Awilco Drilling : Annual Report 2023

Awilco Drilling PLC

Report and Financial Statements

31 December 2023

Awilco Drilling PLC

Directors

Sigurd Thorvildsen

Henrik Fougner

Daniel Gold

John Simpson

Synne Syrrist

Secretary

Burness Paull LLP

50 Lothian Road

Festival Square

Edinburgh

EH3 9WJ

Auditors

Ernst & Young LLP

4th Floor

2 Marischal Square

Broad Street

Aberdeen

AB10 1BL

Bankers

DNB Bank ASA

8th Floor

The Walbrook Building

25 Walbrook London EC4N 8AF

Registered Office

Suite 1

7th Floor

50 Broadway London SW1H 0BL

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Awilco Drilling PLC

Strategic report

Corporate Strategy and business model

Awilco Drilling PLC's ('the Group') strategy is to pursue the arbitration proceedings between Keppel FELS Shipyard and the former rig owning subsidiary companies, Awilco Rig 1 Pte. Ltd and Awilco Rig 2 Pte. Ltd. to a conclusion. During 2020, the vessel construction contracts for two semi-submersible rigs being built in Singapore were terminated, and the subsidiary companies entered into arbitration proceedings with the rig construction company. During April 2023, Awilco Rig 1 Pte Ltd received the arbitration tribunal's ruling which awarded in favour of Keppel FELS.

The second arbitration process between Awilco Rig 2 Pte Ltd and the shipyard continued as planned and commenced on 2 May 2023. In November 2023, the arbitration ruling was received in favour of Awilco Rig 2 Pte Ltd, for the amount of US$ 43.0 million, plus interest and costs. Following an unsuccessful application for leave to appeal, the award, along with the associated interest and costs is now due and payable. No future decisions will be made until the proceeds of the award have been received.

Going Concern

The Company is no longer performing operational activities relating to rigs. As a result of this, the financial statements have been prepared on a basis other than going concern.

Principal activity

The principal activity of the Group during the year was to continue the arbitration processes with Keppel FELS shipyard.

Business review and future developments

The main focus during the year was on the remaining arbitration processes. The final hearing for Nordic Winter was held on 13 January 2023 and as noted above, the arbitration ruling was awarded in favour of Keppel FELS. Awilco Rig 1 Pte Ltd made no appeal against the decision and on 30 June 2023, it was subsequently placed into liquidation.

The final hearing for Nordic Spring was held on 4 July 2023 and in November 2023 the arbitration ruling was received in favour of Awilco Rig 2 Pte Ltd for the amount of US$ 43.0 million, plus interest and costs. In January 2024, Keppel FELS lodged an application for leave to appeal the award of the tribunal with the High Court and during May 2024, the application was denied. The award, along with the associated interest and costs is now due and payable. No future decisions for the Group will be made until the proceeds of the award have been received.

Performance
The Group's financial performance during the year was as follows:
	2023	2022
	US$000	US$000
Revenue	-	-
Operating profit /(loss)	111,516	(145,101)
Profit/(Loss) for the year attributable to equity shareholders	111,625	(145,357)
Operating loss margin %	n/a	n/a
Number of employees and contractors at year end	4	8

The Group had nil rig operating expenses (2022: US$ 4.9 million) relating to rig operating costs included

in cost of sales. General and administration expenses were US$ 14.1 million (2022: US$ 20.2 million). This included US$ 10.4 million in respect of legal fees and other costs in support of the arbitration processes. (2022 : US$ 15.1 million). The Group had a gain on liquidation of the subsidiaries of US$ 125.4 million (2022 : nil).

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Awilco Drilling PLC

Strategic report (continued)

Business review and future developments (continued)

Performance (continued)

Following the disposal of both of the Company's drilling rigs in the prior year, the Company is no longer performing operational activities relating to rigs. The principal KPIs are in respect of maintaining an adequate cash buffer to meet the ongoing obligations of the Company.

Principal risks and uncertainties

Following the disposal of the rigs and no ongoing rig operations, the principal risks are now in respect of liquidity and legal risks.

Liquidity

As described in Note 25 to the financial statements, the Group's objective is to maintain sufficient liquidity in order to support the needs of the business and meet liabilities as they fall due. During May 2024, the Group successfully signed a short-term loan with Awilhelmsen Offshore AS and QVT. The loan is for a total of USD two million, structured as a drawdown facility.

Legal risks

The Group values its reputation and aims to carry out business in a fair and open manner. Despite this the Group may become subject to claims during the course of its business. During 2020, the vessel construction contracts for two semi-submersible drilling rigs being built in Singapore, were terminated. The Group's subsidiary companies entered into arbitration with the rig construction company, with the first arbitration process now concluded. The rig construction contracts were entered into on a non-recourse basis to the parent company or wider group. In order to mitigate any possible risk of cash outflow, the Group has established a dedicated team and has engaged specialist legal advisors to support the actions taken.

Corporate Social Responsibility

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

Core Values

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

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

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

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

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

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Awilco Drilling PLC

Strategic report (continued)

Corporate Social Responsibility (continued)

Environmental matters

As a result of rig disposals, the Company is no longer performing operational activities relating to rigs so has no significant environmental matters to consider. The responsibility for minimising environmental impact in relation to the disposal of rigs passed to the buyers.

Anti-bribery and corruption

The Company requires its employees to observe the highest standards of business and personal ethics in the conduct of their duties and responsibilities. The Company has a specific Anti-Bribery and Corruption policy to ensure compliance with all applicable anti-bribery and corruption regulations and to ensure the Company's business is conducted in a socially responsible manner.

Policy

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

Equal opportunities and diversity

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

As at 31 December 2023, the number of directors and employees was as follows:

	Male	Female
Directors	4	1
Employees:
Senior Managers	1	-
Other staff - onshore	-	3

Health and Wellbeing

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

Absence Management

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

	2023	2022
Group sick leave (as a percentage of total hours worked)	0.0%	0.6%

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Awilco Drilling PLC

Strategic report (continued)

Section 172

The Board of Directors have taken account of stakeholder views when making key decisions that impact the company and its stakeholders. The following matrix provides some examples of how, during the year, consideration was given to key stakeholders, being employees, investors, customers, suppliers, regulators and society in general. In the future, if activity is not increased again, many of these issues may no longer be relevant.

Stakeholder	Strategic Issue	Engagement	Outcome	Key Decision
Employees	Fair compensation	Market analysis is	Pay levels for	Due to disposal of
	and benefits	performed to ensure	existing	rigs and
	package for	compensation levels	employees were	discontinued
	employees	are competitive in	considered to be	operations, the
	prevailing market.
		fair and	decision was
		See also
		competitive	taken to make the
		commitment	within the	offshore personnel
		expressed by the	industry.	and the majority
		Board in respect of
			of onshore
		"Health and
			personnel
		Wellbeing" of
			redundant. A few
		employees on page
			key onshore
		4.
				positions were
				retained to
				support the
				ongoing
				arbitration
				process.
Investors	Continue to seek	Information is	No new outcomes	The Company
	growth	shared with	in respect of	successfully
	opportunities that	investors in the	investment	completed a
	offer attractive	form of half	opportunities at	private placement
	returns to	yearly and annual	this time.	to raise new
	investors	financial reports		equity through the
		and press release		issue of new
		disclosures are		shares.
		required.
		Additionally, half		The proceeds of
		yearly
			the equity issue
		presentations held
			will be used to
		and available on
			support the
		the Company
			ongoing
		website. Regular
			arbitration process
		one to one
			until its
		investor meetings
			conclusion.
		are also held.

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Awilco Drilling PLC

Strategic report (continued)

Section 172 (continued)

Stakeholder	Strategic Issue	Engagement		Outcome			Key Decision
Customers	Customer	When			the	Customer	surveys	No key decisions
	Satisfaction	Company	was	in	feedback		were	at this time.
		an		operational	part	of	the
		phase,	customers	company KPIs.
		were requested to	Scoring	in	this
		provide feedback
		area	was	more
		on	a	variety	of
		than	satisfactory
		areas to ensure the
		during prior years.
		company	was
		performing		in
		accordance	with,
		or	better	than,
		customer
		expectations.
Suppliers	Selection of key	Suppliers invited	Policies,			No key decisions
	suppliers and	to tender and		procedures and	at this time
	high-level	purchasing			scrutiny by the
	purchases. Ensure	procedures require	Board ensures
	that vendors are	fair and			vendor selection
	paid on a timely	transparent			criteria is a robust
	manner.	selection of		process.
		vendors. Refer
		also paragraph on
		Investment
		Appraisal" on
		page 18 of the
		annual report.
Regulators	Accreditation and	Details of			Achievement and	The Company's
	compliance with	standards			continued			has suspended its
	regulatory	achieved are		certification of	ISO 14001
	standards.	detailed under		compliance		accredited
		"Health, Safety		through external	Environmental
		and Environment"	HSE audits		Managements
		on page 6 of the	ensures company	System (EMS) to
		2021 annual		operates at, or	reflect the sale of
		report.				above, the			its remaining
							standards required	assets however
							by the regulatory	the Company
							bodies that govern	remains
							the industry.		committed to its
											previously stated
											goals with regards
											to environmental
											protection.

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Awilco Drilling PLC

Directors' report

Registered No. 7114196

The Directors present their report and financial statements for the year ended 31 December 2023. These financial statements have been prepared under UK-adopted International Accounting Standards (UK- adopted IAS).

Results and dividends

The profit after taxation for the year amounted to US$ 111.6 million (2022: US$ 145.4 million loss).

There were no dividends paid during the year. (2022: nil)

Future developments

See Strategic Report pages 2-7.

Directors

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

Sigurd Thorvildsen

Henrik Fougner

Daniel Gold

John Simpson

Synne Syrrist

Financial instruments

The Group's financial risk management objectives and policies are discussed further in Note 25 on pages 64-66 of the financial statements.

Directors' liability

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

Directors and their interests

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

Major interest in shares

The Company has been notified of the following interests representing 3% or more of the issued ordinary share capital of the Company as at 29 May 2024.

	No of shares	Percentage holding
Awilhelmsen Offshore AS	7,897,748	54.0%
BNP Paribas	2,569,083	17.6%
State Street Bank and Trust Comp	1,019,000	7.0%
Akastor AS	998,632	6.8%
The Bank of New York Mellon SA/NV	806,896	5.5%
Skandinaviska Enskilda Banken AB	500,000	3.4%

QVT Financial LP with affiliated and related parties owned 4,399,200 shares at 29 May 2024, a total of 30.1% of the Company's share capital.

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Awilco Drilling PLC

Directors' report (continued)

Corporate governance

The information given in the corporate governance statement is set out on pages 13-19.

Going concern

As noted in the Strategic report, the Group is no longer performing operational activities relating to rigs. Accordingly, the financial statements have been prepared on a basis other than going concern (Note 2).

Greenhouse gas emissions

The Company's greenhouse gas emissions are categorised between two categories: direct emissions (from rig power generation and loss of refrigerants) and indirect emissions (from purchased electricity for onshore offices). All figures reported are in relation to energy consumed in the United Kingdom and offshore area.

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

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

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

This information was collected and reported in line with the methodology set out in the UK Government's Environmental Reporting Guidelines, 2019. Emissions have been calculated using the latest conversion factors provided by the UK Government. Greenhouse gas emissions are reported in tonnes (t) carbon dioxide equivalents ("CO2e"). Calculations are performed using the emission factors and global warming potential for each chemical compound, which are in accordance with the current guidance from the UK Government GHG Conversion Factors for Company Reporting 2022. The 2023 annual CO2e emitted from operations was nil.

For the year ended 31 December 2023, the estimated carbon dioxide equivalent ("CO2e") gas emissions were nil compared to 1,749 tonnes for the year ended 31 December 2022. Reduction of direct emissions reflects the sale of both rigs during 2022.

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