EXCHANGE OFFER. (EDS Group AS, a private limited liability company incorporated under the laws of Norway)

Transcription

1 EXCHANGE OFFER (EDS Group AS, a private limited liability company incorporated under the laws of Norway) (AGR Group ASA, a public limited liability company incorporated under the laws of Norway) Exchange ratio EDS Share : AGR Share 44 : 56 Giving the right to exchange one EDS Share into AGR Share or one AGR Share into EDS Share Application Period: From 12 August 2013 to 16:30 hours CET on 26 August 2013 The information in this prospectus (the Prospectus ) relates to (i) an offer to existing shareholders of EDS Group AS ( EDS Group ) as of 6 August 2013 (and being registered as such in the Norwegian Central Securities Depository ( Verdipapirsentralen or the VPS ) on the 9 August 2013 (the Record Date ) pursuant to the three days settlement procedure) except for (a) Altor Oil Service Invest AS ( Altor ), and (b) shareholders being resident in a jurisdiction where the EDS Exchange Offer (as defined below) would be unlawful or in a jurisdiction, other than Norway, where the making of the EDS Exchange Offer would require any filing, registration or similar action (the EDS Shareholders ) to apply for an exchange of up to all of its shares in EDS Group (the EDS Shares ) into shares in AGR Group ASA ( AGR Group ) (the AGR Shares ) (the EDS Exchange Offer ) and (ii) an offer to existing shareholders of AGR Group (also referred to as the Company, and, together with its consolidated subsidiaries, AGR or the Group ) as of 6 August 2013 (and being registered as such in the VPS on the Record Date) except for (a) Altor, and (b) shareholders being resident in a jurisdiction where the AGR Exchange Offer would be unlawful or in a jurisdiction, other than Norway, where the making of the AGR Exchange Offer would require any filing, registration or similar action (the AGR Shareholders ) to apply for an exchange of its AGR Shares into EDS Shares (the AGR Exchange Offer and together with the EDS Exchange Offer, the Exchange Offer ). The exchange ratio between one EDS Share and one AGR Share under the Exchange Offer is 44:56, giving the right to exchange one EDS Share into AGR Share or one AGR Share into EDS Share. Under the EDS Exchange Offer, the full settlement of all applications for exchange of EDS Shares for AGR Shares is guaranteed by Altor. Under the AGR Exchange Offer, settlement of AGR Shares in exchange for EDS Shares is subject to the number of EDS Shares tendered under the EDS Exchange Offer. The application period will commence on 12 August 2013 and expire at 16:30 hours, Central European Time ( CET ), on 26 August 2013 (the Application Period ). Settlement of AGR Shares and EDS Shares under the Exchange Offer is expected to take place on or about 29 August 2013 through the facilities of the VPS. The AGR Shares (also referred to as the Shares ) are listed on Oslo Børs, a stock exchange operated by Oslo Børs ASA (the Oslo Stock Exchange ) under the ticker code AGR. The EDS Shares are not, and will not be, listed on any regulated market place. Neither the AGR Shares nor the EDS Shares have been, nor will be, registered under the United States Securities Act of 1933, as amended (the U.S. Securities Act ), or under the securities laws of any state or other jurisdiction of the United States of America (the U.S. or the United States ) and the Exchange Offer will be offered in reliance on Regulation S under the U.S. Securities Act ( Regulation S ). The Exchange Offer will not be made to persons who are residents of Australia, Canada, Hong Kong, Japan or the United States or in any jurisdiction in which the making of such offer would be unlawful. For more information regarding restrictions in relation to the Exchange Offer pursuant to this Prospectus, see Section 5.15 Selling and transfer restrictions. Investing in the Company s Shares involves a high degree of risk. See Section 2 Risk Factors beginning on page 12. The date of this Prospectus is 9 August 2013 i

2 IMPORTANT INFORMATION This Prospectus has been prepared in connection with the Exchange Offer. The Group has furnished the information in this Prospectus. This Prospectus has been prepared to comply with the Norwegian Securities Trading Act of 29 June 2007 no. 75 (the Norwegian Securities Trading Act ) and related secondary legislation, including the Commission Regulation (EC) no. 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 regarding information contained in prospectuses, as amended, and as implemented in Norway (the EU Prospectus Directive ). This Prospectus has been prepared solely in the English language. The Financial Supervisory Authority of Norway (Nw.: Finanstilsynet) (the Norwegian FSA ) has reviewed and approved this Prospectus in accordance with Sections 7-7 and 7-8 of the Norwegian Securities Trading Act. The Norwegian FSA has not controlled or approved the accuracy or completeness of the information included in this Prospectus. The approval by the Norwegian FSA only relates to the information included in accordance with pre-defined disclosure requirements. The Norwegian FSA has not made any form of control or approval relating to corporate matters described in or referred to in this Prospectus. This Prospectus has also been prepared to comply with Section 7-4 of the Regulations to the Securities Trading Act and has been registered with the Norwegian Register of Business Enterprises in accordance with Sections 7-10 cf. 7-2 of the Norwegian Securities Trading Act. For this purpose, the Prospectus has neither been reviewed nor approved, by neither the Norwegian FSA nor any other governmental authorities of Norway. For definitions of certain other terms used throughout this Prospectus, see Section 20 Definitions and Glossary. The information contained herein is current as of the date hereof and subject to change, completion and amendment without notice. In accordance with Section 7-15 of the Norwegian Securities Trading Act, significant new factors, material mistakes or inaccuracies relating to the information included in this Prospectus, which are capable of affecting the assessment of the Shares between the time of approval of this Prospectus by the Norwegian FSA and the completion of the Exchange Offer, will be included in a supplement to this Prospectus. Neither the publication nor distribution of this Prospectus, nor the exchange of any shares related to the Exchange Offer, shall under any circumstances imply that there has been no change in the Group s affairs or that the information herein is correct as of any date subsequent to the date of this Prospectus. Other than the Company, no person is authorised to give information or to make any representation concerning AGR Group, EDS Group or in connection with the Exchange Offer other than as contained in this Prospectus. If any such information is given or made, it must not be relied upon as having been authorised by the Company or by any of the affiliates, representatives or advisors of any of the Company or the Group. The Exchange Offer is being made only in those jurisdictions in which, and only to those persons to whom, offers, sales and exchange of shares may lawfully be made. Neither the AGR Shares nor the EDS Shares have been, nor will be, registered under the U.S. Securities Act, or under the securities laws of any state or other jurisdiction of the United States and may not be offered, sold or exchanged except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and in compliance with any applicable securities law of any state or other jurisdiction of the United States. Pursuant to this Prospectus, the shares under the Exchange Offer are being offered, sold and exchanged outside the United States in reliance on Regulation S. The Exchange Offer will not be made to persons who are residents of Australia, Canada, Hong Kong, Japan or the United States or in any jurisdiction in which such offering would be unlawful. For more information regarding restrictions in relation to the Exchange Offer pursuant to this Prospectus, see Section 5.15 Selling and transfer restrictions. This Prospectus and the terms and conditions of the Exchange Offer as set out herein and any offers, sales or exchange of shares hereunder shall be governed by and construed in accordance with Norwegian law. The courts of Norway, with Oslo as legal venue, shall have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Exchange Offer or this Prospectus. In making an investment decision, prospective investors must rely on their own examination, and analysis of, and enquiry into each of AGR Group and EDS Group and the terms of the Exchange Offer, including the merits and risks involved. Neither AGR Group nor EDS Group, or any of their respective representatives or advisers, is making any representation to any offeree or purchaser of the shares under the Exchange Offer regarding the legality of an investment in such shares by such offeree or purchaser under the laws applicable to such offeree or purchaser. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of an exchange of shares under the Exchange Offer. All Sections of the Prospectus should be read in context with the information included in Section 4 General Information. Investing in the Company s Shares involves a high degree of risk. See Section 2 Risk Factors beginning on page 12. i

3 NOTICE TO UNITED KINGDOM INVESTORS This Prospectus is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as Relevant Persons ). The exchange of AGR Shares and EDS Shares under the Exchange Offer are only available to, and any invitation, offer or agreement to exchange, subscribe, purchase or otherwise acquire AGR Shares and EDS Shares under the Exchange Offer will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents. NOTICE TO INVESTORS IN THE EEA In any member state of the European Economic Area (the EEA ) that has implemented the EU Prospectus Directive, other than Norway (each, a Relevant Member State ), this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of the EU Prospectus Directive. The Prospectus has been prepared on the basis that all offers to exchange AGR Shares and EDS Shares under the Exchange Offer outside Norway will be made pursuant to an exemption under the EU Prospectus Directive from the requirement to produce a prospectus for offer of shares. Accordingly, any person making or intending to make any offer within the EEA of AGR Shares and EDS Shares which is the subject of the Exchange Offer contemplated in this Prospectus within any EEA member state (other than Norway) should only do so in circumstances in which no obligation arises for AGR or EDS to publish a prospectus or a supplement to a prospectus under the EU Prospectus Directive for such offer. Neither AGR nor EDS have authorised, nor do they authorise, the making of any offer to exchange AGR Shares and EDS Shares under the Exchange Offer through any financial intermediary Each person in a Relevant Member State other than, in the case of paragraph (a), persons receiving offers contemplated in this Prospectus in Norway, who receives any communication in respect of, or who exchanges any AGR Shares and EDS Shares under the Exchange Offer contemplated in this Prospectus will be deemed to have represented, warranted and agreed to and with AGR and EDS that: a) it is a qualified investor as defined in the EU Prospectus Directive, and b) in the case of any AGR Shares and EDS Shares exchanged by it as a financial intermediary under the Exchange Offer, as that term is used in Article 3(2) of the Prospectus Directive, (i) such AGR Shares and EDS Shares exchanged by it under the Exchange Offer have not been exchanged on behalf of, nor have they been exchanged with a view to their exchange to, persons in any Relevant Member State other than qualified investors, as that term is defined in the EU Prospectus Directive, or in circumstances in which the prior consent of AGR or EDS have been given to the exchange; or (ii) where such AGR Shares and EDS Shares have been exchanged by it on behalf of persons in any Relevant Member State other than qualified investors, the exchange of those AGR Shares and EDS Shares is not treated under the EU Prospectus Directive as having been made to such persons. For the purposes of this provision, the expression an offer to the public in relation to any of the AGR Shares and EDS Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any AGR Shares and EDS Shares to be exchanged so as to enable an investor to decide to exchange any AGR Shares and EDS Share under the Exchange Offer, as the same may be varied in that Relevant Member State by any measure implementing the EU Prospectus Directive in that Relevant Member State, and the expression EU Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU. ii

4 TABLE OF CONTENTS 1 SUMMARY RISK FACTORS RESPONSIBILITY FOR THE PROSPECTUS GENERAL INFORMATION THE EXCHANGE OFFER THE DEMERGER DIVIDEND AND DIVIDEND POLICY INDUSTRY AND MARKET OVERVIEW BUSINESS OF THE GROUP CAPITALISATION AND INDEBTEDNESS SELECTED FINANCIAL AND OTHER INFORMATION OPERATING AND FINANCIAL REVIEW BOARD OF DIRECTORS, MANAGEMENT, EMPLOYEES AND CORPORATE GOVERNANCE RELATED PARTY TRANSACTIONS CORPORATE INFORMATION AND DESCRIPTION OF SHARE CAPITAL SECURITIES TRADING IN NORWAY TAXATION DESCRIPTION OF EDS GROUP AS ADDITIONAL INFORAMTION DEFINITONS AND GLOSSARY APPENDICES Appendix A ARTICLES OF ASSOCIATION... A1 Appendix B EDS EXCHANGE OFFER ACCEPTANCE FORM... B1 Appendix C AGR EXCHANGE OFFER ACCEPTANCE FORM... C1 1

5 1 SUMMARY Summaries are made up of disclosure requirements known as Elements. These Elements are numbered in Sections A E (A.1 E.7) below. This summary contains all the Elements required to be included in a summary for this type of securities and the Issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of not applicable. Section A Introduction and Warnings A.1 Warning This summary should be read as introduction to the Prospectus; any decision to invest in the securities should be based on consideration of the Prospectus as a whole by the investor; where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the Prospectus before the legal proceedings are initiated; and civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities. Section B - Issuer B.1 Legal and commercial name AGR Group ASA. B.2 Domicile and legal form, legislation and country of incorporation The Company is a public limited liability company organised and existing under the laws of Norway pursuant to the Norwegian Public Limited Companies Act. The Company s registered and business address is Karenslyst Allé 4, 0278 Oslo, P.O. Box 444 Skøyen, 0213 Oslo, Norway. B.3 Current operations, principal activities and markets The Group is a supplier of services and technology to the oil and gas offshore industry. The Group s main operations are based in Oslo, with other offices around the world, including Stavanger, Straume (Bergen), Trondheim, Aberdeen, Guilford, Houston, Perth, Almathy, Moscow, Dubai and Abu Dhabi and Tel Aviv. The Group provides independent oil companies with access to scarce drilling rig capacity, as well as providing specialized geology and geophysics and reservoir expertise and distinctive knowledge in well engineering, well planning and management of full drilling operations. The Group s core competences are geology, geophysics, petro physics, reservoir engineering, drilling and well construction, field management, subsea services. The Group is organized around the areas of Well Management, Reservoir Management, Facilities Solutions, Consultancy, HSE- and Training and Software Solutions. The Group delivers reservoir, well management, and integrated field development services, including subsea project management services, to international petroleum companies across the complete asset life cycle from prospect generation, exploration drilling, field development, and production and field operations to field abandonment. The Group has established itself as a global supplier 2

6 of rig campaigns, drilling and subsurface consultancy as well as offering bespoke training for the E&P Industry. The Group provides technology, expertise and services to several of the world s major oil and gas fields, with a customer base comprising several small and medium sized operators as well as a number of the large international oil companies and national oil companies. B.4a Significant recent trends The Group believes the market outlook for 2013 and beyond to be very strong. The industry is facing high demand for drilling of wells, while at the same time there is a shortage of capacity in the market. In such a market, track record is vital. Petroleum Services has spudded 11 wells year to date in 2013, approximately 500 wells during the last 12 years and the Group believes it is well positioned to offer cost efficient well operations to the global oil & gas industry. AGR s experience is expected to be in high demand going forward, as drilling efficiency, cost efficiency and safety during drilling operations will be key for oil companies to deliver on their exploration plans. The Group has a strong secured order backlog of drilling operations. This is specially the case within its most important regions. At year end 2012 the Group was working on well planning and preparation work for 2013 operations - in Norway alone 10 wells are scheduled for With a large number of new contracts and agreements secured during the year, the Group believes its outlook to be positive. However, the Group s experienced employees are in high demand, and recent year s trend with salary increases in excess of the general economy continues within the oil industry. The Group is also sensitive to external factors such as the oilprice and clients access to funding. No significant trend changes have occurred since the end of 2012 for the Company s business. Given a fairly stable oil price, no trend shifts are reasonably expected for the next six to 12 months. On 24 May 2013, the General Meeting of AGR resolved to separate its two business areas Petroleum Services and Drilling Services into two separate legal entities, by spinning off the Drilling Services business area into a newly incorporated private, non-listed, company, EDS Group AS (the Demerger ). Following a two-month statutory creditor period, the Demerger was completed on 6 August Except for completion of the Demerger, there have been no significant changes in the financial or trading position of the Group since the date of the unaudited interim condensed consolidated financial information for the Group as of and for the three-month periods ended 31 March 2013 and 2012 (the Interim Financial Information ). B.5 Description of the Group The Company is a holding company and the parent company of the Group. The Company was incorporated in Norway on 11 May 2005 with the organisation number in the Norwegian Register of Business Enterprises. All of the operations of the Group are being carried out through the Company s subsidiaries. B.6 Interests in the Company and voting rights The Company is controlled by Altor Funds, holding 78.6% of the Shares as of the date of this Prospectus. Altor Funds is a private fund with business address Seaton Place, St. Helier Jersey JE4 0QH, Channel Islands. Altor is holding the Shares through Altor Oil Service Invest AS, with registered address Tjuvholmen Allé 19, 0252 Oslo, Norway. In addition, RBC Dexia Investors Service Bank, being a wholly owned subsidiary of Royal Bank of Canada, holds 6.2% of the Shares as of the date of this 3

7 Prospectus. The Company is not aware of any other persons or entities that, directly or indirectly, have an interest in 5% or more of the Shares. There are no differences in voting rights. B.7 Selected historical key financial information This Prospectus includes the audited consolidated annual financial statements for the Group as of and for the years ended 31 December 2012, 2011 and 2010 (the Financial Statements ). The following selected financial information present selected financial information in respect of the Group as of and for the three-month periods ended 31 March 2013 and 2012, and the year ended 31 December 2012, 2011 and 2010, and have been derived from and are based on the Interim Financial Information and the Financial Statements, respectively. The Financial Statements and the Interim Financial Information have been prepared in accordance with International Financial Reporting Standards ( IFRS ), as adopted by the European Union ( EU ). In NOK thousand As of and for the three-months ended 31 March As of and for the year ended 31 December Income statement Continuing operations 2013 (unaudited) 2012 (unaudited) 2012 (audited) 2011 (audited) 2010 (audited) Total operating revenue , ,068 1,777,913 1,867,914 1,445,256 Total operating expenses , ,995 1,734,852 1,727,460 1,370,683 Operating profit... 29,059 26,072 43, ,454 74,573 Profit (loss) from continued operations... 19,828 11,462 ( ) 17,582 (19,739) Profit (loss) after tax from discontinued operations... 11,608 (19,238) - 737,016 13,378 Profit (loss) for the year... 31,437 (7,776) (103,957) 754,598 (6,631) Statement of financial position Total assets... Total equity... Total liabilities... 2,123,785-2,170,949 2,790,739 2,661, , ,461 1,411, ,372 1,410,278-1,489,488 1,379,270 1,996,488 Statement of cash flow Net cash flow from operational activities... (210,249) (24,430) 299,988 70, ,256 Net cash flows used in investing activities... (4,115) (23,561) (119,288) 876,109 (108,207) Net cash flow from/(used) in financing activities... 16,012 (29,002) (729,506) (154,459) (253,175) The table below shows the statement of financial income of the Group for the three-month periods ended 31 March 2013 and 2012 and for the year ended 31 December Income statement Continuing operations Three-months ended 31 March Year ended 31 December In NOK thousand (unaudited) (unaudited) (unaudited) Operating revenue , ,068 1,249,148 Operating expenses before depreciation... (282,419) (281,804) (1,138,865) Operating profit (EBIT)... 29,059 26,072 88,835 Profit after taxes... 19,828 11,462 83,610 Profit (loss) for the year... 31,437 (7,776) (103,976) 4

8 The tables below shows the statement of financial income of the discontinued operations of Drilling Services for the three-month periods ended 31 March 2013 and 2012 and for the year ended 31 December The presentation of the discontinued operations of Drilling Services below comprises the Drilling Services segment and the companies AGR CannSeal AS and AGR Marine Engineering AS. AGR CannSeal AS and AGR Marine Engineering AS have previously been presented under the Group segment. In NOK thousand (unaudited) Income statement Discontinued operations EDS T&T DS Group/ Other Total Three-months ended 31 March 2013 Operating revenue... 97, (972) 97,762 Operating expenses before depreciation... (75,094) (6,635) (813) (82,543) EBIT... 4,158 (6,788) (1,806) (4,436) Profit/(loss) for the year... 1,617 (4,092) 14,083 11,608 Three-months ended 31 March 2012 Operating revenue... 93,738 14,309 (4,820) 103,227 Operating expenses before depreciation... (78,782) (19,107) (15) (97,903) EBIT... (3,740) (5,587) (5,525) (14,852) Profit/(loss) for the year... (10,119) (4,689) (4,430) (19,238) Year ended 31 December 2012 Operating revenue ,180 25,330 (1,277) 493,233 Operating expenses before depreciation... (384,386) (61,569) (706) (446,661) EBIT... 84,794 (36,239) (1,983) 46,572 Profit/(loss) for the year... (128,563) (32,984) (18,267) (179,813) In NOK thousand As of 31 March Statement of financial position Discontinued operations 2013 (unaudited) Total assets... 2,123,785 Total equity ,507 Total liabilities... 1,410,278 B.8 Selected key pro forma financial information Not applicable. There is no pro forma financial information. B.9 Profit forecast or estimate Not applicable. No profit forecast or estimate is made. B.10 Audit report qualifications Not applicable. There are no qualifications in the audit reports. B.11 Insufficient working capital Not applicable. The Company is of the opinion that the working capital available to the Group is sufficient for the Group s present requirements, for the period covering at least 12 months from the date of this Prospectus. Section C - Securities C.1 Type and class of securities admitted to trading and identification number The Company has one class of shares, being the Shares. The Shares are registered in book-entry form with VPS under ISIN NO C.2 Currency of issue The currency of the Shares is issued in NOK. C.3 Number of shares in issue As of the date of this Prospectus, the Company s share capital is NOK 139,050,680.16, divided into 124,152,393 Shares with each Share having 5

9 and par value C.4 Rights attaching to the securities a nominal value of NOK All the Shares have been created under the Norwegian Public Limited Companies Act, and are validly issued and fully paid. The Company has one class of Shares in issue, and in accordance with the Norwegian Public Limited Companies Act, all Shares in that class provide equal rights in the Company. Each of the Company s Shares carries one vote. C.5 Restrictions on transfer The Articles of Association do not provide for any restrictions on the transfer of Shares, or a right of first refusal for the Company. Share transfers are not subject to approval by the Board of Directors. C.6 Admission to trading The Company has been listed on the Oslo Stock Exchange in Norway since 3 July 2006 under the ticker AGR. C.7 Dividend policy Under the current dividend policy adopted by the Company s Board of Directors, it is an objective for the Company to over time yield a competitive profit from the shareholders investments. The Company s dividend profile shall at the same time ensure the AGR s need for stability and development in accordance with its objectives and strategies. Under the current dividend policy, the Company s Board of Directors intends to pay no dividends in the foreseeable future. Moreover, the Company has undertaken not to declare any dividend, repurchase any shares or make other distributions to its shareholders during the term of the Bonds issued. Section D - Risks D.1 Key risks specific to the Company or its industry (i) General market conditions The oil service industry in which the Group and its customers operate is focused on providing products and services to the worldwide oil and gas industry. The Group s business and operations depend principally upon conditions prevailing in the oil and gas industry and, in particular, the exploration, development and production spending of oil and gas companies. Such spending is influenced by many factors, including the current and anticipated prices of oil and gas and the global economic activity. A reduction of the currently high oil price could therefore adversely affect the Group s revenues. While the Group is currently experiencing favourable market conditions, there can be no assurances as to the duration of such conditions. A future downturn in general economic condition could have a material adverse effect on the Group s business, operating results and financial condition. (ii) Competitive industry The market for the Group s products and services is competitive. The Group s competitive position may be harmed if its current competitors strengthen their market position or if new competitors with similar products and services establish operations in the same segments of the market. The failure of the Group to maintain competitiveness through the successful management of its product and services strategy could have a material adverse effect on the Group s business, operating results and financial condition. (iii) Management of growth; maintaining and recruiting management and other key personnel The Group s future performance will to a large extent depend on its ability to manage its growth effectively. If the Group fails to attract and retain management and key personnel who can manage the Group s growth effectively, it could have a material adverse effect on the Group s business, operating results and financial condition. Further, potential 6

10 strikes could have an adverse effect on the Group s operating results and financial condition. (iv) Dependency on the activity in the geographic areas which the Group operates in The Group s main operations are based in Oslo, with other offices around the world including Stavanger, Trondheim, Aberdeen, Guilford, Houston, Perth, Almaty, Moscow, Dubai, Abu Dhabi and Tel Aviv. Thus, the Group will be exposed to fluctuations in the general exploration and production ( E&P ) activity level in the geographic areas where the Group provide services. (v) Oil prices Historically, demand for offshore exploration, development and production services has been volatile and closely linked to the price of hydrocarbons. Low oil prices typically lead to a reduction in exploration drilling as the oil companies scale down their investment budgets. A decrease in the oil prices may have a material adverse impact on the financial position of the Group. However, current Group policy is to not hedge oil price changes. (vi) Fluctuation in the Group s earnings The Group s profitability can vary from quarter to quarter. Trends in business volumes are correlated with oil prices and general economic conditions. Moreover, the Group is to a certain degree exposed to seasonal fluctuations, primarily related to holidays and work constraints during the winter season. (vii) Credit risk of clients; the risk of default by contractual counterparties The Group s customers consist of large, medium and small oil companies, of which the majority are publicly listed. The Group consider some of the customers to have moderate credit risk potential. The risk that the counterparties do not have the financial ability to meet their financial obligations is considered low as the Group s historical loss on receivables has been low. However, there is always a risk of the Group s counterparties not having the financial ability to meet their financial obligations and there (viii) Delay in or cancellation of significant projects The Group s revenues and earnings rely upon prompt start-up of scheduled projects. In case of a delay in a project, the Group s earnings relating to such project will be delayed accordingly. Further, projects could be cancelled, in which case the Group may not be entitled to compensation according to the contract, but only to compensation for work performed, incurred expenses and costs related to an orderly close out of the contract. (ix) Legal claims and disputes The Group may be exposed to legal claims from authorities, customers and other third parties and from time to time be involved in disputes in the ordinary course of its business activities. Such disputes may disrupt business operations and adversely affect the results of operations and financial condition. (x) Liquidity risk The Group has a significant customer portfolio with large, medium and small cap customers. Delayed payments from some of the largest customers at the same time could have a significant impact on the Group s liquidity positions. The Group s management and the individual business units have a high focus on working capital management, and continuously 7

11 take actions if customers do not settle their obligations towards the Group in due time. The Group s policy is to reduce the liquidity risk by having a committed long term loan facility. (xi) Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, Australian Dollar and GBP. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. Thus, the fluctuations in currencies in relation to NOK may affect the Group s result. D.3 Key risks specific to the securities (i) The price of the Shares may fluctuate significantly, which could cause investors to lose a significant part of their investment The trading price of the Shares could fluctuate significantly in response to a number of factors beyond the Group s control, including quarterly variations in operating results, adverse business developments, changes in financial estimates and investment recommendations or ratings by securities analysts, announcements by the Group or its competitors of new product and service offerings, significant contracts, acquisitions or strategic relationships, publicity about the Group, its products and services or its competitors, lawsuits against the Group, unforeseen liabilities, changes in management, changes to the regulatory environment in which it operates or general market conditions. Market conditions may affect the Shares regardless of the Group s operating performance or the overall performance of the oil and gas sector. Accordingly, the market price of the Shares may not reflect the underlying value of the Group s assets and operations, and the price at which investors may dispose of their shares at any point in time may be influenced by a number of factors, only some of which may pertain to the Company while others of which may be outside the Group s control. In recent years, the Oslo Stock Exchange has experienced wide price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies. Those changes may occur without regard to the operating performance of these companies. (ii) Future sales of Shares by Altor may depress the price of the Shares The market price of the Shares could decline as a result of sales of a large number of Shares in the market by Altor or the perception that these sales could occur. These sales, or the possibility that these sales may occur, might also make it more difficult for the Company to sell equity securities in the future at a time and at a price that it deems appropriate. (iii) Future issuances of Shares or other securities may dilute the holdings of shareholders and could materially affect the price of the Shares It is possible that the Company may in the future decide to offer additional Shares or other equity-based securities through directed offerings without pre-emptive rights for existing shareholders. Any such additional offering could reduce the proportionate ownership and voting interests of the shareholders, as well as the earnings per Share and the net asset value per Share. (iv) Pre-emptive rights to secure and pay for Shares in any additional issuance may not be available to U.S. or certain other shareholders 8

12 Under Norwegian law, unless otherwise resolved at a general meeting, existing shareholders have pre-emptive rights to participate on the basis of their existing share ownership in the issuance of any new shares for cash consideration. Shareholders in the United States, however, may be unable to exercise any such rights to subscribe for new shares unless a registration statement under the U.S. Securities Act is in effect in respect of such rights and shares or an exemption from the registration requirements under the U.S. Securities Act is available. Shareholders in other jurisdictions outside Norway may be similarly affected if the rights and the new shares being offered have not be registered with, or approved by, the relevant authorities in such jurisdiction. The Company is under no obligation to file a registration statement under the U.S. Securities Act or seek similar approvals under the laws of any other jurisdiction outside Norway in respect of any such rights and shares and doing so in the future may be impractical and costly. To the extent that the Company s shareholders are not able to exercise their rights to subscribe for new shares, their proportional interests in the Company will be reduced. (v) The transfer of Shares is subject to restrictions under the securities laws of the United States and other jurisdictions The Shares have not been registered under the U.S. Securities Act or any U.S. state securities laws or any other jurisdiction outside of Norway and are not expected to be registered in the future. As such, the Shares may not be offered or sold except pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable securities laws. In addition, there can be no assurances that shareholders residing or domiciled in the U.S. will be able to participate in future capital increases or rights offerings. (vi) Shareholders outside of Norway are subject to exchange rate risk The Shares are priced in NOK, and any future payments of dividends on the Shares will be denominated in NOK. Accordingly, investors outside Norway are subject to adverse movements in the NOK against their local currency, as the foreign currency equivalent of any dividends paid on the Shares or of the price received in connection with any sale of the Shares could be materially adversely affected. Section E - Offer E.1 Net proceeds and estimated expenses Not applicable. The Company is not issuing any new Shares or raising any funds under the Exchange Offer. E.2a Reasons for the Exchange Offer and use of proceeds The total costs and expenses of, and incidental to, the Exchange Offer are estimated to amount to approximately NOK 1 million (including VAT). To meet potential preference among investors to hold shares in a publicly listed company rather than in a privately held company, AGR Group, on 17 April 2013 announced that it would seek to facilitate a swap whereby shareholders receiving shares in EDS Group, subsequent to and following completion of the Demerger, would be offered to exchange up to all their shares in EDS Group for shares in AGR Group and, further, a swap whereby shareholders in AGR Group would be offered to, subject to the number of available shares being tendered by shareholders in EDS Group, exchange their shares in AGR Group for shares in EDS Group. 9

13 E.3 Terms and conditions of the Exchange Offer The following is a summary of main terms and conditions of the Exchange Offer: The Exchange Offer comprises of (i) the EDS Exchange Offer, whereby EDS Shareholders as of the Record Date (9 August 2013) are offered to apply for an exchange of their shares in EDS Group for shares in AGR Group; and (ii) the AGR Exchange Offer, whereby AGR Shareholders as of the Record Date are offered to apply for an exchange of their shares in AGR Group for shares in EDS Group. The Exchange Ratio is 44/56, being equal to the exchange ratio of the Demerger, whereby each EDS Share held by an EDS Shareholder gives the right to exchange one EDS Share for AGR Share under the EDS Exchange Offer, and whereby each AGR Share held by an AGR Shareholder gives the right to apply for an exchange of one AGR Share for EDS Share under the AGR Exchange Offer, however, so that the maximum number of EDS Shares being made available for the AGR Shareholders are limited to the total number of EDS Shares actually being tendered for exchange by the EDS Shareholders under the EDS Exchange Offer. Subject to the number of the exchanged EDS Shares or AGR Shares not ending up in whole AGR Shares or EDS Shares, respectively, the remaining value will be settled in cash, however, so that any remaining value of less than NOK 10 will not be settled. Altor will only participate in the Exchange Offer as necessary in order to guarantee for full settlement of AGR Shares under the EDS Exchange Offer. In the event that not all EDS Shares being tendered for exchange under the EDS Exchange Offer are covered by a corresponding amount of EDS Shares applied for under the AGR Exchange Offer, Altor has undertaken to settle such uncovered demand for AGR Shares by exchanging the remaining tendered EDS Shares with AGR Shares held by Altor. No such guarantee has been given for the AGR Exchange Offer. Hence, there is no guarantee that AGR Shareholders will be allocated the full amount of EDS Shares applied for under the AGR Exchange Offer. There is no minimum application amount. The maximum application amount is equal to each EDS Shareholder s and AGR Shareholder s value of EDS Shares and AGR Shares, respectively. The Application Period will run from 12 August 2013 at 09:00 hours (CET) and will expire on 26 August 2013 at 16:30 hours (CET). The Application Period may not be extended or shortened. Arctic Securities ASA is acting as Settlement Agent under the Exchange Offer. Any applications received by the Settlement Agent under the Exchange Offer are binding on the EDS Shareholders and AGR Shareholders, respectively. Notifications of allocation of AGR Shares and EDS Shares in the EDS Exchange Offer are expected to be issued on or about 26 August Delivery of the allocated AGR Shares and EDS Shares against a swap of the tendered EDS Shares and AGR Shares are expected to take place on or about 29 August The Exchange Offer does not constitute an offer of, or an invitation to 10

14 purchase or exchange, EDS Shares for AGR Shares or AGR shares for EDS Shares in any jurisdiction in which such offer or sale or exchange would be unlawful. E.4 Material and confliction interests Arctic Securities ASA is acting as Settlement Agent. The Settlement Agent or its affiliates have provided from time to time, and may provide in the future, investment and commercial banking services to the Group and its affiliates in the ordinary course of business, for which they may have received and may continue to receive customary fees and commissions. The Settlement Agent does not intend to disclose the extent of any such investments or transactions otherwise than in accordance with any legal or regulatory obligation to do so. Altor holds, as of the date of this Prospectus 97,659,680 AGR Shares and 97,659,680 EDS Shares. Altor will not receive any consideration for its undertaking in the EDS Exchange Offer. Beyond the abovementioned, the Company is not known with any interest of natural and legal persons involved in the Exchange Offer. E.5 Selling shareholders and lock-up agreements E.6 Dilution resulting from the Scheme E.7 Estimated expenses charged to investor Not applicable. Not applicable. AGR Group will pay commissions or transactions cost in VPS directly attributable to the Exchange Offer. This means that EDS Shareholders and AGR Shareholders who applies for exchange of their shares under the Exchange Offer will not be debited with brokers fees or similar costs in connection with the Exchange Offer. 11

15 2 RISK FACTORS An investment in the Shares, involves inherent risk. Before making an investment decision with respect to the Shares, investors should carefully consider all of the information contained in this Prospectus, and in particular the risks and uncertainties described in this Section 2, which the Company believes are the principal known risks and uncertainties faced by the Group as of the date hereof. An investment in the Shares is suitable only for investors who understand the risks associated with this type of investment and who can afford to lose all or part of their investment. The absence of negative past experience associated with a given risk factor does not mean that the risks and uncertainties described are not a genuine potential threat to an investment in the Shares. If any of the following risks were to materialise, this could have a material adverse effect on the Group and/or its business, results of operations, cash flow, financial condition and/or prospects, which may cause a decline in the value and trading price of the Shares, resulting in the loss of all or part of an investment in the same. The order in which the risks are presented does not reflect the likelihood of their occurrence or the magnitude of their potential impact on the Group. The information in this Section 2 is as of the date of this document. 2.1 Risks relating to the Group and the industry in which the Group operates General market conditions The oil service industry in which the Group and its customers operate is focused on providing products and services to the worldwide oil and gas industry. The Group s business and operations depend principally upon conditions prevailing in the oil and gas industry and, in particular, the exploration, development and production spending of oil and gas companies. Such spending is influenced by many factors, including the current and anticipated prices of oil and gas and the global economic activity. A reduction of the currently high oil price could therefore adversely affect the Group s revenues. While the Group is currently experiencing favourable market conditions, there can be no assurances as to the duration of such conditions. A future downturn in general economic condition could have a material adverse effect on the Group s business, operating results and financial condition Competitive industry The market for the Group s products and services is competitive. The Group s competitive position may be harmed if its current competitors strengthen their market position or if new competitors with similar products and services establish operations in the same segments of the market. The failure of the Group to maintain competitiveness through the successful management of its product and services strategy could have a material adverse effect on the Group s business, operating results and financial condition Management of growth; maintaining and recruiting management and other key personnel The Group s future performance will to a large extent depend on its ability to manage its growth effectively. If the Group fails to attract and retain management and key personnel who can manage the Group s growth effectively, it could have a material adverse effect on the Group s business, operating results and financial condition. Further, potential strikes could have an adverse effect on the Group s operating results and financial condition Government regulations The oil service industry is subject to numerous and international conventions, as well as national, state and local laws and regulations in force, in the jurisdictions in which the Group conducts, or will conduct, its business. These laws and regulations relate to, inter alia, the protection of the environment, human health and safety, taxes, labour and wage standards, certification, licensing, safety and training and other requirements. Laws, regulations and licenses granted by the local governments, regarding the exploration for and development of their oil and gas reserves, can impact the rate of development of oil and gas fields, which in turn affects the demand for the Group s services. The oil service industry is dependent on demand for services from the oil and gas exploration industry and, accordingly, is affected by changing taxes, regulations and other laws or policies affecting the oil and gas industry generally. The amendment of existing laws and regulations, or the adoption of new laws and regulations, curtailing or further regulating exploratory or development drilling and production for oil and gas for political, economic or other reasons, could harm the Group s business, operating results or financial condition. The Group cannot predict the extent to which its future cash flow and earnings may be affected by mandatory compliance with any such new legislation or regulations. In addition, the Group may become subject to additional laws and regulations as a result of future rig relocations or other operations of the Group being conducted in jurisdictions in which it is not currently operating. 12

16 Moreover, the Group may have no right to compensation from its customers if its costs are increased through such governmental actions, and its operating margins may fall as a result Fluctuation in the Group s earnings The Group s profitability can vary from quarter to quarter. Trends in business volumes are correlated with oil prices and general economic conditions. Moreover, the Group is to a certain degree exposed to seasonal fluctuations, primarily related to holidays and work constraints during the winter season Credit risk of clients; the risk of default by contractual counterparties The Group s customers consist of large, medium and small oil companies, of which the majority are publicly listed. The Group consider some of the customers to have moderate credit risk potential. The risk that the counterparties do not have the financial ability to meet their financial obligations is considered low as the Group s historical loss on receivables has been low. However, there is always a risk of the Group s counterparties not having the financial ability to meet their financial obligations and there can be no assurance that losses will not occur in the future and impact the Group s earnings and cash balances Dependency on the activity in the geographic areas which the Group operates in The Group s main operations are based in Oslo, with other offices around the world including Stavanger, Straume (Bergen), Trondheim, Aberdeen, Guilford, Houston, Perth, Almaty, Moscow, Dubai, Abu Dhabi and Tel Aviv. Thus, the Group will be exposed to fluctuations in the general exploration and production ( E&P ) activity level in the geographic areas where the Group provide services Oil prices Historically, demand for offshore exploration, development and production services has been volatile and closely linked to the price of hydrocarbons. Low oil prices typically lead to a reduction in exploration drilling as the oil companies scale down their investment budgets. A decrease in the oil prices may have a material adverse impact on the financial position of the Group. However, current Group policy is to not hedge oil price changes Market interest rates may influence the price of the Shares The annual growth as compared to yields on other financial instruments may influence the price of the Shares. Furthermore, the interest AGR pays on its debt fluctuates with market interest rates, see Section Bonds. Thus, an increase in market interest rates will result in higher yields on other financial instruments and higher cost for AGR, which could adversely affect the price of the Shares Delay in or cancellation of significant projects The Group s revenues and earnings rely upon prompt start-up of scheduled projects. In case of a delay in a project, the Group s earnings relating to such project will be delayed accordingly. Further, projects could be cancelled, in which case the Group may not be entitled to compensation according to the contract, but only to compensation for work performed, incurred expenses and costs related to an orderly close out of the contract Act of disaster, war, terrorism or other criminal acts Incidents such as natural disasters such as earthquakes, tsunamis etc or acts of war, terrorism or other criminal acts can affect the Group s business directly or indirectly through an adverse effect on the general economic climate or direct attacks on the Group s assets and properties Legal claims and disputes The Group may be exposed to legal claims from authorities, customers and other third parties and from time to time be involved in disputes in the ordinary course of its business activities. Such disputes may disrupt business operations and adversely affect the results of operations and financial condition Access to funds The Group may be dependent on obtaining additional debt or equity financing in the future. There is no assurance that the Group will be able to obtain such future financing or that such financing will be on acceptable terms. If the Group is unable to obtain future debt and/or equity financing on acceptable terms this could materially adversely affect the Group s business, financial condition, results of operation and liquidity. 13

17 Interest rate risk As the Group has no significant interest-bearing assets, the Group s income and operating cash flows are substantially independent of changes in market interest rates. An increase in the Group s floating interest rates may have a material adverse effect on the Group s financial condition and liquidity. The Group s interest rate risk arises from long-term borrowings being the bonds issued by AGR Petroleum Services Holdings AS on 5 February 2013 (the Bonds ), see Section Bonds. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group s policy is that long-term borrowings shall be based on floating interest rates. However, interest rate derivatives can be applied in order to avoid catastrophic losses due to interest rate changes. Based on the risk analysis where a 1% interest rate increase/decrease is applied, the impact of net interest expenses would be negative NOK 5.5 million and positive NOK 5.5 million. At 30 June 2013 the Group held no interest derivatives Liquidity risk The Group has a significant customer portfolio with large, medium and small cap customers. Delayed payments from some of the largest customers at the same time could have a significant impact on the Group s liquidity positions. The Group s management and the individual business units have a high focus on working capital management, and continuously take actions if customers do not settle their obligations towards the Group in due time. The Group s policy is to reduce the liquidity risk by having a committed long term loan facility Risk related to future development and forward-looking statements This Prospectus includes forward looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the Group s actual results, performance or achievements to be materially different from any future results, performances achievements expressed or implied by the forward looking statements. See Important Information above for further details Additional indebtedness in the future The Group may incur additional indebtedness which may have directly or indirectly effects on the investment in the Shares, which could limit the Group s ability to satisfy its obligations under the Bonds, the loan facility being a revolving credit facility made available by DNB Bank ASA to AGR Petroleum Services Holdings AS pursuant to a senior facility agreement dated 27 February 2013 (the RCF ) and other debt, and increase the Group s vulnerability to adverse general economic and industry conditions, require the Group to dedicate a portion of its cash flow from operations to servicing and repaying the Group s indebtedness which may place the Group at a competitive disadvantage to its competitors with less debt. The Group s ability to generate sufficient cash to satisfy its outstanding and future debt obligations will depend upon the Group s future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond the Group s control. In addition, certain of the Group s financing arrangements impose operating and financial restrictions on the Group s business. The indenture governing the Bonds and the RCF prohibits the Group from incurring additional indebtedness, subject to certain exceptions. If the Group incurs additional debt, the risks that it already faces as a result of the Group s existing indebtedness could further increase, and agreements with respect to future indebtedness may contain additional affirmative and negative covenants which could be more restrictive than those contained in the indenture governing the Bonds and the RCF. The indenture governing the Bond and the RCF also contains covenants which impose substantial limitations on, among other things, the Group s ability and the ability of the Group s subsidiaries to incur additional debt, make investments or other restricted payments, pay dividends or distributions on the Group s capital stock or repurchase its capital stock, enter into transactions with its affiliates, create liens on the Group s assets to secure debt, enter into sale and leaseback transactions, sell assets, enter into agreements that restrict the ability of the Group s subsidiaries to pay dividends or make intercompany loans and merge or consolidate with another company. Further, the Company is a guarantor for the Bonds and the RCF, and the Group cannot assure investors that Petroleum Services Holdings AS will have the funds necessary to satisfy the financial obligations under the Bonds if it is unable to do so. If the Company is made responsible for the financial obligations under the Bonds and/or the RFC, see Section 12.7 Borrowings, it may have substantial effect on the Company s financial situation and its ability to raise capital. This may in turn affect the price of the Shares Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, Australian Dollar and GBP. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. Thus, the fluctuations in currencies in relation to NOK may affect the Group s result. 14

18 Uninsured losses The Group s insurance coverage may under certain circumstances not provide sufficient funds to protect the Group from all losses and liabilities that could result from its operations. The Group has a liability cap on its operations. The exception is loss or damage caused by gross negligence or wilful misconduct. The principal risks against which the Group may not be fully insured or insurable are, inter alia, loss due to disruptions in production and environmental liabilities, which may result from a blowout or similar accident, and liabilities resulting from reservoir damage caused by the Group s gross negligence or wilful misconduct. Moreover, any insurance is typically subject to substantial deductibles and provides for premium adjustments based on claims, and the Group s insurance coverage would not protect fully, if at all, against loss of income. The occurrence of a casualty, loss or liability against which the Group is not fully insured, could significantly reduce its revenues and cause the Group to pay fines or damages or otherwise impair its ability to meet its obligations under its indebtedness and to operate profitably. In addition, the Group cannot guarantee that insurance will be available to the Group at all or on terms acceptable to it, that the Group will maintain insurance or, if the Group is so insured, that its policy will be adequate to cover its loss or liability in all cases. The Group has generally been and expects to continue to be able to obtain contractual indemnification pursuant to which its customers agree to protect and indemnify the Group to some degree from liability for reservoir, pollution and environmental damages. Nonetheless, the Group cannot guarantee that it will be able to obtain full indemnities in all of its contracts, that the level of indemnification the Group can obtain will be adequate, that the indemnification provisions will be enforceable or that its customers will be financially able to comply with their indemnity obligations. The Group will always, to some extent, be exposed to potential contractual liabilities and third party claims. Although the Group seeks to obtain adequate coverage under its liability insurance and also to limit its exposure in its agreements with its customers, there can be no assurance that such attempts to limit, reduce or offset such liability will be sufficient. 2.2 Risk related to the completed Demerger The completed Demerger rendered the Group less diversified Upon completion of the Demerger, the Group has become a less diversified Group. Furthermore, the Group will no longer be present in all jurisdictions it was prior to the Demerger, and this might reduce the number of business opportunities the Group is able to identify, and it might be less capable of doing business in jurisdiction where no such presence exists. Thus, the Demerger of the Group s Drilling Services business described in Section 18 Description of EDS Group AS, may not improve, and may even adversely affect, the results of operations of the Group. The Group's ability to benefit from enhanced business opportunities, after spinning off the Drilling Services business, is dependent on business conditions in future periods that cannot be predicted or measured with certainty Norwegian law subjects AGR Group ASA and EDS Group AS to joint liability after the Demerger Upon completion of the Demerger, the obligations of the Group have been divided between AGR Group ASA and EDS Group AS in accordance with the principles of the demerger plan signed by the Board of Directors on 17 April 2013 (the Demerger Plan ). If either AGR Group ASA or EDS Group AS is liable under the Demerger Plan for an obligation that arose from the Demerger Plan and fails to satisfy that obligation, the non-defaulting party will be jointly and severally liable for the obligation. This statutory liability is unlimited in time, but is limited in amount to the equivalent of the net value allocated to the non-defaulting party in the Demerger. 2.3 Risks relating to the Shares The price of the Shares may fluctuate significantly, which could cause investors to lose a significant part of their investment The trading price of the Shares could fluctuate significantly in response to a number of factors beyond the Group s control, including quarterly variations in operating results, adverse business developments, changes in financial estimates and investment recommendations or ratings by securities analysts, announcements by the Group or its competitors of new product and service offerings, significant contracts, acquisitions or strategic relationships, publicity about the Group, its products and services or its competitors, lawsuits against the Group, unforeseen liabilities, changes in management, changes to the regulatory environment in which it operates or general market conditions. Market conditions may affect the Shares regardless of the Group s operating performance or the overall performance of the oil and gas sector. Accordingly, the market price of the Shares may not reflect the underlying value of the Group s assets and operations, and the price at which investors may dispose of their shares at any point in time may 15

19 be influenced by a number of factors, only some of which may pertain to the Company while others of which may be outside the Group s control. In recent years, the Oslo Stock Exchange has experienced wide price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies. Those changes may occur without regard to the operating performance of these companies The Company s ability to pay dividends is dependent on the availability of distributable equity Norwegian law provides that any declaration of dividends must be adopted by the shareholders at the Company s general meeting of shareholders (the General Meeting ). With effect from 1 July 2013, the general meeting may following the approval of the annual accounts also authorize the board of directors of the Company (the Board of Directors ) to declare dividend. Dividends may only be declared to the extent that the Company has distributable equity and that the Company s equity and liquidity is sound in relation to the risk and scope of the Company s business. As the Company s ability to pay dividends is dependent on the availability of distributable equity, it is, among other things, dependent upon receipt of dividends and other distributions of value from its subsidiaries and the companies in which the Company has invested. As a general rule, the General Meeting may not declare higher dividends than the Board of Directors has proposed or approved. If, for any reason, the General Meeting does not declare dividends in accordance with the above, a shareholder will, as a general rule, have no claim in respect of such non-payment, and the Group will, as a general rule, have no obligation to pay any dividend in respect of the relevant period The Company has, and will continue to have, a major shareholder whose commercial goals may not always be aligned with the Group s or other shareholders commercial goals Altor holds 78.6% of the shares in the Company and has the ability to influence matters requiring shareholder approval, including the election of the Board of Directors, approval of annual financial statements and significant transactions and changes in the Articles of Association (including any change in the number of shares or share capital of the Company). The commercial goals of Altor as the major shareholder, and the Group s or other shareholders goal, may not always remain aligned. Furthermore, this concentration of ownership may affect the liquidity in the Shares itself Future sales of Shares by Altor may depress the price of the Shares The market price of the Shares could decline as a result of sales of a large number of Shares in the market by Altor or the perception that these sales could occur. These sales, or the possibility that these sales may occur, might also make it more difficult for the Company to sell equity securities in the future at a time and at a price that it deems appropriate Future issuances of Shares or other securities may dilute the holdings of shareholders and could materially affect the price of the Shares It is possible that the Company may in the future decide to offer additional Shares or other equity-based securities through directed offerings without pre-emptive rights for existing shareholders. Any such additional offering could reduce the proportionate ownership and voting interests of the shareholders, as well as the earnings per Share and the net asset value per Share Pre-emptive rights to secure and pay for Shares in any additional issuance may not be available to U.S. or certain other shareholders Under Norwegian law, unless otherwise resolved at a general meeting, existing shareholders have pre-emptive rights to participate on the basis of their existing share ownership in the issuance of any new shares for cash consideration. Shareholders in the United States, however, may be unable to exercise any such rights to subscribe for new shares unless a registration statement under the U.S. Securities Act is in effect in respect of such rights and shares or an exemption from the registration requirements under the U.S. Securities Act is available. Shareholders in other jurisdictions outside Norway may be similarly affected if the rights and the new shares being offered have not be registered with, or approved by, the relevant authorities in such jurisdiction. The Company is under no obligation to file a registration statement under the U.S. Securities Act or seek similar approvals under the laws of any other jurisdiction outside Norway in respect of any such rights and shares and doing so in the future may be impractical and costly. To the extent that the Company s shareholders are not able to exercise their rights to subscribe for new shares, their proportional interests in the Company will be reduced. 16

20 2.3.7 Investors may not be able to exercise their voting rights for Shares registered in a nominee account Beneficial owners of the Shares that are registered in a nominee account (such as through brokers, dealers or other third parties) may not be able to vote for such Shares unless their ownership is re-registered in their names with the VPS prior to the general meetings. The Company can provide no assurances that beneficial owners of the Shares will receive the notice of a general meeting in time to instruct their nominees to either effect a re-registration of their Shares or otherwise vote for their Shares in the manner desired by such beneficial owners Investors may be unable to recover losses in civil proceedings in jurisdictions other than Norway The Company is a public limited liability company organised under the laws of Norway. The majority of the members of the Board of Directors and of the Group s management reside in Norway. As a result, it may not be possible for investors to effect service of process in other jurisdictions upon such persons or the Company, to enforce against such persons or the Company judgments obtained in non-norwegian courts, or to enforce judgments on such persons or the Company in other jurisdictions Norwegian law may limit shareholders ability to bring an action against the Company The rights of shareholders are governed by Norwegian law and by the Articles of Association. These rights may differ from the rights of shareholders in other jurisdictions. In particular, Norwegian law limits the circumstances under which shareholders of Norwegian companies may bring derivative actions. For instance, under Norwegian law, any action brought by the Company in respect of wrongful acts committed against the Company will be prioritised over actions brought by shareholders claiming compensation in respect of such acts. In addition, it may be difficult to prevail in a claim against the Company under, or to enforce liabilities predicated upon, securities laws in other jurisdictions The transfer of Shares is subject to restrictions under the securities laws of the United States and other jurisdictions The Shares have not been registered under the U.S. Securities Act or any U.S. state securities laws or any other jurisdiction outside of Norway and are not expected to be registered in the future. As such, the Shares may not be offered or sold except pursuant to an exemption from the registration requirements of the U.S. Securities Act and applicable securities laws. See Section 5.15 Selling and transfer restrictions. In addition, there can be no assurances that shareholders residing or domiciled in the U.S. will be able to participate in future capital increases or rights offerings Shareholders outside of Norway are subject to exchange rate risk The Shares are priced in NOK, and any future payments of dividends on the Shares will be denominated in NOK. Accordingly, investors outside Norway are subject to adverse movements in the NOK against their local currency, as the foreign currency equivalent of any dividends paid on the Shares or of the price received in connection with any sale of the Shares could be materially adversely affected. 17