Appointed 29 March 2022, resigned 30 November 2023

Kjetil Gjersdal, born 1970 and a Norwegian resident, has a Bachelor of Science in Marine & Offshore technology from Ålesund University College. He has more than 25 years’ experience in the drilling and well industry. Since joining Odfjell Drilling in 2000, he has held various positions within Operations and Rig Management, such as Rig Manager, VP MODU Operations, SVP MODU International and EVP MODU. He is CEO of Odfjell Drilling AS.

Appointed 9 November 2011, resigned 30 November 2023

Helene Odfjell, born 1965 and a UK resident, holds a Bachelor of Business Administration from the Norwegian School of Economics (NHH), a Master of Business Administration in Finance and Strategy from London Business School and is a Chartered Financial Analyst. Ms. Odfjell has many years of experience in business and management and holds many board and management positions in the affiliates of the Company.

Appointed 29 March 2022, resigned 30 November 2023

Diane Stephen, born 1969 and a UK resident, has an MA Hons degree in Accountancy from the University of Aberdeen and is a qualified Chartered Accountant with over 25 years experience in oil and gas services. She has had several financial management positions in her career, including a period in the US and is the General Manager of Odfjell Drilling Ltd.

Appointed 30 November 2023

Erik Askvik, born 1962 and a Malta resident, has a B.Sc in Petroleum and Drilling Engineering and is CEO of Odfjell Drilling Malta. Mr Askvik has been with the ODL Group since 1986 in a number of positions including EVP Operations, EVP Business Development and General Manager of the Group's rig owning entities.

Appointed 30 November 2023

Øivind Haraldsen, born 1960 and a Malta resident, has a Master of Business & Administration from the University of Oregon, USA. He is Managing Director at Ocean Yield Malta Ltd and previously spent 16 years in Danske Bank AS, mainly as Global Head of Shipping. Prior to that he spent 15 years at Nordea Bank holding positions in the shipping and offshore group., including Head of Shipping in London.

Appointed 30 November 2023

John Carbone, born 1975 and a Malta resident, is a member of the Association of Certified Chartered Accountants and Malta Institute of Accountants and holds a warrant issued by the Malta Accountancy Board to act as a Certified Public Accountant. He has also completed a Diploma in Financial Services Operations and Compliance. He has worked in a number of financial roles as well as previously being CEO of Fast Track Diagnostics Limited, a Siemens Healthineers subsidiary.

In accordance with common practice for Bermuda incorporated companies, the Company’s objects, as set out in its memorandum of association and Bye-laws are wide.

The OR III Group offers two state-of-the-art mobile offshore drilling units to the harsh environment, ultra-deep water and deep water markets.

The Group’s vision is to be the leading supplier of drilling units designed to the highest environmental and safety standards in the offshore oil and gas industry. This will be done utilising the Group’s substantial track record and drilling expertise along with investment in the latest and best technological solutions and ability to implement best practice based on experience and lessons learned. The Group has a zero incident and failures objective and aims to be a trusted and leading partner for its clients.

The Board take account of and refers to objectives and strategies when taking decisions, as well as financial considerations. A framework of operational processes and procedures is in place to support the implementation of the Group strategies.

The Group had book equity of USD 611 million and a book equity ratio of 56% as of 31 December 2023. The Board regards the Group’s present capital structure as appropriate and tailored to its objectives, strategy, and risk profile.

Pursuant to Bermuda law and common practice for Bermuda incorporated companies, the Board has wide powers to issue any authorised but unissued shares of the Company on such terms and conditions as it may decide. Any shares or class of shares may be issued with preferred, deferred, or other special rights, or such restrictions, whether with regard to dividend, voting, return on capital, or otherwise, as the Company may prescribe. Such issuance of shares by the Company is subject to prior approval given by resolution of a General Meeting.

Pursuant to Bermuda law and common practice for Bermuda incorporated companies, the Board also has the power to authorise the Company's purchase of its own shares, whether for cancellation or acquiring as treasury shares, and the power to declare dividends. These powers are neither limited to specific purposes nor to a specified period.

The Company has divided the share capital into shares of a single class. The holder of any shares are entitled to one vote per share as well as any dividends the Board may declare.

As is common practice for Bermuda limited companies no shares in the Company carry pre-emption rights. The Company's constituting documents do not impose any transfer restrictions on the Company's common shares.

Members of the Board and employees must notify the Board if they have a significant (direct or indirect) interest in a transaction carried out by the Company and must declare potential conflict of interest on an annual basis. Directors are reminded to declare any such interests at the start of every board meeting. Employees are required to report potential conflicts via an internal portal which is monitored and escalated to the Board if appropriate.

The Board ensures that:

▪the notice, supporting documents and information on the resolutions to be considered at the General Meeting are before the General Meeting is held

▪the resolutions and supporting documentation, if any, are sufficiently detailed, comprehensive, and specific to allow shareholders to understand and form a view on matters that are to be considered at the General Meeting

▪the person who chairs the meeting shall ensure that the shareholders have the opportunity to vote separately on each candidate nominated for election to the Company’s Board

▪in accordance with the Bye-laws, unless otherwise agreed by a majority of those attending and entitled to vote, the Chairman, if there be one, and if not the President, if there be one, shall act as chairman at all general meetings at which the Chairman is present. In their absence a chairman shall be appointed or elected by those present at the meeting and entitled to vote.

Shareholders who cannot be present at the General Meeting will be given the opportunity to vote using proxies and the Company will:

▪provide information about the procedure for attending via proxy

▪nominate a person who will be available to vote on behalf of a shareholder as their proxy

▪prepare a proxy form which shall, insofar as possible, be formulated so that the shareholder can vote on each item that is to be addressed and vote for each of the candidates that are nominated for election.

The Company does not have a Nomination Committee, The Board considers itself able to adequately fulfil the roles and responsibilities ordinarily assigned to a Nomination Committee.

When a need arises to appoint a new or additional director, a careful review of potential candidates will be carried out, considering the need for a diverse mix of skills, talent, and expertise, whilst also considering the importance of independence.

The Board is comprised of two non-executive directors which are considered independent of the Group’s Executive Management and one executive director.

On 30 November 2023, the management of the Company moved from the UK to Malta and Helene Odfjell, Kjetil Gjersdal and Diane Stephen resigned as directors, with Erik Askvik, Øivind Haraldsen and John Carbone being appointed on the same date.

The Board of Director's section provides further details on each director’s background, skills and expertise. As of 31 December 2023. They possess the relevant expertise, capacity and are elected on an annual basis at the AGM, with the exception of vacancies, which may be filled by the Board. The composition of the Board ensures they can attend to the common interests of all shareholders and that the Board can function effectively as a collegiate body. The Board exercises proper supervision of the management of the Company and its operations.

The Board is comfortable that there is no conflict of interest or compromise to the independence of directors who also serve as directors on Odfjell Rig III Ltd's subsidiary boards. Further, the Board has no concerns about external appointments held by the directors.

The Board hold regular meetings throughout the year and ad hoc meetings may be called should the need arise. The agenda for Board meetings is provided in advance of meetings.

In accordance with the Bye-laws, unless otherwise agreed by a majority of those attending and entitled to vote thereafter, the Chairman, if there be one, and if not the President, if there be one, shall act as chairman at all general meetings at which the Chairman is present. In their absence a chairman shall be appointed or elected by those present at the meeting and entitled to vote.

The Board has in place Decisions Guidelines for Sub Holding Companies and Decisions Guideliens for Rig Ownership which have been put in place by the ODL Board. These clearly define matters which are reserved for the decision of the OR III Board and subsidiaries operate within these guidelines involving the Board in matters of strategic importance to the OR III Group. Delegations by the Board are recorded in Board minutes, resolutions, powers of attorney or service agreements.

The Board is responsible for the Company’s strategic planning, (inter alia):

▪approval of plans and budgets

▪monitoring and supervising the management and business of the Company

▪ensuring that the accounts and the management of the assets are subject to adequate supervision and are conducted in accordance with applicable legislation

▪monitoring, reviewing and approving the annual and interim financial reporting, assessing the performance of internal controls and overseeing the external auditors and legal and regulatory compliance

▪taking decisions, endorsing decisions or authorising decisions to be taken, as appropriate, in matters of an unusual nature or of importance to the Company and the Group

▪following the ODL Group's policies on ethics, conflicts of interest and compliance with com­petition law

The Board has appointed a Chief Executive Officer, who is one of the directors, to undertake day to day management and activities of the Company.

The Board maintains oversight of operational activities through a review of reports. These include operational updates, financial reports, QHSE status reports, tenders and opportunities updates and quarterly and full-year results.

The Company does not have an Audit Committee as this is appointed at the ODL Board level. The Company has not established a Remuneration Committee.

An annual review of directors’ interests is undertaken, and directors are reminded to declare any potential conflicts at the start of every Board meeting. A register of directors’ interests is maintained.

The Board recognises its responsibility to secure appropriate risk management systems and internal controls, including internal and external financial reporting.

The ODL Group has comprehensive corporate manuals and procedures for all aspects of managing the operational business and financial reporting. These are continuously revised to incorporate best practice derived from experience or regulatory requirements and changes.

Routines have been established to provide frequent and relevant management reporting on operational matters. The Board is updated on the capital and liquidity situation and the performance of the business. This ensures adequate information is available for decision-making and allows the Board to respond quickly to changing conditions.

The ODL Group has clear and safe communication channels between employees and management to ensure effective reporting of any illegal or unethical activities in the ODL Group, via a whistle-blower reporting portal.

The Board also recognises its responsibilities with regards to the Group’s values and guidelines for ethics and corporate responsibilities. Core Values reflect the Group’s focus on commitment, safety conscious­ness, creativity, competency, and result orientation. Guidelines for the behaviour of Group representatives are outlined in the ODL Group Drilling’s Ethical Principles and described in detail in the Code of Business Conduct. The Core Values and Code of Business Conduct are available on www.odfjelldrilling.com.

Information on risk management systems and internal controls can be read in the Board of Directors Report.

The remuneration of the Board is decided by the shareholders at the AGM of the Company. The level of compensation to the members of the Board reflects the responsibility, expertise, and the level of activity in both the Board. The remuneration is not linked to the Company’s performance and the Company does not grant share options to members of the Board. 

During the year, none of the members of the Board and/or companies with whom the Board members are associated, have taken on specific paid assignments for the Group in addition to their appointments as members of the Board.

The Company has established guidelines for reporting to the market and is committed to providing timely and precise information to its bond holders, Oslo Stock Exchange and the financial markets in general, through the Oslo Stock Exchange information system. Such information is given in the form of annual reports, quarterly reports, and notices to the stock exchange.

The Company publishes an annual electronic financial calendar with an overview of the dates of important events such as the publishing of interim reports. 

The reappointment of the auditors KPMG was approved by the shareholder at the General Meeting on 4 May 2023. The shareholder authorised the Board to determine the auditor’s annual remuneration.

Processes are in place to ensure that the Company does not utilise the services of the appointed auditor for advice beyond certain thresholds determined in law. Details of fees paid to the auditor, including details of the fee paid for auditing work and any fees paid for other specific assignments can be found in Note 29 - Remuneration to the Board of Directors, key executive management and auditor

The Odfjell Rig III Group had book equity of USD 611 million and a book equity ratio of 56% as at 31 December 2023.

The Company has only one class of shares. Each share in the Company carries one vote, and all shares carry equal rights, including the right to participate in General Meetings. All shareholders are treated on an equal basis. All the 10,000 shares in the company are owned by Odfjell Rig Owning Ltd.

The Company and the two rig owning subsidiaries, are governed from and tax resident in Malta. All three directors of the Company are Malta residents. The ODL Group has published its tax strategy on its website.

The Group maintains internal policies and procedures to support its tax control framework. Key risks and issues related to tax are escalated to and considered by the Board. Where appropriate, the Group looks to engage with tax authorities to disclose, discuss and resolve issues, risks, and uncertain tax positions. The subjective nature of tax legislation means that it is often not possible to mitigate all known tax risks. As a result, at any given time, the Group may be exposed to financial and reputational risks arising from its tax affairs.

The Group seeks to comply with its tax filing, tax reporting and tax payment obligations and to foster good relationships with tax authorities.

During 2023, ODL Group successfully executed a planned refinancing exercise, including raising USD 390 million via a bond for the Company. Securing backlog has been another main area of focus.

The Global Reporting Initiative ("GRI") framework is used to drive continuous improvement in ESG efforts, and our focus is on creating clear sustainability ownership in operations. We have an emissions reduction roadmap to help us achieve our net zero target by 2050.

The ODL Group human rights statement can be found on the website Human rights - Odfjell Drilling as well as the Modern Slavery Statement Modern slavery statement - Odfjell Drilling.

Gender pay gap reporting for Norway and the UK, can also be found on the website at Gender pay gap - Odfjell Drilling.

Demand for our units has been high with options being exercised and work is constantly ongoing to secure backlog.

The Group’s two semi-submersible drilling units operated across multiple projects in Norway during 2023 and saw options being exercised during the year.

The Deepsea Atlantic worked on Johan Sverdrup ph. 2 development under the Master Frame Agreement with Equinor, where options were exercised to drill five additional wells, extending the firm backlog into Q2 2024. The SPS is then planned, after which the rig will operate for Equinor in Norway initially and then in the UK for a firm 23 months. There is also four one well options, and three further additional optional periods of approximately one year each.

The Deepsea Aberdeen was under contract with Equinor, working on the Breidablikk development. Following the exercising of options, this will take it up to the end of 2025, with further options thereafter added to the contract which could keep the rig contracted to 2029 if exercised.

High energy prices and the continuing focus in securing energy supply, along with a lack of supply and new builds means there is a strong outlook for demand for our rigs. We have firm backlog to at least the end of 2025 with options that if exercised extend backlog beyond that.

There is still a preference for Tier 1 units such as ours, due to the ability to deliver lower total well costs via high performance, operability and flexibility.

2024 and into 2025 will see SPS activity for the Deepsea Atlantic and Deepsea Aberdeen. The organisation has extensive experience in efficiently executing these and has a strong focus on cost control.

Odfjell Rig III Group generated operating revenue of USD 303 million in 2023 (USD 296 million), an increase of USD 7 million. The main driver is a positive variance of USD 4 million for Deepsea Aberdeen due to higher rate while working on the Svalin field in Q4, but offset by lower daily rate during Q1 2023 compared to Q1 2022 when the rig worked for BP/Wintershall. Deepsea Atlantic has a positive variance due to higher bonus.

Total operating expenses were USD 165 million (USD 232 million), a decrease of USD 67 million, mainly explained by the USD 71 million reversal of impairment losses.

The operating profit (EBIT) amounted to USD 138 million (USD 64 million), an increase of USD 74 million.

Net financial expenses amounted to USD 43 million (USD 3 million), an increase of USD 40 million. Interest expenses have increased by USD 27 million mainly due to new bond-loan, see Note 15, and interim use of a frame loan agreement with Parent company. There is a negative change of USD 7 million in net currency loss and a negative change of USD 7 million related to fair value measurements compared to 2022.

The income tax expense was positive with USD 2 million (expense of USD 2 million). The 2023 income tax expense was affected by the completion of a tax relocation of the rig owning companies to Malta. The true-up of the tax value of the rigs to market values led to deferred tax assets of USD 3.5 million being recognised.

Net profit was USD 97 million (USD 60 million).

Consolidated total assets as at 31 December 2022 amounted to USD 1,093 million (USD 1,081 million).

Total non-current assets amounted to USD 992 million (USD 955 million).

Current assets amounted to USD 102 million (USD 126 million), of which USD 63 million was cash and cash equivalents (USD 79 million).

Total equity amounted to USD 611 million and the equity ratio was 56%. The equity in the reported 2022 periods are not comparable as these are based on carve-out combined financial statements.

Total liabilities amounted to USD 483 million (USD 230 million), reflecting an increase in interest-bearing borrowings of USD 234 million.

Cash flow from operating activities amounted to USD 151 million (USD 160 million). The variance of USD 139 million from EBIT is mainly explained by depreciation, reversal of impairment and changes in working capital partly offset by interest paid.

The cash outflow from investing activities amounted to USD 327 million (USD 31 million). The Odfjell Rig III Group paid USD 292 million to obtain control of subsidiaries. USD 41 million was paid for purchases of fixed assets, while USD 6 million was received from the Norwegian NOx fund.

The cash flow from financing activities amounted to USD 167 million (cash outflow of USD 110 million). The Group had net proceeds of USD 383 million from the issuance of a bond. The Group repaid USD 107 million to settle the old facility, and paid USD 103 million in ordinary instalments on credit facilities, loans and leases.

The Group makes estimates and assumptions concerning the future. These estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as interest rates, foreign exchange rates and other factors which are outside the Group’s control. The resulting estimates will, by definition, seldom equal the related actual results.

There is estimation uncertainties in the Group's revenue recognition, value in use calculations and evaluation of useful life. There is use of significant judgement in the Group's evaluation of impairment indicators and in the evaluation of lease term.

Please refer to Note - 3 Critical accounting estimates and judgements in the Consolidated Financial Statements for further information.

The business of the Parent Company, Odfjell Rig III Ltd., is as a holding company for investments in subsidiaries.

The Parent Company reported an operating loss (EBIT) of USD 0.3 million (USD 0.1 million).

The Parent Company reported interest income of USD 3 million (USD 5 million), and interest expenses of USD 36 million (USD 10 million). The Parent Company recognised dividends from subsidiaries of USD 33 million (USD 0 million), and had net other financial expenses of USD 5 million (net other financial income of USD 6 million).

The Parent Company reported a net loss of USD 5 million (net profit of USD 1 million).

Total assets in the Parent Company amounted to USD 689 million as at 31 December 2023 (USD 266 million), an increase of USD 423 million mainly related to the acquisition of two subsidiaries.

Equity in the Parent Company amounted to USD 288 million (USD 134 million), corresponding to an equity ratio of 42% (50%).

Cash flow used in operating activities was USD 14 million (cash flow from operating activities USD 7 million). The variance from 2022 is mainly related to increased payment of interest.

Cash flow used in investing activities was USD 210 million (cash inflow of USD 71 million). In 2023 the Parent Company paid USD 292 million to purchase two subsidiaries, and had net proceeds from intercompany funding of USD 82 million.

Cash flow from financing activities was USD 189 million (cash outflow of USD 52 million) The Parent Company had net proceeds of USD 383 million from the issuance of a bond, and repaid USD 107 million to settle the old facility. In addition, the Parent paid USD 87 million in ordinary instalments on loans and credit facilities.

The Group provides drilling rigs and services for the oil and gas industry, which historically has been cyclical in its development. The level of activity in the offshore oil and gas industry will depend, among other things, on the general climate in the global economy, oil and gas prices, the investment level for oil and gas exploration, production and drilling and regulatory issues relating to operational safety and environmental hazards. Financial performance will also depend on the balance of supply and demand for mobile drilling units.

The Group seeks to mitigate these risks by securing contracts, preferably long term, with reputable clients, for its main assets and services. All offshore contracts are associated with risk and responsibilities, including technical, operational, commercial, and political risks. The Group will continuously adjust the insurance coverage as required to limit these risks.

Furthermore, as the Group’s fully owned fleet currently consists of only two own assets, 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. The Group has invested significant time and efforts to maintain a safe, predictable and profitable performance

Factors that, in the Group's view, could cause actual results to differ materially from the outlook contained in this report are:

•volatile oil and gas prices

•global political changes in energy composition

•competition within the oil and gas services industry

•changes in clients’ spending budgets

•cost inflation

•Developments in financial and fiscal markets.

The Group is exposed to a range of financial risks: liquidity risk, market risk (including currency, interest rate, and price), and credit risk.

The financial risk management process focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. To some extent, the Group uses derivative financial instruments to reduce certain risk exposures.

Financial risk management is carried out at the ODL Group level. The ODL Group identifies, evaluates, and hedges financial risks in close co-operation with the ODL Group's operational units. ODL has written principles for risk management of foreign exchange risk, interest rate risk and the use of derivative financial instruments.

Odfjell Rig III held cash and cash equivalents amounting to USD 63 million at the end of 2023. This is deemed to be sufficient funding for the Group’s current activity levels and committed capital expenditures during 2024.

The liquidity risk is connected with the market risk and the re-contracting risk for mobile drilling units. The management continuously focuses on securing new profitable contracts for the Group's mobile drilling units to generate sufficient cash flow from operations, hence reducing the liquidity risk going forward.

The OR III Group's refinancing risk is considered low, as the Group completed a refinancing in 2023 and the bond matures in second half of 2028.

Market risk is the risk of a change in market prices and demand, as well as changes in currency exchange rates and interest levels.

The re-contracting risk for the Group's wholly owned mobile drilling units is limited in 2024, as both units have medium to long-term contracts.

The Group is exposed to foreign exchange risk arising from various exposures to currency fluctuations, primarily with respect to USD and NOK. The Group seeks to minimise these risks through currency hedging via financial instruments or by off-setting local currency elements in charter contracts.

As at 31 December 2023, the OR III Group is not materially exposed to changes in market interest rates, as the bond loan has a fixed interest rate. The fixed-rate portion of the OR III Group’s interest bearing debt as at 31 December 2023 is 100%.

The current main market for the Group’s services is the offshore oil and gas industry, and the clients consist primarily of major international oil companies, independent oil and gas producers and government owned oil companies. The Group performs ongoing credit evaluations of clients and generally does not request material collateral. Credit risk is considered to be limited.

Sustainability risks are considered in day to day operations in line with legislative requirements. There are robust processes in place to assess QHSSE risks and mitigating actions. Human rights risk registers are maintained.

Following an assessment performed by Odfjell Drilling Group of climate risks and opportunities, both physical and transitional risks in the short, medium and long term, were prioritised. The most significant transition risks identified, along with mitigating actions were:

•Changes in fossil energy demand due to policies and consumer behaviour changes, leading to reduced demand for our assets and reduced revenue. This will be factored in to any asset growth decisions and alternative use of assets will be considered

•Cost of and access to capital may go up as banks move to low carbon portfolios, leading to increased interest costs. Consider debt structure and ensure carbon reducing initiatives understood by capital markets

The most significant physical risk identified, along with mitigating actions is:

• Impact of extreme weather offshore on crew and equipment logistics could increase costs and result in downtime. Critical spares analysis and robust planning required as well as protection in commercial contracts

ODL has a group insurance policy for the liability of the Company’s and its subsidiaries’ Directors and Officers. The insurance covers personal legal liabilities including legal costs for defence. The limit of liability is NOK 75 million per claim and in aggregate per year.

The financial statements have been prepared on the basis of the going concern assumption and the Directors have confirmed that this was realistic at the time the accounts were approved.

When assessing the going concern assumption, the Directors and management have considered cash flow forecasts, funding requirements and order back-log.

The Group's refinancing risk is considered low given the full refinancing exercise undertaken in 2023. The bond does not mature until second half of 2028.

Taking all relevant risk factors and available options for financing into consideration, the Board has a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future.

There have been no events after the balance date with material effect for the financial statements ended 31 December 2023.

*Predecessor carve-out combined comparatives, refer to Note 2 for further information.

Items in the statement of comprehensive income are disclosed net of tax. The income tax relating to each item of other comprehensive income is disclosed in Note 8 - Income Taxes.

The accompanying notes are an integral part of these financial statements.

* Predecessor carve-out combined comparatives, refer to Note 2 for further information.

*Predecessor carve-out combined comparatives, refer to Note 2 for further information.

The accompanying notes are an integral part of these financial statements

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 assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Trade receivables are financial assets and are recognised and measured according to accounting policies described in Note 11 - Financial assets and liabilities.

For information about currencies, ageing and loss allowance, refer to Note 21 - Credit risk.

Cash and cash equivalents include cash in hand, deposits held at call with banks, other current highly-liquid investments with original maturities of three months or less.

Also refer to accounting policies regarding Financial liabilities in Note 11 - Financial assets and liabilities.