Amendments to IAS 1 and IAS 8: Definition of Material
• · Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current
• · Amendments to IFRS 9, IAS 39 and IFRS 17: Interest Rate Benchmark Reform
• · Amendments to References to the Conceptual Framework in IFRS standards

It is not anticipated that the application of these standards and amendments will have any material impact on the Group's financial statements.

Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the statement of cash flows, cash and cash equivalents are as defined above and net of outstanding bank overdrafts.

Property, plant and equipment

Rigs and equipment are stated at cost less depreciation and impairment 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 subsequent expenditures have resulted in an increase in future economic benefits expected to be obtained from the use of the assets beyond their originally assessed standard of performance, the expenditure is capitalised as an additional cost of the asset. A component of an asset with a cost that is significant in relation to the total cost of the asset is depreciated separately. Components with a similar depreciation method and useful life are grouped together.

Depreciation is calculated using the straight-line method for each asset, after taking into account the estimated residual value, over its expected useful lives as follows:

Semi-submersible drilling rigs	20 years
Special purpose surveys	5 years
Other fixtures and equipment	3-5 years

Special purpose surveys are a five-yearly thorough inspection and recertification of the hull and main machinery components of the rig, which also include class and flag state renewal and verification. The carrying values of plant and equipment are reviewed for impairment if carrying value may not be recoverable, and are written down immediately to their recoverable amount.

Useful lives and residual values are reviewed annually and where adjustments are required, these are made prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset is included in the statement of comprehensive income in the period of derecognition.

Assets under construction

Assets under construction are costs directly associated with constructing an asset. While the asset is being constructed, no depreciation is applied. Once an asset is ready for use, all associated costs are transferred to the relevant asset category and depreciated accordingly.

Inventories

Inventories of drilling equipment and spares for future integrated drilling service wells are stated at the lower of cost incurred and net realisable value. These inventory items include spare parts and supplies relating to the operation of the semi-submersible drilling rigs.

At 31 December 2019

4. Accounting policies (continued)

Revenue recognition

Revenue derived from charter-hire contracts or other service contracts is recognised in the period that services are rendered at rates established in the relevant contracts include mobilisation fees payable at the start of the contract. In cases where the fee covers a general upgrade of a rig or equipment which increases the value of the rig or equipment beyond the fee is recognised as revenue over the firm contract period whereas the investment is depreciated over the remaining lifetime of the asset. In cases where the fee covers specific upgrades or equipment specific to the contract, the mobilisation fees are recognised as revenue over the firm contract period.

Cost of sales

Cost of sales includes rig operating costs and the depreciation cost for the two rigs.

Taxation

Current income tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.

Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income tax is recognised in the statement of comprehensive income.

Deferred income tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• · When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
• · In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseable future.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:

• · When the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
• · In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

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 liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

At 31 December 2019

4. Accounting policies (continued)

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group'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 functional currency and presentation currency and all values are rounded to the nearest thousand dollars (US\$000) except when otherwise indicated.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the statement of comprehensive income. The principal foreign currencies used by the Group are Pounds Sterling (£ or GBP), Euro (€) and Norwegian Kroner (NOK).

Earnings/(loss) per share

Basic earnings/(loss) per share amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings((loss) per share amounts are calculated by dividing the net profit by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

Leases

Up to 31 December 2018, leases, where the lessor retains a significant portion of the risks and benefits of ownership of the asset were classified as operating leases and rentals payable were charged in the income statement on a straight-line basis over the lease term.

The Group has changed its accounting policy effective 1 January 2019 and applies a single recognition and measurement approach for all leases, except for short-term leases of low-value assets.

For all other leases, the Group recognises lease liabilities representing lease payments and right-of-use assets representing the right to use the underlying assets.

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease and are measured at cost, less any accumulated depreciation and impairment losses, adjusted for any re-measurement of lease

liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct cost incurred, and lease payments made at or before the commencement date less any incentives received. Right of use assets are depreciated on a straight-line basis over the remaining lease term.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities at the present value of lease payments to be made over the lease term, using the interest rate implicit to the lease, and if not readily determinable, at the incremental borrowing rate.

The lease liabilities are included in trade and other payables in Note 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 value through profit or loss, amortised cost, or fair value through other comprehensive income as appropriate. The Group determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. When financial assets are recognised initially, they are measured at fair value, being the transaction price plus, in the case of financial asset not at fair value through profit or loss, directly attributable transaction costs.

At 31 December 2019

4. Accounting policies (continued) Derecognition of financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• · the rights to receive cash flows from the asset have expired; or
• · the Company has transferred its rights to receive cash flows from the assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either:
• · The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but had transferred control of the asset, or
• · The Company has transferred substantially all the risks and rewards of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred of the asset is recognised to the extent of the Company's continuing involvement in the asset. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that rights and obligations that the Company has retained.

Impairment of financial assets

Further disclosures relating to impairment of financial assets are also provided in Note 18.

The Group recognises an allowance for expected credit loss (ECL) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.

Trade and other receivables

Trade receivables and amounts due from subsidiary undertakings, which generally have 60-day terms, are recognised and subsequently carried at the original invoiced value net of expected credit loss. Where the time value of money is material, receivables are carried at amortised cost.

Trade and other payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Loans

Loans are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. Loans are subsequently measured at their amortised cost applying the effective interest rate method.

Finance charges on the loans are recognised as finance expense in the statement of comprehensive income.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

At 31 December 2019

4. Accounting policies (continued)

Derivative financial instruments

The Group uses derivative financial instruments, such as forward currency contracts, to hedge certain foreign currency risks. The derivative financial instruments are initially recognised at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value at the reporting date. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The Group does not derivative financial instruments as hedges nor apply hedge accounting. Any gains or losses arising from changes in the fair value of derivatives are taken to the statement of comprehensive income.

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 details are given in Note 26. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in statement of comprehensive income for the period.

Pension

The pension plan in place is a defined contribution plan. Pension contributions are charged to the statement of comprehensive income as an expense in the period to which the contributions relate. Once the contributions have been paid, there are no further payment obligations.

5. Revenue

Revenue represents the invoiced amount of services provided after the deduction of rebates and retrospective discounts. All items are stated net of value added tax.

The Group only has one segment - providing drilling services in the UK. As a result, no further segmental information has been provided.

Information about major customers

Annual revenue from one major customer amounted to US\$ 38 million arising from the provision of drilling services (2018: US\$ 43 million and US\$ 13 million from two major customers).

6. Operating profit

This is stated after charging

	2019	2018
	US\$000	US\$000
Depreciation (Note 15, 21)	11,586	13,425
Operating lease expense on land and buildings (Note 21)	-	341
Inventory used	779	704

7. Auditors' remuneration

The Group paid the following amounts to its auditors in respect of the financial statements and for other services provided to the Group.

	2019	2018
	US\$000	US\$000
Audit of the financial statements	128	94
Local statutory audits of subsidiaries	52	48
Tax services - compliance	32	31
Tax services - advisory	રે રે	107
	267	280

At 31 December 2019

8. Staff costs

9

1

1

	2019	2019	2018	2018
	Group	Company	Group	Company
	US\$000	US\$000	US\$000	US\$000
Wages and salaries	16.659	3,766	15,122	3,497
Directors Fees	255	ઈ રેરિક	255	ડર્ટ રે
Pension costs	974	241	780	136
Social security costs	1.947	453	2,126	રેજેવ
Long term incentive plan	(422)	(329)	489	354
	19,413	4,386	18,772	4.836

The Company makes contributions to a defined contribution scheme for all eligible employees up to a maximum of 9% of salary. Contributions are charged to the income statement as incurred.

The average monthly number of employees during the year was made up as follows:

	2019	2018
	No.	No.
Onshore, including management (Company)	28	26
Offshore	115	116
	143	142
Finance income
	2019	2018
	US\$000	US\$000
Bank interest	948	1,943
0. Finance expense
	2019	2018
	US\$000	US\$000
Interest on loans and bonds		4,671
Interest on lease liabilities	14
1. Net (loss)/gain on foreign exchange transactions
	2019	2018
	US\$000	US\$000
Gain on foreign exchange transactions	168	135
(Loss) on foreign exchange transactions	(553)	(130)
Net (loss)/gain on foreign exchange transactions	(385)	5

At 31 December 2019

12. Income tax

(a) Income tax on profit on ordinary activities

	1.1117	2010
	US\$000	US\$000
Foreign tax on the profit for the year	71	66
Total current income tax	71	66
Amounts under provided in previous years	4	829
Tax credit available to the UK		(113)
Total current income tax	75	782
Deferred income tax:
Origination and reversal of temporary differences	352	917
Impact of changes in tax rates		(5)
Total deferred income tax	352	912
Income tax charge in the Group statement of comprehensive income	427	1.694

ากาก

าการ

(b) Reconciliation of the total income tax charge

	2019 US\$000	2018 US\$000
Loss from continuing operations	(30,165)	(21,170)
Tax calculated at UK standard rate of corporation tax of 19% (2018:19%)	(5,733)	(4,022)
Expenses not deductible/(income not taxable) for tax purposes	(43)	38
Foreign tax suffered	71	66
Movement in unrecognised deferred tax asset	6,128	4.033
Brought forward deferred tax assets unrecognised		868
Prior year adjustments	4	829
Changes in tax rates	=	(5)
Tax credit available to the UK		(113)
Income tax charge in the Group statement of comprehensive income	427	1,694

The income tax expense above is computed at loss before taxation multiplied by the effective rate of corporation tax in the UK of 19% (2018: 19%). In the 2016 Budget, the UK Government announced that the main rate of corporation tax would be reduced to 17% with effect from 1 April 2020. Legislation introduced in Finance Bill 2020 repeals the previously enacted 17% rate and therefore the rate will remain at 19%.

At 31 December 2019

12. Income tax (continued)

(c) Deferred income tax

The deferred income tax included in the statement of financial position is as follows:

	2019	2018
	OS\$000	US\$000
Deferred tax asset
As at 1 January	461	1,372
Temporary differences relating to property plant and equipment		(868)
Share-based payment	(353)	(43)
As at 31 December	108	461

The main categories of deferred tax assets and liabilities recognised in the statement of financial position are as follows:

	Deferred tax asset US\$000	US\$000	Net recognised Deferred tax deferred tax liability asset/(liability) US\$000
Share-based payments	108		108

(d) Unrecognised deductible temporary differences

The Group has total tax losses of US\$ 56.2 million which arose in the UK (2018: US\$ 48.4 million) that are available for offset against future taxable profits that are not part of the bareboat charter ring-fence arrangements. There are further taxable temporary differences relating to fixed assets of US\$ 30.3 million and US\$ 18.4 million of unutilised capital allowances. Deferred tax assets have not been recognised in respect of these losses or differences due to the uncertainty of future profits being at this level. The Group has identified future taxable profits at an appropriate level in support of the deferred tax asset of US\$108k as detailed in the above table.

At 31 December 2019

13. Earnings/(Loss) per share

The following reflects the income and share data used in the basic and diluted earnings per share computations:

	2019	2018
	US\$000	US\$000
Loss for the year attributable to equity share holders	(30,592)	(22,864)
	2019	2018
	No.000	No.000
Weighted average number of ordinary shares for basic and diluted earnings
per share	53,484	44.221

Total earnings and weighted average number of shares outstanding during the year is the same as for diluted earnings per share.

14. Dividends paid and proposed

	21119	2016
	US\$000	US\$000
Declared and paid during the year
Equity dividends on ordinary shares
Total dividends per share for 2019 nil (2018: US\$ 0.40)		15.533
Dividends paid		15,533

At 31 December 2019

15. Property, plant and equipment

	Semi-	Assets under	Special	Other
Group	submersible	construction	purpose	fixtures and
	drilling rigs		surveys	equipment	Total
	US\$000	US\$000	US\$000	US\$000	US\$000
Cost:
At 1 January 2018	334,550		16,163	1,899	352,612
Additions	1,976	44,384		22	46,382
Disposals			(4)	(12)	(16)
At 31 December 2018	336,526	44,384	16,159	1,909	398,978
Additions	1,081	48,224	=	116	49,421
Disposals	(578)			-	(578)
At 31 December 2019	337,029	92,608	16,159	2,025	447,821
Depreciation and impairment:
At 1 January 2018	(167,763)		(4,675)	(1,365)	(173,803)
Provided	(9,679)	8	(3,694)	(52)	(13,425)
Impairment	(25,000)	-			(25,000)
Disposals				12	11
At 31 December 2018	(202,442)		(8,369)	(1,405)	(212,216)
Provided	(8,088)		(3,117)	(60)	(11,265)
Impairment	(23,000)				(23,000)
Disposals	578	-			578
At 31 December 2019	(232,952)		(11,486)	(1,465)	(245,903)
Net book value:
At 31 December 2019	104,077	92,608	4,673	560	201,918
At 31 December 2018	134,084	44,384	7,789	504	186,761

At 31 December 2019

15. Property, plant and equipment (continued)

Company	Other fixtures and equipment US\$000
Cost:
At 1 January 2018	1,886
Additions	22
At 31 December 2018	1,908
Additions	116
At 31 December 2019	2,024
Depreciation:
At 1 January 2018	(1,352)
Provided	(52)
At 31 December 2018	(1,404)
Provided	(60)
At 31 December 2019	(1,464)
Net book value:
At 31 December 2019	560
At 31 December 2018	504

16. Impairment

The Group has recognised US\$ 23 million (2018: US\$ 25 million) as an impairment loss relating to the WilHunter. The recoverable amount for the WilPhoenix is estimated at US\$ 87.5 million and for WilHunter at US\$ 10.1 million. This does not include capital spares and other capital costs which are included in fixed assets (Note 15).

A value in use assessment has been performed which resulted in an impairment of US\$ 23 million. This was primarily due to there being no contract backlog and the continued weakness of the UK and global drilling market. This calculation was based on management's best estimate of forecast industry conditions and operations, expected utilisation, contract rates, opex and capital requirements of the rigs.

The analysis has been prepared on both rigs separately, as due to the cold stack status of the WilHunter, the cash inflows are forecast as being generated independently of each other. A pre-tax discount rate of 13.7% and post-tax discount rate of 10.1% has been applied. (2018: 13.5% and 10.6%)

The assumptions used are subject to significant judgement and there is a certain amount of uncertainty to the outcome of these assumptions. Due to this uncertainty, the Group has performed a sensitivity analysis of the main assumptions for the rigs. The below table shows the resulting impairment values as a result of the changes.

At 31 December 2019

16. Impairment (continued)

		Impairment
Category	Sensitivity	US\$000
Post tax discount rate:	Increase by 3%	(4,282)
Revenue:	Decrease by 5%	(3,178)
Utilisation:	Decrease by 5%	(3,178)
Opex costs:	Increase by 10%	(2,231)

17. Investments

	Company	Company
	2019	2018
	US\$000	US\$000
Company shares in subsidiary undertakings
At 1 January	277	204
Investment in year	23,080	75
Impairment of investment in year	(23,076)
Disposal in year	(2)	(2)
At 31 December	279	277

During the year, an investment was made in WilHunter (UK) Ltd following the transfer of the rig to fellow subsidiary, Awilco Drilling Offshore (UK) Ltd. The investment no longer holds any value and as a result was subsequently impaired.

Details of the holdings are as follows:

	Country of
Name	Incorporation	Registered Address
WilPhoenix (UK) Ltd (now Awilco Drilling		11-12 St James's Square,
Offshore (UK) Ltd)	United Kingdom	London
		11-12 St James's Square,
WilHunter (UK) Ltd	United Kingdom	London
WilPhoenix (Malta) Ltd - liquidated	Malta	3 Macerata Street
WilHunter (Malta) Ltd - liquidated (disposed
during year)	Malta	3 Macerata Street
Awilco Drilling Pte. Ltd.	Singapore	8 Wilkie Road
Awilco Rig 1 Pte. Ltd	Singapore	8 Wilkie Road
Awilco Rig 2 Pte. Ltd	Singapore	8 Wilkie Road
Awilco Rig 3 Pte. Ltd	Singapore	8 Wilkie Road
Awilco Rig 4 Pte. Ltd	Singapore	8 Wilkie Road
Awilco Drilling Norge AS (acquired during year)		Norway Verksgata IA, 4013 Stavanger

At 31 December 2019

18. Trade and other receivables

	Group	Company	Group	Company
	2019	2019	2018	2018
	US\$000	US\$000	US\$000	US\$000
Trade receivables	8,908	8,908	9.075	9,075
Prepayments and other receivables	578	245	1,311	261
Accrued revenue	7		1,355
VAT receivable	231	160	197	197
	9.724	9,313	11,938	9,533

As at 31 December, the analysis of ageing of trade receivables is as follows:

Group

		Neither past due nor impaired	Past due but not impaired
	Total	<60 days	60-90 days	90+ days
	US\$000	US\$000	US\$000	US\$000
2019	8,908	8,896	1	12
		Neither past due nor impaired	Past due but not impaired
	Total	<60 days	60-90 days	90+ days
	US\$000	US\$000	US\$8000	US\$000
2018	9,075	9,067	1	8

Company
		Neither past due nor impaired	Past due but not impaired
	Total	<60 days	60-90 days	90+ days
	US\$000	US\$000	US\$000	US\$000
2019	8,908	8,896		12
		Neither past due nor
		impaired	Past due but not impaired
	Total	<60 days	60-90 days	90+ days
	US\$000	US\$000	US\$000	US\$000
2018	9,075	9,067	-	8

At 31 December 2019

19. Cash and cash equivalents

	Group	Company	Group	Company
	2019	2019	2018	2018
	US\$000	US\$000	US\$000	US\$000
Cash at bank	41,249	41,203	63,865	63,307

Cash at bank earns interest at floating rates based on daily bank deposit rates. The Company has restricted cash of US\$1.0 million (2018: US\$ 1.3 million) in relation to margin security for foreign exchange forward contracts (see Note 25).

20. Trade and other payables

	Group	Company	Group	Company
	2019	2019	2018	2018
	US\$000	US\$000	US\$000	US\$000
Trade and other payables:
Lease Liabilities	340	340
Trade creditors	1,284	843	1,070	904
Accruals and other liabilities	5,616	2,459	5,214	3,731
	7,240	3,642	6,284	4,635
Non-current:
Lease Liabilities	1,066	1,066
Other liabilities	=	-	433	433

21. Leases

The Group has a lease contract in place for the office building at 2 Kingshill Park, Westhill, Aberdeenshire, AB32 6FL. The Group elected to adopt the modified transition method where the right-of-use asset is equal to the lease liability on transition. Set out below is the carrying amount of the right-of-use assets recognised and the movements during the period:

	Office
	Building
	US\$000
As at 1 January 2019	1,738
Depreciation Expense	(321)
As at 31 December 2019	1.417

Set out below are the carrying amounts of lease liabilities (included under trade and other payables) and the movements during the period:

	2019
	US\$000
As at 1 January	1,738
Accretion of interest	14
Payments	(346)
As at 31 December	1,406
Current	. 340
Non-current	1,066
THE CONSTITUTION AND CONSULTION CONSULTION Always for the same directoried with the Oc

The maturity analysis of lease liabilities is disclosed in Note 25.

At 31 December 2019

21. Leases (continued)

The following are the amounts recognised in profit or loss:

	2019
	US\$000
Depreciation expense of right-of-use assets	321
Interest expense on lease liabilities	14
Expense relating to leases of low-value assets (included in administrative expenses)	ব
Total amount recognised in profit or loss	349

The Group has total cash outflows for leases of US\$ 0.4 million (2018: US\$ 0.3 million).

22. Commitments and contingencies

Obligations under operating leases

At 31 December 2019 the Group had future minimum lease payments under non-cancellable operating leases as set out below:

	Group 2019 US\$000	Company 2019 US\$000	Group 2018 US\$000	Company 2018 US\$000
Payments due under operating lease for land and buildings:
Within one year			318	318
After one year but not more than five years			1,271	1,271
Over five years	1		229	229
	-		1,818	1,818

Capital commitments

There were capital commitments of US\$ 769.9 million at 31 December 2019 (2018: US\$ 386.6 million) which includes US\$ 768.0 million in respect of the new build rigs.

	2019	2018
	US\$000	US\$000
Amounts due within one year	42,500
Amounts due greater than one year	725,500	384,900
	768,000	384,900

The new build rig construction contracts are held by the subsidiary undertakings, Awilco Rig 1 Pte. Ltd. and A wilco Rig 2 Pte. Ltd., with no recourse to the parent company.

Contingent Liability

The Company has been in regular contact with HMRC over the classification of an element of income booked in 2015. The Company has maintained its position that the income was such that accumulated losses could be utilised against the income resulting in a reduction in its tax liability for the year. HMRC have disagreed with the Company's position and issued a notice of amendment indicating additional tax and interest due of about GBP 7.7 million. The Company are of the opinion that HMRC are incorrect in their assessment of the facts and an appeal has been submitted with further action to be taken as necessary; however, in the event that HMRC are successful, management do not expect the liability to crystallise within the 12 months from the approval of these accounts. This is considered as a contingent liability only and no provision has been made.

At 31 December 2019

23. Share capital

	Group and Company

			2019	2018
Authorised			No.000	No.000
Ordinary shares of £0.0065 each			54,582	49,032
Group and Company
	2019	2019	2018	2018
Allotted called up and fully paid	No.000	US\$0000	No.000	US\$000
At 1 January	49,032	477	30,032	304
Issued on 27 March 2018			17,600	161
Issued on 22 June 2018		-	1,400	12
Issued on 14 March 2019	5,550	48	-
At 31 December	54,582	રેટર	49,032	477

Group and Company

	2019	2018
	Share	Share
	premium	premium
	account	account
	US\$000	US\$000
At 1 January	198.242	129,837
Share premium on shares issued on 27 March 2018	=	63,759
Share premium on shares issued on 22 June 2018		4,646
Share premium on shares issued on 14 March 2019	20,139
At 31 December	218,381	198,242

At 31 December 2019

24. Related party transactions

Group

The financial statements include the financial statements of the Group and the subsidiaries listed below:

	Country of
Name	Incorporation	% Interest
WilPhoenix (UK) Ltd	United Kingdom	100
WilHunter (UK) Ltd	United Kingdom	100
WilPhoenix (Malta) Ltd (liquidated)	Malta	100
WilHunter (Malta) Ltd (liquidated)	Malta	100
Awilco Drilling Pte. Ltd.	Singapore	100
Awilco Rig 1 Pte. Ltd	Singapore	100
Awilco Rig 2 Pte. Ltd	Singapore	100
Awilco Rig 3 Pte. Ltd	Singapore	100
Awilco Rig 4 Pte. Ltd	Singapore	100
Awilco Drilling Norge AS	Norway	100

During the year the Group entered into transactions, in the ordinary course of business, with Awilhelmsen Offshore AS, which is a major shareholder through its subsidiaries.

Transactions entered into and trading balances outstanding at 31 December 2019 with Awilhelmsen AS and its subsidiaries are as follows:

	2019	2018
	US\$000	US\$000
Purchase of management services	1.746	2.941
Share based payment	(72)	(22)
Amounts owed to Awilhelmsen AS and its subsidiaries	(212)	(226)

Sales and purchases between related parties are made at normal market prices. Outstanding balances are unsecured, interest-free and cash settlement terms vary between 30 and 90 days. The Company has not provided or benefitted from any guarantees for any related party receivables or payables.

Directors and other key management personnel

The remuneration of directors and other key management personnel of the Group is as follows

	2019	2018
	US\$000	US\$000
Short-term employee benefits	1,774	1,792
Share-based payments	(845)	390
Other long-term benefits	105	104

Included in the short-term employee benefits are director's emoluments of GBP 262,000 (2018: GBP 460,000). Five directors received remuneration in respect of their services to the Company during the year (2018: six). The highest paid director was Jon Bryce - please refer to the Directors' remuneration report on page 32 for further details.

At 31 December 2019

24. Related party (continued)

Company

The Company entered into the following transactions and had the following balances with its wholly owned subsidiaries

	2019	2018
	US\$000	US\$000
Transactions:
Amounts invoiced to WilPhoenix (UK) Ltd in respect of services provided to
the company	32,015	34,369
Amounts invoiced on behalf of WilPhoenix (UK) Ltd	(40,754)	(60,498)
Settlement of balance with WilPhoenix (UK) Ltd		417,653
Settlement of balance with WilHunter (UK) Ltd		179,145
Settlement of balance with Awilco Drilling Pte. Ltd.		(9,632)
Settlement of balance with WilPhoenix (Malta) Ltd		(308,623)
Settlement of balance with WilHunter (Malta) Ltd	2	(278,541)
Invoiced to Awilco Drilling Pte. Ltd.	143	180
Transfer of funds to Awilco Drilling Pte. Ltd.	2,992	1,457
Amounts invoiced to Awilco Rig 1 Pte. Ltd. in respect of services provided
to the company	1,752	43,256
Amounts invoiced to Awilco Rig 2 Pte. Ltd. in respect of services provided
to the company	42,232
Amounts invoiced to Awilco Drilling Norge AS in respect of services
provided to the company	1,933
Taxation paid on behalf of subsidiaries	71	91
Dividends received from WilPhoenix (UK) Ltd	33,070
Increase in investment in Awilco Drilling Pte. Ltd.		(75)
Increase in investment in WilHunter (UK) Ltd	(23,076)
	50,386	18,782
	2019	2018
Balances:	US\$000	US\$000
Amounts receivable from WilPhoenix (UK) Ltd	109,278	84,941
Amounts payable to WilHunter (UK) Ltd	(23,176)	(100)
Amounts payable to WilHunter (Malta) Ltd	42,510	(2)
Amounts (payable to)/receivable from Awilco Drilling Pte. Ltd.		(2,896)
Amounts receivable from Awilco Rig 1 Pte. Ltd	45,008 32	43,256
Amounts receivable from Awilco Rig 2 Pte. Ltd
Amounts receivable from Awilco Drilling Norge AS	1,933
	175,585	125,199
Allowance for expected credit loss	(1,484)	(1,279)
	174.101	123.920

At 31 December 2019

24. Related party (continued)

Set out below is the movement in the allowance for expected credit losses of intercompany receivables:

	2019	2018
	US\$000	US\$000
As at 1 January	(1,279)
Provision for expected credit loss	(205)	(1,279)
As at 31 December	(1,484)	(1,279)

Expected credit loss triggered due to lower contract rates and an idle period in the year for the WilPhoenix

Entity with significant influence over the Group

A wilhelmsen Offshore AS, owns 37.1% of the ordinary shares in Awilco Drilling PLC.

25. Capital management, financial risk management objectives and policies

The Group's and the Company's principal financial liabilities comprise trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations. The Group has trade and other receivables, and cash and cash equivalents that arrive directly from its operations.

Management has assessed the fair values of the financial instruments are generally approximate to the carrying values except foreign exchange contracts which are carried at fair value.

The Group and the Company are exposed to market risk, credit risk and liquidity risk.

Fair value hierarchy

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. The level applicable to the Group is Level 2 : other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly.

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 are trade and other payables and accruals.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when expenses are denominated in a different currency from the Company's functional currency).

At 31 December 2019

25. Capital management, financial risk management objectives and policies (continued)

The Group manages its foreign currency risk by holding cash in the foreign currency required to settle foreign current liabilities, unless the Group has insufficient cash resources available, in which case, it enters into hedging transactions for significant foreign currency commitments.

At the balance sheet date, the Group held GBP 1.5 million in trade and other payables (2018: GBP1.0 million). A 5% strengthening or weakening of US\$ to GBP would have an effect of US\$ 0.1 million on the Group 2019 result (2018: US\$0.1 million). The Group has no other material currency exposures.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables). The Company has credit risk due to its trade and other receivables from subsidiary undertakings and from external clients.

Management assess the credit rating of new and existing clients and determine if any action is required to secure the financial security in respect of work performed.

Liquidity risk

The Group's objective is to maintain sufficient liquidity in order to support the needs of the business and meet the repayments of the debt and commitments as they fall due. In order to achieve this, the Group also has the prospect of issuing new equity or entering into new borrowing arrangements.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments.

Group	Less than	3 to 12	1-5
	3 months	months	years	Total
Trade and other payables	4,771	2,130	-	6.901
Lease liabilities	1	368	1,258	1,626
31 December 2019	4,771	2,498	1.258	8.527
Trade and other payables	4,318	1,966	433	6,717
Lease liabilities			=
31 December 2018	4,318	1,966	433	6,717

The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments.

	Less than	3 to 12	1-5
Company	3 months	months	years	Total
Trade and other payables	3,039	263		3,302
Lease liabilities		368	1.258	1,626
31 December 2019	3,039	631	1,258	4,928
Trade and other payables	3,580	1,055	433	5.068
Lease liabilities	1		1
31 December 2018	3,580	1,055	433	5,068

At 31 December 2019

25. Capital management, financial risk management objectives and policies (continued)

Fair value of financial assets and financial liabilities

The table below summaries the carrying amounts and fair values of the Group's financial assets and liabilities.

Group	2019	2018	2019	2018
	US\$000	US\$000	US\$000	US\$000
	Book Value	Book Value	Fair Value	Fair Value
Financial assets
Amortised Cost
Trade receivables	8,908	9,075	8,908	9,075
Prepayment and other receivables	578	1,311	278	1,311
Accrued revenue	7	1,355	7	1,355
VAT receivable	231	197	231	197
Current tax receivable	-	340		340
Cash and cash equivalents	41,249	63,865	41,249	63,865
Total financial assets	50,973	76,143	50,973	76,143
	2019	2018	2019	2018
	US\$000	US\$000	US\$000	US\$000
	Book Value	Book Value	Fair Value	Fair Value
Financial liabilities
Amortised Cost
Trade and other payables	8,306	6,717	8,306	6,717
Current tax payable	71	66	71	66
Fair value through profit and loss
Foreign exchange contracts	180	172	180	172
Total financial liabilities	8,557	6,955	8,557	6,955

The table below summaries the carrying amounts and fair values of the Company's financial assets and liabilities.

Company	2019	2018	2019	2018
	US\$000	US\$000	US\$000	US\$000
	Book Value	Book Value	Fair Value	Fair Value
Financial assets
Amortised Cost
Trade receivables	8,908	9,075	8,908	9,075
Prepayment and other receivables	245	261	245	261
VAT receivable	160	197	160	197
Cash and cash equivalents	41.203	63.307	41.203	63.307
Amounts due from subsidiary
undertakings	174,101	123,920	174,101	123.920
Total financial assets	224,617	196,760	224,617	196,760

An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses. The calculation reflects the probability weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions.

At 31 December 2019

25. Capital management, financial risk management objectives and policies (continued)

Fair value of financial assets and financial liabilities (continued)

	2019 US\$000 Book Value	2018 US\$000 Book Value	2019 OS\$000 Fair Value	2018 US\$000 Fair Value
Financial liabilities
Trade and other payables	4,708	5,068	4.708	5,068
Fair value through profit and loss
Foreign exchange contracts	180	172	180	172
Total financial liabilities	4.888	5,240	4,888	5,240

Capital management

Capital includes called up share capital, share premium and retained earnings / (deficit).

The Company's intention is to pay dividends in support of its main objective to maximise returns to shareholders. All of the Company's free cash flow is intended to be distributed subject to maintaining a robust cash buffer to support operational working capital requirements and planned capital expenditure. Consideration is also given to future market prospects. With the ordering of two new-build high-end semisubmersible rigs, plus an agreement for a further two independent rig options, the Company is in growth and investment phase. Dividend payments have been suspended and will resume when the Company again reaches an appropriate free cash flow situation.

The Company's capital is monitored at a Group level. The Group monitors capital using a gearing ratio, which is net debt divided by total shareholders' funds plus net debt. The Group includes within net debt, bonds and loans less cash and cash equivalents.

	Group	Group
	2019	2018
	US\$000	US\$000
Cash and cash equivalents (note 19)	(41,249)	(63,865)
Net debt / (funds)	(41,249)	(63,865)
Capital	250,985	261,390
Capital and net debt	209,736	197,525
Gearing ratio	n/a	n/a

26. Share-based payments

Long Term Incentive Plan

A long term incentive plan for key management personnel, with a total limit of up to 4% of the Company's issued share capital was approved at the Annual General Meeting on 26 June 2013. The awards for the years 2010, 2012 and 2014 are now fully exercised. There are still outstanding amounts under the 2015 and 2016 plans.

The plan "vests" after three years and the exercise period is five years subject to the employee remaining employed by the Company with the exception of the 2016 plan which "vests" after four years.

All share options and awards are cash settled.

At 31 December 2019

26. Share-based payments (continued)

The following table list the inputs to the model used for these valuations (share prices are in NOK).

Group and Company	2019		2018
	2015 Plans	2016 Plans		2013 Plans 2014 Plans 2015 Plans		2016 Plans
Exercise price	1
Share price	15.5	15.5	28.0	28.0	28.0	28.0
Expected life		0.88 years			-	1.88 years
Volatility					-	47%
Risk free interest rate	1	1.20%				1.07%
Model used	Black Scholes

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options and awards during the year.

Group	2019	2019	2018	2018
	No.	WAEP (NOK)	No.	WAEP (NOK)
Outstanding as at 1 January	879,017		940,031
Granted during the year			83,026
Exercised during the year	(514,592)	I	(144.040)
Forfeited during the year
Adjusted during the year		-
Outstanding at 31 December	364.425		879,017
Exercisable at 31 December	192,141		637,263

All shares with a strike price have been exercised.

Company	2019	2019	2018	2018
	No.	WAEP (NOK)	No.	WAEP (NOK)
Outstanding as at 1 January	825,306	-	775,649
Granted during the year			68,930
Exercised during the year	(460,881)	-	(19,273)
Forfeited during the year
Adjusted during the year
Outstanding at 31 December	364.425		825,306
Exercisable at 31 December	192.141	-	583,552

At 31 December 2019

26. Share-based payments (continued)

The estimated fair value of the granted share options and awards are reached on the basis of the "Black-Scholes option pricing model". The model is applied utilising a risk-free discount rate and also taking into account the terms and conditions upon which the options and awards are granted as well as the performance conditions that are required to be satisfied before vesting. The weighted average remaining contractual life at 31 December 2019 is 0.88 years. The Group total share option and award credit amounted to US\$2.1 million (2018: US\$ 0.3 million credit). The carrying amount of the liability relating to the cash-settled options at 31 December 2019 is US\$ 0.6 million (2018: US\$ 2.8 million).

The table below summaries the carrying amount of the liability at 31 December 2019

Group and Company	Less than 3 months US\$000	3 to 12 months OSS000	- 5 years US\$000	Total US\$000
Share options and awards 2019	385	263		648
The table below summaries the carrying amount of the liability at 31 December 2018
Group	Less than 3 months	3 to 12 months	- 5 years	Total
Share options and awards	1,266	1,061	433	2,760
At 31 December 2018	1,266	1,061	433	2,760
Company	Less than 3 months	3 to 12 months	- 5 years	Total
Share options and awards	1,076	1.055	433	2,564
At 31 December 2018	1,076	1,055	433	2,564

27. Derivative Financial Instruments

2019	2018
US\$000	US\$000
(180) Foreign exchange contracts	(172)

The foreign currency forwards were entered into in order to minimise the Company's exposure to losses resulting from fluctuations in foreign currency exchange rates. The fair value of the forward exchange contracts, as shown above, is recorded as other payables in the statement of financial position. The changes in the fair value are then recorded in the statement of comprehensive income. Forward currency exchange contracts fair value was determined using quoted forward exchange rates matching the maturities of the contracts.

Fair value hierarchy

All are Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

At 31 December 2019

28. Subsequent events

During February, the Company paid US\$ 10.6 million as part of the second instalment for Rig 1 and agreed a revised delivery schedule for Rig 1 with a new contractual delivery in April 2021.

During March, the Company signed a contract with Petrofac Facilities Management Limited (Petrofac) for the provision of WilPhoenix for a three well Plug & Abandonment program on Rubie and Renee. The program has an estimated duration of 100 days and is scheduled to commence on 25 May 2020. For the period from 1 May to 24 May 2020, the Company will receive a daily fee of US\$ 65,000.

During May, the Company signed a contract with Serica Energy (UK) Limited for the provision of WilPhoenix for a one well workover on the Rhum field. The contract has an estimated duration of 70 days including preparatory works and is scheduled to commence around 15 September 2020.

The Directors recognise that the current market conditions are challenging. The COVID-19 pandemic has resulted in a reduction in economic activity across all markets, along with a low oil price. The impact of the COVID-19 and the recent reductions in oil prices is considered to be a non-adjusting post balance sheet event which is currently not possible to quantify, therefore the potential impairment of the carrying value of fixed assets has not been reflected in the Statement of Financial Position (See Note 3).