Seadrill Limited — Annual Report 2014

Apr 23, 2015

Annual Report and Financial Statements For the Period Ended 31 December 2014

Table of Contents

Board of Directors Report
Introduction	3
Vision and Values	3
Operations in 2014	3
Financial Review	4
Relationship with Seadrill	5
Restructuring and Migration	7
Outlook	8
Risk Factors	9
Corporate Social Responsibility	11
Corporate Governance	12
Remuneration and Benefits	17
Responsibility Statement	18
Consolidated Financial Statements
Consolidated Income Statement	20
Consolidated Comprehensive Income	20
Consolidated Balance Sheet	21
Consolidated Statement of Changes in Equity	22
Consolidated Cash Flow Statement	23
Notes to the Consolidated Financial Statements	24
Sevan Drilling ASA Financial Statements
Sevan Drilling ASA Statement of Income	48
Sevan Drilling ASA Statement of Financial Positions	49
Sevan Drilling ASA Statement of Cash Flow	51
Notes to Sevan Drilling ASA Financial Statements	52
Report of Independent Auditors	62

BOARD OF DIRECTORS REPORT

INTRODUCTION

Sevan Drilling ASA (the "Company" and, together with its subsidiaries, the "Group" or "Sevan") is an international offshore drilling contractor specialising in operations in the ultra deep-water segment. The Group owns three ultra deep-water cylindrical drilling units. Two of these operate in Brazil and the third operates in the US sector of the Gulf of Mexico. The Group has a fourth unit, Sevan Developer, on order with Cosco (QiDong) Offshore Co. Limited ("Cosco"). The unit is, subject to completion of final commissioning and sea trials, ready for delivery. The delivery terms allows the Group to await the conclusion of a drilling contract for the unit before taking delivery. Such drilling contract needs to be at a rate level and for a period that, taken together, will support the financing of the delivery instalment due to Cosco. The contract will terminate on set dates if no such contracts are secured and no options to extend are exercised.

The Company is a Norwegian public limited company maintaining its corporate headquarters at Drammensveien 288, Oslo, Norway. The Group has regional offices in Rio de Janeiro, Brazil, Houston, USA and Singapore and a design office in Bergen, Norway. The Company has operating subsidiaries in these countries and in Bermuda, Hungary and United Kingdom.

The Company's shares are listed on the Oslo Stock Exchange and trades there under the symbol "SEVDR".

The Company's website is: www.sevandrilling.com.

The Group's proprietary management team (the "Management") is employed in Sevan Management AS. The Group's chief executive officer is employed by this entity. Sevan Management AS provides management support to all entities in the Group. The Group's rigs are managed by subsidiaries of Seadrill in Brazil, the US and Singapore. The terms for these assignments are set out in written management agreements. The Group also has a marketing agreement with Seadrill Management Ltd. pursuant to which the Seadrill Group is responsible for the marketing of the Group's fleet. Lastly, Seadrill Management Ltd. provides general administrative support to the Group, supplementing the efforts of Management.

VISION AND VALUES

The Company's vision is, by taking advantage of its unique cylindrical design for offshore drilling rigs, to capture a significant share of the global market for offshore drilling in the ultra deep-water segment. This vision shall be achieved by maintaining a high operational and ethical standards in all of the Group's relations with customers, suppliers and employees.

The Board has defined the Company's values and has adopted ethical guidelines which apply to all employees in the Group. The Company's vision and values are set out in further detail on the Company's website. Ethical guidelines applicable to all the Group's employees can also be found there.

OPERATIONS IN 2014

The Group's oldest rig, "Sevan Driller", continued operations in Brazil under a 6 year contract with Petroleo Brasileiro S.A. ("Petrobras") which commenced in June 2010. The rig will be employed under this contract until June 2016. Petrobras has an option to extend the contract beyond this date. Technical utilisation for Sevan Driller during 2014 was at 89.9%. Economical utilisation for the same period was at 87.0%.

The Group's second rig, "Sevan Brasil", continued operations in Brazil under a 6 year contract with Petrobras. This contract commenced in July 2012, and expires in July 2018. Petrobras has an option to extend the contract period. Technical utilisation for the rig during the year was at 91.7%. Economical utilisation was at 89.9%.

The Group's third rig, "Sevan Louisiana", commenced operations in May 2014 under a 3 year contract with LLOG in the US sector of the Gulf of Mexico. The contract terms were revised in November 2014 as a consequence of the rig not meeting the agreed operational targets under the contract. The day rate agreed following the revision is USD 350,000 per day, subject to various adjustments linked to performance. The contract term was extended by 12 months to May 2018, cancellable by the client with a 365 day notice until May 2016. Technical utilisation for the rig during the part of the year it was in operation was at 65.6%. Economical utilisation was at 63.4%.

The Board is not satisfied with the performance of the Group's fleet in 2014 as the targeted utilisation rate (both technical and economical) was higher than what was achieved. Steps have been taken to improve the quality of operations so as to meet these targets in 2015.

The Group has a fourth rig, "Sevan Developer", on order from Cosco pursuant to an all-in, turn-key construction contract at a price of USD 526 million. The original delivery date for this rig was end April 2014. Due to an extensive delay in the completion of the rig on the part of Cosco, delivery terms were renegotiated in Q4 2014. This led to the delivery date being extended to October 2015 with four six month options to extend the delivery date further until October 2017. Cosco has now completed the construction of Sevan Developer with the exception of final commissioning and sea trials. The Group will be providing management support to Cosco until the delivery date or termination and is actively marketing Sevan Developer to customers. The Group intends to take delivery of Sevan Developer if and when a drilling contract which can support financing of the final instalment of USD 425 million can be secured. If no contract has been secured and no mutual agreement to extend the delivery further has been made by the end of the deferred delivery period, or the subsequent option periods, the contract will terminate. The Group will, in such case, receive a refund of the initial investment made by the Group in the unit of USD 105.2 million. Cosco has provided guarantees for its liability to repay this to the Group from commercial banks, effective through the maximum 36 month deferred delivery period.

FINANCIAL REVIEW

The following constitutes a brief summary of the Group's financial performance and result during the 12 months ending 31 December 2014 versus the same period ending 31 December 2013.

Income statement

The Group's operating revenue in 2014 was USD 321.0 million compared to USD 249.7 million in 2013. The result for the period was a loss of USD 48.3 million compared to a loss of USD 14.6 million in 2013. The Group's EBITDA (operating profit less depreciation, amortisation and impairment) in 2014 was 124.9 million compared to USD 49.5 million in 2013. The increase was a consequence of Sevan Louisiana commencing operations in 2014. The effects of the Group's integration in the Seadrill's management systems contributed to the improvements made to the EBITDA in 2014.

The Group recognised a non-cash impairment of USD 101.6 million in 2014. The impairment was a consequence of a lower value in use estimate for each of Sevan Driller and Sevan Brasil compared to their carrying values following the decline in the rate levels obtainable in the ultra deep-water drilling market in late 2014.

Net financial items in 2014 amounted to USD 70.2 million compared to USD 89.1 million for 2013. Amortisation of deferred finance costs was USD 34.1 million less than in 2013 due to a 36.7 million onetime write-off of fees associated with the debt restructuring which took place in 2013. Interest expense increased by USD 2.1 million from 2013 as a consequence of a higher debt level in 2014, primarily due to the drawdown of debt to cover the final instalment paid for Sevan Louisiana. Net financial items in 2013 included a non-recurring gain of USD 10.1 million on interest rate swaps. No swaps have been held in 2014.

Tax expense in 2014 was USD 6.5 million and consisted of a USD 2.7 million provision related to an income tax liability in China in Q4 and taxes paid as a consequence of Sevan Louisiana's operations in the US Gulf of Mexico.

Balance sheet

Total assets decreased from USD 2,164.2 million in 2013 to USD 1,991.6 million in 2014. The decrease is primarily caused by the USD 101.6 million non-cash impairment of Sevan Driller and Sevan Brasil, and lower cash and cash equivalents as a consequence of the mobilisation of the Sevan Louisiana for its contract in the US Gulf of Mexico.

The Group reviews the carrying values of its tangible assets at the end of each reporting period to determine whether there is any indication that such assets may be impaired. The net asset value of the Group exceeded its market capitalisation as of 31 December 2014. This is identified as an indicator of a need for impairment on major assets. As a result, each of the Group's rigs was, as of 31 December 2014, identified as a cash generating unit and tested for impairment.

The key assumptions applied in relation to rigs in operation include a discount rate and expected future cashflows. To discount future cash-flows, Management used a pre-tax weighted average cost of capital of 9.5%. Estimated future cash-flows are based on the Group's five year forecast and utilise several assumptions (including forecasted operational expense, operational tax, utilisation and expected day-rates). Expected dayrates are based on current contract amounts for the remaining term of these and expected market rates for the period beyond the contract periods. Due to the significant decline in the demand and day-rates in the ultra deep-water drilling market and the timeline for a projected recovery thereof, the Board concluded that the recoverable values of each of Sevan Driller and Sevan Brasil were less than their carrying amounts. The carrying amounts of these rigs were thus reduced through their estimated recoverable values through a noncash impairment. Specifically, Sevan Driller was impaired USD 29.3 million while Sevan Brasil was impaired USD 72.3 million in Q4 2014.

Total liabilities decreased from USD 1,480.5 million in 2013 to USD 1,433.9 million in 2014. Of this amount, USD 1,321 million represented outstanding debt (66% of total equity and liabilities). The decrease in total liabilities is primarily caused by repayments of principal under the Group's bank loan facility, amortisation of deferred financing fees and a write-off of USD 6.9 million deferred fees related to the cancelling of Tranche B of the bank loan facility, off-set by drawdowns under a revolving credit facility in the amount of USD 300.0 million made available to the Group by its majority shareholder, Seadrill ("RCF").

Cash flows

The Group's cash and cash equivalents amounted to USD 30.2 million as of 31 December 2014 compared to USD 128.7 million as of 31 December 2013. The Group used cash generated from its operations and the drawings made under the RCF to fund investment and financing activities throughout 2014.

Net cash used in operating activities during 2014 was USD 9.5 million compared to USD 21.5 million in 2013. This represented an increase in cash generated by operating activities of USD 12 million. This increase was primarily driven by Sevan Louisiana commencing operations and lower operating expenses for the rigs working in Brazil. Net cash used in operating activities in 2014 was USD 109.0 million less than the Group's total loss before taxes. This was primarily caused by the non-cash impairment on Sevan Driller and Sevan Brasil in 2014.

Net cash used in investing activities during 2014 was USD 29.0 million compared to USD 575.2 million in 2013. The decrease is primarily a result of the financing required in order to take delivery of Sevan Louisiana in October 2013 and to mobilise it for its contract in the US Gulf of Mexico.

Net cash used in financing activities during 2014 was USD 60.0 million compared to USD 648.6 million in 2013. The decrease is primarily a result of closing a bank facility in 2013 that allowed refinancing of the then existing bank debt and take-out financing for Sevan Louisiana.

RELATIONSHIP WITH SEADRILL

Seadrill Limited ("Seadrill") controls 50.11% of the shares in the Company and is thus our parent company from a corporate law point of view. Seadrill has financed most of this investment through forward contracts. Seadrill is represented on the Board through Mr. Per Wullf, Seadrill Managemrnt Ltd's Chief Executive Officer.

The Company's financial reporting is, as a consequence of Seadrill's ownership share, fully coordinated with that of Seadrill. Seadrill consolidates the accounts of the Group with its own.

Seadrill has guaranteed the Group's bank loan. The terms of the guarantee is set out in a written guarantee agreement. The Company pays a guarantee fee to Seadrill of 1.0% of the outstanding amount of the loan. The total fee paid in 2014 was USD 13.3 million. Seadrill's support of the Group's financing means that there are no financial covenants applicable to the Company in the bank loan agreement. Further, the costs of the bank financing are significantly lower than what could be achieved had the Group had been a stand-alone entity. The Group is, however, exposed to the risk of Seadrill not meeting its financial covenants and other terms in the guarantee and its own loan agreements due to the cross-default provision in the Group's loan agreement.

Seadrill has provided the Group with the RCF in order to meet the Group's financing needs beyond what is covered by the Group's bank loan. The terms of the RCF are set out in a loan agreement, which was revised in Q4 2014. The main terms are an interest rate of 6.0% plus LIBOR, a commitment fee of 2.4% on any undrawn amounts and a term of 24 months expiring 31 December 2016. The cost of this financing is significantly lower than what the Group would have incurred if such financing should have been arranged on a stand-alone basis.

The Group is party to several management agreements with subsidiaries of Seadrill. These make Seadrill's organisation fully responsible for the day-to-day operation of the Group's (through its subsidiaries in Brazil and USA) and the marketing of the rigs in operation and Sevan Developer (through Seadrill Management Ltd. in the UK). Further, Seadrill Management Ltd. supports Management at the general administrative level.

The terms of these management agreements are market based. Total payments to the Seadrill organisation under these agreements in 2014 were USD 24.5 million.

The Group has realised numerous benefits from its access to Seadrill's infrastructure and management organisation through these agreements.

Operationally, the Group has improved compliance and integrity in its management systems compared to if relied on its proprietary management organisation. Further benefits are access to a larger labour resource pool, improved pricing for insurance, savings through access to vendor master service agreements and increased reliance on internal resources in maintenance and engineering (as opposed to contracting these from third parties). Changes in the philosophy for project management such as integrating newbuild deliveries with acceptance testing have led to significant operating efficiencies being realised. The Group has, as an example, been able to reduce the annual operating expenses on average for each of its rigs in operation by approximately USD 25,000 per day while improving the safety and quality of the asset and minimizing out-of-service time for the customer.

The Seadrill marketing function provides the Group's rig fleet with the benefit of Seadrill's extensive client relationships and access to geographical regions where Seadrill has a presence and proven performance history. The Seadrill organisation actively markets the Group's fleet in all geographical regions and towards all of its own clients, highlighting the advantages of the Group's unique cylindrical design.

Administratively the Group has significantly reduced its payroll through consolidation of its former offices with those of Seadrill. Further, merging corporate functions such as accounting, treasury, supply chain and human resource management with those of Seadrill has realised benefits. The Group's general and administrative costs for 2014 were, as an example, reduced by USD 18.8 million compared to 2013. The Board expects further savings and reductions to be realised in the years to come through the support of Seadrill.

The Board is satisfied with the manner in which the Group has been integrated in Seadrill's management systems. This has both financially and operationally been a significant benefit for the Group and its shareholders.

The Board is monitoring the quality and costs of all services provided by the Seadrill organisation and will, regularly, benchmark these against third party providers of similar services. The Board is aware of the potential conflict of interest of Seadrill but is confident that the Seadrill organisation treats the Group's rigs on par with other rigs in the overall Seadrill fleet.

RESTRUCTURING AND MIGRATION

The Board reviewed the Group's corporate organisation during 2014 and concluded that it was not optimal to maintain the parent company function in Norway. The reasons for this were several.

• 1. The Board found disadvantages and additional costs associated with maintaining the parent level of the Group in Norway. The Group has limited association and presence in Norway and it therefore makes sense to discontinue a structure where the parent level for the Group is in Norway.
• 1. The majority of the Company's shareholders are resident in jurisdictions with whom Norway does not have tax treaties. This means that any dividend paid by the Company to such shareholders will trigger Norwegian withholding tax and thus reduce the amount these shareholders will receive compared to what would be received by Norwegian shareholders and/or shareholders in jurisdictions having a favourable double tax treaty with Norway.
• 1. The Company will, as a Norwegian tax subject, have to pay ordinary Norwegian corporate tax on its profits once its accumulated tax losses have been utilised. As a consequence of the Company's subsidiaries being incorporated outside the applicable area for the Norwegian exemption method for taxation, the Company will be taxed in Norway for dividends and other income it receives from such subsidiaries. Alternatively, Norwegian CFC rules may be applied, leading to the Company being directly taxed for any profits generated by the subsidiaries whether distributed to the Company or not. Given that the Group has little or no association to Norway other than through the parent company function, and that the majority of its shareholders are non-Norwegian, such tax liability does not appear logical.
• 1. The limitations in deductibility for tax purposes of interest and other financial expenses between group companies which came into effect in 2014 will affect the Company directly as a consequence of Seadrill having guaranteed the Group's bank loan and having provided the Group with the RCF. This will accelerate the time it will take the Company to become tax liable on its profits in Norway.

Summarising the above the Board found that the disadvantages and additional costs associated with maintaining the parent level of the Group in Norway were sufficiently negative to the Group going forward to neutralise the short term cost of migrating the parent level to Bermuda.

Consequentially, the Board initiated a restructuring process in 2014 with the aim of enabling the Group to migrate its parent level to Bermuda in 2015. The initial step in this process was the establishment of a wholly owned subsidiary of the Company in Bermuda under the name Sevan Drilling Limited. ("Sevan Limited").

Subsequent to this, all of the Company's assets and liabilities were transferred to Sevan Limited in exchange for shares as a contribution in-kind. Hence the Company's sole asset (apart from a limited amount of cash), as of the date hereof, is the shares in Sevan Limited.

The Board will propose to the Company's annual general meeting (the "AGM") that the migration of the parent company level in the Group, from Norway to Bermuda, is realised through a repayment of paid-in capital in the Company by way of a distribution of all shares in Sevan Limited to the Company's shareholders in a proportion securing that they will hold the same relative ownership in Sevan Limited as they have in the Company. The Board further intends to make the closing of such capital decrease subject to ordinary creditors notice and Sevan Limited being accepted for listing on the Oslo Stock Exchange (the application process for this having been initiated). The current timeline for the process indicates that the capital decrease can be completed late-June.

The Company will, following the closing of the capital decrease, continue to exist but will then have no subsidiaries and only a limited amount of cash. This is sufficient for the Company to operate as a going concern and will enable the Board to consider such alternatives that are available. Its shareholder base will be identical to that of Sevan Limited and it could be an option to raise further equity in order to invest in new businesses within the current scope set forth in the Company's articles of association. This could enable the Company to utilise its tax position in Norway.

An alternative option would be to liquidate the Company, in which case the Board will seek to reach an agreement with Sevan Limited ensuring that Sevan Limited will guarantee to fund the costs of such liquidation against compensation equal to whatever cash remains in the Company at the end of the liquidation period.

It is the Board's intention to present its proposal for the future of the Company to the shareholders in a general meeting during the second half 2015, ensuring that a decision is made and implemented before yearend 2015.

At the listing date, the board of Sevan Limited will be identical to that of the Company. The Board intends to call a general meeting in Sevan Limited in Q3 2015 for the purpose of electing a new board to allow Sevan Limited's shareholders to reconsider the board composition in light of the requirements of Sevan Limited going forward.

As a result of these decisions made by the Board subsequent to year-end 2014, the Company recorded a noncash impairment of USD 597.3 million to the book value of the investment of Sevan Limited in the Company's statutory financial statements. While the Company is expected to continue as a going concern after the migration activity, the asset impairment is recognized to align the book value to the fair value of the Sevan Limited investment at year-end 2014, taking into account the capital distribution to the shareholders expected to occur in the short-term. The impairment was calculated based on the lower of cost versus sales price less selling costs, in accordance with Norwegian GAAP.

At the date of the AGM notice, the Company again assessed the book value of Sevan Limited compared to the market value. An additional impairment based on the same valuation method is recorded in the Company's statutory financial statements to reflect the proposed distribution.

The Board will provide an interim audited Company statutory balance sheet with functional currency in Norwegian Kroner and propose a share capital reduction to NOK 1.0 million. The share capital reduction is required to allow adequate other equity to cover losses, mainly from the second impairment, and distribute the shares of Sevan Limited to the Company's shareholders.

OUTLOOK

The Board is pleased with the various restructuring efforts which was completed during 2014 and believes the Company is now well positioned for the current and coming years.

Operating costs have been brought down significantly through the integration of the Group in Seadrill's management systems. Significant market and financial risks were furthermore reduced through the agreement for deferred delivery of Sevan Developer. The fact that the Company has the possibility of terminating the contract and recovering the investment strengthens the Group financially.

The commencement of Sevan Louisiana's operations and the subsequent revision of the contract terms with LLOG have, while reducing short term earnings, improved the Group's contract backlog.

The revision of the terms of the RCF has furthermore secured the Group's short to medium term financing needs on acceptable terms.

Summarising the above, the Group has a competitive cost base, a stable and predictable cash-flow and no further known unfunded financial needs in 2015, (utilization of the RCF as and when needed). However, the Group remains sensitive to operating performance of its rigs and will have to refinance the RCF at the end of its term in 2016 in order to continue to operate beyond this point. This remains the two main short to medium term risks.

The market for ultra deep-water drilling services turned dramatically down in the latter part of 2014 and has continued its negative development so far in 2015. Demand is now at a very low level and day-rates are, to the extent contracts are concluded, materially lower than what was experienced prior to the downturn.

While the Company is not exposed to the market in the short term due to its contract portfolio, it is dependent on demand picking up towards the expiry of its current contracts. The Board believes that the current market conditions will improve in the longer term, but cannot say with any certainty when demand will start picking up or at what rate levels future contracts can be secured.

The Board has noted, with interest, that there are certain demands for rigs utilising the Group's cylindrical design for new prospects. These covers both drilling operation in harsh environment (notably in Arctic areas where ice is a factor) and in areas where the design has a competitive advantage through its storage capacity. Various customers have expressed interest in the Group's Mark II, III and Arctic designs directed towards such specifications and have initiated studies. Whether these projects will lead to business opportunities for the Group is too early to conclude. The interest is, however, encouraging for the longer term.

Finally, the Board remains confident that the proposed migration of the parent company level to Bermuda will improve the Group's cost base and make it more competitive from an equity investment point of view. Therefore, the Company has prepared its accounts on the assumption that the Group is a going concern.

RISK FACTORS

The Group's activities expose it to a variety of risks, many of which are beyond the Company's control. The Group has a risk management program covering these factors (among others) and seeks to minimise overall exposure to risk and the impact of external factors on performance.

Market risk

The offshore drilling industry is cyclical and volatile. The Group's business depends on the level of activity in the exploration for and development and production of oil and gas in offshore areas worldwide. The availability of quality drilling prospects, exploration success, relative production costs, the stage of reservoir development and political and regulatory environments affect the demand for our services. Oil and gas prices and market expectations of potential changes in these also significantly affect the demand for drilling units specialised in the ultra deep-water segment.

A decline in oil and gas prices for an extended period of time, or market expectations of a potential decrease in these prices, may negatively affect the Group's business. Sustained periods of low oil prices typically result in reduced exploration and drilling activity because oil and gas companies' capital expenditure budgets are subject to cash flow from such activities. These changes can have a dramatic effect on rig demand. Periods of low demand can cause excess rig supply and intensify the competition in the industry, which often results in drilling rigs, particularly older and less technologically advanced units, being idle for long periods of time. The Company cannot predict the future level of demand for its services or future conditions of the oil and gas industry. Any decrease in exploration, development or production expenditures by oil and gas companies could reduce the Group's revenues and materially harm its business and result of operations.

Operational risk

Drilling operations

The operation of drilling rigs requires very high standards of safety. Such operations are associated with considerable risks and liabilities. These include technical, operational, commercial and political risks. The Group will obtain insurance deemed appropriate by it for its business, but it is impossible to insure against all applicable risks and liabilities. As a result of this, the Group could be exposed to substantial liabilities. For instance, under some contracts or legal regimes the Group may have unlimited liability for losses caused by its own negligence, and such liability may not be covered by its insurance policies. The Group may also incur liability for pollution and other environmental damage without being able to recover said liabilities through insurance.

Small fleet size

Since the Group's fleet consists of only three units in operation, any operational downtime or any failure to secure employment at satisfactory rates will affect the Group's results more significantly than for a group with a larger fleet. Furthermore, frequent rig mobilisations could be disruptive to the Group's financial results if it experiences delays due to adverse weather, third party services or physical damage to its rigs

Financial risk

The Group's activities expose it to a variety of financial risks. The Group's overall risk management program seeks to minimise potential adverse effects on the Group's financial performance.

Risk management for the Group is carried out by the treasury function that is integrated in Seadrill's management organisation. Final authority is, however, retained within the Company. Treasury identifies, evaluates and hedges financial risks in close co-operation with the operating units within the Group. The Board approves the principles for overall risk management, as well as policies covering specific areas, such as foreign currency risk, price risk interest rate risk, credit risk, and liquidity risk.

Foreign Currency risk

The Group's assets are nominated in USD and most of the Group's revenues are also nominated in USD. Part of the revenue from the Group's contracts with Petrobras is nominated in Brazilian Reais. The revenue split on these contracts corresponds to the Group's costs in Reais and represent a natural hedge. The Group may use forward contracts to manage the foreign exchange risk arising from future commercial transactions and recognised assets and liabilities. As of 31 December 2014, no forward contracts have been entered.

The consequence of a +/- 5% change in exchange rates on profit or loss and equity for USD / BRL is USD 0.3 million.

The Group's sensitivity to foreign currency has increased during the current year mainly due to the increase in sales and purchases denominated in BRL in the last quarter of the financial year which has resulted in higher BRL denominated trade receivables and payables.

Price risk

Changes to the price level of goods and services acquired may affect the Group, whereafter price developments are carefully monitored. The Group seeks to handle the risk through contract clauses with its customers. Furthermore, operating cost inflation is mitigated through annual dayrate adjustments for Sevan Driller and Sevan Brasil.

Interest rate risk

All of the Group's debt is subject to interest rates which fluctuate with the market. A change in interest rate of +/- 1% would affect the Group's interest cost with +/- USD 15.2 million (2013: 14.0 million). This sensitivity analysis has been determined based on an assumption that the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 100 basis point increase or decrease is used when reporting interest rate risk internally to the Board and represents management's assessment of a reasonably expected change in interest rates.

The Group continuously considers whether part of the interest rate exposure should be hedged. As of 31 December 2014, no interest rate hedges have been entered.

Credit risk

Credit risk arises from derivative financial instruments and deposits with banks and financial institutions, as well as exposures to customers. The Group has no significant concentration of credit risk towards any single financial institution and has policies that limit the amount of credit exposure to individual institutions.

The Company's customers are all engaged in the offshore oil and gas industry and consist primarily of major integrated oil companies, independent oil and gas producers and government-owned oil companies. The Company performs ongoing credit evaluations of its customers and generally does not require collateral for amounts outstanding. The Company's current counterparties are Petrobras for Sevan Driller and Sevan Brasil, and LLOG for Sevan Louisiana. The Group has not had a history of collection problems, significant disputes, and continues to closely monitor ongoing material matters with these customers. No provision for doubtful accounts has been recognised in the periods presented.

Liquidity risk

The Group's objective is to maintain flexibility of financing by providing sufficient credit lines when managing liquidity. This may include maintaining sufficient cash and marketable securities, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. Liquidity is sensitive to operational uptime on the units performing contracts. Reference is made to Note 16 for a maturity analysis of the Group's financial liabilities.

The Group will have to finance the USD 425.0 million of final instalment of Sevan Developer and any mobilisation costs and customer required variations, if and when delivery of the rig occurs. This, however, will only be done if a satisfactory employment contract has been secured upon which external financing can be raised. If the contract is terminated, the paid instalments of USD 105.2 million will be refunded.

The Company cancelled tranche B under the bank loan facility that was available for funding the final delivery instalment for Sevan Developer in 2014.

In December 2014, the Company amended the RCF. The amended terms increased the available amount to USD 300.0 million with an interest margin of 6.0% and extend the term to December 2016. At year-end, USD 115.0 million was drawn thereunder. With these amended terms and cash flow from operations, the Company is forecasting adequate liquidity for the next 12 to 24 months. If the RCF cannot be renewed at expiry or replaced with another facility on similar or better terms there is a risk that the Company does not have adequate liquidity beyond 2016.

CORPORATE SOCIAL RESPONSIBILITY

Being socially responsible is integrated throughout the Group's business. The Board has defined the Group's values and adopted ethical guidelines applicable to all employees and contractors.

Health, safety and environment

The Group's core business principles involve ensuring the health and safety of employees and taking care of the environment. The Group strives for a working environment which provides job satisfaction and good health conditions. The aim is a safe and inspiring working environment characterized by mutual respect and cooperation.

The Group had 28 incidents in 2014, of which 1 was a fatality. The Total Recordable Injury Rate amounted to 0.74 for 2014, which is below the industry average of 0.75. Sick leave amounted to approximately 3.0 percent for the Group for the year.

The Group's operations are subject to numerous laws and regulations in the form of international treaties and maritime regimes, flag state requirements and national environmental laws and regulations in force in the jurisdictions in which our drilling units operate or are registered.

The Group conforms its policies for compliance with these laws and regulations through the Seadrill policies and procedures for health, safety and the environment. The basic fundamentals of safety performance at Seadrill are based on continuous improvement through proactive initiatives in four key areas: safety leadership, risk assessment and hazard recognition, management system and auditing and control. Seadrill has laid down a series of procedures in its management system to contribute to keeping the environment as clean as possible. Emergency response plans have been established to limit harm to the environment in the case of accidental emissions. The Group reviews the performance of the management system daily and at regular intervals as defined in the management agreements with Seadrill.

The Group's drilling units have an environmentally friendly profile. The Group works continuously to minimize and reduce the environmental impacts of their operations. However, their operations involve activities that entail potential risks to the external environment.

Employment and labour practices

The Group makes efforts to ensure all employees are given equal opportunities for personal and professional development. Every employee is treated equally regardless of gender, age, ethnic origin and functional ability. The Group does not tolerate harassment or victimization of another employee or colleague, whether sexual, racial or otherwise.

The Board and Management continue to focus on equal opportunities for men and women among its direct employees and board members. Two of five board members are women. On average for the year, approximately 8 percent of the employees in the Group are women.

In 2014, the Group completed an internal restructure, whereby corporate and regional activities were consolidated, and direct employment was significantly reduced due to general administrative service being provided by Seadrill through the management agreements. At 31 December 2014, the Company has 4 direct employees in Norway and approximately 514 employees seconded into operating subsidiaries.

The Group has not implemented any specific measures in order to meet the objectives of the Discrimination Act and of the Anti-discrimination and Accessibility Act. The need for specific measures in this respect is continuously considered by the Board and Management.

Human rights

The Group's aim is to carry out its business without any violation of basic human rights. Operations are carried out in accordance with internationally recognized human rights standards. The Group supports the UN's Universal Declaration of Human Rights and its work to end forced labour, discrimination and child labour.

Anti-corruption

The Group rejects all forms of corruption, and seeks to identify and eliminate all facilitation payments and enhance transparency in all business transactions. If any employee is in doubt, it is an obligation to elevate the ethical dilemma to their supervisor or manager.

In November 2013, the Board aligned its anti-bribery and corruption compliance manual with Seadrill. At least once a year a risk assessment is conducted and the results communicated to the Board. In 2014, no additional risks were identified that were not documented in the manual.

CORPORATE GOVERNANCE

The Company is committed to sound corporate governance principles contributing to optimal value creation over time. The objective of the Company's corporate governance is to regulate the division of roles between shareholders, the Board and Management more comprehensively than what is required by legislation.

Section 1 - Implementation and reporting on corporate governance

The Board has the ultimate responsibility for ensuring that the Company governance is adequate and has, as a consequence, prepared and approved the Company's policy for corporate governance. The Company, through the Board and Management, carries out an annual review of the policy.

The Norwegian Accounting Act includes provisions on corporate governance in its Section 3-3b which impose a duty on the Company to issue an annual statement on its principles and practice for corporate governance. These provisions also stipulate minimum requirements for the content of this report.

The Norwegian Corporate Governance Board has issued the Norwegian Code of Practice for Corporate Governance (the "Code"). Adherence to the Code is based on the "comply or explain" principle, which means that a company must comply with the recommendations of the Code or explain why it has chosen an alternative approach to specific recommendations.

Oslo Børs requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code in force at the time. The Continuing Obligations of listed companies are available on www.oslobors.no.

The Company complies with the above mentioned rules and regulations, including the current Code, unless otherwise specifically stated.

The Company has not established separate guidelines for corporate social responsibility as recommended by the Code.

The Company was established and listed on Oslo Børs in 2011 and is continuously considering the need for developing further guidelines.

Section 2 – Business activity

The Company's business objective is set out in its articles of association section 3, which defines it as: "To own and/or operate, directly or indirectly, drilling rigs and activities related thereto, as well as investing in other companies."

The Company's articles of association are available at the Company's website, www.sevandrilling.com.

The Company's long term objective, following the clause above, is to become a premier drilling contractor owning units specialising in offshore drilling in ultra-deep water.

The Company will pursue the following main strategies to reach its overall objective (1) Monetise its current design and technology by delivering safe, efficient and cost effective service to its customers, (2) pursue technological advancements with its unique hull design and (3) develop a strong and motivated work force that delivers outstanding service and results.

Section 4 – Health, safety and environment guidelines

The Company believes that all incidents and accidents that cause personal injury or environmental damage should be prevented. It strives to achieve zero incidents and accidents by developing a culture where all employees take responsibility for their own safety, for the safety of their co-workers, for process safety and to protect the environment. The Company encourages all employees to report all unsafe activity or conditions and to stop activities until appropriate risk measures are in place.

A management system is established in cooperation with the employees, ensuring commitment to health, safety, the environment, quality management, continuous improvement of operations and risk management.

Section 5 – Ethical guidelines

The Company aims to maintain a high ethical standard in its relations with customers, suppliers and employees.

Section 6 – Company capital and dividend

The Board aims to maintain a satisfactory equity ratio in the Company suitable to the Company's goals, strategy and risk profile, thereby ensuring that there is an appropriate balance between equity and other sources of financing. The Board regularly assesses the Company's capital requirements.

The Company's objective is to generate a return for its shareholders through dividends and increases in its share price that is at least in line with the return available on similar investment opportunities of comparable risk. Due to the current market conditions, the Company does not intend to pay dividend to shareholders in the short term.

The Group has no restrictions for making dividend payments in its loan agreements.

The Board will not, as a main rule, propose that authorisation is granted to it to increase the share capital and/or to repurchase the Company's shares for periods longer than until the next AGM.

Section 7 - One class of shares

The Company has one class of shares with equal rights.

Section 8 – Transactions with related parties

Any transactions, agreements or arrangements between the Company and its shareholders, members of the Board, members of Management or close associates of any such parties shall only be entered into as part of the ordinary course of business and on arm's length market terms. All such transactions shall comply with the procedures set out in the Norwegian Public Limited Liability Companies Act or similar provisions, as applicable. The Board shall always consider to obtain a valuation from an independent third party unless the transaction, agreement or arrangement in question are immaterial. The Company's financial statements shall provide further information about transactions with related parties.

Section 9 - Freely negotiable shares

The shares in the Company are freely tradable.

Section 10 - The general meeting

The AGM is the Company's highest authority. The Board strives to ensure that the AGM is an effective forum for communication between the shareholders and the Board, and encourages shareholders to participate in the meeting.

The notice of the AGM is made available on the Company's website, www.sevandrilling.com, and sent to shareholders no later than 21 days prior to the meeting, as recommended by the Code.

The deadline for shareholders to give notice of their intention to attend the meeting is set as close to the date of the meeting as possible.

Further information regarding the agenda for the AGM and supporting documents for the matters to be considered at the AGM is set out in section 7 of the Company's articles of association. The notice will set out information about how to attend through a proxy, including a form to appoint a proxy.

The person chairing the AGM will make appropriate arrangements for the AGM to vote separately on each candidate nominated for election to the Company`s corporate bodies. Members of the Board and the nomination committee, as well as, the Company's auditor shall be present at the AGM.

Section 11 - Board of directors – composition – Nomination Committee

According to section 5 of the Company's articles of association, the Board shall consist of three to nine members. The Board is appointed by the Company's general meeting (normally the AGM), after proposal from the Nomination Committee, cf. section 6 of the articles of association.

The current Board does not include any members from the Management. All members, save for Mr. Per Wullf (who is the CEO of Seadrill Management) are considered independent of the Company's material business contacts and the Company's main shareholder, Seadrill.

The members of the Board represent varied and broad experience from relevant industries and areas of technical speciality, and the members bring experience from both Norwegian and international companies.

More information about the board members expertise and background, as well as their holdings of shares in the Company can be found on the Company's website, www.sevandrilling.com

According to section 6 of the Company's articles of association the Company has a nomination committee consisting of three members. The members of the nomination committee are elected by the AGM. The following three members were elected at the Company's AGM in 2014:

• Harald Thorstein, chairman
• Jarle Sjo
• Geir Tjetland

The members were elected for a period of two years. At the same AGM, instructions to the committee were approved. The members are independent of the Board and the management of the Company. Pursuant to section 6 of the articles of associations, the nomination committee shall propose candidates to the Board to the general meeting in connection with notices thereof. The nomination committee shall also make proposal for the remuneration of the Board. The nomination committee shall consult with shareholders, board members and the CEO of the Company as a basis for the nomination of candidates to the Board.

Section 12 – Sub-committees of the Board

The Company shall have a remuneration committee appointed by the Board. The purpose of the committee is to (i) evaluate and propose the compensation of the Company's chief executive officer (the "CEO") and other senior executives, (ii) produce an annual report on the compensation of the executive management team, which shall be included in the Company's annual accounts pursuant to applicable rules and regulations, including accounting standards, promulgated from time to time and (iii) evaluate and propose incentive compensation plans and equity based plans for the Company and any subsidiaries.

Further details on the committee's duties and responsibilities are included in the instructions to the remuneration committee approved by the Board. The Board has appointed Birgitte R. Vartdal and Per Wullf as members of the remuneration committee.

The Company has an audit committee appointed by the Board as set out in the Norwegian Public Limited Liability Companies Act. The audit committee is appointed by the Board to assist the Board in fulfilling its obligations and responsibilities in respect to financial reporting, auditing and internal control. The Board has appointed Kristian Johansen and Birgitte R. Vartdal to the audit committee, both being independent and having accounting qualifications. The audit committee will not make any decisions on behalf of the Board, but will present its assessment and recommendations to the Board. The Board has approved instructions to the audit committee. The Board may also appoint other sub-committees, as deemed necessary or appropriate.

Section 13 – Responsibilities of the Board

The Board prepares an annual plan for its work with special emphasis on goals, strategy and implementation. The Board's primary responsibility is the development and approval of the Company's strategy, performing necessary monitoring functions, and acting as an advisory body for the management team.

The Company's strategy is regularly subject to review and evaluation by the Board. Its duties are not static, and the focus will depend on the Company's ongoing needs. The Board is also responsible for ensuring that the operation of the Company complies with the Company's values and ethical guidelines. The Chairman of the Board is responsible for ensuring that the Board's work is performed in an effective and correct manner. The Board is responsible for the appointment of the CEO.

The Board shall ensure that the Company has satisfactory management resources with clear internal distribution of responsibilities and duties. Further details on the duties of the Board are included in the instructions to the Board. In accordance with the provisions of the Norwegian company law, the terms of reference for the Board are set out in a formal mandate that includes specific rules and guidelines on the work of the Board and decision making.

The Board does not include any members from Sevan's executive management team and all members are considered independent of Sevan's material business contracts. Board member Per Wullf is currently the CEO and President of Seadrill Management. The four other members who served on the Board during the year are considered independent of Sevan's main shareholder.

Section 14 - Risk management and internal control

The Board shall ensure that the Company has sound internal control systems and risk management procedures that are appropriate in relation to the extent and nature of the Company's activities. The internal control and risk management systems shall also encompass the Company's corporate values and ethical guidelines. The objective of the risk management and internal control systems shall be to manage exposure to risks in order to ensure successful conduct of the Company's business and to support the quality of its financial reporting.

The Board shall carry out an annual review of the Company's most important areas of exposure to risk and its internal control arrangements.

Section 15 - Board Compensation

Remuneration of the members of the Board shall be reasonable and based on the Board's responsibilities, work, time invested and the complexity of the enterprise. This remuneration shall be set by the AGM based on a proposal from the nomination committee. The compensation shall be a fixed, annual amount. The Chairman of the Board may receive a higher compensation than the other members. The Board shall be informed if individual members perform other tasks for the Company than exercising their role as directors. Work in sub-committees may be compensated in addition to the remuneration received for board membership. The Company's annual accounts provide information about the Board's compensation.

Section 16 – Compensation of executive management

The Board decides the salary and other compensation to the CEO, however so that any compensation linked to the value of the Company's shares shall be approved by the AGM in accordance with the Norwegian Public Limited Companies Act.

The CEO determines the remuneration of executive employees based on guidelines for the remuneration prepared by the Board through the remuneration committee.

The Company does not, at present, operate a management incentive scheme and the Board has no plans at this stage to propose such a scheme. The Company has certain outstanding options issued to previous management, which are described in further details under the Remuneration and Benefits section.

Section 17 - Information and communications

The Company maintains a proactive dialogue with analysts, investors and other stakeholders of the Company. The Company strives to continuously publish relevant information to the market in a timely, effective and non-discriminatory manner and has a clear goal to attract both Norwegian and foreign investors and to promote higher stock liquidity.

All stock exchange announcements are made available on the Oslo Børs website, www.newsweb.no, as well as on the Company's website, www.sevandrilling.com. The announcements are also distributed to news agencies and other online services through Thomson Reuters.

The Company publishes the dates for important events such as general meetings, reports, open presentations, payment of dividends etc. annually.

The Company publishes its preliminary annual accounts by the end of February and the complete annual report, including its final annual accounts and the annual report from the Board, is available no later than 30 April each year.

Section 18 - Auditor

The Company's accounts are audited by PricewaterhouseCoopers AS.

Each year the auditor presents a plan to the Board for the audit work and confirms that the auditor meets established requirements as to his independence and objectivity.

The auditor shall be present at the Board meeting where the annual accounts are considered. Whenever necessary, the Board shall meet with the auditor to review the auditor's view on the Company's accounting principles, risk areas, internal control routines etc.

The use of the auditor as a financial advisor to the Company shall be limited to cases where such use will not affect or question the auditors' independence and objectiveness as such. Only the CEO shall have the authority to enter into agreements in respect of such advisory assignments.

In connection with the auditor's presentation to the Board of the annual work plan, the Board should specifically consider if the auditor to a satisfactory degree also carries out a control function. The Board shall arrange for the auditor to attend general meetings as and where appropriate.

Section 19 - Take-overs

The Board has established guiding principles for how it will act in event of a take-over bid for the Company. It sets out that the Board will

• seek to follow the general principle of equal treatment;
• seek to ensure that the Company's business activities are not disrupted unnecessarily;
• seek to ensure that shareholders are given sufficient information and time to form a view of the takeover bid;
• not unjustly seek to prevent the take-over bid, unless this is believed to be in the interests of the Company and all of the shareholders;
• in due course issue a statement on the take-over bid in accordance with statutory requirements and applicable Norwegian corporate governance recommendations; and
• consider and, if deemed necessary or purposeful, arrange for a valuation of the take-over bid by an independent expert, the conclusion of which will be made available to shareholders.

Any transaction that is in effect a disposal of the Company's activities will be submitted to a general meeting for approval.

REMUNERATION AND BENEFITS

The remuneration payable to the directors will be set by the AGM. No member of the Board is entitled to severance pay or other benefits upon termination of his/her term.

The CEO receives a base salary, bonus and benefits, which are evaluated in accordance with Section 16 of Governance and disclosed in Note 6 to the Consolidated Financial Statements.

The Company has established a long-term incentive scheme based on grants of share options to certain management members and other employees, based on an authorisation granted to the Board in the extraordinary general meeting on 9 January 2012.

As of this date, the Board does not intend to issue any further grants and all grants are held by former employees, except one employee not in senior management. The outstanding options fully vested upon the change of control in July 2013 and will expire by the end of December 2017. The option program comprises of 9,738,326 options issued. Each of the options entitles the holder to subscribe for one new ordinary share in the Company or a cash settlement, at an exercise price per share of NOK 5.75 (market price at the time of grant).

As of 31 December 2014 the Company had not set aside or accrued any amounts for pensions, retirement or similar benefits, except from what is specified in note 13.

RESPONSIBILITY STATEMENT

The Board and the CEO have today considered and approved the report and the financial statements for the Sevan Drilling Group and the parent company Sevan Drilling ASA for the year ending 31 December 2014.

The consolidated financial statements of Sevan Drilling ASA have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and such additional disclosure requirements as stated in the Norwegian Accounting Act that are applicable per 31 December 2014.

The financial statements for Sevan Drilling ASA have been prepared in accordance with the Norwegian Accounting Act and those Generally Accepted Accounting Principles in Norway that are applicable per 31 December 2014. The Director's report for the Sevan Drilling Group and Sevan Drilling ASA has been prepared in accordance with the Norwegian Accounting Act and the Norwegian Accounting Standard no. 16 applicable per 31 December 2014.

We confirm that, to the best of our knowledge:

• the financial statements for the Sevan Drilling Group and Sevan Drilling ASA for the year ending 31 December 2014 have been prepared in accordance with applicable accounting standards;
• the information in the financial statements gives a true and fair view of the Sevan Drilling Group's and Sevan Drilling ASA's assets, liabilities, financial position as of 31 December 2014 and results of operations for the year ending 31 December 2014; and
• our report for the year ending 31 December 2014 includes a fair view of:
• − the development, results of operations and position for the Sevan Drilling Group and Sevan Drilling ASA; and
• − the principal risks and uncertainties relevant to the operation of the Sevan Drilling Group and Sevan Drilling ASA.

Oslo, 23 April 2015 The Board of Directors

Chairman Vice chairman Board member

Per Wullf Birgitte Ringstad Vartdal Scott McReaken Board member Board member Managing Director

Erling Lind Kristian Johansen Ragnhild Wiborg

Consolidated Financial Statements For the Period Ended 31 December 2014

Consolidated Financial Statements

Consolidated Income Statement

Figures in USD million	Note	2014	2013
Operating revenue	4	321.0	249.7
Operating expense	5	-42.6	-87.9
Depreciation, amortisation and impairment	11	-173.2	-64.1
Employee benefit expense	6	-87.9	-87.8
Other operating expense	5	-66.6	-23.3
Foreign exchange gain/(loss) related to operation		1.0	-1.2
Total operating expense		-369.3	-264.3
Operating (loss)/profit	4	-48.3	-14.6
Financial income	7	0.0	0.2
Financial expense	7	-70.2	-84.7
Foreign exchange gain/(loss) related to financing		-	-4.6
Net financial items		-70.2	-89.1
Loss before tax		-118.5	-103.7
Tax (expense)/income	8	-6.5	-52.9
Net loss		-125.0	-156.6
Attributable to:
Equity holders of the Company		-125.0	-156.6
Earnings per share for profit/(loss) attributable to the equity holders of the Company during the year (USD per share):
	Note	2014	2013
- Basic earnings per share	10	-0.21	-0.28
- Diluted earnings per share	10	-0.21	-0.28
Consolidated Comprehensive Income
Figures in USD million		2014	2013
Net loss		-125.0	-156.6
Foreign currency translation		-1.0	-2.0
Comprehensive loss		-126.0	-158.6

Attributable to:
Equity holders of the Company	-126.0	-158.6

The notes on pages 24 to 46 are an integral part of these consolidated financial statements

Consolidated Balance Sheet

Figures in USD million	Note	2014	2013
ASSETS
Drilling rigs	11	1,833.8	1,916.6
Other fixed assets	11	1.1	19.2
Other non-current assets	12	24.9	40.4
Total non-current assets		1,859.8	1,976.2
Inventories	14	46.5	26.9
Trade and other receivables	15	55.1	32.4
Cash and cash equivalents		30.2	128.7
Total current assets		131.8	188.0
Total assets		1,991.6	2,164.2
EQUITY
Share capital	18	108.6	108.6
Share premium	18	666.0	666.0
Other equity		-216.9	-90.9
Total equity		557.7	683.7
LIABILITIES
Interest-bearing debt	16, 21	1,188.0	1,196.1
Other non-current liabilities	16	0.4	0.1
Total non-current liabilities		1,188.4	1,196.2
Trade payables	17	41.1	74.5
Current portion of interest-bearing debt	16, 21	133.0	173.1
Other current liabilities	17	71.4	36.7
Total current liabilities	17	245.5	284.3
Total liabilities		1,433.9	1,480.5
Total equity and liabilities		1,991.6	2,164.2

The notes on pages 24 to 46 are an integral part of these consolidated financial statements

Oslo, 23 April 2015 The Board of Directors

Erling Lind Kristian Johansen Ragnhild Wiborg Chairman Vice chairman Board member

Per Wullf Birgitte Ringstad Vartdal Scott McReaken Board member Board member Managing Director

.

Consolidated Statement of Changes in Equity

					Other equity
Figures in USD million	Note	Share capital	Share premium	General reserve	Equity settled employee benefits reserve	Foreign currency translation reserve	Retained earnings	Total equity
1 January 2014	18	108.6	666.0	280.0	2.4	-2.8	-370.5	683.7
Net profit/(loss)		-	-	-	-	-	-125.0	-125.0
Foreign currency translation		-	-	-	-	-1.0	-	-1.0
Comprehensive loss		-	-	-	-	-1.0	-125.0	-126.0
31 December 2014	18	108.6	666.0	280.0	2.4	-3.8	-495.5	557.7
1 January 2013	18	61.9	533.9	280.0	1.4	-0.8	-213.9	662.5

Net profit/(loss)		-	-	-	-	-	-156.6	-156.6
Foreign currency translation		-	-	-	-	-2.0	-	-2.0
Comprehensive loss		-	-	-	-	-2.0	-156.6	-158.6
Capital increase	18	46.7	138.0	-	-	-	-	184.7
Transaction cost equity raise	18	-	-5.9	-	-	-	-	-5.9
Fair value of share options		-	-	-	1.0	-	-	1.0
31 December 2013	18	108.6	666.0	280.0	2.4	-2.8	-370.5	683.7

The notes on pages 24 to 46 are an integral part of these consolidated financial statements

.

Consolidated Cash Flow Statement

Figures in USD million	Note	2014	2013
Cash flows from operation activities
Cash from operations	19	45.5	23.4
Tax paid		-1.8	-
Interest paid		-53.2	-44.9
Net cash (used in)/generated from operating activities		-9.5	-21.5
Cash flows from investment activities
Purchases of property, plant and equipment (PPE)		-29.0	-558.1
Interest rate swap settlement		-	-17.1
Net cash used in investing activities		-29.0	-575.2
Cash flows from financing activities
Net proceeds from capital increase		-	178.9
Proceeds from interest-bearing debt		115.0	1,400.0
Deferred transaction fees on interest-bearing debt		-	-30.8
Repayment of interest-bearing debt		-175.0	-899.5
Net cash generated from/(used in) financing activities		-60.0	648.6
Net cash flow for the period		-98.5	51.9
Cash balance at beginning of period		128.7	76.8
Cash balance at end of period*	19	30.2	128.7

Cash and cash equivalents
Figures in USD million	2014	2013
Cash at bank and in hand	30.2	126.8
Restricted employees' tax deduction fund	-	1.9
Total cash and cash equivalents	30.2	128.7

The notes on pages 24 to 46 are an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all financial years presented, and are the same as previous periods, except as described in 1.16 and 1.19. The presentation currency of the Group is USD which corresponds to the functional currency of the majority of the entities in the Group. All figures are in USD million unless otherwise stated.

1.1 Basis of Preparation

The consolidated financial statements of the Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union (EU) that are effective for the year ended 31 December 2014.

The consolidated financial statements have been prepared on a going concern basis under the historical cost convention as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group's accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.

1.1.1 Changes in Accounting Policy and Disclosures

a) New and amended standards adopted by the Group

In the current year, the Group has applied a number of new and revised IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2014. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements. These new and revised standards include:

• Amendments to IAS 32 Offsetting financial assets and financial liabilities
• Amendments to IAS 36 Impairment of assets
• Amendments to IAS 39 Financial instruments: recognition and measurement
• Amendments to IFRS 10, IFRS 12, and IAS 27 Investment entities

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

b) New standards and interpretations not yet adopted,

The following new standards and amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2015, and have not been applied in preparing these consolidated financial statements:

• IFRS 9 Financial instruments²
• IFRS 15 Revenue from contracts with customers¹

1 Effective for annual periods beginning on or after 1 January 2017

2 Effective for annual periods beginning on or after 1 January 2018

The directors of the Company do not anticipate that the application of these standards and amendments will have a significant impact on the Group's consolidated financial statements in the period of initial application.

1.2 Consolidation

Subsidiaries

Subsidiaries comprise all entities over which the Group has the power to govern the financial and operating policies, where the Group is exposed or has rights to variable returns from its involvement with the investee and where it has the ability to use its power to affect its returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases.

The Group uses the acquisition method to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred assumed at the date of exchange. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of the acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement immediately.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group.

1.3 Segment Reporting

The Board of Directors of the Company (which is identified as the chief operating decision maker in the Group ("CODM")), along with management has reassessed the operating segments in 2014. Since the first quarter of 2014, the Group has aggregated its rigs into a single reporting unit representing the fleet as a whole, this is mainly based on evaluation of IFRS 8.12 as aggregating same core characteristics. Sevan Louisiana began operations in the second quarter of 2014. The construction of Sevan Developer was completed in Q4 2014, except for sea trials and final commissioning.

The CODM evaluates the operating performance of each rig but is focused on the overall results of the Group, based on several key metrics at the Group level, including revenue, operating profit, EBITDA and net cash.

1.4 Foreign Currency Translation

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which each entity operates (the "Functional Currency"). The consolidated financial statements are presented in USD, which is the Group's presentation currency.

Transactions and balances

Foreign currency transactions are translated into the Functional Currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from settlement of such transactions (realised items) and from translation at exchange rates prevailing at the balance sheet date of monetary assets and liabilities denominated in foreign currencies (unrealised items) are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges. This will be the case only from the point in time when hedge accounting is implemented.

Foreign exchange gains and losses that relate to interest-bearing debt and cash and cash equivalents are presented (net) as a separate line item in the income statement within net financial items. Foreign exchange gains and losses that relate to operations are presented (net) as a separate line item in the income statement within operating expenses.

Group companies

The results and financial position of all Group entities (none of which has the currency of a hyperinflationary economy) that have a Functional Currency different from the presentation currency, are translated into the presentation currency as follows:

Assets and liabilities are translated at exchange rates prevailing at balance sheet date.

Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates in which case income and expenses are translated at exchange rates prevailing at the dates of the transactions).

Upon consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments are taken to other comprehensive income if relevant. When a foreign operation is sold, exchange differences that were recorded in equit y are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

1.5 Property, Plant and Equipment

Fixed assets are stated at historical cost less accumulated depreciation. The Group has not used, and has no plans of utilising, the revaluation option in IAS 16. Depreciation is calculated using the straight-line method.

Historical cost includes expenditure that is directly attributable to the acquisition of the relevant asset. Costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. Received and approved invoices are the basis of capitalisation.

Costs related to periodic overhauls of drilling rigs are capitalised under capital assets and amortised over the anticipated period between overhauls. This is generally five years. Related costs are primarily yard costs and the cost of employees directly involved in the work. Amortisation costs for periodic overhauls are included in depreciation, amortisation and impairment expense. Costs for other repair and maintenance activities are included in operating expenses and are expensed as incurred.

General and specific borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (which are assets that necessarily take a substantial period of time to get ready for their intended use) are added to the cost of those assets, until such time as the assets are substantially ready for their intended use.

Each major component of the Group's rigs is depreciated separately when the rigs are available for intended use. A major component is defined as a part with a cost that is significant in relation to the total cost of the asset. An estimation of useful lives indicates an average depreciation period of 20-30 years.

Other fixed assets consist of furniture, fixtures and equipment that are depreciated using the straight-line method over their estimated useful lives ranging from three to ten years.

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in the income statement.

1.6 Construction in Progress

Construction contracts are capitalised as construction in progress based on instalments payable to the yard and other suppliers. Received and approved invoices are the basis of capitalisation. Insurance and net financial expenses during the construction period are capitalised as construction in progress. Cost of labour directly attributable to the construction of the Group's rigs is also capitalised. Costs of training, manning and other pre-operational activities are expensed as incurred.

1.7 Intangible Assets

Computer software

Acquired computer software is capitalised on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives, ranging from three to five years. Costs associated with developing or maintaining computer software programs are recognised in the income statement as incurred.

Research and Development

Costs associated with research are expensed as incurred. Development costs are expensed when the criteria for recognition are not met.

1.8 Impairment of Non-Financial Assets

Assets that have an indefinite useful life are not subject to amortisation but are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less cost to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels at which separate cash flows are identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

1.9 Financial Instruments

Loans and receivables are measured at fair value at the transaction date and subsequently re-measured at amortised cost. Loans and receivables are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. Financial instruments are classified as current, except for those with maturities greater than 12 months after the balance sheet date, in which case they are classified as non-current.

Derivative financial instruments are initially recognised at fair value at the date a derivative contract is entered into and are subsequently re-measured at fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates derivatives as hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).

Hedge accounting has not been applied in the periods presented.

1.10 Share-based Payments

The Group has an equity-settled, share-based compensation plan, under which employees can be awarded equity instruments (options) to subscribe for shares in the Company as a long term incentive. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount expensed has been determined by reference to the fair value of the options granted:

• including any market performance conditions (for example, an entity's share price);
• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and
• including the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market performance and service conditions were included in assumptions about the number of options that were expected to vest. The total expense was recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. Ninety days after Seadrill's acquisition of a controlling interest in the Company, all outstanding options became vested. No new options have been granted.

At the end of each reporting period, the Group revised its estimates of the number of options that were expected to vest based on the non-market vesting conditions. It recognised the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The grant by the Company of options over its shares to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

The social security contributions payable in connection with the grant of the options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.

1.11 Inventories

Inventories consist of diesel and spare parts on the rigs which do not meet the definition of property, plant and equipment. Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Cost is determined using the average cost method.

1.12 Trade Receivables

Trade receivables are amounts due from customers for services performed in the ordinary course of business and are classified as current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The impairment charge is recognised in the income statement as 'other operating expense'.

1.13 Cash and Cash Equivalents

In the consolidated statement of cash flow, cash and cash equivalents include cash in hand, bank deposits, and other short-term highly liquid investments with a maturity of less than three months.

1.14 Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company acquires the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable transaction cost and income tax, is included in equity attributable to the Company's equity holders.

1.15 Interest-Bearing Debt

Interest-bearing debt is initially recognised at fair value, net of transaction cost incurred. Interest-bearing debt is subsequently stated at amortised cost; any difference between the proceeds (net of transaction cost) and the redemption value is recognised in the income statement over the period of the interest-bearing debt using the effective interest method. Interest-bearing debt is classified as a current liability unless the Group has an unconditional right to defer settlement for more than 12 months after the balance sheet date.

1.16 Current and Deferred Income Tax

The tax expense for the period comprises current tax and the change in deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit and loss. Deferred income tax is determined using tax rates (and legislation) that have been enacted or substantially enacted by balance

sheet date and are expected to apply when the deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. The tax base included in the calculation of deferred income tax is calculated in local currency and translated into USD at foreign exchange rates prevailing at the balance sheet date. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

In 2014, Management reassessed the nature of gross revenue tax in Brazil and determined that it is better classified as a reduction of revenue due to the starting point for determining the amount of tax paid being more dependent on the amount of gross sales than on a concept of a taxable profit.

1.17 Provisions

A provision is recognised in the balance sheet when the Group has a 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 and the amount has been reliably estimated.

Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured as the present value of the expected expenditures required to settle the obligation using a pretax discount rate that accounts for time value of money and risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

1.18 Trade Payables

Trade Payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method and are classified as current liabilities.

1.19 Revenue Recognition

Revenue comprises the fair value of the consideration receivable for the sale of services and charter in the ordinary course of the Group's activities. Revenue is shown, net of value-added tax, estimated returns, rebates and discounts and after eliminated sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue is recognised as follows:

Charter revenues are recognised on a straight-line basis over the contract period during which the services are rendered, and at the rates established in the underlying contracts. Under some contracts, the Company is entitled to additional payments for meeting or exceeding certain performance targets. Such additional payments are recognised when any uncertainties are resolved or upon completion of the drilling program.

Penalties imposed as compensation to the customer for delivery of a rig later than contractually agreed shall be accrued for on a separate account in the balance sheet at the date the charter contract commences. If any part of the penalty is recoverable from vendors due to directly correlated delays caused by them, the penalty recoverable from the vendor shall offset the accrual of penalties payable to the customer. The net accrued amount is amortised over the fixed term of the charter contract as a reduction of income.

Mobilisation expenses are offset by mobilisation revenues and recognised using the straight line method over the full fixed term of the underlying charter contract, and classified as operating expense.

Interest income is recognised on a time-proportion basis using the effective interest method.

Up to 31 December 2013, the Group classified the gross revenue tax in Brazil as tax expense. In 2014, Management reassessed the nature of this expense and determined that it is better classified as a reduction of revenue due to the starting point for determining the amount of tax paid being more dependent on the amount of gross sales than on a concept of a taxable profit.

1.20 Operating Expenses

Rig operating expenses are costs associated with operating a rig that is either in operation or stacked, and include the remuneration of offshore crews and related costs, rig supplies, insurance costs, expenses for repairs and maintenance as well as costs related to onshore personnel in various locations where we operate the rigs and are expensed as incurred.

1.21 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

When assets owned by the Group are leased to customers under an operating lease, the asset is included in the balance sheet based on the nature of the asset.

Note 2 – Accounting Estimates and Judgements

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

2.1 Critical Accounting Estimates and Assumptions

The Group makes estimates and assumptions concerning the future. These estimates and assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.

Impairment of assets

The Group has tested whether its rigs have suffered any impairment, in accordance with the accounting policy stated in Note 1.8. The recoverable amounts of the assets have been determined based on value-in-use calculations. These calculations require the use of estimates.

Income taxes

The Group is subject to income taxes in various jurisdictions. Judgment is required in determining the provision for income taxes. During the ordinary course of business, transactions and calculations occur for which the ultimate tax effect is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

The accounting for deferred income tax assets relies upon management's judgment of the Group's ability to generate future positive taxable income in each respective jurisdiction.

Up to 31 December 2013, the Group classified the gross revenue tax in Brazil as tax expense. In Q1 2014, Management reassessed the nature of this expense and determined that it is better classified as a reduction of revenue due to the starting point for determining the amount of tax paid being more dependent on the amount of gross sales than on a concept of a taxable profit. This is a reclassification of an item on the Income Statement which has no impact on net

income. There is furthermore no impact on the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity, or the Cash Flow Statement. The change has been made retrospectively.

Residual value and useful life

The Group uses estimates when assessing a capital asset's useful life and residual value to determine the depreciation plan for each unit in operation. The actual lives and residual values of these assets can vary depending on a variety of factors.

2.2 Impairment testing

In line with IAS 36, the Group reviews the carrying amounts of its tangible assets at the end of each reporting period to determine whether there is any indication that those assets may be impaired. The net asset value of the Group exceeded its market capitalisation as at 31 December 2014. This is identified as an indicator of a need for impairment of major assets. As a result, each of the Group's rigs was, as of 31 December 2014, identified as a cash-generating unit and tested for impairment. The Sevan Developer was not considered for impairment in this period as the rig is not in service and the investment is secured by bank guarantees.

Note 3 – Financial risk management

The Group's activities expose it to a variety of financial risks. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

The risk management program includes focusing on the unpredictability of financial markets and seeks to minimise potential adverse effects of such risks on its financial performance. Risk management for the Group is carried out by the Treasury function that is integrated in Seadrill. However, final authority is retained in the Company. Treasury identifies, evaluates and hedges financial risks in close co-operation with the operating units within the Group. The Board approves the principles for overall risk management, as well as policies covering specific areas, such as foreign currency risk, price risk interest rate risk, credit risk, and liquidity risk.

Foreign Currency risk

The Group's assets are nominated in US Dollar and most of the Group's revenues are also nominated in US Dollar. Part of the revenue from both Sevan Driller and Sevan Brasil contracts with Petrobras is nominated in Brazilian Reais. This revenue split on Brazil contracts corresponds to the Group's costs in Reais and represent a natural hedge. The Group may use forward contracts to manage the foreign exchange risk arising from future commercial transactions and recognised assets and liabilities. As of 31 December 2014, no forward contracts have been entered.

The consequence of a change in exchange rates +/- 5% on profit or loss and equity for USD / BRL is USD 0.3 million.

The Group's sensitivity to foreign currency has increased during the current year mainly due to the increase in sales and purchases denominated in BRL in the last quarter of the financial year which has resulted in higher BRL denominated trade receivables and payables.

Price risk

Changes to the price level of goods and services acquired may affect the Group, thereafter price developments are carefully monitored. The Group seeks to handle the risk through contract clauses with its customers. Furthermore, operating cost inflation is mitigated through annual dayrate adjustments with Petrobras in Brazil for Sevan Driller and Sevan Brasil.

Interest rate risk

All of the Group's debt is subject to interest rates which fluctuate with the market. A change in interest rate of +/- 1% would affect the Group interest cost with +/- USD 15.2 million (2013: 14.0 million). This sensitivity analysis has been determined based on an assumption that the amount of the liability outstanding at the end of the reporting period was

outstanding for the whole year. A 100 basis point increase or decrease is used when reporting interest rate risk internally to the Board and represents Management's assessment of the reasonably possible change in interest rates.

The Group continuously considers whether part of the interest rate exposure should be hedged. As of 31 December 2014, no interest rate hedges have been entered.

Credit risk

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers. The Group has no significant concentration of credit risk towards single financial institutions and has policies that limit the amount of credit exposure to any single financial institution.

The market for the Company's services is the offshore oil and gas industry. The customers consist primarily of major integrated oil companies, independent oil and gas producers and government-owned oil companies. The Company performs ongoing credit evaluations of its customers and generally do not require collateral in our business agreements. Our current counterparties are Petrobras for Sevan Driller and Sevan Brasil, and LLOG for Sevan Louisiana. The Group has not had a history of collection problems or significant disputes, and continues to monitor specific situations with these customers. Thus no provision for doubtful accounts has been recognised in the periods presented.

Liquidity risk

The Group's objective is to maintain flexibility of financing, by providing sufficient withdrawal facilities when managing liquidity. This may include maintaining sufficient cash and marketable securities, the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. Liquidity is sensitive to operational uptime on the units performing contracts in connection with management's ability to control costs. Reference is made to Note 16 for a maturity analysis of the Group's financial liabilities.

The Group has an unfunded contingent construction liability for USD 425.0 million for the final instalment when the Sevan Developer is delivered. In October 2014, the Group entered into an agreement with Cosco to defer the delivery date for 12 months with options to extend it for successive 6 month periods until October 2017. At the end of the deferral period if options to extend are not exercised, the construction contract will terminate and the USD 105.2 million initial investment will be refunded. Refund guarantees have been provided for the full deferral period. Delivery will occur when an operating contract can be secured that supports financing of the final delivery instalment.

Subsequent to the deferral agreement, the Company cancelled tranche B under the bank facility that was available for funding the final instalment.

In December 2014, the Company amended the terms of the RCF. The amended terms increased the available amount to USD 300 million with an interest margin of 6% and extended the expiry date to December 2016. At year-end, USD 115 million was drawn on the facility. With these amended terms and cash flow from operations, the Company is forecasting adequate liquidity for the next 12 to 24 months. If the RCF cannot be renewed at expiry or replaced with another facility on similar or better terms there is a risk that the Company does not have adequate liquidity beyond 2016.

The Group has no covenants at the balance sheet date. However, the Group could be impacted if Seadrill breaches any of its covenants.

Note 4 – Revenue

In line with the Group's accounting policies, revenue comprises the fair value of the consideration receivable for the sale of services and charter in the ordinary course of the Group's activities, net after applicable taxes on revenue.

All revenue is based on three contracts with two customers. There is no inter-segment revenue. All revenue is from continuing operations.

Revenues from external customers by country, based on the destination of the customer:

Figures in USD million	2014	2013
Brazil	255.4	249.7
US	64.0	-
Other countries	1.6	-
Total	321.0	249.7

Revenue applicable to Brazil is derived from a single external customer during 2014 and 2013. Revenue applicable to US is derived from a single external customer during 2014.

Note 5 – Operating expense

Operating expense
Figures in USD million	2014	2013
Expenses incurred during day to day operations	42.6	87.9
Total operating expense	42.6	87.9
Office cost (IT, rental etc)	21.6	4.6
Consultancy	10.1	11.5
Marketing	0.1	2.7
Other	34.8	4.5
Total other operating expense	66.6	23.3

The amount classified as "Other" includes management charges from subsidiaries of the Group's immediate controlling party, Seadrill Limited. Management fees charged in 2014 amounted to USD 24.5 million. Management charges included pre-commencement rig services, rig crew and staff management services, technical and commercial management services, insurance arrangements, accounting services, fuel procurement as well as other additional services.

Specification of auditor's fee (excl. VAT)

Figures in USD million	2014	2013
Statutory audit	0.3	0.5
Other assurance services	0.1	0.2
Tax consulting	0.1	0.1
Other assistance from auditor	-	0.3
Total audit fees	0.5	1.1

Note 6 – Employee Benefit Expense

Figures in USD million	2014	2013
Wages and salaries	68.3	58.5
Bonuses	3.5	5.1
Employer's contribution tax	3.6	20.1
Pension costs	2.1	0.9
Share based payment - option cost	-	1.1
Other employee benefit expense	10.4	2.1
Total employee expense	87.9	87.8
Average no. of man-years	531	538

Remuneration of Senior Management and Board of Directors

		2014
					Share
Figures in USD thousand		Salaries	Retirement benefits	Other benefits	Options (thousand)	Start date	End date
Scott McReaken	CEO / CFO	710.1	13.8	31.8	-
Pascal Busch	VP QHSE	114.9	-	861.8	-		Mar-14
Eileen Aspehaug	VP HR	189.7	16.3	418.7	-
Erling Lind *	Chairman	79.7	-	-	-
Kristian Johansen	Vice chairman	60.5	-	-	-
Benedicte S. Fasmer	Board member	30.3	-	-	-		Jun-14
Birgitte R. Vartdal	Board member	60.5	-	-	-
Per Wullf	Board member	55.8	-	-	-
Ragnhild M. Wiborg	Board member	27.9	-	-	-	Jun-14
Total remuneration paid		1,329.4	30.1	1,312.3

* Invoiced from Advokatfirmaet Wiersholm AS

The table shows compensation paid during the year and calculated using average exchange rates for the year.

No loans were granted to the CEO, the Chairman of the Board, or to any other related party. No bonuses were paid in 2014 to direct employees, terminated employees or the Board. Other benefits include severance paid as a result of the restructuring activities. For the Group in total USD 2.3 million was paid in 2014 for severance (2013: USD 6.9 million).

In 2014 Kristian Johansen has been the leader of the audit committee and in June 2014, Birgitte R. Vartdal replaced Benedicte Schilbred Fasmer as a member of the audit committee.

Remuneration of Senior Management and Board of Directors

		2013
Figures in USD thousand		Salaries	Retirement benefits	Other benefits	Share options (thousand)	Start date	End date
Scott McReaken	CEO / CFO	86.2	2.0	5.2	-	Nov-13
Scott Kerr	CEO	943.6	21.6	1,290.2	1,600		Nov-13
Jon Willmann	CFO	951.7	22.6	761.0	1,100		Dec-13
Bjørn Egil Gustavsen	VP Projects	444.0	2.6	41.9	500		Oct-13
Gilberto Cardarelli	VP Brazil	547.4	9.3	424.0	333	Feb-13	Dec-13
Paul Grimen	VP Operations	378.0	-	1,008.0	500		Sep-13
Pascal Busch	VP QHSE	428.4	-	-	500
Eileen Aspehaug	VP HR	258.5	19.9	10.0	500
Åsmund Erlandsen	COO	125.0	-	500.0	250	Jul-13	Sep-13
Erling Lind *	Chairman	85.1	-	-	-
Kristian Johansen	Vice chairman	61.1	-	-	-
Kitty Hall	Board member	63.3	-	-	-		Jul-13
Benedicte S. Fasmer	Board member	61.1	-	-	-
Birgitte R. Vartdal	Board member	21.3	-	-	-	Jul-13
Per Wullf	Board member	61.1	-	-	-
Total remuneration paid		4,515.8	78.0	4,040.3

* Invoiced from Advokatfirmaet Wiersholm AS

The table shows compensation paid during the year and calculated using average exchange rates for the year.

Share options may be granted to directors and to selected employees as a long term incentive. Due to change of control in July 2013, all options were vested as at 27 September 2013 and expire by 31 December 2017. No options were granted in 2014.

Movements in number of share options outstanding and related weighted average exercise prices are as follows:
---------------------------------------------------------------------------------------------------------------	--	--

	2014		2013
	Average exercise price per share option	Options (thousands)	Average exercise price per share option	Option (thousands)
At 1 January	NOK 5.75	9,783.3	NOK 5.75	9,403.3
Granted	-	-	NOK 5.75	1,782.8
Forfeited	-	-	NOK 5.75	-1,126.7
Exercised	-	-	-	-
Expired	-	-	-	-
At 31 December	NOK 5.75	9,783.3	NOK 5.75	9,783.3

Out of the 9,738,326 outstanding options (2013: 9,738,326 options), 9,738,326 options (2013: 9,738,326) were exercisable. No options were exercised in 2014 or 2013, and the options were excluded from the earnings per share calculation as they are antidilutive.

Note 7 – Financial Income and Financial Expense

Currency gains and losses relating to operational activities were classified as a separate line item as an operational expense in the Income Statement and are not included in the tables below. Currency gains and losses relating to financing activities were presented as separate line item as a financial income/(expense) in the Income Statement.

Figures in USD million

Financial income:	2014	2013
Interest income	-	0.2
Total financial income	-	0.2
Financial expense:	2014	2013
Interest expense	41.2	39.1
Amortisation of finance fees	13.1	47.2
Realized hedging loss/(gain)	-	-10.1
Guarantee fees to Sevan Marine ASA	-	3.2
Commitment and guarantee fees to Seadrill	15.9	4.6
Other finance (income)/expense	-	0.7
Total financial expense	70.2	84.7

Note 8 – Income Tax Expense

Figures in USD million	2014	2013
Current tax	6.5	-
Change deferred tax	-	52.9
Net tax expense	6.5	52.9
	2014	2013
Profit/(loss) before tax	-118.5	-103.7
Tax at domestic tax rates applicable to profits in holding company (Norway 27%)	-32.0	-26.8
Currency translation adjustment	-	5.3
Write-down of deferred tax asset	-	51.5
Additional unrecognized deferred tax asset	33.2	21.2
Impact of change in statutory tax rate	-	1.7
Effect of other tax jurisdictions	5.3	-
Tax expense	6.5	52.9

Total tax expense in 2014 was USD 6.5 million represented by a provision of USD 2.7 million related to tax liability for operations in China from 2011 to 2014 under the Cosco project management vendor contracts for the Sevan Louisiana and Sevan Developer, and taxes as a consequence of Sevan Louisiana operating in US Gulf of Mexico.

At the reporting date, the Group has total Norwegian tax losses carried forward of NOK 2,222.3million (USD 299.0 million) (2013: NOK 1,507.1 million - USD 265.6 million) with no expiration date and a tax value of NOK 600.0million (USD 80.7 million) (2013: NOK 406.9 million - USD 71.7 million) for which no deferred tax asset is recognised in the balance sheet.

Note 9 – Dividend per Share

No dividend was paid in 2014. No dividend will be proposed to the 2015 AGM.

Note 10 – Earnings per Share

	2014	2013
Profit/(loss) attributable to equity holders of the Company (USD thousand)	-124,997	-156,562
Weighted average number of ordinary shares on issue (thousands)	594,623	563,725
Basic and diluted earnings per share (USD per share)	-0.21	-0.28

Basic earnings per share were calculated by dividing the profit/(loss) attributable to equity holders in the Company by the weighted average number of ordinary shares in issue during the year. Options are anti-dilutive at 31 December 2014 and 2013, and not included in calculating diluted earnings per share. The basic and diluted earnings per share figures are identical in 2014 and 2013.

Note 11 – Property, Plant and Equipment

Year ended December 31, 2014		Unit in	Total	Other	Total
Figures in USD million	Construction in Progress (CIP)	Operation (UIO)	Drilling Rigs	Fixed Assets	Fixed Assets
Book value 1 January 2014	639.3	1,277.3	1,916.6	19.2	1,935.8
Additions	60.3	21.6	81.9	0.3	82.2
Disposals	-6.8	-	-6.8	-3.1	-9.9
Transfer to UIO	-568.4	583.3	14.9	-14.9	-
Impairment	-	-101.6	-101.6	-	-101.6
Depreciation	-	-71.2	-71.2	-0.4	-71.6
Book value 31 December 2014	124.4	1,709.4	1,833.8	1.1	1,834.9
Cost	692.8	1,423.0	2,115.8	24.6	2,140.4
Transfer to UIO	-568.4	583.3	14.9	-14.9	-
Accumulated impairment	-	-101.6	-101.6	-	-101.6
Accumulated depreciation	-	-195.3	-195.3	-8.6	-203.9
Book value 31 December 2014	124.4*	1,709.4	1,833.8	1.1	1,834.9

* USD 105.2 million secured by guarantees from the shipyard.

Year ended 31 December 2013	Construction in	Unit in Operation	Total Drilling	Other Fixed	Total Fixed
Figures in USD million	Progress (CIP)	(UIO)	Rigs	Assets	Assets
Book value 1 January 2013	172.9	1,327.5	1,500.4	12.5	1,512.9
Additions	466.4	8.4	474.8	12.2	487.0
Depreciation	-	-58.6	-58.6	-5.5	-64.1
Book value 31 December 2013	639.3	1,277.3	1,916.6	19.2	1,935.8
Cost	647.8	1,401.4	2,049.2	27.4	2,076.6
Accumulated impairment	-8.5	-	-8.5	-	-8.5
Accumulated depreciation	-	-124.1	-124.1	-8.2	-132.3
Book value 31 December 2013	639.3	1,277.3	1,916.6	19.2	1,935.8

An interest rate of 5% is used for capitalisation. Capitalised borrowing cost in 2014 was USD 5.5 million (2013: 6.4 million), which are borrowing costs incurred during the construction and mobilisation phase for Sevan Louisiana and Sevan Developer. Security arrangements relating to drilling units are described in Note 21 and commitments relating to capital expenditure are described in Note 22.

.

The key assumptions applied in the value in use calculation for the purpose of impairment testing of rigs in operation include a discount rate and expected future cash flows. To discount the future cash flows, Management used a pre-tax weighted average cost of capital (WACC) of 9.5%. Estimated future cash flows are based on the Group's five-year forecast and utilise several assumptions including forecasted operational expense, operational taxes, utilisation (86% to 95%) and day rates (mid 300,000 per day with a recovery to mid 400,000 per day by 2020). Day rates are based on current contract amounts for the remaining contract term and expected market rates in the rigs' re-contract years for forecasts beyond the contracted periods. Management has assumed no growth above these expected market rates for the remainder of the rig lives beyond the five-year forecast.

Due to the significant decline in demand in the ultra deep-water drilling market and the timeline for a projected recovery thereof, Management concluded that recoverable values of Sevan Driller and Sevan Brazil are less than their carrying amounts. Therefore, the carrying amounts of these rigs have been reduced to their estimated recoverable values through a non-cash impairment. Specifically, Sevan Driller was impaired USD 29.3 million and Sevan Brazil was impaired USD 72.3 million.

Based on sensitivity analyses performed, Management believes that reasonable movements in the key assumptions could result in a further impairment loss to be recognised. Thus there is a possibility the Group may recognise impairment in the following year if the facts underlying the key assumptions change during the year. An increase in the WACC of 100 basis points would result in further impairment of approximately USD 94.0 million, and a reduction of expected market rates in the re-contract years of 10% would result in impairment of approximately USD 68.7 million.

Note 12 – Other Non-Current Assets

Figures in USD million	2014	2013
Net late delivery penalties	2.7	4.2
Net mobilisation expense	21.7	35.1
Others	0.5	1.1
Total other non-current assets	24.9	40.4

Net late delivery penalties include penalties incurred for the late delivery of the service element of the charter contract for Sevan Driller and Sevan Brasil. Net late delivery penalties will amortise over the fixed contract period as a reduction in operating revenue. Net mobilisation will amortise over the fixed contract period as an operating expense.

Note 13 – Subsidiaries

Overview of the Group structure as of 31 December 2014:

			Functional
Subsidiaries	Registered office	Interest held	currency
Sevan Drilling Rig II AS	Norway	100%	USD
Sevan Drilling AS	Norway	100%	USD
Sevan Drilling Rig V AS	Norway	100%	USD
Sevan Drilling Rig VI AS	Norway	100%	USD
Sevan Drilling Management AS	Norway	100%	USD
Sevan Drilling Rig VIII AS	Norway	100%	USD
Sevan Drilling Pte Ltd	Singapore	100%	USD
Sevan Drilling Rig II Pte Ltd	Singapore	100%	USD
Sevan Drilling Rig IV Pte Ltd	Singapore	100%	USD
Sevan Drilling Rig V Pte Ltd	Singapore	100%	USD
Sevan Drilling Rig VI Pte Ltd	Singapore	100%	USD
Sevan Drilling Rig VII Pte Ltd	Singapore	100%	USD
Sevan Drilling Rig VIII Pte Ltd	Singapore	100%	USD
Sevan Drilling Rig IX Pte Ltd	Singapore	100%	USD
Sevan Drilling Limited	UK	100%	USD
Sevan Drilling North America LLC	USA	100%	USD
Sevan Drilling Limited	Bermuda	100%	USD
Sevan Driller Ltd	Bermuda	100%	USD
Sevan Brasil Ltd	Bermuda	100%	USD
Sevan Developer Ltd	Bermuda	100%	USD
Sevan Louisiana Hungary KFT	Hungary	100%	USD
Sevan Marine Servicos de Perfuracao Ltda	Brazil	100%	BRL
Sevan Investimentos do Brasil Ltda	Brazil	100%	BRL

Note 14 – Inventories

Figures in USD million	2014	2013
Diesel stock on-board	2.7	2.3
Spares on-board Sevan Driller	14.1	12.8
Spares on-board Sevan Brasil	13.4	11.8
Spares on-board Sevan Louisiana	16.3	-
Inventories – net	46.5	26.9

Note 15 – Trade and Other Receivables

Figures in USD million	2014	2013
Trade receivables	47.8	14.7
Trade receivables – net	47.8	14.7
Prepayments	-	7.1
Other receivables	7.3	10.6
Trade and other receivables	55.1	32.4

The Group did not make any losses on receivables during 2014 and 2013.

The Group did not make any provisions relating to receivables during 2014 and 2013.

Fair value of trade and other receivables were as follows:

Figures in USD million	2014	2013
Trade receivables	47.8	14.7
Prepayments	-	7.1
Other receivables	7.3	10.6
Total trade and other receivables	55.1	32.4

Trade receivables that are less than three months past due are generally not considered for impairment.

Ageing of trade receivables was as follows:

Figures in USD million	2014	2013
Before due date	47.8	14.5
Up to 3 months after due date	-	0.2
Total trade receivables – net	47.8	14.7

Carrying amounts of trade receivables were denominated in the following currencies:

Figures in USD million	2014	2013
USD	42.2	10.0
BRL	5.6	4.7
Total trade receivables – net	47.8	14.7

Note 16 – Interest-Bearing Debts

Figures in USD million	2014	2013
Non-current liabilities
Bank borrowings	1,073.0	1,196.1
Borrowings from related parties	115.0	-
Other non-current liabilities	0.4	0.1
Total non-current liabilities	1,188.4	1,196.2
Total borrowings	2014	2013
Bank loans
Bank credit facility	1,073.0	1,196.1
Revolving credit facility with Seadrill	115.0	-
Non-current	1,188.0	1,196.1
Bank credit facility	133.0	173.1
Current	133.0	173.1
Total	1,321.0	1,369.2

Total borrowings include secured liabilities (bank and collateralised borrowings) of USD 1,206.0 million (2013: USD 1,369.2 million) – see Note 21 for additional discussion of collateral arrangement. The bank credit facility is a USD 1,750 million facility of which USD 1,400 million has been drawn. The undrawn tranche B of the bank credit facility amounting to USD 350 million was cancelled in December 2014 as a consequence of the arrangement made with Cosco to defer the delivery date of Sevan Developer.

Bank credit facility

As at December 2014, the weighted interest rate is 2.84%.Basic term is divided between Libor +2.50% for GIEK tranche and Libor +2.90% for Commercial tranche. As Seadrill is acting as guarantor on the bank credit facility, the Group incur a guarantee fee payable to Seadrill Limited at 1.00% per annum on the drawn amount of the bank credit facility.

Borrowings from related parties – USD 300 million revolving credit facility with Seadrill Limited

Interest is charged on the principal amount outstanding at Libor + 6.00%. A commitment fee is calculated at 2.40% per annum on the unutilized commitment of the facility. The borrowing with related parties can not be cancelled by either party until the final maturity date set out in the revolving credit facility contract (31 December 2016).

	Carrying Amount		Fair Value
Figures in USD million	2014	2013	2014	2013
Bank borrowings	1,073.0	1,196.1	1,073.0	1,196.1
Borrowings from related parties	115.0	-	115.0	-
Total	1,188.0	1,196.1	1,188.0	1,196.1

The carrying amounts and fair value of the non-current borrowings are as follows:

The group has the following undrawn borrowing facilities:

	2014	2013
Floating rate
- Expiring within one year	-	350.0
- Expiring beyond one year	185.0	-
Total un-drawn debt facilities	185.0	350.0

The USD 185 million undrawn facility expiring beyond one year is the RCF. This has a commitment fee at market rates.

Figured in USD millions

Payment schedule 2014	0 – 6 month	6 – 12 month	Year 2	Year 3	Year 4-5	Later
Borrowings (including interest)	88.8	87.7	172.3	168.0	766.3	73.3
Trade payable	6.1	-	-	-	-	-
Accrued expenses relating to trade payables	35.0	-	-	-	-	-
Total	129.9	87.7	172.3	168.0	766.3	73.3

The table above details the Group's remaining contractual maturity for non-derivative financial liabilities with agreed repayment periods based on undiscounted cash flows on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period.

Note 17 – Current Liabilities

Figures in USD million	2014	2013
Trade payables	6.1	25.4
Accrued expenses relating to trade payables	35.0	49.1
Total trade payables	41.1	74.5
Current portion of bank borrowings	133.0	173.1
Income and gross revenue tax payable	6.1	2.6
Other taxes payable (advance tax, employer contribution, VAT, etc.)	6.3	2.5
Payable to related parties	47.8	6.8
Other payables	11.2	24.8
Total other current liabilities	204.4	209.8
Total current liabilities	245.5	284.3

Note 18 – Share Capital

The total authorised number of ordinary shares was 594.625 million (2013: 594.625 million) with a par value of NOK 1 per share. All issued shares were fully paid in at balance sheet date.

	Number of shares	Share capital	Share premium	Total
1 January 2014	594,623,436	108.6	666.0	774.6
Proceeds from shares issued	-	-	-	-
31 December 2014	594,623,436	108.6	666.0	774.6
	Number of shares	Share Capital	Share premium	Total
1 January 2013	336,625,000	61.9	533.9	595.8
Proceeds from shares issued	257,998,436	46.7	132.1	178.8
31 December 2013	594,623,436	108.6	666.0	774.6

List of 20 major shareholders at January 2, 2015

	Shares	Voting share
**DNB NOR MARKETS, AKS	209,805,142	35.28%
**SKANDINAVISKA ENSKILDA BANKEN AB Oslofilialen	76,828,500	12.92%
J.P. MORGAN CHASE BANK N.A. London NORDEA TREATY ACCOUNT	32,718,359	5.50%
PERESTROIKA AS	20,000,000	3.36%
ODIN OFFSHORE	17,752,904	2.99%
WENAASGRUPPEN AS	17,208,554	2.89%
THE BANK OF NEW YORK MELLON BNY MELLON	15,540,125	2.61%
SKAGEN VEKST	13,252,171	2.23%
US BK EVERMORE GLO VAL	10,392,243	1.75%
VERDIPAPIRFONDET DNB NORGE (IV)	9,221,200	1.55%
J.P. MORGAN CHASE BANK JPMCB NA RE DEPO JPM	6,014,610	1.01%
SKANDINAVISKA ENSKILDA BANKEN AB A/C CLIENTS ACCOUNT	5,250,657	0.88%
DNB LIVSFORSIKRING ASA	3,000,864	0.50%
NIKI A/S	2,500,000	0.42%
MP PENSJON PK	2,106,765	0.35%
NHO- P665AK JP MORGAN CHASE BANK	1,908,330	0.32%
VALSET INVEST AS	1,900,000	0.32%
INVESTTECH INVEST AS	1,800,000	0.30%
NORDNET PENSJONSFORS	1,656,837	0.28%
PER BERGER	1,595,836	0.27%
Total, 20 largest shareholder accounts	450,453,097	75.73%
Total no. of shares	594,623,436
Foreign ownership (Citizenship/Country of registration)	93,723,923	15.76%

**Seadrill holds its shares in the Company through forward contracts with the banks identified above.

Note 19 – Cash Generated from Operations

Figures in USD million	2014	2013
Profit/(loss) before tax	-118.5	-103.7
Adjustments for:
- Depreciation, amortisation and impairment	173.1	64.1
- Net finance items	70.2	89.1
- Other non-cash items	-30.1	-8.8
Changes in working capital:
- Inventory	-19.6	-4.4
- Trade and other receivables	-22.7	1.6
- Trade and other payables	-33.4	0.3
- Other current liabilities	26.5	-14.8
Cash generated from operations	45.5	23.4

Note 20 – Operating Leases

At balance sheet date, the Group has entered into lease- and rental-obligations:

Lease and rental obligations

Figures in USD million	2014	2013
No later than 1 year	0.6	2.8
Between 1-5 years	0.3	1.9
Total lease and rental obligations	0.9	4.7

Future lease payments receivable under charter contracts:

Figures in USD million	2014	2013
No later than 1 year	419.0	365.1
Between 1-5 years	724.1	927.8
Later than 5 years	-	60.1
Total minimum future charter revenues	1,143.1	1,353.0

Order back-log for charter revenue:

Unit	Client	Fixed term (years)	Option Periods (years)	Commencement
Sevan Driller	Petrobras S.A.	6	N/A	12 June 2010
Sevan Brasil	Petrobras S.A.	6	N/A	24 July 2012
Sevan Louisiana	LLOG	4	N/A	28 May 2014

Sevan Driller and Sevan Brasil have option periods available at the expiry of the fixed term of the contract. In November 2014, Sevan Louisiana contract was amended whereby the rig earns a revised dayrate of USD 350,000 per day and the contract was extended for 12 months to May 2018, cancellable with a 365 day notice until May 2016.

Note 21 – Securities for Debt

The Group has contingent liabilities in respect of bank and other guarantees as well as other matters arisen in the ordinary course of business.

At balance sheet date, the Group is party to the following security arrangements:

The bank credit facility is secured, on a cross-collateralized basis, by a first priority mortgage over Sevan Driller, Sevan Brasil, Sevan Louisiana; a guarantee from Seadrill and each of the subsidiaries Sevan Drilling Pte Ltd, Sevan Drilling Rig II Pte Ltd, Sevan Drilling Rig V Pte Ltd, Sevan Driller Ltd, Sevan Brasil Ltd, Sevan Louisiana Hungary Kft, Sevan Drilling Limited, Sevan Drilling Rig II AS and Sevan Drilling North America LLC; a pledge over the shares issued by these subsidiaries; first priority security interest over each of these subsidiaries' rights with respect to all earnings and proceeds of insurance; and a first priority security interests in the bank accounts opened and maintained in the name of each of these subsidiaries in which all hires, freights, income, insurance proceeds and other sums payable in respect of the rigs are credited.

The RCF is secured, on a cross-collateralized basis, by a second priority mortgage over Sevan Driller, Sevan Brasil and Sevan Louisiana.

Note 22 - Commitments

Figures in USD million	2014	2013
Sevan Louisiana	-	7.5
Sevan Developer	425.0	420.8
Total capital commitments	425.0	428.3

The Group has an unfunded contingent construction liability for USD 425.0 million for the delivery instalment when the Sevan Developer is delivered. In October 2014, the Group entered an agreement with Cosco to defer the delivery date for 12 months with options to extend the date for subsequent periods of 6 months until October 2017. At the end of the deferral period and if options to extend are not exercised, the construction contract will terminate and the USD 105.2 million initial investment will be refunded and the investment impaired. Refund guarantees have been provided for the full deferral period. Delivery will occur if and when a contract that can support financing of the final delivery instalment is secured.

Note 23 – Financial Instruments by Category and Credit Quality of Financial Assets

The classification of financial instruments as loans and receivables or assets and liabilities at fair value through profit or loss is shown below. The Group's financial instruments held as at 31 December 2014 consist of cash, trade receivables, trade payables, and bank borrowings measured at amortised cost with variable interest rates. Management believes that carrying value approximates fair value for all the Group's financial instruments. Management believes all financial instruments held at 31 December 2014 are classified as Level 3 in the fair value hierarchy. No interest rate swaps were held at 31 December 2014 or 2013. The different levels are defined as:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)

Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)

Accounting principles or financial instruments were applied to the line items below as indicated:

Figures in USD million		Assets at fair
31 December 2014	Loans and receivables	value through profit and loss	Total
Financial assets
Trade and other receivables	55.1	-	55.1
Cash and cash equivalents	30.2	-	30.2
Total financial assets	85.3	-	85.3
31 December 2013	Loans and receivables	Assets at fair value through profit and loss	Total

Financial assets
Trade and other receivables	25.3	-	25.3
Currency forwards	-	-	-
Cash and cash equivalents	128.7	-	128.7
Total financial assets	154.0	-	154.0

31 December 2014	Other financial liabilities	Liabilities at fair value through profit and loss	Total
Financial liabilities
Interest-bearing debt	1,321.0	-	1,321.0
Trade payables	41.1	-	41.1
Total financial liabilities	1,362.1	-	1,362.1

	Other financial	Liabilities at fair value through
31 December 2013	liabilities	profit and loss	Total
Financial liabilities
Interest-bearing debt	1,369.2	-	1,369.2
Trade payables	74.5	-	74.5
Total financial liabilities	1,443.7	-	1,443.7

Credit Quality of Financial Assets

The credit quality of financial assets that were neither past due nor impaired was assessed by reference to external credit ratings (where available) and by analysis of historical information about counterparty default rates:

Figures in USD million

Cash at bank and short-term bank deposits	2014	2013
A+	20.2	34.0
A	8.3	2.8
A-	1.6	88.6
BBB	-	3.3
BBB-	0.1	-
No rating available	-	-
Total cash and cash equivalents	30.2	128.7

Figures in USD million

Trade receivables - Counterparty with external credit rating	2014	2013
BBB-	26.4	-
BB13	0.0	14.7
Total	26.4	14.7
Trade receivables - Counterparty without external credit rating	2014	2013
Group 1	-	-
Group 2	21.4	-
Group 3	-	-
Total	21.4	-
Total trade receivables	47.8	14.7

Group I - New customers (less than 6 months)

Group 2 - Existing customers (more than 6 months) with no defaults in the past

Group 3 - Existing customers (more than 6 months) with some defaults in the past

Note 24 – Related Party Transactions

Balances and transactions between the entities within the Group have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Seadrill owns 50.11% of the Company's shares. The Group has since been consolidated in Seadrill's accounts, which can be found at www.seadrill.com.

Seadrill has guaranteed the bank facility referred to in Note 16. Seadrill is providing the RCF of which USD 115.0 million was outstanding as of 31 December 2014. Seadrill charged the Group interest on the RCF and guarantee and commitment fees in a total amount of USD 15.9 million in 2014.

Seadrill also provides management support and administrative services to the Group for which a fee of USD 24.5 million was charged during the year.

As a consequence of being responsible for the day-to-day operation of the Group's rigs, Seadrill entities incur direct costs on behalf of the Group. The Group had a total current liability (including the commitment, guarantee and management fees mentioned above) of USD 47.8 million to Seadrill as at 31 December 2014 (compared to USD 6.8 million as at 31 December 2013).

Note 25 – Events After Balance Sheet Date

The Group has evaluated subsequent events after the balance sheet date through the date the accompanying consolidated financial statements became available to be issued.

On 23 April 2015, the Group intends to call the annual general meeting, including consideration of the previously announced migration plan which will move the parent company function from Norway to Bermuda.

Sevan Drilling ASA Financial Statements

For the Period Ended 31 December 2014

Sevan Drilling ASA Financial Statements

Sevan Drilling ASA Statement of Income

Figures in USD	Note	2014	2013
Operating revenue	4	59,220,333	58,486,824
Operating expense		-43,347,407	-56,508,720
Employee benefit expense	7,8	-6,820,229	-8,690,432
Depreciation and amortisation expense	6	-298,460	-555,730
Other operating expense		-23,281,059	-18,785,449
Operating foreign currency gain/(loss)		9,446	-200,809
Total operating expense		-73,737,709	-84,741,140
Operating (loss)/profit		-14,517,376	-26,254,316
Gain on sale of assets		1,050,563	-
Interest income		1,324	114,469
Intercompany interest income	11	19,388,952	16,564,027
Interest expense		-15,989,126	-70,680
Impairment on investment in subsidiaries	12	-714,459,948	-
Other financial income/(expense)		-310,460	443,484
Financial foreign currency loss		-	-3,256,741
Net financial items		-710,318,695	13,794,559
Loss before tax		-724,836,071	-12,459,757
Tax (expense)/income	5	-	-16,293,430
Net loss		-724,836,071	-28,753,187
Brought forward
To other equity		-724,836,071	-28,753,187
Net brought forward		-724,836,071	-28,753,187

The notes on pages 52 to 61 are an integral part of these financial statements

Sevan Drilling ASA Statement of Financial Positions

	Note	2014	2013
Assets
Non-current assets
Tangible fixed assets
Equipment and other movables	6	-	3,946,167
Other non-current assets		-	584,829
Total tangible fixed assets		-	4,530,996
Financial assets
Investments in subsidiaries	12	111,273,906	322,586,497
Loans to group companies	11	-	463,379,573
Total financial assets		111,273,906	785,966,070
Total non-current assets		111,273,906	790,497,066
Current assets
Receivables
Accounts receivables	9	-	35,705
Accounts receivables from group companies	11	7,459,856	27,296,899
Other receivables	9	-	4,533,521
Total receivables		7,459,856	31,866,125
Cash and bank deposits	10	4,551,270	74,049,297
Total current assets		12,011,126	105,915,422
Total assets		123,285,032	896,412,488

The notes on pages 52 to 61 are an integral part of these financial statements

Sevan Drilling ASA Statement of Financial Positions

Equity and liabilities
Restricted equity
Share capital	2, 3, 13	108,624,189	108,624,189
Share premium	2	14,660,843	665,904,128
Total restricted equity		123,285,032	774,528,317
Retained earnings
Other equity	2	-	84,508,190
Total retained earnings		-	84,508,190
Total equity		123,285,032	859,036,507
Liabilities
Pension obligation	7	-	100,753
Loans from group companies	11	-	408,173
Total long term liabilities		-	508,926
Current liabilities
Trade creditors	9	-	6,447,675
Accounts payable to group companies	11	-	20,999,976
Tax payable	5	-	34,639
Public duties payable	9	-	2,802,678
Other short term liabilities	9	-	6,582,086
Total short term liabilities		-	36,867,054
Total liabilities		-	37,375,980
Total equity and liabilities		123,285,032	896,412,487

The notes on pages 52 to 61 are an integral part of these financial statements

Oslo, 23 April 2015 The Board of Directors Sevan Drilling ASA

Chairman Vice chairman Board member

Per Wullf Birgitte Ringstad Vartdal Scott McReaken Board member Board member Managing Director

Erling Lind Kristian Johansen Ragnhild Wiborg

Sevan Drilling ASA Statement of Cash Flow

Cash flows from operation activities -724,836,071 -12,459,757 Profit/(loss) before tax 298,460 555,730 Depreciation and write downs 714,459,948 - Impairment -1,050,563 - Gain on sale of assets 3,340,888 -9,535,726 Other non-cash -9,446 3,457,550 Currency effects 3,788,473 -3,454,306 Change in trade and other receivables -5,220,869 3,719,014 Change in trade creditors -7,605,789 -33.329,371 Change in other accruals
-16,834,969 -51,046,866 Net cash (used by)/generated from operating activities
Cash flows from investment activities
- -3,460,717 Purchases of tangible assets
-167,663,058 -53,951,410 Change in intercompany balances
-167,663,058 -57,412,127 Net cash used in investing activities
Cash flows from financing activities
115,000,000 - Increase in loans from related parties
- 184,740,060 Increase in equity (share issue)
- -5,872,387 Transaction costs on share issue
115,000,000 178,867,673 Net cash generated from/(used by) financing activities
-69,498,027 70,408,680
Net cash flow for the period 74,049,297 3,263,556
Cash balance at beginning of period - 514,315
Cash brought in via merger of group companies - -137,254
Currency effect bank deposits
4,551,270 74,049,297 Cash and cash equivalents at end of the year
Cash and bank deposits actual 4,551,270 74,049,297
Difference - -

The notes on pages 52 to 61 are an integral part of these financial statements

Notes to Sevan Drilling ASA Financial Statements

Note 1- Accounting policies

Sevan Drilling's financial statements have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting principles.

The functional currency for the company is USD as this is the currency by which the Company is financed. The functional currency in the subsidiaries is USD and any potential future dividends will be nominated in USD.

All numbers are in USD 1 unless otherwise stated.

Revenue Recognition

Revenue and operating expenses are related to long term contract arrangements with Cosco in China, whereby the Group provides Cosco with services related to project management, site supervision, and engineering consulting, as well as providing pre-ops spare parts to the rigs under construction. The contracts with Cosco were concluded 10 November 2014.

Revenue is recognised according to the percentage of completion method. The degree of completion is calculated as expenses incurred as a percentage of estimated total expense.

Expenses are recognized as the goods and services are provided. Total expenses are reviewed on a regular basis. If the projects are expected to result in losses, the total estimated loss is recognised immediately.

This revenue and operating expense is eliminated at the Group level, as the costs are part of the rig value acquired by the rig owning entities.

Main principle for evaluation and classification of assets and liabilities

Current assets and current liabilities include items with a due date within one year after the transaction date, as well as items relating to the operating cycle. Other items have been classified as non-current assets and non-current liabilities.

Current assets are measured at the lower of purchase cost and fair value. Short-term liabilities are recognized in the balance sheet at nominal value at the establishment date.

Fixed assets are measured at purchase cost. The fixed assets are written down to net realizable value if a value reduction occurs that is expected to be permanent. Borrowings are recognized in the balance sheet at amortized value on the establishment date, equal to nominal value deducted for transaction costs. Other non-current liabilities are recognized at nominal value.

Receivables

Trade receivables and other receivables are recognized in the balance sheet at nominal value after deduction of provision for bad debt. Bad debt is provided for on the basis of an individual assessment of each receivable.

Fixed assets

Fixed assets are recognized in the balance sheet and depreciated over the asset's expected useful life on a straight-line basis. Maintenance of an asset is expensed under operating expenses as incurred. Additions or improvements are added to the asset's cost price and depreciated together with the asset. When the recoverable amount of the asset is exceeded by the carrying amount of the asset an impairment charge is recognized, and the asset is written down to recoverable amount. Recoverable amount is the highest of net sales value and value in use. Value in use is the net present value of future cash flows, which are expected to be generated from the asset.

Leased assets are reflected in the balances sheet as assets if the leasing contract is considered a financial lease.

Research and development

Cost associated with research activities are expensed as incurred. Qualifying expense associated with development activities are capitalized and depreciated over their expected useful life.

Cash and bank deposits

Cash and bank deposits include cash, bank deposits and other means of payment with an original due date of three months or less from the date of purchase.

Currency

Cash and bank deposits, current assets, and short-term liabilities nominated in other than functional currencies are converted using exchange rates that prevail on the balance sheet date.

Taxes

Deferred income tax liability/deferred tax asset is provided using the liability method on temporary difference at the balance sheet date between the tax basis of assets and liabilities and their carrying amounts for financial reporting purpose. Tax-reducing temporary differences and losses carried forward are offset against tax-increasing temporary differences that are reversed in the same time intervals. Taxes consist of taxes payable (taxes on current year taxable income), and change in net deferred taxes.

Leases

Leases in which more than an insignificant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

Shares in subsidiaries

Investments in subsidiaries are measured under the fair value method.

Group

The Company will be consolidated into the Group accounts, with business address in Oslo.

Cash flow statement

The cash flow statement is prepared in accordance with the indirect method.

Note 2- Equity

			Equity settled employee
	Share capital	Share premium	benefit reserve	Other equity	Total
Equity 1 January 2014	108,624,189	665,904,128	1,265,403	72,325,545	848,119,265
Fair value adjustment of investments in subsidiary	-	-	-	1,838	1,838
Net result for the year	-	-	-	-724,836,071	-724,836,071
Distributed from share premium to cover net loss	-	-651,243,285	-	651,243,285	-
Equity 31 December 2014	108,624,189	14,660,843	1,265,403	-1,265,403	123,285,032

The other equity balance brought forward from 1 January 2014 has been updated to correct for a USD 10,917,242 misstatement relating to the prior year accounts for the merger of Group companies in 2013.

Note 3- Share capital and shareholder information

		Nominal
Share capital	Number	value (NOK)	Registered
Ordinary shares	594,623,436	1.00	594,623,436
Total	594,623,436		594,623,436

List of 20 major shareholders at 2 January 2015

	Shares	Voting share
**DNB NOR MARKETS, AKS	209,805,142	35.28%
**SKANDINAVISKA ENSKILDA BANKEN AB Oslofilialen	76,828,500	12.92%
J.P. MORGAN CHASE BANK N.A. London NORDEA TREATY ACCOUNT	32,718,359	5.50%
PERESTROIKA AS	20,000,000	3.36%
ODIN OFFSHORE	17,752,904	2.99%
WENAASGRUPPEN AS	17,208,554	2.89%
THE BANK OF NEW YORK MELLON BNY MELLON	15,540,125	2.61%
SKAGEN VEKST	13,252,171	2.23%
US BK EVERMORE GLO VAL	10,392,243	1.75%
VERDIPAPIRFONDET DNB NORGE (IV)	9,221,200	1.55%
J.P. MORGAN CHASE BANK JPMCB NA RE DEPO JPM	6,014,610	1.01%
SKANDINAVISKA ENSKILDA BANKEN AB A/C CLIENTS ACCOUNT	5,250,657	0.88%
DNB LIVSFORSIKRING ASA	3,000,864	0.50%
NIKI A/S	2,500,000	0.42%
MP PENSJON PK	2,106,765	0.35%
NHO- P665AK JP MORGAN CHASE BANK	1,908,330	0.32%
VALSET INVEST AS	1,900,000	0.32%
INVESTTECH INVEST AS	1,800,000	0.30%
NORDNET PENSJONSFORS	1,656,837	0.28%
PER BERGER	1,595,836	0.27%
Total, 20 largest shareholder accounts	450,453,097	75.73%
Total no. of shares	594,623,436
Foreign ownership (Citizenship/Country of registration)	93,723,923	15.76%

**Seadrill holds its shares in the Company through forward contracts with the banks identified above.

Shares and options owned or controlled by the Board of Directors	Options	Shares
Scott McReaken, CEO	-	-
Erling Lind, Chairman	-	-
Kristian Kuvaas Johansen, vice chairman	-	17,000
Benedicte Schilbred Fasmer, member of board until 19 June 2014	-	-
Birgitte Ringstad Vartdal, member of board	-	-
Per Winther Wullf, member of board	-	-
Ragnhild M. Wiborg, member of board from 19 June 2014	-	-

Note 4- Operating revenue

	2014	2013
Sales revenue	57,662,033	58,314,975
Other operating revenue	1,558,300	171,849
Total	59,220,333	58,486,824
Activity distribution	2014	2013
Long term contract arrangements with Cosco	57,662,033	58,314,975
Other	1,558,300	171,849
Total	59,220,333	58,486,824
Geographical distribution	2014	2013
China	57,662,033	58,314,975
Other countries	1,558,300	171,849
Total	59,220,333	58,486,824

Note 5- Taxes

Tax expense	2014	2013
Loss before tax	-724,836,071	-12,459,757
Permanent differences	127,075	6,817,984
Permanent currency differences	747,850,751	15,973,525
Changes in temporary differences	-9,265,713	-45,845,337
Tax basis	13,876,042	-35,513,585
Profit/(loss) to be brought forward	-13,876,042	35,513,585
Basis for taxes payable	-	-
Taxes payable	-	-
Change in deferred tax assets	-	16,293,430
Tax expense/(income)	-	16,293,430

Temporary differences	2014	2013
Unrealised forex	45,199,184	35,022,733
Construction contracts	3,030,896	3,703,216
Pension liabilities	82,462	-100,753
Piranema	-772,457	-350,825
Net temporary differences	47,540,084	38,274,371
Losses carry forward	-72,257,399	-86,133,441
Basis for deferred tax asset	-24,717,315	-47,859,070
Deferred tax asset 27% (2013: 27%)	6,673,675	12,921,949
Deferred tax asset in balance sheet	-	-

Tax expense reconciliation	2014	2013
Loss before tax	-724,836,071	-12,459,757
Expected tax charge	-195,705,739	-3,488,732
Tax charge in the profit and loss accounts	-	16,293,430
Difference	-195,705,739	-19,782,162
Tax on permanent differences	-	-1,909,035
Effect of changed tax rate from 28% to 27%	-	-478,591
28% of permanent currency differences	-	-4,472,587
Unrecognised temporary differences	-195,705,739	-12,921,949
Explained difference	-195,705,739	-19,782,162

Note 6- Fixed assets

	IT	Office	Total
	equipment	equipment	fixed assets
Cost as of 1 January 2014	4,335,378	320,731	4,656,109
Additions	-	-	-
Disposals	-4,335,378	-320,731	-4,656,109
Cost as of 31 December 2014	-	-	-
Accumulated depreciation 1 January 2014	573,260	136,682	709,942
Depreciation	97,484	200,976	298,460
Disposals	-670,744	-337,658	-1,008,402
Accumulated depreciation as of 31 December 2014	-	-	-
Net book value as of 31 December 2014	-	-	-

Annual rental of non-financial assets

Non-financial assets	Annual rent
Office	49,937
Machines, furniture, fixtures	12,859
Other	81,449

Note 7- Employee benefit expense

Employee benefit expense	2014	2013
Salaries and vacation pay	5,514,946	3,522,885
Employer's share of social security	824,591	1,622,122
Pension costs	376,743	459,939
Other salary related costs	103,949	3,085,486
Total employee benefit expense	6,820,229	8,690,432

At December 31, 2014, there are four employees directly employed in the Company. The average man-years for the year ended 31 December 2014 was ten. Employment was transferred from the Company to Sevan Drilling Management AS at 31 December 2014. A management agreement was concluded between the parties effective from the same date.

Included in salary and vacation pay is USD 100,258 in bonuses for 2014. The bonus is related to Group recognition of the bonus program. In 2013 the bonuses was USD 334,039.

The Company's pension schemes meet the requirements of the law on compulsory occupational pension. The Group has an immaterial defined benefit pension plan for one employee in 2012, established in 2011 in Sevan Drilling Management AS and added to the Company's accounts as a result of the merger in 2013. The pension plan has now been transferred to Sevan Drilling Management AS as part of the management transfer agreement.

No loans or guarantees have been granted to the CEO, the Chairman of the Board, or to any other related party.

Remuneration of Senior Management and the Board of Directors

		2014
Name	Title	Salaries	Retirement benefits	Other benefits	Share options granted
Scott McReaken	CEO	710,055	13,787	31,835	-
Erling Lind	Board Chairman	79,650	-	-	-
Kristian Kuvaas Johansen	Vice chairman	60,534	-	-	-
Benedicte Schilbred Fasmer	Board member*	30,267	-	-	-
Per Winther Wullf	Board member	55,755	-	-	-
Birgitte Ringstad Vartdal	Board member	60,534	-	-	-
Ragnhild M. Wiborg	Board member*	27,878	-	-	-

The Board members are not included in the Group's collective retirement benefit plans

* Benedicte Schilbred Fasmer was a Board member until 19 June 2014 and was replaced by Ragnhild Wiborg on the same day.

		2013
Name	Title	Salaries	Retirement benefits	Other benefits	Share options granted
Scott McReaken	CEO*	86,203	2,025	5,210	-
Scott Kerr	CEO*	943,611	21,574	1,290,164	1600
Jon Wilmann	CFO*	951,679	22,611	760,968	1100
Erling Lind	Chairman of the Board	85,101	-	-	-
Kristian Kuvaas Johansen	Vice chairman	61,122	-	-	-
Benedicte Schilbred Fasmer	Board member	61,122	-	-	-
Kitty Hall	Board member**	63,276	-	-	-
Per Winther Wullf	Board member	61,122	-	-	-
Birgitte Ringstad Vartdal	Board member**	21,326	-	-	-

* Scott Kerr and Jon Wilmann employment was terminated 15 November 2013 and 20 December 2013, respectively ** Kitty Hall was a Board member until 23 July 2013 and was replaced by Birgitte Ringstad Vartdal

	2014	2013
Statutory audit	279,127	295,394
Other assurance services	115,852	186,439
Tax consulting	68,188	46,141
Other assistance from auditor	-	266,674
Total audit fees	463,167	794,648

Note 8- Share-based payments

Share options may be granted to directors and to selected employees. The exercise price of the granted options is equal to the market price of the shares on the date of the grant. The options shall vest with one third each year. Vesting of the options is conditional upon the recipient, on each of the vesting dates, remaining employed by the Company. The options may, once vested, be exercised at any time up to and including the date falling three years after the relevant vesting dates. The Group has no legal or constructive obligation to repurchase or settle the options in cash. Due to change of control in 2013, all options were vested as at 27 September 2013. No options have been granted after this date.

	2014		2013
	Average exercise price per share option	Options (thousands)	Average exercise price per share option	Options (thousands)
At 1 January	NOK 5.75	9,738.3	NOK 5.75	9,403.3
Granted	-	-	NOK 5.75	1,376.7
Forfeited	-	-	-	-1,041.7
Exercised	-	-	-	-
Expired	-	-	-	-
At 31 December	NOK 5.75	9,738.3	NOK 5.75	9,738.3

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows

Out of the 9,738,326 outstanding options (2013: 9,738,326 options), 9,738,326 options (2013: 9,738,326) were exercisable. No options were exercised in 2014 or 2013, and the options were excluded from the earnings per share calculation as they are antidilutive.

No options were granted in 2014 (2013: 1,376.7k).

Note 9- Receivables and liabilities

The Company has no receivables or liabilities with a due date later than five years as at 31 December 2014 and 2013.

Note 10- Cash and bank deposits

	2014	2013
Taxes withheld from employees deposited in a restricted bank account	-	1,772,674
Cash and other bank deposits	4,551,270	72,276,623
Total cash and bank deposits	4,551,270	74,049,297

Note 11- Intercompany transactions

Remuneration to executives is disclosed in note 7.

Statement of financial positions	2014	2013
Long-term receivables from Group companies	-	463,379,573
Accounts receivables from Group companies	7,459,856	27,296,899
Total receivables from Group companies	7,459,856	490,676,472
Long-term payables to Group companies	-	408,173
Accounts payables to Group companies	-	20,999,976
Total liabilities to Group companies	-	21,408,149

Statement of Income	2014	2013
Sales/(Purchases) of services to/from Group companies	-	-
Interest income from Group Companies	19,388,952	16,564,027
Interest cost to Group companies	-	-
Total income / (cost) from Group companies	19,388,952	16,564,027

Note 12- Investments in subsidiaries

					Net result for
Company	Address	Ownership	Book value	Equity	the year 2014
Sevan Drilling Limited	Bermuda	100%	111,273,906	2,818,537	2,818,537
Total			111,273,906	2,818,537	2,818,537

In the fourth quarter 2014, the Company completed a contribution agreement with Sevan Drilling Ltd and a management transfer agreement with Sevan Drilling Management AS.

Impairment on investment in subsidiaries for USD 714,459,948 was recognized as a result of the contribution agreement and migration plan. On 10 November 2014, the Company impaired investment in subsidiaries for USD 117,186,489. The impairment was recognized to fair value investments prior to contributing, with related intercompany balances, in exchange for equity in Sevan Drilling Ltd. of USD 708,547,365. In the first quarter 2015, the Company assessed the recoverable value of the Sevan Drilling Ltd. investment in relation to approving the migration plan. The Company concluded it would not be recoverable to the Company in the short-term, as the migration plan includes distributing the investment in Sevan Drilling Ltd to the shareholders of the Company. Therefore, an impairment of USD 597,273,459 was recorded to fair value to sales price (closing share price of the Company on the Oslo Børs at 31 December 2014 plus a sales premium) resulting in a fair value of USD 111,273,906.

The management transfer agreement transferred all assets and liabilities to Sevan Drilling Management AS. The migration was carried out using the continuity method for both accounting and tax.

Companies owned by subsidiaries	Address	Owner	Ownership
Sevan Drilling Rig II AS	Oslo	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling AS	Oslo	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling Rig V AS	Oslo	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling Rig VI AS	Oslo	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling Management AS	Oslo	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling Rig VIII AS	Oslo	Sevan Drilling Limited (Bermuda)	100%
Sevan Driller Ltd	Bermuda	Sevan Drilling Limited (Bermuda)	100%
Sevan Brasil Ltd	Bermuda	Sevan Drilling Limited (Bermuda)	100%
Sevan Developer Ltd	Bermuda	Sevan Drilling Limited (Bermuda)	100%
Sevan Louisiana Hungary KFT	Hungary	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling Pte Ltd	Singapore	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling Rig IX Pte Ltd	Singapore	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling Rig II Pte Ltd	Singapore	Sevan Drilling Rig II AS	100%
Sevan Drilling Rig IV Pte Ltd	Singapore	Sevan Drilling AS	100%
Sevan Drilling Rig V Pte Ltd	Singapore	Sevan Drilling Rig V AS	100%
Sevan Drilling Rig VI Pte Ltd	Singapore	Sevan Drilling Rig VI AS	100%
Sevan Drilling Rig VII Pte Ltd	Singapore	Sevan Drilling Management AS	100%
Sevan Drilling Rig VIII Pte Ltd	Singapore	Sevan Drilling Rig VIII AS	100%
Sevan Drilling Limited	UK	Sevan Drilling Limited (Bermuda)	100%
Sevan Drilling North America LLC	USA	Sevan Drilling Rig V AS	100%
Sevan Investimentos do Brasil Ltda*	Brazil	Sevan Drilling Rig IX Pte Ltd	99.99%
Sevan Marine Servicos de Perfuracao Ltda*	Brazil	Sevan Drilling Rig IX Pte Ltd	99.99%

* 0.01% shareholding in Sevan Investimentos do Brasil Ltda and Sevan Marine Servicos de Perfuracao Ltda held by Sevan Drilling Limited (Bermuda) and Sevan Investimentos do Brasil Ltda respectively.

Note 13- Earnings per share

	2014	2013
Profit/(loss) attributable to equity holders	-724,836,071	-28,753,187
Weighted avg. no. of ordinary shares	594,623,436	563,725,089
Earnings per share (basic and diluted)	-1.22	-0.05

Basic earnings per share were calculated by dividing the profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the year. Options are anti-dilutive at 31 December 2014 and 2013, and not included in calculating diluted earnings per share. The basic and diluted earnings per share figures are identical in 2014 and 2013.

Note 14- Financial risk management

The Company's activities expose it to a variety of financial risks: market risk (foreign currency risk), credit risk, and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance.

Market risk

Foreign currency risk

The Company operates internationally and is exposed to foreign currency risk arising from various currency exposures, primarily with respect to the NOK, GBP and Euro. Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not an entity's functional currency. The Group aims to achieve a natural hedge between cash inflows and cash outflows by matching the currency of operating costs with the currency of revenue as well as the currency of financial assets with the currency of financial liabilities, and thus has minimal exposure of foreign currency risk on its trade receivables and payables.

Credit risk

Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers. The Company has no significant concentration of credit risk towards single financial institutions and has policies that limit the amount of credit exposure to any single financial institution.

Liquidity risk

Prudent liquidity risk management includes maintaining sufficient cash and marketable securities and the availability of funding from an adequate amount of committed credit facilities. It is the Company's objective to maintain flexibility of financing by providing sufficient withdrawal facilities and committed credit lines.

Note 15- Related Party Transactions

Seadrill owns 50.11% of the Company's outstanding shares.

During 2014, the Company received operating revenue of USD 1.6 million from North Atlantic Norway Limited, a related party. North Atlantic Norway Limited entered into a contract with Exxon Exploration Inc. for the development of an Artic Mobile Offshore Drilling Unit and subcontracted this work to the Company.

Seadrill is providing the RCF of which USD 115.0 million was outstanding as of 31 December 2014. The RCF was payable by the Company up until the effective date of the contribution agreement. The liability has been transferred to Sevan Limited as part of the contribution agreement. Seadrill charged the Group interest on the RCF and guarantee and commitment fees of which USD 12.2 million is expensed to the Company in 2014. The Company has also been charged USD 8.9 million by related parties relating to recharges of personnel and consultancy costs in 2014.

Note 16- Long- term contract

Due (to)/from customers under long-term
contract	2014	2013
Opening balance	2,267,147	-39,736,221
Billings	-55,000,000	-16,311,607
Contract revenue earned	57,662,033	58,314,975
Balance transferred to Sevan Drilling Management AS	-4,929,180	-
Ending balance	-	2,267,147

Note 17- Events After Balance Sheet Date

On 24 March 2015, the Company contributed USD 6,562,691 of an interest receivable in exchange for additional paid in capital in Sevan Drilling Ltd. The balance is an interest receivable related to an intercompany loan with another subsidiary that has been contributed to Sevan Limited on 10 November 2014.

In April 2015, the Company will assess the fair value of the Sevan Drilling Ltd investment in order to present an audited interim balance sheet to the shareholders to propose approval for a share capital reduction in the AGM. An impairment will be recorded to fair value the USD 117, 836,597 investment in Sevan Drilling Ltd.

Effective 1 January 2015, Sevan Drilling ASA changed the functional currency from United States Dollar (USD) to Norwegian Kroner (NOK).