Letter from the CEO Dear Polarcus shareholders, 2009 has been one of the most challenging years on record for our industry as well as for most other industries. Despite the challenges this presented to our young company, we responded quickly and implemented measures to attack the problems at hand. And problems there were. First, we had the formidable task of funding the company in an extremely difficult financial market as well as a sluggish seismic outlook. Being a newcomer did not ease this challenge. Second, we had an equally great challenge of not only building the vessels on time and cost, to the quality we aspire to achieve, but also to secure contract backlog and transform the company from a “vessel building company” to an operational service provider to the oil and gas industry. In order to meet these challenges we required top quality people, both onshore and offshore. The challenge in recruiting and attracting such top industry talent has been an immense task of paramount importance. It is people that build the company and at Polarcus we truly believe that our people are our greatest assets. I am proud to say that we have achieved the tasks we set ourselves at the beginning of the year and that we have managed to accomplish this whilst staying true to our vision and overall goal of being the most environmentally responsible towed marine service provider. We stayed focused on the task in hand and did not deviate from our pure play commitment and the building of a fleet of innovative high-end seismic vessels. We did announce a restructuring plan whereby two of our six vessels under construction were sold in order to reduce the company’s overall capital needs and consequently increase our financial flexibility. As part of the restructuring we received options to repurchase the vessels for a price equal to the cost incurred for completing the vessels. Through this transaction we therefore managed to maintain the original ambition of being a six vessel company. The restructuring plan also helped us refocus on spending habits and we made a concerted effort to reduce SG&A costs. Our employees met the challenge of working smarter and we ended the year with a saving of USD 13 million in SG&A cost compared to budget as we continued to drive efficiency across our company. The restructuring together with our solid business plan enabled us to secure a long-term loan facility of USD 80 million backed by Eksportfinans and GIEK as well as raise more than NOK 725 million in an Initial Public Offering. This capital injection meant that all four of our committed vessels became financed.
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Although we did guide a minor correction to the delivery schedule of our vessels, we did take delivery of Polarcus Nadia in December 2009 followed shortly thereafter by the delivery of Polarcus Naila in February 2010. We are further progressing well with the construction of the remaining vessels. We are pleased with their quality, and we are delivering in accordance with guided capital expenditure and well below the budget we originally set ourselves when we formed the company. Having the bargaining power of ordering six vessels has clearly been a significant factor in securing competitive prices for the various components and systems required to build modern 3D seismic vessels. Our achievement has been made possible to a great extent by the caliber and commitment of the people we have recruited since our launch. Our vision and core values have proven to be a strong attraction for those who support our belief that Polarcus can bring something new to the seismic industry; that we can be a pioneer of responsible exploration. As a result we closed 2009 with a strong and highly respected office team together with highly experienced and expert field crews for our first two vessels. This will enable us to move successfully to the next phase of the company’s development and assure Polarcus’ strong competitiveness in the high end 3D seismic market. As we grow further, we will not lose focus on the necessity to keep our company ‘‘feeling small’’. Our goal is to recruit and retain the best people in the industry as we recognize our success depends on our employees who enjoy working at Polarcus and who are proud of the job they do. Listening and responding to our people and working together as one team will help us build and maintain a secure future. In 2010, after having the first two vessels successfully delivered from the yard, we are taking the huge step from being a “vessel building company”, to that of an operational seismic service provider. In preparation for this we have developed all required tools and implemented our management system that will guide our operations and company development forward. The first vessel is in solid production, and the ULSTEIN XBOW® has already proven to be a very effective design in the heavy seas experienced during her transit. We are well aware, as any start-up company with all new tonnage would be, that there will be issues to deal with and that operational performance, although solid, has room for improvement. We are continually monitoring our operations and establishing improvement plans in line with the management system that we believe will quickly and efficiently transform our early operations into world class performance.