2008 Acergy Initiating Coverage Arctic Sec

01

Oil Services Arctic Sell Medium Risk Initiation of coverage Price NOK 117.50 11 April 2008 Target NOK 115.00

Acergy S.A.

Down to execution • Larger, deeper, riskier. Subsea projects are larger and more complex than ever,

leading to an unfavourable development in risk-reward for ACY. Cost inflation and larger share of revenues from less developed markets will make overallEBITDA margin expansion challenging. We estimate EBITDA margins of 16.7% for 2008, 17.6% for 2009 and 18.0% for 2010, well below consensus.

• Subsea market demand still strong, but expect delays in contract awards. Demand for Acergy’s services will stay strong across the board. However, subseaplayers have been growing capacity accordingly. We also expect to see moredelays in contract awards as clients are strained and struggle with cost inflation.The combined effect of this can be additional pressure on margins going forward.

• Q1 2008 slightly below consensus. ACY delivered revenues of USD 636m below consensus of USD 684m and EBITDA of USD 102m versus consensus of USD 108m. EBITDA margin was 16.0% in line with expected 15.8%. Management remainedbullish on long term outlook, but warned of continued short term cyclicality.

• Challenging valuation. We estimate end 2008 DCF of NOK 117.0 (WACC 9.5%).This assumes continued revenue growth and long term EBITDA margin of 18%,above historical average of 7-8% (1999-2006). ACY is currently trading at 17.7x 2008 P/E, a 16% unjustified premium to its subsea peers, SUB, SPM and TEC. Weinitiate coverage with an Arctic Sell recommendation and NOK 115 target.

Key figures Share price USDm 2006 2007 2008e 2009e 2010eSales 2,124 2,663 2,988 3,306 3,610EBITDA 358 441 500 580 649EBIT 285 347 394 467 529EBIT margin (%) 13.4 13.0 13.2 14.1 14.7Pre-tax profit 302 341 388 464 526Net IB debt (346) (196) (221) (461) (743)EPS reported (USD) 1.2 0.6 1.3 1.6 1.8EPS adj dil (USD) 1.2 0.6 1.3 1.6 1.8EPS adj growth (%) 57.0 (45.6) 102.4 21.7 11.8EV/Sales (x) 1.6 1.4 1.4 1.2 1.0EV/EBITDA (x) 9.6 8.7 8.3 6.7 5.6EV/EBIT (x) 12.1 11.0 10.5 8.4 6.9P/E adj (x) 16.4 32.9 17.7 14.5 13.0P/BV (x) 4.6 4.9 4.2 3.3 2.7FCFE yield (%) (1.8) 0.7 2.1 6.4 7.3ROE (%) 29.0 16.4 24.0 23.3 21.1DPS (USD) 0.0 0.0 0.0 0.0 0.0Div yield (%) 0.0 0.0 0.0 0.0 0.0

Erik Tønne (lead analyst) / [email protected] / +47 21 01 32 26 Kjetil Garstad / [email protected] / +47 21 01 32 24

NOK

90

100

110

120

130

140

150

160

170

180

Apr-07 Oct-07 Apr-08

ACY.OL / ACY NOOSEBX (Rebased)

Forecast changes

Old New Old New

USDm 2008e 2008e 2009e 2009e

Sales n.a. 2,988 n.a. 3,306

EBITDA n.a. 500 n.a. 580

EBIT n.a. 394 n.a. 467

EPS n.a. 1.3 n.a. 1.6

Performance

Change (%) (%) (%)

Last 1m 3m 12m

ACY 4.2 (1.5) (8.6)

OSEBX 4.9 (7.1) (7.4)

OSX 10.1 0.8 37.2

Arctic vs consensus

Arctic Cons Arctic Cons

USDm 2008e 2008e 2009e 2009e

Sales 2,988 3,159 3,306 3,538

EBITDA 500 555 580 662

EBIT 394 421 467 525

EPS 1.3 1.4 1.6 1.8

Key share data

Market cap (USDm) 4,370

Market cap (NOKm) 22,102

Free float (%) 89.7

Shares outstand (m) 188.10

Shares fully dil (m) 213.30

Avg volume (000s) 2,530

02

Contents

Investment summary 4 P&L 4 DCF valuation & valuation summary 6 Peer group valuation multiples 7 Valuation summary 7 Risk factors 8

Subsea Market: Executive summary 9 Market demand will stay strong 9 Capacity will be strained occasionally – people likely main bottleneck 9 Bidding, risk management, project execution and resource allocation key challenges 11

Company description 12

ACY & SUB: Comparison on key dimensions 14 Geographical exposure 14 Regional performance. Earnings margins 14 Subsea 7 currently outperforming Acergy on overall EBITDA performance 16 How important is seasonality for the two companies? 17 Subsea 7 has consistently weak Q4s 18 Projects’ profit booking procedure leads to quarterly lumpiness 18 Order intake (contract awards) and book-to-bill ratios 19 Backlog development 20 To what extent do contract announcements work as share price triggers? 23 Fleet comparison 24

Financials 27 P&L 27 Cash flow statement 28 Balance sheet 29 Quarterly P&L 29

Valuation 31 Peer group valuation multiples 31 12 months forward looking P/E and EV/EBITDA multiples 31 On average, analysts have been downgrading ACY and SUB EPS estimates since autumn 2006 32 DCF valuation 33 Valuation summary 35

Subsea Market: Introduction & industry overview 36 Overview of key players 36

Subsea Market: Global subsea capex will continue to grow 39 Estimated global subsea expenditure 39 Order backlog and company forecasts support strong growth forward 41 Company forecasts of key industry equipment signal strong growth 43 Africa, SA (Brazil), and Europe will continue to be the largest markets 44 Subsea capex breakdown on categories 46 Pipeline construction – the most important segment for subsea installation and construction companies 47 The customer side is changing – NOCs increasingly important 48

Subsea Market: The main areas and projects 50

03

The North-Sea represents the main subsea legacy area 50 West-Africa, GoM and Brazil are the world’s main deepwater regions 50 Overview of the world’s main offshore field development projects 51 Pazflor – an illustrative example of the increasing scope of subsea projects 53

Record strong deepwater activity will drive subsea 55 Deepwater constitute an increasing share of subsea activity 55 The subsea industry has continuously been breaking frontiers and moving to deeper waters 56 Deepwater E&P increasing importance for the oil industry 57 Brazil, West-Africa, US GoM and Asia-Pacific will continue to be dominating deep water areas 59 Petrobras is the leading deepwater operator 59 Record strong deepwater drilling backlog also supports strength in expected subsea demand going forward 60 Strong expected growth in floating production solutions further strengthen our growth assumption 61

Management and Board of Directors 64 Management 64 Board of Directors 65

Shareholders and share price performance 66

Appendix 1: Company description, Subsea 7 67

Appendix 2: Glossary of key subsea terms 69

Profit & loss statement 71

Balance sheet & Cash flow 72

Key ratios & Valuation 73

Disclaimer 74

Contact information 77

04

Investment summary

We initiate coverage on Acergy with an Arctic Sell recommendation and a share price target of NOK 115.

• We estimate weaker EBITDA margins than consensus and have a 16.7% EBITDA

margin for 2008 (versus consensus of 17.4%), 17.6% for 2009 (consensus 18.8%) and 18.0% for 2010 (consensus 19.1%).

• The share price target is in line with our DCF valuation of NOK 117.0. This

assumes a cyclical 20% revenue drop from 2012 to 2013, long term growth rate of 2.5% and a long term EBITDA margin of 18% (2010 and beyond). Long term EBITDA margin of 18.0% is high, compared to historic average (1999-2006) of around 7-8%, and conditioned on the industry managing to discipline bidding, capacity and execution going forward. We use a WACC of 9.5%, which could also be argued to be low, given current cost of capital and the fact that ACY are in a net cash position

• Acergy is about to take on larger projects than ever before in its history. This

implies more complexity and increases risk. At the same time, organization has grown substantially, implying relatively more inexperienced staff. Overall outcome space widens, and we don’t see expected project values increase accordingly. Thus – risk-reward develops unfavourably

• We also see the risk of further delays in large project sanctioning among

increasingly exhausted client organizations, where people are the bottleneck. Furthermore, oil companies’ decision-making is slower due to high cost inflation

• Margins seem to be flattening out in key markets. We do not expect to see

significant margin improvements forward, as projects have long lead times from bidding to execution, and cost inflation among sub-contractors has been increasing

• A larger share of revenues going forward will originate from areas that so far

have had poor margins, most notably Brazil. We also observe that single projects can be enough to erode overall margins (Mexilhao, Q4 2007)

• The NOC’s share of the client base is increasing, implying more bureaucracy and

potential of delays (ref e.g. Petrobras). Furthermore, this also usually involves increased complexity as these organizations outsource a larger part of the project scope. Finally, these clients also tend to demand a high share of local content in projects, something we believe yield increased risk

• We believe overall market demand will stay strong, but the subsea companies

have been growing capacity in line with this and we thus so far don’t see room for significant margin expansion due to a tight supply side

P&L We estimate 2008 revenues in line with Acergy’s guidance of USD 3.0 billion. As the company will also have high drydock levels during 2008, this leaves limited room for additional (unexpected) increase in revenues. ACY just delivered its Q1 results, somewhat below consensus expectations. Revenues came in at USD 636 million versus consensus of USD 684 million. Adjusted EBITDA came in at USD 102 million versus expected USD 108 million, thus adjusted EBITDA margin was 16.0% versus expected 15.8%. Management confirmed its guidance for 2008 topline (USD 3.0 billion) and margins (“moderate improvement over 2006 and 2007”). Management remained bullish on long term outlook, but warned of continued short term cyclicality.

We believe Acergy will likely meet its 2008 revenue guidance and estimate 2008 revenues to be around USD 3.0 billion

Arctic Sell recommendation. Target NOK 115

05

We estimate a 2008 adjusted EBITDA margin of 16.7%, in the lower end of consensus, and fairly in line with realized adjusted EBITDA margin for 2007 (2007 adjusted EBITDA margin came in 16.6% after transition to IFRS). Acergy has guided “moderate improvement on the adjusted EBITDA margin achieved in 2006 and targeted for 2007”, likely meaning 100-200 basis points. However, given previous disappointments to this, as well as ongoing challenges with the Mexilhao project, we estimate a flat margin development through 2008. Going forward, we are also in the lower range of consensus with regard to EBITDA margin estimates. We estimate an adjusted EBITDA margin of 17.6% in 2009 (versus consensus 18.8%) and 18.0% in 2010 (versus consensus 19.1%). We believe projects like Mexilhao, increasing share of revenues from Brazil, and some major projects to be executed in a high inflation environment going forward will poise challenges for Acergy’s ability to improve EBITDA short to medium term.

Assumptions for regional EBIT margin development and overall EBITDA margin development

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

2004 2005 2006 2007 2008E 2009E 2010E

AFMED

NEC

SAM

AME

(%)

Income (loss) from operations (EBIT) margins per region, yearlyCorresponding EBITDA margin development (Actual, Arctic Securities estimates and consensus estimates)

-6

-3

0

3

6

9

12

15

18

21

2003 2004 2005 2006 2007 2008 2009 2010

-5,4-5,4

10,810,8

12,612,6

16,916,9 16,616,617,3

16,7

18,7

17,6

19,1

18,0

EBITDA margin (%)

EstimatesEstimates

Source: Arctic Securities

We don’t view it as realistic that Acergy will realize significant margin improvements in the North Sea region (NEC), as they have had a presence there for a long time already (i.e. likely hard to up prices), and as costs are rising. AFMED margins will depend on successful project execution on major projects, and we assume a moderate, but continuous improvement in margins in this region. SAM (Brazil) and AME are the “wildcards”, and significant improvements in these regions can lift overall margins. This especially applies to Brazil due to higher relative share of backlog. However, given continued poor performance in this region, both from Acergy and key peer Subsea 7, we don’t see this as an easy-fix improvement in the short-medium term. Longer term, Acergy may be able to improve EBITDA margins, in line with the company’s stated ambition. This will depend on positive closure on large West-Africa projects (Block 15 and Pazflor), continued improvement of bidding margins and strong execution, including management of sub-suppliers and cost inflation. We estimate a top line growth to around USD 3.3 billion for 2009E and further to USD 3.6 billion in 2010. Corresponding EBITDA is USD 500 million for 2008, USD 580 million for 2009 and USD 649 million for 2010.

We assume moderate margin improvement in NEC and AFMED

We believe it will be challenging for Acergy to improve EBITDA margins significantly

Improving Brazil will likely be challenging

06

P&L (USDm) 2005 2006 2007 2008E 2009E 2010E

Revenues 1,529 2,124 2,663 2,988 3,306 3,610

Operating expenses (1,284) (1,730) (2,121) (2,389) (2,638) (2,873)

Gross Profit 244 394 543 598 668 738

SG&A (120) (149) (228) (236) (248) (271)

Other operating costs and revenues (net) 7 0 0 (3) (3) (3)

Share of net income of non-consolidated JVs 27 41 32 35 50 65

Net Operating Income (EBIT) 157 287 347 394 467 529

Net financials (23) 15 (6) (6) (3) (3)

Net income before taxes from continuing operations 135 302 341 388 464 526

Income tax provision (13) (74) (212) (140) (162) (184)

Net Income from cont. Operations 111 221 129 248 302 342

Inc/loss from disc. Operations 10 (19) 6 3 4 0

Gain on disposal from cont. Operations 27 35 0 0 0 0

Net Income 149 237 135 251 306 342

Gross profit margin 16.0% 18.6% 20.4% 20.0% 20.2% 20.4%

EBITDA (adjusted) 193 358 441 500 580 649

EBITDA (adjusted) % 12.6% 16.9% 16.6% 16.7% 17.6% 18.0%

Source: Arctic Securities We estimate a 2008E EPS of USD 1.31, four per cent below consensus estimate. Our 2009E EPS estimate is at USD 1.60, some nine per cent below consensus of USD 1.76. For 2010E, we estimate an EPS of USD 1.79, around 13% below current consensus of USD 2.06. Arctic estimates versus consensus on key P&L items

2008E 2009E 2010E

Revenues (USDm)

Arctic Securities estimate 2,988 3,306 3,610

Consensus estimate 3,047 3,418 3,710

Deviation (59) (112) (99)

Deviation % -2% -3% -3%

EBITDA (USDm)

Arctic Securities estimate 500 580 649

Consensus estimate 531 642 710

Deviation (31) (61) (60)

Deviation % -6% -10% -9%

EPS (USD)

Arctic Securities estimate 1.31 1.60 1.79

Consensus estimate 1.38 1.76 2.06

Deviation (0.06) (0.16) (0.27)

Deviation % -4% -9% -13%

Note: All consensus numbers from Bloomberg. Prior to Q1 2008 presentation.

Source: Arctic Securities DCF valuation & valuation summary Our DCF valuation of Acergy is sensitive towards several key elements, mainly our overall assumption for cycle length, and long-term level for EBITDA margins. We have estimated a continued topline growth to and including 2012. After that, we assume a cyclical drop of -20% in revenues, affecting 2013 top line. In our estimates, this moves from around USD 4.2 billion in 2012 to about USD 3.3 billion in 2013. Our long term EBITDA margin is currently estimated to 18%, something we believe might be ambitious, given historical levels. On the other hand, the industry has overall demonstrated a consistent EBITDA margin improvement, and we expect to see these margins sustain. Using a WACC of 9.5%, we find an end 2008 DCF value per share in ACY of NOK 117.0.

End 2008 DCF value of NOK 117 per share

07

DCF summary (USDm) End-2008

WACC 9.5%

NPV forecast period 1,429

Terminal value 2,665

Net debt - adjusted for div. (246)

MV (USDm) 4,340

Shares 191.0

Equity value per share (USD) 22.7

Equity value per share (NOK) 117.0 Source: Arctic Securities Note that we have used a NOK/USD assumption of 5.15 in line with the current six months forward price. Peer group valuation multiples We identify a peer group for Acergy consisting of European offshore E&C companies (TEC, SPM), its key Norwegian competitor (SUB), and Norwegian and US based subsea equipment suppliers (AKVER, NOV, CAM, FTI and DRQ). ACY is currently trading at 17.8x 2008 and 14.6x 2009 P/E, and 8.3x 2008 and 6.8x 2009 EV/EBITDA. The peer group is currently trading at 15.0x 2008 and 12.5x 2009 P/E, and 8.5x 2008 and 6.9x 2009 EV/EBITDA. ACY is thus trading at a premium compared to peers. Comparing ACY to its key subsea peers (Subsea 7, Saipem and Technip), we note that ACY is currently trading at 17.8x 2008 P/E vs. a 15.0x average for the core peer group, implying an 16% premium. For 2009 and 2010, the premium is similar. We do not see this as justified by ACY’s recent performance.

Peer Group valuation table

Price MV Free cash flow yield

Name (local) (USDm) 2008E 2009E 2010E 2008E 2009E 2010E 2008E 2009E 2010E 2008E 2009E 2010E 2008 2009 2010

Aker Kvaerner Asa 124.5 6,785 (555) (881) (1,027) 12.0x 9.8x 8.5x 6.7x 5.4x 4.5x 7.4x 5.9x 5.1x 11.9% 14.0% 14.8%

National Oilwell Varco 69.6 24,918 (1,433) (3,281) (4,989) 14.9x 12.9x 11.0x 8.4x 6.8x 5.5x 9.1x 7.3x 6.0x 8.5% 10.6% 11.9%

Cameron International Corp. 46.5 10,165 (110) (347) (447) 18.2x 15.4x 13.2x 10.1x 8.6x 7.4x 11.5x 9.8x 8.2x 7.9% 9.1% na

Fmc Technologies Inc 62.6 8,107 (60) (560) (664) 21.6x 18.4x 15.6x 12.0x 9.7x 7.6x 13.7x 11.0x 8.9x 6.8% 8.3% na

Dril Quip 51.8 2,115 (246) (336) (428) 17.3x 14.6x 12.7x 10.3x 8.2x 7.1x 10.6x 8.9x 7.8x 7.7% 7.7% na

Saipem SpA (Ordinary) 27.1 18,887 3,670 4,280 3,778 17.2x 14.6x 11.5x 10.1x 8.5x 6.9x 13.7x 11.5x 9.3x 10.5% 13.0% 13.7%

Technip SA (FR Listing) 56.3 9,537 (2,449) (2,618) (3,181) 15.8x 13.9x 11.9x 6.0x 5.1x 4.2x 7.7x 6.8x 5.3x 10.0% 12.3% 11.9%

Subsea 7 Inc. 118.8 3,469 266 (4) (441) 13.6x 11.0x 9.8x 7.1x 5.5x 4.5x 8.8x 7.1x 5.5x 12.0% 14.0% 17.0%

DOF Subsea ASA 28.6 558 961 1,184 990 9.3x 5.0x 4.2x 8.4x 5.9x 4.7x 11.8x 7.8x 6.2x na na na

DeepOcean A/S 23.0 403 260 281 na 9.7x 8.8x 7.7x 6.2x 5.6x na 9.8x 8.8x na na na

Average all 15.0x 12.5x 10.6x 8.5x 6.9x 5.8x 10.4x 8.5x 6.9x 9.4% 11.1% 13.9%

Average - Equipment suppliers 18.0x 15.3x 13.1x 10.2x 8.3x 6.9x 11.2x 9.2x 7.7x 7.7% 8.9% 11.9%

Average - Subsea I&C 15.5x 13.2x 11.1x 7.7x 6.4x 5.2x 10.1x 8.5x 6.7x 10.8% 13.1% 14.2%

Acergy SA (Ordinary) 117.5 4,556 (221) (461) (743) 17.8x 14.6x 13.1x 8.3x 6.8x 5.6x 10.6x 8.4x 6.9x 2% 6% 7%

Premium/(discount) 16% 15% 19% -2% -2% -3% 2% -1% 0%

Net debt (USDm) P/E EV/EBITDA EV/EBIT

Source: Facset; Arctic Securities Valuation summary We initiate coverage on Acergy with an Arctic Sell recommendation and target of NOK 115, in line with our end 2008 DCF value of NOK 117.0. Acergy also seems expensive on key multiples compared to peers, and we would expect consensus to come down further.

Peer group consisting of Norwegian and European subsea installation and construction peers and key Norwegian and US subsea equipment peers

Arctic Sell. Target NOK 115

08

Risk factors Several risk factors apply to the Acergy investment case Commodity price risk The demand for Acergy’s services is dependent on oil and gas prices levels. If there was a sharp reduction in oil prices, it is likely that the global E&P spending levels would be reduced. This is likely to have a negative impact on the demand for Acergy’s services. Project execution Acergy is dependent on good execution of its backlog to realize profitable margins. Acergy’s projects are increasingly larger and more complex, something that increases risk of delays and cost overruns eroding margins. Large projects are mostly undertaken on turnkey basis with lump sum payments where price is negotiated up front. Faulty identification of risks and associated costs contingencies may increase risk of cost overruns. There is in general always risk with these types of projects as the repeat factor is relatively low. Cost inflation for input factors Acergy sells the majority of its services on a fixed price basis and has a great deal of sub-contracting. As the projects in most cases also have long lead times until delivery, controlling the cost levels of your input factors & sub-contractors is key to extract the budgeted margins.

09

Subsea Market: Executive summary

Market demand will stay strong We believe the market demand for subsea services will remain strong for a long time, driven by a combination of sustained demand from traditional petroleum basins and clients, and increased demand from deepwater basins, less traditional regions and new clients, primarily the NOCs and new smaller oil and gas companies. The world is about to embark on the most extensive deepwater exploration period in the history of mankind. At the same time, we are now witnessing some of the largest contracts ever awarded to the subsea companies. These are mainly a result of large deepwater discoveries outside the coast of West-Africa and Brazil. We believe the increased deepwater exploration efforts will lead to more such contracts for the industry, as new discoveries need to be brought on stream. Furthermore, these projects are increasingly more complex, adding to the demand for longer term subsea installation and construction support. At the same time as deepwater basins are becoming increasingly important, we note that demand for subsea services remains strong in traditional basins such as the North Sea. The customer side is changing, with IOCs forced into deeper waters and harsher environments, as NOCs and consortiums increasingly take control over home basins. This expands the total customer base, as the IOCs keep pushing for reserves replacement and growth and the NOCs require a broad spectre of services. In our view, all indicators we have investigated lead us to the conclusion that growth for the subsea industry will be strong for a long time to come:

• We estimate the oil price to stay high. Arctic Securities’ official oil price estimate is USD 85 per bbl through 2008, increasing thereafter by general inflation

• Contracted deepwater drilling backlog is record high with number of contracted drilling years having increased around 7 times for capacity over 5,000 feet and around 12 times for capacity over 7,500 feet. Backlog is currently at around 560 rig years > 5,000 feet (123 rigs) and around 425 rig years > 7,500 feet (80 rigs)

• Number of FPSOs (and other floating production solutions) are estimated to grow strongly forward, from 123 FPSOs end of 2007 to about 170 in 2011

• We estimate that around 1,700 subsea wells will be installed over the coming years in deepwater areas alone, with majority during 2008-2013/2014. To compare, global installed base today is around 2,700 (all water depths)

• Subsea capex estimates indicate further growth. Infield estimates global subsea capex to grow with about 2% annually over the period 2008-2012. We however expect an even stronger growth, based on record strong backlogs and multiple projects expected to be brought on stream over the period. Strong industry cost inflation should also lead to growth in subsea spending above Infield estimates

• Order backlog for the subsea companies is record strong and has grown substantially over the last five years. However, the largest contracts the industry has seen have just started to be awarded

To conclude, we see a strong demand side going forward, with few risk factors that can distort the picture. Capacity will be strained occasionally – people likely main bottleneck The subsea construction and installation companies have been growing capacity in terms of both assets and people over the last years in line with other oil services segments. Subsea 7 has allocated USD 1 billion for new vessel investments over the period 2006-2008, and expands its fleet with eight units 2007-2009, of which five are large CSVs (construction/pieplay vessels). The company has also put forward multiple recruiting and

Subsea construction and installation market will stay strong

Extensive deepwater exploration over the years to come… …and sustained demand from more mature, shallower areas

NOCs more important

Multiple indicators support strong demand side

Subsea I&C companies have grown capacity in line with demand and expected demand growth

10

training efforts to strengthen the people side, and currently has about 5,000 employees, of which about 3,400 are based in UK & Norway and another 1,100 in Brazil. Acergy has also expanded its fleet, though spending somewhat less than Subsea. Capex 2006-2008 is around USD 700 million, and the company will take delivery of six new vessels from 2007 to 2010, of which four are CSVs (construction/pipelay). Acergy has also grown its workforce, from around 4,000 people end of 2004 to about 8,000 people end of 2007. Looking at the estimated growth in number of units across key segments in oil services, we note that subsea installation capacity will grow more or less in line with other oil service segments. As such, we don’t view asset capacity in this segment as a potential bottleneck. People may however be a challenge for several of the companies, and we expect to see this differ from region to region over time. As large scale subsea construction projects require highly skilled project management, we see this as a potential bottleneck in certain periods when several projects in e.g. West-Africa and Brazil are scheduled to be brought on stream at the same time.

Global pipelay capacity seems to grow more or less in line with expected demand

2.400

2005

3.100

1.000

0

2006

3.300

2007

3.500

2008

4.100

2009

4.400

2010

4.500

2011

4.600

2.000

3.000

4.000

5.000

Km

+10%

2012

40403837

35

29

2525

0

5

10

15

20

25

30

35

40

45 +7%

2012201120102009200820072005 2006

Nr. of ships

0

30

60

90

120

150

180

2005 2006 2007 2008 2009 2010 2011 2012

Acergy estimate Acergy estimate Arctic Securities illustration based on Acergy estimates

Km pipe per vessel, assuming even distribution

Source: Acergy; Arctic Securities

Fleet expansion should be capable of handling expected pipelay demand

People will be a potential bottle-neck, especially qualified project management

11

Estimated asset growth across key segments of the oil services value chain

48%67%

49%

84%

40%31%

106%

020406080

100120

Floating production

(FPSO)

Supply (AHTS) Supply (PSV)

N/A

Subsea equipement

Subseaconstruction &

pipleay

Seismic(3D vessels)

Drilling (Jackups)

Drilling (Floaters)

% change in fleet

Seismic Drilling Production Supply Subseaequipment

Subseainstallation

Change

Fleet ’11

Fleet ’05

+13+450+634+78+80+118+36

401126194017128050370

2767613069320038534

Change

Fleet ’11

Fleet ’05

+13+450+634+78+80+118+36

401126194017128050370

2767613069320038534

Note: Subsea construction and pipelay fleet defined as key enabling assets for pipelaying, mainly from ACY, SUB, TEC and SPM. Numbers do not include

various barges etc. under construction for a wide range of companies.

Source: ODS-Petrodata, Clarkson, Arctic Securities

Bidding, risk management, project execution and resource allocation key challenges We see execution in all parts of the business, as well as resource allocation as key challenges for the subsea companies going forward. With a record strong demand for subsea services, as well as equipment and services provided by sub-suppliers, bidding EPIC projects at the right levels in the one end and controlling cost inflation in the other end becomes more and more central for the companies. Lump sum EPIC projects have a long lead time. Projects like Pazflor being bid in during 2007 and where the contract is announced late 2007 often start offshore execution 2-3 years later. This makes execution extremely important and challenging. Furthermore, the projects currently in the backlogs of the subsea installation and construction companies are far more complex than previously, increasing the risk of overruns, delays and overall poor project execution. The subsea construction and installation industry has yet to prove that it can deliver sustained high margins. Proper resource allocation – people and vessels – becomes another challenge as the total demand side grows, and as projects in different regions progress with varying pace. Both Acergy and Subsea 7 have experienced the challenges faulty resource allocation can yield. As size of projects, and hence complexity also grows, this becomes increasingly important.

Execution is critical, and becomes even more important as project complexity increases

12

Company description

Acergy is a subsea construction and installation player with global presence. The company has four business areas: SURF, IMR, Conventional and Trunklines

• SURF (Subsea, Umbilicals, Risers and Flowlines): Engineering and construction associated with subsea field developments, pipeline and riser systems together with associated services.

• Trunklines: Installation of large diameter pipes over long distances from the pipelay barge Acergy Piper.

• Conventional: Fabrication and installation of fixed offshore platforms and associated pipelines in West Africa.

• IMR (Inspection, Maintenance and Repair): Examination by divers and ROVs (Remotely Operated Vehicles) of offshore facilities. Undertaking repairs as necessary.

SURF is by far the largest business area, as illustrated by EoY 2007 order backlog. Acergy’s backlog grew to USD 3,972 million over Q1 2008.

2007 end of year order backlog per business area, USD million and share

4

100

0

20

40

60

80

100Share (%)

IMR

715

ConventionalTrunklinesSURF

74

Total

127

2.500

3.500

USDm

3.175

Total

2.350

SURF

476

Trunklines

222

Conventional IMR

0

1.000

500

3.000

2.000

1.500


Majority of Acergy’s revenues over the last years has come from West Africa and the North Sea. During 2007, 53% of the company’s revenues came from then AFMED (Africa and Middle East region), mainly West-Africa, and 34% from the NEC (Northern Europe and Canada) region, mainly the North Sea. Remaining revenues came from other regions,. Of which Brazil (SAM) was the most significant. Share of revenues from Brazil have been growing steadily over the period.

Revenue distribution and share of revenues per region, 2005-2007

11081 38

83130

2.124

2006

1.398

908

3

1034

2.663

2007

248

3.000

714

579

9550

1.529

2005

1.045

827

USDm

2.500

2.000

1.500

500

0

+32%

1.000

AFMED

NEC

NAMEX

SAM Other

AMEAFMED

NEC

NAMEX

SAM Other

AME

0%1%2%

0%10%20%30%40%50%60%70%80%90%

100%

47%

38%

6%3%

5%

2005

49%

39%

4%6%

2006

53%

34%

0%9%

4%0%

2007

Share (%)

Note: AFMED = Africa and Mediterranean, NEC = Northern Europe & Canada, NAMEX = North America and Mexico, SAM = South America and AME = Asia and

Middle East


Acergy has a fleet of 19 existing vessels, and is expecting delivery of four newbuilds, of which two in 2008 and two in 2010. Including newbuilds, the vessels are distributed as follows: 12 pure CSVs, one CSV/DSV, one heavylift/CSV, one DSV, three Barges (pipe-

Acergy is mainly a SURF player with about 74% of EoY 2007 backlog within this business area

Majority of revenues from West-Africa

Acergy’s fleet consists of 19 vessels, and will grow with two more units in 2008 and additional two in 2010

13

/derricklaying) and five IMR vessels. Acergy’s DSV business is very limited (the pure DSV mentioned above is a newbuild), whereas Subsea 7 still has some focus on this business.

14

ACY & SUB: Comparison on key dimensions

Geographical exposure Revenue breakdown on geographies for the two companies illustrate that Acergy has a larger share of relative exposure to West-Africa and that overall, AFMED and NEC has constituted a large share of the companies revenues. For 2007, Acergy had 53% from AFMED and 34% from NEC (mainly North Sea). South-America (Brazil) was the third most important region, with around 9% of revenues. Subsea 7’s revenues are generally somewhat more diversified, with a larger share of revenues over the last three years from Brazil, Asia-Pacific and US GoM. We believe the diversification is positive for the company, securing operational experience in these regions and potentially to some extent reducing risks. However, we are concerned about the large and increasing Brazil exposure, unless the company starts delivering more positive margins in this region. The North Sea is still by far the most important area for Subsea 7, and contributed with 47% of revenues for 2007. Africa, mainly West-Africa, is the second-most important region, with 24% of 2007 revenues. For 2007, Brazil accounted for 15% of revenues, and the region has accounted for about 10-20% of revenues over the last three years. Given the maturity of the North Sea, it is interesting to note the continued strong relative importance of the area for both these companies. We think this is a strong indicator for the overall industry growth that should be expected going forward, as new growth areas come on stream in a stronger way and at the same time activity continues to be high in more mature areas.

Acergy and Subsea 7: Comparison of geographical exposure

53% AFMED34%

AMESAM3%NAMEX

6%

NEC

4%5%

6%

47% AFMED

38%

AMESAMNAMEX 3%

NEC

6%

49% AFMED

39%

AMESAMNAMEX

4%

NEC

2%

4%

53% AFMED34%

AMESAM

NAMEX 9%

NEC

0%

20042004

Ace

rgy

Subs

ea7

20052005 20062006 20072007

8%

7%

28%Africa

46%

Asia-Pac

Brazil

GoM

12%

N. Sea

8%

6%

23%

Africa

46%

Asia-Pac

Brazil

GoM

18%

N. Sea

8%

7%

24%

Africa

47%

Asia-Pac

Brazil

GoM

15%

N. Sea Note (1): AFMED = Africa and Mediterranean, NEC = Northern Europe & Canada, NAMEX = North America and Mexico, SAM = South America and AME = Asia

and Middle East

Note (2): ACY and SUB use somewhat different definitions, however these are to a large extent overlapping, i.e. NEC in ACY’s definition is mainly North

Sea, SAM is mainly Brazil etc.

Source: Acergy; Subsea 7; Arctic Securities

Regional performance. Earnings margins Acergy and Subsea 7 use different reporting parameters when reporting on regional performance. However, both measures provide a rather accurate view of regional performance for the two companies, as well as what level of earnings margins that can be expected in the various regions.

Acergy has its largest share of revenues from Africa, with 53% of 2007 revenues from AFMED region

Subsea 7 has its largest share of revenues from the North Sea

The North Sea is the legacy area for both companies

15

Acergy on a regional basis reports “Income (loss) from operations” or EBIT, whereas Subsea 7 reports “Profit (loss) before tax” or PTP. The illustrations below utilize the two companies’ reported measures.

Earnings margins per region Subsea 7:

-30-25

-20-15-10

-505

101520

2530

Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07

North Sea

Africa

Brazil

GoM

Asia-Pac

PBT (%)

-30-25

-20-15-10

-505

101520

2530

2005 2006 2007

North Sea

Africa

Brazil

GoM

Asia-Pac

PBT (%)

Margins per region, quarter by quarterMargins per region, quarter by quarter Margins per region, yearlyMargins per region, yearly Company margin, yearlyCompany margin, yearly

-30-25

-20-15-10

-505

101520

2530

2005 2006 2007

7,0

12,414,7

PBT (%)

Acergy: Margins per region, quarter by quarterMargins per region, quarter by quarter Margins per region, yearlyMargins per region, yearly Company margin, yearlyCompany margin, yearly

-50

-40

-30

-20

-10

0

10

20

30

Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07

AFMED

NEC

SAM

AME

Ops. Inc. (%)

-30-25

-20-15-10

-505

101520

2530

2005 2006 2007

AFMED

NEC

SAM

AME

Ops. Inc. (%)

-30-25

-20-15-10

-505

101520

2530

2005 2006 2007

5,910,3

13,0

Ops. Inc. (%)

Source: Acergy; Subsea 7, Arctic Securities

The development in margins above illustrate some clear observations • Margins are very lumpy on a quarterly basis. This is partly related to how

these companies book earnings and illustrated that it is challenging to evaluate the performance of the companies on a quarterly basis.

• North Sea and Africa are the only two regions with consistently positive margins. Subsea 7 has had the strongest development in the North Sea, whereas Acergy seems to have had a somewhat stronger development in Africa. For both Subsea 7 and Acergy, the North Sea is also the legacy area, and the companies history, track record and strong relations in this area may explain some of the reason for why margins are so good here.

• Both companies struggle in Brazil, demonstrating that they so far consistently do not manage to realize positive earnings on annual basis in this market. This calls for caution when evaluating both companies, especially as they have both increased their backlogs in this area. On the other hand, increased backlog may implicate more revenues to partly cover a larger fixed cost base in the area, following both companies gradual build up of capacity.

• Acergy also has challenges realizing positive margins in its AME region and development has so far been negative. For Subsea 7, the opposite has been the case, with strongly improving margins over the last years. However, both companies have limited revenues in the region and are in a build-up phase. We believe Asia will be important going forward, as growth is expected to stay high for a number of years.

• Subsea 7 in general demonstrates a stronger operational performance in majority of regions, with Brazil currently being the only challenge.

• It is hard to see evidence of further strong margin expansion going forward, purely from development, though margins have been developing favourably so far. Both Acergy and Subsea 7 have been arguing the case that the industry “deserves” stronger margins than what is currently being realized. We think this

Quarterly margins are lumpy. Both companies struggle in Brazil. The North Sea and Africa are the best regions in terms of operational performance

16

may be realistic over time through improving project bidding margins, but looking purely at margin development so far, we rather see these as stabilizing/increasing marginally rather than continuing to realize strong margin expansion.

Acergy’s Q1 2008 regional margins did not display any significant changes (as these margins are volatile on a quarterly basis). However, the NEC region came in significantly lower than expected (at -5%) and SAM surprised on the positive side with a positive margin of 7%.

Subsea 7 currently outperforming Acergy on overall EBITDA performance Subsea 7’s operational performance in the different regions also demonstrates that the company has lately been outperforming Acergy on overall EBITDA margin development. Acergy has also recently not met its guiding on EBITDA margin, and has been forced to adjust this on some occasions. This has been explained by management as due to weak performance on certain key projects (most lately the Mexhilao trunkline project in Brazil). During Acergy’s pre-close trading update and outlook 29 November 2006 the company guided an adjusted EBITDA margin of “at least 16%” and under outlook for 2007 stated that we should see “continued improvement in EBITDA margin”. Acergy delivered an adjusted EBITDA margin of 16.8% for 2006. During the same session for 2007, Acergy was forced to guide down their statement on continuous improvement somewhat, stating that “meeting the group’s adjusted EBITDA expectation will be dependent on the positive closure of projects and insurance claims through the reporting period”. Acergy disappointed the market by delivering an EBITDA margin of 16.4% for 2007, down from 2006. Acergy’s management still claims that the company will deliver consistently improving margins (and over time significantly stronger than today’s level). Currently, we assume a cautious stance towards this and estimate EBITDA margins to come in at the lower end of guidance. Furthermore, though strong execution and profit realization on significant projects are important for overall margins we are concerned about seeing parts of single projects (e.g. Mexilhao) driving down the company’s overall EBITDA margin to such extent. Acergy delivered EBITDA margin of 16.6% for FY 2007 (16.5% prior to change to IFRS), while Subsea 7 delivered 17.9%, demonstrating continuous improvement. Following the year end results, analysts consequently upgraded EBITDA expectations for Subsea 7 somewhat and downgraded expectations for Acergy, thus expecting a widening gap forward.

Subsea 7’s EBITDA margin development so far seems more gradual and steady than Acergy’s

Acergy has struggled with meeting its guidance on EBITDA margins

Management claims that margins will improve

Acergy delivered an EBITDA margin of 16.6% for 2007 (16.5% under US GAAP) versus Subsea 7’s 17.9%

17

Delivered EBITDA margin and consensus estimates for EBITDA margin development Consensus EBITDA estimates prior to Q4… …and after Q4 (with actual EBITDA% for 2007 full year)

-6

-3

0

3

6

9

12

15

18

21

2003 2004 2005 2006 2007 2008 2009

5,2

-5,4

9,2

10,8

13,012,6

15,916,9

17,916,6

19,0

18,4

19,9

19,6

EBITDA margin (%)

SUB

ACY

SUB

ACY

-6

-3

0

3

6

9

12

15

18

21

2003 2004 2005 2006 2007 2008 2009

5,2

-5,4

9,2

10,8

13,012,6

15,916,9

17,916,6

19,1

17,3

20,4

18,7

EBITDA margin (%)

SUB

ACY

SUB

ACY

Note: 2007 numbers display actual EBITDA margins for both companies. 2008 and 2009 numbers are average consensus estimates

Source: Acergy; Subsea 7; Facset; Arctic Securities

How important is seasonality for the two companies? Operational performance for the companies overall and per region on a quarterly basis displays limited seasonality effect for the two companies. The North Sea is the only exception to this, mainly due to the harsh weather in the winter season. The North Sea seasonality effect is more visible in Subsea 7, which has its majority of revenues from the region. Illustration of cyclicality in the North Sea (North Sea revenues and operational profits only)

223

339299

163177

231217

136130

188167

96

0

50

100

150

200

250

300

350

Q1/05

Q2/05

Q3/05

Q4/05

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

USDm

Subsea 7, North Sea revenues

15

29

24

16

3

2723

17

8

1817

2

0

5

10

15

20

25

30

Q1/05

Q2/05

Q3/05

Q4/05

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

(%)

Subsea 7, North Sea margins

173

281

216238

217

295

214

101

165183

149

83

0

50

100

150

200

250

300

Q1/05

Q2/05

Q3/05

Q4/05

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

USDm

Acergy, NEC revenues

-1

21

1517

12

20

14

7

1614

12

-5-10

-5

0

5

10

15

20

25

Q1/05

Q2/05

Q3/05

Q4/05

Q1/06

Q2/06

Q3/06

Q4/06

Q1/07

Q2/07

Q3/07

Q4/07

(%)

Acergy, NEC margins

Source: Subsea 7; Acergy; Arctic Securities

North Sea only area with consistent seasonality effect; usually weaker Q4s and Q1s due to harsh winter weather

18

Subsea 7 has consistently weak Q4s For Subsea 7, Q4s overall (i.e. not just North Sea region) are consistently the weakest quarters. No such pattern is evident for Acergy’s overall results. We do not see Subsea 7’s weak Q4s as due to an industry trend, and looking at revenues by quarterly share of annual revenues, this is not due to seasonality in revenues, i.e. lower revenues in Q4. We hence assume this is due to specific accounting measures done by the company related to year-end.

Subsea 7: Q4 profits generally weaker than rest of year. Not due to lower revenues during Q4s Quarterly revenues as share of year total revenues since Q1 2005 (%):

26

28

2422

2425

28

24

282626

21

Q1 Q2 Q3 Q1 Q2 Q3 Q4Q3 Q4Q1 Q2Q4

14

19

15

10

2

1717

13

6

910

1

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 Q4Q2Q1 Q1

Quarterly profit (loss) margins since Q1 2005 (%):

2005 2006 2007 2005 2006 2007

Source: Subsea 7; Arctic Securities Projects’ profit booking procedure leads to quarterly lumpiness As previously mentioned, results are generally lumpy for these companies on quarterly basis. This is partly due to the revenue and profit recognition process of large projects. Majority of revenues and profit is booked towards the end of projects, leading to significant variations in profit margins, as contingencies (related to pre-identified risks during the bidding process) are released or additional costs occur, depending on project execution. This also implicates that for many projects, it is hard to judge profitability prior to the last phases and/or completion of the project at hand. Acergy has provided a simplified illustration of this process, displayed below.

Subsea 7 has consistently reported weak Q4s. This is not driven by revenue fluctuation alone.

Majority of revenues and profits in large projects booked towards end of the project phase

19

Revenue & profit recognition in major projects – illustration

Source: Acergy Order intake (contract awards) and book-to-bill ratios Looking at the contract awards that have built the backlog, and the companies’ book-to-bill ratios we see some observations worth commenting. Firstly, over the last two to three years, projects and contracts to both Acergy and Subsea 7 have gotten larger (this is also the fact for Technip & Saipem). This implies that going forward, both companies shall execute larger and more complex projects than they have ever done before. These large projects open up for potential for significant profits, but also increase the risk taken by the companies, as especially project management becomes more complex. Furthermore, these projects depend on several counterparties, and hence risk of delays/sliding of project sanctioning increase. Among key large scale project contract awards over the last years worth noticing are the USD 700 million contract for Acergy on Pazflor, the USD 670 million contract on Block 15, Angola and the USD 400 million contract on the Mexilhao project. Acergy was approximately 12% into execution on the Mexilhao project end of 2007, and is currently negotiating with Petrobras for altered terms on this (challenging) contract. Offshore installation on Block 15 is scheduled to start Q4 2008, and on Pazfloor mid 2010. For Subsea 7, the main large project contracts are the USD 290 million contract on Tombua Landana (Angola) with offshore installation late 2008 and/or early 2009, the USD 390 million extension to the “Hybrid Vessel” contract in Brazil, and the recently announced USD 200 million contract in Santos Basin. The two very large contracts (USD 700 million and USD 400 million respectively) illustrated in 2006, are six years charter contracts with Shell in the North Sea (i.e. not project specific). Looking at accumulated contract value over the last years, Subsea 7 and Acergy has announced almost the same value of contracts, when including contracts announced in 2008. Subsea 7 has announced contracts of an accumulated value of USD 6,590 million since 2004 and Acergy USD 6,618 million. Subsea 7 is however growing from a smaller base, and in light of this outperforming Acergy.

Orders are getting larger. This increases profit opportunities, but also ups risk due to increased complexity

Acergy’s largest contract wins last three years are Pazflor (USD 700 million) Block 15 (USD 670 million) & Mexilhao (USD 400 million)

Subsea 7 and Acergy have both announced contracts for an accumulated value of around USD 6.6 billion each since 2004

20

Order intake since 2002 (ACY) and 2004 (SUB) per order and accumulated per year

2002

2003

2004

2005

2006

2007

20082002

2003

2004

2005

2006

2007

2008

200

50

14012580

390

45

280275

80

250290

200128

50

700

400

60

160

286485

3055723

3237

4050

60115

29

150

5618

150

670

150

6012

250

2445

29

270

20

110140

1825

0

100

200

300

400

500

600

700

18 3080 55 70

11561

Avg.112

Contract value USD Million

250

1,236

2,890

1,235979

0

500

1,000

1,500

2,000

2,500

3,000

2002 2005 2006 20082007

USD Million

20042003

Subs

ea7

6060

150195

700670

58120

175

85

400

28

14012060

6540

150

40

125

245

35

125145

140

16

90

250

5550

280

36507540

4050120

200

7050

150

4055

550

250

70

300

70

0

100

200

300

400

500

600

700

Contract value USD Million

80140 Avg.

143

1,165

1,936

1,2761,246995

320370

0

500

1,000

1,500

2,000

2,500

3,000

20072006

USD Million

20082002 2003 2004 2005

Accumulated contract value per yearAccumulated contract value per year

Acer

gy


Book-to-bill ratios for the two companies illustrate high quarterly volatility for both companies, depending on when major contracts come in and are announced.

Order intake and book-to-bill ratios

0

50

100

150(%)

868

380428

260315

125

391

671

205170

200

445

0

100

200

300

400

500

600

700

800

900

Q1/05Q2/05Q3/05Q4/05Q1/06Q2/06Q3/06Q4/06Q1/07Q2/07Q3/07Q4/07

USDm

0

50

100

150

200

250

300

350

400(%)

265

515456

0

895

140252

419350

244222

Q1/05Q2/05Q3/05Q4/05Q1/06Q2/06

1.603

Q3/06Q4/06Q1/07Q2/07Q3/07Q4/07

0

1.000

1.200

1.400

1.600

1.800

200

400

600

800

USDm

Subsea 7: Quarterly order intake and book-to-bill ratioSubsea 7: Quarterly order intake and book-to-bill ratio

Order intake

Book-to-bill ratio

Order intake

Book-to-bill ratio

Acergy: Quarterly order intake and book-to-bill ratioAcergy: Quarterly order intake and book-to-bill ratio

Order intake

Book-to-bill ratio

Order intake

Book-to-bill ratio

Note: Book-to-bill ratio here is calculated as quarterly order intake divided by quarterly revenues (illustrated in %, right hand axis)


Backlog development Acergy and Subsea 7 have both seen a very strong order intake and growth in backlog over the last years. Subsea 7 currently had the largest backlog, USD 4,215 million at the end of Q4 2007, and has announced contract awards of USD 250 million so far in 2008. Subsea 7 has also seen the strongest growth in backlog over the last years, with its

Subsea 7’s backlog has increased more than 3x since 2005 from USD 1,354 to USD 4,215 million end of 2007

21

backlog increasing more than 3x since 2005 from USD 1,354 million to USD 4,215 million end of 2007. Acergy’s reported backlog at end of Q4 (30 November) was USD 3,175 million, and the company has announced contract awards of another USD 1,165 million since then. Acergy’s backlog has grown about 1.4x 2005-2007 from USD 2,194 million to USD 3,175 million. (Note however that this increases to about 2.0x when including new contracts awarded since Q4 2007, if assuming that existing backlog has not been reduced). At the end of Q1 2008, Acergy’s order backlog stood at USD 3,972 million, an increase over the quarter of USD 797 million. A large share of Subsea 7’s backlog growth over the last years are constituted by two large frame agreements with Shell worth a total of USD 1.1 billion, running for six years with 4x1 year options for each of the contracts. Acergy has some similar contracts, mainly three vessels chartered to Petrobras (the Pertinacia, the Condor and the Harrier running to Q1 2012 and 2x Q4 2010 respectively), constituting a total announced contract value of USD 530 million. In addition, Acergy has two frame-agreements in the North Sea, at a total announced contract value of USD 160 million.

Quarterly backlog development per region Q105 – Q407

0%

20%

40%

60%

80%

100%

Q2/05Q1/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07

Share (%)

Q3/06

3.748

Q4/06

3.809

Q1/07

3.938

Q2/07

4.228

Q3/07

4.215

Q4/07

+11%

0

1.000

1.5002.000

2.500

3.5004.000

4.500

500

USDm

3.466

1.374

Q1/05

1.342

Q2/05

1.623

Q3/05

1.6261.354

Q4/05

1.445

Q1/06 Q2/06

3.000

North Sea

Africa

Brazil

GoM

Other

Asia-Pac.

North SeaNorth Sea

AfricaAfrica

BrazilBrazil

GoMGoM

OtherOther

Asia-Pac.Asia-Pac.

Subs

ea7

Ace

rgy

Q1/05 Q2/05

1.866

Q3/05

2.194

Q4/05

2.286

Q1/06

2.470

1.715

Q2/06

2.618

+5%

Q4/07

3.175

Q3/07

2.745

Q2/07

3.031

Q1/07

2.557

Q3/06

2.576

Q4/06

1.500

0

2.500

1.000

2.000 1.802

4.000

500

4.500

3.000

3.500

USDm

AFMED

NEC

NAMEX

SAM

Total

AME

AFMEDAFMED

NECNEC

NAMEXNAMEX

SAMSAM

TotalTotal

AMEAME

0%

20%

40%

60%

80%

100%

Q2/05Q1/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07

Share (%)

Source: Subsea 7, Acergy, Arctic Securities

In terms of geographical exposure, Subsea 7 has seen the largest relative increase in the North Sea over the last three years. This is mainly due to the large charter contracts with Shell. We view this as positive, as the company generally has secured strong margins in this market. Acergy’s backlog to the end of 2007 saw the strongest relative increase in the SAM region, i.e. Brazil, whereas AFMED’s relative share was reduced. This will likely change somewhat when Q1 2008 numbers are included, as this will include the USD 700 million Pazflor contract. Both companies have significantly increased the backlog in Brazil over the last three years, and majority of these contracts are moving into execution now, or have already started. Acergy and Subsea 7 both need to improve execution in this market for this not to affect overall margins in a negative direction.

Acergy’s is growing from a larger base and has increased its backlog 1.4x over the period 2005-2007, from USD 2,194 to USD 3,175 million end of 2007

Subsea 7 has seen the strongest relative increase in its North Sea backlog

Brazil and Wesrt-Africa most important in Acergy’s backlog

Both companies have increased Brazil backlog significantly. We need to see strong execution on these projects

22

Annual backlog development per region 2005-2007

35%

22% 31%

2%3%6%0%

20%

40%

60%

80%

100%

2005 2006 2007

18%

3%

55%

8%

4%

Share (%)

33%

18%

8%

54%

North Sea

Africa

Brazil

GoM

Other

Asia-Pac.

North SeaNorth Sea

AfricaAfrica

BrazilBrazil

GoMGoM

OtherOther

Asia-Pac.Asia-Pac.

Subs

ea7

Ace

rgy

AFMED

NEC

NAMEX

SAM

Total

AME

AFMEDAFMED

NECNEC

NAMEXNAMEX

SAMSAM

TotalTotal

AMEAME1%

0%

20%

40%

60%

80%

100%

0%18%

48%

4%14%

64%

17%30%

Share (%)

200720062005

6%

34%

0%20%

40%

4%

4.500

2.194

2005

2.576

2006

3.175

2007

0

1.000

1.5002.000

2.5003.000

3.500

500

4.000

USDm

0

1.000

1.500

2.500

3.000

3.500

4.000

4.500

500

2.000

USDm

2005

3.748

2006

4.215

2007

1.354

Source: Subsea 7; Acergy; Arctic Securities Over the period 2005-2007, Subsea 7’s backlog has increased substantially faster than revenues, whereas Acergy’s increase in backlog has been more in line with revenue increase.

Annual revenues and year end backlog 2005-2007

USDm

1.000

4.000

3.000

5.000

2.000

0

2007

4.215

2.187

2006

3.748

1.6701.3541.300

2005

Subsea 7

Revenues

Year end backlog

Revenues

Year end backlog1.529

2.194

2005

2.1242.576

2006

2.6633.175

2007

0

2.000

5.000

3.000

USDm

1.000

4.000

Acergy

Source: Subsea 7; Acergy; Arctic Securities Subsea 7’s backlog distribution is also more evenly distributed going forward, whereas the majority of Acergy’s backlog consists of work to be conducted in 2008. Acergy is larger than Subsea 7 revenue wise, and as such also “eats into” its backlog faster, even in a zero growth scenario. Acergy’s 2007 revenue level constitutes as much as 84% of its backlog end of year 2007, versus 52% for Subsea 7. Still assuming no growth, Acergy has as much as 83% of revenues booked for 2008 through scheduled backlog work, versus 78% for Subsea 7.

Acergy ”consumes” its backlog more rapidly than Subsea 7

23

Distribution of EoY 2007 backlog going forward Subsea 7

4.215

2007

1.710

2008

1.017

2009

647

2010

841

2011

0

1.000

USD Million

2.000

5.000

3.000

4.0003.175

2007

2.223

2008

667

2009

286

2010

0

1.000

2.000

3.000

4.000

5.000

USD MillionAcergy

Source: Subsea 7; Acergy; Arctic Securities To what extent do contract announcements work as share price triggers? Looking at the largest contracts announced by Subsea 7 and Acergy over the last two years does not provide clear evidence of very strong share price reactions after contract announcement. It actually looks more like the share prices seem to react some time prior to contract announcements. This could be due to a lot of attention related to soon-to-come contract awards in advance with market participants identifying “most likely” winners for the specific tender at hand.

Subsea 7: Share price reactions to the 10 largest announced contracts since 2006

1.56%0.16%-0.29%1.08%0.44%1.52%3.11%Average top 10 contracts

10.85%4.40%3.52%1.79%0.30%2.10%8.60%NEC23-Mar-06160

-0.82%-0.44%-0.66%0.30%0.30%0.59%3.21%Average all contracts 2006-2008 (27)

na.3.48%2.17%0.66%1.11%1.77%3.37%SAM31-Mar-08200

-6.67%1.56%0.89%1.35%-1.11%0.22%-4.46%AFMED15-Sep-06200

0.42%2.08%-0.42%2.78%1.97%4.80%7.14%SAM20-Oct-06250

5.26%0.00%-0.48%-3.24%-0.92%-4.13%-0.48%NEC17-Jul-06255

0.22%-0.22%-0.87%-1.08%0.87%-0.22%-6.71%SAM18-Dec-06275

5.90%-1.89%-3.30%0.24%0.71%0.95%-7.22%AFMED2-Oct-06290

4.43%-0.40%-0.40%1.43%1.87%3.33%1.84%NEC15-May-07341

-11.95%-6.38%-6.71%3.56%-0.67%2.86%11.09%SAM23-Jul-07390

5.62%-0.98%2.69%3.28%0.25%3.54%17.87%na.3-Jul-061100

10 days after

2 days after

1 day afterIntraday1 day ahead

2 days ahead

10 days ahead

Region DateContract

value (USDm)

1.56%0.16%-0.29%1.08%0.44%1.52%3.11%Average top 10 contracts

10.85%4.40%3.52%1.79%0.30%2.10%8.60%NEC23-Mar-06160

-0.82%-0.44%-0.66%0.30%0.30%0.59%3.21%Average all contracts 2006-2008 (27)

na.3.48%2.17%0.66%1.11%1.77%3.37%SAM31-Mar-08200

-6.67%1.56%0.89%1.35%-1.11%0.22%-4.46%AFMED15-Sep-06200

0.42%2.08%-0.42%2.78%1.97%4.80%7.14%SAM20-Oct-06250

5.26%0.00%-0.48%-3.24%-0.92%-4.13%-0.48%NEC17-Jul-06255

0.22%-0.22%-0.87%-1.08%0.87%-0.22%-6.71%SAM18-Dec-06275

5.90%-1.89%-3.30%0.24%0.71%0.95%-7.22%AFMED2-Oct-06290

4.43%-0.40%-0.40%1.43%1.87%3.33%1.84%NEC15-May-07341

-11.95%-6.38%-6.71%3.56%-0.67%2.86%11.09%SAM23-Jul-07390

5.62%-0.98%2.69%3.28%0.25%3.54%17.87%na.3-Jul-061100

10 days after

2 days after


2 days ahead

10 days ahead

Region DateContract

value (USDm)

Source: Subsea 7; Arctic Securities

Contract announcement do not seem to trigger share price appreciation – shares rise more prior to announcements

24

Acergy: Share price reactions to the 10 largest announced contracts since 2006

0.52%-1.38%-0.27%0.00%0.66%0.65%2.48%Average top 10 contracts

-15.06%-2.56%-0.64%-0.95%1.61%0.65%1.13%SAM30-Oct-07140

1.07%0.39%0.73%0.45%0.40%0.82%2.83%Average all contracts 2006-2008 (28)

-4.23%1.01%-0.20%0.20%-0.60%-0.40%3.33%NEC05-Feb-07140

-8.56%-4.38%-2.30%3.68%2.44%6.21%3.68%AFMED05-Sep-06150

12.35%-1.94%0.88%-3.08%0.86%-2.24%7.79%AME06-Jul-07175

22.22%4.76%1.59%-0.32%-1.86%-2.17%-10.00%SAM20-Jun-06245

11.28%0.00%0.61%-2.67%0.30%-2.38%-3.24%SAM14-Feb-06301

7.35%0.47%3.32%6.67%1.75%8.54%7.22%NEC13-Feb-08345

-1.55%-0.19%-0.19%1.18%-1.93%-0.77%7.97%SAM03-Apr-07400

-5.16%-10.32%-5.95%-7.18%4.02%-3.45%-4.00%AFMED29-Nov-07670

-13.48%-0.60%0.20%2.47%0.00%2.47%10.94%AFMED02-Jan-08700

10 days after

2 days after


2 days ahead

10 days ahead

Region DateContract

value (USDm)

0.52%-1.38%-0.27%0.00%0.66%0.65%2.48%Average top 10 contracts

-15.06%-2.56%-0.64%-0.95%1.61%0.65%1.13%SAM30-Oct-07140

1.07%0.39%0.73%0.45%0.40%0.82%2.83%Average all contracts 2006-2008 (28)

-4.23%1.01%-0.20%0.20%-0.60%-0.40%3.33%NEC05-Feb-07140

-8.56%-4.38%-2.30%3.68%2.44%6.21%3.68%AFMED05-Sep-06150

12.35%-1.94%0.88%-3.08%0.86%-2.24%7.79%AME06-Jul-07175

22.22%4.76%1.59%-0.32%-1.86%-2.17%-10.00%SAM20-Jun-06245

11.28%0.00%0.61%-2.67%0.30%-2.38%-3.24%SAM14-Feb-06301

7.35%0.47%3.32%6.67%1.75%8.54%7.22%NEC13-Feb-08345

-1.55%-0.19%-0.19%1.18%-1.93%-0.77%7.97%SAM03-Apr-07400

-5.16%-10.32%-5.95%-7.18%4.02%-3.45%-4.00%AFMED29-Nov-07670

-13.48%-0.60%0.20%2.47%0.00%2.47%10.94%AFMED02-Jan-08700

10 days after

2 days after


2 days ahead

10 days ahead

Region DateContract

value (USDm)

Source: Acergy; Factset; Arctic Securities

Fleet comparison Including units under construction, Subsea 7 has a fleet of 22 units. Of these, five are still under construction and will be delivered during 2008. The company has conducted significant investments over the last years, resulting in a relative modern fleet with an average age of around seven years. Including newbuilds, Subsea 7’s fleet consists of 12 CSVs, (pipelay and multipurpose support), five ROVs and five DSVs.

Subsea 7 has a fleet of 22 vessels, including newbuilds not yet delivered

25

Subsea 7: Fleet overview Vessel Vessel Year built/ Size Owned/

Vessel name main type sub-category converted (length m) leased

Existing fleet1 Rockwater 1 DSV Diving 1983 98 Owned2 Rockwater 2 DSV Diving 1984 119 Owned3 Pelican DSV Diving 1985 94 Owned4 Kommandor Subsea ROV ROV support 1986 69 Owned5 Seisranger ROV ROV support 1993 85 Charter6 Kommandor Subsea 2000 ROV ROV support 1996 78 Owned7 Toisa Perseus CSV Pipelay 1998 114 Charter8 Kommandor 3000 CSV Flexible pipelay 1999 118 Owned9 Skandi Navica CSV Pipelay 1999 109 Charter10 Subsea Viking CSV Multipurpose support 1999 103 Charter11 Toisa Polaris DSV Diving 1999 114 Charter12 Lochnagar CSV Pipelay 2005 105 Owned13 Skandi Neptun CSV Pipelay 2005 104 Charter14 Amazonia CSV Survey/subsea support 2005 74 Charter15 Skandi Bergen ROV ROV support 2007 106 Charter16 Normand Seven CSV Pipelay 2007 130 Charter17 Seven Oceans CSV Pipelay 2007 157 Owned

Ordered/under construction18 Seven Seas CSV Flexible pipelay 2008 154 Owned19 Seven Sister CSV Multipurpose light construction 2008 104 Charter20 Normand Subsea 7 ROV ROV support 2008 113 Charter21 Skandi Seven CSV Construction/maintenance 2008 121 Charter22 Seven Atlantic DSV Diving 2009 145 Owned

Source: Subsea 7; Clarksons; Arctic Securities Acergy has also invested in rejuvenating its fleet over the last years, taking delivery of three newbuilds/modified vessels in 2007, the Sapura 3000 in Q1 2008, and aiming to take delivery of another three vessels during 2008-2010, bringing its total fleet (including JV assets) to 23 vessels. Including newbuilds, Acergy’s fleet consists of 12 pure CSVs, one heavylift/CSV, one CSV/DSV, one pure DSV, three barges (pipe-/derricklaying) and five IMR vessels.

Acergy has a fleet of 23 units when including newbuilds not yet delivered. Acergy’s fleet is on average about 4 years older than Subsea 7’s (approximately 11 versus seven years)

26

Acergy: Fleet overview Vessel Vessel Year built/ Size Owned/

Vessel name main type sub-category converted (length m) leased

Existing fleet1 Acergy Piper Barge Pipelay 1975 Owned2 Acergy Orion Barge Derrick lay 1977 Owned3 Acergy Hawk CSV Construction support 1978 94 Owned4 Acergy Polaris Barge Pipelay 1979 Owned5 Acergy Osprey CSV/DSV Construction support/diving 1984 102 Owned6 Acergy Harrier CSV Construction support 1985 83 Owned7 Acergy Legend CSV Construction support 1988 64 Owned8 Acergy Discovery CSV Subsea construction 1990 125 Owned9 Acergy Falcon CSV Rigid pipelay 1997 153 Owned10 Acergy Eagle CSV Subsea construction 1997 142 Owned11 Polar Bjørn IMR IMR/Survey 2001 90 Charter12 Far Saga IMR IMR/Survey 2001 89 Charter13 Acergy Condor CSV Flexible pipelay 2002 145 Owned14 Toisa Proteus CSV Subsea construction 2002 132 Charter15 Normand Mermaid IMR IMR/Survey 2002 90 Charter16 Acergy Petrel IMR IMR/Survey 2003 77 Charter17 Pertinacia CSV Flexible pipelay 2007 130 Charter18 Polar Queen CSV Subsea construction 2007 148 Charter19 Acergy Viking IMR IMR/Survey 2007 98 Charter

Ordered/under construction20 Sapura 3000 CSV Heavy lift/pipelay 2008 151 Owned21 Skandi Acergy CSV Subsea construction 2008 157 Charter22 Acergy Havila DSV Diving 2010 120 Owned23 Oleg Strashnov CSV Heavy lift 2010 NA Owned

Source: Acergy; Clarksons; Arctic Securities

27

Financials

P&L We estimate 2008 revenues in line with Acergy’s guidance of USD 3.0 billion, as there are several large scale projects coming towards completion through the year, and furthermore as Acergy will take delivery of only one new vessel through the year. As such, Acergy should have a fairly good overview of full year estimates for 2008. The company will also have high drydock levels during 2008, leaving limited room for additional (unexpected) increase in revenues. For 2007 (during its regular Pre-close Trading update and outlook 29 November 2006) Acergy first guided a topline “in the region of USD 2.3 billion”, but then had to upgrade this in its Q2 presentation to USD 2.7-2.8 billion. We see limited (upside) risk of this happening through 2008. We estimate a 2008 adjusted EBITDA margin of 16.7%, in the lower end of consensus, and fairly in line with realized adjusted EBITDA margin for 2007. Acergy has guided “moderate improvement on the adjusted EBITDA margin achieved in 2006 and targeted for 2007”, likely meaning 100-200 basis points. However, given previous disappointments to this, as well as ongoing challenges with the Mexilhao project, we estimate a flat margin development through 2008. Going forward, we are also in the lower range of consensus with regard to EBITDA margin estimates. We estimate an adjusted EBITDA margin of 17.6% in 2009 (versus consensus 18.8%) and 18.0% in 2010 (versus consensus 19.1%). We believe projects like Mexilhao, increasing share of revenues from Brazil, and some major projects to be executed in a high inflation environment going forward will poise challenges for Acergy’s ability to improve EBITDA short to medium term. Still, our estimates are based on gradual improvement in all of the regions where Acergy operates. Our estimates for development in regional EBIT (Net Operating Income) margins per region, as well as the correspondent development in overall EBITDA margin versus consensus expectations, are illustrated below. We don’t view it as realistic that Acergy will realize significant margin improvements in the North Sea region (NEC), as they have had a presence there for a long time already (i.e. likely hard to up prices), and as costs are rising. AFMED margins will depend on successful project execution on major projects, and we assume a moderate, but continuous improvement in margins in this region. SAM (Brazil) and AME are the “wildcards”, and significant improvements in these regions, can lift overall margins. This especially applies to Brazil due to higher relative share of backlog. However, given continued poor performance in this region, both from Acergy and key peer Subsea 7, we don’t see this as an easy-fix improvement in the short-medium term. Overall, Acergy’s operational expenses have been fairly stable and moved in line with revenues. This also applies to SG&A levels. To us, this indicates a so far limited scale effect in Acergy’s business, and as such, we so far see limited grounds for estimating significant cost improvements.

We believe Acergy will likely meet its 2008 revenue guidance and estimate 2008 revenues to be around USD 3.0 billion

We assume moderate margin improvement in NEC and AFMED

Improving performance in Brazil is one of the key areas to lift overall earnings

Limited history of scalability (or opex improvements) so far

We believe it will be challenging for Acergy to improve EBITDA margins significantly and estimate a somewhat conservative margin development going forward

28

Assumptions for regional EBIT margin development and overall EBITDA margin development

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

2004 2005 2006 2007 2008E 2009E 2010E

AFMED

NEC

SAM

AME

(%)

Income (loss) from operations (EBIT) margins per region, yearlyCorresponding EBITDA margin development (Actual, Arctic Securities estimates and consensus estimates)

-6

-3

0

3

6

9

12

15

18

21

2003 2004 2005 2006 2007 2008 2009 2010

-5,4-5,4

10,810,8

12,612,6

16,916,9 16,616,617,3

16,7

18,7

17,6

19,1

18,0

EBITDA margin (%)

EstimatesEstimates


Longer term, Acergy may be able to improve EBITDA margins, in line with the company’s stated ambition. This will depend on positive closure on large West-Africa projects (Block 15 and Pazflor), continued improvement of bidding margins and strong execution, including management of sub-suppliers and cost inflation. We estimate a top line growth to around USD 3.3 billion for 2009E and further to USD 3.6 billion in 2010. Corresponding EBITDA is USD 500 million for 2008, USD 580 million for 2009 and USD 649 million for 2010. P&L (USDm) 2005 2006 2007 2008E 2009E 2010E

Revenues 1,529 2,124 2,663 2,988 3,306 3,610

Operating expenses (1,284) (1,730) (2,121) (2,389) (2,638) (2,873)

Gross Profit 244 394 543 598 668 738

SG&A (120) (149) (228) (236) (248) (271)

Other operating costs and revenues (net) 7 0 0 (3) (3) (3)

Share of net income of non-consolidated JVs 27 41 32 35 50 65

Net Operating Income (EBIT) 157 287 347 394 467 529

Net financials (23) 15 (6) (6) (3) (3)

Net income before taxes from continuing operations 135 302 341 388 464 526

Income tax provision (13) (74) (212) (140) (162) (184)

Net Income from cont. Operations 111 221 129 248 302 342

Inc/loss from disc. Operations 10 (19) 6 3 4 0

Gain on disposal from cont. Operations 27 35 0 0 0 0

Net Income 149 237 135 251 306 342

Gross profit margin 16.0% 18.6% 20.4% 20.0% 20.2% 20.4%

EBITDA (adjusted) 193 358 441 500 580 649

EBITDA (adjusted) % 12.6% 16.9% 16.6% 16.7% 17.6% 18.0%

Source: Arctic Securities Cash flow statement Acergy has changed its reporting from US GAAP to IFRS effective from Q1 2008. As such, we do not put too much emphasis on historic cash flows, and thus have only included the 2007 CF below. One of the most important elements to pay attention to in Acergy’s cash flow is the development in net operating assets, or working capital, as Acergy has fairly large current assets and current liabilities items in its balance sheet. This is due to the nature of large lump sum projects and controlling working capital is important.

29

We estimate a capex of USD 300 million for 2008, in line with company guidance after changing to IFRS (2008 capex is somewhat up compared to previous guidance, due to re-classification of some maintenance costs). We estimate a capex of USD 175 million for 2009 and 2010. Furthermore, we expect the company to continue to pay out dividends, with an annual level of around USD 38-40 million. This excludes share buybacks. Cash flow statement (USDm) 2007 2008E 2009E 2010E

Net Profit 135 251 306 342

D&A and impairments 94 106 113 120

WC - Other current assets (trade and other receivables) (174) (104) (102) (97)

WC - Current liabilities (ST liabilities) 174 130 127 122

Chg. Assets held for sale (other current assets) 16 1 0 0

Chg. Other non-current liabilities (non int bearing) 17 10 10 9

Cashflow from operating act. 261 394 454 495

Net investment (235) (300) (175) (175)

Chg. Other non-current assets (45) (44) 0 0

Cashflow from investing act. (280) (344) (175) (175)

Net debt 15 3 0 0

Net equity / dividend (131) (25) (38) (38)

Cash flow from financing act. (116) (22) (38) (38)

Change in cash (135) 28 240 282

Source: Arctic Securities Balance sheet Acergy has a healthy balance sheet with net cash of around USD 200 million at the end of 2007. The company has limited long term debt and significant assets. Acergy owns roughly half of its fleet of 23 vessels (including newbuilds). The remaining vessels are chartered on long term contracts. Other important items on Acergy’s balance sheet are short term assets and short term liabilities. Given a strong performance and gradual limitations to future capex, Acergy should have a decent dividend capacity. Balance sheet (USDm) 2007 2008E 2009E 2010E

Cash and cash equivalents 583 611 851 1,133

Other current assets (trade and other receivables) 818 922 1,023 1,121

Assets held for sale 1 0 0 0

Fixed assets (PPE) 814 1,008 1,070 1,125

Other non-current assets 211 255 255 255

Total assets 2,427 2,796 3,200 3,634

Current liabilities (ST liabilities) 1,100 1,230 1,357 1,479

Other non-current liabilities (non int bearing) 121 131 140 149

Long term debt 387 390 390 390

Shareholders equity 819 1,045 1,313 1,616

Total equity and liabilities 2,427 2,796 3,200 3,634

Net debt (196) (221) (461) (743)

Source: Arctic Securities Quarterly P&L As mentioned previously, quarters are lumpy for Acergy’s business. This is due to uneven recognition of revenues and profits on major projects. We have expected quarterly seasonality to continue in the North Sea due to harsh weather in the winter season (usually). Furthermore, we have noticed that Q4 numbers for the AFMED region historically have been somewhat stronger than other quarters, and we have expected this to continue forward. These two effects lead to some seasonality in our quarterly P&L estimates.

30

ACY just delivered its Q1 results, somewhat below consensus expectations. Revenues came in at USD 636 million versus consensus of USD 684 million. Adjusted EBITDA came in at USD 102 million versus expected USD 108 million, thus adjusted EBITDA margin was 16.0% versus expected 15.8%. Management confirmed its guidance for 2008 topline (USD 3.0 billion) and margins (“moderate improvement over 2006 and 2007”). Management remained bullish on long term outlook, but warned of continued short term cyclicality.

Quarterly P&L (USDm) Q1/07 Q2/07 Q3/07 Q4/07 Q1/08E Q2/08E Q3/08E Q4/08E

Revenues 566 634 709 754 636 715 781 856

Operating expenses (470) (509) (547) (595) (513) (576) (627) (674)

Gross Profit 96 125 163 160 123 139 155 182

SG&A (48) (56) (56) (67) (60) (54) (59) (64)

Other operating costs and revenues (net) 0 0 (0) 0 (1) (1) (1) (1)

Share of net income of non-consolidated JVs 2 14 11 5 11 8 8 8

Net Operating Income (EBIT) 50 83 117 98 74 93 103 125

Net financials 0 8 1 (15) (4) (1) (1) (1)

Net income before taxes from continuing operations 50 91 117 83 70 92 102 124

Income tax provision (16) (43) (40) (113) (29) (32) (36) (43)

Net Income from cont. Operations 34 48 77 (30) 41 60 67 81

Inc/loss from disc. Operations 4 1 0 1 0 1 1 1

Gain on disposal from cont. Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Income 38.2 48.8 76.8 (29.3) 41.1 60.6 67.6 81.7

Gross profit margin 16.9% 19.7% 22.9% 21.2% 19.4% 19.4% 19.8% 21.2%

EBITDA (adjusted) 71 105 141 124 102 119 129 151

EBITDA (adjusted) % 12.5% 16.6% 19.8% 16.5% 16.0% 16.6% 16.6% 17.6%


31

Valuation

We have valued Acergy using both peer group multiples and DCF. Peer group valuation multiples We identify a peer group for Acergy consisting of European offshore E&C companies (TEC, SPM), its key Norwegian competitor (SUB), and Norwegian and US based subsea equipment suppliers (AKVER, NOV, CAM, FTI and DRQ). ACY is currently trading at 17.8x 2008 and 14.6x 2009 P/E, and 8.3x 2008 and 6.8x 2009 EV/EBITDA. The peer group is currently trading at 15.0x 2008 and 12.5x 2009 P/E, and 8.5x 2008 and 6.9x 2009 EV/EBITDA. ACY is thus trading at a premium compared to peers on P/E and in line on EV/EBITDA. Comparing ACY to its key subsea peers (Subsea 7, Saipem and Technip), we note that ACY is currently trading at 17.8x 2008 P/E vs. a 15.0x 2009 P/E average for the core peer group, implying an 16% premium. We do not see this as justified by ACY’s recent performance.

Peer Group valuation table Price MV Free cash flow yield

Name (local) (USDm) 2008E 2009E 2010E 2008E 2009E 2010E 2008E 2009E 2010E 2008E 2009E 2010E 2008 2009 2010

Aker Kvaerner Asa 124.5 6,785 (555) (881) (1,027) 12.0x 9.8x 8.5x 6.7x 5.4x 4.5x 7.4x 5.9x 5.1x 11.9% 14.0% 14.8%

National Oilwell Varco 69.6 24,918 (1,433) (3,281) (4,989) 14.9x 12.9x 11.0x 8.4x 6.8x 5.5x 9.1x 7.3x 6.0x 8.5% 10.6% 11.9%

Cameron International Corp. 46.5 10,165 (110) (347) (447) 18.2x 15.4x 13.2x 10.1x 8.6x 7.4x 11.5x 9.8x 8.2x 7.9% 9.1% na

Fmc Technologies Inc 62.6 8,107 (60) (560) (664) 21.6x 18.4x 15.6x 12.0x 9.7x 7.6x 13.7x 11.0x 8.9x 6.8% 8.3% na

Dril Quip 51.8 2,115 (246) (336) (428) 17.3x 14.6x 12.7x 10.3x 8.2x 7.1x 10.6x 8.9x 7.8x 7.7% 7.7% na

Saipem SpA (Ordinary) 27.1 18,887 3,670 4,280 3,778 17.2x 14.6x 11.5x 10.1x 8.5x 6.9x 13.7x 11.5x 9.3x 10.5% 13.0% 13.7%

Technip SA (FR Listing) 56.3 9,537 (2,449) (2,618) (3,181) 15.8x 13.9x 11.9x 6.0x 5.1x 4.2x 7.7x 6.8x 5.3x 10.0% 12.3% 11.9%

Subsea 7 Inc. 118.8 3,469 266 (4) (441) 13.6x 11.0x 9.8x 7.1x 5.5x 4.5x 8.8x 7.1x 5.5x 12.0% 14.0% 17.0%

DOF Subsea ASA 28.6 558 961 1,184 990 9.3x 5.0x 4.2x 8.4x 5.9x 4.7x 11.8x 7.8x 6.2x na na na

DeepOcean A/S 23.0 403 260 281 na 9.7x 8.8x 7.7x 6.2x 5.6x na 9.8x 8.8x na na na

Average all 15.0x 12.5x 10.6x 8.5x 6.9x 5.8x 10.4x 8.5x 6.9x 9.4% 11.1% 13.9%

Average - Equipment suppliers 18.0x 15.3x 13.1x 10.2x 8.3x 6.9x 11.2x 9.2x 7.7x 7.7% 8.9% 11.9%

Average - Subsea I&C 15.5x 13.2x 11.1x 7.7x 6.4x 5.2x 10.1x 8.5x 6.7x 10.8% 13.1% 14.2%

Acergy SA (Ordinary) 117.5 4,556 (221) (461) (743) 17.8x 14.6x 13.1x 8.3x 6.8x 5.6x 10.6x 8.4x 6.9x 2% 6% 7%

Premium/(discount) 16% 15% 19% -2% -2% -3% 2% -1% 0%

Net debt (USDm) P/E EV/EBITDA EV/EBIT

Source: Facset; Arctic Securities

12 months forward looking P/E and EV/EBITDA multiples Looking at 12 months forward P/E and EV/EBITDA multiples, we note that both Acergy and its closest peer, Subsea 7, are trading at low levels compared to historic numbers. Acergy is currently trading at about P/E 17.8x for 2008 (15.4x on consensus estimates), after having come somewhat up from all-time low 12 month forward P/E of around 12x. Based on our estimates, ACY is currently trading at a 12 month forward P/E of around 16.5x (14.2x on consensus estimates). The low trading level indicates that the market may be pricing in an ending of the cycle, something we don’t view as very likely, given our strong belief in a continued boom for deepwater activity, and the fact the subsea companies tend to be late-cyclical. On the other hand, we don’t see much room for significant further appreciation, unless performance improves going forward. Margin improvements should however if they occur provide room for multiple-expansion.

Acergy and Subsea 7 are trading in the low range compared to historic numbers

Peer group consisting of Norwegian and European subsea installation and construction peers and key Norwegian and US subsea equipment peers

32

12 months forward looking P/E and EV/EBITDA multiples since 2003

14

6

8

P/E

16

26

28

18

20

22

12

30

0

10

24

2003 2004 200820062005 20072003 2004 200820062005 2007

7

6

5

4

14

13

12

11

10

EV/EBITDA

9

8

0

2003 2004 200820062005 20072003 2004 200820062005 2007

SUB

ACY

SUB

ACY

SUB

ACY

SUB

ACY

Source: Factset; Arctic Securities

12 months forward looking P/E multiples since January 2006

0

11

12

13

14

15

16

17

18

19

20

P/E

Jan-06 Apr-06 Jul-06 Jul-07Jan-07 Jan-08Oct-06 Apr-07 Oct-07 Apr-08Jan-06 Apr-06 Jul-06 Jul-07Jan-07 Jan-08Oct-06 Apr-07 Oct-07 Apr-08

SUB

ACY

SUB

ACY


On average, analysts have been downgrading ACY and SUB EPS estimates since autumn 2006 Looking at development in consensus EPS estimates for ACY and SUB, we note that analysts systematically have been downgrading these more or less continuously since around September 2007 for Acergy. For Subsea 7, the picture is more mixed, with what seems to be a first session of downgrades from October/November 2006 to April/May 2007. Thereafter followed a short period of upgrades, before SUB again was downgraded in line with Acergy from around September 2007.

Analysts have consistently been downgrading EPS estimates since October/ November2006

33

Since EPS estimates peaked, ACY’s 2008 consensus EPS estimate is down about 17% from USD 1.7 to USD 1.4, the 2009 estimate is down 19% from USD 2.1 to USD 1.7 and the 2010 estimate down 16% from USD 2.4 to USD 2.1. Corresponding for SUB, expected EPS for 2008 is down 24% from USD 2.3 (Oct/Nov 2006) to USD 1.7, 2009 estimate is down 24% from USD 2.7 (January 2007) to USD 2.0 and the 2010 estimate is down 8% from USD 2.6 to USD 2.4.

Acergy: Development in consensus EPS estimates since February 2006

1,3

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

1,7

2,1

2,4

Sep-07

Jun-06

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

1,4

1,7

2,1

45d

1,0

1,5

2,0

2,5

1,0

EPS (USD)

1,0

Feb-06

Mar-06

Apr-06

Oct-07

May-06

Jul-06

Aug-06

Sep-06

Oct-06

3,0

-16%

-19%

-17%

Adjustment from peak to now (%)

2008 2009 201020082008 20092009 20102010


Subsea 7: Development in consensus EPS estimates since February 2006

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

2,6

Sep-07

1,9

1,4

Feb-06

Mar-06

Aug-07

May-06

Jun-06

Jul-06

Aug-06

2,1

Sep-06

Apr-06

Oct-06

2,3

Nov-06

Dec-06

2,7

Jan-07

Oct-07

Nov-07

Dec-07

Jan-08

Apr-08

1,7

2,0

2,4

Feb-08

Mar-08

45d

1,0

1,5

2,0

2,5

3,0

EPS (USD)

2008 2009 201020082008 20092009 20102010

-8%

-24%

-24%

Adjustment from peak to now (%)

Source: Factset; Arctic Securities We believe ACY consensus will have to come further down as margin growth expectations are too positive given complexity of projects, industry cost inflation, a larger share of revenues in Brazil and from other NOC-dominated areas. DCF valuation Our DCF valuation of Acergy is sensitive towards several key elements, mainly our overall assumption for cycle length, and long-term level for EBITDA margins. We have estimated a continued topline growth to and including 2012. After that, we assume a cyclical drop of -20% in revenues, affecting 2013 top line. In our estimates, this moves from around USD 4.2 billion in 2012 to about USD 3.3 billion in 2013. We assume a long term growth rate of 2.5%.

We expect consensus to come down further

34

Our long term EBITDA margin is currently estimated to 18%, something we believe might be ambitious, given historical levels of around 7-8% over the period 1999-2006. On the other hand, the industry has overall demonstrated a consistent EBITDA margin improvement, and we expect to see these margins sustain. However, should numbers from the sector companies start indicating lower margins, we will adjust this quickly. As mentioned, our DCF valuation is sensitive towards EBITDA margin assumptions, and we have therefore illustrated a sensitivity curve for this below.

DCF assumptions (USDm) 2008 2009 2010 2011 2012 2013 2014

Revenues 2,988 3,306 3,610 3,881 4,172 3,338 3,588

Revenue growth YoY 12.2% 10.7% 9.2% 7.5% 7.5% -20.0% 7.5%

EBITDA 500 580 649 698 750 601 646

EBITDA margins 16.7% 17.6% 18.0% 18.0% 18.0% 18.0% 18.0%

D&A (106) (113) (120) (126) (132) (138) (144)

EBIT 394 467 529 572 618 463 502

Tax on EBIT (164) (185) (200) (216) (162) (176)

Capex (300) (175) (175) (139) (145) (152) (158)

Change in WC 37 35 34 2 2 (6) 2

Cash flow 277 322 361 391 281 314

Terminal value - - - - - 4,594


Using a WACC of 9.5%, we find an end 2008 DCF value per share in ACY of NOK 117.0. DCF summary (USDm) End-2008

WACC 9.5%

NPV forecast period 1,429

Terminal value 2,665

Net debt - adjusted for div. (246)

MV (USDm) 4,340

Shares 191.0

Equity value per share (USD) 22.7

Equity value per share (NOK) 117.0 Source: Arctic Securities Note that we have used a NOK/USD assumption of 5.15, in line with six months forward price.

35

Long term EBITDA margin assumption sensitivity The DCF valuation of ACY is sensitive to long term EBITDA margins. If long term margins fall to 10%, we see and end 2008 DCF value of NOK 69.4 per share. DCF value sensitivity to long term EBITDA margin assumption

0

20

40

60

80

100

120

140Share price

1011121314151618 171920

Long term EBITDA margin assumption (%)

Source: Arctic Securities Valuation summary We initiate coverage on Acergy with an Arctic Sell recommendation and target of NOK 115, in line with our end 2008 DCF value of NOK 117.0. Acergy also seems expensive on key multiples compared to peers, and we would expect consensus to come down further.

Arctic Sell. Target NOK 115

36

Subsea Market: Introduction & industry overview

The subsea sector covers subsea equipment manufacturers, subsea installation companies, as well as other service companies. Equipment manufacturers produce relevant subsea infrastructure (the “hardware”), while service companies mainly focus on subsea construction and installation of this, in addition to trenching and pipelay work, and IMR services (Inspection, Maintenance and Repair). The main activities within the subsea space often fall in-between drilling and installation for production. Expected E&P/drilling activity and expected growth in floating production solutions are hence important indicators for subsea activity (and often easier to track). Illustrative oil service value chain

Seismic Drilling Subsea Production

• PGS • TGS Nopec • Western Geco • CGG Veritas

• Seadrill• Awilco• Transocean • FOE

• Acergy • Subsea 7 • Technip• Aker Kværner• FMC

• SBM • Modec • Prosafe • BW Offshore

Value chain illustration:

Company examples:

Source: Arctic Securities Even though subsea activity is highly related to field development, other important drivers such as IMR-activity, life-of-field management and EOR measures also affect the growth and activity of subsea companies. As such, it is difficult to place the subsea segment strictly in a linear value chain order, and the activity of the subsea companies spans several parts of the value chain. Overview of key players The subsea construction and installation business is dominated by four companies: Saipem, Technip, Acergy and Subsea 7. Of these, the latter two are mainly pure play SURF (Subsea, Umbilical, Risers and Flowlines) focused, though both still have IMR business, while Saipem and Technip are large, integrated E&C companies that typically take on large scale field developments. The subsea equipment manufacturing space is also dominated by four publicly traded companies; Aker Kværner, FMC Tehcnologies, Cameron and DrilQuip, and Vetco Gray which is owned by GE. Of the four publicly traded companies, FMC and Cameron are the largest. Aker Kværner covers a broad scope of activities such as large scale EPC contracts and the production of drilling equipment for drilling rigs, in addition to subsea activities. Within subsea, Aker Kværner delivers a full scope of subsea production systems and is the only player that also offers umbilicals. DrilQuip is the smallest of the companies, and more of a niche player. The subsea companies often overlap each other with regard to the product and service spectre they offer. The most pure head to head competitors are Acergy and Subsea 7. On large scale projects, the companies often cooperate, even though they are competitors, as large scale field developments are resource intensive and often require a combination of assets, production capacity and people. A good example is the Pazflor project, where FMC Technologies will produce the subsea production and processing equipment, and Technip and Acergy produce and install the flowlines, umbilicals and risers. In this case, Technip and Acergy will both install water

Subsea includes equipment manufacturers, subsea installation and construction companies and other service companies

Saipem, Technip, Acergy and Subsea 7 are the leading global subsea construction and installation players

The subsea companies’ services overlap each other and the companies often cooperate on projects

37

injection lines, production flowlines and umbilicals, as well as provide two subsea vessels each for the installation work. Below we have provided and overview of the main subsea players within the two key subsea segments.

38

Overview of the subsea industry

Serv

ice

com

pani

es (

subs

eain

stal

lati

on a

nd c

onst

ruct

ion)

Equi

pmen

t co

mpa

nies

(su

bsea

hard

war

e pr

oduc

ers)

Companies

7,88

3,06

3,71

16,96

Market cap. USD billion

9,05

6,63

1,95

6,05

Main shareholders

SiemIndustries (38.2%)

ENI (42.9%)

Aker Holding AS (40.3%)

Pure subseafocus (share of revenues) Short description & key focus areas

• Pure play subsea installation and construction company with focus on the SURF segment

• Main geographic stronghold in West Africa and the North Sea

• Subsea installation and construction company with focus on the SURF segment

• Also has IRM business• Main geographic stronghold in the North Sea

• Integrated engineering, tech. and construction company• Focus on the oil/gas and petrochemicals industries • Revenue distribution: ~32% subsea, 17% offshore, ~51%

onshore

• Large, integrated turnkey contractor experienced in taking on large scale field development projects

• Three global business units: Onshore, Offshore & Drilling

• Integrated EPC/turnkey engineering provider. Focus on large scale project developments

• Subsea division includes production of Christmas trees, manifolds and umbilicals

• Highly specialized subsea equipment manufacturer and world leading on several technological breakthroughs

• 79% of revenues from Energy Systems division, of which most is subsea

• Provide fully integrated subsea equipment packages • Provide subsea systems, flow control technology, valves,

surface systems etc.

• Highly focused subsea equipment manufacturer • Three divisions: Subsea, Surface and Offshore Rig Equip. • Subsea related equipment majority of revenues

• Oil & gas business with USD 6.8 billion in 2007 revenues • Six BA’s: Subsea drilling systems, subsea production

systems, mud line equipment, drilling equipment, floating production solutions and surface drilling & production

Not listed separately. Part of GE Oil & Gas

GE (100%)

Note: Pure subsea focus (Harvey balls) roughly estimated

Source: Companies; Arctic Securities

39

Subsea Market: Global subsea capex will continue to grow

We estimate the global subsea market to continue to display strong growth going forward, based on key macroeconomic and industry specific drivers, as well as estimates for subsea capex going forward:

• The oil market will continue to be tight and oil prices will remain high. We forecast an average oil price of USD 85 per bbl, growing thereafter in line with inflation

• Deepwater activity will increase strongly, resulting in discoveries that need subsea development. Contracted deepwater drilling years (>5,000 ft), have increased around 7x from January 2005 to February 2008 and current backlog is around 560 rig years (distributed on about 123 rigs). Infield estimates global subsea capex to grow 2% annually over 2008-2012, from USD 19.1 billion in 2007 to USD 22.9 billion in 2012. We think the risk to this is on the upside and expect even stronger growth, also supported by strong industry cost inflation which should also contribute to growth in subsea spending above Infield estimates

• Discoveries are continuously smaller and in deeper waters, making them more suitable for subsea developments combined with floating production solutions rather than large scale infrastructure investments

• Reservoirs are deeper and more complex to handle, requiring increasingly complex wells and injection systems to produce oil and gas efficiently

• Petroleum provinces around the world are maturing rapidly, resulting in increased need for EOR (IOR) measures. These measures usually rely heavily in subsea services

To a large extent, estimated subsea spending over the coming years is a result of significant deepwater discoveries in recent years, especially offshore West-Africa and Brazil. Currently, the world is about to embark on the greatest deepwater E&P cycle in the history of mankind, as e.g. evident by the record strong backlog of already contracted deepwater drilling years. This will yield discoveries that will contribute to a long term strong demand for the subsea sector. Estimated global subsea expenditure We estimate the total global subsea expenditure to continue to grow going forward. The average annual growth in global subsea expenditure over the last five years has been around 19.5% based on estimates from Infield. Global subsea expenditure grew from USD 9.3 billion in 2003 to USD 19.1 billion in 2007. This takes into account both volume growth and industry cost inflation. Going forward, Infield estimates a growth in subsea expenditure of around 2% annually over the period 2008-2012. Global expenditure is estimated to from USD 19.1 billion in 2007 to USD 21.9 billion in 2012. The forecasted annual expenditure is however kept fixed in 2006 value terms, hence illustrating only the expected volume growth. Taking into account cost inflation, we would expect to see significantly higher growth in nominal terms. Furthermore, the strong growth from 2003 reflects that the growth over 2003-2007 has come from a small base, whereas annual expenditure is now expected to stabilize at a higher level. During 2003-2007, we have also seen significant projects brought on stream. The continued high level illustrates the expectation that this will continue, with new, significant projects continuing to be developed. A factor that potentially will limit the volume growth is supply side growth limitations. Although a relatively large number of vessels are ordered lately, the contractor industry to a certain degree remains sold out. Furthermore, strained organizational capacity on the customer side (oil companies and other oil service companies) may also contribute to hold back growth somewhat. Many oil companies have been capacity constrained over

Global subsea capex will continue to grow

Deepwater discoveries made over the last couple of years are key in driving continued growth in subsea spending

Infield estimates global subsea capex to grow 2% annually during the period 2008-2012

40

the last two-three years, especially on the people-side, and this may cause delays in project sanctioning and execution. Global subsea expenditure has grown 20% annually over the last 5 years

0

2

4

6

8

10

12

14

16

18

20

22

12.3

8.69.3

North America

M. East & Caspian

South & Latin America

Europe

Australasia

Asia

Africa

201220112003 2004 2005 2008

USD billion

19.5%

2007

21.921.7

19.921.2

20.419.1

15.0

201020092006

1.9%

Global subsea expenditure 2003-2012, USD billion

Note: Data includes four categories: Drilling and Comletions, Equipment, Pipelines and Control Lines (umbilicals)

Source: Infield Subsea Market Update 2008-2012; Arctic Securities Though we believe Infield is a reliable data source on the subsea market, we believe their growth forecasts are conservative and that the risk is on the upside. This is based on the observed strength of underlying drivers: Overview of large future projects, upcoming known contract awards, signals & forecasts from market participants and our estimates for growth in the floater sector. In addition, Infield has over the years jacked up their estimates consistently, both as a result of stronger than expected inflation, and as a result of higher than expected activity (see illustration below). Previous subsea forecasts have continuously been undershooting observed growth

Source: Infield Subsea Market Update 2008-2012; Arctic Securities

We believe Infield’s growth estimate is conservative

41

Order backlog and company forecasts support strong growth forward The main subsea companies have all experienced strong revenue growth over the last few years. The current record strong (and still growing) order backlog is however more interesting for the future revenue growth. Many subsea projects, especially the large scale ones, are ordered and scheduled for several years ahead. As companies usually book revenues and profits according to progress with a large share towards project completion, we expect revenues to continue to grow going forward.

Order backlogs for the subsea companies have demonstrated very strong growth

10,9519,706

10,6188,8388,7758,704

6,719

4,008

0

2,000

4,000

6,000

8,000

10,000

12,000

Q1/06Q2/06Q3/06Q4/06Q1/07Q2/07

NOK million +15%

Q4/07Q3/07

3,700

2,700

1,9001,500

1,000900

0

1,000

2,000

3,000

4,000

5,000

2002 2003 2004 2005 2006 2007

+33%

USD million

4,2153,748

1,3551,242

0

1,000

2,000

3,000

4,000

5,000

2004 2005 2006 2007

+50%USD million

AKVER Subsea FMC Technologies

Acergy Subsea 7

3,2002,587

2,1941,788

1,026

0

1,000

2,000

3,000

4,000

5,000

2003 2004 2005 2006 2007

+33%

USD million

CAGR 02-07

CAGR 03-07

CAGR 04-07

Equi

pmen

tCo

nstr

ucti

on &

inst

alla

tion

CAGR Q1/06-Q4/07

Source: FMC Technologies; Aker Kværner ; Acergy; Subsea 7; Arctic Securities

The existing order backlogs are at record levels for the subsea players, but still they continue to secure more contracts and grow backlogs further. We expect this to continue, as e.g. several large West-African projects in Angola and Nigeria start awarding contracts. Acergy’s order intake so far in 2008 is a good example of continued building of backlog, the company having secured as much as USD 1,165 million in new contracts over three months.

Subsea companies’ order backlogs are at record levels, supporting strong revenue growth forward

Order intake is still large and major West-Africa contracts are still to be awarded

During the first three months of 2008, Acergy has seen an order intake of USD 1,165 million

42

Acergy: Order intake per year

1,165

1,936

1,2761,246

995

320370

0

500

1,000

1,500

2,000

2002 2003 2004 2005 2006 2007 2008

USD Million

Contracts secured during the first 3 months of 2008

Source: Acergy; Arctic Securities The order backlogs of the subsea companies also provide visibility with regard to expected revenues going forward, as the companies quarterly provide an overview of how the revenues are distributed going forward. At end of year 2007, Acergy reported a distribution of 70% of backlog to be realized during 2008, 21% in 2009 and 9% in 2010. Subsea 7’s backlog ranges one year longer into the future and distribution were 41% for 2008, 24% for 2009, 15% for 2010, and 20% for 2011 and beyond. A part of Subsea 7’s long backlog duration is due to two long term charters with Shell in the North Sea, running to 2012. Acergy and Subsea 7: Contract backlog split over coming years

Subsea 7: Distribution of order backlog

647

4.000

1.500

3.000

2011

1.000

0

4.500

1.710

4.215

841500

2.000 1.017

2009

USD Million

3.500

2010

2.500

2007 2008

Total revenues 2007: USD 2,187 million

Acergy: Distribution of order backlog

4.500

4.000

0

1.000

1.500

2.000

2.500

3.000

500

USD Million

3.500 3.175

2009

2.223

2008

667

2007 2010

286

Total revenues 2007: USD 2,663 million

Source: Acergy; Subsea 7; Arctic Securities Given the long term nature of the backlog work to be realized, and also the long term nature of field development planning & coherent negotiations between oil companies and sub-contractors, we believe the subsea companies generally have a rather good overview of the future outlook of their industry. Furthermore, contracts such as some of the large West-Africa contracts entered into now are for work running through 2010 and 2011, providing a rather good visibility with regard to outlook. The main risk factors that can distort the future outlook are macro-economic shocks affecting the industry, such as sudden and material changes in oil price outlook. This will naturally change the outlook of the entire oil services industry. Another key risk factor for the subsea companies are delays in contract awards and project sanctioning/FID among the oil companies, as this may cause pre-mature allocation of fleet and resources to specific areas. Except from these two main risk factors, we believe the subsea companies have a fairly good understanding of the future demand outlook. As such, we are re-assured on the market demand side by the recent guiding from several of the industry leaders. Acergy,

If assuming revenues in line with 2007 level (i.e. no growth), Acergy had some 83% of revenues “in the bag” already at year end 2007. Corresponding number for Subsea 7 was 78%

Macro-economic shocks and sharp oil price decline are the key risk factors that can distort the future outlook for the subsea companies

43

Subsea 7, FMC Technologies and Aker Kværner have all recently commented that they see strong markets for several years to come. Acergy’s CEO e.g. stated during the company’s Q4 presentation that “Market fundamentals remain as strong as ever” and that “we see strong growth going forward to 2010 and beyond”. Company forecasts of key industry equipment signal strong growth Company forecasts of key industry equipment yield additional support to our assumption of continued strong growth for the subsea companies. FMC has estimated a significant growth in the use of subsea wells, with installed base growing from about 1,000 subsea wells in the 1990s, to more than 3,500 during the 2000s. This is further supported by Infield that sees a demand of about 500 Christmas trees per year globally over the period 2008-2012. Another industry player, DrillQuip has put forward estimates that indicate a growth of 77% for floating production products, 61% for subsea tree products and 46% for floating drilling products over the period 2007-2011.

Company estimates for growth in subsea wells, subsea trees and floating production and drilling solutions

FMC: Estimated growth in use of subsea wellsDrilQuip: Estimated market growth

2007-2011 for key subsea related equipment

46

61

77Floating production products

Subsea tree products

Floating drilling products

0 10 15 20 25 30 35 40 455 50 55 60 65 70 75 80

Market growth (%)

1.100

1.500

2.200

50 100 400

60s 70s 80s 90s 2000s

0

1.000

1.500

2.000

2.500

3.000

3.500

4.000

500

Nr. of wells

# subsea trees completions

# subsea trees forecast (normalized)

Source: FMC Technologies; Quest Offshore; DrilQuip; Arctic Securities

Looking at Aker Kværner Subsea’s forecast for the market for Steel Tube Umbilicals (STUs), both with regard to value and volume, further underpins the estimated growth going forward. Over the period 2007-2011, then STU market is expected to grow between 79% and 3,300% (depending on region) compared to the period 2003-2006. Note that the strongest growth is from a very small base (virtually zero) in South America. It is however more interesting to note that both North Sea and the US GoM, which are more mature regions, are both expected to continue to grow strongly.

Several of the subsea companies have stated that they see a strong market for years to come

Subsea wells estimated to increase from around 1,000 in the 1990s to more than 3,500 during the 2000s

44

Expected market turnover in USD million for the STU market 2007-2011 vs. 2003-2006, growth and STU km installed

824

460

2003-2006 2007-2011

+79%

0

1.000

200

400

600

800

USD million

1184

2003-2006 2007-2011

+3.271%

0

1.000

200

400

600

800

USD million

955

303

2003-2006 2007-2011

+215%

0

1.000

200

400

600

800

USD million

519

81

2003-2006 2007-2011

+541%

0

1.000

200

400

600

800

USD million

689

356

2003-2006 2007-2011

+94%

0

1.000

200

400

600

800

USD million

1488 1684

19 315

988 1931253 1049

1168 1405

Market turnover, Steel Tube Umbilicals, 2003-2006


Km umbilicals installed



Km umbilicals installed

Source: Aker Kværner; Quest Offshore

Africa, SA (Brazil), and Europe will continue to be the largest markets Looking at a geographical breakdown of estimated global subsea expenditures going forward, we note that Africa (mainly West-Africa), South/Latin-America (for all practical purposes Brazil) Asia-Pacific and Europe continue to be the most important markets near term. At the end of 2007, Africa constituted an estimated 27% of the global market, South/Latin-America around 19% and Europe around 21%. Africa Africa’s relative share will grow going forward to 2012 and constitute around 30%. Africa also constitutes around 30% of the accumulated estimated subsea capex over the coming five-year period (2008-2012). The continent’s large share of expected subsea expenditures is mainly driven by large West-African projects to be developed over the next couple of years. West-Africa constitutes an estimated 83% of the capex spending in Africa, while the rest is North Africa, mainly Egypt. North America North America will be the second most important region, with around 20% of total spending when looking at accumulated spending over 2008-2012. This is driven by large projects in deepwater GoM (US side). North America’s relative share is the largest during 2008, and the relative importance of the region will be reduced towards the end of the forecasting horizon. This might change with additional discoveries and field development plans, though we mainly expect to see the impact of such potential events after 2012. Europe Though a mature region, Europe is still the third largest over the 2008-2012-period in terms of accumulated spending. This is driven by the North Sea. UK and Norway account for 48% and 45% of the estimated spending respectively. As the North Sea is maturing and average field sizes are decreasing, oil companies increase their EOR (IOR) efforts to

At the end of 2007, Africa constituted about 27% of global subsea capex

Africa’s relative share of the global subsea market is expected to grow to about 30% in 2012

Europe is a fairly mature subsea market, but is still the world’s third largest region in terms of spending

45

extract as much as possible of the remaining hydrocarbons. This contributes strongly to increased subsea activity, and is also one of the key reasons behind our rational for a continued strong subsea market also in the longer term (as long as oil prices don’t come down significantly). Another aspect that applies to more mature petroleum basins is the increased number of players (often smaller E&P companies) that usually explore more aggressively and to a larger extent pursue development of smaller prospects. This also contributes to sustained subsea activity in such areas. Looking at the North Sea (Europe in the chart below), it is interesting to note that this region’s share of subsea spending has been high during the period 2003-2007 and is also estimated to stay at high levels. We interpret this as a strong indication of the likely remaining subsea investments yet to be made also in less mature regions, as well as an indication of the sustainability of subsea spending in mature regions. South/Latin-America (mainly Brazil) Brazil is already one of the world’s most established subsea markets, and has seen many fields developed with subsea solutions. Brazil accounts for 96% of the forecasted capex in this region, driven by Petrobras. South/Latin America is estimated to account for around 17% of the world’s estimated total capex spending 2008-2012. Asia-Pacific Asia-Pacific will likely experience strong growth, but in relative terms, the size and importance of this region will first start to kick in towards the end of the forecasting period. This is also in line with the expectations of major subsea construction and installation operators such as Saipem, Acergy and Subsea 7. Several of these have put forward Asia-Pacific as a future focus area, and several have also already dedicated vessels, such as Acergy with the Sapura 3000 (JV with SapuraCrest Petroleum). Combining Asia and Australasia in the graph below, we note that the Asia-Pacific region accounts for about 16% of the accumulated spending over 2008-2012. The largest relative share of this is as mentioned from 2010/2011 and onwards.

Geographical distribution of global subsea spending on key regions Share of global subsea expenditure 2003-2012 (%)Share of global subsea expenditure 2003-2012 (%)

23% 28%27%

25% 21% 17% 17%20%

18%

6% 7% 11%

7% 6%

0%

19%

1% 4%3%1%1% 2%

19%

27%

45

2004

28%

3%

9%

32%

30

2005

30%

4%

17%

0%

21%

100

2006

27%

5%

19%

1%

23%

100

2007

27%

8%

14%1%

27%

100

2008

28%

0%19%

1%

23%

100

2009

29%

4%

17%

0%

20%

100

2010

33%

9%

15%

0%

17%

25%

2%

16%

0%

33%

23

2003

23%

100

2011

31%

10%

19%

2%

6%

100

2012

Africa

Asia

Australasia

Europe


M. East & Caspian

North America

13%

18%

8%

30%

8%

17%

1%

20%

23

Total 2008-12

Source: Infield Subsea Market Update 2008-2012; Arctic Securities

Increased number of players help drive subsea activity

Brazil (Petrobras) accounts for 96% of South American subsea spending

Asia Pacific is commonly regarded as the key growth region going forward for the subsea companies – however, growth is mainly assumed to kick in for full from about 2010

46

Subsea capex breakdown on categories Pipelines is the largest sub-category within subsea expenditures, closely followed by drilling and completion, based on data from Infield. The sub-categories are defined as follows:

• Equipment: Procurement, installation and hook-up of Manifolds, PLEMS, Templates and Christmas trees.

• Pipelines: Mainly fluid transfer lines. Refers to all lines that are directly connected to a subsea unit

• Control lines: Mainly umbilicals that can transfer electric signals and control/hydraulic fluids in the same lines

• Drilling and Completions: Refers to the drilling and completion of wells on the seabed. Majority of this is not relevant for the subsea companies, as this mainly covers drilling costs

Pipelines/fluid transfer lines has been the largest sub-category continuously over time, and is also forecasted to continue to be so. It accounts for roughly 40% of the capex. We believe this, in addition to equipment and control lines are the three most relevant categories to look at, as drilling and completion, though accounting for a large share of subsea expenditure, contains a mixture of drilling related services (including drilling rig costs).

Pipelines is the largest sub-category within subsea expenditure

Global subsea expenditure per sub-category, 2003-2012, USD billionGlobal subsea expenditure per sub-category, 2003-2012, USD billion Sub-categories share of global subsea expenditure, 2003-2012 (%)Sub-categories share of global subsea expenditure, 2003-2012 (%)

39% 49% 51% 49%40% 38% 38%

46% 39% 43%

6%

20%

2003

32%

16%

4%

2004

27%

16%

5%

2005

32%

14%

5%

2006

37%

19%

5%

2007

34%

19%

5%

2008

39%

19%

4%

2009

35%

15%

5%

2010

38%

18%

5%

2011

35%

18%

4%

2012

39%

0

2

4

6

8

10

12

14

16

18

20

22

Pipelines

Drilling & completion

21.921.720.9

9.3

2003

Control lines

8.6

2004

12.3Equipment

2005

15.0

2006

19.0

20122007

20.4

2008 2011

21.2

2009 2010

USD billion

41%

37%

18%

Total 2008-12

4%

Source: Infield; Arctic Securities

Looking at estimated global subsea expenditure per sub-category and excluding the “Drilling and completion” sub-category, we note that pipelines account for 65% of accumulated spending 2008-2012, control lines another 7% and equipment 28%. We also note that the estimated growth over the period 2008-2012 is around 3% per year, compared to about 2% when including the category.

Subsea expenditure per sub-category, excluding “Drilling & completion” Global subsea expenditure per sub-category, 2003-2012, USD billionGlobal subsea expenditure per sub-category, 2003-2012, USD billion Sub-categories share of global subsea expenditure, 2003-2012 (%)Sub-categories share of global subsea expenditure, 2003-2012 (%)

9% 6% 7% 8% 8% 7% 7% 7% 7% 6%

60% 71% 71% 71%63% 61% 62%

70% 63% 66%

2009

23%

2010

30%

2011

28%

2012

31%

2003

23%

2004

22%

2005

21%

2006

29%

2007

31%

2008

31%

0

5

10

15

6.1

2003

5.9

2004

9.0

2005

10.3

2006

12.1

2007

12.5

2008

12.9

2009

13.7

2010

13.5

2011

14.2

2012

Equipment

Pipelines

Control lines

3.1%USD billion

7%

65%

28%

Total 2008-12


Pipelines (i.e. subsea construction and installation of pipelines) is the largest subse capex sub-category

When xxcluding drilling and comopletion, pipelines accounted for about 65% of accumulated subsea spending 2008-2012

47

Pipeline construction – the most important segment for subsea installation and construction companies Construction and installation of pipelines is the most important sub-segment within subsea construction and installation. This is where both Acergy and Subsea 7 have the majority of their fleet, and the pipelaying assets (CSVs) are also the most important assets for these companies to achieve high utilization on. Pipeline construction and installation volume has been growing steadily over the last couple of years (2005-2007), in line with other subsea equipment and construction & installation services. About 4,500 miles of pipelines were installed during 2005. During 2007, this had grown to around 6,200 miles, something which is also expected as a minimum for 2008. For 2009 and 2010, about 4,900 and 4,000 miles are expected respectively. This is based on what is already either under construction or planned, and we would expect planned volumes to increase further beyond this as additional projects are being further developed (i.e. we don’t believe in a drop as illustrated below). Geographical distribution of volumes under construction and planned for 2008-2010 illustrates that West-Africa will be the largest region, with 2,600 miles of pipelines, corresponding to about 17% of total volume over the period. NW Europe and SE Asia regions are almost as large, with 2,400 miles of pipelines to be installed. Asia is a very large region, and by using e.g. Subsea 7’s term for geographical reporting, “Asia-Pacific”, and grouping e.g. SE Asia, ANZ and Indian Ocean below, we see that this would constitute as much as 4,650 miles of pipelines. Hence, we would not underestimate the importance of the Asian region for these companies going forward.

Offshore pipeline construction

2010

4.000

0

2008

6.2006.200

5.600

4.5004.900

4.000

2009200720062005

6.000

Pipeline miles

1.000

7.000

3.000

5.000

2.000

Offshore pipeline construction by year and nr. of miles

100

500

1.600Middle East

1.150GoM

1.050

NW Europe

South America

2.600

Central America

2.5001.500

1.700

SE Asia 2.400

1.050

Indian Ocean 550

Canada

500 3.0002.0001.0000

Med/Black Sea

West Africa

2.400

ANZ

Offshore pipeline construction by region 2008-2010

Installed Under construction PlannedInstalled Under construction Planned Installed Under construction PlannedInstalled Under construction Planned

Source: ODS Petrodata Offshore Construction Locator; Arctic Securities

Acergy has compiled data from the key players within offshore construction and installation to come up with a global pipelay forecast and a asset growth forecast, illustrating growth in “key enabling assets”, mainly CSVs/large scale pipelaying capacity. These numbers illustrate an average 10% growth over the period 2005-2012 in installed pipe per year, and an average asset growth of 7%. Taking a simplified assumption of even distribution of both pieplay needs and vessels (i.e. vessels move where there is pipe that needs to be laid), we note that development in km/vessel is fairly flat. This is in line with our assumption that asset growth in this segment is in accordance with demand.

West Africa will be the largest region for pipeline installation over the next three years

Newbuilds coming into the pipelaying market will balance demand and level of pipelaying km per vessel displays a rather flat development

48

Global pipelay forecast, growth in pipelay assets and km pipe per vessel, assuming even distribution

2.400

2005

3.100

1.000

0

2006

3.300

2007

3.500

2008

4.100

2009

4.400

2010

4.500

2011

4.600

2.000

3.000

4.000

5.000

Km

+10%

2012

40403837

35

29

2525

0

5

10

15

20

25

30

35

40

45 +7%

2012201120102009200820072005 2006

Nr. of ships

0

30

60

90

120

150

180

2005 2006 2007 2008 2009 2010 2011 2012

Acergy estimate Acergy estimate Arctic Securities illustration based on Acergy estimates

Km pipe per vessel, assuming even distribution

Note: Discrepancy between Acergy data and ODS data is likely due to different definitions used

Source: Acergy, Arctic Securities

The customer side is changing – NOCs increasingly important As within other sectors of the oil and oil services industries, the increasing importance of the NOCs (National Oil Companies) going forward will also make an impact on the subsea sector. Looking at global offshore reserves expected to be brought on stream during the coming five-year period (2008-2012), we see a very large increase in the share of reserves being developed by NOCs, consortiums and operator subsidiaries. The latter two of these categories are also highly influenced by the NOCs, and hence, the increased relative importance of the NOCs is even more significant than displayed in the illustration below. Consortiums involve IOCs and NOCs producing alongside each other (partnerships), whereas the operator subsidiaries category is highly influenced by Gazprom and NIOC operating more flexibly to encourage foreign investments. NOCs are increasing their relative share from 18% to 29% from 2008-2012 without taking into account indirect shares through consortiums and operator subsidiaries. The IOCs relative importance is forecasted to be reduced significantly, as their share drops from 59% to 33%. It is difficult to forecast the overall impact of these changes on the customer side for the subsea operators. However, we would expect to see some more bureaucracy on the client side, whether it is a pure NOC or a consortium, potentially leading to increased share of delays in project sanctioning and execution. All this represents increased risk for contractors such as ACY and SUB, and none of these companies have e.g. been able to realize positive profit margins in Brazil on an annual basis. On an aggregate level, we view the changes one the customer side as positive, as we believe the IOCs will continue to be active and as the overall customer base grows. However, we will watch execution in projects dominated by NOCs closely.

NOC’s share of reserves is increasing significantly, making these customers more important for the subsea companies

Total customer base increasing, as IOCs are not likely to stop pursuing development activities

Large share of revenues from NOCs represents more risk for the subsea companies

49

Customer mix changes going forward

14%

11%

9%

33%

Independent

100%100%

Operator subsidiary

Consortium

NOCs

13%

59%

IOCs

13%

2008-2012

29%

2003-2007

1%

18%

Breakdown of global offshore reserves on-stream 2008-2012


50

Subsea Market: The main areas and projects

West-Africa, North America (US GoM), the North Sea, Brazil and Asia Pacific waters are the world’s most important subsea regions. Of these, the North Sea is the legacy area, West-Africa, Brazil and GoM are the current hot-spots and key deepwater areas, while Asia-Pacific waters are expected to grow strongly going forward. The North-Sea represents the main subsea legacy area Northern Europe, and mainly the North Sea has always been at the frontier of offshore and subsea development, and the region continues to be important for all subsea companies. For the equipment players, this is one of the areas where they conduct groundbreaking R&D, testing, and pioneer work like recently exemplified by the Ormen Lange development and the world’s first subsea separation, boosting and injection system at the Tordis field. For the service companies, the region involves a lot of steady work, as well as continuous new challenges, especially with regard to operations in harsh weather conditions. For 2007, the North Sea still contributed with as much as 47% and 34% of revenues for Subsea 7 and Acergy respectively. Corresponding numbers for 2006 were 46% and 39% respectively.

Number of installed subsea wells clearly illustrates the North Sea as the legacy area of the subsea industry

North Sea

1.210

0

1.000

1.200

1.400

200

Subsea wells

400

600800

376

1.000

200

North America

600

1.200

800

0

400

Subsea wells

1.400

538

1.000

200

South America (mainl Brazil)

600

1.200

800

0

400

Subsea wells

1.400

381

1.000

200

Africa

600

1.200

800

0

400

Subsea wells

1.400

168

1.000

200

Asia Pacific

600

1.200

800

0

400

Subsea wells

1.400

Total installed base ~2700 wellsTotal installed base ~2700 wells

Worldwide distribution of installed subsea wells as per September 2007

Source: FMC Technologies; Arctic Securities

West-Africa, GoM and Brazil are the world’s main deepwater regions West-Africa, GoM, and Brazil are the world’s leading deepwater regions with regard to reserves that have been brought on stream since 2000. These three regions will also continue to be of significant importance when looking at planned reserves to be brought into production during the years going forward to 2015. In addition to these regions, the Asia-Pacific region is expected to grow strongly, mainly from 2010 and forward.

The North Sea is the subsea industry’s legacy area, with more than 1,200 installed subsea wells

Looking at deepwater reserves, West Africa, US GoM and Brazil stand out as the most important areas

51

This is also in line with the expectations of Acergy and Subsea 7, who both recently stated that they continue to see West-Africa, GoM and Brazil as key deepwater regions, and expect stronger growth in Asia-Pacific from around 2010 and onwards. Note that the illustration below is based on the known reserves to be brought on stream – i.e. this represents already planned and/or sanctioned deepwater field developments. We expect deepwater reserves estimates to continue to grow also for the years going forward from 2015, as the oil companies continue to discover resources and plan additional field developments.

Overview of the key deepwater (>500 meters) regions of the world and production brought on stream 2000-2007 and estimated to be brought on stream 2008-2015

0

2,000

4,000

6,000

091011121314150706050403 08020100

0

2,000

4,000

6,000

00 01 0203 04 0506 07 080910 11 1213 14 15

0

2,000

4,000

6,000

00010203040506070809101112131415

Reserves to come on stream

Reserves on stream

0

2,000

4,000

6,000

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

0

2,000

4,000

6,000

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

0

2,000

4,000

6,000

00 01 02 03 04 141312111009080705 06 15

Note: Includes only deepwater projects. All data based on Infield. Reserves to come on stream 2008-2015 are estimates and dependent on the operators

carrying out projects according to announced plans


Overview of the world’s main offshore field development projects Currently there are as many as 120 major ongoing offshore field developments globally that will still require a lot of subsea work. West-Africa, Brazil and Asia-Pacific are those regions that are estimated to bring the largest reserves volumes on stream over the coming years. Several of the projects listed below are already on stream and producing, but still require a lot of subsea work, i.e. several more wells are scheduled for drilling, with coherent installment of Christmas trees and hook up to existing subsea infrastructure. Others again, such as the Pazflor project, are giant projects where subsea work has not yet begun. The majority of these projects are planned on stream from now and until 2013/2014, and a large share of the subsea work related to these projects are yet to be contracted. This gives us confidence that the subsea market will be strong also beyond 2010. We also think this potentially could lead to significant tightness in subsea construction and installation in periods if many of the projects award work to be conducted in the same time intervals.

More than 120 major offshore projects under development or scheduled to be developed going forward

Giant projects, similar to Pazflor, that await sanctioning gives us confidence in the strong subsea demand for years to come

52

The world’s currently most important offshore field development projects Field Name Year on strean mboe

Al Shaheen 1995/2009 780

Scarab-Saffron 2002 680

ACG 2005/2007/2008 5,400

Serpent 2007 264

Solar 2007 176

Sequoia 2009 176

Tengiz expansion 2009 9,000

Gaza Marine 2010 311

Abu Sir 2010 181

Saurus 2010 176

El Max 2010 176

Taalab/Tennin (EDDM) 2010 141

Pelican (Block 7) 2011 135

Raven 2011 755

NEMED KG45-1/KJ49-1 & LA52-1 2012 234

Giza North 2012 186

Taurus (North Alexandria HJ-1X) 2012 133

Libra 2013 148

Simian Sienna 2015 512

Tiof/Tiof West 2011/2014 301

Mediterrainian & Middle East

Field Name Year on strean mboe

Elgin Franklin 2001 692

Grane 2003 700

Clair Ridge 2005 250

Ormen Lange 2007 2,500

Snøhvit 2007 1,144

Buzzard 2007 550

Statfjord Late Life 2008 250

Kristin Tyrihans 2009 380

Shtokman 2010 20,000

Gjøa 2010 300

Skarv 2011 360

Suilven 2011 185

Laggan 2012 122

Lochnagar/Rosebank 2013 530

Laxford 2014 106

Conival 2015 294

Luva 2016 247

Stetind 2018 182

Haltenbanken (Hvitveis) 2018 171

Tobermory 2016 88

NW Europe


Girassol 2000 700

Amenam Kpono 2003/2008 588

Clov (Block 17) 2003/2010-2013 871

Tombua Landana (Block 14) 2006/2009 1,200

Block 18 2007/2008-2001 1,034

Kizomba (A, C, D) (Block 15) 2007/2008-2011 2,092

Agbami 2008/2011 1,431

Moho Bilondo 2008/2011 535

Akpo 2008/2015 1,455

Bonga (N, NW, SW) 2009/2011 1,167

Block 31 2010-2017 2,111

Chota Preowe 2011-2016 958

Bosi 2011 1,082

Usan/Usan West 2011/2014 648

Pazflor 2011 533

Block 32 2012-2018 1,821

Ngolo (OML 135 Ex OPL 219) 2013 405

Nnwa Doro 2013/2014 2,000

Egina 2013/2017 417

Bilah 2015 717

West Africa


Peng Lai (Phase 2) 2008 600

Tangguh 2008 3,100

Angel 2008 1,200

JDA 2008/2012 770

Kikeh 2009 812

Ichtys 2009 N/A

Pluto (WA-350-P) 2010 765

Scarborough (WA-1-R) 2011 1,058

Liwan LW 03-1-1 (Block 29/26) 2012 622

Malampaya 2001/2009 1,455

Bayu Undan 2004/2006 920

Sakhalin 1&2 2005/2009 9,500

D6 2008-2015 2,624

Krishna 2008-2015 670

Gumsut Kakap 2010/2011 582

Greater Gorgon Area 2011-2020 6,642

Browse 2013-2015 3,400

Evans Shoal N/A 1,150

Xihu trough N/A N/A

Shwe N/A 820

Asia-Pacific


Roncador 2000 2,927

Marlim Sul 2001 1,467

Albacora Leste 2006 825

Espardarte 2007 375

Corocoro 2008 790

Frade 2009 518

Marlim Leste 2009/2012 420

Area Do 2009-2015 450

Golfinho 2009/2012 354

Peregrino 2010 400

BC-10 2010-2012 515

Tupi (Pilot, Phase1 & 2, South West) 2010-2017 8,000

Papa Terra 2011 750

Brazil BS-400 (1-SPS-36) 2011 450

Jubarte Phase 2 2011 572

Baleia Franca 2012 648

Jupiter 2014 5,000

Xerelete 2014/2017 393

Mariscal Sucre N/A 1,870

Platforma Deltana N/A 1,200

South America


Mad Dog 2005/2009 474

Thunder Horse 2008/2009 1,512

Walker Ridge Jack 2013 428

Mississippi Canyon Hawkes 2013 353

Mississippi Canyon Tubular Bells 2013 294

DeSoto Canyon Vicksburg 2013 153

Keathley Canyon Kaskida 2012 471

Green Canyon Pony (Knotty Head North) 2012 243

Green Canyon Puma 2012 236

Walker Ridge St Malo 2012 193

Walker Ridge Big Foot 2012 176

Alaminos Canyon Great White 2010 578

Chinook Cascade 2010 353

Green Canyon Tahiti 2009 503

Green Canyon Shenzi 2009 353

Mississippi Canyon Thunder Hawk 2008 186

Mississippi Canyon Blind Faith 2008 155

Atwater Valley Neptune 2007 161

Mississippi Canyon Europa 2000 175

Green Canyon Genesis 1999 160

US GoM


Many of the projects above are large scale with regard to subsea field developments, and require larger and more complex subsea solutions than the vast majority of historical projects. This will involve record sized contracts for construction and installation companies such as Acergy and Subsea 7. As an example, Acergy’s share of the Pazflor contract is USD 700 million, versus an average contract size for Acergy over the last six years of around USD 150 million. Over the same period, Acergy has only had two other contracts larger than USD 500 million (equivalent to 4% of number of contracts) and only nine contracts over USD 200 million (18% of number of contracts awarded). Pazflor requires 49 subsea wells with coherent installation of 49 Christmas trees as well as a large scope of other subsea equipment. Several of the above listed projects scheduled to be brought on stream are of similar size, and have not yet contracted subsea equipment and/or construction/installation services. Kizomba requires 53 future subsea wells, Bonga 44, and Usan 44 in West Africa (Cameron was recently awarded the Christmas tree contract sized at USD 650 million for 44 trees). Similar projects exist in Brazil and Asia-Pacific. Below we have illustrated the number of known future subsea wells to be constructed going forward, split on regions and projects. These are all deepwater wells only, and we expect there to be market demand also in shallower waters, as these areas will still constitute around 40% of subsea capex. The total estimated number of deepwater subsea wells over the period is around 1,700 wells. To compare, global installed base of subsea wells today is around 2,700.

Many of the projects we have reviewed require far more extensive and complex subsea solutions than historic projects

Pazflor requires 49 subsea wells, Kizomba 53, Bonga 44 and Usan 44. These are all West Africa projects, but similar projects exist also in other regions

53

Estimated number of future subsea wells to be installed per region going forward

121213131818202021222324

333742444953

83144

Azurite MarineOrquidea (Block 17)

Tulipa (Block 17)Negage (Block 14)

Mahogany (Jubilee East)Akpo

Uge (OPL 214)Bosi (OML 133 Ex OPL 209)

Nnwa DoroEgina

AgbamiBlock 18

ClovChota Preowe

Usan/Usan West (OPL 222)Bonga

PazflorKizomba (A, C, D)

Block 32Block 31

56666810101212

18192020

283133

3747

67

Albacora LesteFrade

EspardarteCanapu

CachaloteUrugua (Brazil BS-500) Carioca (Brazil BM-S-9)

BC-10Brazil BS-400 (1-SPS-36)Atlanta (Ex Brazil BS-4)

XereleteMarlim LestePapa Terra

Albacora (Phase III)Jubarte Phase 2

RoncadorTupi (Pilot, Phas 1&2)

PeregrinoArea Do

Marlim Sul

44444

66667777889

162324

49

Hijau BesarGula

BangkaKrishna

Annapurna Malampaya

Kikeh Kecil (SB-K)M Field (KG-DWN-98/2)

Liwan LW 03-1-1 Kamunsu

West SenoPluto (WA-350-P)

Laverda (WA-271-P)Tulip

Merah BesarAster

Scarborough (WA-1-R)D6

Gumsut KakapGreater Gorgon Area

Asia-PacificWest Africa Brazil

5555666678899101010

1213

1830

NabMississippi Canyon, Thunder Hawk

Mississippi Canyon, Blind FaithAtwater Valley, Neptune

Atwater Valley, SturgisAlaminos Canyon, TridentAlaminos Canyon, Tobago

Alaminos Canyon, Silvertip Green Canyon, Puma

LakachKeathley Canyon, Kaskida

Chinook CascadeGreen Canyon, TahitiWalker Ridge, St Malo

Walker Ridge, Big FootAlaminos Canyon, Gotcha

Walker Ridge, JackGreen Canyon, Shenzi

Mississippi Canyon Tubular BellsThunder Horse

111

233

44

68

11121212

1317

TorridonNortheas Foinaven (Cullin C & S)

AlliginLaxford

TormoreStetind

TobermoryLuva (Nordland 6707/10 Nykhigh)

LagganConivalGrane

Tyrihans - tyinn til KristinSuilven

Lochnagar/RosebankGjoa

Ormen Lange

122222

333

44444455

66

21

SerpentOr 1 (Med)Noa (Med)

SolarPolaris (WMDW)

Al BahigTaurus (North Alexandria)

Taalab/Tennin (EDDM)Libra (North Alexandria K-1X)

Chinguetti (Block 4 PSC-B)Rovesti/Giove/Medusa

SaurusNEMED KG45-1/KJ49-1 & LA52-1

Giza North (North Alexandria)El Max

Gaza MarineEl King

Raven (North Alexandria R-1X)Abu Sir

Tiof/Tiof West

Med and MEGoM Northern Europe

Note: Distribution over time follows timing of field development on major fields as illustrated previously. I.e. majority of these wells will be installed over

the period from today to 2013/2014. However, there are some assumptions and the latest wells scheduled here will be installed as late as around 2020.


Pazflor – an illustrative example of the increasing scope of subsea projects The Pazflor project in Angola (Block 17) is illustrative for the increasing size and complexity of subsea developments contributing to our belief in a continued strong market development for the subsea sector. The project is also one of the giant projects leading to major contracts for subsea equipment providers and providers of subsea construction and installation services. So far, project subsea contracts of close to USD 3 billion have been awarded, split between a USD 980 million contract to FMC Technologies for the subsea processing and production system and a USD 1.86 billion contract to Technip (about USD 1.16 billion) and Acergy (about USD 700 million) for the production and installation of flowlines, umbilicals and risers. Pazfloor illustration from FMC Technologies


Subsea contracts worth around USD 3 billion has been awarded for Pazflor, of which the installation contract constitutes USD 1.86 billion

54

Pazflor is located 150 km from the Angola shore in water depths 600-1,200 meters. The scope and complexity of the subsea work is illustrative for the large scale subsea developments of recent West-Africa projects. Project scope includes:

• 49 subsea wells connected via subsea production, injection lines and risers to an FPSO

• 49 Christmas trees and wellhead systems • 3 four slot production manifold systems • 3 gas/liquid separation systems, including subsea pumps, control system and

umbilicals • Production controls system and umbilical distribution system • Gas export system • Topside control system designed to accommodate another 21 wells and a fourth

subsea separation unit • Subsea construction and installation services, involving the use of at least 4

subsea construction vessels (Acergy Polaris and Polar Queen from Acergy and Deep Blue and Deep Pioneer from Technip)

The project targets oil in two independent reservoir structures

• Reservoir one is at 600-900 meters water depth and contains heavy oil to be recovered using subsea gas/liquid separation and liquid boosting

• Reservoir two is at 1,000-1,200 meters water depth and contains light oil to be developed using a production loop including riser bottom gas lift

The Pazflor project requires 49 Christmas trees, three manifolds and three gas/liquid separators. The project will demand at least four construction vessels with offshore installation scheduled to start in 2010

55

Record strong deepwater activity will drive subsea

The current expected strong flow of new contracts for the subsea companies in deepwater areas are a result of exploration and significant discoveries over the last years, e.g. outside the coast of West-Africa and Brazil. Currently, the world is about to embark on the greatest deepwater exploration cycle ever seen. This will likely lead to new discoveries that will need to be developed – in most cases likely with a combination of subsea solutions and floaters. Deepwater constitute an increasing share of subsea activity Worldwide deepwater activity will continue to be strong, as offshore share of newly discovered oil continues to increase, and as deeper waters constitute an ever increasing share of offshore discoveries. The increased deepwater activity will continue to drive subsea activity. This section of the report is focused on deepwater as a key driver for the subsea industry. However, a lot of historic subsea activity has also taken place in shallower waters such as the North Sea. Even though shallow water areas are generally more mature, we still expect these areas to strongly contribute to continued high subsea activity. We believe the shallow-water subsea activity will continue to constitute a strong fundament for subsea companies’ revenues while the increasing scope and level of complexity in deep water projects will contribute significantly to drive the growth going forward. An overview of forecasted subsea tree installations going forward, illustrate the increasing importance of deeper waters. Demand in shallow waters is expected to sustain or grow moderately going forward, from about 200 trees in 2007 to about 220 trees in 2012. Deeper waters are expected to drive growth, with annual levels deep and ultra deep water at about 300-330 trees. For the overall subsea activity level, this is highly positive, especially as the sustained shallow-water activity illustrated below is only related to installation of new trees (i.e. new activity/modifications to existing production solutions), and not so much to well-interventions, EOR measures and IMR activity, i.e. other activities that are relevant for more mature areas. As such, shallow water activity in total should display even stronger development than illustrated below.

Development in number of subsea trees according to year installed and water depth

80 90 100

80100 110

0

100

200

300

400

500

600

150

170

270

200

230

250

230

260

220

200

220

240

240

220

30

150

120

20

130

90

10

150

130

240290

340

590

500560 570570

300

2003 2004 2005

20

2007 2008 2009 20102006 2012

Year installed

Nr. of trees

550

2011

Ultra deep

Deep

Shallow

Ultra deep

Deep

Shallow

Deepter waters will drive growth going forward, while shallow water demand still grows moderately


Large deepwater exploration activity going forward will lead to strong subsea activity

Deepwater will be a key growth area for subsea companies going forward, but shallow water will still be important

Of annual expected demand levels of about 600 Christmas trees for the period 2008-2012, more than half will come from deepwater areas

56

The increasing importance of deepwater areas is further illustrated by the pipeline capex according to water depth. More than 60% of the expected pipelines capex over the period 2008-2012 is expected to be spent on water depths greater than 500 meters. In addition to the generally increased deepwater activity driving subsea activity, we also note that the often increased complexity of deepwater operations contribute further to increased activity especially for the subsea construction and installation companies, as they have to be engaged longer and cover a wider scope for each assignment.

Pipeline capex according to water depth and time Share of pipeline capex by water depth 2008-2012Pipeline capex by water depth 2003-2012


The subsea industry has continuously been breaking frontiers and moving to deeper waters The subsea industry is central for the oil industry’s ability to develop assets in increasingly complex environments. Ultra deep waters and arctic environments have been described as the last frontiers of the oil industry, and subsea developments are currently being pursued in such areas, with projects such as Pazflor, Snøhvit and Shtokman. The illustration below from FMC Technologies illustrates how the industry has gradually advanced towards deeper waters. FMC’s first Christmas trees were installed at around 190 meters water depth in 1980, while the latest instalments have been at as much as 2,700 meters.

More than 60% of the expected pipeline capex over the period 2008-2012 is expected to origin from deepwater areas

The subsea industry has gradually advanced towards deeper waters, and the world’s deepest subsea tree installation today is at about 2,700 meters

57

FMC Technologies’ Christmas trees installed at ever increasing water depths is illustrative for the industry’s development


Deepwater E&P increasing importance for the oil industry The drive towards deeper water developments is evident not only in the level of total major oil and gas discoveries coming from offshore, as seen in the graph below, but also that deeper water discoveries (here defined as above 300 meters vs. generally used definition of above 500 meters) have grown rapidly since the early 1990s. Furthermore, the deepwater share has increased even more over the latter part of the period. During 2004 and 2005, the deep water (>300m) share was 67% and 75% respectively. Several of these discoveries are currently under development, and have already chosen or are likely to choose a subsea production solution combined with a floater.

Offshore fields account for majority of discoveries last 10 years. Moving towards deeper waters

58

Majority of discoveries last 10 years have been offshore Deepwater share of discoveries have increased steadily Mboe

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Onshore

Offshore

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

Mboe

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0 - 300 m

> 300 m

0

40.000

20.000

15.000

10.000

5.000

25.000

35.000

30.000

Source: ODS-Petrodata; Arctic Securities Source: ODS-Petrodata; Arctic Securities

Using data from Infield we see that the number of projects developed on water depths of 500 meters or more is expected to grow rapidly from virtually none in the early nineties, to 57 in 2012. Data here on an aggregated level beyond 2012 do not provide meaningful interpretations due to the limited visibility of the oil companies planning horizon.

Number of projects on stream by year and water depth

0

5

10

15

20

25

30

35

40

45

50

55

60

2001

12

2002

11

2003

10

2004

5

2005

2

2006 2007 2008 2009 2010 2011 2012

2500-3000 (m)

2000-2500 (m)

1500-2000 (m)

1000-1500 (m)

500-1000 (m)

Projects per year

24

18

22

40

48 49

2

1988

4

1989

0

1990

1

1991

1

1992

1

1993

24

1994

57

1995

51

1996

41

1

1998

21

1999

14

2000

10

1997

Note: Including fixed platforms, floating production, subsea and projects with no currently planned development scheme


Looking at the same data accumulated, we see a strong growth in deepwater fields above 500m water depths estimated to be developed over the coming years.

Developed projects below 500 meter water depths increasing from close to zero in early 1990s to 57 in 2012

59

Accumulated number of projects on stream by year and water depth

0

50

100

150

200

250

300

350

400

450

500

1991

271

1992

223

1993

183

1994

161

1995

143

1996

119

1997

95

1998

74

1999

60

2000

50

2001

38

2002

27

2003

17

2004

12

2005

10

2006

8

2007

4

2008

4

2009

3

2010

2

2011

469

2012

2500-3000 (m)

2000-2500 (m)

1500-2000 (m)

1000-1500 (m)

500-1000 (m)

1

1988

412

1989

361

1990

320

Accumulated numberof projects

Note: Including fixed platforms, floating production, subsea and projects with no currently planned development scheme


Brazil, West-Africa, US GoM and Asia-Pacific will continue to be dominating deep water areas Geographical distribution of recent deepwater discoveries and estimated future deepwater production indicate what will be the future growth regions for the subsea sector. Looking at the global deepwater discoveries in the graph below, we see that Angola and Nigeria were two important areas in the late 1990s and early 2000s. However, large deep water discoveries were also made in Brazil, US GoM and Asia Pacific.

Annual global deepwater discoveries by geographical region/area

0

1

2

3

4

5

6

7

1992 1993 1994 1995 1996 1997 1998 1999 2000 20011984 2003 2004 2005

Other Africa

Asia-Pacific

US GoM

Nigeria

Angola

Brazil

Bn bbl

1985 1986 1987 1988 1989 1990 1991 2002 Source: Phd Thesis “Giant Oil Fields – the Highway to Oil” by Fredrik Robelius (2007); Arctic Securities

Petrobras is the leading deepwater operator Petrobras will be the world’s leading deepwater operator going forward, measured by number of projects to be brought on stream. Petrobras plans to bring as many as 44 projects on stream over the coming years. Chevron, Total and BP rank as the immediate followers of Petrobras with 42, 39 and 38 projects respectively. Looking at the overview of the top 10 deepwater operators, we note that only one of them is a NOC, while the rest of them are IOCs. This is in line with

Majority of deep water discoveries in WA, Brazil, GoM and Asia Pacific

Petrobras will be the world’s leading deepwater operator going forward

60

our above mentioned observation that the IOCs are increasingly forced to deeper waters, and that a large share of the reserves to be brought on stream is operated by consortiums and/or operator subsidiaries. Top 10 deepwater operators, measured by nr. of projects to come on stream 2008-2021

9

11

14

14

17

25

38

39

42

44

0 10 20 30 40 50

Nr. of projects

Petrobras

Chevron

Total E&P

BP

Shell

Anadarko

Esso

Reliance

Elf Petroleum Nigeria Limited

Murphy

Source: Infield; Arctic Securities Record strong deepwater drilling backlog also supports strength in expected subsea demand going forward This stipulated growth in deepwater E&P is backed by the strong increase in dayrates for ultra deepwater drilling rigs and contract backlog for these as we show below. Looking at developments in dayrates for deepwater drillships and semis, these started increasing in 2005, something which has lead to significant contracting of newbuilds that again has increased rig year backlogs substantially.

Finally, looking at the overall development in the deepwater fleet, we see that the backlog for drilling rigs capable of drilling in water depths above 5,000ft has increased more than sixfold since January 2005. Today's deepwater drilling fleet, including newbuilds capable of drilling in water depths above 5,000ft., is around 560 rig years including options, up from 83 rig years for the total fleet in 2005. If only looking at rigs and drillship capable of drilling above 7,500ft, the rig year backlog increases from 37 years in 2005, to 425 years today, an almost 12x increase. As contracting activity for deepwater rigs continues to be strong and there are several deepwater rigs under construction, which have not yet received contracts upon delivery, this backlog is expected to increase further.

Deep water drilling backlog has increased from 1.4 years per unit in 2005 to 4.9 years per unit in 2007 for drilling below 7500ft water depth, a 3.5x increase in two years

61

Contracted rig years in deep waters have increased significantly last two years

5.34.61.41.5Avg. years of backlog per unit

801232757Number of rigs

425.1559.736.683.4Total years

89.9113.13.814.8Options

335.2446.632.868.6Firm rig years

> 7,500 ft.> 5,000 ft.> 7,500 ft.> 5,000 ft.

Feb-2008Jan-2005

5.34.61.41.5Avg. years of backlog per unit

801232757Number of rigs

425.1559.736.683.4Total years

89.9113.13.814.8Options

335.2446.632.868.6Firm rig years

> 7,500 ft.> 5,000 ft.> 7,500 ft.> 5,000 ft.

Feb-2008Jan-2005

~6.7 x~6.7 x

~11.6 x~11.6 x

Source: ODS Petrodata; Arctic Securities

We believe that this evident strong focus on deepwater exploration and development in the years to come, will alone lead to long term strong demand for subsea equipment and services as discoveries move into field developments. Strong expected growth in floating production solutions further strengthen our growth assumption Subsea field developments and the demand for subsea equipment, construction and installation services have historically displayed a close correlation with the growth in number of floating production solutions. Each floating production solution needs flowlines, umbilicals, risers and other subsea equipment, and as such, we view expected growth in floating production solutions also as a good indication going forward. Furthermore, estimates for floating production solutions are also somewhat easier to monitor, than growth in subsea equipment and services directly.

Growth in floating production units and subsea expenditures go hand in hand

0

50

100

150

200

250

300Floaters

0

2

4

6

8

10

12

14

16

18

20

22

9.3

2003

8.6

2004

12.3

2005

15.0

2006

19.1

2007

USD billion

Africa

Europe

North America

Asia


Australasia

M. East & Caspian

Africa

Europe

North America

Asia


Australasia

M. East & Caspian

218,0236,0

254,0269,0

302,0

Note 1: Numbers for floating production units include units under construction/conversion, idle, in yard and working. Includes FPSOs, FSOs, Semis, Spars, and TLPs

Note 2: Subsea expenditures include drilling and completions, equipment, pipelines and control lines

Source: Infield; ODS Petrodata; IMA; Arctic Securities

Subsea solutions are often combined with the use of floating production solutions (FPSOs most common)

62

Going forward, we may see more pure “subsea to beach with subsea processing solutions”, without any surface/topside facilities, e.g. Ormen Lange. FMC Technologies has described this as the “field development of the future”. However, we think this development will be gradual and that floating production facilities combined with subsea installations will still be the dominating production solution for deepwater assets. The expected growth in number of FPSOs going forward is another key argument for why we believe the subsea sector will continue to be strong. The historic annual growth in number of FPSOs has been around 12%, and we don’t see any reasons for why this growth should slow going forward. The number of FPSOs is expected to grow from 123 end of 2007 to 150 end of 2008, and 161 end of 2009. The graph below only displays ordered units, and as such the apparent leveling off in growth from 2009/2010 is due to average lead time from order to delivery of about 18-24 months, as well as the limited visibility caused by the planning horizon of the oil companies.

FPSO fleet growing at a CAGR of 10% last 10 years. Fleet will continue to grow strongly

4333 600000

20

40

60

80

100

120

140

160

180

8

1986

58

1987

58

1988

59

1989

7

13

1990

88

16

1991

89

17

1992

810

18

1993

8

14

22

1994

10

15

25

1995

11

19

30

1996

23

40

1997

20

27

47

1998

27

32

59

1999

17

00

1982

00

1983

11

1984

11

1985

28

34

62

2000

30

38

68

2001

34

42

76

2002

40

47

87

2003

44

49

93

2004

47

57

5

2005

50

60

110

2006

61

62

123

2007

81

69

150

2008

89

72

104

2009

94

73

167

2010

97

74

171

2011

FPSO operators

Oil companies

+41% +97%+12%

FPSOs

161

CAGR 97-07

Source: ODS Petrodata; IMA; Arctic Securities

Taking a look at the short term expectations for number of FPSOs as displayed by ongoing and planned tendering activity, we get further evidence that demand for FPSOs, and implicitly also the demand for subsea services will stay strong. In an “Early scenario” for possible year of first oil for FPSO projects, we note that as many as 75 projects are either in the “Bidding/Final design” or “Planned/Being studied” phase (Note that “Final design” here corresponds to final design of field development). This is up from 66 in October 2007, when we released the Arctic Securities FPSO Sector Initiation coverage. The majority of these projects are expected to produce first oil in 2010, 2011 and beyond, and we expect to see additional projects for first oil in later years to be added over time. Looking at a late scenario for the same projects we still observe majority of first oil projects in 2010 and 2011, but with some more projects being pushed towards first oil in 2013 and 2014.

Ongoing and planned tendering activity further underpins strong growth assumption

Pure subsea to beach solution being described as the field development of the future

FPSO sector will still see strong growth

63

Year of possible first oil FPSO projects, early scenario Year of possible first oil FPSO projects, late scenario

0

5

10

15

20

25

8

11

19

0

20152010

6

05

15

21

2008 2011

1

2

4

13

14

6

2012

10

2009

10

2013

Bidding or final design

Planned or being studied

FPSO projects

2014

5

0

5

10

15

20

25

311

1

9

19

2009

5

2011

4

10

2013

4

2

6

12

2008

7

7

2

14

2010 20142012

7

8

1

7

2015

Bidding or final design

Planned or being studied

FPSO projects

11

Source: IMA; ODS Petrodata; Arctic Securities Source: IMA; ODS Petrodata; Arctic Securities

64

Management and Board of Directors

Management Jean P. Cahuzac (CEO) Mr. Cahuzac joins Acergy in April 2008, coming from the position as Executive Vice President Assets with Transocean. He has more than 25 years of experience from the oil and gas industry and has held various senior positions including COO, President and Executive President of Transocean. Prior to this he spent several years with Schlumberger holding technical and managerial positions globally, including President of Engineering, Vice President Europe & Africa Business Unit and President Sedco Forex. Mr. Cahuzac is a graduate from Ecole des Mines Saint Etienne and the French Petroleum Institute. Stuart Jackson (CFO) Mr. Jackson joined Acergy as CFO in 2003, coming from NRG Energy U.K., where he was the Managing Director. Mr. Jackson has previously headed finance, commercial and HR functions in the power sector and worked with Marathon Oil and LASMO in London, North Africa and the Far East. He is an Honours Graduate from Loughborough University of Technology and a Chartered Management Accountant. Bruno Chabas (COO) Mr. Chabas joined Acergy in 1992 and was appointed COO in 2002. He has held various positions in the UK., France and the US., including CFO. Mr Chabas holds a MA in Economics and an MBA from Babson College in Massachusetts. Jean-Luc Laloë (Corporate VP Strategic Planning) Mr. Laloë has more than 25 years of experience from the offshore oil and gas construction industry. He has previously worked with Stena Offshore and Coflexip Stena. Mr. Laloë joined the Acergy management team in 2003 coming from Technip, where he held various positions including Executive VP-North America, Managing Director-UK and VP Special Operations in Paris. He holds a Masters degree in Aeronautical & Space Engineering. Mark Preece (Corporate VP Business Development & Marine) Mr. Preece joined the Acergy management team in 2004. He has previously worked with Bibby Line, Stena Offshore, Coflexip Stena and Technip holding various senior management positions. Mr. Preece is a Marine Superintendent and hols an MBA from Henley Management College. Keith Tipson (Corporate VP Human Resources) Mr. Tipson joined the Acergy management team in 2003 and has previously worked with the Dowty Group and lately Alstom, holding the positon as Senior Vice President HR, Power Sector. Mr. Tipson has a Business Degree from Thames Valley University, London. Johan Rasmussen (Corporate VP and General Counsel) Mr. Rasmussen joined Acergy in 1988 and was appointed General Counsel in 1996. He has previously worked within a subdivision of the Norwegian Ministry of Defence and as a Deputy Judge with Haugesund District Court. Mr. Rasmussen holds a Masters Degree in Law. Allen Leatt (CTO & Corporate Vice President Global Performance) Mr. Leatt was appointed CTO in 2003 coming from the position as the Executive Vice President of the SURF Product Line with Acergy. He has also previously worked with what is now Technip and John Laing Construction. Mr. Leatt holds a first degree in Civil Engineering, an MBA and he is a Chartered Civil Engineer in the U.K.

65

Board of Directors Mark Woolveridge (Chairman) Mr. Woolveridge was appointed Chairman in 2005, after serving as Deputy Chairman since 2002 and non-executive Director since 1993. He retired from the position as CEO of BP Engineering in 1992 after being with the company since 1968, holding various positions including General Manager Oil and Gas Developments. He has also served on the Board of BP Oil. Mr. Woolveridge holds a Masters degree from Cambridge University and is a Fellow of the Royal Academy of Engineering and of the Institute of Mechanical Engineers. James B. Hurlock (Deputy Chairman) Mr. Hurlock was appointed Deputy Chairman in 2005, after serving as a Non-excecutive Director since 2002. He is a retired partner from the law firm White & Case LLP, serving as Chairman of its Management Committee for 20 years. He was a part of the founding and served on the Board of Directors of Northern Offshore. Mr. Hurlock holds a BA degree from Princeton University, an MA in Jurisprudence from Oxford University and a JD from Harward Law School. George Doremus (Board member) Mr. Doremus has served as a non-executive Director since 2004 and currently works with Gulf Energy Technologies, holding the position as CEO. He has previously worked with Aker Kværner as a EVP Oil and Gas Process International and President of Houston region operations. Tom Ehret (Board memeber) Mr. Ehret has more than 30 years of experience from the offshore oil and gas business. He joined Acergy as CEO in 2003 and stepped down in 2008. He came from the position as Vice Chairman Technip-Coflexip and President its offshore branch. Mr. Ehret has previously worked for Comex, FMC Corporation, Stena Offshore, Coflexip Stena and Technip in various management positions. Mr. Ehret is a trained mechanical engineer. J. Frithjof Skouverøe (Board member) Mr. Skouverøe has more than 30 years of experience from the offshore business and has served on the Acergy board since 1993. He previously held the position as CEO of Stolt-Nielse Seaway and has been serving on the board of Ocean Rig since 1996. Mr Skouverøe holds an MBA from INSEAD and an MSc from the Technical University of Norway. Trond Ø. Westlie (Board member) Mr. Westlie currently holds the position as Executive Vice President and CFO of the Telenor Group. He has previously worked with Aker Kværner as the Group Executive Vice President and CFO, Aker Maritime as CFO and Executive Vice President, and Aker RGI as Executive Vice President Business Development. Mr Westlie is a State Authorised Public Author, Norges Handelshøyskole. Sir Peter Mason KBE (Board member) Sir Peter Mason retired as CEO of AMEC in 2006, after holding the postion since 1996. He has previously worked with BICC, holding various management positions including Executive Director. Sir Peter Mason is serving as a Non-executive Director of BAE Systems and as a non-executive capacity on the Board of the Olympic Delivery Authority. He is a Fellow of The Institution of Civil Engineers and holds a Bachelor of Science in Engineering.

66

Shareholders and share price performance

Top 10 shareholders Name Shares Ownership

DWS Investments 19,218,430 9.9%

GE Asset Management 18,845,293 9.7%

Artisan Partners 18,752,800 9.6%

Fidelity International 8,743,303 4.5%

Fidelity Investments Luxembourg 6,185,928 3.2%

Fidelity Management & Research 2,576,052 1.3%

Fidelity Investments Services 2,439,262 1.3%

Hartford Investment Financials 2,289,000 1.2%

Teachers Advisors 2,266,877 1.2%

DWS Investment 1,532,274 0.8%

Other 112,104,753 57.5%

Total number of shares 194,953,972 100.0%

Source: VPS Acergy share price performance

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

OBX (rebased)

OSX (rebased)

ACY

Volume

0

100

120

140

160

180

80

NOK Volume

Jan-06 Apr-06 Jul-06 Jul-07Jan-07 Jan-08Oct-06 Apr-07 Oct-07 Apr-08

Source: Factset

67

Appendix 1: Company description, Subsea 7

Subsea 7 is mainly a pure-play subsea construction and installation company that also has some IRM activities. Subsea 7 competes primarily with Acergy, and also Technip and Saipem, though the latter two are significantly larger in size. Subsea 7 has global operations, currently with the largest share of its revenues in the North Sea. During 2007, the company had 47% of its revenues from the North Sea market, 24% from Africa, and 15% from Brazil. Remaining revenues were distributed between GoM and Asia Pacific. For 2006, the mix was 35% from the North Sea, 17% from Africa and 14% from Brazil. The company currently has a fleet of 17 vessels, and will take delivery of another four vessels during 2008 and one vessel in 2009. Including newbuilds, 12 of the vessels are CSVs (pipelay & multipurpose support), five are ROVs and five are DSVs.

Revenue distribution and share of revenues per region, 2005-2007

300323

9140

1.000

1.500

2.000

2.500

500

USDm

5

581

357

1479297

1.287

2005

761

377

97

2006

1.6701.025

514

152

+30%

167

2.187

2007

126

North Sea

Africa

Brazil

GoM Other

Asia-Pac.North Sea

Africa

Brazil

GoM Other

Asia-Pac.

11% 18% 15%

0%10%20%30%40%50%60%70%80%90%

100%

45%

28%

7%8%

1%

2005

46%

23%

6%8%1%

2006

47%

24%

7%8%0%

2007

Share (%)

Source: Subsea 7; Arctic Securities

Brief history Subsea 7 was created in 2002 from the existing businesses of Halliburton Subsea and DSND (Søndenfjeldske). The company has been through an active restructuring and development phase ever since, restructuring and re-focusing its business activities 2002-2005 and then pursuing aggressive fleet growth from 2005 and onwards. The ongoing fleet expansion/capital expenditure program initiated in 2005 is set to be completed during 2008, and the company will then enter a more “normal” capital expenditure phase with annual maintenance capex around USD 100 million. Below, we have listed some of the key milestones in the company’s history. Up to 2005, Subsea 7 was mainly a player in the North Sea & Brazil. This changed in 2006 with the establishment of a JV with Technip to operate offshore subsea activities in Asia-Pacific & coherently the first contracts for the JV in this area, as well as the first large contracts for Subsea 7 in Nigeria and Angola. This marked the steps to a ore internationally diversified company, though the North Sea is still its stronghold.

Subsea 7 has its largest share of revenues from the North Sea

Major fleet expansion program set to be completed in 2008

68

Key company milestones 2002 – 2007

Company milestones (2002 – 2007)Company milestones (2002 – 2007)

2003

2004

2005

2006

2002

2007

May: DSND Inc. (Søndenfjeldske) and Haliburton Subsea combine resources and establish Subsea 7

Sold its Geotechnical business to Fugro

DSND Inc renamed to Siem Offshore Inc (later Siem Industries) Siem Offshore pays Haliburton USD 200 million for its 50% share in Subsea 7 and de-lists the company

Subsea 7 (re-introduced) trades on OSE. Siem Industries’ control around 45% of outstanding sharesAwarded 1st major contract in South Africa, USD 115 million by Petro SA

Established JV with Technip to operate offshore subsea activities in Asia Pacific (excluding India and the Middle East). 1st JV contracts awarded same year in Australia and New Zealand Awarded 1st contract in Nigeria, USD 60 million by Star Deep Water Ltd Awarded 1st contract in Angola, USD 200 million by Esso Angola Awarded two 6 years long charter contract with Shell in the North Sea, valued at USD 1.1 billion

Continued to build backlog: Awarded major contracts in Brazil, USD 390 million trunkline contract and the North Sea, USD 280 million contract for the Troll area Took delivery of three new vessels, two major pipelay/CSVs and one ROV support vessel Operational improvement – steadily increasing EBITDA margin

Source: Subsea 7; Press search; Arctic Securities

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Appendix 2: Glossary of key subsea terms

Christmas/Xmas tree: An assembly of control valves, gauges and chokes that control oil and gas flow in a completed well. Christmas trees installed on the ocean floor are referred to as subsea, or “wet” trees. Christmas trees installed on land or platforms are referred to as “dry” trees. Deepwater: Generally defined as operations in water depths of 1,500 feet or more. Development well: A well drilled in a proven field to complete a pattern of production. Flow-control equipment: Mechanical devices for the purpose of directing, managing and controlling the flow of produced or injected fluids. Flowline: A pipe, laid on the seabed, which allows the transportation of oil/gas production or injection of fluids. Its length can vary from a few hundred meters to several kilometres. HP/HT (High Pressure/High Temperature): Refers to deepwater environments producing pressures as great as 15,000 psi and temperatures as high as 350 degrees Fahrenheit. Intervention systems: A system used for deployment and retrieval of equipment such as subsea control modules and pressure caps; also used to perform pull-in and connection of umbilicals and flowlines and to enable diagnostic and well-manipulation operations. Jumpers: Connections for various subsea equipment, including tie-ins between trees, manifolds or flowline-skids. Manifold: A subsea assembly that provides an interface between the production pipeline and flowline and the well. The manifold performs several functions, including collecting produced fluids from individual subsea wells, distributing the electrical and hydraulic systems and providing support for other subsea structures and equipment. PSI: Pounds per square inch. Measure commonly used to describe pressure. Risers: Physical link between the seabed and the topside of offshore installations. Used to transfer produced fluids from the seabed to surface facilities, and transfer injection or control fluids from the surface facilities to the seabed. Risers can be either rigid or flexible and are critical components of these types of installations. RLWI: Riserless Well Intervention. Well maintenance that is performed using DP vessels rather than anchored drilling rigs. The system is deployed through a moonpool from a DP vessel and installed on the subsea Christmas tree without the use of anchors or risers. Subsea separation and processing: Subsea processing consists of treating produced fluids, upstream or surface facilities at or below the seabed, including oil/gas/water separation, active sand management, multi-phase pumping, gas compression and flow assurance. Subsea system: Ranges from single or multiple subsea wells producing to a nearby platform, floating production system or TLP to multiple wells producing through a manifold and pipeline system to a distant production facility. Subsea tree: A Christmas/Xmas tree installed on the ocean floor. Also called a “wet” tree. Topside: Refers to the oil production facilities above the water, usually on a platform or production vessel (typically an FPSO), as opposed to the subsea production facilities.

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Also refers to the above-water location of certain subsea system components such as some control systems. Ultra deepwater: Usually refers to operations in water depths of 5,000 feet or greater. Umbilical: An assembly of hydraulic hoses which can also include electrical cables or optic fibres used to control subsea structures from a platform or a vessel. Wellhead: The surface termination of a wellbore that incorporates facilities for installing casing hangers during the well construction phase. The wellhead also incorporates a means of hanging the production tubing and installing the Christmas tree and surface flow control facilities in preparation for the production phase of the well. Source: FMC Technologies, Technip

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Profit & loss statement

Profit & loss USDm 2006 2007 2008e 2009e 2010eSales 2,124 2,663 2,988 3,306 3,610Operating expenses (1,766) (2,222) (2,487) (2,725) (2,961)EBITDA 358 441 500 580 649Depreciation (73) (94) (106) (113) (120)EBITA 285 347 394 467 529Amortisation & impairment 0 0 0 0 0EBIT 285 347 394 467 529Net interest 15 (39) (33) (31) (31)Other financial items 1 33 26 28 28Pre-tax profit 302 341 388 464 526Taxes (74) (212) (140) (162) (184)Net profit 237 135 251 306 342

EPS reported (USD) 1.2 0.6 1.3 1.6 1.8EPS adj (USD) 1.2 0.6 1.3 1.6 1.8EPS adj fully diluted (USD) 1.2 0.6 1.3 1.6 1.8

Sales growth (%) 39.0 25.4 12.2 10.7 9.2EBITDA growth (%) 85.8 23.1 13.4 16.0 11.8EBIT growth (%) 129.1 21.9 13.6 18.5 13.2Pre-tax profit growth (%) 124.0 13.0 13.9 19.5 13.3Net profit growth (%) 59.3 (43.2) 86.6 21.7 11.8

EPS reported growth (%) 57.0 (45.6) 102.4 21.7 11.8EPS adj growth (%) 57.0 (45.6) 102.4 21.7 11.8EPS adj fully diluted growth (%) 57.0 (45.6) 102.4 21.7 11.8

EBITDA margin (%) 16.9 16.6 16.7 17.6 18.0 Source: Arctic Securities Research

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Balance sheet & Cash flow

Balance sheet USDm 2006 2007 2008e 2009e 2010ePPE 673 814 1,008 1,070 1,125Other fixed assets 166 211 255 255 255Fixed assets 839 1,025 1,263 1,325 1,380Receivables 644 818 922 1,023 1,121Other current assets 17 1 0 0 0Cash & cash equivalents 718 583 611 851 1,133Current assets 1,378 1,402 1,533 1,875 2,254

Total assets 2,217 2,427 2,796 3,200 3,634

Shareholders' equity 816 819 1,045 1,313 1,616Provisions 104 121 131 140 149LT IB debt 372 387 390 390 390LT liabilities 476 508 521 530 539Payables 926 1,100 1,230 1,357 1,479Current liabilities 926 1,100 1,230 1,357 1,479Total liabilities 1,402 1,608 1,750 1,887 2,018

Total liabilitites and equity 2,217 2,427 2,796 3,200 3,634

Cash & cash equivalents 718 583 611 851 1,133Gross IB debt 372 387 390 390 390Net IB debt (346) (196) (221) (461) (743)Working capital (282) (282) (308) (334) (358)Capital employed 1,291 1,327 1,566 1,843 2,155

Net IB debt/Equity (%) (42) (24) (21) (35) (46)Equity/Assets (%) 37 34 37 41 44

Cash flow USDm 2006 2007 2008e 2009e 2010eNet profit 237 135 251 306 342Non-cash adjustments 73 94 106 113 120Change in working capital 370 33 37 35 34Operating cash flow (OCF) 680 261 394 454 495Capital expenditures (747) (235) (300) (175) (175)Free cash flow (FCF) (67) 26 94 279 320Share issues & buybacks 579 (131) (25) (38) (38)Change in debt 372 15 3 0 0Other non-cash adjustments (166) (45) (44) 0 0Change in cash 718 (135) 28 240 282 Source: Arctic Securities Research

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Key ratios & Valuation

Share data 2006 2007 2008e 2009e 2010eShares outstanding (m) (y-e) 192.7 188.4 188.1 188.1 188.1Shares fully diluted (m) (y-e) 201.1 213.3 191.0 191.0 191.0Shares fully diluted average (m) 198.3 207.2 191.0 191.0 191.0Share price NOK (y-e) 120.8 118.5 117.5 117.5 117.5Share price USD (y-e) 19.6 21.4 23.2 23.2 23.2Market capitalisation (USDm) 3,778 4,026 4,370 4,370 4,370Enterprise value adj (USDm) 3,432 3,830 4,149 3,909 3,627

EPS reported (USD) 1.2 0.6 1.3 1.6 1.8EPS adj(USD) 1.2 0.6 1.3 1.6 1.8EPS adj fully diluted (USD) 1.2 0.6 1.3 1.6 1.8DPS (USD) 0.0 0.0 0.0 0.0 0.0

Growth 2006 2007 2008e 2009e 2010eSales growth (%) 39.0 25.4 12.2 10.7 9.2EBITDA growth (%) 85.8 23.1 13.4 16.0 11.8EBIT growth (%) 129.1 21.9 13.6 18.5 13.2Pre-tax profit growth (%) 124.0 13.0 13.9 19.5 13.3Net profit growth (%) 59.3 (43.2) 86.6 21.7 11.8

EPS reported growth (%) 57.0 (45.6) 102.4 21.7 11.8EPS adj growth (%) 57.0 (45.6) 102.4 21.7 11.8EPS adj fully diluted growth (%) 57.0 (45.6) 102.4 21.7 11.8

Margins 2006 2007 2008e 2009e 2010eEBITDA margin (%) 16.9 16.6 16.7 17.6 18.0EBITA margin (%) 13.4 13.0 13.2 14.1 14.7EBIT margin (%) 13.4 13.0 13.2 14.1 14.7Pre tax margin (%) 14.2 12.8 13.0 14.0 14.6Net margin (%) 11.1 5.0 8.4 9.2 9.5

Valuation 2006 2007 2008e 2009e 2010eEV/Sales (x) 1.6 1.4 1.4 1.2 1.0EV/EBITDA (x) 9.6 8.7 8.3 6.7 5.6EV/EBIT (x) 12.1 11.0 10.5 8.4 6.9P/E (x) 16.4 32.9 17.7 14.5 13.0P/E adj (x) 16.4 32.9 17.7 14.5 13.0P/BVPS (x) 4.6 4.9 4.2 3.3 2.7

Profitability 2006 2007 2008e 2009e 2010eROE (%) 29.0 16.4 24.0 23.3 21.1ROCE (%) 22.1 26.2 25.2 25.4 24.6Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 Source: Arctic Securities Research

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Disclaimer

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Contact information

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2008 Acergy Initiating Coverage Arctic Sec

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