Dolphin Drilling AS — Annual Report 2014

Apr 30, 2015

Contents

A Brief Presentation	3
Contract Overview	4-5
Financial Summary 2010-2014	6
Board of Directors' Report 2014	7-11
Directors' Responsibility Statement	12
Accounts Fred. Olsen Energy Group	13-44
Consolidated Statement of Income	13
Group Consolidated Statement of Comprehensive Income	14
Consolidated Statement of Financial Position	15-16
Consolidated Statement of Changes in Equity	17
Consolidated Statement of Cash Flows	18
Notes to the Consolidated Financial Statements	19-44
Accounts Fred. Olsen Energy ASA	45-56
Income Statement	45
Balance Sheet	46
Statement of Cash Flows	47
Notes to the Financial Statements	48-56
Auditor's Report	57-58
Corporate Governance	59-63
Corporate Social Responsibility
Reporting	64-66
Addresses	68

A Brief Presentation

Fred. Olsen Energy ASA is listed on Oslo Stock Exchange and is a leading provider of exploration and development services to the oil and gas industry. The Company is based on more than 160 years experience within shipping and 50 years in off shore drilling, and provides competitive solutions to the benefi t of its customers, employees and shareholders.

Offi ces

Semi submersibles Ultra-deepwater drillship The Company is headquartered in Oslo with offi ces in Norway, the UK, Singapore, Mozambique and South Africa.

Revenues 2014
---------------	--	--	--	--	--

EBITDA 2014

-4

Employees per 31.12.2014

Contract Overview

Name/			Built year/	Water
(Ownership)	Type	Location	upgrade	depth	Features
Bolette Dolphin (100%)	Gusto P 10 000	Colombia	2014	12 000 ft	285 t, 1100 t and 1*165 t deck cranes, 15 000 psi
Bollsta Dolphin (100%)	Moss maritime CS 60E	Under construction at	Hyundai Heavy Industries Co., Ltd.	10 000 ft	2*100 t deck cranes, 15 000 psi
Belford Dolphin (100%)	Drill ship	Mozambique 2000		10 000 ft	80 000 barrels storage 2*80 t deck cranes, 15 000 psi
Blackford Dolphin (100%)	Aker H-3 Enhanced	UK, North Sea 1974/-08		7 000 ft	2*85 t deck cranes 15 000 psi
Bideford Dolphin (100%)	Aker H-3 Enhanced	Norway, North Sea	1975/-99	1 500 ft	145 t + 150 t deck cranes 10 000 psi
Borgland Dolphin (100%)	Aker H-3 Enhanced	Norway, North Sea	1976/-99	1 500 ft	145 t + 170 t deck cranes 15 000 psi
Bredford Dolphin	Aker H-3	Norway,	1976	1 500 ft	2*50 t deck cranes
(100%)		North Sea	/-81/-97/-01/-07		10 000 psi
Byford Dolphin (100%)	Aker H-3	UK, North Sea	1973 /-85/-90/-96/-98 /-10	1 500 ft	142 t + 153 t deck cranes 15 000 psi
Borgsten Dolphin (100%)	Aker H-3 Tender support vessel North Sea	UK,	1975 /-85/-95/-00/-13	1 500 ft	155 t +150 t deck cranes
Borgholm Dolphin Aker H-3 (100%)	Accommodation	UK, North Sea	1975/-02		1*37.5 t deck crane 314 beds in double cabins
Borgny Dolphin (100%)	Aker H-3		1977 /-85/-91/-92/-97/-02 /-10	2 300 ft	2*50 t deck cranes 10 000 psi

(Ownership) Type Location upgrade depth Features 2014 2015 2016 2017 2018 2019 2020

Class Renewal Survey / yard Mobilization Option Terminated

Financial Summary 2010-2014 Fred. Olsen Energy – Group

Income Statement Data All amounts in USD million	2014	2013	2012	2011	2010
Revenues	1 184.1	1 194.4	1 228.0	1 100.8	1 006.7
Operating profit before depreciation (EBITDA)	516.2	572.6	631.0	602.3	568.8
Net result after tax (hereof majority interests)	117.3	300.8	325.4	348.1	324.2
Minority interests	1.0	-0.7	0.3	0.2	-0.6
Assets
Current assets	522.3	546.4	533.4	710.1	558.3
Long term assets	2 946.3	2 519.4	2 323.4	1 770.4	1 750.5
Total assets	3 468.6	3 065.8	2 856.8	2 480.5	2 308.8
Liabilities and equity
Interest bearing debt	1 455.4	793.4	884.6	959.2	945.8
Total liabilities	2 160.7	1 628.9	1 491.4	1 147.4	1 123.9
Equity of majority	1 307.9	1 436.9	1 365.4	1 331.9	1 184.0
Minority interests	-	-	-	1.15	0.90
Total liabilities and equity	3 468.6	3 065.8	2 856.8	2 480.5	2 308.8

Key Figures	Definitions	2014	2013	2012	2011	2010
Market capitalization	1	611.5	2 706.7	2 895.3	2 237.0	2 935.8
Net interest bearing debt	2	1 252.0	571.3	635.5	595.0	690.0
Enterprise value	3	1 863.5	3 278.0	3 530.8	2 832.0	3 625.8
Debt/Book equity ratio		1.11	0.55	0.65	0.72	0.80
Debt/Market capital ratio		2.38	0.29	0.31	0.43	0.32
Current ratio	4	0.79	0.65	0.88	2.05	1.66
EBITDA margin	5	43.6 %	47.8 %	51.3 %	54.7 %	56.5 %
Average number of shares outstanding		66,7 mill	66,7 mill	66,7 mill	66,7 mill	66,7 mill
Share price at year end in NOK	6	68.2	246.9	241.8	201.0	257.8
Earnings per share (EPS) in USD	7	1.77	4.54	4.88	5.22	4.86
Diluted earnings per share in USD		1.77	4.54	4.88	5.22	4.86
Capital expenditures per share		-12.00	-6.61	-11.50	-3.66	-3.04
Price/Earnings	8	5.2	9.4	8.9	6.4	8.9
Price/Book	9	0.5	1.9	2.1	1.7	2.5
EV/EBITDA		3.6	5.9	5.6	4.8	6.2

1 Closing price * number of shares at year-end

• 2 Short-term debt + long-term debt- cash and cash equivalents
• 3 Market capitalisation + net interest bearing debt
• 4 Current assets / Current liabilities
• 5 EBITDA / Revenue
• 6 Last trade on last trading day of the year
• 7 Net profit / average number of shares outstanding
• 8 Closing price / EPS
• 9 Closing price / Book value per share

For 2014; closing price converted to USD at the rate per 31.12.14

The operating activities of Fred. Olsen Energy ASA and its subsidiaries (the Group) consist of offshore drilling and engineering and fabrication services. The parent company of the Group is Fred. Olsen Energy ASA (the Company), with its corporate headquarters located in Oslo, Norway. The Group manages its activities from offices in Norway, the UK, Singapore, South Africa and Mozambique. Operation of the Group's offshore units is managed through Dolphin Drilling AS (100% owned) in Stavanger and Dolphin Drilling Ltd. (100% owned) in Aberdeen. The Harland & Wolff (H&W) shipyard (92.2% owned), located in Belfast, Northern Ireland, and related activities form the Group's engineering and fabrication division.

Gross revenues in 2014 were USD 1 184 million, a decrease of USD 10 million from the previous year. The Group achieved Earnings Before Interest, Taxes, Depreciation, Amortisation and impairment (EBITDA) of USD 516 million compared to EBITDA of USD 573 million in 2013. The cash flow from operations amounted to USD 395 million compared to USD 488 million for 2013. Net interest bearing debt at 31 December 2014 for the Group was USD 1 252 million.

Markets and prospects

The low contracting activity experienced during second half of 2013 continued into 2014, driven mainly by the Exploration and Production companies curtailing their spending levels. The low contracting activity combined with a continuous flow of newbuilds into the market led to an oversupply developing in the mobile rig market through 2014. This paralleled with an imbalance in the demand and supply of oil in the third quarter resulting in a sharp drop in oil price.

The significant drop in oil price has been the primary driver for the changes in the rig market and is having a major disruptive influence on budgeting and planning for oil and gas companies on a global level. The drop in oil price came at a time when operators were already experiencing pressure on their free cash flow. This development is due to several years of high levels of activity combined with a steadily rising costs base. For the rig market it means that the current focus for the operators is very much on reducing activity levels and cutting costs where possible. Few new enquiries are coming to the market resulting in reduced rig demand on a global basis in 2015.

In deepwater, the market impact has been almost immediate with a slowdown in new demand meeting rising supply from newbuilds. This means that a number of units in all categories are now idle and dayrates are under downward pressure. In shallow and mid water, units with low specification are being cold stacked or permanently retired by a number of contractors. As a result scrapping of early generation semi-submersibles is currently at a historically high level and may in the medium and longer term create better stability in this market segment.

By year-end, the fleet contract backlog for the Group was 22 months (32 months in 2013). The firm contract value for the fleet as per 31 December 2014 was approximately USD 3.4 billion (USD 4.7 billion in 2013).

The Group operates three deepwater units, and five mid-water semi-submersible drilling rigs in addition to one tender support vessel and one accommodation unit. Three of the semi-submersible drilling rigs are operating on the Norwegian Continental Shelf. A new semi-submersible drilling rig for harsh environment, Bollsta Dolphin, is scheduled to be delivered in 3Q 2015.

Offshore Drilling

The drilling activities generated revenues of USD 1 158 million compared to USD 1 152 million in 2013. Within the drilling segment, the Group achieved EBITDA of USD 521 million. In 2013, the corresponding result was USD 580 million.

Bideford Dolphin commenced operations under a new three-year drilling contract for Statoil ASA in January 2014. The unit completed its five-year Class Renewal Survey in third quarter 2014.

Borgland Dolphin continued operations into 2014 under the four-year drilling contract with a consortium managed by Rig Management Norway AS. In April 2014 the rig commenced a 18 well drilling contract, estimated to 3.5 years, with a Rig Management Norway consortium consisting of four oil companies. The unit commenced its five-year Class Renewal Survey in fourth quarter 2014 and it was completed in February 2015.

Bredford Dolphin continued operations under a 12 well drilling campaign with an AGR coordinated group of four oil companies for operation on the Norwegian Continental Shelf. The contract is estimated to expire in September 2015. The unit completed its five-year Class Renewal Survey in August 2012.

Bolette Dolphin was delivered from Hyundai Heavy Industries Co., Ltd. in Korea in February 2014 and commenced its four-year

drilling contract with Anadarko Petroleum Corporation in second quarter 2014. The unit commenced drilling in West Africa, before moving to Colombia in 2015 for a two-well drilling campaign.

Belford Dolphin continued operations under the four-year drilling contract with Anadarko Petroleum Corporation. A notice of termination for convenience is received from Anadarko for the contract. The termination will be effective form early September 2015. The termination fee is approximately USD 52 million. The unit is currently operating offshore Mozambique. The unit is scheduled to undertake its five-year Class Renewal Survey second quarter 2015.

Blackford Dolphin completed its Class Renewal Survey and upgrades at Harland & Wolff July 2014. Upon completion of the Class Renewal Survey the unit commenced a contract with MPX followed by a contract with Nexen for operations in UK, estimated to be completed June 2015. In December 2013 a new 572 days contract was entered into with Chevron, for UK operations, with commencement in direct continuation with current contract. Chevron has an option to extend the contract for a further period of between 300 and 700 days.

Byford Dolphin continued operations under a three-year drilling contract with BP Exploration Operating Co. Ltd., estimated to expire in August 2016. The rig commenced its Class Renewal Survey, including installation of a new BOP, in January 2015. The Class Renewal Survey is scheduled to be completed in May. The operator has an option for a three-year contract extension.

Borgsten Dolphin continued under a 40 months contract for Tender Support service at the Dunbar platform with Total E&P UK Ltd. The operator has an option for two six month periods. The rig completed its Class Renewal Survey and conversion in 2013.

Borgholm Dolphin completed its accommodation contract with Shell in 2014 and commenced a new accommodation contract with BG in October 2014, estimated to be completed in May 2015. The unit completed its five-year Class Renewal Survey in 2012.

Borgny Dolphin completed operations with Petrobras first quarter 2014 and the rig was relocated to the Harland & Wolff yard in Belfast. The rig is currently cold stacked.

The harsh environment ultra-deepwater semi-submersible drilling rig Bollsta Dolphin, currently under construction at Hyundai Heavy Industries Co., Ltd. in Korea, is scheduled to be delivered third quarter 2015 and after mobilization commence a five-year drilling contract with Chevron North Sea Limited.

Engineering and Fabrication

Total revenues within the engineering and fabrication division amounted to USD 92 million and EBITDA was USD 15 million, including USD 66 million and USD 19 million respectively in inter-segment activities, eliminated in the consolidated figures. In 2013, total revenues were USD 51 million and EBITDA was USD -7 million. The H&W yard continued its operations in engineering, ship repair and shipbuilding. During the year the yard completed the Class Renewal Survey of Blackford Dolphin and was awarded the Class Renewal Survey and upgrade contract for Byford Dolphin which will be carried out in 1st half 2015. The substation jacket and piles for the Humber Gateway offshore wind farm was completed and delivered in August 2014. In addition, the yard has provided services to some 27 vessels ranging from short duration emergency repairs to normal maintenance repair dockings.

The core workforce increased to 198 employees in 2014 (2013: 174). The company will continue to seek to secure contracts within renewable energy and offshore projects, in addition to shipbuilding, ship repair and engineering in the years to come.

Financial result and balance sheet at year end

Consolidated revenues were USD 1 184 million compared to USD 1 194 million in 2013. EBITDA for the Group was USD 516 million, a decrease of USD 56 million compared to 2013. After depreciation , amortisation and impairment of USD 372 million, the operating profit before net financial expenses amounted to USD 144 million, compared to USD 330 million in 2013. Net financial items were USD 4 million, a decrease of USD 17 million from the previous year. Profit before taxes was USD 149 million compared to USD 318 million in 2013. The net profit for the year was USD 118 million against USD 300 million in 2013. At year-end, the Group had consolidated assets of USD 3 469 million. The ratio of net interest bearing debt to total assets was 36% compared to 19% at the beginning of the year. The book value of the equity was USD 1 308 million. Net cash from operating activities was USD 395 million against USD 488 million in 2013. Cash and cash equivalents decreased by USD 19 million during the year, from USD 222 million to USD 203 million at the end of the year.

Fred. Olsen Energy ASA is a holding company and provides management services to the subsidiaries within the Group. The Company had revenues of USD 1 million in 2014, compared to USD 1 million in 2013. EBITDA for the year was negative USD 9 million compared with negative USD 12 million in 2013. Net profit was USD 125 million compared to USD 208 million in 2013. The decrease of USD 83 million is mainly due to a group contribution of USD 117 million compared to a group contribution of USD 215 million in 2013. The annual accounts of the Company and the consolidated accounts are based on the assumption of continued operation.

International Financial Reporting Standards (IFRS)

The consolidated financial statements have been prepared in accordance with the Norwegian Accounting Act and International Financial Reporting Standards (IFRS) as adopted by EU and interpretations adopted by the International Accounting Standards Board (IASB). The accounts for the parent company have been prepared in accordance with the Norwegian Accounting Act.

Investment and capital resources

Capital expenditures amounted to USD 801 million in the year compared to USD 441 million in 2013. The capital expenditures were mainly related to the Group's investment in two newbuilds, the Bolette Dolphin delivered in first quarter 2014 and the Bollsta Dolphin, scheduled to be delivered in third quarter 2015, as well as Class Renewal Survey and upgrades for Blackford Dolphin, Bideford Dolphin and Borgland Dolphin.

Per 31 December 2014, the Group's debt consisted of one credit facility with a consortium of banks and two bond loans. The facility was refinanced in July 2014 and is a combined term loan and revolving credit facility of initially USD 2 000 million, with final maturity in 2019. The outstanding amount under the credit facility at year-end was USD 1 150 million. The bond loan FOE 04 of NOK 1 400 million was raised in the Norwegian bond market in May 2011 and has final maturity in May 2016. The bond loan FOE 05 of NOK 1 100 million was raised in the Norwegian market in February 2014 and has final maturity in February 2019. See also note 12 on page 31.

Research and development activities

The Group's research and development activities are an integrated part of the ongoing operations and are being carried out through cooperation with various engineering- and equipment supply vendors. The Group constantly monitors and evaluates new drilling rig related technology, including those materializing through the operations and project developments. Expenditures on research activities, undertaken with the prospect of gaining technical know-how and understanding, are recognized in the income statement as incurred expenses.

Financial risks

The Group is exposed to certain financial risks related to its activities. These are mainly foreign exchange risks, interest rate risks and credit risks. The Group continuously monitors and manages its financial risks by partly hedging its exposure. See also note 13, page 32 to 35.

Liquidity risk

The outstanding under the bank facility at year-end was USD 1 150 million. The Company is in compliance with all covenants in its loan agreements. USD 300 million is undrawn and available under the facility. See also note 12 for further details.

Foreign exchange

From 2014, the Group's financial statements are presented in USD. The Group's revenues consist primarily of USD, NOK and GBP with USD as the most dominant currency. The Group's expenses are primarily in NOK, GBP and USD. The Group's earnings are exposed to fluctuations in the currency market. The Group's future foreign exchange exposure is dependent upon the currency denomination of revenues and expenses.

Interest rate

The Group is exposed to fluctuations in interest rates for USD. At 31 December 2014 approximately 3% (2013: 6%) of the Group's interest expenses was based on fixed interest rate swap agreements. The remaining portion of the debt was based on floating interest rates (USD LIBOR and NIBOR) plus a margin.

Credit risk

Due to the nature of the Group's operations, revenues and related receivables are typically concentrated amongst a relatively small customer base, including national oil companies, super majors, majors and independent oil companies. The Group continuously evaluates the credit risk associated with customers and, when considered necessary, requires certain guarantees. The Group's shortterm investments are limited to cash deposits in the Group's relationship banks and derivative financial instruments are normally entered into with the Group's main relationship banks. As such, the Group considers its exposure to credit risk to be moderate.

Board of Director's Report 2014 Fred. Olsen Energy Group and Fred. Olsen Energy ASA

Corporate Governance

The Company emphasizes the importance of maintaining and further developing its corporate governance policy and supports the principles set out in the Norwegian Code of Practice for Corporate Governance. A description of the Company's compliance with the above recommended Corporate Governance principles is presented on pages 59 to 63.

The Board of Directors consists of five board members who are elected for a two-year period. All of the Directors are independent of the Company's management and three of them are independent also in relation to the Company's main shareholders Ganger Rolf ASA and Bonheur ASA. 40% of the Board of Directors are women. During 2014 the Board of Directors had 10 meetings.

The Board of Directors has appointed an Audit Committee consisting of two Directors, of which one is independent of the main shareholders of the Company. The charter of the Audit Committee is to assist the Board of Directors in fulfilling its responsibilities concerning the financial reporting process, internal controls, management of financial risks, the audit process and the Group's process for monitoring compliance with applicable laws and regulations.

The Board of Directors has appointed a Compensation Committee comprising four Directors, including the Chairman of the Board. The Compensation Committee discusses and recommends to the Board of Directors salary and benefits for the Chief Executive Officer and Senior Management, as well as the management incentive schemes for the Group. The compensation to the Chief Executive Officer comprises salary, pension scheme and performance bonus.

Dividends will be distributed subject to earnings, the Company's investment plans, financial strategy, market conditions and approval by the shareholders. In addition, the Company may consider share buy-backs in accordance with the authorization to the Board of Directors from the Annual General Meeting. Due to the challenging offshore market and uncertainty of how long this will persist, the Board of Directors will propose to the Annual General Meeting in May 2015 not to pay dividend for 2014.

Share Capital Issues

The Annual General Meeting in May 2014 authorized the Board of Directors to issue up to 6 669 422 new shares in the Company through an equity issue and to issue up to 6 669 422 new shares by raising loans with the right to subscribe for new shares for a period of up to one year. At the time of approving final accounts, these authorizations have not been used. At year-end the Company owned 430 100 own shares (2013: 430 100). At 31 December 2014 the Company's share capital amounted to NOK 1 334 million, corresponding to 66 694 229 shares at par value NOK 20 each.

Safety, work environment, organization and equal opportunities

The Group has a strong focus on health, safety and environment (HSE) for its employees, subcontractors and customers. Continuous efforts involve planning, training of personnel and careful selection of subcontractors. The Group maintains a "zero accident" objective and is closely monitoring its established procedures for operations, projects and work sites both onshore and offshore. The Total Recordable Incident (TRI) rate for offshore drilling and related services in 2014 was 5.85 per one million working hours, compared to 6.0 per one million working hours in 2013. TRI includes personnel injuries of the categories lost time incidents and medical treatment incidents.

Sick leave was 4.58% (2013: 4.37%) for the Group and 1.20% (2013: 0.40%) for the Company. The Group continues to focus on reducing sick leave. The Group aims to be a workplace with equal opportunities, offering challenging and motivating jobs to all personnel, regardless of nationality, culture, religion or gender. The composition of genders within the Group reflects the available recruitment base for offshore work, which traditionally has a higher proportion of men, being the nature of the offshore industry worldwide. However, the Group's policy is to offer equal opportunities for male and female. Two out of five members of the Board of Directors are women, including the Chairman of the Board. At year-end 2014 the Group had 1 595 employees, including 15 in the parent company. 153 of the employees were women and 13 percent of leading onshore personnel within the Group are women. A description of the Company's Corporate Social Responsibility is presented on pages 64 to 66.

Significant legal matters

During 2014 the Group had one legal dispute with business counterparts. See note 18 for further information.

External Environment

The Group's operations involve activities that entail potential risks to the external environment. The Group is careful in its approach to the environment and continuously strives to reduce the use of hazardous chemicals and materials to minimize negative effects and seeks alternative products to safeguard the environment. The Company is a holding company and as such has no activities that entail potential significant risks to the external environment.

Allocation of profit

Net profit after tax for the parent company was USD 125 million, which is proposed allocated as follows:

To retained earnings	125 million
Total allocated	125 million

Annual General Meeting

The date of the Annual General Meeting is scheduled for 27 May 2015.

Oslo, 31 December 2014 / 8 April 2015 Fred. Olsen Energy ASA

Anette S. Olsen	Jan Peter Valheim	Cecilie B. Heuch	Øivin Fjeldstad	Agnar Gravdal	Ivar Brandvold
Chairman					Chief Executive Officer

Directors' Responsibility Statement Fred. Olsen Energy – Group

Today, the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Directors' report and the consolidated and separate annual financial statements for Fred. Olsen Energy ASA, for the year ending and as of 31 December 2014 (annual report 2014). Fred. Olsen Energy ASA's consolidated financial statements have been prepared in accordance with IFRS and IFRIC as adopted by the EU and additional disclosure requirements in the Norwegian Accounting Act, and should be used as of 31 December 2014. The separate financial statements for Fred. Olsen Energy ASA have been prepared in accordance with the Norwegian Accounting Act and Norwegian accounting standards as of 31 December 2014. The Board of Directors' Report for the Group and the Company is in accordance with the requirements in the Norwegian Accounting Act and Norwegian accounting standard no 16, as of 31 December 2014.

To the best of our knowledge:

• the consolidated and separate annual financial statements for 2014 have been prepared in accordance with applicable accounting standards
• the consolidated and separate annual financial statements give a true and fair view of the assets, liabilities, financial position and profit (or loss) as a whole as of 31 December 2014 for the Group and the Company.
• the Board of Directors' report for the Group and the Company includes a true and fair review of
• the development and performance of the business and the position of the Group and the Company.
• the principal risks and uncertainties the Group and the Company face.

Oslo, 31 December 2014 / 8 April 2015 Fred. Olsen Energy ASA

Anette S. Olsen	Jan Peter Valheim	Cecilie B. Heuch	Øivin Fjeldstad	Agnar Gravdal	Ivar Brandvold
Chairman					Chief Executive Officer

Consolidated Statement of Income Fred. Olsen Energy – Group

For the years ended 31 December

Amounts in USD 000's	Note	2014	2013
Revenues	2,17,19	1 184 066	1 194 369
Materials		-11 824	-17 028
Salaries and other personnel costs	3,17	-318 691	-323 687
Other operating expenses	4,17	-337 338	-281 075
Operating profit before depreciation, amortisation, impairment and net financial expenses		516 213	572 579
Depreciation and amortisation	7	-329 418	-242 308
Impairment	7	-42 702	0
Operating profit before net financial expense		144 093	330 271
Financial income		127 095	66 934
Financial expenses		-122 611	-79 125
Net financial expenses	5,13,17	4 484	-12 191
Profit before tax		148 577	318 080
Income tax expenses	6	-30 228	-17 981
Profit for the year		118 349	300 099
Attributable to:
Equity holders of the parent		117 350	300 751
Non-controlling interest		999	-652
Profit for the year	11	118 349	300 099
Basic earnings per share	21	1.77	4.54
Diluted earnings per share	21	1.77	4.54

The notes represent an integral part of the consolidated financial statements.

Consolidated Statement of Comprehensive Income Fred. Olsen Energy – Group

For the years ended 31 December

Amounts in USD 000's	Note 2014	2013
Profit for the year	118 349	300 099
Items that will never be reclassified to statement of separate income
Actuarial losses on defined benefit pension plans	-19 378	-614
Income tax relating to components of other comprehensive income	2 802	-1 123
Items that are or may be reclassified to statement of separate income
Exchange differences on translation of foreign operations	-8 130	-755
Total comprehensive income for the year	93 643	297 607

Attributable to:
Equity holders of the parent		93 798	297 725
Non-controlling interests		-155	-118
Total comprehensive income for the year	11	93 643	297 607

The notes represent an integral part of the consolidated financial statements.

Consolidated Statement of Financial Position Fred. Olsen Energy – Group

Amounts in USD 000's	Note	2014	2013
Assets
Property, plant and equipment	7	2 901 586	2 476 237
Intangible assets	8	13 262	16 203
Other non-current assets	15,17	205	26
Deferred tax assets	9	31 237	26 970
Total non-current assets		2 946 290	2 519 436
Consumable spare parts		115 165	102 953
Prepayments and tax refunds		31 085	31 684
Trade and other receivables	13,17	172 657	189 707
Cash and cash equivalents	10	203 425	222 086
Total current assets		522 332	546 430
Total assets		3 468 622	3 065 866

The notes represent an integral part of the consolidated financial statements.

..continues on the next page

Consolidated Statement of Financial Position

Amounts in USD 000's	Note	2014	2013
Equity
Share capital		193 290	193 290
Share premium		83 549	83 549
Translation reserves		6 875	15 005
Reserve for own shares		-1 215	-1 215
Retained earnings		1 025 430	1 146 285
Share of equity attributable to shareholders of the parent	11	1 307 929	1 436 914
Non-controlling interests		0	0
Total equity		1 307 929	1 436 914
Liabilities Interest-bearing loans and borrowings	12,13,17	1 359 937	662 158
Employee benefits	15	133 899	121 276
Financial instruments	13	5 100	3 386
Total non-current liabilities		1 498 936	786 820
Interest-bearing loans and borrowings	12,13,17	95 455	131 200
Trade and other payables	17	58 346	43 564
Financial instruments	13	7 510	179
Tax payable		15 219	7 578
Other accrued expenses and deferred revenue	7	485 227	659 611
Total current liabilities		661 757	842 132
Total liabilities		2 160 693	1 628 952
Total equity and liabilities		3 468 622	3 065 866

The notes represent an integral part of the consolidated financial statements.

Oslo, 31 December 2014 / 8 April 2015 Fred. Olsen Energy ASA

Anette S. Olsen	Jan Peter Valheim	Cecilie B. Heuch	Øivin Fjeldstad	Agnar Gravdal	Ivar Brandvold
Chairman					Chief Executive Officer

Consolidated Statement of Changes in Equity Fred. Olsen Energy – Group

				Reserve			Non
	Share		Share Translation	for own	Retained		controll.	Total
Amounts in USD 000's	capital	premium	reserves	shares	earnings	Total	interests	equity
Balance at 1 January 2013	193 290	83 549	15 760	-1 215	1 074 941	1 366 325	0	1 366 325
Total comprehensive income
for the period	0	0	-755	0	298 362	297 607	0	297 607
Dividends	0	0	0	0	-227 018	-227 018	0	-227 018
Balance at 31 December 2013	193 290	83 549	15 005	-1 215	1 146 285	1 436 914	0	1 436 914
Balance at 1 January 2014	193 290	83 549	15 005	-1 215	1 146 285	1 436 914	0	1 436 914
Total comprehensive income
for the period	0	0	-8 130	0	101 773	93 643	0	93 643
Dividends	0	0	0	0	-222 628	-222 628	0	-222 628
Balance at 31 December 2014	193 290	83 549	6 875	-1 215	1 025 430	1 307 929	0	1 307 929

The notes represent an integral part of the consolidated financial statements.

See also note 11.

Consolidated Statement of Cash Flows Fred. Olsen Energy – Group

For the year ended 31 December

Amounts in USD 000's	Note	2014	2013
Cash flows from operating activities
Profit before income tax		148 577	318 080
Adjustment for:
Depreciation and amortisation	7	372 120	242 308
Interest expenses	5	41 611	19 485
Loss/(gain) on sale of property, plant and equipment		208	-622
Unrealised gain on financial instruments/debt		-67 007	-32 354
Changes in trade and other receivables		-10 791	-18 949
Changes in trade and other payables		-1 274	29 807
Changes in other balance sheet items		-15 384	-15 964
Cash generated from operations		468 060	541 791
Interest paid		-44 198	-38 120
Income taxes paid		-29 069	-15 172
Net cash from operating activities		394 793	488 499
Cash flows from investing activities
Purchases of property, plant and equipment		-940 978	-212 389
Proceeds from sale of equipment		314	1 091
Net cash used in investing activities		-940 664	-211 298

Cash flows from financing activities

1 933 618	115 000
-1 183 200	-191 200
-222 628	-227 018
527 790	-303 218
-18 081	-26 017
222 086	249 131
-580	-1 028
203 425	222 086

The notes represent an integral part of the consolidated financial statements.

Notes to the Consolidated Financial Statements Fred. Olsen Energy – Group

Note 1 - Significant accounting policies

Fred. Olsen Energy ASA (the "Company") is a company domiciled in Norway.

The consolidated financial statements of the Company for the year ended 31 December 2014 comprise the Company and its subsidiaries (together referred to as the "Group").

The financial statements were authorised for issue by the Directors on 8 April 2015.

Basis of accounting

The consolidated financial statements have been prepared in accordance with the Norwegian Accounting Act and International Financial Reporting Standards (IFRS) as adopted by the European Union.

Basis of preparation

The financial statements are presented in US Dollar (USD), rounded to the nearest thousand. The Group changed its reporting currency and Fred. Olsen Energy ASA its functional currency from Norwegian Krone to US Dollar effective from 1st January 2014. The comparative numbers are presented as if USD had always been the Group's presentation currency. They are prepared on the historical cost basis except that derivative financial instruments are measured at fair value.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed regularly. Actual results may differ from these estimates.

Judgements made by management in the application of IFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

The accounting policies have been applied consistently by Group entities.

Basis of consolidation

Subsidiaries

The consolidated financial statements include the Company and its subsidiaries (the Group of companies).Subsidiaries are entities controlled by the Group. See note 22 for details of the subsidiaries.

Transactions eliminated in consolidation

All material intra-group transactions, any unrealised income and expenses arising from intra-group transactions and intra-group balances have been eliminated in preparing the consolidated financial statements.

Foreign currency

Foreign currency transactions

The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are presented in USD, which is the presentation currency of the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in foreign currencies are translated at the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the foreign exchange rate at the balance sheet date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transactions. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the exchange rates ruling at the dates the fair value was determined.

Financial statements of foreign operations

The assets and liabilities of foreign subsidiaries are translated into USD at the foreign exchange rate at the balance sheet date. The revenues and expenses of foreign subsidiaries are translated using average monthly foreign exchange rate, which approximates that foreign exchange rates on the dates of the transactions. Foreign exchange differences arising on translation are recognised directly as a separate component of equity.

Financial Instruments

Financial assets and financial liabilities are recognized on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instruments.

Derivative financial instruments

The Group uses derivative financial instruments to manage its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are classified as at fair value through profit or loss.

Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on re-measurement to fair value is recognised in profit or loss. There are no derivatives to which hedge accounting is applied.

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the swap at the balance sheet date. The fair value of forward exchange contracts is their market price at the balance sheet date, being the present value of the quoted forward price as provided by financial institutions.

Fred. Olsen Energy – Group

Notes

Trade and other receivables

Trade and other receivables are stated at their amortised cost less impairment losses.

Cash and cash equivalents

Cash and cash equivalents includes cash, bank deposits and other shortterm highly liquid assets that are readily convertible to known amounts of cash and which are subject to insignificant changes in value.

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interestbearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

Trade and other payables

Trade and other payables are stated at cost.

Property, plant and equipment

Owned assets

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of self-constructed assets and modifications includes the cost of material, direct labour and other direct attributable cost to bring the asset to a working condition for its intended use. Rigs and drillships under construction are accounted for using the percent of completion method and recognised if it is probable that the future economic benefits associated with the asset will flow to the entity and it's cost can be measured reliably.

Where components of an item of property, plant and equipment have different useful lives, they are accounted for separately.

Subsequent expenditures are capitalised when it is probable that they will give rise to future economic benefits. Other costs are recognised in the income statement as incurred.

Borrowing costs are capitalised as part of the cost on certain qualifying assets in accordance to IAS 23. A qualifying asset is one which necessarily takes a substantial period of time to be made ready for its intended use, which are generally assets that are subject to major development or construction projects.

Depreciation

Depreciation is charged to the income statement on a straight-line basis over the estimated useful life of each component of property, plant and equipment. The estimated useful lives,residual values and decommissioning costs are reviewed at each financial year end. Any changes are accounted for prospectively as a change in accounting estimate. No decommissioning costs have been recorded to date, and the presence of any obligations is reviewed at each financial year end.

The estimated useful lives are as follows:

Rigs	20 to 25 years
Deepwater Drillship	25 years
Major components	5 to 15 years
Plant and Buildings	5 to 50 years
Machinery and Equipment	3 to 10 years

Repairs and maintenance

Cost for Class Renewal Surveys on offshore units required by classification societies, are capitalised and depreciated over the anticipated period between surveys, generally five years. Other repair and maintenance costs are expensed as incurred.

Intangible assets

Goodwill

Goodwill represents amounts arisen on the acquisition of subsidiary, and is the difference between the cost of the acquisition and the fair value of identifiable net asset acquired.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to the cash generating unit and is tested annually for impairment.

Research and development

Expenditures on research and development activities, undertaken with the prospect of gaining technical knowledge and understanding, is recognised in the income statement as an expense as incurred.

Consumable spare parts

The Group categorizes spare parts into two groups, spare parts and spare equipment. A spare part is a consumable that is not depreciated, but expensed when used against repair and maintenance cost. A spare equipment is larger spare item that is recorded as a rig component and depreciated. Consumables are recorded at cost and are expensed when used.

Impairment

The carrying amounts of the Group's assets, other than inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. When considering impairment indicators, the Group considers both internal e.g. adverse changes in performance and external sources e.g. adverse changes in the business environment. These are analyzed by reviewing dayrates and broker valuations. Another external indicator of possible impairment considerations is if the carrying amount of the net assets of the Group exceeds the market capitalisation of the Company. The recoverable amount of an asset is the higher of its fair value less costs to sell and value in use. The value in use is calculated as the present value of the expected future cash flows for the individual units.

The value in use is used for the annual impairment test for goodwill, which is the present value of the future cash flows from continuing use and ultimate disposal expected to be derived from the cash generating unit that includes goodwill, which is Dolphin Drilling AS, representing the Group's North Sea activities on the Norwegian continental shelf. The discount rate used in the calculations is based on a risk-free rate and a market risk premium.

An impairment loss is recognised if the carrying amount of an asset exceeds the recoverable amount.

Employee benefits

Pensions

The Company and certain of its subsidiaries have pension plans for employees which provide for a defined pension benefit upon retirement. The benefit to be received by employees generally depends on many factors including length of service, retirement date and future salary increases. The Group's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date reflecting the maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified actuary.

Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses,are recognised in other comprehensive income (OCI).

In addition, employees of other subsidiaries are covered by multi-employer pension plans administered by trade unions and by plans administered by related companies. Costs related to these plans are expensed as incurred.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Revenue

Charter rate contracts

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. Certain 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 contract period, the fee is recognised as revenue over the 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 fee is recognised as revenue over the estimated contract period. The related investment is depreciated over the estimated contract period.

Long-term engineering and fabrication contracts

Revenues on long-term contracts are recognised using the percentage of completion method throughout the performance period of the contract when the outcome can be measured reliably. The percentage of completion is typically calculated based on the ratio of contract costs incurred to date to total estimated contract costs after providing for all known or anticipated costs. On certain contracts the Group may use the ratio of incurred to total estimated direct labour hours to determine the percentage of completion. Costs include material, direct labour and engineering. Selling, general and administrative expenses are charged to operations as incurred. The effect of changes in estimates of contract costs is recorded currently. An expected loss on a contract is recognised immediately in the income statement.

Costs and estimated earnings in excess of billings on uncompleted contracts represent revenues earned under the percentage of completion method but not yet billable under the terms of the contract. Amounts billed in advance of satisfying revenue recognition criteria on long term contracts are classified as billings in excess of costs and estimated earnings on uncompleted contracts.

Generally, contract revenues become billable upon the Group attaining certain contract milestones. The Group typically does not require collateral from customers except in situations where warranted due to assessments of risk factors.

Expenses

Operating lease expenses

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease.

Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable, foreign exchange gains or losses, and gains and losses on financial instruments.

Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in OCI, in which case it is recognised in OCI.

Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method. Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Segment reporting

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with the other of the Group's component. The Group provides services and operates within the two operating segments; offshore drilling and engineering and fabrication. The operating segments' results are reviewed regularly by the Group's management to make decisions and assess its performance, and for which discrete financial information is available.

Earnings per share

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares.

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has no dilutive potential ordinary shares outstanding.

New accounting policies

IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in other entities and IAS 28 Investments in Associates and Joint Ventures were effective from 1 January 2014. Given the nature of the Group's structure and investments activities, the adoption of these standards and amendments have not had any impact on the consolidated financial statements.

IFRS 9 Financial Instruments

Replaces the existing guidance in IAS39 and is effective for annual reporting on or after 1 January 2018. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 9.

IFRS 15 Revenue from Contracts with Customers Replaces existing revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs and is effective for annual reporting on or after 1 January 2017. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15.

There have not been any other new IFRS standards or interpretations issued after the completion of the annual consolidated financial statements for the year ended 31 December 2014 that have a significant impact on the Group's financial reporting.

Accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

For accounting purposes the Group makes estimates and assumptions

concerning the future. The resulting accounting estimates may differ from the eventual outcome, but are regarded as the best estimate at the balance sheet date. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

I) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on best estimate of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.

II) Pension obligations

The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost for pensions include the discount rate. Any changes in these assumptions will impact the calculated pension obligations. The Group determines the appropriate discount rate at the end of each year. This is rate that used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. The rate used for Norwegian subsidiaries is based on 10 years government bonds or OMF rate. Beyond 10 years the rate has been based on an extrapolation of the government bond rate and long-term swap rates for the relevant period. Other key assumptions for pension obligation are based on current market conditions.

III) Estimates of fair value for rigs and drill ship

At each balance sheet date judgement is used to determine whether there is any indication of impairment of the Group fleet of rigs and the drill ship. If any such indication exists, the asset's recoverable amount is estimated. If an indicator of impairment is noted, further management estimate is required to determine the amount, if any, of impairment. In order to measure for potential impairment, the carrying amount of the rigs and drill ship would be compared to the recoverable amount, which normally is the value in use. The value in use is calculated as the present value of the expected future cash flows for the individual units, requiring significant management estimates of the proper discount rates as well as the length and amounts of cash flows. An impairment loss will be recognised to the extent the carrying amount exceeds the recoverable amount.

IV) Estimated fair value of cash generating unit for impairment testing of goodwill

In accordance with the accounting policy the Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating unit have been determined based on a value-in-use calculation. This calculation requires the use of estimates and is based on assumptions that are consistent with the market valuation of the Group.

Note 2 - Segment reporting

Segment information is presented in respect of the Group's operating segments and is based on the Group's management and internal reporting structure. For each of the strategic business units, internal management reports are reviewed on a monthly basis.

Inter-segment pricing is determined on an arm's length basis.

Operating segments

The Group comprises the following operating segments:

Offshore drilling provides services to the offshore oil and gas industry. Fred. Olsen Energy ASA is included within the offshore drilling segment.

Engineering and fabrication provides engineering, fabrication, ship building and repair services for various offshore and onshore industries. In addition, the yard holds a waste management license and is used as logistics and assembly base for offshore windfarms.

Operating segments

				Engineering and
Amounts in USD 000's	Offshore drilling			fabrication		Eliminations		Consolidated
	2014	2013	2014	2013	2014	2013	2014	2013
Revenues from external customers	1 158 082	1 152 452	25 984	41 917	0	0	1 184 066	1 194 369
Inter-segment revenues	0	0	65 821	8 741	-65 821	-8 741	0	0
Total revenues	1 158 082	1 152 452	91 805	50 658	-65 821	-8 741	1 184 066	1 194 369
							0	0
Operating expenses	-637 462	-572 815	-76 978	-57 716	46 587	8 741	-667 853	-621 790
Segment result before depreciation,
amortisation and impairment	520 620	579 637	14 827	-7 058	-19 234	0	516 213	572 579
Depreciation and amortisation	-327 118	-240 620	-2 300	-1 688	0	0	-329 418	-242 308
Impairment	-42 702	0	0	0	0	0	-42 702	0
Segment result	150 800	339 017	12 527	-8 746	-19 234	0	144 093	330 271
Net financing costs	4 266	-12 549	218	358	0	0	4 484	-12 191
Income tax expenses	-30 228	-17 981	0	0	0	0	-30 228	-17 981
Profit/(loss) for the period	124 838	308 487	12 745	-8 388	-19 234	0	118 349	300 099
Segments assets	3 405 739	3 007 302	65 738	62 117	-2 855	-3 553	3 468 622	3 065 866
Segments liabilities	2 092 652	1 567 281	70 896	65 224	-2 855	-3 553	2 160 693	1 628 952
Capital expenditures	796 346	434 144	4 365	6 960	0	0	800 711	441 104
Net cash from operating activities	402 665	487 858	11 362	641	-19 234	0	394 793	488 499
Net cash used in investing activities	-955 533	-204 338	-4 365	-6 960	19 234	0	-940 664	-211 298
Net cash from financing activities	527 790	-303 218	0	0	0	0	527 790	-303 218

Geographical information

		Europe		Asia		Americas		Africa		Consolidated
	2014	2013	2014	2013	2014	2013	2014	2013	2014	2013
Revenues from
external customers 1)	824 172	827 156	86	196	33 996	187 546	325 812	179 471	1 184 066 1 194 369
Capital expenditure	9 884	18 254	790 827	422 851	0	0	0	0	800 711	441 105

Of the total revenue in 2014, Norway and UK contributed 38% and 30% respectively (2013: 44% and 26%). Revenues from Statoil in 2014 constituted 14% (2013: 26%), revenues from Anadarko constituted 28% (2013: 15%), revenues from BP and Lundin constituted 11% and 10% respectively.

1) Based on location of units. Revenues in Asia are of administrative nature.

Note 3 - Salaries and other personnel costs

Amounts in USD 000's	2014	2013
Salaries	247 123	242 069
Social security costs and employee taxes	35 672	34 137
Pension costs	30 597	25 452
Training	11 608	8 470
Temporary staff	30 391	22 839
Other	15 323	15 510
Capitalised personnel expenses	-52 023	-24 790
Total	318 691	323 687
Average number of employees	1 615	1 622
Number of employees at year end	1 595	1 619
Average man-labour year	1 860	1 933

Other includes insurance expenses for offshore and onshore personnel, health plan and other personnel expenses.

The costs of employee benefits that are incurred for employees working directly on the construction of assets have been capitalised and are included as part of the rig costs. See note 7.

Note 4 - Other operating expenses

Amounts in USD 000's	2014	2013
Repairs and maintenance on offshore units	116 403	88 312
Recharged expenses	70 502	43 675
Rig overheads	56 859	63 600
Travel	29 758	28 035
General operating expenses	9 183	8 310
Insurance	13 062	12 078
Provision for bad debt	0	625
Professional and operational fees	15 409	15 962
Catering costs	21 431	16 350
Property rental expenses	4 484	3 958
Loss on sale of assets	247	170
Total	337 338	281 075

Fees for audit and other services provided by the Group's auditor are as follows:

Amounts in USD 000's	2014	2013
Audit	963	872
Tax advisory services	86	164
Other non-audit services	19	10
Total	1 068	1 046

Note 5 - Net financial expenses

Amounts in USD 000's	2014	2013
Financial income
Interest income	2 634	2 183
Gain on financial instruments	1 254	14 619
Foreign exchange gain	123 207	50 132
Total	127 095	66 934
Financial expenses

Interest expenses	41 611	19 485
Amortised borrowing cost	5 434	5 648
Loss on financial instruments	13 118	8 410
Other financial expenses	26 163	11 867
Foreign exchange loss	36 285	33 715
Total	122 611	79 125
Net financial income/(expenses)	4 484	-12 191

Net financial expenses include non-cash interest on borrowings calculated using the effective interest rate method.

Gain on financial instruments in 2014 includes realised gain related to currency contracts. (2013: unrealised gain of USD 10.5 million related to fixed interest contracts and USD 4.1 million related to currency contracts where USD 0.3 million were unrealised).

Loss on financial instruments in 2014 relates to realised loss on fixed interest contracts of USD 1.5 million (2013: USD 8.1 million) and loss on currency contracts of USD 11.6 million whereof USD 10.5 million were unrealised (2013: USD 0.3 million)

The interest expenses is net of capitalised interest costs of USD 8.6 million (2013: USD 18.1 million).

Note 6 - Income tax expenses

Amounts in USD 000's	2014	2013
Current tax expenses	35 636	19 135
Deferred tax expenses/(benefits)	-5 408	-1 154
Total income tax expenses in income statement	30 228	17 981
Income tax relating to components of other comprehensive income	-2 802	1 123
Reconciliation of effective tax rate		2014
Profit before tax		148 577
Income tax using the domestic corporation tax rate	27.0 %	40 116
Permanent differences	0.5 %	817
Permanent differences due to currency effects in tax filings	-49.5 %	-73 554
Effect of foreign subsidiaries	-10.8 %	-16 111
Change in limitation of deferred tax assets related to tax loss carryforward	53.1 %	78 960
Effective tax rate	20.3 %	30 228
Reconciliation of effective tax rate		2013
Profit before tax		318 080
Income tax using the domestic corporation tax rate	28.0 %	89 062
Permanent differences	1.0 %	3 207
Permanent differences due to currency effects in tax filings	-6.6 %	-20 842

Effect of foreign subsidiaries -27.1 % -86 257 Change in limitation of deferred tax assets related to tax loss carryforward 10.3 % 32 811 Effective tax rate 5.7 % 17 981

Note 7 - Property, plant and equipment

	Rigs and	Machinery and	Plant, building
Amounts in USD 000's	drillships	equipment	and land	Total
Cost
Balance at 1 January 2013	3 384 663	83 801	20 106	3 488 570
Acquisitions	422 748	17 033	1 323	441 104
Disposals	-17 856	-979	-153	-18 988
Effect of movements in foreign exchange	0	-757	-321	-1 078
Balance at 31 December 2013	3 789 555	99 098	20 955	3 909 608
Balance at 1 January 2014	3 789 555	99 098	20 955	3 909 608
Acquisitions	790 755	5 852	4 104	800 711
Disposals	-27 515	-1 589	0	-29 104
Effect of movements in foreign exchange	0	-7 678	-1 670	-9 348
Balance at 31 December 2014	4 552 795	95 683	23 389	4 671 867
Accumulated depreciation
Balance at 1 January 2013	1 132 032	66 693	11 074	1 209 799
Depreciation charge for the year	236 757	5 316	235	242 308
Disposals	-17 695	-676	-153	-18 524
Effect of movements in foreign exchange	0	-59	-153	-212
Balance at 31 December 2013	1 351 094	71 274	11 003	1 433 371
Balance at 1 January 2014	1 351 094	71 274	11 003	1 433 371
Depreciation charge for the year	321 846	7 007	565	329 418
Impairment charge for the year	42 702	0	0	42 702
Disposals	-27 517	-1 067	0	-28 584
Effect of movements in foreign exchange	0	-5 745	-881	-6 626
Balance at 31 December 2014	1 688 125	71 469	10 687	1 770 281
Carrying amounts
At 1 January 2013	2 252 631	17 108	9 032	2 278 771
At 31 December 2013	2 438 461	27 824	9 952	2 476 237
At 1 January 2014	2 438 461	27 824	9 952	2 476 237
At 31 December 2014	2 864 670	24 214	12 702	2 901 586

Interest expenses of USD 8.6 million (2013: USD 18.1 million) has been capitalized to Bolette Dolphin (until completion) and Bollsta Dolphin under construction. The Group's weighted average interest rate on current borrowings of 3.5% has been applied for the calculation.

The acquisitions include accruals of USD 198 million based on percentage of completion of Bollsta Dolphin under construction. The total accruals are recorded under other accrued expenses and deferred revenue and amount to USD 293 million.

Decommissioning costs

There is no decommissioning liability on the drillship or the drilling rigs as there is no legal or constructive obligation to dismantle or restore the assets. In practice, assets of this nature are rebuilt when no longer useful, laid up or scrapped. For a standard vessel, special dismantling yards pay for a vessel to be scrapped per light displacement tonne (LDWT) of the vessel.

Residual values

The residual value is reviewed at each year-end, with any change in estimate accounted for prospectively.

The most common method to estimate residual values for ships is to use scrap price that is publicly noted by brokers in USD per LDWT of a complete vessel with all normal machinery and equipment on board. This method is used to determine the residual value for the drillship Belford Dolphin. The estimated residual value for Bolette Dolphin and Belford Dolphin as at 31 December 2014 is USD 12.7 million and USD 13.8 million respectively. (2013: Belford USD 11.0 million).

Drilling rigs are considerably more complicated to scrap than ships and have much less metal and scrapable/recoverable material due to their construction, design and nature. The price that could be recovered from the sale for scrap is estimated to approximate the cost of extracting this scrap metal. Therefore, no residual value is recorded since if the assets were disposed of in their expected ages and conditions at the end of their useful lives, at current prices no material net amount is estimated to be recovered.

Useful lives

The useful lives of the assets are reviewed at each year end. Management has reviewed each of the rigs by expected usage and considered the scheduled 5 years Class Renewal Surveys going forward.

Blackford Dolphin completed its Class Renewal Surveys and was upgraded for UK sector in July 2014. Bideford Dolphin completed its Class Renewal Survey in 2014 while Borgland Dolphin and Byford Dolphin will complete their Class Renewal Surveys in first half of 2015.

Borgny Dolphin is currently cold stacked due to market conditions and has not undertaken its Class Renewal Survey.

Estimates of the lifetimes for 2nd generation rigs are generally based on the assumption that they will carry out their next forthcoming Class Renewal Survey and continue to operate five years thereafter. Belford Dolphin, Blackford Dolphin, Bideford Dolphin, Borgland Dolphin are either new or substantially upgraded, and have longer expected useful lifetimes than the 2nd generation rigs. Due to the market conditions, the estimated remaining lifetime for Belford Dolphin has been reduced by five years.

Estimates
Remaining lifetime	Net book value as at
		31 December
	2014	2013
11	190	181
10	179	94
10	231	123
5	86	87
5	28	97
3	65	97
8	164	183
3	72	48
19	683	566
24	626	654
	541	308
	2 865	2 438
	as at 31 December 2014

..the note continues on the next page

Impairment

An impairment loss of USD 42.7 million was recorded in 2014 related to Borgny Dolphin. (2013: 0) The rig is currently in lay-up due to overcapacity of offshore drilling units worldwide. The Company is pursuing new contract opportunities in parallel with potential sale of the unit. Due to the uncertainty in the offshore drilling market, value in use is not readily determinable and the Company has used estimated market values to determine the recoverable amount of the unit. The measurement of the asset is categorised in Level 3. The average of the market values from two different brokers have been used in addition to concrete discussions with potential buyers. The key assumptions for the measurement are:

• The proposed sales price takes into consideration multiple valuation approaches, including market approach/income approach/present value techniques which are acceptable methods within IFRS 13 and are based on the highest and best use principle.
• The estimated fair value provided by the brokers represents what Management believe to be a fair price between market participants and our best estimate of fair value less costs of disposal at 31 December 2014.
• The unit of account (Borgny Dolphin) is specifically identified in the proposed sales price

Impairment tests have been undertaken for all other units in the fleet. Our determination of the recoverable amount for each Cash Generating Unit (CGU) is based on value in use calculation by estimating future cashflows to be derived from continuing use of each CGU. The appropriate discount rate has been applied on the future cashflows. The base case cashflow projections showed no need for impairment on those units.

Commitments

Commitments related to investments are approximately USD 135 million as at 31 December 2014 in addition to USD 496 million related to Bollsta Dolphin under construction whereof total USD 293 million is accrued for based on percent of completion.

Note 8 - Intangible assets

Amounts in USD 000's	Goodwill
Balance at 1 January 2013	17 709
Effect of movements in foreign exchange	-1 506
Balance at 31 December 2013	16 203
Balance at 1 January 2014	16 203
Effect of movements in foreign exchange	-2 941
Balance at 31 December 2014	13 262

Goodwill

The intangible asset balance of USD 13 262 consists entirely of goodwill relating to Dolphin Drilling AS, included in the offshore drilling segment.

Impairment

The Group performs an impairment test of the goodwill in December of each year. A value in use calculation is used for the impairment test, which is the present value of the future cash flows from continuing use and ultimate disposal expected to be derived from the cash generating unit which is Dolphin Drilling AS. Fair value is not readily determinable.

The value in use calculation was based on the following key assumptions.

• Projected cash flows for the rigs being operated by Dolphin Drilling AS are based on budgets and forecasts for 2015, including firm contract day rates and expected future day rates less operating expenses and an annual growth rate of 2.0 percent for subsequent periods over the remaining useful lives of the rigs in Norway.
• A discount rate of 8.12 % was applied in determining the recoverable amount of the unit.

The recoverable amount of Dolphin Drilling AS was estimated to be higher than its carrying amount and no impairment was required.

Sensitivity

Projected cash flows could vary significantly due to changes in assumptions for Dolphin Drilling AS, however an impairment would still not be expected to be incurred due to the estimated recoverable amount exceeding the Cash Generating Unit's carrying amount by 34%.

Note 9 - Deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

		Assets		Liabilities		Net
Amounts in USD 000's	2014	2013	2014	2013	2014	2013
Property, plant and equipment	-3 192	-86	23	0	-3 169	-86
Provisions	-202	-247	0	0	-202	-247
Other items	-27 921	-26 721	55	84	-27 866	-26 637
Tax value of loss carry-forward recognised	0	0	0	0	0	0
Tax (assets)/liabilities	-31 315	-27 054	78	84	-31 237	-26 970
Set off 1)	78	84	-78	-84	0	0
Net tax (assets)/liabilities	-31 237	-26 970	0	0	-31 237	-26 970

1) Deferred tax assets and liabilities are offset only when there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income tax levied to the same taxable entity.

Unrecognised deferred tax assets:

Deferred tax assets have not been recognised in respect of the following items:

Amounts in USD 000's	2014	2013
Deductible temporary differences	8 207	11 324
Tax losses	192 917	136 257
Total unrecognised deferred tax assets	201 124	147 581

As at 31 December 2014, approximately USD 164 million of the tax losses carried forward are available to offset the taxable income for subsidiaries in UK and USD 593 million for subsidiaries in Norway, in total USD 757 million in tax losses carried forward for the Group. These losses are not recorded as a deferred tax asset due to uncertainty of the level of the future suitable taxable profits in taxable jurisdictions.

The tax losses carried forward have no expiry date.

Fred. Olsen Energy – Group

Notes

Note 10 - Cash and cash equivalents

Amounts in USD 000's	2014	2013
Cash related to payroll tax withholdings	5 054	5 842
Other restricted cash	2 106	5 458
Total restricted cash	7 160	11 300
Unrestricted cash	196 265	210 786
Total cash and cash equivalents	203 425	222 086

Note 11 - Capital and reserves

Share capital and share premium

Par value per share	NOK 20
Number of shares authorized	73 363 651
Number of shares issued	66 694 229
Outstanding shares	2014	2013
As at 31 December	66 264 129	66 264 129

Translation reserves

This reserve represents exchange differences resulting from the consolidation of subsidiaries having different functional currencies, refer to Consolidated Statement of Changes in Equity, page 17.

Reserve for own shares

The Company held 430 100 shares as at 31 December 2014 (unchanged from 2013).

Dividend

The Annual General Meeting in May 2014 approved the Board's proposal of an ordinary dividend payment of NOK 10 and an extraordinary dividend of NOK 10 per share for the year 2013. The payment was made in June 2014 and amounted to USD 222.6 million (NOK 1 325.3 million). In 2013 the dividend payments were USD 227.0 (NOK 1 325.3 million).

Note 12 - Interest-bearing loans and borrowings

Amounts in USD 000's					31.12.14		31.12.13
				Nominal		Nominal
	Currency	Interest rate	Maturity	value	Balance	value	Balance
Bond loan	NOK	3M Nibor + 4.25%	2016	188 344	187 692	230 123	229 011
Bond loan	NOK	3M Nibor + 3.00%	2019	147 985	146 455	0	0
Fleet loan USD 1 500 million facility (repaid)	USD	Libor + 3.25%	2017	0	0	583 200	564 347
Fleet loan USD 2 000 million facility	USD	Libor + 2.30%	2020	1 150 000	1 121 245	0	0
Total interest bearing loans and borrowings				1 486 329	1 455 392	813 323	793 358
Current interest bearing loans and borrowings					95 455		131 200
Non-current interest bearing loans and borrowings					1 359 937		662 158
Total interest bearing loans and borrowings					1 455 392		793 358

Of the interest bearing debt of the Group at 31 December 2014, USD 1 150 million is denominated in US dollars (2013: USD 583 million), and USD 336 million is denominated in NOK (2013: USD 230 million).

Per 31 December 2014 USD 300 million is undrawn and available under the credit facility for general corporate purposes. Furthermore, the Group has a short term facility of USD 150 million. The facility is undrawn per 31.12.2014, with maturity in December 2015.

Note 13 - Financial risk management

Capital management

The Group's objective is to have a sound financial position in order to maintain market confidence and sustain future development of the business. The Board monitors the capital structure and return on capital on a continuous basis, with the aim to maintain a strong capital base while maximizing the return on capital. Since 2007, the Board has proposed a dividend on a yearly basis and has proposed extraordinary dividends during the last years. For 2014, the Board will propose to the Annual General Meeting in May 2015 to suspend the dividend payment in 2015 due to the challenging offshore market.

The Company may purchase its own shares in the market within the authorization given by the Annual General Meeting. The Company does not have a formally defined share buy-back program however this is evaluated on a continuous basis.

The Group has the following financial covenants in its loan agreements:

• Net debt/EBITDA to be less than 4.5x
• Interest coverage to be higher than 2.5x
• Minimum free cash of USD 30-50 million

The Group is in compliance with the covenants in all loan agreements.

Market risk

The Group is exposed to credit-, interest rate- and foreign currency risks in its operations. Derivative financial instruments are from time to time entered into to hedge against fluctuations in foreign currency rates and interest rate levels. The Group does not enter into commodity contracts.

Credit risk

Due to the nature of the Group's operations, revenues and related receivables are typically concentrated amongst a relatively small customer base of international oil and gas companies. The Group continually evaluates the credit risk associated with customers and, when considered necessary, requires certain guarantees, either in the form of parent company guarantees, bank guarantees or cash collateral. The Group's short-term investments are limited to cash deposits in the Group's relationship banks and derivative financial instruments are normally entered into with the Group's main relationship banks. As such, the Group considers its exposure to credit risk to generally be moderate.

At 31 December 2014 there was no significant concentration of credit risk. Maximum exposure to credit risk is reflected in the carrying value of each financial asset, including derivative financial instruments, in the balance sheet.

2014	2013
172 816	189 733
203 425	222 086
376 241	411 819

Amounts in USD 000's	2014	2013
Loans to employees 1)	159	26
Customers	172 657	189 707
Total	172 816	189 733

1) Average interest rate for loans to employees was 2.5% in 2014 and 2.3% for 2013. Part of the amount contains rolling travel advances.

The ageing of trade receivables at the reporting date was:

	2014				2013
	Nominal value	Provision	Balance	Nominal value	Provision	Balance
Not due	149 115	0	149 115	157 991	0	157 991
Overdue 0-30 days	10 126	0	10 126	19 017	0	19 017
Overdue 30-90 days	268	0	268	401	0	401
Overdue 90-180 days	0	0	0	0	0	0
Overdue 180-360 days	0	0	0	0	0	0
Overdue > 360 days 1)	16 933	-3 785	13 148	16 249	-3 951	12 298
Total	176 442	-3 785	172 657	193 658	-3 951	189 707

1) see note 18

Liquidity risk

In June 2014, the Group refinanced its main bank credit facility. The new facility of USD 2 billion has final maturity in 2020 with semi annual instalments of USD 118.4 million, when fully drawn. In February 2014, the Group established a bond loan of NOK 1.1 billion with maturity in February 2019. The Group is in compliance with covenants in all loan agreements. The Group continuously evaluates the refinancing need and will carry out refinancing transactions from time to time. The overview of the Group's loans and adjacent repayment schedule is further detailed in note 12. The following are the contractual maturities of financial liabilities including interest payments.

Amounts in USD 000's						Due in
		Nominal Contractual
31 December 2014	value 31.12.14	cash flows	2015	2016	2017	2018	2019	2020
Bond loan FOE04 (NOK)	188 344	203 578	11 188	192 390	0	0	0	0
Bond loan FOE05 (NOK)	147 985	176 621	6 881	6 881	6 881	6 881	149 097	0
Fleet loan (USD)	1 150 000	1 246 245	123 365	214 001	209 169	204 336	199 504	295 870
Total Interest bearing loans and borrowings	1 486 329	1 626 444	141 434	413 272	216 050	211 217	348 601	295 870
Amounts in USD 000's						Due in
		Nominal Contractual
31 December 2013	value 31.12.13	cash flows	2014	2015	2016	2017
Bond loan (NOK)	230 123	262 511	13 669	13 669	235 173	0
Fleet loan (USD)	583 200	627 341	149 550	144 963	140 377	192 451
Total Interest bearing loans and borrowings	813 323	889 852	163 219	158 632	375 550	192 451

Interest rate risk

The Group is exposed to fluctuations in interest rates for USD and NOK. During the recent years, the Group has had up to approximately 50% of its interest expenses based on fixed rates, either as fixed rate loans or through interest rate derivatives. As per 31 December 2014 approximately 3% of outstanding debt was at fixed rate. At 31 December 2014 the Group's USD denominated debt amounted to USD 1 150 million, while the NOK denominated debt amounted to NOK 2 500 million. The debt with floating interest rate is based on US Libor or Nibor plus a margin. USD 50 million is based on a fixed rate of 3.16% plus a margin, and was fixed for 10 years from 2009.

Realized loss of USD 1.5 million (2013: realized loss of USD 8.1 million and unrealized gain of USD 10.5 million) was recorded as net financial expense in 2014 related to fixed rate agreements. The mark-to-market value of the interest rate swaps are measured as the difference between the agreed fixed rate and the current market interest rate with the corresponding maturity as the remaining fixed rate maturity.

Foreign currency risk

The Group is exposed to foreign currency risks related to its operations and debt instruments. From 2014, the Group's financial statements are denominated in US Dollar (USD) and most of the subsidiaries use US dollar as their functional currency. Some subsidiaries use the British Pound (GBP) as their functional currency. The Group's revenues consist primarily of NOK, GBP and USD with USD as the main currency. The Group's expenses are primarily in NOK, GBP and USD. As such, the Group's earnings are exposed to fluctuations in the foreign currency market. The Group's future foreign currency exposure is dependent upon the currency denomination of future operating contracts and denomination of operating expenses. In 2014, approximately 84% of revenues and 24% of operating expenses are in USD. In the longer term, parts of the USD/NOK exposure is neutralised due to a majority share of the Group's debt being denominated in USD. 77 % of total debt is denominated in USD, while 23% is denominated in NOK.

At 31 December 2014, the Group had outstanding currency derivative contracts for forward sale of USD 43.5 million towards GBP and USD 85 million towards NOK.

The hedging is structured as convertible forwards as follows on an average basis:

Currency	Amount	Fwd rate	Knock in	Expiry
GBP/USD		Range	Range
USD	43 500 000	1.53-1.705	1.36-1.47	February - August 2015
USD/NOK
USD	30 000 000	6.15-6.75		February - August 2015
USD	5 000 000	7.48	8.55	August 2015
USD	50 000 000	7.05-7.10	8.16-8.4	May 2016

..the note continues on the next page

Notes Fred. Olsen Energy – Group

USD will be sold at spot between forward price and knock-out level. If the spot rate touches the knock-out level the contract becomes a standard forward contract at forward rate, similarly one will receive forward rate if the spot rate is less favourable than the forward rate.

The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. Net fair market value of currency forward contracts as per 31 December 2014 was USD 9.3 million, whereof USD 7.5 is recorded as current liabilities and USD 1.8 million as non-current liabilities (2013: USD 1.4 million as current assets). A net loss of USD 10.3 million related to foreign exchange contracts was recorded in 2014 (2013: gain of USD 3.8 million).

Sensitivity analysis

In managing interest- and currency risks the Group aims to reduce the impact on its earnings from short-term fluctuations in interest rates and currency exchange rates. Over the longer-term changes in currency exchange rates and interest rate levels will have an impact on the Group's earnings.

Interest rate sensitivity

At 31 December 2014 it is estimated that 1 – one percent incremental change in USD LIBOR and NIBOR is estimated to have an effect on the net result of approximately USD 12.3 million (2013: USD 5.4 million), taken into account the fixed rate portion of the net debt.

The Group is exposed to fluctuations in the interest rates. At the reporting date the following table shows the amounts of financial instruments with fixed and variable interest:

2014	2013
-50 000	-50 000
203 425	222 086
-1 436 329	-763 323
-1 232 904	-541 237

Exchange rate sensitivity from operations

For the year 2014 a 10% increase in NOK versus USD would decrease the Group's EBITDA by USD 8 million while a 10% increase in GBP versus USD would decrease the EBITDA by USD 22 million.

Exchange rate sensitivity on balance sheet items and derivatives as at reporting date

At December 2014, an incremental change in the GBP/USD and the USD/NOK exchange rate will have the following impact on profit before tax due to the currency derivatives of USD 43.5 million which is sold against GBP and USD 85 million sold against NOK (please see section on foreign currency risk), accounts payable denominated in GBP, accounts receivables in USD and currency deposits where currencies differ from the various functional currencies:

Impact on profit in USD	GBP/USD					USD/NOK
% change in exchange rates		2014		2013		2014		2013
	10%	-10%	10%	-10%	10%	-10%	10%	-10%
Through outstanding currency derivatives	3.5	-4.2	4.9	-	0.2	9.1	-	1.2
Through accounts payable	-0.1	0.1	-0.4	0.4	-0.5	0.5	0.9	-0.9
Through accounts receivable	-	-	-	-	2.6	-2.6	5.9	-5.9
Through currency deposit accounts	0.3	-0.3	1.0	-1.0	1.0	-1.2	4.7	-4.7
Total impact in USD million	3.7	-4.4	5.5	-0.6	3.3	5.8	11.5	-10.3

Fair values

The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:

Amounts in USD 000's		2014		2013
	Carrying amount	Fair value	Level	Carrying amount	Fair value	Level
Assets carried at fair value
Currency contracts	-	-		1 360	1 360	2
Assets carried at amortised cost
Loans and receivables	176 679	176 679	1	189 733	189 733	1
Cash and cash equivalents	203 425	203 425	1	222 086	222 086	1
Total	380 104	380 104		411 819	411 819

Amounts in USD 000's	2014				2013
	Carrying amount	Fair value	Level	Carrying amount	Fair value	Level
Liabilities carried at fair value
Non-current liabilities
Interest rate swaps	3 311	3 311	2	3 386	3 386	2
Currency contracts	1 789	1 789	2	-	-	2
Current liabilities
Currency contracts	7 510	7 510	2	-	-	2
Total	12 610	12 610		3 386	3 386
Liabilities carried at amortised cost
Secured bank loans	1 121 245	1 150 000	1	564 347	583 200	1
Bond loan	334 147	319 515	2	229 011	187 758	2
Trade and other payables	58 346	58 346	1	43 564	43 564	1
Total	1 513 738	1 527 861		836 922	814 522

The gain or loss on re-measurement to fair value for the financial instruments stated at fair values is recognized in profit or loss.

The mark to market value on the interest swaps is derived from the interest rate difference between the fixed rate and the relevant market interest rate for the remaining maturity of the interest rate swap.

The fair value of the bond loan is calculated based on the present value of future principal and interest cash flows discounted at a market rate of 7.6% for 2014 and 3.8% for 2013. Due to the nature of the bank loan the fair value is considered equivalent to the nominal value. The carrying amounts are a reasonable approximation of the fair value of the receivables, cash, trade and other payables.

The Group is required to disclose the hierarchy of how fair value is determined for financial instruments recorded. The hierarchy gives highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 includes assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly.

Note 14 - Mortgages and guarantees

Amounts in USD 000's	2014	2013
Interest bearing debt	1 150 000	583 200
Other guarantees and liabilities	2 106	5 458
Total	1 152 106	588 658
The net book value of assets pledged as security:
Rigs and drillship	2 295 941	1 330 896
Total	2 295 941	1 330 896

As a normal part of it operations, the Group has provided performance guarantees in relation to certain of its drilling contracts.

Note 15 - Employee benefits

Pension plans

Fred. Olsen Energy ASA including its subsidiaries Dolphin Drilling AS and Harland & Wolff Group Ltd/Harland & Wolff Heavy Industries Ltd have independent pension plans that provide employees with a defined benefit upon retirement. The employees participating in these plans are entitled to future pension payments based on length of service and salary upon retirement. The total number of employees involved in the pension plans as of 31 December 2014 was 693 and the number of pensioners was 1 984, of which the majority is related to Harland & Wolff. Each of these pension plans are operated independently of each other and have no recourse in case of underfunding to either other pension plans or other companies within the Group.

Characteristics of the plans:

Harland & Wolff Group Ltd's:

The pension scheme liabilities are spread mainly across the deferred and pensioner categories. The weighted average duration of the scheme's liabilities is 15 years. The scheme remains open to accrual for existing active members but is not open for new members. As of 31 December the active members are 56. Existing members (excluding Executive members) accrue an annual pension of 1/60th (to 1/30th depending on membership category) of final salary for each year of pensionable service, increasing in line with inflation while in payments. The scheme also provide 50% spouse's pension on the death of a member.

Norway:

Employees have the right to future pension benefits based on the number of contribution years and the salary level at the pensionable age. The retirement age is 67 years. The offshore personnel retire at age 60. The pension funds are administered by pension funds legally separated from the Group.

The pension plan for the Norwegian Group companies is in accordance with the Norwegian law concerning mandatory occupational pension (OTP).

Fred. Olsen Energy ASA has pension agreement for senior management, in which the beneficiaries will receive 70% of their final year salary with early retirement at the age of 65. This is unfunded pension obligations. Fred. Olsen Energy ASA has defined benefit plan for its employees but is not open for new members. New employees participate in a defined contribution plan.

Employees not eligible for coverage under the defined benefit plans in the UK are eligible to participate in pension plans in accordance with local industrial, tax and social regulations. All of these plans are considered defined contribution plans. The Company's contributions to defined contribution plans for year ended December 31, 2014 and 2013 were USD 6.4 million and USD 2.2 million respectively. The Company's contribution to Norwegian seamen pension was USD 1.7 million in 2014 and USD 2.8 million in 2013.

The status of the defined benefit obligations is as follows:

Amounts in USD 000's	2014	2013
Present value of unfunded obligations	14 992	11 093
Present value of funded obligations	388 401	376 849
Total present value of obligations	403 393	387 942
Plan assets at market value	269 494	266 666
Net liability for defined benefit obligations	-133 899	-121 276
Hereof unfunded pension plans	-14 992	-11 093
Hereof funded pension plans	-118 907	-110 183
Net liability for defined benefit obligations	-133 899	-121 276
Other investments	0	0
Employee benefits	-133 899	-121 276
Balance at 31 December	-133 899	-121 276

Movements in the net liability for defined benefit obligations recognised in the balance sheet:

		Defined benefit		Fair value of		Net defined
Amounts in USD 000's		obligation		plan assets		benefit liability
Funded	2014	2013	2014	2013	2014	2013
Balance at 1 January	-376 849	-359 568	266 666	251 640	-110 183	-107 928
Pension contribution	0	0	8 232	10 450	8 232	10 450
Benefits paid by the plan	13 766	14 070	-13 139	-13 019	627	1 051
Total	13 766	14 070	-4 907	-2 569	8 859	11 501
Included in profit or loss:
Interest	-15 499	-14 026	10 963	9 898	-4 536	-4 128
Current service cost	-16 348	-14 628	0	0	-16 348	-14 628
Net pension cost	-31 847	-28 654	10 963	9 898	-20 884	-18 756
Included in other comprehensive income:
Actuarial gain/(loss) arising from:
Demographic assumptions	0	-18 739	0	0	0	-18 739
Financial assumptions	-37 669	4 050	20 573	7 966	-17 096	12 016
Experience adjustments	2 565	7 445	0	0	2 565	7 445
	-35 104	-7 244	20 573	7 966	-14 531	722
Foreign currency translation	41 633	4 547	-23 801	-269	17 831	4 278
Balance at 31 December	-388 401	-376 849	269 494	266 666	-118 907	-110 183
Hereof Harland & Wolff Group Ltd	-261 299	-247 133	203 799	205 527	-57 500	-41 606
Amounts in USD 000's
Unfunded					2014	2013
Balance at 1 January					-11 093	-9 340
Benefits paid by the plan					259	209
Included in profit or loss:
Current service costs					-1 137	-1 098
Interest on pension liability					-417	-374
Net pension cost					-1 554	-1 472
Included in other comprehensive income:
Actuarial gain/(loss) arising from:
Demographic assumptions					-3 812	-1 386
Financial assumptions					-1 035	234
Experience adjustments					0	-184
					-4 847	-1 336
Foreign currency translation					2 243	846
Balance at 31 December					-14 992	-11 093

Total expense recognised in the income statement for all defined benefit plans:

Amounts in USD 000's	2014	2013
Current service costs	17 485	15 726
Interest on obligations	15 916	14 400
Expected return of plan assets	-10 963	-9 898
Net pension cost for defined benefit plans	22 438	20 228
Hereof Harland & Wolff Group Ltd	2 974	2 961

..the note continues on the next page

Notes

Major categories of plan assets

	2014	2013
Equity instruments	33 %	36 %
Corporate bonds	43 %	36 %
Government bonds	11 %	12 %
Annuities	9 %	10 %
Real estate	3 %	4 %
Cash	1 %	2 %
Plan assets	100 %	100 %

Approximately 98% of the equities and 70% of the bonds are quoted at bid prices. The annuities have been valued on a basis consistent with the valuation of the scheme's liabilities. There are no investments in the Company or in property occupied by the Group.

Total present value of obligations

Amounts in USD 000's	2014	2013
Employees Deferred	149 279 102 529	146 288 94 186
Pensioners	151 584	147 467
Total present value of obligations	403 392	387 941

Assumptions used in the calculation of pension obligations are as follows:

	2014		2013
	UK	Norway	UK	Norway
Assumed salary increases	2.9%	2.5%-3.5%	3.3%	5.0%
Discount rates	3.5%	2.5%	4.5%	4.0%

Sensitivity:	Increase in PBO 1)
Amounts in USD 000's
Future salary and pension increase with 0.25%	-6 645
Discount rate decrease by 0.25%	-18 409
Future mortality increase by 1 year	-12 820

1) Projected Benefit Obligation

Expected contributions to funded defined benefit plans in 2015 are USD 8.4 million. Expected payments of benefits for the unfunded plans are in 2015 estimated to be USD 0.3 million.

Risks:

The major risks for the defined benefit plans are interest rate risk, investment risk, inflation risk and longevity risk.

A potential risk for the Harland and Wolff Group PLC pension scheme may impact on the ability to meet the benefits payable and on the stability of future contributions. The current recovery plan started in March 2012 assumes that future experience will match the valuation assumptions and estimated to cover the deficit over 15 years. If future experience (for example investment returns lower than expected) is unfavourable the deficit will take longer than 15 years unless revised.

Note 16 - Rental & Leases

Leases

The Group has certain long-term operating leases expiring on various dates, some which contain renewal options.

Nominal accumulated non-cancellable operating lease rentals are as follows:

Amounts in USD 000's	2014	2013
Less than one year	1 131	1 301
Between one and five years	2 868	2 653
More than five years	43 956	47 300
Total	47 955	51 254

The Group does not have any financial leases. The Group subsidiary Compact Properties (NI) Ltd. in Belfast has a property lease contract that expires in 2114 and is the major part of the above.

Note 17 - Related parties

In the ordinary course of business, the Group recognises revenues and expenses with related companies, which may have a significant impact on the Group's consolidated financial statements. The Group receives certain administrative and legal advisory services from Fred. Olsen & Co. The agreements are on arms-length terms and are subject to ordinary termination provisions. Other related parties relate entirely to Ganger Rolf ASA and Bonheur ASA which are the owners of a combined 51.92 % of the Group, and their subsidiaries and Fred. Olsen & Co. Revenues and purchases from such companies were as follows:

Amounts in USD 000's	2014	2013
Revenues
Others	228	6 036
Total	228	6 036
Operating expense
Others	618	494
Fred. Olsen & Co.	1 081	1 156
Total	1 699	1 650
Accounts receivables
Other	26	141
Total	26	141
Accounts payable
Fred. Olsen & Co.	98	24
Other	21	150
Total	119	174
Loan to employees
Loan to senior management	73	0
Loan to employees	86	26
Total	159	26

Average interest rate for loans to employees was 2.5% for 2014 and 2.3% for 2013. Part of the amount contains rolling travel advances.

The loan to senior management has monthly settlements and is fully repaid in October 2018.

..the note continues on the next page

Fred. Olsen Energy – Group

Notes

The remunerations of Board of Directors and Senior Management were as follows:

		Board of Directors
Amounts in USD 000's	2014	2013
Remuneration	173	184
Total	173	184
		Senior Management

Amounts in USD 000's	2014	2013
Salary	2 743	2 744
Bonus	1 292	1 230
Pension costs	169	175
Other	405	459
Total	4 609	4 608

2014
	Board
Amounts in USD 000's	remuneration	Salary	Bonus	Other	Pension	Total
Senior Management
Ivar Brandvold, Chief Executive Officer	23	837	419	72	37	1 388
Hjalmar Krogseth Moe, Chief Financial Officer	11	355	185	26	29	606
Total parent company	34	1 192	604	98	66	1 994
Per Johansson, Managing Director (until 31st July)		308	297	147	31	783
Gunnar Koløen, Managing Director (from 1st August)		132	-	55	3	190
Joakim Kleppe, Managing Director		374	230	27	24	655
Robert Cooper, Managing Director		327	-	36	-	363
Graeme Murray, Managing Director		410	161	8	45	624
Total	34	2 743	1 292	371	169	4 609
Board of Directors
Anette S. Olsen	40					40
Øivin Fjeldstad	32					32
Jan Peter Valheim	32					32
Agnar Gravdahl	32					32
Cecilie B. Heuch	32					32
Stephen Knutzon	5					5
Total	173	0	0	0	0	173

2013
	Board
Amounts in USD 000's	remuneration	Salary	Bonus	Other	Pension	Total
Senior Management
Ivar Brandvold, Chief Executive Officer	23	798	398	94	38	1 351
Hjalmar Krogseth Moe, Chief Financial Officer	11	353	178	29	30	601
Total parent company	34	1 151	576	123	68	1 952
Per Johansson, Managing Director		529	287	211	28	1 055
Joakim Kleppe, Managing Director		389	224	26	42	681
Robert Cooper, Managing Director		319	55	34	-	408
Graeme Murray, Managing Director		356	88	31	37	512
Total	34	2 744	1 230	425	175	4 608
Board of Directors
Anette S. Olsen	43					43
Øivin Fjeldstad	34					34
Jan Peter Valheim	34					34
Agnar Gravdahl	34					34
Cecilie B. Heuch	34					34
Stephen Knutzon	5					5
Total	184	0	0	0	0	184

The pension above reflect the contributions to the plans. Earned pension entitlement to Chief Executive Officer are for 2014 USD 0.4 million (2013: USD 0.3 million)

Senior Management consists of Group management (Chief Executive Officer and Chief Financial Officer) and the Managing Directors in the subsidiaries, in total 6 employees.

The management has a management cash bonus scheme. The beneficiaries of the scheme are Senior Management and certain key personnel. Annual payments under the scheme, maximised to one year's salary, are subject to the Group achieving certain predefined financial criteria, including achieved budget goals and development of the Company's share price. The Group has not any share based remuneration scheme.

Guidelines for 2014

The Board of Directors of Fred. Olsen Energy ASA has a Compensation Committee comprising four Directors including the Chairman of the Board and two Directors independent of the main shareholders. The Compensation Committee discusses and recommends to the Board salary and benefits for the Chief Executive Officer and Senior Management as well as management incentive schemes for the Group.

The policy of Fred. Olsen Energy ASA is to offer competitive payments and benefits to Senior Management to attract qualified management within the company's business segments. The Company seeks to apply competitive and motivating remuneration principles to attract, develop and retain highly qualified employees.

The salaries paid to the senior management are determined on the basis of the responsibility and complexity of the appointment in question. A part of the remuneration to the Senior Management is based on the Company's financial performance and related to achieved budget goals and the development in market value of the shares for the Company.

The remuneration for 2014 has been in accordance with the statement presented at the Annual General Meeting in May 2014.

Fred. Olsen Energy – Group

Notes

Note 18 - Contingencies

Outstanding receivables from customers

As per 31 December 2014 the Group was involved in a legal dispute with one specific customer with claims in dispute amounting to USD 18.3 million. The Group has made provisions of USD 3 million based on evaluations of the status of the outstanding receivables.

Outstanding issues from suppliers

A Group Company is involved in a customs issue in one of the countries of operation. This is not expected to have an effect on the accounts.

Note 19 - Uncompleted contracts

At 31 December 2014 the Group's engineering and fabrication division had uncompleted activities on various ship repair, manufacturing and offshore wind farm logistics base activities at Harland & Wolff.

Profit recognised of estimated earnings and net outstanding receivables on long term uncompleted contracts (with unconsolidated entities) are as follows:

Amounts in USD 000's	2014	2013
Contract revenue during the period, external	25 984	41 917
Contract revenue during the period, internal	65 821	8 741
Contract cost incurred plus recognised profit on uncompleted contracts	1 296	42 551
Less progress billings to date	-956	-42 774
Accrued and (deferred) revenue, net	340	-223

The deferred revenue is included in the accompanying balance sheet under the following captions:

Amounts in USD 000's	2014	2013
Accounts receivable	340	935
Deferred revenue	0	1 158
Accrued and (deferred revenue), net	340	-223

Note 20 - Shareholder information

Shareholders holding more than 1% of the shares at 31 December 2014 are as follows:

Shareholder	Percent of shares	Number of shares
Bonheur ASA	25.96 %	17 314 382
Ganger Rolf ASA	25.96 %	17 314 382
State Street Bank and Trust Co.	2.94 %	1 963 634
Clearstream Banking S.A	2.64 %	1 758 342
Folketrygdfondet	2.54 %	1 696 732
Euroclear Bank S.A/N.V.	2.14 %	1 425 034
BNP Paribas Sec.Services S.C.A	1.51 %	1 007 956
BNP Paribas Sec.Services S.C.A	1.39 %	929 134
J.P. Morgan Chase Bank N.A. London	1.28 %	857 000
Schroder Internation Selection FD	1.14 %	762 634
Nordnet Bank AB	1.06 %	705 145
Others	31.44 %	20 959 854
Total	100.00 %	66 694 229

Shares owned directly by the Company's directors and Senior Management at 31 December 2014:

Name	Title	Shares
Anette S. Olsen	Chairman	100 *)
Øivin Fjeldstad	Director	4 220
Agnar Gravdal	Director	20 000

*) Private Fred. Olsen related interests directly/indirectly hold a majority shareholding interest with the Company.

Note 21 - Earnings per share

The calculation of basic and diluted earnings per share is based on the following data:

Earnings
Amounts in USD 000's	2014	2013
Earnings for the purpose of basic earnings per share	117 350	300 751
Effect of dilutive potential ordinary shares	0	0
Earnings for the purpose of diluted earnings per share	117 350	300 751
Number of shares
In 1000's	2014	2013
Weighted average number of ordinary shares for the purposes of basic earnings per share	66 264	66 264
Effect of dilutive potential ordinary shares	0	0
Weighted average number of ordinary shares for the purposes of diluted earnings per share	66 264	66 264
Earnings per share
	2014	2013
Basic	1.77	4.54
Diluted	1.77	4.54

Note 22 - Subsidiaries

The ownership percentage in subsidiaries companies as of 31 December 2014 was as follows:

		Shareholding and
Company	Jurisdiction	voting shares
Dolphin Drilling AS	Norway	100.0 %
Dolphin International AS	Norway	100.0 %
Dolphin Finans AS	Norway	100.0 %
Blackford Dolphin Pte. Ltd.	Singapore	100.0 %
Bideford Dolphin Pte. Ltd.	Singapore	100.0 %
Borgland Dolphin Pte. Ltd.	Singapore	100.0 %
Borgsten Dolphin Pte. Ltd.	Singapore	100.0 %
Byford Dolphin Pte. Ltd.	Singapore	100.0 %
Borgny Dolphin Pte. Ltd.	Singapore	100.0 %
Dolphin Drilling Pte. Ltd.	Singapore	100.0 %
Borgholm Dolphin Pte. Ltd.	Singapore	100.0 %
Bredford Dolphin Pte. Ltd.	Singapore	100.0 %
Bolette Dolphin Pte. Ltd.	Singapore	100.0 %
Bollsta Dolphin Pte. Ltd.	Singapore	100.0 %
Dolphin Drilling Personnel Pte. Ltd.	Singapore	100.0 %
Dolphin Drilling Ltd	Scotland	100.0 %
Dolphin Drilling Operations Ltd.	Scotland	100.0 %
Dolphin Mexicana AS	Norway	100.0 %
Dolphin Drilling South Africa (Proprietary) Ltd.	South Africa	100.0 %
Dolphin Drilling Perfuracão Brasil Ltda	Brazil	100.0 %
Dolphin Brasil Ltda	Brazil	100.0 %
Dolphin Drilling Malta Ltd.	Malta	100.0 %
Atlan Shipping Co. Ltd.	Bermuda	100.0 %
Harland and Wolff Group PLC	Northern Ireland	92.2 %
Harland and Wolff Heavy Industries Ltd.	Northern Ireland	92.2 %
Compact Holdings (NI) Ltd	Northern Ireland	100.0 %
Compact Properties (NI) Ltd	Northern Ireland	100.0 %

Note 23 - Subsequent events

In March 2015, The Group received a termination for convenience notice from Anadarko Petroleum Corporation for the contract for the drilling unit Belford Dolphin. The termination will be effective in early September 2015. The termination fee is approximately USD 52 million.

For the years ended 31 December

Amounts in USD 000's	Note	2014	2013
Revenues	15	983	1 302
Gain on sale of property	7	13	17
Salaries and other personnel costs	3	-6 115	-9 919
Other operating expenses	4	-3 350	-3 237
Operating loss before depreciation and net financial income		-8 469	-11 837
Depreciation and amortisation	7	-928	-1 054
Operating loss before financial income		-9 397	-12 891
Financial income		245 088	259 693
Financial expenses		-110 967	-39 076
Net financial income	5	134 121	220 617
Profit before tax		124 724	207 726
Income tax expense	6	0	0
Profit for the year		124 724	207 726
Proposed allocations:
Dividends		0	217 842
To/(from) other equity		124 724	-10 116
Total allocations		124 724	207 726

The notes represent an integral part of the financial statements.

Balance Sheet Fred. Olsen Energy ASA

As at 31 December

Amounts in USD 000's	Note	2014	2013
Assets
Property, plant and equipment	7	148	1 004
Investments in subsidiary companies	16	1 770 598	558 929
Other non-current assets	8, 15	42 356	5 423
Deferred tax assets	6	0	0
Total non-current assets		1 813 102	565 356
Other current assets		185	570
Trade and other receivables	9, 15	134 329	216 661
Currency derivatives	17	0	1 360
Cash and cash equivalents	10	56 374	35 106
Total current assets		190 888	253 697
Total assets		2 003 990	819 053
Equity
Share capital		193 290	193 290
Treasury shares		-1 215	-1 215
Share premium		83 550	83 550
Other equity		197 850	77 991
Total equity	11	473 475	353 616
Liabilities
Interest-bearing loans and borrowings	12	1 390 874	230 123
Other non-current liabilities	3	15 582	11 522
Currency derivatives	17	1 789	0
Total non-current liabilities		1 408 245	241 645
Interest-bearing loans and borrowings	12	95 455	0
Trade and other payables	13, 15	7 631	41
Dividends	11	0	217 842
Currency derivatives	17	7 331	0
Other accrued expenses	14	11 853	5 909
Total current liabilities		122 270	223 792
Total liabilities		1 530 515	465 437
Total equity and liabilities		2 003 990	819 053

The notes represent an integral part of the financial statements.

Oslo, 31 December 2014 / 8 April 2015 Fred. Olsen Energy ASA

Anette S. Olsen	Jan Peter Valheim	Cecilie B. Heuch	Øivin Fjeldstad	Agnar Gravdal	Ivar Brandvold
Chairman					Chief Executive Officer

Statement of Cash Flows Fred. Olsen Energy ASA

For the years ended 31 December

Amounts in USD 000's	2014	2013
Cash flows from operating activities
Profit before income taxes	124 724	207 726
Adjustment for:
Group contribution	-32 610	73 635
Depreciation and amortization	928	1 054
Interest expenses	34 930	14 597
Unrealised currency gain financial instruments	-69 334	-756
Changes in trade and other receivables	1 454	2 240
Changes in trade and other payables	6 293	1 440
Changes in other balance sheet items	-30 778	-6 859
Cash generated from operations	35 607	293 077
Interest paid	-27 689	-14 833
Net cash from operating activities	7 918	278 244
Cash flows from investing activities
Net purchase of property, plant and equipment	-72	-31
Investment in subsidiary	-80	-1 501
Net cash used to investing activities	-152	-1 532
Cash flows from financing activities
Borrowing of interest bearing debt	242 607	0
Intercompany interest-bearing loans	-12 000	-35 500
Dividend paid	-217 106	-222 849
Net cash from/(used) to financing activities	13 501	-258 349
Net increase in cash and cash equivalents	21 268	18 363
Cash and cash equivalents at 1 January	35 106	16 743
Cash and cash equivalents at 31 December	56 374	35 106

The notes represent an integral part of the financial statements.

Note 1 - Basis of presentation

Fred. Olsen Energy ASA (the Company) is domiciled in Norway. The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in Norway.

The financial statements which have been prepared by the Company's Board of Directors and Management should be read in conjunction with the report of the Board of Directors and the Auditors report. The financial statements have been prepared in accordance with the requirements of the Norwegian Accounting Act.

Fred. Olsen Energy ASA is a company being consolidated into the Bonheur group of companies. Bonheur ASA has prepared consolidated financial statement and have business address Fred. Olsens gt. 2, Oslo.

The notes and accounting policies refer to the Company's financial statements unless specified otherwise.

Note 2 - Summary of significant accounting policies

Reporting currency/Functional currency

The Company changed it's functional currency from NOK to USD from 1st January 2014. Figures for 2013 are recalculated for comparison.

Foreign currency

Gains and losses on transactions denominated in foreign currencies are included in financial income/(expense). Assets and liabilities are translated at the exchange rate on the balance sheet date.

Property, plant and equipment

Property, plant and equipment are recorded at cost and are depreciated on a straigt-line basis over 3-5 years.

Investments in subsidiaries

Investments in subsidiaries are accounted for using the cost method in the Company's accounts. The investments are valued at cost less any impairment losses. Write downs to fair value are recognised when the impairment is considered not to be temporary. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, if no impairment loss had been recognised.

Classification and valuation of other balance-sheet items

Current assets and current liabilities include items due within one year. Other assets and liabilities due after one year are classified as non-current assets or non-current liabilities. Current assets are valued at the lowest of cost and fair value. Current liabilities are valued at nominal value at the time of recognition.

Cash and cash equivalents

The cashflow statement is prepared in accordance with the indirect method. Cash and cash equivalents includes cash and bank deposits that are readily convertible to cash.

Non-current assets

The carrying amount of the Company's non-current assets, other than deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, each asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is determined by the higher of fair value or estimated future discounted cash flows. In estimating future discounted cash flows, certain assumptions are made concerning discount rates which vary depending on the asset, terms of relevant contracts, foreign currencies, useful life of the assets and market growth. Impairment losses are recognised in the income statement.

Financial instruments

Interest rate derivatives

The Company uses derivative financial instruments to manage the Group's exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Unrealised gains and loss on interest rate derivatives are recognised on a current basis.

Forward exchange contracts

The Company enters into forward currency contracts throughout the year to hedge the currency exposure on income, expenses, investments and debt in Great British pounds (GBP), United States dollars (USD) and Norwegian kroner (NOK). Unrealised gains/losses on foreign exchange contracts used to offset the effect of anticipated transactions are marked to market and recognised as financial income or expenses.

Income taxes

Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates as they apply to taxable income in the years in which the differences are expected to be recovered or settled. Deferred tax assets are recognised in the balance sheet to the extent that is more likely than not that benefits will be recognised.

Use of estimates

In the preparation of the financial statements, management is required to make estimates and assumptions affecting reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Pensions

The Company's pension plans for employees provide for a defined pension benefit upon retirement. The benefit to be received by employees generally depends on many factors including length of service, retirement date and future salary increases. The Company accounts for defined benefit pension plans in accordance with NRS 6A, which means that the company can elect to present pension liabilities in NGAAP accounts in accordance with IAS 19. Costs related to these plans are expensed as incurred. Amendments have been issued to IAS 19, which change the measurement principles of expected return on plan assets and remove the accounting policy choice for recognition of actuarial gains and losses using the corridor mechanism.

The pension cost for defined benefit plans are estimated to be USD 2.1 million in 2014 (2013: USD 2.1 million).

Notes

Note 3 - Salaries and other personnel costs

Amounts in USD 000's	2014	2013
Salaries	2 513	2 560
Earned bonus	0	3 670
Social security expenses	673	804
Pension costs	2 145	2 072
Travel expenses	453	530
Other	331	283
Total	6 115	9 919
Average number of employees	15	13

Salaries, remuneration and other personnel expenses to the Chief Executive Officer, Senior Management and Board of Directors, see note 17 for the Group.

Pension Plans

Fred. Olsen Energy ASA has pension plans that provide employees with a defined benefit upon retirement. The employees participating in these plans are entitled to future pension payments based on length of service and salary upon retirement. The total number of employees involved in the pension plans as of 31 December 2014 was 13. The pension plan assets consist primarily of bank deposits, investments in fixed income and equity securities. The pension plan for the Company is in accordance with the Norwegian law concerning mandatory occupational pension (OTP).

As of 1.6.2012 the defined benefit plan was closed for new members, and are included in the defined contribution plan.

The Company has an extended pension plan agreement for Chief Executive Officer and Senior Management, in which the beneficiaries will receive 70% of their final year salary at early retirement at the age of 65. This is unfunded pension obligations.

The funded status of the defined benefit pension plans is as follows:

Amounts in USD 000's	2014	2013
Projected benefit obligation	19 237	15 376
Plan assets at market value	3 655	3 854
Net pension liability	-15 582	-11 522
Assumptions used in the calculation of pension obligations are as follows:	2014	2013
Assumed salary increases	2.5 %	4.0 %
Discount rates	2.5 %	4.0 %
Expected rates of return on pension plan assets	2.5 %	4.0 %

Net periodic pension costs for defined benefit plans are as follows:

Amounts in USD 000's	2014	2013
This period's earned pensions	1 708	1 678
Interest expense on pension liabilities	579	525
Earnings on pension funds	-163	-151
Net pension cost for defined benefit plans	2 124	2 052
Net pension cost for defined contribution plans	21	20

Social security cost of pension cost is included in the calculation from the actuary, and is expensed in net pension cost.

Earned pension entitlement to Chief Executive Officer are for 2014 USD 0.4 (2013: USD 0.3).

The following loans were outstanding to employees of the Company:

Amounts in USD 000's	2014	2013
Loan to non management employees	73	10
Loan to Chief Executive officer	74	0
Total	147	10

The loan comply with Company law requirements and are adequately secured, when required. The interest rate for the loan to Chief Executive officer are the State regulated interest rate. The loan will be repaid monthly and in full within October 2018.

Note 4 - Other operating expenses

Amounts in USD 000's	2014	2013
General operating overheads	3 133	3 075
Property rental expenses	217	162
Total	3 350	3 237

Fees for audit (exclusive VAT) and other services provided by the Company's auditor are as follows:

Amounts in USD 000's	2014	2013
Audit fees	307	243
Tax advisory services	18	60
Other non-audit services	3	8
Total	328	311

Note 5 - Financial income and expenses

Amounts in USD 000's	2014	2013
Financial income
Interest income	1 656	1 278
Group contribution	116 496	215 429
Gain on foreign currency contracts	0	4 169
Other financial income	1 089	1 400
Foreign exchange gains	125 847	37 417
Total	245 088	259 693
Financial expense
Interest expenses	34 930	14 826
Loss on foreign currency contracts	10 455	401
Other financial expenses	16 426	715
Foreign exchange losses	49 156	23 134
Total	110 967	39 076
Net Financial income	134 121	220 617

The Board of Directors of the subsidiary Dolphin International AS has proposed a Group contribution to Fred. Olsen Energy ASA of USD 100 million. The Board of Directors of the subsidiary Dolphin Drilling AS has proposed a Group contribution to Fred. Olsen Energy ASA of USD 15 million. The Board of Directors of the subsidiary Dolphin Finans AS has proposed a Group contribution to Fred. Olsen Energy ASA of USD 1.5 million.

Interest income is related to return on cash and cash equivalents and loans to other companies in the Group.

Other financial expenses is primarily amortised borrowing costs, fee to Oslo Stock Exchange and guarantee fee to other companies in the Group.

Information regarding interest income and expenses from Group companies and other related parties is provided in note 15.

Notes Fred. Olsen Energy ASA

Note 6 - Taxes

Temporary differences between the book and tax basis of assets and liabilities, and related deferred taxes, are as follows:

Amounts in USD 000's	2014	2013
Temporary difference	267	-10 164
Losses carried forward	-332 227	-137 594
Limitation of deferred tax assets	331 960	147 758
Net basis for deferred tax (assets)/liabilities	0	0

Deferred tax assets have not been recognised in respect of these items, because it is not probable that future taxable profits will be available against which the Company can utilize the benefits.

The provisions for income taxes are as follows:

Amounts in USD 000's	2014	2013
Profit before income tax	124 724	207 726
Change in temporary differences	-8 585	3 471
Group contribution without tax effect	-93 273	-175 344
Permanent differences	-4 867	-1 868
Currency effects in tax filings	-237 612	-12 794
Basis taxes payable	-219 613	21 191
Tax rate	27 %	28 %

Effective tax rate:

Amounts in USD 000's	2014		2013
Expected income tax expense according to statutory tax rate	33 676	27 %	58 163	28 %
Permanent differences	-26 498		-49 619
Effect of tax losses utilised / not recognized	-7 178		-8 544
Income tax	0	0 %	0	0 %

Note 7 - Property, plant and equipment

Amounts in USD 000's	2014	2013
Cost
Balance at 1 January	5 188	5 176
Additions during the period	72	103
Disposals during the period	-330	-91
Balance at 31 December	4 930	5 188
Accumulated depreciation
Balance at 1 January	4 184	3 186
Depreciation during the period	928	1 016
Disposals during the period	-330	-18
Balance at 31 December	4 782	4 184
Net book value at 31 December	148	1 004

Note 8 - Other non-current assets

Amounts in USD 000's	2014	2013
Capitalised borrowing costs	30 937	1 113
Long-term receivables (see note 15)	11 419	4 310
Total	42 356	5 423

Note 9 - Trade and other receivables

Amounts in USD 000's	2014	2013
Related parties (note 15)	134 329	216 661
Total	134 329	216 661

Note 10 - Cash and cash equivalents

Amounts in USD 000's	2014	2013
Payroll taxes	170	180
Total restricted cash	170	180
Unrestricted cash	56 204	34 926
Total cash and cash equivalents	56 374	35 106

Note 11 - Capital and reserves

Amounts in USD 000's	Share capital	Treasury shares	Share premium	Paid in other equity	Other equity	Total
Balance at 1 January 2013	193 290	-1 215	83 550	24 931	65 022	365 578
Net profit for the year	0	0	0	0	207 726	207 726
Actuarial loss on defined benefit pension plans	0	0	0	0	-1 869	-1 869
Other changes	0	0	0	0	23	23
Proposed dividend	0	0	0	0	-217 842	-217 842
Balance at 31 December 2013	193 290	-1 215	83 550	24 931	53 060	353 616
Balance at 1 January 2014	193 290	-1 215	83 550	24 931	53 060	353 616
Net profit for the year	0	0	0	0	124 723	124 723
Actuarial loss on defined benefit pension plans	0	0	0	0	-4 864	-4 864
Balance at 31 December 2014	193 290	-1 215	83 550	24 931	172 919	473 475

Treasury shares

The Company has not purchased nor sold any own shares in 2014 and at 31 December 2014 the Company holds 430 100 of its own shares.

Par value

The par value per share in the Company is NOK 20.

Dividend

The Annual General Meeting in May 2014 approved the Board's proposal of an ordinary dividend payment of NOK 10 per share and an extraordinary dividend of NOK 10 per share for the year 2013. The payment was made in June 2014 and amounted to USD 217.8 million (NOK 1 325.3 million).

Note 12 - Interest-bearing loans and borrowing

				Principal and interest payments
	Balance	Interest rate				2018 &
Amounts in USD 000's	at 31.12.14	at 31.12.14	2015	2016	2017	Thereafter
Bond loan FOE04 (NOK)	188 344	5.94%	11 188	192 390	0	0
Bond loan FOE05 (NOK)	147 985	4.65%	6 881	6 881	6 881	155 978
Fleet loan	1 150 000	2.53%	123 365	214 001	209 169	699 710
Total parent company facilities	1 486 329		141 434	413 272	216 050	855 688

In May 2011 the Company completed a senior unsecured bond issue of NOK 1 400 million, with a coupon of 3 months NIBOR + 4.25%. The maturity date for the bond is 12th of May 2016. The Company borrowed a new bond loan of NOK 1 100 million in February 2014. The bond was raised in the Norwegian bond market at a coupon of 3 months NIBOR + 3.00 %. In June 2014 the Company signed a new six year bank credit facility of USD 2 000 million. The credit facility was used to repay existing bank loan in the subsidiary Dolphin International AS of USD 1 089 million. USD 1 150 million is drawn under the new credit facility and available lines were USD 300 million as per 31 of December 2014.

Mortgages:

Amounts in USD 000's	2014	2013
Interest bearing debt	1 150 000	0
Total	1 150 000	0
The net book value of assets pledged as security:
Rigs and drillship	2 295 941	0
Total	2 295 941	0

Note 13 - Trade and other payables

Amounts in USD 000's	2014	2013
Trade	172	12
Related parties (note 15)	7 459	29
Total	7 631	41

See note 15 for additional information on balances with Group companies and other related parties.

Note 14 - Other accrued expenses

Amounts in USD 000's	2014	2013
Accrued wages	1 978	3 910
Accrued interest	9 138	1 897
Other	737	102
Total	11 853	5 909

Note 15 - Related parties

In the ordinary course of business, the Company recognises revenues and expenses with related companies, which may have a significant impact on the Company's financial statements. The Company receives certain administrative and legal advisory services from Fred. Olsen & Co. The agreements are on arms-length terms and are subject to ordinary termination provisions. Other related parties relate entirely to Ganger Rolf ASA and Bonheur ASA which are the owners of a combined 51.92 % of the shares in the Company, and their subsidiaries and Fred. Olsen & Co.

Revenues, purchases, financial income and financial expenses from such companies were as follows:

Amounts in USD 000's	2014	2013
Revenues
Subsidiaries	983	1 302
Total	983	1 302
Operating expenses
Subsidiaries	57	12
Other related parties	1 297	1 317
Total	1 354	1 329
Financial income
Subsidiaries	117 993	217 879
Total	117 993	217 879
Financial expense
Subsidiaries	7 912	229
Total	7 912	229
Revenues from subsidiaries are recharge of personnel expenses and administrative income. Financial income relates primarily to Group contribution. Amounts in USD 000's	2014	2013
Other non-current assets
Subsidiaries	11 272	4 300
Other related parties	147	10
Total	11 419	4 310
Trade and other receivables
Subsidiaries	134 329	216 661
Total	134 329	216 661
The balance relates primarily to Group contributions and loans to subsidiaries.
The subsidiaries will repay the loans based on the "pay-as-you earn" principle. The interest rate is based on market rate plus a margin.
Amounts in USD 000's	2014	2013

Trade and other payables
Subsidiaries	7 338	5
Other related parties	121	24
Total	7 459	29

See note 5,8, 9 and 13 for further information on transactions with related parties.

Note 16 - Shares in subsidiaries and other equity investments

		Amounts in USD 000's
		% of holding &		Net profit	Historical	Repaid	Book
Subsidiaries	Business Offices	voting shares	Equity	(loss)	cost	equity	value
Dolphin Drilling AS	Tananger, Norway	100 %	20 723	15 850	62 141	-11 356	50 785
Dolphin International AS	Oslo, Norway	100 %	2 344 895	29 987	1 528 205	0	1 528 205
Dolphin Finans AS	Oslo, Norway	100 %	91 378	-2 586	95 081	0	95 081
Atlan Shipping Co. Ltd.	Hamilton, Bermuda	100 %	9 445	-68	9 514	0	9 514
Dolphin Drilling Perfuracao Brasil Ltda	Macae, Brazil	2 %	-7 329	315	12	0	12
Dolphin Drilling Operations Ltd	Aberdeen, UK	100 %	85 386	-2	87 001	0	87 001
Total			2 544 498		1 781 954	-11 356	1 770 598

Note 17 - Financial instruments

The Company is exposed to interest rate- and foreign currency risks in its operations. Derivative financial instruments are from time to time entered to partly hedge against fluctuations in foreign currency rates and interest rate levels.

Interest rate risk

The Company is exposed to interest rate risk and may use interest rate derivatives or fixed rate loans to achieve a satisfactory mix of exposure to fixed and floating interest rate on the Company's debt instruments. The Company had no interest derivatives at 31 December 2014 or 2013.

Foreign currency risk

At 31 December 2014, the Company had outstanding currency derivative contracts for forward sale of USD 43.5 million against GBP (2013: USD 18 million) and USD 85 million against NOK (2013: USD 15 million)

The hedging is structured as convertible forwards as follows on an average basis:

	Total outstanding	Avg. forward rate	Avg. knock in rate	Expiry dates
GBP/USD	43 500 000	1.53-1.705	1.36-1.47	February - August 2015
USD/NOK	30 000 000	6.15-6.75	Forwards	February - August 2015
USD/NOK	5 000 000	7.48	8.55	August 2015
USD/NOK	50 000 000	7.05-7.1	8.16-8.4	May 2016

USD will be sold at spot between forward price and knock-out level. If the spot rate touches the knock-out level the contract becomes a standard forward contract at forward rate, similarly one will receive forward rate if the spot rate is less favourable than the forward rate.

The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. Net fair market value of currency forward contracts as per 31 December 2014 was USD 1.8 mill recorded as long term liabilities and USD 7.3 mill recorded as current liabilities (2013: USD 1.4 million as current asset). A net loss of USD 10.5 million related to foreign exchange contracts was recorded as financial expense in 2014 (2013: net gain of USD 3.8 million).

Implementation and reporting on Corporate Governance

High standards of Corporate Governance is a cornerstone of Fred. Olsen Energy. A strong Corporate Governance framework provides the guide to our overall approach to business operations, dealings and providing services to customers and adding shareholder value.

The Board of Directors in Fred. Olsen Energy continually develops and refines its Corporate Governance policy and strive to be in compliance with the Norwegian Code of Practice for Corporate Governance (NUES). The Corporate Governance is subject to an annual assessment by the Board of Directors. Corporate Governance instituted throughout our Company reflects the economy and industry we operate in.

The Corporate Governance chapter is structured in the same order as the Norwegian Code of Practice. In the Board of Directors Report, Fred. Olsen Energy is required to report our Corporate Governance in accordance with the Norwegian Accounting Act section 3-3b. We refer to this in the Board of Directors report.

Business

According to the Articles of Association, the Company's purpose is to carry out shipping business, including the ownership and leasing of floating platforms and everything related thereto, including owning shares and interests in companies with similar or related businesses. In carrying out their duties, assignments or appointments for the Company, all employees are expected to follow high standards of ethical and non-discriminating behaviour. The objectives of the Company, as defined in its articles of association, are to own or carry out industrial and other associated businesses, management of capital, and other functions for the Group, and to participate in or acquire other businesses. The principal strategies of the Group are presented in the Annual Report. Each year, the Board of Directors evaluates the strategy, goals and guidelines of the Company through designated strategy processes. Information concerning the financial position and principal strategies of the Company, and any changes thereto is disclosed to the market in the context of the Company's quarterly reporting and in designated market presentations.

Equity and dividends

To the extent it is considered desirable the Company may raise new equity in the capital market to strengthen its business within the offshore segment. In this regard the Board of Directors received an authorization from the Annual General Meeting in 2014 to increase the share capital by 6 669 422 shares through an equity issue and to increase the share capital by another 6 669 422 shares through convertible loans. This mandate expires at the next Annual General Meeting. When the General Meeting of shareholders considers whether or not to authorize the Board of Directors to carry out share capital increases for multiple purposes, each purpose must be considered separately by the meeting. At 31 December 2014, the consolidated equity is USD 1 308 million (USD 1 437 million in 2013), which is equivalent to 38% (47%) of total assets. The Board of Directors considers this satisfactory. The Company's need for financial strength is considered at any given time in the light of its objectives, strategy and risk profile.

The Annual General Meeting authorized the Board in 2014 to purchase up to 10% of the Company's own shares, pursuant to Sections 9-2 onwards of the Norwegian Public Limited Companies Act, in order to allow greater flexibility around managing the Company's capital structure. This mandate expires at the next Annual General Meeting. As at 31 December 2014 the Company held 430 100 shares of its own shares.

Dividends will be distributed subject to earnings, the Company's investment plans, financial strategy and approval by the shareholders. The Company may consider share buy-backs in accordance with the authorization to the Board of Directors from the Annual General Meeting. In 2007 the Company distributed dividends for the first time since the listing in 1997. The Company paid dividends of NOK 10 per share and stated that the Company will pursue the strategy to pay a dividend of NOK 10 per share subject to earnings, investment plans and financial strategy. Due to the challenging offshore market and uncertainty of how long this will persist, the Board of Directors will propose to the Annual General Meeting in May 2015 not to pay dividend for 2014.

Treatment of shareholders, transactions with close associates

The Company's shares are listed on Oslo Stock Exchange. Shares have been issued in only one share class. The Company's transactions in own shares will be carried out in the market at market price. All shares in the Company have equal rights and all shareholders have the right to participate in General Meetings.

There have been no share capital increases in the Company since the listing in 1997 except conversion of the convertible bond loan FOE 02 in the period 2005 to 2008. In a case where the preemptive right of existing shareholders is waived in connection with a capital increase a stock notice with the reasoning behind the proposal will be issued to the Oslo Stock Exchange.

Corporate Governance

In connection with transactions that are not immaterial between the Company and related parties (see note 17), a competent Board of Directors consisting of Board members independent of the Company's main shareholders, Bonheur ASA and Ganger Rolf ASA, will deal with any such matters and avoid conflicts of interest. In such cases the Board will ensure that an independent valuation is presented to the Board.

The Company has established routines to ensure that the Board is notified if Directors or management directly or indirectly have material interest in agreements entered into by the Company.

Freely negotiable shares

The Company has no restrictions on ownership and voting rights.

General Meetings

The Annual General Meeting (AGM) is normally held in May each year. Invitations together with all supporting documents and resolution proposals are sent to shareholders and will also be available on the Company's website 21 days prior to the AGM. The supporting documents must contain all the documentation necessary to enable the shareholders to decide on the matters to be decided. The registration to participate in the AGM is set as close to the AGM date as possible.

The auditor is present at the AGM. The Chairman for the AGM is elected at the AGM. One shareholder together with the Chairman will sign the minutes and approval of the Notice of the Meeting and the Agenda. It is intended for the Board of Directors to attend the general meeting.

Shareholders registered in the Norwegian Registry of Securities (VPS) can vote in person or by proxy. Shareholders who can not attend the meeting are urged to authorize a proxy, and the system facilitates the use of proxies on each individual item on the agenda. Shareholders, who are not able to attend the Annual General Meeting in person, may execute a proxy in the name of another person attending the meeting. Such proxy may be issued to the Chairman Anette S. Olsen, CEO Ivar Brandvold or any other person. If no name is stated the proxy will be considered given to the Chairman of the meeting.

The Annual General Meeting of shareholders elects individually the members to the Board of Directors, appoints the external auditor, determines the auditor's remuneration, approves the annual result and dividend proposed by the Board of Directors and determines the remuneration to the Board of Directors. The summons and registration form are distributed to all shareholders according to the address list in VPS, at least 21 days before the Annual General Meeting.

Nomination committee

Fred. Olsen Energy ASA has for the time being no Nomination Committee. Due to the ownership structure of the Company, the Company has not considered it adequate to establish a Nomination Committee. The Board will appoint a Nomination Committee as a sub-committee of the Board on an ad hoc basis as and if required.

Corporate Assembly and Board of Directors, composition and independence

In accordance with Norwegian law, the Board of Directors is responsible for managing the Company and for ensuring that the Company's operations are organized in a satisfactory manner. The Company's Articles of Association provides that the Board of Directors shall have no less than three and no more than seven members. In accordance with Norwegian law, the CEO and at least half of the members of the Board of Directors must either be resident in Norway, or be citizens of and resident in an EU/ EEA country. The Annual General Meeting of the shareholders elects each member of the Board of Directors individually. The Board of Directors currently consists of five Board members who are elected for a two-year period. The Chairman of the Board is elected annually by the Board of Directors.

All of the Directors are independent of the Company's management and three of them are independent also in relation to the Company's main shareholders, Ganger Rolf ASA and Bonheur ASA. 40% of the Members of the Board are women. In 2014 the Board of Directors had ten meetings. Board members are elected based on need for expertise, capacity and ability to make balanced decisions in the best interests of the shareholders in general. The Board shall operate independently of any special interests and function effectively as a collegiate body in the best interests of the shareholders in general. Two Directors attended all Board meetings, while one Director was excused from one meeting and two Directors from two meetings. The Board of Directors are encouraged to own shares in the Company. The Company has no Corporate Assembly.

The Board of Directors consists of:

Anette S. Olsen (b. 1956), Chairman. Ms. Olsen has been the Chairman of the Board since the inception of the Company in 1997. Since 1994 Ms. Olsen has been the sole proprietor of Fred. Olsen & Co. – which is in charge of the management of the stock listed companies Bonheur ASA and Ganger Rolf ASA, where Ms.

Corporate Governance

Olsen holds the position as Managing Director. Ms. Olsen holds chairman and ordinary board positions with a number of companies, amongst others with Fred. Olsen Ocean Ltd., Fred. Olsen Renewables Ltd., Fred. Olsen Cruise Lines Ltd., Timex Corporation and NHST Media Group AS. Ms. Olsen holds a BA in Business Organization and an MBA. Ms. Olsen is a Norwegian citizen, resident in Oslo, Norway.

Øivin Fjeldstad (b. 1936), Director, independent of the main shareholders. Mr Fjeldstad served as a deputy to the Board for several years and has been a Director since 2002. He is now active as an independent consultant and professional non-executive board director. Previously, he has been senior adviser to HSH Nordbank, Hamburg/Kiel. In the period 1993 – 98 he was Managing Director of DnB Luxembourg SA. He has also experience as deputy managing director of Bergen Bank/Den norske Bank, and served 4 years as group finance director in Akergruppen. At present he holds chairman and board positions with a number of companies and he has previous experience from several boards both in Norwegian and foreign companies. Mr. Fjeldstad has political experience as a former member of the Norwegian parliament. He is a graduate of the Norwegian School of Business and Economics. Mr. Fjeldstad is a Norwegian citizen, resident in Ringerike, Norway.

Agnar Gravdal (b. 1941), Director, independent of the main shareholders. Mr. Gravdal became a Director of the Board in May 2007. He is currently working as independent consultant after being CEO at the Rosenberg Yard from 2003-2007. In addition, he has many years experience from CEO positions within various companies in the Kværner group, Aker group and Umoe group as well as from development and design of advanced LNG ships. He holds positions within several boards, including chairman of the board in Sway AS and Lyse Produksjon AS and board member in Scanfuel AS and Inwind AS. He holds a Master Degree in Naval Architecture and Marine Engineering from NTNU 1968. Mr. Gravdal is a Norwegian citizen, resident in Stavanger, Norway.

Cecilie B. Heuch (b. 1965), Director, independent of the main shareholders. Ms. Heuch became a Director of the Board in 2007. She is presently Chief Human Resource Officer in DNV GL. Ms Heuch has previously worked for Norsk Hydro in the fertilizer division (now Yara), in Hydro Aluminium and in Corporate staff. She has had several positions within economic and market analysis, strategy and business development. Ms. Heuch graduated from Institutd'Etudes Politiques de Paris. She has a MSc from London School of Economics and a Business diploma from Henley Management College. Ms. Heuch is a Norwegian citizen, resident in Bærum, Norway.

Jan Peter Valheim (b. 1951), Director. Mr. Valheim became a Director of the Board in May 2007 after he resigned from the position as Chief Financial Officer (CFO) of the Company and joined Fred. Olsen & Co. as CFO. Prior to joining Fred. Olsen Energy ASA in 2002, Mr. Valheim has held positions in Scribona AB, PC Lan ASA, Saga Petroleum ASA and Fearnley Finans AS. Mr. Valheim is a graduate from BI Norwegian School of Management. He is a Norwegian citizen, resident in Bærum, Norway.

The work of the Board of Directors

The Company has implemented guidelines for the work of the Board of Directors. The purpose of these guidelines is to establish a practical tool for the Board's annual plan for exercising good Corporate Governance. The Board has prepared special instructions for the CEO. The current composition of Directors reflects adequate competence relative to the main business areas of the Group. The Board of Directors has appointed an Audit Committee consisting of two Directors, of which one is independent of the main shareholders of the Company. The charter of the Audit Committee is to assist the Board in fulfilling its responsibilities concerning the financial reporting process, internal controls, management of financial risks, the audit process, and the Company's process for monitoring compliance with applicable laws and regulations. The Audit Committee has regular meetings with the management and the external auditor. Parts of the meetings with the external auditor are without participation of the management. The Board of Directors has appointed a Compensation Committee comprising four Directors including the Chairman of the Board and two of the independent Directors. The Compensation Committee discusses and recommends to the Board salary and benefits for the CEO and senior management as well as the management incentive schemes for the Group. Meetings of the Board of Directors are chaired by the Chairman of the Board. If the Chairman of the Board is absent, the Board must select a member to chair the meeting.

The Board evaluates its own work and work methods annually, and the evaluation forms the basis for adjustments and measures. In addition, the Board's competencies, overall and those of each Board member, are evaluated.

Risk management and internal control

Board of Directors holds responsibility that proper guidelines and internal control processes are instituted and operated. The Company's risk management, financial reporting and internal control procedures are reviewed by the Audit Committee in accordance with its charter. The risk management process of

Corporate Governance

the Group is carried out in accordance with the Group's Risk Management Manual. The process ensures identification and treatment of all relevant risks in order to support the organization in achieving defined corporate objectives, enable explicit consideration of risks in decision-making and maintain the risk exposure of the Group at an acceptable level. The operational risk management, financial reporting and internal controls are carried out within each subsidiary in accordance with the nature of the operations and the government legislation in the relevant jurisdiction. In addition, the Company carries out internal audits related to specific projects and to the ongoing business. Risk management related to foreign exchange, interest rate management and short-term investments is handled by the Company on behalf of itself and the subsidiaries, in accordance with listed authorizations, policies and procedures. The Company receives reports on the financial development of each business segment and subsidiary on a monthly basis. The Audit Committee will raise issues to the Board of Directors if deemed necessary and a review of the Group's risks is part of an annual review.

Remuneration of the Board of Directors

The Board's remuneration reflects the Board's responsibility, expertise, time commitment and the complexity of the Company. All Directors are remunerated with a fixed fee and the remuneration is not linked to the Group's bonus scheme and there is no option program for Directors. If any additional remuneration is given to Board members it will be specified in the annual report. The remuneration to the Board of Directors is fully disclosed in note 17. In 2014 none of the Board of directors have worked for the Company outside of their directorships

Executive Management

The Chief Executive Officer (CEO) is appointed by and serves at the discretion of the Board of Directors. He is responsible for the daily management and the operations of the Company. The CEO is not a member of the Board of Directors.

The executive management consists of:

Ivar Brandvold (b. 1956), Chief Executive Officer. Mr. Brandvold joined the company in September 2009, and was appointed President and Chief Executive Officer as of November 2009. Before joining the company, Mr. Brandvold held the position as Chief Operating Officer of DNO International ASA. He previously has 23 years of experience from Norsk Hydro ASA, of which he has held a number of positions within the company's oil and gas activities, including the overall responsibility for Norsk Hydro's global drilling operations from 2002 to 2007. Mr. Brandvold has a Master of Science degree from The Norwegian Institute of Science and Technology (NTNU) in Trondheim, Norway. Mr. Brandvold is a Norwegian citizen, and resides in Bergen, Norway.

Hjalmar Krogseth Moe (b. 1971), Chief Financial Officer. Mr. Moe has been Chief Financial Officer since June 2007. Mr. Moe joined Fred. Olsen Energy ASA in January 2005 as Financial Manager, and has previously held positions in Aros Securities and A. Sundvall ASA/Kaupthing ASA. Mr. Moe is a graduate from BI Norwegian School of Management. He is a Norwegian citizen and resides in Bærum, Norway.

Joakim Kleppe (b. 1951), Chief Executive Officer of Dolphin Drilling AS since June 2002. Mr. Kleppe was previously Senior Vice President HR/QHS&E & ICT at Dolphin Drilling AS and had been working within similar responsibilities and professions for 16 years for Kværner/Kværner Oil & Gas. Mr. Kleppe is a graduate from University of Bergen and Rogaland Distriktshøyskole, Stavanger. Mr. Kleppe is a Norwegian citizen and resides in Stavanger, Norway.

Graeme Murray (b. 1968), Managing Director Dolphin Drilling Limited since April 2012. Prior to his appointment Mr. Murray was General Counsel of Subsea 7 for 10 years. Beginning his career as a solicitor in private practice, Mr. Murray has also held legal positions with Halliburton and Coflexip Stena. A member of the Law Society of Scotland, Mr. Murray has an LLB degree and postgraduate Diploma in Legal Practice from Aberdeen University and is a Notary Public. Mr. Murray is UK citizen and resides in Aberdeen, Scotland.

Gunnar Koløen (b. 1978), Managing Director, Dolphin Drilling Pte Ltd. Mr. Koløen was appointed Managing Director of Dolphin Drilling Pte Ltd in July 2014. He first joined the Company in July 2011 as CFO for Dolphin Drilling Pte Ltd. He has previously held positions in the Awilco Offshore Group (later known as China Oilfied Services Limited), Gram Car Carriers and KPMG. Mr Koløen holds a Master of Science degree in Finance and qualified as a state authorised public accountant from Norway. Mr. Koløen is a Norwegian citizen, and resides in Singapore.

Robert J Cooper (b. 1952), Chief Executive Officer, Harland and Wolff Group Plc. Mr. Cooper was appointed CEO of Harland and Wolff Group PLC in February 2003. Prior to that he held the position as financial director in the Harland and Wolff Group from 1993. Mr. Cooper joined the Company in 1983 as a trainee accountant, and after completing his ICMA professional examinations he held a number of positions within the fi nance department. Mr. Cooper is a UK citizen and resides in Belfast, Northern Ireland.

Remuneration of the executive management

The Board has adopted guidelines for remuneration of executive management in accordance with section 6-16a of the Norwegian Public limited Liability Companies Act. These guidelines are communicated to the Annual General Meeting.

The Board's Compensation Committee present and recommends to the Board of Directors salary and benefi ts for the Chief Executive Offi cer and leading personnel as well as management incentive schemes for the Group.

Management has had a cash bonus scheme since 2005. The benefi ciaries of the scheme are the executive management and certain key personnel. Annual awards under the scheme, maximized to one year's salary, are subject to the Group achieving certain predefi ned fi nancial criteria, including achieved budget goals and development of the Company's share price. See also note 17 on page 40.

Information and communications

The Company provides information to the market through quarterly and annual reports; investor- and analyst presentations open to the media and by making operational and fi nancial information available on the Company's website. Events of importance are made available to the stock market through notifi cation to the Oslo Stock Exchange in accordance with the Stock Exchange regulations. Information is provided in English.

Takeovers

In light of the Company's shareholder structure, with the controlling shareholders holding a majority of the shares, the Board of Directors has not found it appropriate to establish separate guidelines to prepare for a take-over situation.

Auditor

The auditor is appointed by the Annual General Meeting. The remuneration of the auditor is stated in the Annual Report and approved by the general meeting of shareholders. The same fi rm of auditors should also as a general rule be appointed for all subsidiaries. The auditor should not perform any work for the Company which could lead to confl icts of interest. The Audit Committee is responsible for ensuring that the auditor's independent role is maintained and, on a annual basis, the auditor presents a review of the Company's internal control procedure to the committee. A summary annual audit plan shall be presented to the Audit Committee once a year. In accordance with the auditor's independence requirement, the Company is cautious when using the elected external auditor for tasks other than the fi nancial audit required by law. Nevertheless, the auditor may be used for tasks that are naturally related to the audit, such as technical assistance with tax returns, annual accounts, understanding of accounting and tax rules and confi rmation of fi nancial information in various contexts. Information about fees paid by the Company to the auditor is provided in the Annual Report. The Audit Committee is kept informed, on a regular basis, of all work undertaken by the auditor. The auditor provides the Board with an annual written confi rmation that a number of requirements, including independence and objectivity are met. The auditor attends meetings of the Audit Committee that deal with the fi nancial statements and that review the report on the auditor's view of the Company's accounting principles, risk areas and internal control routines. The external auditor also takes part in the Board's discussions on the fi nal annual fi nancial statements. Both the Audit Committee and Board of Directors ensures that it is able to discuss relevant matters with the auditor without the presence of the management.

Corporate Social Responsibility Reporting

Introduction

The Corporate Strategy, Corporate Governance and the Code of Conduct Policy constitute the fundamental steering principles in the Group. Together these form the foundation of how we should act and operate in the Group as well as giving the priorities and the direction of the Group.

Supplementary to these principles are the Corporate Management Systems. Together, these define the roles and responsibilities within the organization and towards our stakeholders, including employees, customers, shareholders, regulatory and governmental bodies, financial institutions, vendors and the environment as well as local communities and countries where we operate.

Working environment

The Group has a strong focus on health, safety and environment (HSE) for its employees, subcontractors and customers, embedded in our zero accident objective. We are closely monitoring the established procedures for operations, projects and work sites both onshore and offshore. Continuous efforts involve planning, training of personnel and careful selection of subcontractors. The objective of zero accident applies to personnel injuries, harm to the environment and material damage.

The Total Recordable Incident (TRI) rate for offshore drilling and related services in 2014 was 5,85 per one million working hours, compared to 6,0 per one million working hours in 2013. TRI includes personnel injuries of the categories lost time incidents, medical treatment incidents and work restricted cases.

Furthermore, all incidents relating to personnel, environment and equipment with a high potential risk factor are recorded separately (defined as "high potential"). All injuries and damages are registered and the potential risk factors are determined based on a five by five risk matrix system. Three personnel injuries were categorized as high potential during the year. The incidents were squeezed hand on the drill floor, hand injury while using a wash down gun and a leg injury (strike) caused by a hose. We had one high potential incident with a riser that caused 12 m3 Oil Based Mud to sea and material damage. The other high potential incidents are damages to equipment and certain falling objects during work operations. The damages to equipment were small, however the incidents could have a potential for more serious damages or consequences and therefore registered as high potential incidents.

Co-operation and experience transfer between the operational regions have been systemized and improved by regular network meetings within each discipline and on top management level. HSE results are measured and benchmarked continuously in order to improve performance and to react proactively to negative trends.

To meet our zero accident objective on a long-term basis five areas of continuous improvement have been established. These can be summarized as follows:

• Adherence to the Management Systems; follow rules and procedures
• Observation techniques on site; including pictures and documented observations
• Red zone areas on the units; restricted zones for personnel entry
• Zip card reporting; reporting of incidents and actions for improvement
• Avoid falling objects; procedures related to preventing falling objects

When negative trends are observed or any rigs are underperforming on their KPIs, corrective actions are taken. In 2013 we had a positive trend on falling objects on the rigs and we have managed to keep the improved trend level in 2014. The TRI level has improved in 2014 compared to 2013. The proactive risk awareness reporting level have improved in general on the rigs in 2014 compared 2013.

Whenever an incident has occurred, investigations are carried out in order to understand the underlying causes and corrective actions are taken to improve. The implementation of mandatory last minute risk assessment and debrief prior to and after each work task have improved the planning process and the lesson learnt process.

Leadership training for offshore personnel has continued in 2014 with further focus on planning and debriefs of work processes. All rig crews have been trained in observation technique and we can see the proactive risk awareness improving in the daily job tasks.

The Group has performed several HSE activities in 2014 in order to continuously improve the HSE performance and culture. Special focus in 2014 has been focus on improving procedures in the management system and verification of implementation

Corporate Social Responsibility Reporting

of procedures. The management systems in the Group govern both HSE, onshore and operational related activities. HSE goals and key performance indicators (KPI) have been developed for 2015. The KPIs cover areas such as personnel injuries, emissions to the environment and damages to equipment. The goals and the KPIs have been developed and agreed with a high degree of workforce involvement in order to achieve ownership and follow up.

Internal audits have been carried out in order to verify knowledge and implementation of the management system and the result from these audits confirm that the management system is well known and accessible. Findings from audits are presented to relevant top management and to the department in question and corrective actions are taken. The internal audit plan is comprehensive and monthly status and updates are performed.

Sick leave was 4.58% in 2014 versus 4.37% in 2013. The Group continues to focus on reducing sick leave. We have several training programs for employees with the aim of preventing sick leave, focusing for example on ergonomics in order to prevent injuries. We have improved our procedures for how to follow up employees in case of sick leave, and increased our focus on the long-term sick leave.

Equality

The Group aims to be a workplace with equal opportunities, offering challenging and motivating jobs to all personnel, regardless of gender. The composition of genders within the Group reflects the available recruitment base for offshore work, which traditionally has a higher proportion of men, being the nature of the offshore industry worldwide. For onshore operations, there are 37% women. There are no particular initiatives to attract or retain either female or male employees.

Two out of five members of the Board of Directors are women, including the Chairman of the Board. At year-end 2014 the Group had 1 595 employees. 10% of the employees are women and 13% of leading onshore personnel within the Group are women.

Discrimination

The Group aims to be a workplace with equal opportunities, offering challenging and motivating jobs to all personnel, regardless of nationality, culture, religion or gender. It is the Group's Code of Conduct Policy to conduct business in accordance with the letter and spirit of the law and with the overriding ethical standards of good business conduct including non-discriminating behaviour. The Group does not accept any form of discrimination or harassment e.g. based on race, color, religion, gender, age or disability.

The composition of nationalities reflects the available recruitment base for the offshore drilling industry. Per year-end 2014, there were more than 20 nationalities working for the Group. There are to a large extent local management teams in the foreign subsidiaries and as some of the well as local Managing Directors.

Environment

The Group's operations involve activities that entail potential risks to the external environment, with the main risks being emissions to air and discharges to sea.

One of the corporate focus areas going forward includes technical solutions and environmental initiatives with the aim to reduce the environmental impact of our business activities.

The Group is careful in its approach to the environment and discharges to sea are continuously monitored and reported. The Group strives to reduce the use of hazardous chemicals and materials through established routines and procedures and seeks alternative products to safeguard the environment.

The CO2 emissions are continuously monitored and reported. The Group is consumer of different types of fuel oil in our operations. This is primarily for operations of the rigs, but also for travelling as well as heating of office buildings. The emission of CO2 amounted to 140,899 metric tons in 2014, compared to 118,310 metric tons in 2013. The fuel consumption amounted to 50,578 metric tons in 2014 versus 43,525 in 2013.

The international rigs in the Group are ISO 9000-14 001 certified. The Norwegian rigs are in process of being certified to the same standards. Furthermore, the Group will during 2015 continue to evaluate measures that can be undertaken in order to further reduce the environmental impact from our operations.

Corporate Social Responsibility

The Corporate Strategy and Code of Conduct Policy constitute the foundation in managing our Corporate Social Responsibility as a Group. The Code of Conduct Policy is distributed to our main suppliers and relations as well as to all employees. The Corporate

Corporate Social Responsibility Reporting

Strategy emphasizes the respect for human rights and ethical behaviour including the zero tolerance for corruption. In addition, compliance with the UK Bribery Act is managed through a separate Ethics and Bribery Procedure. All employees may be part of a union. There are no specific policy regarding human rights, however this is treated in the Code of Conduct.

The Group has a zero tolerance for corruption related to any parts of our business. The Code of Conduct Policy and Ethics and Bribery Procedure, underline that any form of corruption or bribery is strictly prohibited. This includes any type of undue payments made to influence someone conducting their duties. There shall be full transparency and all transactions shall be backed by invoices. Use of intermediaries is based on the internal procurement procedures in the Group. It is emphasized that all contracts with intermediaries shall include a contract clause stating that any corruptive actions or unethical behaviour is prohibited while representing any company within the Fred. Olsen Energy Group. Specific training regarding UK Bribery Act has been carried out within the organization and towards subcontractors. Furthermore, there are internal audit plans that are carried out on a yearly basis, of which some of the scope covers bribery and corruption.

There are clear and strict guidelines with regard to gifts received by any member of the Fred. Olsen Energy Group as well as for those offered by any Group member.

Initiatives in 2015 will continue to further enhance the knowledge of the Code of Conduct Policy. The principles will be emphasized regularly when representatives from the Senior Management have review meetings with management teams and employees.

Fred. Olsen Energy ASA

Enterprise number: 977 388 287 Fred. Olsens gate 2 N-0152 Oslo, Norway Telephone: +47 22 34 10 00 Fax: +47 22 41 18 40 E-mail: adm@fredolsen-energy.no www.fredolsen-energy.com

Reporter

Chief Executive Offi cer Hjalmar Krogseth Moe, Chief Financial Offi cer

Dolphin Drilling AS

Enterprise number: 920 473 210 Plattformveien 5 N-4056 Tananger, Norway Telephone: + 47 51 69 43 00 Fax: + 47 51 69 61 56 www.dolphindrilling.no

Joakim Kleppe, Managing Director

Dolphin Drilling Ltd.

UK Registration number: 1017560 Howe Moss Dr., Kirkhill Industr. Est. Dyce, Aberdeen AB21 0GL, Scotland Telephone: +44 1224 411 411 Fax: +44 1224 411 482 E-mail: marketing@dolphin-doc.no www.dolphindrilling.no

Managing Director

Dolphin Drilling Pte. Ltd.

Enterprise number: 200303833E One Temasek Avenue #36-02 Millenia Tower Singapore 039192 Telephone: +65 6305 4710 Fax: +65 6305 4711 E-mail: reception.singapore@dolphindrilling.com.sg www.dolphindrilling.com.sg

Managing Director

Harland and Wolff Group Plc.

UK Registration number: NI 38422 Queen's Island, Belfast BT3 9DU Northern Ireland Telephone: +44 2890 458 456 Fax: +44 2890 458 515 E-mail: sales@harland-wolff .com www.harland-wolff .com

Robert Cooper, Managing Director

Annual Report 2014