This document comprises a Prospectus relating to Petrofac Limited prepared in accordance with the Prospectus Rules made by theFinancial Services Authority under Part VI Financial Services and Markets Act 2000.

Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services andMarkets Act 2000 (the “UK Listing Authority”) and to the London Stock Exchange plc (the “London Stock Exchange”) for all of theissued ordinary share capital of the Company described in this Prospectus to be admitted to the Official List of the UK Listing Authority(the “Official List”) and to trading on the London Stock Exchange. Admission to the Official List together with admission to trading onthe London Stock Exchange’s main market for listed securities constitute admission to official listing on a regulated market(“Admission”). Conditional dealings in the Ordinary Shares (as unlisted securities) are expected to commence on the London StockExchange on 4 October 2005. It is expected that Admission will become effective and that unconditional dealings in the Ordinary Shareswill commence on 7 October 2005. Dealings on the London Stock Exchange before Admission will only be settled if Admission takesplace and will be for settlement three business days after Admission. All dealings before the commencement of unconditional dealingswill be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned.

See Part II – “Risk factors” for a discussion of certain factors that should be considered in connection with an investment in the OrdinaryShares.

This Prospectus does not constitute an offer to sell, or the solicitation of an offer to buy, Ordinary Shares in any jurisdiction in which suchoffer or solicitation is unlawful. The Ordinary Shares have not been and will not be registered under the US Securities Act of 1933, asamended (the “Securities Act”) and, subject to certain exceptions may not be offered or sold within the United States or to, or for theaccount or benefit of, US Persons (as defined in Regulation S under the Securities Act (“Regulation S”)). For a description of these andcertain further restrictions on offers, sales and transfers of the Ordinary Shares and the distribution of this Prospectus, see Part VIII –“Details of the Offer”.

Petrofac Limited(incorporated in Jersey under the Companies (Jersey) Law 1991 with registered number 81792)

Offer of up to 152,977,031 Ordinary Shares of US$0.025 each at anOffer Price expected to be between 180 pence and 230 pence per share

and admission of 345,159,920 Ordinary Shares to the Official Listand to trading on the London Stock Exchange

Sponsor and Global Co-ordinator

Credit Suisse First BostonJoint Lead Managers and Joint Bookrunners

Credit Suisse First Boston Lehman BrothersCo-Lead Managers

JPMorgan Cazenove Shuaa Capital

Up to 152,977,031 Ordinary Shares are being offered by the Selling Shareholders (as defined herein) in the Offer. The Ordinary Sharesare being offered to certain institutional investors in the United Kingdom and the rest of the world excluding the United States by way ofthe Offer.

In connection with the Offer, Credit Suisse First Boston as stabilising manager (the “Stabilising Manager”) may over-allot or effecttransactions with a view to supporting the market price of the Ordinary Shares at a level higher than that which might otherwise prevail.Such transactions may commence on or after the publication of the Offer Price and will end no later than 30 days thereafter. However,there is no obligation on the Stabilising Manager to do this. Such transactions may be effected on the London Stock Exchange, theover-the-counter market or otherwise. There is no assurance that such transactions will be undertaken and, if commenced, they may bediscontinued at any time. Save as required by law, the Stabilising Manager does not intend to disclose the extent of any over-allotmentsand/or stabilisation transactions under the Offer.

In connection with the Offer, certain of the Selling Shareholders have granted the Stabilising Manager an option (the “Over-allotmentOption”), exercisable for 30 days after publication of the Offer Price, to make available up to 15,297,702 additional Ordinary Shares atthe Offer Price to cover over-allotments, if any, made in connection with the Offer and to cover short positions resulting fromstabilisation transactions.

Share capital immediately following Admission

Authorised Issued and fully paid upNumber Nominal Value Number Nominal Value

750,000,000 US$18,750,000 Ordinary Shares of US$0.025 each 345,159,920 US$8,628,998

Credit Suisse First Boston and Lehman Brothers, which are authorised and regulated in the United Kingdom by the Financial ServicesAuthority, are advising the Company in relation to the Offer and no one else and will not be responsible to anyone other than theCompany for providing the protections afforded to customers of Credit Suisse First Boston or Lehman Brothers respectively nor forproviding any advice in relation to the Offer, the contents of this Prospectus or any transaction or arrangement referred to herein.

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Any reproduction or distribution of this Prospectus, in whole or in part, and any disclosure of itscontents or use of any information herein for any purpose other than considering an investment inthe Ordinary Shares offered hereby is prohibited, except to the extent such information is otherwisepublicly available. Each person receiving a copy of this Prospectus by accepting delivery of thisProspectus agrees to the foregoing.

The distribution of this Prospectus and the offer and sale of the Ordinary Shares in certainjurisdictions may be restricted by law. No action has been taken by the Company, the SellingShareholders or the Underwriters that would permit a public offer of Ordinary Shares or possessionor distribution of this Prospectus where action for that purpose is required, other than in the UK.Persons into whose possession this Prospectus comes should inform themselves about and observeany such restrictions. Any failure to comply with these restrictions may constitute a violation of thesecurities laws of any such jurisdiction. This Prospectus does not constitute an offer of, or aninvitation to purchase, any Ordinary Shares in any jurisdiction in which such offers or invitationwould be unlawful. Further information with regard to restrictions on offers and sales of theOrdinary Shares and the distribution of this document is set out in Part VIII – “Details of the Offer”.

No person has been authorised to give any information or to make any representation other thanthose contained in this Prospectus in connection with the Offer and, if given or made, suchinformation or representation must not be relied upon as having been authorised by or on behalf ofthe Company, the Selling Shareholders or the Underwriters. This Prospectus does not constitute anoffer to sell or the solicitation of any offer to buy any securities other than the securities to which itrelates or an offer to sell or the solicitation of an offer to buy such securities by any person in anycircumstances in which such offer or solicitation is unlawful. Without prejudice to any obligationof the Company to publish a supplementary prospectus pursuant to section 87G Financial Servicesand Markets Act 2000 and Prospectus Rule 3.4.1, neither the delivery of this Prospectus at any timenor any sale made under this Prospectus shall, under any circumstances, create any implication thatthere has been no change in the business or affairs of the Company or of the Company and itssubsidiaries and affiliates taken as a whole since the date hereof or that the information containedherein is correct as of any time subsequent to its date.

The information contained in this Prospectus has been provided by the Company. None of theUnderwriters makes any representation, express or implied, or accepts responsibility, with respectto the accuracy or completeness of any of the information in this Prospectus. This Prospectus is notintended to provide the basis of any credit or other evaluation and should not be considered as arecommendation by any of the Company, the Selling Shareholders or the Underwriters that anyrecipient of this Prospectus should purchase the Ordinary Shares. Each potential purchaser ofOrdinary Shares should determine for itself the relevance of the information contained in thisProspectus and its purchase of Ordinary Shares should be based upon such investigation as it deemsnecessary.

A copy of this document has been delivered to the registrar of companies in Jersey in accordancewith Article 5 of the Companies (General Provisions) (Jersey) Order 2002, and the registrar hasgiven, and has not withdrawn, consent to its circulation. The Jersey Financial Services Commissionhas given, and has not withdrawn, its consent under Article 2 of the Control of Borrowing (Jersey)Order 1958 to the issue of securities in the Company. It must be distinctly understood that, in givingthese consents, neither the registrar of companies nor the Jersey Financial Services Commissiontakes any responsibility for the financial soundness of the Company or for the correctness of anystatements made, or opinions expressed, with regard to it.

The contents of this Prospectus are not to be construed as legal, business or tax advice. Eachprospective investor should consult its own solicitor, financial adviser or tax adviser for legal,financial or tax advice.

Certain terms used in this document are defined and certain technical and other terms used in thisdocument are explained in Part XI – “Definitions” and Part XII – “Glossary of industry terms”.

Unless the context otherwise requires or it is expressly provided to the contrary, the information inthis document assumes (a) an Offer Price of 205 pence per Ordinary Share, being the mid point ofthe Offer Price Range, (b) no exercise of the Over-allotment Option, (c) the re-organisation of the

4

Company’s share capital (which is conditional upon Admission) having been completed; (d) theallotment and issue of all Ordinary Shares due to be allotted and issued under Petrofac’s Long TermIncentive Plan (LTIP), which allotment and issue is conditional upon Admission; and (e) eachSelling Shareholder selling his/its full entitlement of Ordinary Shares, including participatoryinterests in Ordinary Shares held under Petrofac’s Executive Share Scheme (ESS) and the LTIP,permitted for sale. All times referred to in this document are, unless otherwise stated, references toLondon time.

CURRENCY AND PRESENTATION OF FINANCIAL INFORMATION

Unless otherwise indicated, all references in this document to US$ or US Dollars are to the lawfulcurrency of the United States of America and all references in this document to £ or Sterling are tothe lawful currency of the United Kingdom. The Company prepares its financial statements in USDollars.

Unless otherwise indicated, financial information in this document has been prepared inaccordance with International Financial Reporting Standards (IFRS) which differs in certainsignificant respects from UK GAAP.

The Financial Information included in Part X – “Financial Information on Petrofac” has beenprepared in accordance with the Statements of Investment Circular Reporting Standards issued bythe Auditing Practices Board in the United Kingdom and the related consent to its inclusion in theProspectus appearing in Part IX – “Additional Information” has been included as required by theProspectus Rules and solely for that purpose.

Accounts are drawn up to 31 December each year. The periods analysed in this document are the12 month periods ended 31 December 2002, 2003 and 2004, and such periods are referred to inthis document as the 2002 financial year (or FY 2002), 2003 financial year (or FY 2003) and 2004financial year (or FY 2004), respectively. References to H1 2005 are to the period from 1 January2005 to 30 June 2005 and references to H1 2004 are to the period from 1 January 2004 to 30 June2004. References to H2 2005 are to the period from 1 July 2005 to 31 December 2005 andreferences to H2 2004 are to the period from 1 July 2004 to 31 December 2004.

The financial information for H1 2004 included in this document is unaudited and has beenprovided as a comparative to the financial information for H1 2005. This financial information hasbeen prepared using the Group’s management accounts on the basis set out in note 2 to section 5 ofPart X – “Financial Information on Petrofac”.

Financial results included in this document are, unless otherwise stated, results from continuingoperations.

Unless otherwise stated, basic and diluted earnings per share figures of the Company in thisdocument are calculated by reference to the number of shares, or potential number of shares, priorto the Company’s 40:1 share split that has been approved by the Board, conditional uponAdmission.

Unless otherwise stated, share figures to be sold in the Offer and share figures relating to SellingShareholders reflect the Company’s 40:1 share split that has been approved by the Board,conditional upon Admission.

Various figures and percentages set out in this document have been rounded and, accordingly, maynot total. Percentage figures of divisional results relative to the Group are, unless otherwise stated,calculated using, as the denominator, Group results after consolidation and eliminationadjustments.

Unless otherwise stated, the values of the investments of the Resources Division are book equityvalues.

BacklogPetrofac uses the measurement of revenue backlog as a key performance indicator for itsEngineering & Construction and Operations Services businesses.

Backlog consists of the estimated revenue attributable to the uncompleted portion of lump sumengineering, procurement and construction (EPC) contracts and variation orders plus, with regardto engineering services and facilities management contracts, the estimated revenue attributable to

5

the lesser of the remaining term of the contract and, in the case of life of field facilities managementcontracts, five years. To the extent work advances on these contracts, revenue is recognised andremoved from the backlog. Where contracts extend beyond five years, the backlog relating theretois added to the backlog on a rolling monthly basis.

Backlog includes only the revenue attributable to signed contracts for which all pre-conditions toentry have been met and only the proportionate share of joint venture contracts that is attributableto Petrofac. Backlog does not include any revenue expected to arise from contracts where the clienthas no commitment to draw upon services from the Company.

With regard to certain of the Group’s facilities management contracts, a substantial proportion ofthe revenue estimated to arise is subject to the level of capital and operational expendituredetermined ultimately by the client. The actual revenue realised on such contracts may thereforediffer from that originally estimated in calculating backlog. In addition, the backlog in relation tosuch contracts may differ from the values ascribed to such contracts by Petrofac at the time ofcontract award. In relation to such contracts, the backlog figure reflects, at any point in time, theDirectors’ best estimate of the future level of expenditure and hence revenue expected to arise overthe remaining term of the contract. In addition, a significant proportion of the Group’s revenue isdenominated in Sterling. The backlog figure, reported in US Dollars, includes the Sterling revenueconverted into US Dollars at the prevailing period end exchange rate. Subsequent variations in theexchange rate will therefore vary the US Dollar backlog amount although the underlying Sterlingbacklog will remain unchanged.

Backlog is not an audited measure. Other companies in the oil and gas industry may calculate thismeasure differently. Please also see Part II – “Risk factors” and Part VI – “Operating and financialreview”.

EBITDAReferences to EBITDA in this document are to the profit before tax and net finance costs and beforedepreciation, goodwill and other amortisation and impairment losses. References to EBITDAmargin are to EBITDA as a percentage of revenues from continuing operations. The Directors useEBITDA internally as an important supplemental measure of Petrofac’s operational performanceand believe it is frequently used by securities analysts, investors and other interested parties in theevaluation of companies in the oil and gas industry.

EBITDA has its own limitations as an analytical tool and it should not be considered in isolationfrom, or as a substitute for, analysis of Petrofac’s results of operations, as reported under IFRS.Some of the limitations of EBITDA as a measure are as follows:

� it does not reflect finance charges, or the cash requirements necessary to service interest orprincipal repayments, on Petrofac’s debt;

� it does not reflect finance income arising from Petrofac’s cash balances;

� it does not reflect taxes;

� although depreciation, goodwill and other amortisation are non-cash charges, the tangible orintangible assets being depreciated, amortised or impaired will often have to be replaced inthe future; and

� other companies in the oil and gas industry may calculate this measure differently, limiting itsusefulness as a comparative measure.

FORWARD-LOOKING STATEMENTS

This document includes “forward-looking statements” which include all statements other thanstatements of historical facts, including, without limitation, those regarding the Group’s financialposition, business strategy, plans and objectives of management for future operations (includingdevelopment plans and objectives relating to the Group’s products and services), or any statementspreceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”,“intends”, “will”, “may”, “anticipates”, “would”, “could” or similar expressions or the negative

6

thereof. Such forward-looking statements involve known and unknown risks, uncertainties andother important factors beyond the Group‘s control that could cause the actual results,performance or achievements of the Group to be materially different from future results,performance or achievements expressed or implied by such forward-looking statements. Suchforward-looking statements are based on numerous assumptions regarding the Group’s presentand future business strategies and the environment in which the Group will operate in the future.Among the important factors that could cause the Group’s actual results, performance orachievements to differ materially from those in forward-looking statements are those in Part II –“Risk factors”, Part VI – “Operating and financial review”, and elsewhere in the document. Theseforward-looking statements speak only as at the date of this document. The Company expresslydisclaims any obligation or undertaking to disseminate any updates or revisions to anyforward-looking statements contained herein to reflect any change in the Group’s expectationswith regard thereto or any change in events, conditions or circumstances on which any suchstatements are based unless required to do so by applicable law or the Prospectus Rules, DisclosureRules or Listing Rules.

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TABLE OF CONTENTS

Page

Directors, secretary, registered office and advisers 9

Offer statistics and expected timetable of principal events 10

PART I Summary 11

PART II Risk factors 17

PART III Information on the Petrofac Group 29

1. Overview 29

2. History 32

3. Business strategy 34

4. Description of the business 35

5. Health, safety and the environment (HSE) and security 54

6. Risk management 56

7. Employee Share Schemes 59

8. Dividend policy 63

PART IV Directors and Senior Managers 65

1. Board members 65

2. Other divisional chief executives 66

3. Senior Managers 66

4. Corporate governance 69

5. Directors’ and Senior Managers’ interests in Ordinary Shares 70

PART V Selected financial information on Petrofac 72

PART VI Operating and financial review 76

1. Overview 76

2. Background 78

3. Recognition of revenues and profit and timing of cash flows 79

4. Consolidation of joint ventures 81

5. Accounting treatment of foreign currencies 81

6. Backlog 81

7. Review of the financial results of the Petrofac Group 82

8. Review of the financial results of Engineering & Construction 89

9. Review of the financial results of Operations Services 91

10. Review of the financial results of Resources 94

11. Discontinued operations 96

12. Liquidity and cash resources 97

13. Ratio analysis 102

14. Capitalisation and indebtedness 104

15. Treasury management 106

16. Working capital 108

17. Current trading and prospects 108

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Page

PART VII Competent person’s report by Ryder Scott 109

PART VIII Details of the Offer 110

1. Summary of the Offer 110

2. Over-allotment and stabilisation 110

3. Underwriting Agreement 111

4. Dealing arrangements 111

5. CREST 112

6. Lock-in arrangements 112

7. Provisions governing sales 113

PART IX Additional Information 115

1. Responsibility 115

2. The Company 115

3. Share capital 115

4. Summary of the Memorandum and the New Articles 119

5. Employee Share Schemes 127

6. Directors and Senior Managers 127

7. Directors’ and Senior Managers’ emoluments 129

8. Major Shareholders 131

9. Selling Shareholders 132

10. Related party transactions 132

11. Taxation 133

12. Legal and arbitration proceedings 135

13. Underwriting arrangements 138

14. Material contracts 140

15. Subsidiaries and joint ventures 143

16. Property, plant and equipment 147

17. Research and development 148

18. Intellectual property 148

19. No significant change 148

20. Miscellaneous 148

21. Documents on display 149

PART X Financial Information on Petrofac 150

PART XI Definitions 210

PART XII Glossary of industry terms 214

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DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS

DirectorsRodney Chase, Non-Executive Chairman

Michael Press, Non-Executive, Senior Independent DirectorKjell Almskog, Non-Executive

Bernard de Combret, Non-ExecutiveAyman Asfari, Group Chief ExecutiveKeith Roberts, Chief Financial Officer

Maroun Semaan, Chief Executive Engineering & Construction

all of Whiteley Chambers, Don Street, St Helier, Jersey LE4 9WG

Company Secretary and registered officeOgier Secretaries (Jersey) Limited

Whiteley ChambersDon StreetSt Helier

Jersey JE4 9WG

Legal advisers to the CompanyAs to English Law

Norton RoseKempson HouseCamomile Street

London EC3A 7AN

As to Jersey LawOgier & Le MasurierWhiteley ChambersDon Street, St Helier

Jersey JE4 9WG

Sponsor and Global Co-ordinatorCredit Suisse First Boston

1 Cabot SquareLondon E14 4QJ

Joint Lead Managers and Joint BookrunnersCredit Suisse First Boston

1 Cabot SquareLondon E14 4QJ

Lehman Brothers25 Bank Street

London E14 5LE

Co-Lead ManagersJPMorgan Cazenove

20 MoorgateLondon EC2R 6DA

Shuaa CapitalLevel 28

Emirates TowersSheikh Zayed Road

Dubai, United Arab Emirates

Legal Advisers to the ManagersLinklaters

One Silk StreetLondon EC2Y 8HQ

Auditors and Reporting AccountantsErnst & Young LLP

1 More London PlaceLondon SE1 2AF

RegistrarsCapita IRG (Offshore) Limited

Victoria ChambersLiberation Square1/3 The EsplanadeSt. Helier, Jersey

JE4 0FF

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OFFER STATISTICS AND EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Offer statisticsOffer Price Range(1) 180 to 230 pence

Number of Ordinary Shares in the Offer,(to be sold by the Selling Shareholders) Up to 152,977,031

Number of Ordinary Shares subject to the Over-allotment Option Up to 15,297,702

Expected market capitalisation following the Offer(2) £707.6 million

Expected timetable of principal eventsEvent 2005

Announcement of Offer Price and allocation(1) Tuesday, 4 October

Publication of pricing statement containingthe Offer Price and number of OrdinaryShares in the Offer Tuesday, 4 October

Commencement of conditional dealings(in unlisted securities) on the LondonStock Exchange(3) 8.00 a.m. on Tuesday, 4 October

Admission and commencement ofunconditional dealings on the LondonStock Exchange 8.00 a.m. on Friday, 7 October

CREST accounts credited 8.00 a.m. on Friday, 7 October

Where applicable, definitive share certificatesdespatched by post on or as soon as practicable after Tuesday, 18 October

Each of the times and dates in the above timetable is subject to change.(1) It is currently expected that the Offer Price will be within the Offer Price Range, although it may be set above or below this range.

(2) Assumes the mid-point of the Offer Price Range.

(3) It should be noted that, if Admission does not occur, all conditional dealings will be in unlisted securities and will be of no effect.Any such dealings will be at the sole risk of the parties concerned.

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PART I

Summary

Any decision by a prospective investor to invest in the Ordinary Shares should be based onconsideration of the document as a whole and not solely on this summarised information.Following the implementation of the relevant provisions of the Prospectus Directive (Directive2003/71/EC) in each member state of the European Economic Area (EEA), civil liability will attachto the Directors in any such member state for this summary, including any translation hereof, butonly if this summary is misleading, inaccurate or inconsistent when read together with the otherparts of this document. Where a claim relating to the information contained in this document isbrought before a court in an EEA state, the claimant may, under the national legislation of the EEAstate in which the claim is brought, be required to bear the cost of translating this document beforelegal proceedings are initiated.

1. Information on PetrofacPetrofac is a leading international provider of facilities solutions to the oil and gas production andprocessing industry, with a diverse client portfolio which includes many of the world’s leadingintegrated, independent and national oil and gas companies. Through its three divisions, Engineering & Construction (E&C), Operations Services (OS) andResources, Petrofac designs and builds oil and gas facilities; operates, maintains or managesfacilities and trains personnel; and, where return criteria are met and revenue synergies identified,co-invests with clients and partners. Petrofac’s range of services allows it to help meet its clients’needs across the life cycle of oil and gas assets.Petrofac operates out of four strategically placed international centres in Aberdeen, Scotland;Sharjah, UAE; Mumbai, India; and Woking, England, and has a further 13 offices worldwide, withapproximately 5,500 employees.In FY 2004, Petrofac’s total revenue from continuing operations was US$951.5 million, with a netprofit attributable to Petrofac shareholders of US$46.1 million. In H1 2005, Petrofac’s totalrevenue from continuing operations was US$692.4 million, with a net profit attributable toPetrofac shareholders of US$36.4 million. At 30 June 2005, Petrofac’s backlog was US$2.5 billion.Petrofac’s business is focused on the UK Continental Shelf (UKCS), the Middle East, North Africaand the Former Soviet Union (FSU) and developed out of a US based engineering, procurement andfabrication business founded in 1981 and disposed of in 2003. Through both organic growth andstrategic acquisitions, Petrofac’s engineering, procurement and construction activities have beencomplemented with development planning and early stage engineering services, facilitiesmanagement, training and co-investment.

Engineering & Construction (E&C) DivisionThe E&C Division provides services to oil and gas industry clients to develop, design and constructfacilities, including:� integrated engineering, procurement and construction (EPC) services, including project

management, engineering, procurement services and the construction management andcommissioning of oil and gas facilities; and

� specialist engineering and consultancy services, including preparation of field developmentplans and associated studies, design development, front end engineering and design (FEED),de-manning and decommissioning studies, and the provision of risk, safety andenvironmental consultancy services.

In FY 2004, the E&C Division’s external revenue was US$467.1 million with net profit ofUS$33.1 million, representing approximately 49 and 72 per cent. respectively of the Group for thatperiod. In H1 2005, the E&C Division’s external revenue was US$390.2 million with net profit ofUS$23.0 million, representing approximately 56 and 63 per cent. respectively of the Group for thatperiod.The Directors believe the competitive strengths of the E&C Division include its:� disciplined project evaluation and selection;

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� proven in-house expertise in engineering design and project execution;

� proven project execution capability in challenging and geographically remote areas;

� established client relationships with both international and national oil companies;

� access to high calibre engineering personnel from low cost countries; and

� established local relationships with partners and sub-contractors.

Operations Services (OS) DivisionThe OS Division provides services to oil and gas industry clients to operate, maintain and modifyfacilities and train personnel, including:

� facilities operations and maintenance services for onshore and offshore installations,including the provision of operations management, maintenance services and consultancy,brownfield engineering services and specialist manpower; and

� specialist training and human resource development, including: safety training; operationsand technical training; emergency response and critical incident management training; andtraining support and management services.

In FY 2004, the OS Division’s external revenue was US$439.4 million with net profit of US$9.6million, representing approximately 46 and 21 per cent. respectively of the Group for that period.In H1 2005, the OS Division’s external revenue was US$279.6 million with net profit ofUS$7.3 million, representing approximately 40 and 20 per cent. respectively of the Group for thatperiod.

The Directors believe the competitive strengths of the OS Division include its:

� leading position as an independent provider of turnkey facilities management in the UKCS;

� established track record of facilities performance improvement;

� range of specialist and value-added services;

� strong safety track record; and

� highly regarded training businesses in practical fire-fighting, survival training, technicaltraining and emergency response training.

Resources DivisionIn selected situations, the Resources Division invests alongside its clients and partners in producingand proven or probable but not fully developed oil and gas reserves and energy infrastructure.Investments are assessed on the basis of their projected financial return reflecting the anticipatedrisks of the investment and, independently, the opportunity for the Group to provide services to itsclients and partners.

In FY 2004, the Resources Division’s external revenue was US$45.0 million with net profit ofUS$7.0 million, representing approximately 5 and 15 per cent. respectively of the Group for thatperiod. In H1 2005, the Resources Division’s external revenue was US$22.6 million with net profitof US$12.0 million, representing approximately 3 and 33 per cent. respectively of the Group forthat period.

As at 30 June 2005, the Group’s investments had a book value of US$96.6 million.

The Directors believe the competitive strengths of the Resources Division include its:

� experienced and high calibre project development team;

� ability to draw on client relationships, know-how and service expertise within the widerGroup to enhance identification, evaluation and completion of investments;

� ability to share high level business contacts established by the Resources Division to createnew business opportunities for the wider Group; and

� track record in challenging countries.

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2. Industry ConditionsAs a provider of services to the oil and gas industry, Petrofac’s revenues are driven by three broadfactors: (i) the level of capital expenditure of the oil and gas industry to develop proven andprobable hydrocarbons and construct related hydrocarbon processing, transportation and refiningfacilities; (ii) the level of operations outsourcing by oil and gas companies; and (iii) theindustry-wide requirements for trained personnel. In turn, these three factors are affected bycurrent and expected oil and gas prices. According to the BP Statistical Review of World EnergyJune 2005, there is limited excess production capacity relative to demand and, since 2004, this hasled to significant increases in current and expected oil and gas prices. The additional supplynecessary to match the expected increase in demand is likely to require an increased level ofspending across the life cycle of oil and gas production assets.

Three ongoing trends are affecting the structure of the oil and gas industry. First, during the 1990s,oil and gas companies adjusted their business models to focus on reservoir identification andmanagement, and activities such as project and facilities management have subsequently beenincreasingly outsourced. Second, there has been a trend for major integrated oil companies to divesttheir more mature and smaller-scale fields to independent E&P companies. This trend has beenevident in the UKCS, where Petrofac is a significant provider of facilities management servicesthrough its OS Division. Third, although the national oil companies have historically relied uponmajor integrated or independent companies to operate and manage their fields through concessionor licence agreements, they are increasingly seeking to develop their reserves and operate theirproduction processes themselves. As hydrocarbon reserves in OECD countries become increasinglydepleted, the remaining concentration of hydrocarbon reserves is shifting to non-OECD regionssuch as the Middle East, Caspian, North Africa, and West Africa, where hydrocarbon reserves aretypically controlled by national oil companies. The national oil companies are therefore awardingan increasing proportion of construction and facilities maintenance contracts. The Directorsbelieve that Petrofac’s service offerings and existing customer relationships with the independentE&P companies and national oil companies position it to benefit from each of these trends.

3. Business strategyThe Directors’ goal is to generate sustainable growth in value for Petrofac’s shareholders by being aleading international provider of facilities solutions to the oil and gas industry, deliveringworld-class project development, project management, engineering, procurement, construction,operations and training services.

The Directors aim to achieve this goal by:

� leveraging client relationships by providing a range of services across the life cycle of an asset;

� focusing on regions with major hydrocarbon reserves where significant capital andoperational expenditures are expected;

� expanding the Group’s established service offering into new countries;

� assisting clients in achieving their local content goals by increasing the use of indigenousresources and improving the competence of local workforces;

� improving revenue and earnings stability through a diversified and complementary businessmodel;

� attracting and retaining recognised specialists and key personnel;

� maintaining and improving on high safety standards; and

� identifying, acquiring, integrating and developing complementary businesses, whereappropriate.

4. Risk factorsRisks attaching to an investment in Petrofac include the following:

Business risks

� Demand for the Group’s services is linked to the level of expenditure by the oil and gasindustry, which is not easy to predict.

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� The trend for owners of oil and gas installations to outsource management of thoseinstallations may not continue or may be reversed.

� The Group may not accurately estimate the costs of, or execute within budget, its lump sumcontracts or may fail to complete contracts on time.

� The Group may be affected by the actions of third parties, including sub-contractors,manufacturers and partners.

� The Group is subject to counterparty credit risk.

� The investments made by the Group’s Resources Division may not generate profit or businesssynergies and may decline in value.

� The Group is dependent on a relatively small number of contracts at any given time.

� The Group’s revenues, cash flow and earnings may vary in any period depending on a numberof factors, including its performance of major contracts.

� The Group’s future business performance depends on the award of new contracts andrenewals and extensions of existing contracts.

� The Group’s long term contracts may be subject to early termination, variation ornon-renewal.

� The Group has significant international operations, particularly in the Middle East, NorthAfrica and the FSU, which are susceptible to political, social and economic instability.

� The Group is subject to the complexity of running a business with a wide geographic spread.

� The Group is exposed to foreign exchange risk.

� Consolidation among oil and gas companies may result in fewer potential clients for theGroup or in termination of existing contracts.

� Competition in the Group’s industries could result in reduced profitability and loss of clients.

� The Group may encounter difficulties integrating future acquisitions.

� Intellectual property infringement could adversely affect the financial performance of theGroup.

� Petrofac may not be able to manage its growth effectively.

Human resources risks

� The Group may be unable to attract and retain sufficient skilled personnel to meet itsoperational requirements.

� The change in ownership resulting from the Offer may have an adverse effect on the Group’sability to retain or incentivise its Directors and Senior Managers.

� The Group is dependent on its senior personnel.

� Work stoppages and other labour problems could adversely affect the Group.

Liability risks

� The Group could be subject to substantial liability claims due to the hazardous nature of itsbusiness.

� The Group conducts its business within strict environmental regimes and may be exposed topotential liabilities and increased compliance costs.

� The Group conducts its operations within strict health and safety regimes, particularly in theUKCS. Failure to comply with the relevant regulations could adversely affect its reputationand future revenues.

� The Group’s businesses may be subject to claims for professional errors and omissions.

� Liability to clients under warranties may materially and adversely affect the Group’searnings.

� The Group is, and may continue to be, involved in litigation.

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� Damage to the Group’s reputation and business relationships may have an adverse effectbeyond any monetary liability arising.

Taxation risks

� Changes in certain fiscal regimes could adversely impact the financial condition of the Group.

� If the Company were deemed to be resident for taxation purposes outside Jersey, this couldhave adverse taxation implications.

Risks relating to the Ordinary Shares

� Because the Company is a holding company it is financially dependent on receivingdistributions from its subsidiaries.

� If the Company becomes a controlled foreign company for UK taxation purposes, a UKresident holder of 25 per cent. or more of the Ordinary Shares would be exposed to a tax risk.

� The Group’s reporting currency is different to the currency in which dividends will be paid.

� Investors may not be able to resell their Ordinary Shares at or above the Offer Price.

� The availability of Ordinary Shares for future sale could depress the share price.

5. Summary financial informationThe table below sets out Petrofac’s summary financial information for the periods indicated.

Summary Consolidated Income Statement

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Continuing operationsEngineering & Construction 390,216 185,335 467,116 340,891 364,781Operations Services 279,622 196,064 439,372 273,372 12,703Resources 22,572 21,569 45,042 14,439 13,914

Revenue 692,410 402,968 951,530 628,702 391,398

Profit from continuingoperations before tax andfinance costs 41,081 32,453 68,283 37,747 35,296

Profit for the period fromcontinuing operations 36,392 21,948 46,037 35,195 34,022

Discontinued operations Loss for the period fromdiscontinued operation (202) (12,942) (13,162) (16,241) (12,268)

Profit for the period 36,190 9,006 32,875 18,954 21,754

Attributable to:Petrofac shareholders 36,190 9,052 32,921 22,118 22,068Minority interests — (46) (46) (3,164) (314)

36,190 9,006 32,875 18,954 21,754

Continuing operationsEBITDA 54,346 45,143 96,065 48,075 39,043

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Selected Balance Sheet Items30 June 31 December 31 December 31 December

2005 2004 2003 2002US$’000 US$’000 US$’000 US$’000

Property, plant and equipment (net bookvalue) 123,806 123,413 119,395 93,268Trade and other receivables 209,742 200,042 96,485 88,238Cash and short term deposits 141,427 143,534 97,502 110,524Total assets 749,012 729,357 527,088 467,643

Total equity 133,883 138,558 109,394 96,102Trade and other payables 100,080 114,873 110,516 116,021Total debt(1) 155,025 161,478 117,593 87,116Total equity and liabilities 749,012 729,357 527,088 467,643

(1) Total debt comprises current and non current interest-bearing loans and borrowings and also includes US$37.7 million of Aordinary shares which, immediately prior to Admission, will be converted into ordinary shares and consequently reclassified asequity.

6. Summary of the OfferThe Offer comprises an offer of up to 152,977,031 Ordinary Shares by the Selling Shareholders.The Ordinary Shares are being offered to certain institutional investors in the United Kingdom andthe rest of the world (excluding the United States).The Over-allotment Shareholders have granted the Stabilising Manager, on behalf of theUnderwriters, the Over-allotment Option, exercisable for a period of up to 30 days afterpublication of the Offer Price, over Ordinary Shares representing up to 10 per cent. of the OrdinaryShares in the Offer at the Offer Price to cover any over-allotments made in connection with theOffer and to cover short positions resulting from stabilisation transactions.Under the Offer, all Ordinary Shares will be sold at the Offer Price, which will be determined by theJoint Lead Managers following consultation with the Company, and is expected to be announcedon 4 October 2005. Admission and unconditional dealings in the Ordinary Shares are expected tocommence on the London Stock Exchange on 7 October 2005. Prior to that time, it is expected thatdealings in the Ordinary Shares will commence on a conditional basis on the London StockExchange on 4 October 2005. These dates may change.Dealings on the London Stock Exchange before Admission will only be settled if Admission takesplace and will be for settlement three business days after Admission. All dealings before thecommencement of unconditional dealings will be in unlisted securities, of no effect if Admissiondoes not take place and at the sole risk of the parties concerned.

7. ManagementDirectors and Senior ManagersThe Company’s Directors are:Rodney Chase, Non-Executive ChairmanMichael Press, Non-Executive, Senior Independent DirectorKjell Almskog, Non-ExecutiveBernard de Combret, Non-ExecutiveAyman Asfari, Group Chief ExecutiveKeith Roberts, Chief Financial OfficerMaroun Semaan, Chief Executive Engineering & Construction

The Board is supported by divisional chief executives, Amjad Bseisu and Robin Pinchbeck, and afurther 16 Senior Managers.

Lock-in arrangementsThe New Articles will contain provisions governing the transfer of Ordinary Shares by certainemployee Shareholders.In addition, the Company and certain Selling Shareholders and members of senior managementhave agreed not (without the Joint Lead Managers’ prior consent) to issue, sell, grant options overor otherwise dispose of Ordinary Shares for designated lock-in periods.

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PART II

Risk factors

Any investment in the Ordinary Shares is subject to a number of risks. Before making anyinvestment decision, prospective investors should carefully consider the factors and risks attachingto an investment in the Ordinary Shares, together with all other information contained in thisdocument including, in particular, the risk factors described below. The information below doesnot purport to be exhaustive. Additional risks and uncertainties not presently known to the Group,or that the Group currently deems immaterial, may also have an adverse effect on its business.Investors should consider carefully whether an investment in the Ordinary Shares is suitable forthem in light of the information in this document and their personal circumstances.

Business risksDemand for the Group’s services is linked to the level of expenditure by the oil and gas industry,which is not easy to predict.

Demand for the majority of the Group’s oil and gas services is dependent on expenditure by the oiland gas industry for the exploration, development and production of crude oil and natural gasreserves. Lower expenditure by the oil and gas industry may result in lower demand for the Group’sservices, which would adversely affect the Group’s financial performance and condition.

Demand for the Group’s services may be influenced by cyclical patterns in the wider oil and gasindustry. In particular, the Group’s Resources Division, which has investments in producing fields,is potentially exposed to fluctuations in oil and gas prices, while the Group’s Operations Services(OS) Division and Engineering & Construction (E&C) Division may also be indirectly affected bysuch changes. The diversity of the Group’s operations may not protect the Group against suchfluctuations in demand. Increases in oil and gas prices may not result in an increase in demand forthe Group’s services. On the other hand, a substantial or extended decline in oil or gas prices wouldbe likely to cause a decline in the demand for the Group’s services.

The trend for owners of oil and gas installations to outsource the management of those installationsmay not continue or may be reversed.

The Directors believe that asset owners are increasingly outsourcing the management of theironshore and offshore assets. If this outsourcing trend does not continue (in particular, outside theUKCS), or is reversed, the number of potential clients of the Group may be reduced. In addition, theGroup may lose existing clients if this trend reverses. The Group may also lose employees (whocould have been retained and redeployed elsewhere) if owners of facilities with the managementoutsourced to Petrofac choose to take management of such facilities and, accordingly, the relevantemployees, in-house. Reductions in oil prices to levels that reduce the economic life of fields orresult in reduced divestiture activity by major oil companies (which have been traditional users ofoutsourced management) may lead to less demand for the Group’s services. A reduction in demandfor the Group’s services due to a shift in this outsourcing trend may have a material adverse effect onthe Group’s future financial performance and condition.

The Group may not accurately estimate the costs of, or execute within budget, its lump sumcontracts or may fail to complete contracts on time.

Under the Group’s lump sum contracts (including its major engineering, procurement andconstruction (EPC) contracts), the Group performs its services and provides its products at a fixedprice. If the Group’s cost estimate for a contract is inaccurate, or if the Group does not execute thecontract within its cost estimates, cost overruns may cause the project to be less profitable thanexpected or cause the Group to incur losses.

The Group’s EPC projects generally involve complex design and engineering, significantprocurement of equipment and supplies, and extensive construction management. Many projectsare ongoing for extended time periods, often in excess of two years, from initial award through tocompletion. During this time the Group may encounter difficulties in the design or engineering of

18

the project or in equipment and supply delivery, schedule changes or other disruption (such aspolitical or local community unrest or prolonged adverse weather conditions), some of which maybe beyond its control, and any of which may impact its ability to complete the project within budgetor in accordance with the original delivery schedule. Delays in completion of a lump sum project orfailure to meet certain Key Performance Indicators (KPIs) may in certain circumstances also exposethe Group to liquidated damages, which may have an adverse effect on the Group’s financialperformance.

The Group may be affected by the actions of third parties, including sub-contractors,manufacturers and partners.

The Group relies on third-party equipment manufacturers and sub-contractors in the completionof its projects. To the extent that the Group cannot engage sub-contractors or acquire equipment ormaterials according to its plans and budgets, its ability to complete an EPC project in a timelyfashion or at a profit may be impaired. If the amount the Group is required to pay for these goodsand services exceeds the amount estimated in bidding for fixed price work, the Group couldexperience losses under the relevant contracts. In addition, if a sub-contractor or a manufacturer isunable to deliver its services, equipment or materials according to the negotiated terms or on time,the Group may be required to purchase such services, equipment or materials from another sourceat a higher price. The resulting additional costs may be substantial, and the Group may be requiredto compensate the project client for delays. The Group may not be able to recover all of these costsin all circumstances, which may reduce the profit to be realised or result in a loss on a project forwhich the services, equipment or materials were needed.

The Group may bid for a particular contract jointly with a consortium or joint venture partners. Inthese circumstances, the Group’s ability to maximise the profitability of any contract awarded to itmay be adversely affected by the performance of its consortium or joint venture partners. Inaddition, the Group may be dependent on the expertise of partners in assessing certain of the costsof the contract. To the extent such costs are inaccurately calculated in relation to lump sumcontracts, the Group may be exposed to its share of any cost overruns of the consortium or jointventure, which could have a material adverse effect on the financial performance of the Group.

In certain circumstances, the Group may be jointly and severally liable for the acts or omissions ofits consortium or joint venture partners. This may arise under the terms of the consortium or jointventure arrangement or because the Group is exposed to the losses of any consortium or jointventure vehicle. In addition, the Group may in certain circumstances accept primary liability byway of a separate guarantee for the overall performance of the contract where it is only providingpart of the goods or services to the client. If a client pursued claims against the Group or against aconsortium or joint venture vehicle as a result of the acts or omissions of the Group’s partners, theGroup’s ability to recover from such partners may be limited. Recovery under such arrangementsmay involve delay, management time, costs and expenses or may not be possible at all, which couldadversely affect the Group’s financial performance.

The Group is subject to counterparty credit risk.

The Group provides its services to a variety of contractual counterparties and is therefore subject tothe risk of non-payment for services it has rendered or non-reimbursement of costs it has incurred.The EPC contracts which the Group enters into may require significant expenditure by the Groupprior to receipt of relevant payments from the client and expose the Group to potential credit risk.In addition, the Group is active in a number of markets where payment terms are not always met orwhere its counterparties may take a strict contractual approach to performance of KPIs regardlessof the overall success of the project. In these markets, management intervention is often required inorder to obtain payment.

Petrofac may enter into contracts with a joint venture or consortium representing the various assetowners. Unless appropriate guarantees can be obtained by the Group, the Group is subject to ahigher risk of non-payment when its contractual counterparty is a special purpose joint venture orconsortium vehicle which does not have significant financial resources of its own.

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Failure by any of its contractual counterparties to pay for services provided or reimburse costsincurred by the Group could have a material adverse effect on the Group’s cashflow and on theprofitability of the relevant contract for the Group. This does not qualify the working capitalstatement made by the Company in Part VI – “Operating and financial review”.

The investments made by the Group’s Resources Division may not generate profit or businesssynergies and may decline in value.

The Group’s Resources Division invests in companies and projects in order to earn an investmentreturn and to secure additional service provision by the Group’s E&C and OS Divisions. However,there can be no assurance that any investment will generate the expected return or provide theexpected business synergies for the other two divisions of the Group.

If the market value of any of the Group’s investments declines, the Group may be forced to writedown the recorded value of the investment. The Group may also be required to make additionalcash investments in the future to fund the operating or capital expenses of its investments.Furthermore, some of the investments are subject to contractual and other restrictions on transferand the Group may not be able to dispose of them at attractive prices or in a timely manner. TheGroup’s financial performance and condition may be impaired by investments which do notgenerate profit or business synergies or which decline in value or cannot be remarketed.

The Group is dependent on a relatively small number of contracts at any given time.

Due to the size of many of its E&C and OS projects, the majority of the Group’s revenue in any yearmay be derived from a relatively small number of contracts. For the 6 months ended 30 June 2005for example, contracts for five clients represented approximately 90 per cent. of the Group’srevenues from its E&C Division and contracts for five clients represented approximately 43 percent. of the Group’s revenues from its OS Division. Consequently, should any one of thosecontracts prove less profitable for the Group than expected, or be loss making, revenues maydecline, which may have a material adverse effect on the Group’s financial performance andcondition. In addition, the Group may have multiple projects for the same client; therefore oneclient may comprise a significant percentage of the Group’s backlog.

Part of the Group’s strategy is to bid for integrated projects, which involve several different parts ofthe Group and to leverage existing relationships to offer services from its other divisions. In theevent that this strategy results in the Group’s portfolio becoming more concentrated on fewercontracts or fewer clients, its exposure to individual contract risks will increase. Loss of a contractfor a client of more than one division of the Group or worse than expected performance under sucha contract may have a knock-on impact on contracts for the same client in the other divisions, andmay thereby have a correspondingly more significant adverse effect on the Group’s financialperformance and condition.

The Group’s revenues, cash flow and earnings may vary in any period depending on a number offactors, including its performance on major contracts.

The Group’s revenues from its lump sum contracts are recognised using thepercentage-of-completion (POC) method of accounting. This involves the Group recognising anincreasing proportion of contract revenues and earnings as the contract progresses towards 100 percent. completion. The revenues and earnings (or losses) are based on estimates of contract revenues,costs and profitability and may not reflect actual revenues, earnings or losses for the contract. Inaddition, although revenue and earnings may be recognised, these do not represent cash received bythe Group and accordingly there will be a difference between the Group’s revenues and cashflowsfor any particular reporting period.

Cancellations of projects or delays in completion of contracts could affect the revenue, cash flowand earnings actually received from contracts reflected in the Group’s backlog, and in certaincircumstances may result in a reduction, reversal or elimination of previously reported revenues orearnings. Accordingly there can be no assurance that the revenues projected in the Group’s backlogwill be realised. In the event of project cancellation, the Group may have no contractual right to thetotal revenues reflected in its backlog other than reimbursement for certain costs. If the Group were

20

to experience significant cancellations or delays of projects in its backlog, its financial performanceand condition would be adversely affected. This does not qualify the working capital statementmade by the Company in Part VI – “Operating and financial review”.

The Group’s future business performance depends on the award of new contracts and renewals andextensions of existing contracts.

A substantial portion of the Group’s revenues is directly or indirectly derived from large-scaleprojects. It is generally very difficult to predict whether and when the Group will be awarded suchcontracts as they frequently involve a lengthy and complex bidding and selection process. Thisprocess is affected by a number of factors, such as market conditions, financing arrangements andgovernmental approvals. In addition, many of these contracts are subject to financing contingenciesand, as a result, the Group is subject to the risk that it or the client will not be able to secure thenecessary financing for the project.

The bidding costs associated with tendering for new contracts or for extensions in the scope of workor renewals of existing contracts can be significant and may not necessarily result in the award of anew contract, or in the extension or renewal of an existing contract. These costs are usually notrecoverable even if the tender is won. The Group participates in a number of such tenders each year.Failure to win such tenders may adversely affect the Group’s future financial performance. Inaddition, preparation of bids can divert significant management and operating resources awayfrom the day-to-day running of the business.

The Group’s long term contracts may be subject to early termination, variation or non-renewal.

Certain of the contracts entered into by members of the Group are long term contracts, which areperformed over a period that often exceed two years. Any of the Group’s contracts may beterminated earlier than expected, either within the relevant notice periods or upon default ornon-performance by the contracting Group member. In such circumstances the Group may nothave the right to receive compensation in respect of such early termination.

Certain of the long term contracts of the Group’s OS Division give clients the right to terminate atany time on short notice with little or no penalty. In addition, failure to meet certain milestonesunder a Field Development Plan (FDP) relating to investments of the Resources Division may leadto other adverse effects including, for example, loss of a licence.

Termination rights may also arise as a result of a change of control of the Company or a change inthe level of holdings in the Company’s issued share capital. In particular, the Ohanet Consortium(in which the Group has a 10 per cent. interest) operates subject to certain provisions of Algerianlaw, which regulate the direct or indirect ownership by foreign companies of interests in Algerianpartnerships for the prospection, research and exploitation of liquid hydrocarbons, and which can,in certain circumstances (including a change of control or a third party acquiring a determiningpower in the direction or management of the Company, for example, by acquiring a holding inexcess of 10 per cent. or the power to decide on the composition of the Board) give rise to a right oftermination. As detailed in the paragraph headed “Ohanet, Algeria” in section 4 of Part III –“Information on the Petrofac Group”, it is not envisaged that the Offer will give rise to such a rightof termination. However there can be no assurance that changes in ownership of the issued sharecapital of the Company, including as a result of the Offer, will not give rise to such terminationrights arising in relation to the Ohanet Consortium in the future.

In addition, certain of the Group’s contracts, particularly for the OS Division, are subject torenewal at intervals. There can be no assurance that such contracts will be renewed and, if renewed,that the renewal will be on the same terms.

The early termination or non-renewal of contracts would have an adverse impact on the Group’sfinancial performance and condition as they may not be replaced by new contracts.

The Group’s contracts may also be subject to variation by renegotiation or by requiring the Groupto provide a different level of service, which may result in reduced profitability or losses for theGroup.

21

The Group has significant international operations, particularly in the Middle East, North Africaand the Former Soviet Union (FSU), which are susceptible to political, social and economicinstability.

The Group’s international operations, particularly those in the Middle East, North Africa and theFSU, may be susceptible to political, social and economic instability and civil disturbances. Risksfor the Group in operating in such areas include:

� difficulties in collecting accounts receivable and longer collection times than in the UK;

� disruption to operations, including strikes, civil actions or political interference;

� restrictions on the movement of funds or limitations on the repatriation of funds;

� the imposition of sanctions by the UK government, EU Commission, US government or othergovernments; and

� limited access to markets for periods of time.

Any of the above factors could result in disruptions to the Group’s business, increase costs, result inliability for liquidated damages or reduce future growth opportunities. Potential losses caused bythese disruptions may not be covered by insurance.

The Group is subject to the complexity of running a business with a wide geographic spread.

The Group operates its business in a range of international locations and it is expected that thegeographical expansion of the Group’s business will take it into new locations in the future. TheGroup currently operates its businesses and markets its services in more than 20 countries.

Through its international presence the Group is subject to increased risk from a number of legal,economic and market factors which could have an adverse effect on the ability of the Group toprovide services in those areas, or to continue to expand its business geographically. Such risksinclude:

� increased expenses due to the requirement in some countries that business be conductedthrough local agents;

� reversal of current policies (including favourable tax and lending policies) encouragingforeign investment or foreign trade by the governments of countries in which the Groupoperates;

� changes in and difficulties in complying with laws and regulations of different countries,including tax and labour laws;

� restrictive actions by local governments, including the imposition of tariffs and limitations onimports or exports;

� nullification, modification or renegotiation of contracts; and

� expropriation of assets.

The occurrence of any of these events could have an adverse effect on the financial performance andcondition of the Group and adversely affect the value of its assets.

In addition, the geographical spread of the Group’s operations means co-ordination of effort andcommunications with employees are subject to certain challenges, which could lead to inefficientallocation of resources or duplication of effort.

Furthermore, distance from the Group’s principal locations can make it more difficult to implementand impress upon local workforces the Group’s policies on matters such as health and safety andcan present challenges in the supervision of the Group’s sub-contracted employees. Failure todeliver consistently high standards across all of its fields of operations could create risks for theGroup, including reputational risks.

22

The Group is exposed to foreign exchange risk.

The Group’s reporting currency is US Dollars. All of the revenues and costs from the UKCSoperations of its OS Division are denominated in Sterling. The US Dollar contribution of the OSDivision in the Group’s reported results, and to the Group’s overall level of backlog, may thereforefluctuate with changes in Sterling/US Dollar exchange rates.

From time to time the Group enters into contracts or incurs costs denominated in currencies otherthan US Dollars or Sterling and may not always be able to match revenues with costs denominatedin the same currency. Whilst the Group attempts to minimise its exposure to such foreign exchangerisks through measures such as buying the local currencies of its suppliers and vendors forward atthe date on which the contract is awarded and by including escalation provisions for projects ininflationary economies, there can be no assurance that the Group will be able to successfully hedgeits foreign exchange risks.

Consolidation among oil and gas companies may result in fewer potential clients for the Group orin termination of existing contracts.

Consolidation among oil and gas companies may result in fewer potential clients for the Group.This may lead to increased competition to secure contracts. Furthermore, mergers and acquisitionsmay result in the acquisition of a client of the Group by an entity which does not have a policy ofoutsourcing services or which has established relations with a competitor of the Group. Similarly, achange of control of an asset managed by the Group may lead to the early termination of theGroup’s facilities management contract in relation to that asset.

The termination of any of the Group’s facilities management contracts or a reduction in demand forthe Group’s services as a result of merger and acquisition activity may have a material adverse effecton the Group’s financial performance and condition.

Competition in the Group’s industries could result in reduced profitability and loss of clients.

Contracts for the Group’s services and products (including the majority of its EPC contracts andcertain of its OS contracts) are generally awarded following a competitive process. While servicequality, technological capacity and performance and personnel, as well as reputation andexperience, are considered in client decisions, price is the major factor in most tender awards. In thepast, the Group’s industry has been frequently subject to price competition. If price competitionwere to intensify in the future, the number of tenders meeting the Group’s margin criteria coulddecline and the Group’s financial performance could be adversely affected.

The Group may encounter difficulties integrating future acquisitions.

From time to time, the Group has made acquisitions to pursue market opportunities, increase itsexisting capabilities or expand into new areas of operation. The Group may make furtheracquisitions in the future. If such acquisitions are pursued and executed, the Group may encounterdifficulties integrating these acquisitions into its business and in successfully realising the growthexpected from such acquisitions. To the extent the Group encounters problems in integrating itsacquisitions, the Group’s financial performance and condition could be adversely affected.

The Group’s expansion into new business areas may also expose it to additional business risks thatare different from those it has experienced to date. Failure to manage such risks successfully mayhave an adverse effect on the Group’s financial performance and condition.

Intellectual property infringement could affect the financial performance of the Group.

In providing its services the Group uses both know-how which it regards as proprietary and certainintellectual property which it licenses from third parties. The Group has not protected itsproprietary know-how by patents or other registered form of intellectual property right protectionand, while it seeks to secure appropriate contractual protection, it is possible that third parties mayaccess and utilise this know-how to the detriment of the Group. The Group’s business may beadversely affected if it infringes patents or other intellectual property rights held by third parties orif certain licenses are withdrawn or not renewed.

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The Group invests resource in building the goodwill and brand recognition applicable to the namesPetrofac, RGIT Montrose and Rubicon. While steps have been commenced to protect the Petrofacname through formal trade and service mark registration or similar legal protection, until thisprocess is complete the Group may have a limited ability in law to prevent third parties fromdiluting the Group’s brand and goodwill in certain markets. The Group uses the RGIT Montrosename under licence. Failure to protect adequately the Group’s brand and goodwill may have anadverse effect on the financial performance and condition of the Group.

Petrofac may not be able to manage its growth effectively.

Petrofac’s business and operations have experienced significant growth. Since 2002, Petrofac’stotal revenue has grown at a compound annual growth rate of 56 per cent. The growth in theGroup’s business has placed, and is likely to continue to place, significant demands on itsoperational and financial infrastructure as well as upon management.

The Group has upgraded and streamlined its financial and management reporting systems over thelast three years, including the implementation of a new consolidation and financial reportingsystem which was completed in early 2005. In addition, the Group has attempted to addresspersonnel resourcing issues that have arisen as a result of its international expansion. If thesemeasures prove ineffective, its financial performance and operating results could be materially andadversely affected. The Group may have to incur further expenditure to address additionaloperational and financial control requirements and management resources would be required to becommitted to their implementation.

The Group operates from a number of locations internationally and does not currently have aformalised disaster recovery plan covering all of its locations to ensure the continued operation ofcore information technology systems and business processes in the event of a serious disruption.The Directors plan to develop a disaster recovery plan for all of the Group’s major locations.However if this is not implemented successfully, Petrofac’s financial performance and conditioncould be materially adversely affected.

Human resources risksThe Group may be unable to attract and retain sufficient skilled personnel to meet its operationalrequirements.

Demand for engineers, production operations personnel and other technical and managementpersonnel is currently high worldwide and supply is limited, particularly in the case of skilled andexperienced engineers and field service personnel in Western Europe and the US. This shortage isexacerbated by the ageing of the current skilled workforce which is not being fully replaced byyounger entrants, as well as an increasing reluctance of workers from Western Europe and the US towork overseas and by local employment legislation, such as the European Working Time Directive,which may limit the hours and shift patterns that employees in the UKCS can work. This shortagemay also be exacerbated where the Group is required by national oil companies to use localworkforces, which may not be fully trained.

The ability of the Group to meet its operational requirements and the future growth andprofitability of the Group may be affected by the scarcity of engineers, production operationspersonnel and other technical and management personnel or by potential increases incompensation costs associated with attracting and retaining these employees.

The change in ownership resulting from the Offer may have an adverse effect on the Group’s abilityto retain or incentivise its Directors and Senior Managers.

At Admission, the Directors and Senior Managers of the Group, together with their connectedpersons, will own, or have a beneficial interest in, approximately 53 per cent. of the OrdinaryShares. It is expected that following the Offer that group will own, or have a beneficial interest in,up to approximately 39 per cent. of the Ordinary Shares. This change in ownership structure mayresult in the interests of the Group and its Directors and Senior Managers becoming, or beingperceived to be, less aligned. There can be no assurance that the measures put in place by the Groupaimed at incentivising and retaining Directors and Senior Managers will be successful.

24

The Group is dependent on its senior personnel.

The Group depends on the continued services of its senior personnel, including its directors andsenior management from time to time. The existing Directors and Senior Managers possessmarketing, engineering, project management, financial and administrative skills that are importantto the operation of the Group’s business.

The Group is putting in place succession planning measures aimed at ensuring the development ofits employees to provide successors, over time, for the Group’s existing Directors and SeniorManagers. However, there can be no assurance that these measures will be successful or that theGroup will be able to attract, develop or retain executives of the right calibre. The ability of theGroup to meet its operational requirements and the future growth and profitability of the Groupmay be affected by the scarcity of senior management personnel.

If the Group lost or suffered an extended interruption in the services of a substantial number of itsDirectors or Senior Managers, or if it were unable to attract or develop a new generation of seniormanagement, its financial performance and condition could be adversely affected.

The Group does not, in all cases, have the benefit of restrictive covenants in relation to its Directorsand Senior Managers, and where it does, such restrictive covenants may not be enforceable.

Work stoppages and other labour problems could adversely affect the Group.

A lengthy strike or other work stoppage at any of the Group’s facilities could have a materialadverse effect on the Group’s ability to conduct its activities and complete its contractualobligations. Some of the UKCS employees of the OS Division are represented by labour unions.From time to time the Group may also experience attempts to unionise its non-union operations,and it may experience additional union activity in the future. In addition, the Group may encounterdelays and interruptions caused by industrial action affecting its sub-contractors or suppliers, or bypolitical interference or local community action. Any such delays, stoppages or interruptions couldhave a material adverse effect on the Group’s financial performance and condition.

Liability risksThe Group could be subject to substantial liability claims due to the hazardous nature of itsbusiness.

Many of the Group’s services are carried out in hazardous environments, such as development andproduction installations, and the Group engineers and constructs large industrial facilities in whichsystem failure can be disastrous. An accident or a service failure can cause personal injury, loss oflife, damage to property, equipment or the environment, consequential losses and suspension ofoperations. The Group may also be liable for acts and omissions of sub-contractors or joint venturepartners which cause such loss or damage. The Group’s insurance and its contractual limitations onliability may not adequately protect it against liability for such events, including events involvingpollution, or against losses resulting from business interruption. In addition, indemnities which theGroup receives from sub-contractors may not be easily enforced if the relevant sub-contractors donot have adequate resources. Moreover, the Group may not be able to maintain insurance at levelsthat it deems adequate or ensure that every contract contains adequate limitations on liabilities.Any claims made under its insurance policies are likely to cause the Group’s premiums to increase.Any future damage caused by the Group’s products or services that are not covered by insurance,are in excess of policy limits, are subject to substantial deductibles or are not limited by contractuallimitations of liability could adversely affect the financial performance and condition of the Group.

The Group conducts its business within a strict environmental regime and may be exposed topotential liabilities and increased compliance costs.

The Group is subject to increasingly stringent laws and regulations relating to environmentalprotection in conducting the majority of its operations, including laws and regulations governingemissions into the air, discharge into waterways, and the generation, storage, handling treatmentand disposal of waste materials. The Group incurs, and expects to continue to incur, capital andoperating costs to comply with environmental laws and regulations. The technical requirements of

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environmental laws and regulations are becoming increasingly expensive, complex and stringent.These laws may provide for strict liability for damage to natural resources or threats to publichealth and safety. Strict liability can render a party liable for environmental damage whether or notnegligence or fault on the part of that party can be shown. Some environmental laws provide forjoint and several strict liability for remediation of spills and releases of hazardous substances.

The business of the Group often involves working around and with volatile, toxic and hazardoussubstances and other highly regulated materials, the improper characterisation, handling ordisposal of which could constitute violations of UK or other legislation and result in criminal andcivil liabilities. Environmental laws and regulations generally impose limitations and standards forcertain pollutants or waste materials and require the Group to obtain permits and comply withvarious other requirements.

Governmental authorities may seek to impose fines or penalties on the Group, or revoke or denyissuance or renewal of operating permits, for failure to comply with applicable laws andregulations. The Group could become subject to potentially material liabilities relating to theinvestigation and clean-up of contaminated properties, and to claims alleging personal injury orproperty damage as the result of exposures to, or releases of, hazardous substances or as a result ofaccidents or other incidents at facilities managed by the Group or otherwise resulting from theGroup’s operations, all of which could have a material adverse effect on the Group’s financialcondition and results of operations.

In addition, certain of the Group’s contracts subject the Group to possible claims if the Group failsto meet certain environmental standards which may be more stringent than those imposed underthe regulatory regime in force in the relevant country of operation.

Stricter enforcement of existing laws and regulations, the introduction of new laws and regulations,the discovery of previously unknown contamination or the imposition of new or increasedrequirements could require the Group to incur costs or become the basis of new or increasedliabilities that could reduce earnings and cash available for operations.

The Group conducts its operations within a strict health and safety regime, particularly in theUKCS. Failure to comply with the relevant regulations could adversely affect its reputation andfuture revenues.

The Group is subject to strict health and safety regimes, governing the full spectrum of itsoperations. The Group may be exposed to fines, penalties or prosecutions by governmentalauthorities in respect of non-compliance with applicable regulations.

The Group’s OS Division manages the operation of installations in the UKCS on behalf of a numberof clients which own the installations and have been granted a production licence by theDepartment of Trade and Industry (DTI). As part of its management role in assisting certain clientsto discharge responsibilities under their licences, the Group takes on full responsibility for the safemanagement of these offshore installations. In such cases, under the applicable offshore safetyregulations, the Group is considered to be acting as “duty holder” in performing this role. TheGroup is responsible, amongst other matters, for preparing and updating a safety case,demonstrating that it has considered all the possible hazards that may occur on the installation,their likelihood of occurrence and how it has minimised the associated risks. The applicableoffshore health and safety regulations are enforced by a team of inspectors from the UK Health andSafety Executive (H&S Executive). Improvement notices or prohibition notices may be filed orprosecutions may be brought against the Group by the H&S Executive for its failure to comply withthese regulations. A prosecution in the area of health and safety could adversely affect thereputation of the Group, including in particular, its reputation as an operator offering duty holdercapability. This, in turn, could adversely affect the future revenue and profits of the Group’s OSDivision, and its ability to generate new business.

The Group’s businesses may be subject to claims for professional errors and omissions.

Providing project management, engineering and construction services involves the risk ofcontractual and professional errors and omissions and other liability claims, as well as adversepublicity that may adversely affect the Group’s financial performance and condition. The Group

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may not be able to maintain or obtain adequate insurance coverage at rates it considers reasonableor it may take the decision not to insure such risks. Even in the event coverage is obtained, claimsmay exceed such insurance coverage.

Liability to clients under warranties may materially and adversely affect the Group’s earnings.

The Group provides warranties as to the services it provides and as to the proper operation andadherence to specifications of the engineering and construction services equipment it designs,modifies or constructs. Failure of this equipment to operate properly or to meet specifications mayincrease the Group’s costs by requiring additional engineering resources and services, replacementof parts and equipment or monetary reimbursement to a client. Furthermore, these failures maycause significant and costly damage to the equipment. To the extent that the Group incurssubstantial warranty claims in any period, its reputation, ability to obtain future business andfinancial performance and condition could be materially and adversely affected.

The Group is, and may continue to be, involved in litigation.

In the ordinary course of business the Group has been and may from time to time in the future benamed as a defendant in legal actions in connection with the activities it carries out. These actionsmay include employment-related claims and contractual disputes (including claims bysub-contractors) or claims for personal injury or property damage which occurs in connection withservices performed relating to project or construction sites.

The Group has had operations and shareholders in the US and continues to have a small presence inthe US. The Board considers the litigation risk in the US to be higher than in other jurisdictions. TheGroup currently is and may in the future be exposed to litigation in respect of past corporate actionsand past and present operations. For further detail on current litigation in the US, please seeparagraph 12 in Part IX – “Additional Information”.

In addition to being a defendant, the Group may also act as claimant or counterclaimant in certainactions, for example seeking recovery of monies owed.

Any litigation could have adverse financial consequences for the Group, and the Group may nothave adequately reserved for the potential losses associated with litigation payments. Litigationalso involves a diversion of management time from the day-to-day running of the business.Negative outcomes of litigation in which the Group is involved may also adversely affect theGroup’s reputation.

Damage to the Group’s reputation and business relationships may have an adverse effect beyondany monetary liability arising.

The Group’s business depends on its client goodwill, its reputation and on maintaining goodrelationships with its clients, joint venture partners, employees and regulators. Any circumstanceswhich publicly damage the goodwill of the Group, injure its reputation or damage its businessrelationships may lead to a broader adverse effect on its business and prospects by way of loss ofbusiness, goodwill, clients, joint venture partners and employees than solely the monetary liabilityarising directly from the damaging events. For example, the reputation of the Group as an entityoffering to undertake the role of duty holder in the UKCS would be likely to be adversely affected byan incident which involved a serious breach of a health and safety regulation.

Taxation risksChanges in certain fiscal regimes could adversely impact the financial condition of the Group.

The Group’s profitability is impacted by the levels of direct and indirect taxation levied on its profitsand services and on the profits and services of its clients in the locations in which it operates.Increases in these direct or indirect taxes can adversely affect the returns that can be achieved by theGroup and its clients and may result in a decline in revenues and profits. Such increases may, inparticular, impact the returns to be made from the investments made by the Resources Division. Inaddition, the Group’s OS and E&C Divisions operate in certain countries on the basis of certain taxexemptions granted to its client or a member of the Group by the government of a country in whicha project is to be undertaken. Withdrawal of such exemptions could have an adverse impact on the

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profit that can be achieved by the Group or its clients under the relevant contract and could, incertain cases, lead the Group or its clients to question the economic viability of their presence in thatcountry. In addition, the interpretation of guidelines, rules and legislation by governmentaltaxation bodies in the countries in which the Group operates may change from time to time. TheGroup’s conduct of operations may not be held to be consistent with such changes in interpretation,which could require the Group to change aspects of its operations which may correspondingly leadto a decline in revenues and profits.

If the Company were deemed to be resident for taxation purposes outside Jersey, this could haveadverse taxation implications.

Although the Group as a whole pays tax in the jurisdictions in which it operates in accordance withlocal regulations, the Company itself is resident in Jersey. While the Directors have no reason tobelieve that any authority in any other jurisdiction could successfully claim that the Company wastax resident in that jurisdiction, there can be no assurance that such a claim will not be brought or, ifbrought, will not be successful. In this event, the Company could face penalties and charges totaxation in respect of current and earlier years, which could have a material adverse effect on thefinancial condition of the Group.

Risks relating to the Ordinary SharesBecause the Company is a holding company, it is financially dependent on receiving distributionsfrom its subsidiaries.

The Company is a holding company and all of its operations are conducted through subsidiaries.Consequently, it relies on dividends or advances from its subsidiaries, including those that are notwholly-owned. The ability of these subsidiaries to pay dividends, and the Company’s ability toreceive distributions from its investments in other entities, such as joint venture vehicles, are subjectto applicable local laws and other restrictions, including, but not limited to, applicable tax laws andcovenants in some of the Group’s bank credit facilities. These laws and restrictions could limit thepayment of dividends and distributions to the Company by its subsidiaries, which could restrict theCompany’s ability to fund other operations or to pay a dividend to holders of the Ordinary Shares.

If the Company becomes a controlled foreign company for UK taxation purposes, a UK residentholder of 25 per cent. or more of the share capital of the Company would be exposed to a tax risk.

The Company may become a controlled foreign company for UK taxation purposes following theOffer. As detailed in paragraph 11 of Part IX – “Additional Information”, if more than 50 per cent.of the share capital of the Company is held by persons who are resident in the UK, the Company willbe a “controlled foreign company” for UK taxation purposes. In this event, any UK residentcompany which, either alone or together with connected or associated persons, holds 25 per cent.or more of the share capital of the Company (or Ordinary Shares which entitle it to 25 per cent. ormore of the income of the Company) may be assessed to corporation tax in respect of the profits ofthe Company which are attributable to such investor’s interest in the Company. Although such anassessment may not be raised if the Company pursues an “acceptable distribution policy”, whichbroadly requires the Company to distribute annually 90 per cent. of its “net chargeable profits” ascalculated for UK tax purposes, the Directors do not intend that the Company will pursue such apolicy.

The Group’s reporting currency is different to the currency in which dividends will be paid.

The Group’s reporting currency is US Dollars and its dividend policy will be based on US Dollarfinancial results. Any dividends or other distributions in respect of the Ordinary Shares will be paidin Sterling and the market price of the Ordinary Shares will be reported in Sterling. Accordingly,investors will be subject to the risk of currency fluctuations between the declaration of a dividend inUS Dollars and its payment in Sterling. In addition, the US Dollar dividend policy may not result in aconsistent payout when expressed in Sterling terms.

Investors may not be able to resell their Ordinary Shares at or above the Offer Price.

Prior to the Offer, there has been no public market for the Company’s Ordinary Shares. After theOffer, an active trading market for the Ordinary Shares may not develop or, if developed, may notbe sustained. The Offer Price will be determined by negotiation between the Company, the Selling

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Shareholders and the Underwriters, and may not be indicative of the price at which the OrdinaryShares will trade following the completion of the Offer. The market price of the Ordinary Sharescould also be subject to significant fluctuation, and investors may not be able to resell theirOrdinary Shares at or above the Offer Price.

The availability of Ordinary Shares for future sale could depress the share price.

Sales of a substantial number of Ordinary Shares in the public markets following the Offer, or thepossibility that these sales may occur, could have a material adverse effect on the price of theOrdinary Shares or could impair the Company’s ability to obtain further capital through anoffering of equity securities.

In particular, following the Offer the Directors will have a beneficial interest in up to approximately35 per cent. and the Group’s Directors and Senior Managers together with other employees as agroup will have a beneficial interest in up to approximately 49 per cent. of the Ordinary Shares. TheGroup cannot predict whether substantial numbers of Ordinary Shares in addition to those whichwill be available in the Offer will be sold in the open market following the expiry of the “lock-in”arrangements described in paragraph 6 of Part VIII – “Details of the Offer”. In particular, there canbe no assurance that, after the expiration of these arrangements, the relevant shareholders will notreduce their holdings of Ordinary Shares. Furthermore, the Group cannot predict what effect, ifany, market sales of Ordinary Shares held by any shareholders or the availability of these OrdinaryShares for future sale will have on the market price of the Ordinary Shares.

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PART III

Information on the Petrofac Group

1. OverviewPetrofac is a leading international provider of facilities solutions to the oil and gas production andprocessing industry, with a diverse client portfolio which includes many of the world’s leadingintegrated, independent and national oil and gas companies. Petrofac has a presence in the UKContinental Shelf (UKCS), where there has been rapid growth in operations and managementservices for mid- and late-life fields, as well as the growing new development regions of the MiddleEast, North Africa and the Former Soviet Union (FSU).

Through its three divisions, Engineering & Construction, Operations Services and Resources,Petrofac designs and builds oil and gas facilities; operates, maintains or manages facilities andtrains personnel; and, where return criteria are met and revenue synergies identified, co-invests withclients and partners. Petrofac’s range of services allows it to help meet its clients’ needs across thelife cycle of oil and gas assets.

Petrofac operates out of four strategically placed international centres in Aberdeen, Scotland;Sharjah, UAE; Mumbai, India; and Woking, England, and has a further 13 offices worldwide, withapproximately 5,500 employees.

Through both organic growth and strategic acquisitions, Petrofac has grown significantly frominception of the business. In FY 2004, total revenue from continuing operations was US$951.5million, with a net profit attributable to Petrofac shareholders of US$46.1 million compared withUS$628.7 million and US$38.4 million respectively in FY 2003. In H1 2005, Petrofac’s totalrevenue from continuing operations was US$692.4 million, with a net profit attributable toPetrofac shareholders of US$36.4 million. Since 2002, Petrofac’s total revenue has grown at acompound annual growth rate of approximately 56 per cent. In addition, Petrofac has increasedsignificantly and diversified its backlog, which stood at US$2.5 billion at 30 June 2005.

Petrofac’s revenues from continuing operations categorised by division for FY 2004 and, inaggregate, for FY 2002, FY 2003 and FY 2004, together with the revenues for H1 2004 (unaudited)and H1 2005, are shown below.

Petrofac’s EBITDA from continuing operations (before consolidation and eliminationadjustments) split by division for FY 2004, and, in aggregate for FY 2002, FY 2003 and FY 2004,together with the EBITDA for H1 2004 (unaudited) and H1 2005, are shown below.

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Petrofac’s net profit attributable to its shareholders from continuing operations (beforeconsolidation and elimination adjustments) split by division for FY 2004 and, in aggregate, for FY2002, FY 2003 and FY 2004, together with the net profit for H1 2004 (unaudited) and H1 2005 areshown below.

Petrofac’s business is carried out principally in the geographical areas of Europe, the Middle East,North Africa and the FSU. Revenues for FY 2004 were US$392.1 million in Europe, US$281.7million in the Middle East & Africa, US$272.4 million in the FSU/Asia and US$5.4 million in theAmericas.

Engineering & Construction Division (E&C Division)The E&C Division provides services to oil and gas industry clients to develop, design and constructfacilities, including:

� integrated engineering, procurement and construction services, including projectmanagement, engineering, procurement services and the construction management andcommissioning of oil and gas facilities; and

� specialist engineering and consultancy services, including preparation of field developmentplans and associated studies, design development, front end engineering and design (FEED),demanning and decommissioning studies, and the provision of risk, safety and environmentalconsultancy services.

Major EPC contracts are typically undertaken on a lump sum, or fixed price basis, whileengineering and consultancy services are often provided on a cost reimbursable basis.

Operations Services Division (OS Division)The OS Division provides services to oil and gas industry clients to operate, maintain and modifyfacilities and train personnel, including:

� facilities operations and maintenance services for onshore and offshore installations,principally in the UKCS but with an increasing presence outside the UKCS, including theprovision of operations management, maintenance services and consultancy, brownfieldengineering services and specialist manpower; and

� specialist training and human resource development, including safety training, operationsand technical training, emergency response and critical incident management training; andtraining support and management services.

The Group’s facilities operations and maintenance services are typically provided under long term,cost reimbursable contracts which include performance related remuneration, while the basis ofremuneration for the Group’s training services varies depending on the scope of the services beingprovided by the Group.

Resources DivisionIn selected situations, the Resources Division invests alongside its clients and partners in producingand proven or probable but not fully developed oil and gas reserves and energy infrastructure.Investments are assessed on the basis of their projected financial return reflecting the anticipatedrisks of the investment, and independently, the opportunity for the Group to provide services to itsclients and partners.

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Industry conditionsAs a provider of services to the oil and gas industry, Petrofac’s revenues are driven by three broadfactors: (i) the level of capital expenditure of the oil and gas industry to develop proven andprobable hydrocarbons and construct related hydrocarbon processing, transportation and refiningfacilities; (ii) the level of operations outsourcing by oil and gas companies; and (iii) theindustry-wide requirements for trained personnel. In turn these three factors are affected by currentand expected levels of oil and gas prices.

Over the long-term, global economic growth is expected to continue to drive demand for oil and gasresources. According to the BP Statistical Review of World Energy June 2005, there is limited excessproduction capacity relative to demand and since 2004 this has led to significant increases incurrent and expected oil and gas prices. The additional supply necessary to match the expectedincrease in demand is likely to require an increased level of spending across the life cycle of oil andgas production assets – from drilling to field development to maintenance, modification andoperations. Further, as remaining reserves are developed in increasingly remote regions withundeveloped hydrocarbons transportation infrastructure (for example, areas such as the CaspianSea region, onshore North Africa and Eastern Siberia), significant infrastructure expenditure isnecessary to bring these reserves to market. The Worldwide Petroleum Industry Report expectsgrowth in capital expenditure to average 6.7 per cent. per annum during the period 2005-08,increasing from US$152 billion to US$172 billion per annum. The Middle East and Africa arepredicted to see the highest growth out of all regions of about 9.1 per cent. per annum, representing10.7 per cent. of the total capital expenditure in 2008. In addition, a global shift towards heaviercrude oils, increasing regulatory requirements, and demand for clean fuels are driving theconstruction of new refineries and infrastructure upgrades.

As an international provider of engineering and construction and operations services, Petrofacstands to benefit directly from these increases in capital and operating expenditure by oil and gascompanies. In addition, as a direct equity investor in selected oil and gas projects, Petrofac maybenefit from higher hydrocarbon prices.

Higher oil prices are also contributing to a currently strong market for maintenance, modificationand operations services. This market strength is due to the favourable impact higher oil prices haveon the economics of higher cost fields. As evidence of this trend, the operating costs per barrel of oilequivalent (boe) produced has increased substantially from 1999 to 2004: for 20 international oilcompanies, national oil companies, and independent oil companies producing an aggregate ofapproximately 30 million boes per day in 2004, the weighted average operating cost1 increasedfrom US$3.95/boe produced in 1999 to US$6.14/boe produced in 2004, representing a compoundannual growth rate of 9.3 per cent.2. The Directors believe that this trend is likely to enhance furtherthe opportunities for the OS business.

Structure of the oil and gas sector

The oil and gas sector is comprised of major integrated companies, independent companies andnational oil companies. The major integrated companies are involved in all stages of the energychain, from the exploration and production of hydrocarbons, to transportation and shipping,refining and marketing, and the production of petroleum or natural gas derived chemicals andrelated products. These major integrated companies operate globally and compete for large scaleprojects. A range of smaller, independent companies are also active in the oil and gas sector. Manyof these are focused on the exploration and production of hydrocarbons, although there are severalcompanies which are exclusively engaged in the refining, marketing and petrochemicals segments.The oil and gas sector in many emerging market oil producing and consuming economies isdominated by large national oil companies, predominantly, if not exclusively, owned by theirrespective host countries. These national oil companies often retain legal ownership of allhydrocarbon resources in their respective countries.

Three ongoing trends are affecting the structure of the oil and gas industry. First, during the 1990s,oil and gas companies adjusted their business models to focus on reservoir identification andmanagement, and activities such as project and facilities management have subsequently been1 Lifting costs; excluding DD&A and exploration expense

2 Data source: JS Herold

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outsourced to an increasing degree. Second, there has been a trend for the major integrated oilcompanies to divest their more mature and smaller-scale fields to independent E&P companies.This trend has been evident in the UKCS, where Petrofac is a significant provider of facilitiesmanagement services through its OS Division. Third, although the national oil companies havehistorically relied upon major integrated or independent companies to operate and manage theirfields through concession or license agreements, they are increasingly seeking to develop theirreserves and operate their production processes themselves, rather than allow internationalcompanies to control the development of fields. As such, the national oil companies are awardingan increasing proportion of construction contracts and facilities maintenance contracts in thesector. The Directors believe that the nature of Petrofac’s service offerings and its existing customerrelationships with the independent E&P companies and the national oil companies position it tobenefit from each of these three trends.

Relative sensitivity of oil and gas sector service offerings to hydrocarbon prices

Exploration and production spending is generally categorised as either operating or capitalexpenditure. Activities designed to add and produce hydrocarbon reserves are classified as capitalexpenditure, while those associated with maintaining or accelerating production are categorised asoperating expenditure.

Capital expenditure tends to be relatively sensitive to volatility in oil and gas prices because projectdecisions are tied to a return on investment spanning a number of years. As such, capitalexpenditure economics often requires the use of commodity price forecasts which may proveinaccurate over the full life of the project. Periods of low commodity prices have been associatedwith lower levels of capital expenditure as projects are deferred until prices return to an acceptablelevel.

In contrast, levels of both mandatory and discretionary operating expenditure are substantially lesscorrelated to current and expected hydrocarbon prices than exploration and drilling expenditure.Mandatory operating expenditure projects involve activities that cannot be avoided in the shortterm, such as regulatory compliance, safety, performance of contractual obligations and projects tomaintain the well and related infrastructure in operating condition. Discretionary operatingexpenditure projects may not be critical to the short-term viability of a lease or field but theeconomic viability of these projects is relatively insensitive to commodity price volatility.Discretionary operating expenditure work is often evaluated according to a simple short-termpayout criterion which is far less dependent on commodity price forecasts.

Petrofac’s business is influenced substantially by both operating and capital expenditure by oil andgas companies. Because existing oil and gas wells require ongoing spending to maintainproduction, expenditures by oil and gas companies for maintenance of existing facilities arerelatively stable and predictable compared to exploration and drilling expenditures. In contrast,capital expenditures by oil and gas companies for exploration and drilling are more directlyinfluenced by current and expected oil and gas prices and generally reflect the volatility ofcommodity prices.

2. HistoryThe Group has its origins as a Texas based engineering, procurement and fabrication (EPF)business founded in 1981. Petrofac operated as both a domestic and an international engineering,procurement and fabrication contractor, principally focused on the design and fabrication ofmodular plant for the upstream oil and gas and downstream refining markets. In 1991, recognisingthe increased opportunities in international markets, Petrofac recruited Ayman Asfari (the GroupChief Executive) and Maroun Semaan (Chief Executive of the E&C Division) to open a new officein Sharjah, UAE. This brought international commercial, construction and project managementskills into the Group, which developed full service EPC capabilities targeting the rapidly growingMiddle East, North Africa and FSU markets.

Petrofac sought to differentiate its E&C business by developing the capability to invest alongsidecertain clients through the establishment of the Resources business in 1997. In 2000, Petrofaccommitted over US$100 million in investment by taking a 10 per cent. interest in the Ohanetdevelopment in Algeria alongside BHP Petroleum, the operator, and other international partners

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and secured a major EPC contract to construct the gas processing facilities for this development in ajoint venture with ABB Lummus. The successful completion of the Ohanet EPC contract in 2003which, at that time, was the largest contract undertaken by Petrofac, significantly enhancedPetrofac’s reputation to undertake large-scale and complex projects. The Ohanet investmentcontinues to generate strong financial returns and forms the core of the Resources Division’sportfolio.

In 2001, Petrofac expanded its E&C services to include development and field facilities planning,early stage engineering, design and consultancy, through a new office established in Woking,England. This office has since developed capabilities for detailed engineering and projectmanagement services for small and large scale facilities projects, both onshore and offshore.

Prior to January 2002, the Group’s operations were owned and operated through a combination ofcompanies organised in the United States and other countries in which a group of commonshareholders owned various share interests. The principal group holding company was PetrofacCorporation Limited (PCL). In January 2002, the Group completed a corporate reorganisationthrough which the Company acquired full ownership of PCL and of the minority interests in PCL’ssubsidiaries that PCL did not already directly or indirectly own. The Company also purchasedcertain assets from the minority shareholders of Petrofac LLC and the remaining minority interestin Petrofac LLC. The reorganisation resulted in PCL becoming a wholly owned subsidiary ofPetrofac Limited and PCL wholly owning each of its direct subsidiaries. Subsequently, PCL wasmerged into Petrofac Limited. These reorganisation transactions included the issuance of ordinaryand preference shares and the payment of cash. Financial information for the 2002 financial yearcontains a full year’s contribution from Petrofac’s predecessor companies.

In May 2002, Petrofac raised long term capital from 3i Group plc (3i) through the issuance ofUS$40.25 million variable rate unsecured loan notes maturing in 2009 together with the grant of anoption to purchase Petrofac A ordinary shares representing 13.0 per cent. of the fully dilutedordinary share capital of Petrofac. Following completion of the purchase and cancellation ofapproximately 25 per cent. of the Company’s issued ordinary share capital in 2004, 3i’s option wasincreased from 13.0 per cent. to 16.2 per cent. In June 2005, the conditions allowing the Companyto call upon 3i to subscribe for its 16.2 per cent. interest were met and the aggregate subscriptionamount was satisfied by the cancellation of the loan notes and the issue of A ordinary shares to 3i.

As the E&C business expanded internationally, Petrofac decided to divest its loss-making USoperations due to their lower growth prospects and reduced strategic value to the future of the Group.In 2003, it sold its US EPF business to Chicago Bridge & Iron Company N.V. on terms wherebyPetrofac retained contractual responsibility for the work in progress at the date of sale. The physicalwork under such contracts was substantially completed by 30 June 2004. The results of this businesshave been separately classified as a discontinued operation within the Group’s accounts.

During the late 1990s, Petrofac began to develop a facilities management capability to takeadvantage of growing trends towards the outsourcing of non-core activities by the oil and gasproducers. It secured contracts to manage refineries in Fujairah, UAE and Kyrgyzstan, FSU, whereit also had an investment in the operation, and a gas processing facility in Bolivia. In 2002, Petrofacseparated these operations into a new facilities management business unit. Later that year, Petrofacsignificantly increased the scale of its operations services activities with the acquisition forUS$28.1 million of PGS Production Group Limited, trading as PGS Production Services (PGS PS), aleading operations and maintenance provider in the UKCS.

Petrofac recognised the growing need to train the next generation of industry workers due to theshortage of skilled personnel, together with the growing importance of safety and environmentalrisk management to its client base. In 2003, Petrofac developed a training and competencemanagement capability within its OS Division, initially through the acquisition of a smallcompetence and production training business, Chrysalis Learning, followed, in 2004, by the moresignificant acquisition of RGIT Montrose, a leader in the provision of fire and safety trainingservices, for US$17.2 million. In 2005, the training business was further strengthened by theacquisition of an emergency response and crisis management consultancy, Rubicon Response, forUS$6.3 million.

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With the addition of development planning and early stage engineering services, facilitiesmanagement and training and investment to the original EPC business, Petrofac now offers thecapability to optimise clients’ capital and operating expenditures throughout an asset’s life cycleand provide alignment through equity or mezzanine financing participation, where appropriate.

3. Business strategyThe Directors’ goal for the Company is to generate sustainable growth in value for Petrofac’sshareholders by being a leading international provider of facilities solutions to the oil and gasindustry, delivering world-class project development, project management, engineering,procurement, construction, operations and training services, focusing on oil and gas productionfacilities, gas plants, oil refineries and pipeline transportation systems.

The Directors aim to achieve this goal by:

� Leveraging client relationships by providing a range of services across the life cycle of an assetWhile each of the Group’s divisions pursues new business opportunities independently,where appropriate, Petrofac seeks to leverage its competence and expertise across all of itsservice offerings to secure additional revenues. The Directors believe that clients derivegreater benefit when working with service providers which can support all phases of an asset,from conceptual design through construction and operations and, ultimately, todecommissioning, and can accompany this with project co-investment where appropriate.This approach may mitigate the risks inherent in monetising hydrocarbon assets byoptimising both capital and operating costs over the life of the asset and aligning the serviceprovider to the financial risk and reward of the development.

� Focusing on regions with major hydrocarbon reserves where significant capital andoperational expenditures are expectedPetrofac’s activities outside the UKCS are predominantly focused on the Middle East, NorthAfrica and FSU regions where, in aggregate, approximately 65 per cent. of the world’s provenhydrocarbon reserves are located and where significant capital and operational expendituresare required to bring these reserves to market efficiently. Petrofac has strong relationshipsand significant experience of operating in these regions and, with its Sharjah and Mumbailocations and its extensive network of country offices, has a well established infrastructure tosupport its activities in these areas.

� Expanding Petrofac’s established service offering into new countries and regionsPetrofac takes business lines developed in one of its markets into its other core geographicterritories. For example, Petrofac has a market leading operations management business inthe UKCS where there is an established history of licence operators outsourcing productionservices operations. In recent years, Petrofac has taken this business model into othergeographic markets such as Kuwait where traditionally these activities have been performedin-house. Similarly, Petrofac’s training business had origins in the UKCS and is nowoperating in other locations around the world. The Directors believe there is substantialscope to bid for operations services contracts in the Middle East, North Africa and the FSU asthe national oil companies within these regions increasingly seek to develop resources ontheir own and retain ownership of midstream refining and processing facilities, by utilisingthe expertise and resources of international contractors such as Petrofac.

� Assisting clients in achieving their local content goals by increasing the use of indigenousresources and improving the competence and technical skills of local workforcesPetrofac’s E&C Division has long-established relationships with local partners andsub-contractors in its areas of operations, which can assist clients in meeting the local contentrequirements of host governments. Furthermore, through its training operations, Petrofaccan manage and provide dedicated on-site training programmes to local workforces.

The Directors believe that developing technical competence within the local workforce isbecoming an issue of increasing importance, particularly for governments in developing

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economies which have good standards of higher education but high levels of unemployment.The Directors believe that Petrofac’s operations and safety training capability providesPetrofac with a competitive advantage by enabling it to assist national governments inachieving their strategic goals.

� Improving revenue and earnings stability through a diversified and complementary businessmodelThe Directors believe that the Group’s three divisions provide diversification and synergybenefits and therefore provide Shareholders with a more balanced exposure to risk andgreater stability of revenues and earnings. The differing project scope and contract profile ofeach division highlights this diversity. The E&C Division typically undertakes lump sum EPCprojects where revenues and earnings are recognised over the life of the contract, typically oneto three years. The OS Division typically provides services on a cost reimbursable basis withpotential performance-linked bonuses over contracts that can last for five years or more.Investments made by the Resources Division are designed to provide an investment returnonce the project has been completed. The Group seeks incremental revenues through theprovision of services on a combined basis where practical, and benefits from internalexpertise across the divisions when pursuing and executing new business.

� Attracting and retaining recognised specialists and key personnelPetrofac recognises that the ability to attract and retain high calibre personnel is critical to thedelivery of its existing services, maintaining competitive positioning and the continuedgrowth of its business. Petrofac is committed to the professional and operationaldevelopment of employees and encourages an ethos of individual responsibility andrecognition. The Directors believe Petrofac’s open and accessible culture to be a major factorin the retention of employees.

The Directors believe that Petrofac’s success to date is attributable in part to its culture ofshare ownership which aligns the interests of employees with those of Petrofac and whichassists in building long term sustainable value across its business areas. Following Admission,interests in approximately 15 per cent. of the issued share capital of the Company will be heldby approximately 300 employees below Board level. Petrofac has put in place new employeeshare schemes designed to continue this alignment.

� Maintaining and improving on high safety standardsPetrofac is a socially responsible employer and contractor with a commitment to operate tohigh health, safety and environment (HSE) standards. Petrofac seeks to ensure that itsemployees are aware of, and take individual responsibility for, HSE matters in anenvironment where safety is regarded as a high priority. The Directors believe that high safetystandards are important in maintaining Petrofac’s reputation and ability to win and retainsignificant contracts and consider that its role as a leading provider of safety training is lentcredibility by its own strong safety record.

� Identifying, acquiring, integrating and developing complementary businesses, whereappropriateWhile Petrofac’s primary focus is on delivering organic growth from its existing businesses, italso considers opportunities to broaden its service offering or extend the geographic reach ofexisting services through the acquisition of complementary businesses that are considered tobe a good fit with the Group’s culture and strategy.

4. Description of the businessThrough its three divisions, Engineering & Construction, Operations Services and Resources,Petrofac designs and builds oil and gas facilities; operates, maintains or manages facilities andtrains personnel; and, where return criteria are met and revenue synergies identified, co-invests withclients and partners. Petrofac’s range of services allows it to help meet its clients’ needs across thelife cycle of oil and gas assets.

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Engineering & ConstructionPetrofac’s Engineering & Construction Division focuses on project development and valueengineering services and the provision of integrated engineering, procurement and construction(EPC) services for the oil and gas industry. Through Petrofac’s origins in the US in 1981, the Grouphas nearly 25 years’ experience in oil and gas production, processing and refinery projects.

The E&C Division operates principally from Sharjah, UAE; Mumbai, India; and Woking, England,with approximately 1,750 employees.

In FY 2004, the E&C Division’s external revenue was US$467.1 million with net profit of US$33.1million, representing 49 and 72 per cent. respectively of the Group for that period. In H1 2005, theE&C Division’s external revenue was US$390.2 million with net profit of US$23.0 million,representing 56 and 63 per cent. respectively of the Group for that period. At 30 June 2005, thebacklog for the E&C Division was US$1.0 billion. The provision of integrated EPC servicescontributes the predominant share of the E&C Division’s financial performance.

Industry outlookDemand for oil and gas engineering and construction services is dependent on the capitalinvestments undertaken by oil and gas companies that in turn are largely driven by energy pricesand demand. Oil prices have recently achieved all-time highs with the Brent crude oil reference priceexceeding US$60 per barrel and, according to International Energy Agency (IEA) estimates, globalenergy consumption is expected to grow by 60 per cent. over the next 20 years, driven primarily bycontinued economic growth particularly in developing economies such as China and India.

Due to the limited opportunities to discover new reserves, oil and gas companies have increasedtheir capital expenditure budgets to develop their existing reserves and are also reinvesting tomaximize the life and production of their existing assets. New reserves are often located in remoteareas and require material investments in drilling, processing and transportation infrastructure. Inaddition, a global shift towards heavier crude oils, increasing regulatory requirements and demandfor clean fuels are driving the construction of new refineries and infrastructure upgrades.

Engineering, procurement and constructionPetrofac provides integrated EPC services for oil and gas facilities focusing on the Middle East,North Africa and the FSU. Petrofac’s EPC expertise covers oil and gas gathering, processing andtransportation in both greenfield and brownfield developments, with the ability to tailorconstruction planning and detailed scheduled activities around specific site conditions. Petrofac’srole in a lump sum EPC contract will generally include design, detailed engineering, procurement ofequipment and materials, construction management and commissioning. Petrofac’s main EPCoperating base is in Sharjah, UAE, with an engineering office in Mumbai, India. These offices aresupported by an extensive network of regional offices and project site offices which provideadditional engineering and project management capability as well as in-depth knowledge of localmarkets. The EPC business has approximately 1,600 employees. This does not include temporaryand local employees appointed by the BTC/SCP joint venture (as Petrofac does not typically directlyemploy temporary or local labour itself to work on its EPC projects, or include such employees in itsemployee count).

Engineering

Petrofac employs experienced teams across core engineering disciplines to meet its clients’engineering needs, including process engineering, instrument, control and telecommunicationsengineering, electrical engineering, mechanical engineering, rotating equipment engineering andcivil and structural engineering. Core areas of expertise include:

� oil gathering and production facilities;

� crude oil stabilisation;

� liquified petroleum gas (LPG) and natural gas liquids (NGL) recovery including turbo-expander plants;

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� gas processing, separation and compression;

� oil refining;

� sulphur recovery;

� oil terminals and pumping stations;

� water treatment and injection; and

� flowlines and pipeline systems.

Procurement

Petrofac uses established competitive tendering procedures to seek to procure equipment andservices globally. Petrofac’s procurement offices are located in the UAE, UK and USA, together withproject offices located in various countries of operation providing support to the procurementprocess. Petrofac sources equipment and materials from pre-qualified vendors and suppliers andregularly monitors the vendors’ product quality and delivery performance. Vendors are supervisedthrough approved test and inspection plans and periodic inspections by experienced in-houseinspectors. Petrofac may post its own expediters at a vendor’s place of operation to supervise thedelivery of all critical equipment and also engages third party inspectors for independent inspectionat key stages of the project and at completion.

Construction

Petrofac is not a construction company, rather it provides expert construction managementservices, including the organisation and supervision of sub-contractors, through the constructionphase of a project. Petrofac generally uses the services of local and international constructioncontractors, whilst maintaining responsibility for construction and the quality and health andsafety aspects of a project. With experienced construction managers and supervisors withestablished track records, Petrofac has expertise in sub-contractor management, fabrication andonsite construction, commissioning, overall site construction management, clearance, logistics andhandling of imported equipment and materials, systems for developing health and safetyprocedures and detailed pre-commissioning, commissioning and operations manuals.Construction projects are often carried out in extreme and remote environments.

Clients

Petrofac’s major EPC clients include Agip Kazakhstan North Caspian Operating Company N.V.(AGIP KCO), BHP Petroleum, BP, Kuwait Oil Company (KOC), Petroleum Development OmanLLC, Qatar Petroleum and Total S.A.

Contracts

Petrofac has historically targeted contracts in the range of US$50 million to US$700 million.

Most of Petrofac’s EPC contracts are undertaken on a lump sum basis, meaning that Petrofac’srevenues consist of an all inclusive lump sum price for the completed project.

Petrofac has a disciplined approach to project selection and will not bid, or will discontinue a bid,where the Directors believe its selection criteria (relating to margins, availability of resource,reputation and risk management, among other things) are not achievable. For further informationon risk management, please see paragraph 6 of this Part III.

Examples of contracts on which the engineering, procurement and construction business iscurrently working or which it has recently completed include:

AGIP KCO – Kashagan field, Kazakhstan

Petrofac is undertaking the main engineering and procurement contracts with AGIP KCO (aconsortium including Eni SpA, Royal Dutch Shell plc and the national oil company of Kazakhstan)in relation to the onshore oil, gas and sulphur plants for the Kashagan oil field in Kazakhstan. Thevalue of the contracts is over US$500 million. The contracts were signed in August 2004 and aredue to be completed in March 2009.

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Qatar Petroleum – Mesaieed, Qatar

Petrofac is undertaking an engineering, procurement, installation and commissioning contract forQatar Petroleum at its Mesaieed complex in Qatar where Qatar Petroleum owns and operates fourNGL plants. The contract value is US$173 million. The contract was awarded in April 2004 and theproject is due to be substantially completed by the end of 2005.

Crescent Petroleum – Sharjah, UAE

Petrofac was awarded an EPC contract by Crescent Petroleum Company International Ltd for anew gas processing facility in Sajaa, Sharjah. The value of the contract on announcement wasUS$82 million. The contract was awarded in April 2004 and is due to be completed during thefourth quarter of 2005.

Kuwait Oil Company – facilities upgrade, Kuwait

Petrofac is working on a contract for KOC to undertake the facility upgrade and relocation ofunderground process piping in KOC’s gathering centres and booster stations. The value of thecontract on announcement was US$644 million. The contract was awarded in April 2005 and isexpected to be completed by year end 2007.

BP – BTC (Baku-Tbilisi-Ceyhan) and SCP (South Caucasian Pipeline) pipelines, Georgia andAzerbaijan

Petrofac is working with its joint-venture partner Amec-Spie S.A. (Amec) on a contract with BPExploration (Shah Deniz) Limited to build the 248 km Georgia stretch of the BTC and SCP oil andgas pipelines, as well as the associated pumping and metering stations in Georgia and Azerbaijan.The contract value is approximately US$800 million, with Petrofac having a 50 per cent. share. Thecontract was awarded in August 2002 and is due to be substantially completed at the end of 2005.Although work on the oil pipeline and facilities is now substantially complete and the introductionof oil commenced in May 2005, the project has suffered from extensive delays resulting insignificant cost overruns.

The joint venture has filed claims for costs overruns and associated claims. Further detail of theclaims made are set out in paragraph 12 of Part IX – “Additional Information”.

BHP Petroleum – Ohanet gas field, Algeria

Petrofac was awarded a contract in a 50/50 joint venture with ABB Lummus by BHP Petroleum forthe redevelopment of the Ohanet surface facilities, in which Petrofac also invested through itsResources Division. The final contract value was approximately US$600 million, with Petrofachaving a 50 per cent. share. The contract was awarded in October 2000 and the project wascompleted in February 2004.

Competitors

Petrofac’s competitors on major lump sum projects include Technip S.A., Japan Gas Corporation,Snamproggetti SpA. (part of the Eni SpA group), Bechtel Corporation and KBR (part of theHalliburton Inc group), whilst its competitors on mid-sized projects include Technicas Reunidas,SNC-Lavalin Group Inc. and various Korean contractors. The Group also faces competition fromLarsen & Toubro Limited, Punj Lloyd Ltd, the Dodsal group and China Petroleum Engineering &Construction Group.

Engineering and consulting servicesPetrofac’s engineering and consulting services business is a specialist provider of greenfield andbrownfield engineering services and assists clients in planning and assessing the feasibility ofengineering projects in Europe, the Middle East, Africa and the FSU. The engineering andconsulting services business operates principally from offices in Woking, England and Aberdeen,Scotland and has approximately 150 employees.

Petrofac’s engineering and consulting services include:

� the preparation of full field development plans and associated technical, commercial and riskstudies – working with its clients to establish and document whether a business opportunityor a hydrocarbon find is technically feasible and has economic potential to justify furtherdevelopment;

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� design development – seeking to identify relevant and feasible technical and commercialconcepts and undertaking further work to evaluate and define the selected project option andconfirm that the business opportunity will be in line with corporate objectives;

� FEED services – developing and documenting the basic engineering and design and costestimates, based on the selected concept, to such a level that a final project decision can betaken, applications to authorities can be made and contracts for project implementation canbe entered into;

� design packages – used by Petrofac and its clients to enable the preparation of fielddevelopment plans, master participants plans and invitations to tender;

� de-manning and decommissioning studies – advising the client on options for “exit” uponcessation of production, how to manage that exit process and means of disposal of plant andequipment; and

� independent consultancy and engineering services and studies – health, safety andenvironmental studies, process engineering and flow assurance, engineering and designservices, value engineering and operability and operational enhancement studies.

Clients

Petrofac’s major engineering and consulting services clients include Anadarko PetroleumCorporation, BG Tunisia, BP, Burlington Resources, Lundin Petroleum AB (Lundin), NorskHydro, RWE Dea AG, TNK-BP (Rospan), Qatar Petroleum, the Oil and Energy IndustryDevelopment Company (OEID), a subsidiary of the National Iranian Oil Company, and StatoilASA.

Contracts

The basis of Petrofac’s engineering and consulting services business is the delivery of engineeringservices and associated documentation together with project cost estimates and schedules.The products range from delivery of a study report or a technical design basis, throughdevelopment of a FEED/EPC tender packages to providing the services of an individual or taking onfull project management responsibility on behalf of the client.Contracts range in duration from a single day (for example for a hazard or operability (HAZOP)review) to a few weeks for a study, to several months for a FEED or up to three years for a servicecontract (with no guaranteed workload). Generally the limit of liability will be for re-performanceof services in the event of defective work. Due to the nature of its products, the engineering andconsulting services business carries professional indemnity insurance.Engineering and consulting services contract terms vary from lump sum based contracts to ratereimbursable contracts with contract ceilings. Contract values can range from studies up to a valueof US$100,000, through to conceptual and front end engineering contracts in a typical range ofUS$500,000 to US$3 million, with occasional larger design services or front end engineeringcontracts of US$3 million up to US$10 million. Where Petrofac undertakes a project managementcontract, this value may be considerably higher depending on the extent of, inter alia, procurement.The frequency of small contracts provides the Group with access to a wider range of potentialclients than it might otherwise achieve.Examples of contracts on which the engineering and consulting services business is working orwhich it has recently completed are:

BP Amoco and La Société Nationale Sonatrach – In Amenas, Algeria

Petrofac is providing engineering and procurement services to BP Amoco Exploration and LaSociété Nationale des Hydrocarbures (Sonatrach) in relation to the Tiguentourine gas condensatefield, which is part of the In Amenas project in Algeria, North Africa. Petrofac is also assisting withthe selection of the construction contractor. The contract was awarded in December 2003 and isdue to be completed in early 2006.

Lundin Netherlands – Oudna, Tunisia

Petrofac is providing engineering and project management services to Lundin Netherlands B.V. inrelation to the Oudna field in Tunisia, North Africa. The contract was signed in November 2004and is due to be completed at the end of 2006.

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Addax Petroleum Development – Adanga and Oron, Nigeria

Petrofac is providing project management, engineering and design services to Addax PetroleumDevelopment (Nigeria) Limited in relation to the Adanga and Oron platforms in offshore Nigeria,Africa. The contracts were awarded in March 2003 and services are expected to be completed bythe end of 2005.

TNK-BP (Rospan), Russia

Petrofac undertook a FEED study for Rospan, a subsidiary of TNK-BP, in relation to the Rospangas and condensate field in Russia, FSU. The contract was awarded in May 2004 and completed inDecember 2004. During 2005, further engineering services were provided in relation to safety andintegrity upgrades for the gas plant.

Competitors

The main competitors of Petrofac’s engineering and consulting services business are UK orEuropean EPC contractors and consultants. These include Technip (especially its specialist frontend subsidiary, Genesis), KBR (especially its specialist front end subsidiary Granherne), WorleyParsons, Wood Group (including its subsidiary, Woodhill Engineering Consultants), INTECEngineering, IGL, John Brown Hydrocarbons, Bechtel and Amec.

Competitive strengths of the E&C DivisionThe Directors believe that the competitive strengths of the E&C Division include the following:

� Disciplined project evaluation and selectionDrawing on its experience and strong track record of completing projects on time andprofitably, the Group has developed risk management procedures that seek to identify andmitigate the risks inherent in lump sum EPC business.

� Proven in-house expertise in engineering design and project executionPetrofac’s E&C Division has completed over 70 engineering and design and EPC contractssince 1991 alongside over 200 engineering and consulting contracts. Petrofac has provenengineering, procurement, construction and commissioning capabilities, and the Directorsbelieve that Petrofac’s strong track record highlights its demonstrable expertise in projectexecution and this gives the Group an advantage in competitive tender situations. In addition,Petrofac has access to specialist front-end engineering skills through its operational office inWoking, England.

� Proven project execution capability in challenging and geographically remote areasPetrofac has successfully completed EPC contracts in a variety of challenging andgeographically remote oil and gas producing regions, including for example, the Kharyagaproject in the Russian Arctic region and the Ohanet project in the Algerian desert. Suchprojects demonstrate its ability to manage and execute projects notwithstanding challenginggeo-political or environmental conditions.

� Established client relationships with both international and national oil companiesPetrofac has strong relationships with international integrated oil companies, independentoil companies and NOCs. The Directors believe such relationships will allow it to capitaliseon any potential changes in the structure of the industry including, in particular, the increasein activity of NOCs.

� Access to high calibre engineering personnel from low cost countriesPetrofac is able to call on a pool of high quality, highly qualified and motivated individualsthrough its operational offices in Sharjah, UAE and Mumbai, India at a lower cost than if ithad to source staff of equivalent calibre from Western Europe or the USA.

� Established local relationships with partners and sub-contractorsThe E&C Division has established relationships with local partners and sub-contractors in itsareas of operation. Petrofac’s experience in the management of diverse cultures and workingenvironments helps foster constructive employee and sub-contractor relationships.

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Operations ServicesPetrofac’s Operations Services Division consists of two business activities. The first, PetrofacFacilities Management, offers managed outsourced operations, maintenance and support servicesto oil and gas installations. Petrofac currently either operates or provides services to 30 platforms inthe UKCS, operating the facilities for 16 fields, and is the leading outsourced oil and gas processfacilities manager in the UKCS. These platforms produce approximately 0.9 million boe per day,representing almost 25 per cent. of current UK production activity. The division has also recentlyexpanded into the Middle Eastern and Asian markets. The second activity, Petrofac Training,provides safety and technical training and consultancy services to the oil and gas industry. PetrofacTraining trains over 30,000 delegates annually, and has provided training and consultancy servicesin over 26 countries.

The OS Division is based in Aberdeen, Scotland, and Sharjah, UAE, and employs approximately3,600 employees.

In FY 2004, the Operations Services Division’s external revenue was US$439.4 million with netprofit of US$9.6 million, representing 46 and 21 per cent. respectively of the Group for that period.In H1 2005, the Operations Services Division’s external revenue was US$279.6 million with netprofit of US$7.3 million, representing 40 and 20 per cent. respectively of the Group for that period.At 30 June 2005, the backlog for the Operations Services Division was US$1.5 billion.

Industry outlookSince the early 1990s, a number of the world’s major integrated and independent oil and gascompanies have been outsourcing certain of their global maintenance, modification and operationsservice requirements. More recently, NOCs have started to follow a similar trend. Outsourcing isoften viewed as a compelling alternative by producers who recognise that it allows them to focus ontheir core competencies, enhance their safety performance and reduce costs. Given Petrofac’sstrong market share in the UKCS and its international presence, the Directors expect it to benefitdirectly from this trend.

The training needs of the oil and gas sector have increased with the move to more demandingfacility locations (such as offshore production), developments in countries where local manningmay be required or desired as a matter of local policy, and an increased regulatory emphasis onsafety.

Facilities ManagementPetrofac provides operations, maintenance and turnkey facilities management for the oil and gasindustry. The Facilities Management business has approximately 3,400 employees.

The key component services of Petrofac’s Facilities Management business include:

� management of oil and gas facilities on a turnkey basis on behalf of oil and gas companyclients;

� maintenance management of important oil and gas production equipment;

� machinery management of critical offshore equipment;

� maintenance consulting services regarding the design and operational performance of aclient’s plant, including modelling to improve design, risk assessments and conditionmonitoring through CBMNet, an internet-enabled service operated remotely;

� recruitment and provision of personnel – providing skilled offshore personnel to the drilling,marine, production and construction sectors, on placements, short-term supply or on acontract crew basis. At any one time, approximately 500 to 600 personnel are supplied toclients through Petrofac’s Atlantic Resourcing and associated international manpoweragency units. In a support role, Petrofac also offers project management of the process ofrecruitment, induction and placement to site as well as advice on personnel payroll, tax andinsurance issues; and

� operational effectiveness audits of how platforms are being managed (conducted on thirdparty managed platforms as well as platforms managed by Petrofac).

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Petrofac’s services are offered either as component services to facilities managed by owners(Operations Support) or together as a more comprehensive service offering to facilities wherePetrofac has overall management responsibility, known as “turnkey” facilities management(Operations Management).

Through the knowledge, experience and perspective gained across the various aspects of facilitiesmanagement, Petrofac has developed the capability to implement operational performancestep-change and significantly enhance asset value through extension of economic field life.Typically, the opportunity to implement change occurs upon transition of asset ownership fromone oil company to another. In this regard, the services Petrofac provides to its clients include:

� asset transition planning and execution, including improvement in the crewing andmanagement of oil and gas production installations; and

� data room and due diligence services for clients pursuing asset acquisitions.

Drawing on the expertise of the Group’s engineering and consulting services business, Petrofac alsoprovides specialist engineering services including brownfield studies, detailed engineering,construction services and commissioning services, to support Operations Management contractsand to pursue external business.

Petrofac is the leading outsourced oil and gas process facilities manager in the UKCS, having beenawarded five of the six duty holder contracts so far granted to contractors to manage facilities in theUKCS. Petrofac’s clients, who are operators of installations in the UKCS, operate under productionlicences from the DTI, and have overall responsibility for maximising the reserves extracted,establishing and maintaining a safe operating regime, preventing environmental damage anddecommissioning. However, these operators may contract certain of these duties to third parties.Petrofac manages the operation of offshore and onshore facilities on behalf of those operatorclients which have chosen to outsource this activity. Petrofac has thereby been at the forefront of thetransition in the UKCS whereby independent oil companies have entered the UKCS in place of themajor oil and gas companies. The Operations Management service offering supports these newentrants into the UKCS and the subsequent growth of their asset portfolio. Petrofac has anestablished portfolio of managed facilities in the UKCS comprising the Northern Producer on theGalley field, Montrose and Arbroath platforms, Greater Kittiwake assets, Hewett offshore facilityand Bacton Terminal, Schooner and Ketch platforms, Horne and Wren platforms and Heather andThistle platforms. Brief details of certain of the contracts relating to such facilities and platforms areset out in “Contracts” below.

Responsibility for operating a facility brings with it the responsibility for establishing andmaintaining a safe operating regime, and under the relevant safety regulations, Petrofac, as facilitymanager, is known as the duty holder. For further information on Petrofac’s regulatory obligationsas a duty holder, please see paragraph 5 of this Part III.

Since the Facilities Management business was established by the Group in 2002, it has acceleratedits service provision outside the UKCS with new contracts in Kuwait, Iran, Papua New Guinea andSudan. To date, the nature of the facilities management work secured outside the UKCS has largelybeen Operations Support.

Clients

The client base of Petrofac Facilities Management for the provision of its managed operationsservices has historically been the growing number of smaller independent oil and gas companies inthe UKCS, due to their high propensity to outsource. Such clients include Paladin Expro Limited(Paladin), Venture Production (North Sea Developments) Limited (Venture), Tullow Oil UKLimited (Tullow) and members of the Lundin group. Petrofac also provides its operational supportservices to major oil companies, including Hydrocarbon Resources Limited (HRL), BHP BillitonLimited (BHP Billiton), BG Exploration and Production Limited, BP, ExxonMobil Corporation,Marathon, Total E&P (UK) Limited (Total), Kerr-McGee North Sea UK Limited and CanadianNatural Resources Limited (CNR). In recent years, Petrofac has entered into operationsmaintenance contracts with two major national oil companies: KOC and South Pars GasCompany, a subsidiary of the National Iranian Gas Company (SPGC).

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Contracts

The Facilities Management business is, in general, long term contract based, and contracts aretypically cost reimbursable with an element of performance related remuneration. The majority ofcontracts either include a schedule of rates or a fee based remuneration structure. The UKCS life offield duty holder contracts have limited provision for serving without cause termination notices.The international contracts of the Facilities Management business contain a wider variety of terms.

Examples of contracts on which the Facilities Management business is currently working include:

Lundin (Heather and Thistle platforms) – turnkey facilities management

From 1 May 2005, Petrofac has taken over responsibility for the management of the Heather andThistle platforms for Lundin. The contract is on a life of field basis. Petrofac acts as turnkey facilitiesmanager (providing operations and maintenance management) and safety case duty holder of theHeather and Thistle platforms. Petrofac also undertakes significant brownfield engineering andconstruction activity under this contract. The value of the contract on announcement wasUS$250 million.

Talisman (Galley) – turnkey facilities management

Under a contract renewed in February 2005, Petrofac is responsible for the management of theNorthern Producer floating production installation on the Galley field. The original contract wasentered into in October 1997. Under a contract with Sea Production Limited, which in turncontracts with Talisman (the owner of the field), Petrofac acts as facilities manager (providingoperations and maintenance management) and safety case duty holder. Petrofac is also responsiblefor the onshore and offshore operations teams and provides facilities engineering support. Thecontract lasts until June 2006. The value of the contract on announcement was US$26 million.

Venture (Greater Kittiwake Area) – turnkey facilities management

On 26 November 2003, Petrofac entered into an agreement with Venture to act as facilitiesmanager in relation to its assets in the Greater Kittiwake area of the UKCS. Petrofac acts as turnkeyfacilities manager (providing operations and maintenance management) and safety case dutyholder. The contract lasts for five years, with two two-year optional extensions at the client’soption. The value of the contract on announcement was US$64 million.

Tullow (Hewett offshore and Bacton onshore terminal, Schooner and Ketch platforms, Horne andWren platforms) – turnkey facilities management

On 1 October 2003, Petrofac took over responsibility for the management of Tullow’s Hewettfacility in the Southern North Sea and its Bacton gas terminal in Norfolk. The agreement markedthe first time that a facilities management company had assumed management as duty holder of anonshore gas terminal in the UK (Bacton). Petrofac acts as turnkey facilities manager (providingoperations and maintenance management) and safety case duty holder for the Hewett field andCOMAH Report holder for the onshore gas terminal at Bacton. The contract is on a life of fieldbasis. On 31 March 2005, Tullow awarded additional contracts to Petrofac for the support of its(normally unmanned) Schooner, Ketch and new Horne and Wren assets. These contracts are alsoon a life of field basis.

Paladin Expro (Montrose and Arbroath platforms) – turnkey facilities management

On 20 May 2003, Petrofac entered into an agreement to act as facilities manager for Paladin inrelation to the Montrose and Arbroath platforms. Petrofac acts as safety case duty holder andprovides turnkey facilities management (operations and maintenance management). The contractis on a life of field basis. Petrofac’s role was broadened in 2004 to include brownfield engineeringcapabilities and to manage Paladin’s supply chain activities in support of its drilling and capitaldevelopment projects.

Total (Alwyn and Dunbar platforms) – operations and maintenance contract

On 17 January 2005, Petrofac agreed a contract to provide operations and maintenance personnelonboard platforms and in the client’s onshore offices for Total’s Alwyn and Dunbar facilities. Thecontract lasts for five years with an option to extend for a further two years. The value of thecontract on announcement was US$70 million.

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BHP Billiton (Liverpool Bay platforms) – operations, maintenance and construction contract

On 1 December 2004, Petrofac was awarded a five-year extension of its contract with BHP Billitonin relation to the Liverpool Bay Assets located in the Irish Sea. The contract is for the provision ofmaintenance personnel onboard offshore platforms and the ad hoc supply of personnel to theclient’s onshore facilities, together with a full range of engineering and construction services. Thecontract is an extension of the parties’ original 10-year contract entered into on 22 February 1996.The Liverpool Bay development comprises the Douglas and Lennox platforms, an oil storageinstallation and the onshore gas processing terminal at Point of Ayr. The value of the contract onannouncement was US$114 million.

Kuwait Oil Company (KOC), Kuwait – Maintenance management contract

Under a contract awarded on 15 March 2005 by KOC, Petrofac is responsible for the provision ofmaintenance management and full maintenance services, of various facilities in North and WestKuwait areas comprising oil gathering centres, gas booster stations, gas steam and water injectionplants, water gathering and pumping stations, gas and crude oil pipelines and well heads. Theservices include maintenance management and technical support, corrective and predictivemaintenance, engineering services, the provision of spare parts for control and shutdown systemsand training of personnel. The contract lasts for five years with a one year extension at the client’soption. The value of the contract on announcement was US$125 million.

Greater Nile Petroleum Operating Company (GNPOC), Sudan – maintenance contract

On 1 April 2004, Petrofac entered into a contract with GNPOC in relation to its power plant andpipeline facilities in Sudan. Petrofac is responsible for maintenance management and technicalexpertise regarding maintenance of operating assets. The contract lasts for three years with a oneyear extension at the client’s option. The value of the contract on announcement was US$40million.

South Pars Gas Company (SPGC), Iran – maintenance and operations contract

On 1 March 2004, Petrofac entered into a contract with SPGC, a subsidiary of the National IranianGas Company, for maintenance, modifications and operations on the South Pars Phases 1 and 2.The contract lasts for three years with a two year extension at the client’s option. During 2004, thecontract was extended to include the provision of further logistical support to additional Phases.

Interoil, Papua New Guinea – commissioning and facilities management

On 9 November 2003, Petrofac entered into a contract with Interoil Corporation in relation to theNapa Napa refinery in Papua New Guinea. Under the contract Petrofac was responsible for thepre-commissioning and commissioning of the refinery whilst it was under construction, andsubsequently for the total management of the day to day refinery operations, maintenanceand production.

Competitors

Petrofac’s competitors for facilities management in the UKCS include Wood Group, Aker KvaernerASA, Amec and the KBR group, and a number of specialist providers of operational supportservices. Its international competitors include Amec, KBR, Vetco International, Wood Group andWorley Parsons. Petrofac also competes with the in-house ability of oil and gas companies tomanage and support their own facilities.

TrainingPetrofac Training provides training and training management solutions to the oil and gas industryon a worldwide basis. In order to work offshore in the UK, certain safety training qualifications arerequired. The UK Offshore Operators’ Association (UKOOA) has created guidelines that oil andgas operators should adhere to regarding emergency response training. COGENT, the industrymanaged training regulator in the UK, has also created and accredited training standards, whichPetrofac delivers. One such mandatory training course is the Basic Offshore Safety induction andEmergency Training (BOSIET) course, which is regarded as the minimum requirement fortravelling and working offshore. As Petrofac is involved in the provision of many of these required

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core safety training courses, Petrofac Training has a regular demand for its approved courses.Petrofac also provides a range of skills-based training and assessment. Petrofac offers “blendedlearning”, combining structured learning with practical development and assessment. Its four keyproduct streams are:� Safety training through the well-known RGIT Montrose brand

RGIT Montrose was originally established as an industry-wide training centre, and has beenoperating for over 25 years. Petrofac offers survival courses, basic offshore safety induction,emergency training, helicopter underwater escape training and fire training courses. Theregulatory requirement to have completed safety training before working offshore generallymeans that Petrofac’s business in this area is regular and also consists of a considerableproportion of repeat business.

� Operations and technical training and consultancyPetrofac provides skills-based training and assessment for production, operations,maintenance and well services disciplines. Such training ensures that offshore workers arecertified to industry-standard levels of competence in order to perform their services offshore.Petrofac also provides advice on all safety and skills training areas in relation to systems andsafety case development, risk assessment and management, accident and incidentinvestigation and HSE audits.

� Support and management services, including Training Management Solutions“Turnkey” training solutions offer a single solution for oil companies seeking to train theiremployees in skills and safety courses. Petrofac provides comprehensive training solutions forthe management and administration of all a client’s training requirements, which mayinvolve providing certain in-house training itself and/or arranging for the delivery ofadditional third party training. An example is the Company’s management of Shell’s offshoretraining requirements in the UK, the Netherlands and Norway. Training solutions can alsoincorporate the design, establishment and running of a training centre owned or leased byPetrofac and where the training programmes would be provided by Petrofac. An example isthe Caspian Technical Training Centre, in joint venture with TTE International.

� Emergency response and critical incident management through the Rubicon Response brandPetrofac Training offers training and consultancy in relation to dealing with emergencysituations, including courses on major emergencies, crisis management and incident control.

With a professional team of more than 200 people, Petrofac Training operates out of centresestablished in the UK (Aberdeen, Montrose and Dundee), in the Caspian (Baku), the United States(Lafayette, Louisiana) and Trinidad (Port Lisas) with additional offices in Sharjah, UAE, Houston,Texas and Kuala Lumpar, Malaysia. Petrofac Training trains over 30,000 delegates annually, andhas provided training and consultancy in over 26 countries.Petrofac Training now has a presence in, or access to, capability in all of the major oil and gasregions worldwide and a leading depth of knowledge and ability in safety and skills training anddevelopment. It is highly regarded in the oil and gas industry for practical fire-fighting and survivaltraining and technology skills training.

ClientsPetrofac Training’s clients for its safety and technical training in the UK include many of the UK’soil and gas operators and contractors. The clients of its international training business include BPSharjah and ENI Iran. Clients of its turnkey training solutions business include Shell Explorationand Production Europe Limited (Shell) and Total. In addition, Petrofac Training’s clients alsoinclude individual clients and a number of organisations arranging ad hoc training courses for theiremployees. Petrofac Training also provides in-house training to Petrofac’s own employees.

ContractsThe Petrofac Training business is driven by a large number of short term and short lead timecontracts. Petrofac Training generally contracts under its standard terms and conditions of servicefor calendar course provision and short-term project work. It offers over 150 different calendarcourses. Larger projects, especially those involving infrastructure, are usually negotiated and mayinclude a longer-term contract.

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Examples of contracts on which Petrofac’s training business is currently working include:

TTE International – Caspian Technical Training Centre

Following the successful completion of a design-and-build contract for a BP-led consortium’straining centre in Baku, Azerbaijan, Petrofac (in joint venture with TTE International) wasawarded a three-year management and operations contract on 1 January 2004, to include theprovision of training centre staff and the supply of consumables and curriculum materials. In May2004, the Caspian Technical Training Centre was opened. Based at the Sangachal TerminalExpansion Project area, the centre has a capacity to train 400 operations and drilling technicians ayear to full international standards. The contract lasts until 1 January 2007, with the possibility oftwo one-year renewals at BP’s option.

Shell Exploration and Production Europe

Petrofac provides comprehensive offshore training management solutions to Shell, covering itsthree key European operating centres of the UK, the Netherlands and Norway. The initial contractcommenced in January 1999. Petrofac Training successfully gained a two-year extension of thecontract in May 2005, together with two further one-year optional extensions, at Shell’s option.

BP Sharjah

BP Sharjah Oil Company awarded Petrofac Training the contract to provide and manage its HSEtraining provision for three years from 1 April 2005. Theoretical and practical HSE training isprovided to BP Sharjah delegates at the Petrofac facilities in Sharjah and the BP Sajaa plant atSharjah. Petrofac is also responsible for the training co-ordination, planning and scheduling andmaintenance of training records.

ENI Iran

Petrofac Training has a contract with ENI Iran to provide theoretical and practical HSE training atENI’s facilities in Iran. The contract was entered into in June 2005, and is a call off contract againsta client’s specified budget.

Competitors

Competition in the training market is more fragmented compared to the markets for Petrofac’sother services. Competition in the provision of training management solutions comes from ASETand Nutec (part of the Global Safety Group). There are a number of independent operators whichcompete with Petrofac in the provision of certain of its training courses, including for example, TheFire Service College in Moreton-in-Marsh, England in relation to the provision of fire trainingservices and Amec for technical and competency training. Petrofac also competes with the in-houseability of the oil and gas companies to manage and provide training to their own employees.

Competitive strengths of the Operations Services DivisionThe Directors believe that the competitive strengths of the OS Division include the following:

� Petrofac is the leading independent provider of turnkey facilities management in the UKCSThe Directors believe that the UKCS is one of the world’s most advanced markets inoperations outsourcing. Petrofac’s leading position is recognised throughout the industry –Petrofac has secured five of the six duty holder contracts that have to date been awarded tocontractors in the UKCS covering 16 out of the 17 offshore installations operating under sucharrangements. Petrofac has demonstrated its competence at performing the duty holder rolewith its clients. Petrofac has also developed credibility and an effective relationship with boththe H&S Executive and the DTI.

Petrofac has a focus on efficient operation of marginal and mature oil and gas fields in theUKCS. It is well placed to combine its UKCS expertise with the international reach of theE&C Division to create a platform for international expansion. Petrofac has establishedclient relationships and a track record internationally through its EPC business as well asrecent OS Division contracts. The Directors believe Petrofac is well positioned to grow itsinternational OS business, being well regarded in the market as having expertise in operating

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in the Middle East, North Africa and the FSU. The Directors also believe Petrofac’sestablished relationships with certain NOCs in these regions is a competitive strength.

� Petrofac has an established track record of facilities performance improvementPetrofac has demonstrated strong capabilities in implementing performance step-changes inasset ownership transitions. Petrofac has improved volumetric efficiency, reduced operatingcosts and improved production uptime under certain of its facilities management contracts.

� Petrofac provides from a single source a range of specialist and value-added servicesOffering specialist services, for example, machinery management or operational effectivenessaudits on platforms, broadens the range of services offered by Petrofac. By developing newand innovative services, Petrofac is able to expand the range of services offered to its clientsand increase the value added to the management and operation capabilities offered.

� Petrofac has a strong safety track recordPetrofac’s commitment to high health and safety standards is reflected in its historic trackrecord in safety. In recent years, Petrofac has consistently ranked in the top quartile of safetyperformance in the UKCS, when measured against its competitors or against the operating oilcompanies, as measured by UKOOA. Petrofac is an associate member of UKOOA in theNorth Sea and its safety performance is measured regularly against its operating oil companypeers. Petrofac has developed an effective relationship with the H&S Executive as dutyholder with responsibility for safety management on the platforms it manages. Health andsafety credibility is a critical element to winning new business as a duty holder in the UKCS,particularly as many smaller independents may not have a comparable safety record.Petrofac’s strong safety record puts it in a good position to win new business and toconsolidate its business with existing clients.

� Petrofac’s training in practical fire-fighting, survival training and emergency responsetraining is long established and highly regarded by the industryRGIT Montrose was established as an industry-wide training centre and has been operatingfor over 25 years. RGIT Montrose is a well regarded oil and gas safety training brand. Thisstrong brand awareness gives Petrofac a good position on which to develop its business. The“halo effect” associated with Petrofac’s safety training excellence gives Petrofac additionalcredibility when offering to take on the management of a platform for oil companies.

As a duty holder for 16 offshore installations, and COMAH Report holder for one onshoreterminal, Petrofac provides a full emergency response capability which is comparable to thatprovided by the major operating oil companies. This service has been extended to providestandalone emergency response services to three Amerada Hess facilities, for which Petrofacis not the duty holder. This emergency response capability has recently been launched as anindependent service to the North Sea industry seeking to substitute the several oil companyspecific, part-time, response teams with a fully staffed, professional service integrated withcoastguard, police and oil spill response services.

� Petrofac has successfully blended oil company and contractor skill-sets, giving it an informedindustry insight and allowing it to anticipate client needs.A relatively high proportion of Petrofac’s senior personnel have significant experience ofworking for major oil companies. Combined with the experience of those team members witha contractor-based background, this gives Petrofac an informed industry insight, allowing itto anticipate client needs.

ResourcesIn selected situations, the Resources Division invests alongside its clients and partners in producingand proven or probable but not fully developed oil and gas reserves and energy infrastructure.Investments are assessed on the basis of their projected financial return reflecting the anticipatedrisks of the investment and, independently, the opportunity for the Group to provide services to itsclients and partners.

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This business is based in Sharjah, UAE; Kuala Lumpur, Malaysia; and London, England andemploys 36 business development employees including petroleum engineers and other technicallytrained personnel with a further 150 employees involved in the operation of a refinery investment inKyrgyzstan.

In FY 2004, the Resources Division’s external revenue was US$45.0 million with net profit ofUS$7.0 million, representing 5 and 15 per cent. respectively of the Group for that period. In H12005, the Resources Division’s external revenue was US$22.6 million with net profit ofUS$12.0 million representing 3 and 33 per cent. respectively of the Group for that period. At30 June 2005, the Group’s investments had a book value of US$96.6 million.

Industry outlookCurrent and expected levels of oil and gas prices typically have a direct effect on the cash flowsgenerated and returns earned from upstream oil and gas investments. As a result, higher oil and gasprices typically increase the level of expected returns for upstream investments.

The major integrated oil companies grew significantly in scale during the 1990s as a result ofconsolidation. Partly as a result of the increased scale of these sector participants, there has been atrend for them to divest their smaller scale fields in order to concentrate their development andmanagement resources on larger developments. The Directors believe this trend provides increasedopportunities for the Resources Division to invest in high-quality upstream assets. In addition, theDirectors believe that Petrofac has a competitive advantage in developing and operating such fieldsin a cost effective manner, based upon the experience and knowledge housed within its E&C andOS Divisions.

Since the mid 1990s, many of the world’s major national and independent oil and gas companieshave been increasingly outsourcing their global maintenance, modification and operations servicerequirements. Outsourcing is often viewed as a compelling alternative by producers who recognisethat it allows them to focus on their core competencies, enhance their safety performance andreduce costs. The Directors believe that clients who have contracted with Petrofac’s E&C or OSDivisions may seek to align Petrofac’s economic interests with their own by having Petrofacco-invest in certain projects. Conversely, when Petrofac’s Resources Division makes a minorityinvestment in an asset, the Directors believe this will result in increased opportunities for Petrofac’sE&C and OS Divisions to provide services to the asset.

Investments in oil and gas reservesThe Resources Division’s investments in producing and proven or probable but undevelopedreserves would include, for example, participation in large onshore field developments, onshoreand offshore field developments that major oil companies may consider to be marginal, and late lifeproducing assets, particularly those offshore.

� Large field developments can depend on the ability to cap EPC and or operations andmaintenance costs if they are to be developed effectively. With the benefit of the Group’swider service offering, opportunities to provide this service, coupled with equity investment,are a target area for the business of the Resources Division.

� The operatorship of many smaller undeveloped fields is often held by the major oilcompanies. However, in comparison to other development opportunities and the need toreplenish reserves, these smaller fields may not be regarded as having sufficient scale by theircurrent owners. Typically, such assets undergo transition of operatorship, and possiblyownership, and through participation in this process, the Resources business can catalyse thedevelopment of these assets using the focused skills of the wider Petrofac Group.

� The opportunity to invest in, and further develop, late life or mature assets in order toenhance remaining production generally cannot provide the relative economic justification tomerit the attention of the major oil companies.

These types of investment would typically be made by acquiring an interest in a production sharingcontract (PSC) or risk service contract (RSC), under which the investment return is earned throughmonetisation of partners’ entitlements to the hydrocarbons lifted. In certain circumstances, such

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investment might mean that Petrofac becomes the licence operator of that asset, as is the case withthe Cendor investment in offshore Malaysia.

When disposing of interests in late life assets, vendors will often seek to transfer their liability fordecommissioning. Whilst the Resources Division will consider opportunities to take over suchassets on a case by case basis, Petrofac would only be likely to accept decommissioning liability if itcan establish that the risks are well understood and manageable, and that there are appropriatemechanisms in place to mitigate against such risks.

Certain investment opportunities may require the Resources Division to commit to limitedexploration expenditure. The strategy of the Resources Division in this regard is to ensure that anysuch expenditure constitutes only a minor part of the wider investment opportunity; furthermore,Petrofac looks to defer, where possible, such expenditure until an investment is providingsatisfactory cash flow and may also seek to finance the investment through a farm-in and carryarrangement. Investments in assets may include reservoir appraisal expenditure, for example thecost of drilling a limited number of additional wells on known hydrocarbon structures.

Because Petrofac does not take pure exploration risk except on an upside basis above its base casereturn requirements, it is therefore able to capitalise on its investments relatively more quicklycompared to investments that rely on exploration success.

Investments in energy infrastructurePetrofac’s investments in oil and gas midstream and downstream infrastructure would include, forexample, refineries, pipeline transmission, tolling process plants and utilities, and comprise bothinvestment in greenfield facilities or acquisition of existing brownfield facilities. These types ofinvestment would typically be structured either as the direct acquisition of an asset or a variety ofturnkey project development structures, including Build Operate Transfer (BOT), Build OwnOperate Transfer (BOOT) and Build Own Operate (BOO) development arrangements with thelocal government or national oil company where the asset is domiciled.

Petrofac has entered into an alliance with First Reserve, a US private equity fund, to co-operate oncertain midstream and downstream infrastructure investments in North Africa, the Middle Eastand Central and Eastern Europe. The alliance brings together Petrofac’s project identification andassessment capabilities with First Reserve’s financing and transaction structuring expertise.Petrofac has also entered into an alliance with Cal Dive to pursue opportunities jointly in matureoffshore oil and gas properties and proven undeveloped reserves in the UKCS. The alliance bringstogether Petrofac’s engineering and operational track record in the UK with Cal Dive’s GoMexperience in marine contracting and particularly decommissioning. The alliance’s strategy is tooperate mature fields and offer the capability to manage and carry out decommissioning asrequired.

Business developmentThe business development team of the Resources Division comprises highly qualified personnelwith technical, operational, asset investment and asset management backgrounds, typically gainedin major oil companies. A key differentiating feature of the Resources business is the businessdevelopment team’s combination of skills, which enable the Group to make a rapid, informedassessment of investment opportunities. In carrying out its business, the team undertakesopportunity identification, project technical, economic and risk analysis, contract negotiation,structured financing, government and regulatory liaison, contract management and assetmanagement.

The Resources business leverages the expertise of Petrofac’s E&C and OS Divisions to optimisedevelopment and operational costs and to provide combined development and operationalsolutions where needed. Following investment, the team’s operational background provides thenecessary expertise to manage an asset’s development, procuring the services of the wider Groupwhere appropriate.

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Principal investmentsDetails of the principal investments of the Group for the 2002, 2003 and 2004 financial years andfor the period between 1 January 2005 and 19 September 2005 (the latest practicable date prior tothe publication of this document) are set out below. With the exception of the Ohanet project,which was part financed through external project finance, all the investments referred to belowhave been financed through Petrofac’s own cash resources. At 30 June 2005, the total book value ofinvestments was US$96.6 million with the Ohanet and Cendor projects representing 87.0 and9.5 per cent. respectively of the total.

Ohanet, Algeria

Petrofac Resources’ largest investment is in the Ohanet project in Algeria.

In a joint venture with BHP (as operator), Japan Ohanet Oil & Gas Co., and Woodside Energy(Algeria), Petrofac invested in excess of US$100 million for a 10 per cent. share in an RSC withSonatrach, Algeria’s national oil company. The investment commitment was made in July 2000.

The US$1 billion Ohanet development is located in the Illizi province of Algeria, south-east ofAlgiers and close to the Libyan border. The development phase consists of a 3D seismic programmeover the entire Ohanet contract area, the drilling of 32 new wells and the re-completion of 15existing wells, a gas gathering system comprising over 150km of flowlines, a two train wet gastreatment facility and export to the Sonatrach pipeline network.

Petrofac’s E&C Division carried out the EPC contract for the gas processing facilities of Ohanet injoint venture with ABB Lummus, worth a total of approximately US$600 million (with Petrofachaving a 50 per cent. share). The Group’s OS Division was also responsible for part of the onsitecommissioning works. The Directors believe that Petrofac’s ability to draw on its servicecapabilities know-how and demonstrate to BHP Billiton how capital costs could be reduced placedthe consortium in a competitive position to win the bid.

First gas for export began flowing in late October 2003 with production increasing into 2004.During 2004, the Ohanet development produced, on average, approximately 450 million standardcubic feet per day of dry gas for export, approximately 23,900 barrels per day (bpd) of condensateand approximately 1,800 tonnes of liquefied petroleum gas (21,200 bpd of oil equivalent).

Under the terms of the RSC, signed in July 2000, Petrofac and its joint venture partners (the OhanetConsortium) receive a portion of the Ohanet liquids production over an 8 to 12 year period,depending on hydrocarbon price and production levels, commencing in October 2003. Thepipeline sales gas and its associated revenue is owned and marketed by Sonatrach. Productionoperations are managed by a joint BHP/Sonatrach operating company.

The RSC entitles the Ohanet Consortium to an in-kind payment comprising three components: (i)repayment of investment, (ii) a remuneration payment providing a defined uplift on the investment,and (iii) re-imbursement of its share of the agreed-upon operating costs (the Ohanet Consortium isentitled to recover Sonatrach’s share of the operating costs during the month immediatelyfollowing the month during which costs were incurred).

The Ohanet Consortium’s annual revenue is capped at 49 per cent. of the total production(including the gas) by weight measured in tonnes of crude oil equivalent using agreed conversionfactors. If there is insufficient revenue to pay the Ohanet Consortium in any month due toinsufficient liquids production, low price or the revenue cap, the Ohanet Consortium can recoverany costs not repaid in any month, in the next or subsequent months.

Because this remuneration is in-kind, the repayment period is a function of production levels andprevailing hydrocarbon prices. The initial recovery period is set at 8 years. If production levels orprices for the products drop such that recovery is not attained within the 8 year period, the periodcan be extended for an additional three years. Finally, if recovery is not achieved within the 11 yearperiod, and if the average benchmark Brent prices during the 11 years had averaged below aminimum level, then the period would be extended for a final (12th) year.

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The monetary value of the hydrocarbon liquids delivered to the Ohanet Consortium aredetermined on the basis of sales prices realised by Sonatrach in export transactions.

At Petrofac’s current base case production profiles, the benchmark Brent prices would need toaverage below US$24/bbl from 30 June 2005 to extend the repayment period beyond 8 years. Ifprices are US$15/bbl average from June 2005, the repayment period will extend to 11 years.Average prices would need to be below US$10/bbl from June 2005 to enable an extension into afinal year of recovery.

Each member of the Ohanet Consortium has appointed an affiliate of BHP, BHP Trading andMarketing (BHP T&M), to market the hydrocarbons based on a separate marketing agreement.Under this agreement, BHP T&M is authorised to market each partner’s share of the hydrocarbonson an exclusive basis. BHP T&M’s obligations under the marketing agreement are guaranteed byBHP. Further, BHP T&M is also authorised to sell all the hydrocarbons to Sonatrach under theterms of a separate sale and purchase agreement between Sonatrach and BHP T&M.

The investment commitment was made at a time when prevailing oil prices were at approximatelyUS$20 per barrel. In the current environment, with relatively high oil prices, the OhanetConsortium’s entitlement is typically achieved within the first two weeks of each month.

Sonatrach is liable to pay a royalty and all taxes applicable under Algerian law with respect to theentire production coming from the Ohanet project.

All decisions relating to the management and execution of the RSC are taken by unanimous vote ofa management committee comprising four members from Sonatrach with the Ohanet Consortiumappointing a further four members. The chairman of the management committee is a Sonatrachrepresentative and the vice-chairman is a representative of the Ohanet Consortium.

Algerian law requires foreign companies with interests in partnerships for the prospection, researchand exploitation of liquid hydrocarbons in Algeria to make certain notifications to the Ministry ofEnergy and Mines concerning changes affecting control of their companies. Examples of theserequirements include information concerning holdings of more than 10 per cent. of the foreigncompany’s corporate capital and concerning any transaction as a result of which one or moreindividuals or corporate entities may lose a determining power in the direction or management ofthe foreign partner company. If any measure or transaction were to result in other individuals orcorporate entities obtaining a determining power in the direction or management of the partnercompany, the Ministry may within three months following receipt of the relevant information,notify the foreign partner that such measure or transaction is incompatible with maintaining theapproval of any protocol, agreement or contract concluded with the State and the nationalcompany and may require termination of the partnership. The circumstances of the Offer requirenotification to be given, and such notification has been given to Sonatrach and will be given to theMinistry following Admission, but the relevant provisions of Algerian law do not provide a processfor determining whether or not the Offer will result in any individual or corporate entity obtainingany determining power in the direction or management of Petrofac so as to result in any such rightof termination arising. The Board considers that the Offer will not result in such a termination rightarising; however, BHP has reserved its position in full until it receives confirmation that this is thecase.

Cendor PM304, Malaysia

In May 2004, Petrofac Resources acquired the Amerada Hess subsidiary which owns and operatesa 40.5 per cent. interest in the PSC for the undeveloped Cendor field offshore Peninsular Malaysiain Block PM304, and has subsequently reached agreement with PetroVietnam InvestmentDevelopment Company (PIDC) for the sale to PIDC of a 10.5 per cent. interest.

The field will be developed in phases by a Petrofac-led, joint operating team with Petronas Carigali,Kuwait Foreign Petroleum Exploration Company and PIDC.

Drawing on the skills within the Group’s E&C and OS Divisions, the Petrofac-led team submittedthe partner approved proposed field development plan (FDP) in February 2005 and gainedregulatory approval from Petronas in May. The major contracts for the development are now in theprocess of being let. Ryder Scott, an independent reserves consultant, estimates proven reserves of

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the field to be approximately 24.6 million barrels and proven plus probable reserves ofapproximately 30.3 million barrels. For further detail on this report, please see Part VII –“Competent Person’s report by Ryder Scott”. The Directors believe that the Group’s OS Divisionwill be closely involved with the facilities management of the platform upon start up of production.

The Directors believe that offshore Malaysia offers a number of additional opportunities forPetrofac to replicate its combined approach of investment, asset development and operationsmanagement in monetising proven undeveloped discoveries.

Hewett, UKCS

In August 2005, Petrofac Resources agreed to acquire Centrica’s 23.15 per cent. interest in theHewett gas field in the UKCS. Completion of the acquisition is subject to the approval of the Hewettpartners and the DTI, currently expected to be received in late 2005. Under the terms of the alliancePetrofac has with Cal Dive described above, Petrofac will offer Cal Dive the right to acquire half ofPetrofac’s interest in the field, subject to the approval of the Hewett partners and the DTI.

Originally discovered in 1966, Hewett is a mature gas field and has produced over 3.4 trillion cubicfeet of gas to date. There are 6 platform structures in the field complex, which deliver gas into theBacton terminal on the east coast of England.

Petrofac’s OS Division currently acts as service operator and duty holder for the Hewett area fieldsand COMAH Report holder for the Bacton terminal on behalf of Tullow, the licence operator. TheDirectors believe that alignment between Petrofac and the other field owners will be enhanced byPetrofac’s participation as an equity holder. In addition to continued improvement in operatingcost efficiencies, developing new transportation business and reinvesting in the fields will be key toextending the commercial life of the facilities.

The Directors believe gross reserves to be 35 billion cubic feet for the area and that production in2005 is averaging approximately 33 million cubic feet per day (7.7 million cubic feet per day netsales gas to Petrofac Resources). Third party gas from the Thames and Lancelot fields is alsoprocessed through the Bacton terminal.

At completion, Centrica will pay Petrofac Resources £4 million and transfer certain plant andmachinery allowances with the asset. The economic date of the transaction is 1 January 2005.Petrofac Resources will be required to provide Centrica with a letter of credit to cover thedecommissioning liability which is presently estimated at £20 million net to Petrofac (on the basisof its current ownership of the 23.15 per cent. interest). Although decommissioning is currentlyestimated to occur in 2010, Petrofac Resources will be reviewing strategies alongside its partners toextend the life or look at alternative uses of the Hewett area assets.

Kyrgyz Petroleum Company, Kyrgyz Republic

Petrofac Resources owns a 50 per cent. interest in Kyrgyz Petroleum Company (KPC), a companyengaged in the production and refining of crude oil and the marketing and sale of oil products in theKyrgyz Republic. KPC is jointly owned by Petrofac and Kyrgyzneftegaz, the state-owned oil andgas company in the Kyrgyz Republic, and is the only integrated oil refiner and distributor ofpetroleum products in the country. Petrofac has managed KPC’s facilities and operations since1998, having completed the design and construction of the facility. KPC now employs around 150technical specialists and support personnel who, after a major training programme instituted byPetrofac, are now almost entirely Kyrgyz citizens.

Cragganmore, UK North Sea

In January 2004, Petrofac Resources acquired a 5.58 per cent. interest in Block 9/28a Area B in theUK North Sea. The block contains the Crawford field, since renamed Cragganmore, which wasoriginally developed by Hamilton Oil and Gas (now BHP Billiton) using a convertedsemi-submersible production vessel.

Petrofac Resources is in partnership with Tuscan Energy, as operator of the field, Acorn Oil andGas and Stratic Energy. The field is being remapped using up-to-date data processing andinterpretation methods. A number of development options are being evaluated together with aprospect inventory of additional appraisal targets. Petrofac’s decision to partner was based on theprospect of services being provided by the Group’s E&C Division and ultimately by its OS Division.

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Elke, UKCS

In May 2004, Petrofac Resources acquired a 100 per cent. interest in the Block 28/3 in the UKCS,containing the Elke field. The Elke field was discovered in 2002 by OMV and containsapproximately 227 million barrels of heavy oil initially in place. However, due to the low APIgravity of the oil, the field remained undeveloped by OMV and its original partners. Developing anoffshore field with low API gravity oil requires an innovative development scheme and Petrofac islooking to draw on the expertise of its E&C and OS Divisions with a view to providing an economicFDP. If successful, the approach may have application to other offshore heavy oil fields.

Save as disclosed above and other than continuing capital investment requirements of the investmentsoutlined above, the management bodies of the Petrofac Group have not made any firm commitmentson any principal future investments which are material to the Petrofac Group as a whole.

CompetitorsThe Resources Division faces competition from the following diverse groups:

� oil and gas companies which compete for equity participation in projects. This is particularlyprevalent in the upstream arena;

� mezzanine and debt financiers of projects, which can obviate the need for further equityparticipation; for example, certain Japanese trading house financing arms, working withengineering partners, can be either competitors or partners. Pipeline projects are typicallycontested by local engineering and construction companies along with finance groups; and

� certain Chinese and Indian oil companies which have close ties to low cost nationalengineering companies or internal EPC arms which often compete, particularly ondownstream projects.

Competitive strengths of the Resources DivisionThe Directors believe that the competitive strengths of the Resources Division include thefollowing:

� An experienced and high calibre project development team provides rapid evaluation,execution and financing of project opportunities, together with project management andfinancing capabilities to support implementation

The Petrofac Resources team has multi-disciplinary capabilities and analytical and technicalstrengths and includes a number of petroleum engineers. Alongside the investment analysisand execution capabilities, the personnel are very well informed in the services related to assetmanagement and evaluation, and are able to understand and shape the performance of theassets. The Petrofac Resources development team can also leverage the expertise within therest of the Petrofac Group.

� Petrofac is able to draw on client relationships, know-how and service expertise within thewider Group to enhance identification, evaluation and completion of investments

The Resources Division makes investments with the benefit of the broader Group’s expertisein relation to the development of a project across the asset’s life cycle. By accessing thesedesign, construction and operating capabilities, the Resources Division can more effectivelyevaluate the scope and risks involved and develop, shape and create value in those projects itis investing in.

� High level business contacts established by the Resources Division can create new businessopportunities for the rest of the Group.

The business development team in the Resources Division forges relationships andestablishes contacts with senior personnel in the process of negotiating and finalisinginvestments. Petrofac’s other two divisions can draw on these contacts with a view toestablishing new business opportunities through high level contacts.

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� Ability to assess completion and process performance risk when structuring investmentseases financing requirementsOn entering into oil and gas infrastructure investments, Petrofac’s E&C and facilitiesmanagement expertise provide it with the ability to assume, on a case by case basis, the riskfor performance and completion of the project. Such risk would be taken on for those parts ofthe project which Petrofac is dealing with in-house which would be subject to its standardassessments, including risk assessment. This effectively allows Petrofac to offer aperformance “wrap” to its investment proposal which may be attractive to certain partners.

� Track record in challenging countriesPetrofac has successfully invested in projects in Algeria at a particularly politically unstableperiod (the Ohanet project) and in a remote area of Kyrgyzstan (through its investment inKPC). Both projects demonstrate its ability to undertake investments notwithstandingchallenging geo-political conditions. The investment in KPC has helped to generate a local oilindustry in the country and the majority of the personnel working on the project are nowKyrgrz nationals, having been trained to high standards under a training programmeinstigated by Petrofac.

5. Health, safety and the environment (HSE) and securityPetrofac sets high standards of health and safety for itself, its staff and its sub-contractors. It alsorecognises that a responsible strategy to manage environmental issues affected by its business isessential to its employees, its clients and society.

Group policies

The Group has developed its own health and safety policies that are adopted by each of the Group’sdivisions, adapted, where applicable, for that business unit’s particular scope of operation. TheGroup is committed to continual improvements in its environmental performance, to theprevention of pollution, and to full compliance with relevant environmental legislation and otherrequirements.

HSE matters are considered at each regular meeting of the Board, with performance, programmeand opportunities for improvement being the main items for discussion. Each division has its ownprogramme of HSE audits and reviews. In addition, the Corporate Safety function, under thedirection of the Corporate Safety Director, performs an annual independent HSE review. Thesereviews identify performance issues and measure compliance by the divisions with the Group’s HSEpolicies and standards. The results of this report are reported back to the Board.

Health and safety incidents

With respect to incident reporting, Petrofac has adopted the American Occupational Safety andHealth Administration (OSHA) guidelines and definitions, as being most applicable to the Group’sprincipal geographic areas of operation and clients. However, the UK system for the Reporting ofInjuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) is operated in parallel tomeet local legislative requirements for UKCS operations. Each business unit reports monthly atdivisional board level on any health and safety incidents that have occurred that month. At eachregular Petrofac Board meeting, all incidents in the OSHA “recordable” category are identified andreviewed to establish trends. All Lost Time Injuries (LTIs) are required to be identified anddiscussed in detail to assure the Board that the appropriate lessons have been learned andimplemented. All LTIs are required to be reported promptly to the executive Directors andDivisional Chief Executives. In addition, the Group sets KPIs for health and safety incidents andagain, at the divisional board meetings, performance against these KPIs is reviewed.

Approximately 130 million man-hours have been completed or managed from January 2002 todate. During 2004, approximately 39 million man-hours were worked or managed across theGroup’s operations (2003: approximately 38 million). During the year, the Group experienced 112“recordable injuries” (RIs) (2003: 124), representing an RI frequency rate of 0.57 per 200,000man-hours (2003: 0.65) and 14 LTIs (2003: 9), representing an LTI frequency rate of 0.08 per200,000 man-hours (2003: 0.05). The Directors believe these frequency rates demonstrate a good

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level of performance when compared against annual OPG (International Association of Oil andGas Producers) performance measures, being an LTI frequency rate of 0.32 per 200,000 man hoursand an RI frequency rate of 0.97 per 200,000 man hours. Regrettably, sub-contractors working forthe Group have experienced a total of three fatalities, one in each of FY 2003, FY 2004 and duringFY 2005.

Five H&S Executive improvement notices have been served on Petrofac Facilities Managementduring 2005. Of these, two relating to Heather and Thistle are very recent and have not beenentered into on the H&S Executive public register of enforcement notices website as they arecurrently in the appeal window. Of the remaining three, two have been complied with and one(relating to a failure to implement a system to monitor safety critical elements of the installation) isoutstanding although work is in progress in this regard. In addition, one H&S Executiveprohibition notice has been served on Petrofac Facilities Management on 16 September 2005relating to certain parts of the drilling infrastructure on the Kittiwake offshore installation whichare operated by a third party drilling contractor. Work is in progress to ensure appropriaterectification. Petrofac is also party to a prosecution brought by the H&S Executive, further detailsof which are set out in paragraph 12 of Part IX – “Additional Information”.

Environmental incidents

The Group monitors environmental incidents carefully. An incident which results in the accidentalemission or discharge of a substance categorised as harmful to the environment is recordableaccording to the level of emission or discharge, with three levels of recording based on theirconsequence, Level 1 being the most serious. During the three years and 6 months ended 30 June2005, the Group has recorded only two environmental incidents. One Level 2 incident was theresult of the discharge of sewage into controlled waters in North Wales (for further details seeparagraph 12.6 in Part IX – “Additional Information”) and the other was a Level 3 incident withrelatively minor consequences. The Directors place confidence on the effectiveness of Petrofac’senvironmental incident reporting, while continuing to seek opportunities for improvement.

UKCS duty holder obligations

Petrofac’s UKCS offshore facilities management business is subject to particularly detailed healthand safety regulation, as Petrofac is the duty holder for 16 offshore installations and COMAHReport holder for one onshore installation, which it manages for its clients. The duty holder of aninstallation must demonstrate that the facility has been designed and constructed to afford thelowest practicable risk of injury to the employees. As well as providing a fundamentally safeinstallation, the duty holder must prepare a safety case, which demonstrates that it has consideredall the possible hazards that may occur and their likelihood of occurrence; and has minimised risksby adopting safe operating and maintenance practices. Details of certain regulations applicable toPetrofac as duty holder are set out below.

The offshore industry is a hazardous and consequently highly regulated industry. Following theCullen report into the Piper Alpha disaster, a detailed framework of legislation relating to theoperation of an offshore installation was introduced, including the Offshore Installations (SafetyCase) Regulations 1992 (the Safety Case Regulations). This legislation applies to Petrofac inrelation to those UKCS installations for which it is the duty holder.

The duties and responsibilities of a duty holder start with duties under the Health and Safety atWork Act 1974 as amended (HASAWA), imposing duties on employers and other parties to bothemployees and third parties. These duties are non-delegable and breach is punishable undercriminal law. HASAWA also applies offshore. Certain secondary legislation has also beenimplemented under the HASAWA to address particular issues in the offshore industry, including:

� the Safety Case Regulations;

� the Offshore Installations and Wells (Design and Construction) Regulations 1996;

� the Offshore Installations (Prevention of Fire and Explosion and Emergency Response)Regulations 1995; and

� the Offshore Installations and Pipeline Works (Management and Administration)Regulations 1995.

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The Safety Case Regulations set out the requirement for the operator of fixed or mobile installationsto prepare a safety case and for that safety case to be examined by the H&S Executive. The safetycase identifies safety critical elements, for instance an item of a plant, failure of which could cause orcontribute substantially to a major accident. Such plant must be identified, a performance standardset and the process and performance verified. The operator must conform with the safety case asaccepted by the H&S Executive.

The Safety Case Regulations further create a framework of non delegable duties, with theresponsibility for fulfilment of those duties remaining with the duty holder owner or operatorregardless of any contractual provisions relating to the actual operation of the unit. Breach of anysuch duties is punishable by criminal law. The specific duties, which are set out in the regulationsreferred to above relate to:

� the duties of installation managers, and related instructions and communicationrequirements;

� the integrity of offshore installations, safety of wells, safety of the workplace offshore andarrangements for the verification of safety critical elements; and

� preventative and protective measures to be taken to manage fire and explosion hazards and tosecure emergency response.

Similar legislation applies to onshore installations in the UK, for example to onshore gas terminals.The report holder under the Control of Major Accident Hazards Act 1999 (COMAH) has overallresponsibility for the health and safety of the onshore installation.

Contractual issues

Many of the Group’s contracts, particularly EPC contracts and Operations Services contracts setthe standards and targets in relation to HSE, to which the Group is contractually required toadhere. Where in-country HSE legislation exists, this is typically defined in the contracts and oftensupplemented by client specific requirements. In some cases, the HSE requirements of both clientand host country are below the Group’s expectations. In these cases or in the absence of any specificHSE requirements in a contract, the Group’s internal guidelines on HSE management strategies,policies and expectations provide the default requirements. Typically, and at an early stage, acontract will require a specific HSE plan to include specific reference as to how the contractualrequirements will be met. The Group seeks to educate the personnel engaged on the relevant projectto ensure that they are aware of the standards required and the importance of meeting suchstandards. The Group has generally been successful in achieving at least the HSE standardsrequired of it pursuant to these plans.

Security

The Directors regard the security of Petrofac’s personnel, property and reputation as a priority andaccordingly the Group is developing a security management strategy to manage these risks. Thestrategy focuses on many aspects of the Group’s operations but the security of Petrofac’s personnelwho have to travel and work in countries where the social and political conditions are ofteninsecure is the main focus of the security programmes currently in place. The basis of Petrofac’sstrategy is the development and execution of security plans, developed by each division specificallyfor each location. Petrofac also receives support from a third party security services provider, whichincludes input into the Group’s security plans, the provision of local risk assessments and also a fulltime monitoring service for all of the Group’s geographical locations.

6. Risk managementPetrofac manages risk through a set of delegated authorities which provide that any significantadditional risk, whether arising from, inter alia, new contracts or investments, counterpartyexposure or new process, technology or country of operation, has to be reviewed by the RiskReview Committee and approved at either the divisional board level or, where more significant, atmain Board level.

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The Risk Review Committee is chaired by the Group Chief Executive and its members areindependent of the proposal under review. The committee is charged with examining a proposedactivity and the steps being taken by the project sponsor to address the areas of risk to which itexposes the Group. The permanent members of the Risk Review Committee are the Group ChiefExecutive, the Chief Financial Officer and the Director of Group Legal and Commercial Affairs.Other senior employees are co-opted to the Risk Review Committee on an ad hoc basis.

The Group requires each individual business unit to take responsibility for identifying the risksinherent in bidding for and accepting new business and in managing existing contracts. Eachdivision operates a peer review process, whereby colleagues undertake an independent assessmentof the conclusions reached by bid proposal teams.

Each new business proposal is subject to the internal reviews identified above. Subsequently,certain types and size of proposal are subject to further review by the Risk Review Committee. Thiscommittee will make a recommendation to the divisional board or to the Board as appropriate as towhether a particular project or activity should be pursued having regard, inter alia, to thesustainability of the Group’s business and its reputation.

The nature of risk, and therefore the procedures required to identify and assess those risks, differacross the Group’s three divisions.

Engineering & Construction

Most of the E&C Division’s business is undertaken on a lump sum basis. In order to identify andmanage the business and financial risks inherent in lump sum contracts, the E&C Division hasadopted a procedure aimed at ensuring that contracts are bid for and accepted only on the basis of athorough understanding of the specific risks and how these might be mitigated, whether throughcontractual negotiation, involvement of counterparties (including sub-contractors) and suppliersor through appropriate insurances.

During consideration of a bid proposal, various risk factors will be evaluated, including technicalrisk and the availability of appropriate resources to ensure competent and timely execution of theproject (including procurement of equipment, materials, and services and logistical issues relatingto the site concerned); counterparty risk (including clients, partners, sub-contractors andsuppliers); the contractual liability regime being proposed; the likelihood of achieving a satisfactorynegotiated position and the cost of mitigating any remaining risks; the HSE requirements and theHSE standards of the counterparties involved; financial risk; and country and political risk.

Detailed consideration of these factors allows a clear assessment to be made as to the viability of aproject, the appropriateness of contracting on a sole basis or in partnership and the financial rewardrequired to compensate for the risk to be undertaken. Upon taking a decision to pursue a project,the next step is to seek to mitigate satisfactorily any identified risks. This can be done by:

� negotiation of contract terms and conditions, including payment terms and variationapproval procedures to minimise contract and financial risks;

� ensuring that all projects undertaken are within the Group’s technical competence and thatthe relevant resources are available to commit to it;

� partnering with other companies where strategically important to do so but ensuring anappropriate balance between relative risk and reward;

� selecting appropriate project counterparties, be they partners, sub-contractors or vendors,based on technical strength and experience and financial strength;

� ensuring any exposure to potential contractual liabilities is reflected in the contractualarrangements agreed with vendors and sub-contractors;

� estimating and controlling costs accurately, drawing on the Group’s significant experience inprocuring equipment, materials and services;

� regular project reviews by senior management to ensure that any issues arising are properlyconsidered and resolved;

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� obtaining the necessary insurance required to cover the services provided and reduce financialexposure;

� requiring clients, partners, and sub-contractors to obtain the necessary insurance andindemnity agreements, where possible;

� procuring materials and equipment effectively and efficiently and, to the extent possible, inthe currency of the project contract, in order to reduce currency exposure; and

� using experienced and qualified project managers.

Operations Services

The OS Division typically contracts on a cost-reimbursable basis and, as a result, the commercialand financial risks are different from, and less significant than, those involved with lump sumcontracts. However, HSE risks are common to both divisions.

Within the OS Division, the more basic services, such as manpower supply, are provided on thesimple basis of cost-reimbursement plus an agreed margin. As the technical level of serviceincreases, the complexity of the remuneration arrangements tends to increase too. Typically, aschedule of rates will be agreed with the client and work undertaken will be reimbursed at theagreed rates (termed “open rate”); alternatively, for some clients, contracts may be priced with anagreed cost recovery margin for a fixed period, but with the risk of cost inflation during that periodon certain cost lines residing with the contractor. This approach is termed “closed rate”. Theprogression from cost plus, through open rate to closed rate, requires Petrofac to ensure marginsare protected and not eroded through underestimation of cost inflation, typically driven by scarcityof resource. Where appropriate, incentive income will be negotiated so as to align Petrofac’srevenue with the achievement of performance measures that reflect the client’s priorities such asproduction uptime, operating expenditure and cashflow improvements.

The Directors believe that the business and financial risks inherent in the OS Division, particularlywithin its operations in the UKCS, are lower than those in lump sum contracts in the E&C Division(for example, contractual financial penalties and liquidated damages are unusual);correspondingly, however, gross margins are typically lower. Nonetheless, the OS Divisionoperates a similar assessment process to that of the E&C Division when considering potentialnew business.

Outside the UKCS, specifically in the Middle East, North Africa and Papua New Guinea,contractual terms are similar but more commonly also include penalties for underperformance andbonuses for performance. For example, remuneration may be based on an agreed schedule of ratesbut be translated into a lump sum fee (with liquidated damages for non-performance) but withadditional works being undertaken on a cost plus basis. Such contracts are subject to the sameassessment of risk and reward as the rest of the OS Division’s contracts.

Resources

In common with the E&C and OS Divisions, the Resources Division undertakes a risk assessmentrelating to new business. All investments must meet the two principal criteria of generating aninternal rate of return satisfactory to the Group and offering the possibility for services to beprovided by the wider Petrofac Group. The risks examined include an assessment of thecounterparties involved in terms of reputation, competence, existing relationships with the Groupand financial strength, country and political risk and exposure to changes that might have a bearingon cost, such as legislation. All investments of more than US$1 million are required to be reviewedby the Risk Review Committee and the assessment of all investments follows a form, and is basedon assumptions, which is periodically reviewed and approved by the Board. Investments of morethan US$10 million require approval by the Board. The base case oil price assumption forinvestments made by the Resources Division is currently US$25 per barrel (Brent) and 23 pence pertherm gas.

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7. Employee Share SchemesThe Petrofac Limited Executive Share Scheme (the ESS)IntroductionThe ESS was established in 2002 and provides selected participants with the opportunity to acquirea participatory interest in Ordinary Shares, financed as to 75 per cent. of the acquisition price byway of a non-recourse loan from the Company.

Participatory interests over a total of 57,055,960 Ordinary Shares remain outstanding under the ESS.

SummaryA participatory interest in Ordinary Shares means an absolute interest in Ordinary Shares subject tocertain terms and conditions as set out in the ESS rules. Pursuant to such rules, the Ordinary Sharescomprised in participatory interests acquired before Admission must be held in the name of thetrustee of the Petrofac Limited Executive Share Trust (the Trustee) as security for obligationsaccepted by participants under the ESS rules, including but not limited to obligations under the loanagreement entered into by the participant and the agreement that the voting rights attaching to suchOrdinary Shares shall be exercised only in accordance with the written instructions of theDirectors.

A participant is required to repay the loan used to acquire a participatory interest, together with anyinterest, in three equal annual instalments. The interest rate is calculated by reference to the ratecharged by the Internal Revenue Service of the United States.

A participant is entitled to any and all dividends and other distributions paid in respect of theOrdinary Shares comprised in a participatory interest. However, under the terms of the loanagreement, a participant agrees that the Trustee may first apply any dividends received on suchshares in satisfaction of monies owing under the loan agreement.

Effect of AdmissionOn Admission, most participants will be entitled to exercise the voting rights attributable to theOrdinary Shares comprised in their participatory interest themselves subject to the Articles and torequire the Trustee to transfer such Ordinary Shares to them provided that their loan has beenrepaid in full.

On Admission, most participants may direct the Trustee to sell a proportion of the Ordinary Sharescomprised in their participatory interests at the Offer Price. The rules of the ESS provide that thesale proceeds should first be applied in satisfaction of outstanding monies due under participants’loan agreements.

In the case of a small number of participatory interests acquired under the ESS, but not the OrdinaryShares held by the Trustee, the contractual voting and transfer restrictions do not fall away until theexpiry of the relevant “restricted period”, being between one and three years from the date theparticipatory interest was acquired.

The ESS will continue to be operated post-Admission in relation to existing participatory interestsalthough no further participatory interests will be awarded.

The Petrofac Performance Share Plan (the PSP)IntroductionThe PSP was established by resolution of the Board on 13 September 2005, conditional uponAdmission. Participants are granted contingent awards to receive Ordinary Shares which shall vestfree of charge subject (in normal circumstances) to the continued employment of the participantand to the extent that performance conditions have been satisfied.

The vesting of an award (under both the PSP and the DBSP which is summarised in the followingsection) means that the participant becomes entitled to receive the Ordinary Shares to which hisaward relates.

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EligibilityAwards will be made to employees and executive directors selected by the RemunerationCommittee of the Board (the Remuneration Committee) at its discretion.

Individual LimitIn any financial year of the Company, no participant may be granted awards over Ordinary Shareswith a market value in excess of 100 per cent. of basic salary or, in circumstances which theRemuneration Committee deems to be exceptional, 150 per cent. of basic salary.

Vesting of AwardsIt is currently intended that, provided the participant is still employed by the Group, awards willvest on the third anniversary of their date of grant to the extent that testing performance criteria,determined by the Remuneration Committee at the date of grant, have been satisfied. For initialawards, it is envisaged that vesting of a proportion of the awards will depend upon Petrofac’s totalshareholder return (TSR) performance as compared with the TSR performance of selected relevantcompanies and vesting of the balance of the awards will be contingent upon Petrofac’s performanceagainst earnings per share growth targets.

Cessation of EmploymentIf a participant dies, his award will vest in full and the relevant number of Ordinary Shares will betransferred to his personal representatives as soon as practicable. Such vesting will not be subject tothe satisfaction of the performance conditions.

If a participant’s employment ceases before the end of the vesting period, he will not automaticallyforfeit his award provided he leaves by reason of injury, ill-health, disability, redundancy,retirement, as a result of the company by which he is employed being transferred outside the Group,or in other circumstances which, in the view of the Remuneration Committee, justify him beingtreated as a “good leaver”. In such cases, the maximum number of Ordinary Shares which aparticipant may receive will usually be determined on a pro-rated basis by reference to the timeelapsed since the date of the award. However, vesting will not be accelerated as a result of leavingand such vesting will be subject to the satisfaction of the performance conditions at the end of therelevant performance period unless the Remuneration Committee, in its discretion, determinesotherwise.

Cessation of employment for any other reason will cause all unvested awards to be forfeited.

Change of ControlThe vesting of awards on a change of control will usually be determined on a pro-rated basis.However, vesting will be subject to the discretion of the Remuneration Committee, having regardinter alia to the progress to date in meeting the performance conditions.

The Petrofac Deferred Bonus Share Plan (the DBSP)IntroductionThe DBSP was established by resolution of the Board on 13 September 2005, conditional uponAdmission. Under the DBSP, participants may volunteer or may be required to invest a proportionof their bonuses in Ordinary Shares. The Company will then grant matching awards over OrdinaryShares.

EligibilityEmployees and executive directors will be eligible to participate in the DBSP. Participation will beat the discretion of the Remuneration Committee.

AwardsTwo types of award will be made under the DBSP.

If the Plan is operated in any year and a bonus is payable, the Remuneration Committee maydetermine that part of a participant’s annual bonus is delivered in Ordinary Shares or may inviteselected employees to elect to receive part of their bonus in Ordinary Shares. These shares will beknown as “Invested Shares” comprised in “Invested Awards”.

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Following such investment, a further award will be granted over a number of Ordinary Sharesbearing a specified ratio to the number of Invested Shares. These further awards are referred tobelow as “Matching Awards”.

VestingAwards will generally only vest three years after grant and provided that the participant does notleave the Company’s employment during that three year period (although there are certain “goodleaver” exceptions (see below). In addition, the vesting of Matching Awards may be subject to thesatisfaction of performance conditions.

Cessation of EmploymentIf a participant dies, his awards will vest in full. If a participant is a “good leaver” his InvestedAwards will vest in full and his Matching Awards will vest on a pro-rated basis. Vesting ofMatching Awards which are subject to performance conditions will be subject to satisfaction ofthose conditions at the end of the relevant performance period unless the RemunerationCommittee, in its discretion, determines otherwise. Cessation of employment for any other reasonwill cause all unvested awards to be forfeited.

Change of ControlIn the event of a change of control, Invested Awards will vest in full but Matching Awards willusually vest on a pro-rated basis and taking into account the extent to which any performanceconditions have been met. However, this is subject to the discretion of the RemunerationCommittee.

The Petrofac Approved Share Incentive Plan (the SIP)IntroductionThe SIP was established by resolution of the Board on 13 September 2005, conditional uponAdmission and has been submitted to HM Revenue & Customs for informal approval underSchedule 2 to the Income Tax (Earnings and Pensions) Act 2003. The SIP is established under a trustdeed with a UK resident trustee.

EligibilityAll employees and executive directors of the Group who are UK resident and have been employedfor a specified qualifying period are eligible to participate in the SIP. The qualifying period may beup to 18 months. The SIP can be extended to non-UK resident employees at the discretion of theDirectors.

Free SharesUp to the statutory maximum (currently £3,000), Ordinary Shares may be awarded free of chargeto each eligible employee in each tax year (Free Shares). The Directors may choose to make theaward of Free Shares subject to the satisfaction of performance targets. The holding period duringwhich the Free Shares must be held in trust may be anything between three and five years.

Partnership SharesEach eligible employee may be invited to use up to £1,500 per tax year of pre-tax salary (or, if less, 10per cent. of salary) to purchase Ordinary Shares (“Partnership Shares”). The SIP permits deductionsfrom salary to be accumulated over a period of time set at the discretion of the Directors but notexceeding 12 months (the “Accumulation Period”). Where there is an Accumulation Period, the priceat which Partnership Shares are acquired on behalf of employees will be the lower of the market valueof an Ordinary Share at the beginning of the Accumulation Period and on the acquisition date. Wherethere is no Accumulation Period, the price at which Partnership Shares are acquired will be the marketvalue on the acquisition date. There is no holding period for Partnership shares.

Matching SharesPartnership Shares purchased by eligible employees may attract, at the discretion of the Directors,an award of free Ordinary Shares (Matching Shares) in a ratio (to be determined by the Directors) ofup to two Matching Shares for each Partnership Share. The holding period for Matching Sharesmust be between three and five years.

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Dividend SharesThe Directors may require or permit eligible employees to reinvest dividends received on OrdinaryShares held under the SIP in further Ordinary Shares (Dividend Shares) up to a limit of £1,500 peremployee in any tax year. There is a three-year holding period for Dividend Shares.

Cessation of EmploymentFree and Matching Shares

If a participant dies or ceases to be an employee of the Group by reason of injury, ill-health,disability, redundancy, retirement on or after reaching the age of 60 or as a result of the company bywhich he is employed being transferred outside the Group, any Free Shares or Matching Shares heldby the SIP trustee will be transferred to the participant (or his personal representatives).

When Free Shares or Matching Shares are awarded, the Directors may determine that a participantwho ceases employment with the Group for any reason other than as outlined in the aboveparagraph within three years of the allocation of the Free Shares or Matching Shares will forfeitthem. Where forfeiture does not apply, the SIP trustee will transfer the Ordinary Shares to theparticipant.

When Matching Shares are awarded, the Directors may stipulate that if the related PartnershipShares are withdrawn from trust within three years, the Matching Shares will be forfeited.

Partnership and Dividend Shares

Whenever and for whatever reason a participant ceases to be an employee of any Group company,his Partnership Shares and Dividend Shares will be transferred to him.

Change of ControlIn the event of a change of control of the Company, any shares received as consideration will be heldin trust under the SIP on the same terms as the Free Shares, Partnership Shares, Matching Shares orDividend Shares in exchange for which they are received.

Dividend and voting rightsParticipants will be the beneficial owners of the Ordinary Shares held by the trustee of the SIP forthem. All dividends and other distributions received in respect of the Ordinary Shares which are notreinvested in Dividend Shares will be passed on to the participants concerned by the trustee as soonas practicable after receipt. The trustee will exercise the voting rights attaching to the OrdinaryShares in accordance with the wishes of the beneficial owners provided that participants have givenprior voting directions in writing.

Terms applying to the New Employee Share Plans generallyAdministrationEach of the New Employee Share Plans will be administered by the Remuneration Committee,other than in the case of the SIP, which will be administered by the Directors.

Overall LimitsNot more than 10 per cent. of the Company’s issued share capital may be allocated or issuableunder the PSP, the DBSP and the SIP and any other discretionary employee share plan adopted orestablished by the Company in any ten-year period.

Not more than five per cent. of the Company’s issued share capital may be allocated or issuableunder the PSP and the DBSP and any other employee share plan adopted or established by theCompany in any ten-year period.

For the purposes of the above limits, shares are allocated when an award to acquire unissued sharesis granted or when shares are issued other than in respect of such an award, and awards which havelapsed or are over shares which are already in issue are to be disregarded.

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Voting, Dividend and Other RightsOther than under the SIP, participants will have no voting or dividend rights in respect of OrdinaryShares until awards vest. However, when a dividend is paid, the number of Ordinary Sharescomprised in awards under the PSP and the DBSP will be increased by the number of OrdinaryShares which could have been acquired with the amount of dividend which would have beenreceived had the participant been the legal and beneficial owner of the Ordinary Shares comprisedin the award. The vesting of the extra Ordinary Shares will be subject to the same vesting terms asthe original Ordinary Shares.

In the event of a variation of the Company’s share capital, the number of Ordinary Sharescomprised in an award may be varied in such manner as the Remuneration Committee considersappropriate.

Ordinary Shares allotted under any of the New Employee Share Plans will rank pari passu with theexisting Ordinary Shares with the exception of rights attaching by reference to a record date prior tothe allotment date. Application will be made to the UK Listing Authority for all such OrdinaryShares to be listed.

Awards are non-transferable and non-pensionable.

AmendmentsSubject to what follows, the SIP may be amended in any respect by the Directors and the rules of thePSP and the DBSP may be amended in any respect by the Remuneration Committee.

The prior approval of the Company in general meeting will be required for specified amendments tothe material benefit of participants.

No amendment may be made to the rules of a plan if it would adversely affect the rights ofparticipants without the approval of the requisite majority of participants.

Minor amendments to benefit the administration of the relevant plan, to take account of changes inlegislation, to obtain or maintain favourable tax, exchange control, or regulatory treatment or totake account of a corporate transaction may, however, be made without the need for either of theapprovals set out above where such amendments do not alter the basic principles of therelevant plan.

No amendment to the SIP shall take effect without the prior approval of HM Revenue & Customs,where such approval is required.

Overseas EmployeesWhen making awards to employees resident outside the United Kingdom, the RemunerationCommittee may modify the terms of the relevant New Employee Share Plan, other than the SIP, totake account of tax laws or other legal or regulatory requirements in the relevant country.

The above description summarises the principal features of the ESS, the PSP, the DBSP and the SIPbut does not form part of their detailed rules (or trust deed, in the case of the SIP). The descriptionshould not, therefore, be taken as affecting the interpretation of the detailed terms and conditionsof the ESS, the PSP, the DBSP and the SIP. A full copy of the rules of the ESS, the PSP and the DBSPand the rules and trust deed of the SIP are available for inspection as described at paragraph 21 ofPart IX – “Additional Information”.

8. Dividend policyThe Directors intend to adopt a dividend policy which will reflect the long term earnings and cashflow potential of the Group, having taken into account the Group’s capital requirements, whilstmaintaining an appropriate level of dividend cover.

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From 1 January 2006 the Directors intend to pay an interim and final dividend in respect of eachfinancial year, with approximately one-third of the full year’s dividend being payable as an interimdividend and two-thirds as a final dividend. The Group reports its financial results in US Dollarsand will therefore declare dividends in US Dollars, together with a Sterling equivalent based on theexchange rate at the point the dividend is declared. Unless Shareholders elect to the contrary, theywill receive the Sterling equivalent.

Had Petrofac’s Ordinary Shares been listed throughout the 2004 financial year, the Directorsbelieve that they would have declared aggregate dividends equal to 25 per cent. of profit for theperiod from continuing operations (excluding the charge on variable rate unsecured loan noteswhich were converted into A ordinary shares on 21 June 2005). Going forward, the Group mayrevise its dividend policy from time to time. As a holding company, the ability of Petrofac to paydividends will be dependent upon dividends and interest being distributed to it by its subsidiaries.

With respect to the 2005 financial year, and, in the absence of unforeseen circumstances, theDirectors intend to recommend a final dividend at the time of announcing the preliminary resultsfor the 2005 financial year expected to be in March 2006, which it is expected will be payable inMay 2006. Since the Group will only be public for approximately three months of 2005, the finaldividend declared will be approximately half the level that would have been declared had Petrofacbeen listed for the whole of the 2005 financial year, having taken into account the Directors’intention to pay two thirds of the full year dividend as a final dividend.

For risks relating to dividends, please see Part II – “Risk factors”.

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PART IV

Directors and Senior Managers

1. Board membersRodney Chase, aged 62, Non-Executive Chairman3

Rodney Chase was appointed Non-Executive Chairman of Petrofac on 21 June 2005. Rodneyspent 38 years at BP plc, of which 11 were served on its board. He was deputy group CEO on hisretirement from the BP group in May 2003. He also spent time as CEO of the exploration andproduction, and marketing and refining divisions. He is currently non-executive deputy chairmanof Tesco plc, non-executive director of Computer Sciences Corporation, non-executive director ofNalco Company and senior advisor to Lehman Brothers. He has previously held positions as aboard member of BOC plc and Diageo plc.Michael Press, aged 58, Non-Executive Director, Senior Independent Director1 2 3

Michael Press was appointed to the Petrofac Board in January 2002, having previously held seniorexecutive positions for the Standard Oil Company Inc and BP and as a main board director ofAmerada Hess. Between 1997 and 2001, Michael held various posts at KBC AdvancedTechnologies including non-executive director, executive chairman, and chief executive. He iscurrently also non-executive chairman of SPS International, a supplier of downhole tools andservices used in wellbore clean-up and filtration, a director of ABARTA Inc. and T3 Energy Servicesand a member of the advisory board of Pharmadule Emtunga.Kjell Almskog, aged 64, Non-Executive1 2 3

Kjell Almskog was appointed to the Petrofac Board in March 2005. After starting his professionalcareer in brand management, with Procter & Gamble, Kjell subsequently spent some 25 years invarious senior executive positions. During 13 years in the ABB group, Kjell was country manager inNorway while, in parallel, developing a substantial and highly successful international oil and gasactivity, ultimately becoming group executive vice-president and head of ABB Oil, Gas andPetrochemicals. In 1998, he moved to Kvaerner as chief executive with responsibility for executinga major turnaround of that business until its acquisition by Aker in 2001. Presently, Kjell is senioradvisor and non-executive director of several international companies, including Orkla, a largelisted Norwegian group involved in branded consumer goods, chemicals and financial investments.He is also chairman of the Kverneland Group, a Norwegian listed international supplier ofagricultural machinery.Bernard de Combret, aged 62, Non-Executive1 2 3

Bernard de Combret was appointed to the Petrofac Board in November 2003. Bernard is aninternational consultant and former deputy chairman of TotalFinaElf’s (TFE) executivecommittee. Following senior positions in both foreign affairs and the Ministry of Finance with theFrench Civil Service, he spent over 20 years with the Elf Group. During his industry career, Bernardwas heavily involved in building the trading organisation of Elf Aquitaine and then subsequentlyTotal. As chief executive of refining marketing, he played a leading role in increasing profitability ofthe downstream sector and, in 2000, became deputy chairman of TFE’s executive committee,president and chief executive for gas and power and chief executive for trading and shipping.Bernard left TFE in 2002, after successful completion of the merger. He is currently a director ofAXA-RE and Winstar Resources Ltd.Ayman Asfari, aged 47, Group Chief Executive3*Ayman Asfari joined Petrofac in 1991 to establish Petrofac International Ltd. Ayman has 25 years’experience in the oil and gas industry and served as Chief Executive Officer of PetrofacInternational until his appointment as Group Chief Executive of Petrofac Limited in January 2002.Ayman previously worked as the managing director of a major civil and mechanical constructionbusiness based in Oman.1 denotes a member of the Audit Committee

2 denotes a member of the Remuneration Committee

3 denotes a member of the Nominations Committee

* denotes a permanent member of the Risk Review Committee

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Keith Roberts, aged 48, Chief Financial Officer*Keith Roberts joined Petrofac in March 2002 as Chief Financial Officer having spent most of hisworking life as an investment banker based in the city of London. After positions in commercialbanking with Standard Chartered Bank and then with County Bank, the merchant bankingsubsidiary of National Westminster Bank, Keith moved into corporate finance with HawkpointPartners where he was a managing director and a member of the operating committee. Keith is alsoa non-executive director of The Peacock Group, a UK listed value-for-money clothing retailer.

Maroun Semaan, aged 49, Chief Executive, Petrofac Engineering & ConstructionMaroun Semaan joined Petrofac in 1991 to establish Petrofac International Ltd. From 1977 to1991, Maroun held various project positions with Consolidated Contractors International Co.(CCC), based in the Middle East, where he was involved in the management of oil and gas pipeline,process facilities and civil works construction contracts in Oman and Bahrain. He was appointedChief Executive of Petrofac Engineering & Construction in April 2004.

2. Other divisional chief executivesAmjad Bseisu, aged 42, Chief Executive, Petrofac ResourcesAmjad Bseisu joined Petrofac in 1998 and founded the Resources investment business. From 1984to 1998, Amjad worked for the Atlantic Richfield Company (ARCO) starting his career as seniorengineer in the drilling and production division and moving to the position of vice-president – ArcoPetroleum Ventures, with responsibility for operations and commercial activities in the MiddleEast and North Africa and ultimately, in 1996, as head of International Marketing, Negotiationsand Business Development and president of ARCO Petroleum Ventures and ARCO CrudeTrading, Inc.

Robin Pinchbeck, aged 52, Chief Executive, Petrofac Operations ServicesRobin Pinchbeck joined Petrofac in 2002 to establish an independent facilities managementbusiness and has over 30 years’ experience in the upstream oil and gas industry. Followingpetroleum engineering and general management roles worldwide with BP, in 1995 he becamemanaging director of Atlantic Power & Gas, a leading UK North Sea operations managementservices provider which was sold in 1998 to Petroleum Geo-Services and subsequently acquired byPetrofac in 2002. Robin was appointed Chief Executive of Operations Services in April 2004.Robin is a non-executive director of Sondex plc, a UK listed oilfield logging technology company.

3. Senior ManagersEngineering & ConstructionMarwan Chedid, aged 44, Executive Vice President, OperationsMarwan Chedid has 21 years’ experience in the oil and gas sector, and joined Petrofac in 1992 tohelp establish its international office in Sharjah, UAE. Prior to joining Petrofac, Marwan worked invarious project positions at Consolidated Contractors Company. Marwan is a member of the E&Cdivisional board.

Rob Jewkes, aged 49, Executive Vice President and Managing Director, Petrofac EngineeringRob Jewkes joined Petrofac in January 2004, with the primary objective of building a Europe-basedengineering and construction division, to complement the Sharjah-based operations. Rob has over25 years’ experience in the oil and gas engineering and construction industry, principally gainedwith the Australian Clough Group, where he established Clough’s offshore engineering andconstruction division, and held a number of positions both in Australia and South-East Asia,ultimately serving as chief executive officer of the main operating company, Clough Engineering.Rob has many years of project management experience in facilities projects both in the Australasiaregion and in Europe and the Middle East. Rob is a member of the E&C divisional board.

Vivek Prakash, aged 48, Vice President, Finance and AdministrationVivek Prakash joined Petrofac in 2004 with responsibility for finance, HR, for administration andIT. Vivek has over 25 years of experience of which 15 years were in the oil and gas contractingsector as director of the Dodsal Group, overseeing the activities of the Group in the MESA region.Vivek is a chartered accountant by qualification and is a member of the E&C divisional board.

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Rajesh Verma, aged 55, Executive Vice President, Technical ServicesRajesh Verma has 30 years’ experience in the oil and gas sector and joined Petrofac in 1992 to helpestablish its international office in Sharjah, UAE. Prior to joining Petrofac, Rajesh worked invarious project management positions at Consolidated Contractor Company (CCC) in the MiddleEast as well as with Tata Consulting Engineers in Mumbai, India. Rajesh is a member of the E&Cdivisional board.

Peter Warner, aged 48, Senior Vice President, Sales and MarketingPeter Warner joined Petrofac in 2000 to lead the sales and marketing function of the E&C Division.He has over 25 years’ experience in the international E&C contracting business. He joined DavyPowergas in the late 1970s as a process engineer and subsequently held project and executive levelfinancial, strategic planning and sales positions in the UK and the USA. During the 1990s, Peterheld leading sales and marketing positions with Davy McKee, M W Kellogg and Stone & Webster.Peter is a fellow of the Institution of Chemical Engineers and a chartered engineer in the UK and waspreviously a licensed professional engineer in the USA. Peter is a member of the E&C divisionalboard.

Operations ServicesJim Atack, aged 54, Managing Director, Petrofac Facilities ManagementJim Atack joined Petrofac in 2002 following the acquisition of PGS PS, formerly Atlantic Power &Gas. Jim joined Atlantic Power & Gas as operations and change manager for the takeover by Oryxof the Hutton, Murchison and Lyell oilfields in 1994, and was then the architect of similar work inChevron’s takeover of the Ninian Field in 1996. More recently he was engaged in there-habilitation of the Ramform Banff FPSO, and establishing Petrofac as a full service facilitiesmanagement company. Jim’s prior experience spans some 17 years of oil and gas field productionand development projects with BP in the North Sea, onshore UK, and Alaska. Jim is a member of theOS divisional board.

Steve Bullock, aged 49, International Operations Director, Petrofac Facilities ManagementSteve Bullock joined Petrofac in 1994 and has 25 years’ experience in the oil and gas industry,including 12 years at Marathon Oil where he occupied a number of posts in Aberdeen, London andoffshore, variously operating in commissioning, maintenance and production management roles.Steve is a member of the OS divisional board.

Kevin Martin, aged 43, Financial Controller, Operations ServicesKevin Martin joined Petrofac in 2002 following the acquisition of PGS PS, assuming the role ofFinance Director of the facilities management business in 2003, and Finance Controller of the OSDivision in 2005. Before the acquisition, he held senior finance posts within the PGS Atlantic Powergroup of companies from 1991 and within labour-supply contracting companies from 1983.

Sandy Reid, aged 44, Sales and Marketing Director, Petrofac Facilities ManagementSandy Reid joined Petrofac in 2002 to spearhead the early development of the internationaloperations business prior to the acquisition of PGS PS, formerly Atlantic Power & Gas Limited.Sandy has over 20 years’ experience in various companies, including management posts at AtlanticPower & Gas Limited and BG Group. Sandy is a member of the OS divisional board.

Murray Strachan, aged 41, Managing Director, Petrofac TrainingMurray Strachan joined Petrofac in 2004 following the acquisition of RGIT Montrose. Following ashort period post qualification in commercial management within the UK construction industryuntil 1987, Murray has been in various commercial, operational, change management and seniorgeneral management roles within the service sector of the oil and gas industry, including withindivisions of Maersk and Liberty Mutual. Murray joined RGIT Montrose in 2000, became groupmanaging director in 2001 and led the management buyout of the business in early 2003. Murray isa non-executive director of CLAN, a north east Scotland cancer charity. Murray is a member of theOS divisional board.

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ResourcesRory Edwards, aged 49, Vice President, Business Development, Petrofac ResourcesRory Edwards has had a 26 year oil industry career and has been with Petrofac for two years. Hehas worked in technical and commercial areas, asset management and general management all withindependent or major companies including ENI Agip, Amoco, Shell, BG and Amerada Hess. Hespent 13 years with Amerada Hess in the UK, latterly as deputy managing director of itsinternational business and was responsible for operations in 8 countries. Rory trained as apetroleum engineer on graduating from university.

Richard Hall, aged 45, Vice President, Project Development and Operations, Petrofac ResourcesRichard Hall joined Petrofac in 2003 and has 24 years’ oil industry experience. His first 10 yearswere spent in operating companies, including Amoco, Murphy Oil and Amerada Hess, developinga broad experience base in petroleum engineering, offshore operations supervision (production andwell and rig related), field developments and commercial and head office functions. He then wenton to be co-founder, co-owner and executive director of UWG Group, providing equipment andengineering solutions to operators worldwide. Richard trained as a petroleum engineer.

Felix Lobo ACA, aged 39, Chief Accountant, Petrofac ResourcesFelix Lobo joined Petrofac in 1997. A chartered accountant with over 17 years of experience, hestarted his career in 1990 as an accounts officer with Hindustan Petroleum Corporation Limited,and was responsible for accounts at the marketing department of Gujarat Refinery. From 1990 to1994, he worked at various locations within Hindustan Petroleum including head office. From1995 to 1997, he worked as the accounts manager for Agroline Ventures Ltd. Lagos, Nigeria acommodities trading firm, and was responsible for the accounts and finance of the Group’s clientsin West Africa.

GroupLeigh Howarth ACA, aged 41, Group Financial ControllerLeigh Howarth joined Petrofac in 2002. After starting his professional career with KPMG, Leighmoved into industry in 1992, initially working for WMS Group, an importer and distributor ofwindow and door hardware. In 1996, Leigh joined Atlantic Power & Gas, a leading UK oil and gasservice provider and, in 1998, was appointed group finance director to the business. In 2003,following the acquisition of this business by Petrofac in December 2002, Leigh relocated to theUnited Arab Emirates to head Petrofac’s group finance function. Leigh is an associate charteredaccountant and is a member of the OS divisional board.

Richard Milne, aged 50, Director, Group Legal and Commercial Affairs*Richard Milne joined Petrofac as Director, Group Legal and Commercial Affairs in 2004. Hequalified as a solicitor in 1980 and spent 8 years in various legal and financial positions within theSedgwick Group, an international insurance broker. In 1990, he joined a corporate finance adviserJ O Hambro Magan & Co. where he became a managing director and, following the acquisition ofthe business by National Westminster Bank in 1996, he became chief operating officer of thecorporate finance business which became Hawkpoint Partners. He left Hawkpoint Partners in1999 to become chief operating officer of Eastgate Group, an insurance outsourcing business.Following the sale of this business in 2000, he helped establish the London offices of corporatefinance advisers Gleacher & Co and Tricorn Partners before joining Petrofac.

Derek Moorfield, aged 57, Corporate Safety DirectorDerek Moorfield joined Petrofac in 2001 having spent most of his working life in the execution ofrisk and safety engineering of oil and gas EPC projects for various major operating companies. In1978, following a career as an aeronautical engineer he moved into the oil and gas industry withNPCC, Abu Dhabi, as their first safety engineer later moving to Norway for Norsk Hydro. In 1989,he joined Granherne where, on behalf of Occidental Inc., he was the resident safety engineer,providing guidance on the implementation of the recommendations from Lord Cullen’s PiperAlpha enquiry. Derek became corporate head of HSE for Granherne and also undertook* denotes a permanent member of the Risk Review Committee

69

resident HSE manager roles in major offshore EPC projects in Australia, South Africa and Brazil.Derek is a corporate member of the Chartered Institute of Management and the InternationalInstitute of Risk and Safety Management attained by the award of the Diploma in IndustrialManagement (CIMgmt) and the Diploma in Safety Management (BSC) required for the respectiveinstitutions.

The business address of all the Directors and Senior Managers (including the divisional chiefexecutives) named above is the registered office of the Company.

4. Corporate governanceThe Board places great emphasis on sound corporate governance and intends to comply with theprinciples of good governance and Code of Best Practice (the Combined Code). The CombinedCode recommends that the board of directors of a UK public company should include a balance ofexecutive and non-executive directors (and in particular non-executive directors), such that noindividual or small group of individuals can dominate the board’s decision-taking. The CombinedCode further recommends that at least half of the Board, excluding the Chairman, should comprisenon-executive directors determined by the Board to be independent, and that one non-executivedirector should be nominated as the senior independent director.

Petrofac currently has seven Directors, three of whom are non-executive Directors considered bythe Board to be independent. Michael Press has been nominated Petrofac’s Senior IndependentDirector. As a result, the Directors consider that there is a satisfactory balance of decision makingpower on the Board.

The Board has established an Audit Committee, a Remuneration Committee and a NominationsCommittee with the following roles within the Group:

Audit Committee

The members of the audit committee are Bernard de Combret (Chairman), Kjell Almskog andMichael Press. Others may be co-opted onto the committee by the committee members.

Meetings are held not less than three times a year. The Chief Financial Officer is invited to attendmeetings where appropriate and the Company’s auditors are regularly invited to attend meetings,including once at the planning stage before the audit and once after the audit at the reporting stage.Other Board members may also be invited to attend, although at least once a year the auditcommittee must meet the Company’s external auditors without management being present.

The role of the audit committee includes consideration of matters relating to the appointment of theCompany’s auditors and the independence of the Company’s auditors, reviewing the integrity ofthe Company’s annual and interim reports, preliminary results’ announcements and any otherformal announcement relating to its financial performance. The Committee also reviews theeffectiveness of the Group’s system of internal control and compliance procedures.

Remuneration Committee

The members of the Remuneration Committee are Michael Press (Chairman), Kjell Almskog andBernard de Combret.

The primary duty of the Remuneration Committee is to determine and agree with the Board theframework or broad policy for the remuneration of the Company’s Chief Executive, Chairman, theexecutive directors, the Company Secretary and such other members of the executive managementas it is designated to consider. The remuneration of non-executive Directors is a matter for theChairman and the executive members of the Board. No Director or manager may be involved in anydecisions as to their own remuneration.

Nominations Committee

The members of the Nominations Committee are Rodney Chase (Chairman), Kjell Almskog,Ayman Asfari, Bernard de Combret and Michael Press.

The Nominations Committee’s terms of reference are to review regularly the structure, size andcomposition (including the skills, knowledge and experience) required of the Board compared to itscurrent position and make its recommendations to the Board with regard to any changes. The

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nominations committee also considers future considerations of the composition of the Board,taking into account the challenges and opportunities facing the Company, and what skills andexpertise are needed on the Board.

The nominations committee also makes recommendations to the Board about the membership ofthe audit and remuneration committees.

The Directors believe that Petrofac will be in compliance with the requirements of the CombinedCode to the extent these will be applicable on Admission.

5. Directors’ and Senior Managers’ interests in Ordinary Shares5.1 The table below shows the interests of the Directors in the Ordinary Shares which would be

notifiable to the Company in accordance with the New Articles (as summarised in paragraph4(b)(iii)(F) of Part IX – “Additional Information”) and the interests of the Senior Managersin the Ordinary Shares which would be notifiable to the Company if the Senior Managerswere Directors, in both cases as at 19 September 2005, being the latest practicable date priorto the publication of this document and as expected immediately following the Offer:

Name

No. of OrdinaryShares held

as at19 September

2005(1)

Percentage ofshare capital

as at19 September

2005(1)

Expected No. ofOrdinary Sharesheld immediately

following theOffer(1)

ExpectedPercentage ofshare capitalimmediately

following theOffer(1)

DirectorsRodney Chase 800,000(2) 0.2 1,000,000(10) 0.3Michael Press 400,000(2) 0.1 240,000 0.1Kjell Almskog 200,000(2) 0.1 400,000(11) 0.1Bernard de Combret 400,000(2) 0.1 600,000(12) 0.2Ayman Asfari 101,641,480 29.4 76,231,110 22.1Keith Roberts 5,200,000(2)(3) 1.5 3,380,000 1.0Maroun Semaan 49,981,200 14.5 37,485,900 10.9

Senior ManagersDivisional Chief ExecutivesAmjad Bseisu nil n/a nil n/aRobin Pinchbeck 3,200,000(2)(4) 0.9 2,080,000 0.6

Other Senior ManagersJim Atack 1,640,000(2)(5) 0.5 984,000(13) 0.3Steve Bullock 600,000(2) 0.2 360,000(13) 0.1Marwan Chedid 3,320,560(6) 1.0 1,992,336(13) 0.6Rory Edwards 1,200,000(2) 0.3 720,000(13) 0.2Richard Hall 1,200,000(2) 0.3 720,000(13) 0.2Leigh Howarth 860,000(2)(7) 0.2 516,000(13) 0.1Rob Jewkes 1,660,000(2)(8) 0.5 996,000(13) 0.3Felix Lobo 127,600(2) 0.0 76,560(13) 0.0Kevin Martin 340,000(2) 0.1 204,000(13) 0.1Richard Milne 1,200,000(2) 0.3 720,000(13) 0.2Derek Moorfield 300,000(2) 0.1 180,000(13) 0.1Vivek Prakash 400,000(2) 0.1 240,000(13) 0.1Sandy Reid 1,200,000(2) 0.3 720,000(13) 0.2Murray Strachan 1,800,000 0.5 1,080,000(13) 0.3Rajesh Verma 3,560,560(2) 1.0 2,136,336(13) 0.6Peter Warner 1,065,120(2)(9) 0.3 639,072(13) 0.2

(1) Assuming (a) no exercise of the Over-allotment Option; (b) the re-organisation of the Company’s Share Capital (which isconditional upon Admission) having been completed; (c) the allotment and issue of all Ordinary Shares due to be allottedand issued under Petrofac’s Long Term Incentive Plan (LTIP), which allotment and issue is conditional upon Admission;(d) each Director and Senior Manager selling his full entitlement of Ordinary Shares, including participatory interests inOrdinary Shares under the ESS and the LTIP, permitted for sale.

(2) Shareholding of Ordinary Shares held (in whole or in part) through the ESS.

(3) Includes 200,000 Ordinary Shares issued or to be issued to satisfy the vesting of awards under the LTIP.

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(4) Includes 200,000 Ordinary Shares issued or to be issued to satisfy the vesting of awards under the LTIP.

(5) Includes 40,000 Ordinary Shares issued or to be issued to satisfy the vesting of awards under the LTIP.

(6) Includes 160,000 Ordinary Shares issued or to be issued to satisfy the vesting of awards under the LTIP.

(7) Includes 60,000 Ordinary Shares issued or to be issued to satisfy the vesting of awards under the LTIP.

(8) Includes 60,000 Ordinary Shares issued or to be issued to satisfy the vesting of awards under the LTIP.

(9) Includes 120,000 Ordinary Shares issued or to be issued to satisfy the vesting of awards under the LTIP.

(10) It is expected that Rodney Chase will purchase 200,000 Ordinary Shares in the Offer.

(11) It is expected that Kjell Almskog will purchase 200,000 Ordinary Shares in the Offer.

(12) It is expected that Bernard de Combret will purchase 200,000 Ordinary Shares in the Offer.

(13) This assumes the sale of the maximum number of Ordinary Shares eligible for sale by such person, and is subject toconfirmation.

5.2 The individual Directors purchasing Ordinary Shares in the Offer will have their applicationssatisfied in full.

5.3 As at 30 June 2005, US$1.42 million was outstanding under loans made by the Company todirectors of the Company as at that date, for the purchase of participating interests inordinary shares through the ESS. See Note 30 to the financial information set out in Part X –“Financial Information on Petrofac”. The individual loans (including accrued interestpayable) were US$1,334,242 to Keith Roberts and US$85,761 to Robin Pinchbeck. It isexpected that these outstanding loans will be fully repaid by such individuals after the Offer,in whole or in part out of the proceeds of the Offer received by them.

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PART V

Selected financial information on Petrofac

The table below sets out Petrofac’s summary financial information for the periods indicated. Thedata has been extracted without material adjustment from and should be read in conjunction with,the Financial Information in Part X – “Financial Information on Petrofac” which has beenprepared in accordance with IFRS. As this is only a summary, investors are advised to read thewhole of this document and not rely on the information summarised in this Part V.

Consolidated income statement

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Continuing operationsRevenue 692,410 402,968 951,530 628,702 391,398Cost of sales (618,197) (345,099) (829,081) (554,198) (335,907)

Gross profit 74,213 57,869 122,449 74,504 55,491

Selling, general andadministration expenses (34,073) (29,008) (58,825) (38,705) (23,030)Other income 2,819 4,668 6,246 2,025 3,762Other expenses (1,878) (1,076) (1,587) (77) (927)

Profit from continuingoperations before taxand finance costs 41,081 32,453 68,283 37,747 35,296

Finance costs (4,786) (3,685) (7,544) (1,046) (725)Finance income 1,389 1,209 1,997 1,073 1,645

Profit before tax 37,684 29,977 62,736 37,774 36,216Income tax(expense)/income (1,292) (8,029) (16,699) (2,579) (2,194)

Profit for the periodfrom continuingoperations 36,392 21,948 46,037 35,195 34,022

Discontinued operationsLoss for the period fromdiscontinued operation (202) (12,942) (13,162) (16,241) (12,268)

Profit for the period 36,190 9,006 32,875 18,954 21,754

Attributable to:Petrofac Limitedshareholders 36,190 9,052 32,921 22,118 22,068Minority interests — (46) (46) (3,164) (314)

36,190 9,006 32,875 18,954 21,754

Earnings per share (US$):From continuing anddiscontinued operations:– Basic 5.05 1.00 3.77 2.30 2.21– Diluted 4.35 0.98 3.48 2.11 1.94From continuingoperations:– Basic 5.08 2.42 5.28 4.00 3.43– Diluted 4.37 2.20 4.77 3.58 3.00

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Consolidated balance sheet30 June 31 December 31 December 31 December

2005 2004 2003 2002US$’000 US$’000 US$’000 US$’000

ASSETSNon-current assetsProperty, plant and equipment 123,806 123,413 119,395 93,268Goodwill 49,631 49,653 29,594 31,854Intangible assets 372 6,721 — —Available-for-sale financial assets 2,273 4,104 2,135 —Other non-current assets 4,533 11,205 18,079 38,336Deferred income tax assets 6,031 782 975 7,617Investment in associate — — — 1,000

186,646 195,878 170,178 172,075

Current assetsInventories 1,635 1,702 1,589 2,671Work in progress 153,609 109,037 102,841 47,116Trade and other receivables 209,742 200,042 96,485 88,238Due from related parties 31,490 20,889 21,635 2,039Other current assets 22,549 54,597 33,087 37,142Cash and short-term deposits 141,427 143,534 97,502 110,524

560,452 529,801 353,139 287,730

Non-current assets classified as held for sale 1,914 3,678 3,771 7,838

TOTAL ASSETS 749,012 729,357 527,088 467,643

EQUITY AND LIABILITIESEquity attributable to Petrofac LimitedshareholdersShare capital 7,184 7,166 9,066 10,000Share premium 29,219 28,553 52,592 59,018Capital redemption reserve 10,881 10,881 8,634 310Treasury shares — — (106) (1,018)Net unrealised gains on available-for-salefinancial assets 1,301 2,395 1,127 —Net unrealised gains/(losses) on derivatives (6,008) 22,964 (1,020) 1,132Foreign currency translation (809) 1,688 1,308 581Retained earnings 92,115 64,911 35,552 21,758

133,883 138,558 107,153 91,781Minority interest — — 2,241 4,321

Total equity 133,883 138,558 109,394 96,102

Non-current liabilitiesInterest-bearing loans and borrowings 85,717 110,787 85,627 83,221Other non-current liabilities 13,315 12,789 4,525 4,952Deferred income tax liabilities 2,922 1,535 120 187

101,954 125,111 90,272 88,360

Current liabilitiesTrade and other payables 100,080 114,873 110,516 116,021Due to related parties 1,526 1,453 108 105Interest-bearing loans and borrowings 69,308 50,691 31,966 3,895Income tax payable 3,938 3,172 613 2,597Billings in excess of cost and estimatedearnings 15,922 72,155 11,382 32,858Accrued contract expenses and provisions 270,319 179,008 150,519 97,548Accrued expenses and other liabilities 52,082 44,336 22,318 22,821Redeemable preference shares — — — 7,336

513,175 465,688 327,422 283,181

TOTAL LIABILITIES 615,129 590,799 417,694 371,541

TOTAL EQUITY AND LIABILITIES 749,012 729,357 527,088 467,643

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Consolidated cash flow statement

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Operating activitiesNet profit before incometaxes and minorityinterests:Continuing operations 37,684 29,977 62,736 37,774 36,216Discontinued operation (202) (12,942) (13,162) (11,326) (18,428)

37,482 17,035 49,574 26,448 17,788Adjustments for:Depreciation, amortisationand impairment 13,265 12,696 27,888 11,059 4,329Finance costs, net 3,350 2,460 5,512 495 (949)Minority interests — 46 46 3,164 314Other non cash items, net 2,398 86 (412) (158) 958Gain on disposal ofdiscontinued operation — — — (12,507) —Gain on disposal ofinvestments (1,819) (2,402) (2,932) — —

Operating profit beforeworking capital changes 54,676 29,921 79,676 28,501 22,440Trade and other receivables (7,574) (26,635) (99,582) (8,247) (10,017)Work in progress (44,572) 11,308 (6,196) (55,725) (17,616)Due from related parties (10,601) 294 746 (19,596) 2,840Inventories 67 (249) (113) 1,082 62Other current assets 13,765 (9,560) 171 4,002 (20,353)Trade and other payables (15,274) (16,375) (4,581) (5,610) 51,322Billings in excess of costand estimated earnings (56,233) 12,166 60,773 (21,476) (14,407)Accrued contract expensesand provisions 91,311 (11,509) 28,489 52,971 4,579Due to related parties 73 (108) 1,345 108 (352)Accrued expenses andother liabilities 2,835 8,472 17,965 (2,791) 3,645

28,473 (2,275) 78,693 (26,781) 22,143Other non-current items, net (622) 11,901 19,123 13,689 (11,782)

Cash generated from/ (usedin) operations 27,851 9,626 97,816 (13,092) 10,361Interest paid (5,296) (3,168) (5,695) (1,705) (1,169)Income taxes paid, net (7,548) (6,016) (13,278) (2,590) (777)

Net cash flows from/ (usedin) operating activities 15,007 442 78,843 (17,387) 8,415

Of which discontinuedoperations (112) (9,589) (8,903) (35,927) (451)

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Consolidated cash flow statement (continued)

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Investing activitiesPurchase of property, plantand equipment (6,257) (9,132) (17,142) (34,321) (52,324)Acquisition of business assets — — (695) (373) —Acquisition of subsidiary,net of cash acquired (4,073) (9,119) (9,119) — (16,111)Acquisition of interest injoint venture — (1,000) (1,000) — —Purchase of intangible oiland gas assets (372) (3,744) (4,480) — —Purchase of available-for-salefinancial assets (691) — — — —Net cash from disposal ofdiscontinued operation — — — 20,692 —Proceeds from disposal of property,plant and equipment 1,955 405 804 1,617 534Proceeds from disposal of available-for-sale financial assets 3,247 — 2,344 — 1,969Movement in translation reserve (2,497) 1,539 380 727 581Interest received 2,061 1,196 1,665 576 1,224Investment in associate — — — — (1,000)

Net cash flows used ininvesting activities (6,627) (19,855) (27,243) (11,082) (65,127)

Of which discontinued operations 1,895 — 39 21,929 (6,662)

Financing activitiesProceeds from issue ofshare capital — 1,511 1,511 — —Proceeds from interest-bearingloans and borrowings 20,347 — 45,722 31,412 88,455Repayment ofinterest-bearing loans andborrowings (31,176) (14,712) (35,684) (2,294) (15,500)Purchase of derivativefinancial instruments — — (62) — (1,000)Redemption of preference shares — — — (7,336) (310)Shareholders loan notetransactions, net 2,983 1,714 (1,581) 208 1,428Transactions withemployee share plan, net 655 (18) 3,016 890 (118)Exercise of option toacquire group shares (2,400) — — — —Repurchase of shares — — (30,760) (8,250) —Equity dividends paid (6,586) (1,315) (1,315) — —Net cash used in reorganisation — — — — (16,288)

Net cash flows (used in)/from financing activities (16,177) (12,820) (19,153) 14,630 56,667

Of which discontinued operations — — — — 5,317

Net (decrease)/increase incash and cash equivalents (7,797) (32,233) 32,447 (13,839) (45)Cash and cash equivalentsat 1 January 127,823 95,376 95,376 109,215 109,260

Cash and cash equivalentsat period end 120,026 63,143 127,823 95,376 109,215

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PART VI

Operating and financial review

The following review should be read in conjunction with the Financial Information set out inPart X – “Financial Information on Petrofac” and the other financial information containedelsewhere in this document. This review contains forward-looking statements that involve risksand uncertainties. Petrofac’s actual results could differ materially from those anticipated in theseforward-looking statements as a result of certain factors including, but not limited to, thosediscussed in Part II – “Risk factors” and in “Forward-Looking Statements” on pages 5 and 6 of thisdocument. The financial information contained in Part X – “Financial Information on Petrofac”has been prepared in accordance with IFRS and in compliance with the applicable requirements ofJersey law.

References in this document to the Group’s financial results are the financial results fromcontinuing operations, unless otherwise stated.

Percentage figures of divisional results relative to Group are, unless otherwise stated, calculatedusing, as the denominator, Group results after consolidation and elimination adjustments.

EBITDAReferences to EBITDA in this document are to the profit before tax and net finance costs and beforedepreciation, goodwill and other amortisation and impairment losses. References to EBITDAmargin are to EBITDA as a percentage of revenues. The Directors use EBITDA internally as animportant supplemental measure of Petrofac’s operational performance and believe it is frequentlyused by securities analysts, investors and other interested parties in the evaluation of companies inthe oil and gas industry.

EBITDA has its own limitations as an analytical tool and it should not be considered in isolationfrom, or as a substitute for, analysis of Petrofac’s results of operations, as reported under IFRS.Some of the limitations of EBITDA as a measure are as follows:

� it does not reflect finance charges, or the cash requirements necessary to service interest orprincipal repayments, on Petrofac’s debt;

� it does not reflect finance income arising from Petrofac’s cash balances;

� it does not reflect taxes;

� although depreciation, goodwill and other amortisation are non-cash charges, the tangible orintangible assets being depreciated, amortised or impaired will often have to be replaced inthe future;

� other companies in the oil and gas industry may calculate this measure differently, limiting itsusefulness as a comparative measure.

1. OverviewPetrofac is a leading international provider of facilities solutions to the oil and gas production andprocessing industry, with a diverse client portfolio which includes many of the world’s leadingintegrated, independent and national oil and gas companies.

Through its three operating divisions, Engineering & Construction (E&C), Operations Services(OS) and Resources, Petrofac designs and builds oil and gas facilities, operates, maintains ormanages facilities and trains personnel, and, where return criteria are met and revenue synergiesidentified, co-invests with clients and partners. Petrofac’s range of services allows it to meet itsclients’ needs across the life cycle of oil and gas assets.

Business segments

The following tables show revenues, operating profit, net profit and EBITDA from continuingoperations generated by Petrofac’s three divisions in the 6 month period ended 30 June 2005 andthe financial year ended 31 December 2004, as well as certain margin data.

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6 months ended 30 June 2005Engineering &

ConstructionOperations

ServicesResources Consolidation

and elimination TotalUS$ in thousands (unless stated otherwise)

Total Revenue 398,987 279,668 22,572 (8,817) 692,410Operating profit 22,867 12,391 8,769 (2,946) 41,081Net profit 22,958 7,294 12,034 (5,894) 36,392EBITDA 28,055 13,296 15,730 (2,735) 54,346

Operating margin 5.7% 4.4% 38.8% 5.9%Net margin 5.8% 2.6% 53.3% 5.3%EBITDA margin 7.0% 4.8% 69.7% 7.8%

Discontinued operations, which are described in further detail at paragraph 11 below incurred anet loss of US$0.2 million during the 6 months ended 30 June 2005.

Financial year ended 31 December 2004

Engineering &Construction

OperationsServices

Resources Consolidationand elimination Total

US$ in thousands (unless stated otherwise)

Total Revenue 473,466 440,127 45,042 (7,105) 951,530Operating profit 33,524 17,347 17,164 248 68,283Net profit 33,100 9,643 6,953 (3,613) 46,083EBITDA 41,880 21,135 32,289 761 96,065

Operating margin 7.1% 3.9% 38.1% 7.2%Net margin 7.0% 2.2% 15.4% 4.8%EBITDA margin 8.8% 4.8% 71.7% 10.1%

Discontinued operations, which are described in further detail in paragraph 11 below, incurred anet loss of US$13.2 million during the 2004 financial year.

Geographical segments

The following tables show revenues, assets and capital expenditure by geographical segments forthe 6 month period ended 30 June 2005 and the financial year ended 31 December 2004.

Six months ended 30 June 2005Middle East

& AfricaFormer Soviet

Union/AsiaEurope Americas Consolidated

US$ in thousands

Total Revenue 170,823 284,806 235,206 1,690 692,525Continuingoperations 170,823 284,806 235,206 1,575 692,410Discontinuedoperations — — — 115 115

Carrying amount ofsegment assets 343,185 203,375 195,376 7,076 749,012

Capital expenditureTangible fixed assets 1,968 2,340 1,940 9 6,257Intangible fixed assets — 1,746 372 — 2,118

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Financial year ended 31 December 2004

Middle East& Africa

Former SovietUnion/Asia Europe Americas Consolidated

US$ in thousands

Total Revenue 281,678 272,384 392,085 18,007 964,154Continuing operations 281,678 272,384 392,085 5,383 951,530Discontinued operations — — — 12,624 12,624

Carrying amount of segmentassets 382,100 127,561 207,576 12,120 729,357

Capital expenditureTangible fixed assets 5,674 8,851 2,537 80 17,142Intangible fixed assets — 6,721 — — 6,721

Backlog

The following table sets out the backlog of the E&C and OS Divisions as at 30 June 2005 and31 December 2004, 2003 and 2002. The definition of backlog is set out in paragraph 6 below.

H1 2005 2004 2003 2002US$ in millions

Engineering & Construction 1,041 739 308 348Operations Services 1,453 1,001 789 537

Total 2,494 1,740 1,097 885

As at 30 June 2005, the top five contracts (by backlog) accounted for, in aggregate, 68 per cent. oftotal backlog.

2. BackgroundCorporate reorganisation

Prior to January 2002, the Group’s operations were owned or operated through a combination ofcompanies organised in the United States and other countries in which a group of commonshareholders owned various share interests. The principal holding company was PetrofacCorporation Limited (PCL). On 13 January 2002, the Group completed a corporatereorganisation through which the Company acquired full ownership of PCL and of the minorityinterests in PCL’s subsidiaries that PCL did not already directly or indirectly own. Thereorganisation resulted in PCL becoming a wholly owned subsidiary of Petrofac Limited and PCLwholly owning each of its direct subsidiaries. Subsequently, PCL was merged into Petrofac Limited.These reorganisation transactions included the issue of ordinary and preference shares and thepayment of cash. Financial information for the 2002 financial year contains a full year’scontribution from Petrofac’s predecessor companies.

Investment by 3i

In May 2002, Petrofac raised long term capital from 3i through the issuance of US$40.25 millionvariable rate unsecured loan notes maturing in 2009 together with an option to purchase Petrofacordinary shares representing 13.0 per cent. of the fully diluted ordinary share capital of Petrofac.This was subsequently increased to 16.2 per cent. reflecting the buyout and cancellation ofapproximately 25 per cent. of the Company’s then issued ordinary share capital in October 2004.

In June 2005, the conditions allowing the Company to call upon 3i to subscribe for its 16.2 per cent.interest were satisfied and the aggregate subscription amount was satisfied by the cancellation ofthe loan notes and the issue of A ordinary shares to 3i.

Acquisitions

Prior to 2002, Petrofac had not made any acquisitions. Recognising the opportunity to expand itsbusiness model and leverage its core business skills into new markets, the Group has sincecompleted a number of acquisitions, the most significant of which was the acquisition of PGS PS

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which established the core of the Operations Services Division. The Operations Services Divisionhas broadened its service offering through further acquisitions, including RGIT MontroseHoldings Limited (RGIT), which now forms the core of the Group’s Training business, andRubicon Response Limited (Rubicon Response), providing emergency response managementconsultancy and training services. Further details of these acquisitions are set out below. From1 January 2005, goodwill related to purchase acquisitions is no longer subject to amortisation.

PGS Production Services

On 11 December 2002, the Group acquired 100 per cent. of the issued and outstanding shares ofPGS Production Group Limited, trading as PGS Production Services (PGS PS) together with itssubsidiaries and joint ventures for a cash consideration of US$28.1 million, inclusive of acquisitioncosts and deferred and contingent consideration. The fair value of the identifiable assets andliabilities of PGS PS acquired was US$3.3 million including interest-bearing loan notes amountingto US$5.2 million and cash and short-term deposits amounting to US$8.3 million. PGS PS wasrenamed Petrofac Facilities Management Group Limited.

RGIT Montrose

On 12 February 2004, the Group acquired 100 per cent. of the issued and outstanding shares ofRGIT, a leading provider of training and consultancy services to the upstream oil and gasexploration and production markets. Following the acquisition, RGIT changed its name toPetrofac Training Holdings Limited. Total consideration for the acquisition of the shares, inclusiveof acquisition costs, was US$17.2 million. The fair value of the identifiable net assets and liabilitiesof RGIT acquired was US$3.7 million including US$11.0 million of property, plant and equipment,US$9.8 million of interest-bearing loan notes and US$0.6 million of cash and short-term deposits.The consideration was settled by a combination of cash and the issue of bank guaranteed loannotes. All of the loan notes had been redeemed in accordance with their terms by 30 June 2005.

Rubicon Response

On 28 January 2005, the Group acquired 100 per cent. of the issued and outstanding shares ofRubicon Response, a leading provider of emergency response management consultancy andtraining services to the upstream oil and gas exploration and production markets. Totalconsideration for the acquisition of the shares, inclusive of acquisition costs, was US$6.3 million incash. The fair value of the net assets acquired was US$2.6 million, including US$2.3 million of cashand short-term deposits.

3. Recognition of revenues and profit and timing of cash flowsEngineering & Construction

The E&C Division’s EPC contracts are typically undertaken on a fixed price or lump sum basis.Revenue is recognised to the extent that it is probable economic benefits will flow to the Group andthe revenue can be reliably measured. As such, revenues from fixed price and modified fixed pricecontracts are recognised on the percentage-of-completion method, based on surveys of workperformed. The Directors consider this to be the best available measure of progress on thesecontracts. Petrofac does not recognise profit on its lump sum contracts until a project has reached athreshold percentage of completion. The final profitability of a lump sum contract is assessed uponcompletion, with an allowance being made, where appropriate, for any anticipated liabilitiesduring the warranty period. It is therefore not unusual for the profit recognition on a contract to lagthe revenue recognition and, depending on execution risks during a contract’s closing stages andthe duration of any warranty periods, to be weighted towards the end of a contract. Revenues fromcost-plus-fee contracts are recognised on the basis of costs incurred during the period plus the feeearned measured by the cost-to-cost method.

Provision is made for all losses expected to arise on completion of contracts entered into at thebalance sheet date, whether or not work has commenced on these contracts.

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Incentive payments are included in revenue when the contract is sufficiently advanced and theamount of the incentive payments can be measured reliably. Claims are only included in revenuewhen negotiations have reached an advanced stage such that it is probable the claim will beaccepted and can be measured reliably.

Due to the nature of the business, revenues tend to vary year on year depending on the size ofcontract awards and the percentage completed during the year. The E&C Division’s lump sum EPCcontracts typically extend beyond a single financial year end and often beyond two years.

The timing of cash flow realised during the course of a lump sum EPC contract does not necessarilyclosely follow the recognition of profit. This may be due to the receipt of advance payments fromthe client ahead of contract mobilisation, potentially significant cash outflows arising fromprocurement of major equipment and materials and also to the nature and timing of contractuallydetermined milestone payments.

The E&C Division’s engineering service and consultancy contracts are typically undertaken on areimbursable basis against an agreed schedule of rates, plus, in certain circumstances, incentivepayments arising out of the performance according to specified KPIs. Certain contracts areundertaken on a fixed price basis and are recognised on the percentage of completion method,measured by milestones completed or earned value. The timing of cash flow realised by theengineering service and consultancy business is less volatile than for EPC contracts as a result of asmaller and more diversified contract base.

Operations ServicesThe OS Division’s contracts are typically undertaken on a reimbursable basis against an agreedcontract schedule of rates, plus, in certain circumstances, incentive payments arising out of theperformance according to specified KPIs. Revenues from reimbursable contracts are recognised inthe period in which the services are provided. Incentive payments are included in revenue when thecontract is sufficiently advanced and the amount of the incentive payments can be measuredreliably. Certain contracts are undertaken on a fixed price basis and are recognised on thepercentage of completion method, measured by milestones completed or earned value. Themajority of the OS Division’s activities are undertaken in the UKCS. Typically, contractual termsrequire clients to promptly reimburse Petrofac for the services undertaken on behalf of the client.Often this can include procurement of materials and services which may represent a significantproportion of contract revenue and which may not attract a profit margin.

The Directors believe that, because of the nature of the services provided, the facilities managementand service operator contracts of the OS Division can be expected to have a lower variability ofoperating margins than the E&C contracts over the life of a contract.

ResourcesThe most significant producing asset in the Resources portfolio is Petrofac’s 10 per cent. investmentin the Ohanet development in Algeria. Under the terms of an RSC, Petrofac receives monthlyremuneration and reimbursement over the term of its investment from first production whichcommenced in late October 2003. The only other current revenue producing asset is an investmentin a crude oil refinery in Kyrgyzstan through a 50 per cent. interest in KPC, although in August2005, Petrofac agreed to acquire a 23.15 per cent. interest in the Hewett gas field in the UKCS.Completion of the acquisition is subject to the approval of the Hewett partners and the DTI. TheDirectors believe that production in 2005 from the Hewett field is averaging 35 million cubic feetper day (7.7 million cubic feet per day net sales gas to Petrofac, on the basis of its current ownershipof the 23.15 per cent. interest). Resources has a number of investments in development phase, themost significant of which is its 30 per cent. interest in a PSC for the Cendor PM-304 block inoffshore peninsular Malaysia. The Cendor investment is scheduled to commence production in late2006. Following approval of a field development plan in early 2005, Petrofac is presently procuringthe major capital items required for development of the asset. Other development investments areinterests in two UKCS fields for which studies are underway to determine the feasibility of economicdevelopment. For further information, see the description of these projects in paragraph 4 of Part III– “Information on the Petrofac Group”.

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Revenue generated by Resources’ investments is recognised to the extent that it is probable thateconomic benefit will flow to the Group and the revenue can be reliably measured. As such, oil andgas revenues comprise the Group’s share of sales from the processing or sale of hydrocarbons on anentitlement basis.

4. Consolidation of joint venturesPetrofac sometimes forms joint ventures with other firms in the course of its work. Petrofac’sinterests in joint ventures are accounted for by proportionate consolidation, which involvesrecognising Petrofac’s proportionate share of the joint venture’s assets, liabilities, income andexpenses on a line-by-line basis. In accordance with IFRS, the Group’s proportionate share of itsjoint venture interests is also disclosed separately.

5. Accounting treatment of foreign currenciesPetrofac’s functional currency for financial reporting purposes is US$ since a significant proportionof the Group’s assets, liabilities, income and expenses are US$ denominated. Notwithstanding this,there are a number of Group subsidiaries with non-US$ functional currencies. In particular, theGroup’s main trading subsidiaries with activities in the UKCS have Sterling functional currency.

The balance sheets of subsidiaries and joint ventures with functional currencies other than US$ aretranslated using the closing rate method, whereby assets and liabilities are translated at the rates ofexchange ruling at the balance sheet date. The income statements of such subsidiaries and jointventures are translated at average exchange rates for the period. Exchange differences arising on theretranslation of net assets are taken directly to equity.

In the accounts of individual Group companies, transactions in foreign currencies are recorded atthe prevailing rate at the date of the transaction. At the period end, monetary assets and liabilitiesdenominated in foreign currencies are retranslated at the rates of exchange prevailing at the balancesheet date. All foreign exchange gains and losses are taken to the income statement.

The following table sets out the average exchange rates for US$ / Sterling for the 6 month periodsended 30 June 2005 and 2004 and the financial years of 2004, 2003 and 2002, and the period endexchange rates for US$/Sterling as at 30 June 2005 and 2004 and 31 December 2004, 2003 and2002, used by Petrofac for its financial reporting.

H1 2005 H1 2004 2004 2003 2002US$/£

Average rate for the period 1.86 1.82 1.83 1.66 1.51Period end rate 1.79 1.81 1.93 1.78 1.60

6. BacklogPetrofac uses the measurement of revenue backlog as a key performance indicator for itsEngineering & Construction and Operations Services businesses.

Backlog consists of the estimated revenue attributable to the uncompleted portion of lump sumEPC contracts and variation orders plus, with regard to engineering services and facilitiesmanagement contracts, the estimated revenue attributable to the lesser of the remaining term of thecontract or, in the case of life-of-field facilities management contracts, five years. To the extentwork advances on these contracts, revenue is recognised and removed from the backlog. Wherecontracts extend beyond five years, the backlog relating thereto is incremented on a rolling monthlybasis.

Backlog includes only the revenue attributable to signed contracts for which all pre-conditions toentry have been met and only the proportionate share of joint venture contracts that is attributableto Petrofac. Backlog does not include any revenue expected to arise from contracts where the clienthas no commitment to draw upon services from the Group.

With regard to certain of the Group’s facilities management contracts, a substantial proportion ofthe revenue estimated to arise is subject to the level of capital and operational expendituredetermined ultimately by the client. The actual revenue realised on such contracts may thereforediffer from that originally estimated in calculating backlog. In addition, the backlog in relation tosuch contracts may differ from the values ascribed to such contracts by Petrofac at the time ofcontract award. In relation to such contracts, the backlog figure reflects, at any point in time, the

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Group’s best estimate of the future level of expenditure and hence revenue expected to arise over thelesser of five years or the remaining term of the contract. In addition, a significant proportion of theGroup’s revenue is denominated in Sterling. The backlog figure, reported in US$, includes theSterling revenue converted into US$ at the prevailing period end exchange rate. Subsequentvariations in the exchange rate will therefore vary the US$ backlog amount although the underlyingSterling backlog will remain unchanged.

Backlog is not an audited measure. Other companies in the oil and gas industry may calculate thismeasure differently. See also Part II – “Risk factors”.

7. Review of the financial results of the Petrofac Group7.1 The Petrofac Group, overviewThe following table sets out selected financial information relating to the continuing operations ofPetrofac. It has been extracted or derived without material adjustment from, and should be read inconjunction with, Part X – “Financial Information on Petrofac”.

H1 2005 H1 2004(unaudited)

2004 2003 2002

US$ in thousands (unless stated otherwise)

Total Revenue 692,410 402,968 951,530 628,702 391,398E&C 398,987 188,259 473,466 342,871 382,684OS 279,668 197,244 440,127 274,881 12,703Resources 22,572 21,569 45,042 14,439 13,914Consolidation and elimination (8,817) (4,104) (7,105) (3,489) (17,903)

Growth/(decline) on prior periodTotal 71.8% 51.3% 60.6%E&C 111.9% 38.1% (10.4%)OS 41.8% 60.1% 2,063.9%Resources 4.7% 211.9% 3.8%Consolidation and elimination 114.8% 103.6% (80.5%)

Operating profit/(loss) 41,081 32,453 68,283 37,747 35,296E&C 22,867 15,170 33,524 30,529 37,669OS 12,391 8,238 17,347 10,173 642Resources 8,769 8,990 17,164 (1,805) 2,082Consolidation and elimination (2,946) 55 248 (1,150) (5,097)

Operating MarginTotal 5.9% 8.1% 7.2% 6.0% 9.0%E&C 5.7% 8.1% 7.1% 8.9% 9.8%OS 4.4% 4.2% 3.9% 3.7% 5.1%Resources 38.8% 41.7% 38.1% (12.5%) 15.0%

Net profit/(loss)* 36,392 21,994 46,083 38,359 34,336E&C 22,958 15,888 33,100 32,183 36,757OS 7,294 4,275 9,643 6,816 440Resources 12,034 3,552 6,953 1,579 2,396Consolidation and elimination (5,894) (1,721) (3,613) (2,219) (5,257)

Net MarginTotal 5.3% 5.5% 4.8% 6.1% 8.8%E&C 5.8% 8.4% 7.0% 9.4% 9.6%OS 2.6% 2.2% 2.2% 2.5% 3.5%Resources 53.3% 16.5% 15.4% 10.9% 17.2%

EBITDA 54,346 45,143 96,065 48,075 39,043E&C 28,055 18,808 41,880 34,254 40,217OS 13,296 9,737 21,135 11,614 710Resources 15,730 16,354 32,289 2,572 2,716Consolidation and elimination (2,735) 244 761 (365) (4,600)

EBITDA MarginTotal 7.8% 11.2% 10.1% 7.6% 10.0%E&C 7.0% 10.0% 8.8% 10.0% 10.5%OS 4.8% 4.9% 4.8% 4.2% 5.6%Resources 69.7% 75.8% 71.7% 17.8% 19.5%

* attributable to Petrofac shareholders

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7.2 The Petrofac Group, 6 months ended 30 June 2005 compared with unaudited 6 monthsended 30 June 2004

Revenues

Revenues increased by 71.8 per cent. to US$692.4 million (H1 2004 : US$403.0 million), reflectingthe following changes at a divisional level:

� Revenues arising from the E&C Division increased by 111.9 per cent. to US$399.0 million(H1 2004: US$188.3 million) reflecting progress made on contracts that were either at anearly stage of completion during H1 2004 or were awarded in H2 2004.

� Revenues arising from the OS Division increased by 41.8 per cent. to US$279.7 million (H12004: US$197.2 million) with growth experienced across all business areas reflecting, inparticular, in the UKCS, a new service operator contract and increased revenues from theother services and, outside the UKCS, a new maintenance management contract in Kuwait.

� Revenues arising from the Resources Division increased to US$22.6 million (H1 2004:US$21.6 million) reflecting an increase in the Division’s share of revenue from the KPC jointventure offset by a reduction in revenues from the Ohanet investment (H1 2004 havingbenefited from revenue catch-up in accordance with the terms of the RSC arising from lowerproduction levels during start-up in late 2003).

� Inter-divisional revenues eliminated on consolidation for the period were US$8.8 million (H12004: US$ 4.1 million).

Selling, general and administrative expenses

Selling, general and administrative expenses (SG&A) increased to US$34.1 million (H1 2004:US$29.0 million), representing 4.9 per cent. of revenues (H1 2004: 7.2 per cent.). The increase inSG&A includes US$2.3 million of legal and professional expenses in relation to the Company’slisting on the London Stock Exchange, as well as an increase in expenses in the E&C and OSDivisions reflecting the continued growth of the business.

Other operating income and expenses

Other operating income, net of other operating expenses, amounted to US$0.9 million, net (H12004: US$3.6 million, net) and included gains made on the sale of certain investments held by theResources Division of US$1.8 million (H1 2004: US$2.4 million), other income of US$0.2 million,net (H1 2004: US$0.8 million, net), offset by net foreign exchange losses of US$1.1 million (H12004: net foreign exchange gains US$0.4 million).

Operating profit

Operating profit increased by 26.6 per cent. to US$41.1 million (H1 2004: US$32.5 million),representing 5.9 per cent. of revenues (H1 2004: 8.1 per cent.), reflecting the following changes at adivisional level:

� Operating profit arising from the E&C Division increased by 50.7 per cent. to US$22.9million (H1 2004: US$15.2 million), representing a margin of 5.7 per cent. (H1 2004: 8.1 percent.). The reduction in operating margin in H1 2005 as compared to H1 2004 reflected thelower overall risk profile (and therefore margin) of those contracts generating revenuesduring the period, fewer contracts reaching completion (with profit recognition beingtypically back-end weighted), and a further provision on the BTC/SCP contract.

� Operating profit arising from the OS Division increased by 50.4 per cent. to US$12.4 million(H1 2004: US$8.2 million), representing a margin of 4.4 per cent. (H1 2004: 4.2 per cent.).The improvement in operating margin as compared to H1 2004 was primarily attributable tolower SG&A costs (including the cessation of goodwill amortisation from the beginning of2005) as a percentage of revenue in H1 2005.

� Operating profit arising from the Resources Division decreased marginally to US$8.8 million(H1 2004: operating profit US$9.0 million), representing a margin of 38.8 per cent. (H12004: 41.7per cent.).

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In addition, unallocated corporate costs, net of unallocated operating profits increased toUS$2.9 million (H1 2004: US$0.1 million, net unallocated income). The increase is primarilyattributable to accrued legal and professional expenses in relation to the Company’s listing on theLondon Stock Exchange.

Finance income and charges

Net interest payable by the Group in H1 2005 was US$3.4 million (H1 2004: US$2.5 million). Theincrease in interest costs as compared to H1 2004 is mainly attributable to an increase in the level ofterm loan borrowings within the Group, following the share buyback in October 2004, an increasein the interest payable to 3i on the variable rate unsecured loan notes prior to their conversion intoordinary shares in June 2005 and an increase in benchmark US interest rates. The increase waspartly offset by lower interest costs associated with Ohanet. For the period ended 30 June 2005, netinterest cover (being profit from continuing operations before tax and finance costs divided by netfinance costs) was 12.1 times (H1 2004: 13.1 times).

Tax

The income tax charge as a percentage of profit before tax in H1 2005 was 3.4 per cent. (H1 2004:26.8 per cent.). The effective rate of tax decreased in H1 2005 as compared to H1 2004 largely as aresult of recognising a tax credit of US$7.6 million relating to the Cendor project. This tax creditarose on losses that became available for tax relief in H1 2005 following the approval of the fielddevelopment plan in relation to Block PM-304, Malaysia. In addition, in H1 2004 a UK deferredtax charge within the OS Division relating to unremitted dividends from overseas subsidiaries wasrecognised; there was no corresponding charge in H1 2005.

Net profits

Net profits attributable to Petrofac shareholders increased by 65.5 per cent. to US$36.4 million (H12004: US$22.0 million), representing 5.3 per cent. of revenues (H1 2004: 5.5 per cent.), reflectingthe changes noted above. At a divisional level:

� Net profits arising from the E&C Division increased by 44.5 per cent. to US$23.0 million (H12004: US$15.9 million), representing a margin of 5.8 per cent. (H1 2004: 8.4 per cent.),reflecting primarily the decline in operating margin (as described above) but also an increasein the effective rate of tax in H1 2005 as compared to H1 2004, with a greater proportion ofbusiness being executed in taxable jurisdictions.

� Net profits arising from the OS Division increased by 70.6 per cent. to US$7.3 million (H12004: US$4.3 million), representing a margin of 2.6 per cent. (H1 2004: 2.2 per cent.). Theincrease in net margin in H1 2005 as compared with H1 2004 was attributable to animprovement in the operating margin (as described above) and a reduction in the effectiverate of tax.

� Net profits arising from the Resources Division increased to US$12.0 million (H1 2004: US$3.6million), representing a margin of 53.3 per cent. (H1 2004: 16.5 per cent.). The increase on H12004 principally reflects the benefit of a tax credit of US$7.6 million from the Division’sinvestment in Cendor. In addition, interest costs were lower in H1 2005 as a result of theprogressive repayment of project finance loans relating to the Division’s Ohanet investment.

On a fully diluted basis, adjusting for the impact of the unsecured loan notes, net profits fromcontinuing operations attributable to shareholders increased by 61.3 per cent. to US$37.7 million(H1 2004: US$23.3 million), representing 5.4 per cent. of revenues (H1 2004: 5.8 per cent.).

EBITDA

EBITDA increased to US$54.3 million (H1 2004: US$45.1 million), representing 7.8 per cent. ofrevenues (H1 2004: 11.2 per cent.). The increase in EBITDA is attributable to the E&C and OSDivisions, partly offset by the unallocated Group charge of US$2.3 million for legal andprofessional expenses in relation to the Company’s listing on the London Stock Exchange and a fallof US$0.6 million in EBITDA for the Resources Division. The decline in the EBITDA margin isprincipally attributable to a decline in the relative proportion of EBITDA from the ResourcesDivision, a fall in the EBITDA margin of the E&C Division (relating mainly to the fall in operatingmargin as described above) and the increase in unallocated Group charge.

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Backlog

The combined backlog of the E&C and OS Divisions as at 30 June 2005 was approximatelyUS$2,494 million, representing an increase of 43.3 per cent. on the comparable figure as at31 December 2004.

� The backlog of the E&C Division as at 30 June 2005 was approximately US$1,041 million,representing an increase of 40.9 per cent. on the comparable figure as at 31 December 2004.

� The backlog of the OS Division as at 30 June 2005 was approximately US$1,453 million,representing an increase of 45.2 per cent. on the comparable figure as at 31 December 2004.

7.3 The Petrofac Group, 2004 financial year compared with 2003 financial yearRevenues

Revenues increased by 51.3 per cent. to US$951.5 million (2003: US$628.7 million), reflecting thefollowing changes at a divisional level:

� Revenues arising from the E&C Division increased by 38.1 per cent. to US$473.5 million(2003: US$342.9 million) reflecting a combination of new contract awards during the year,revenue recognition on prior year contract awards, partially offset by lower overall revenuesfrom existing contracts approaching completion.

� Revenues arising from the OS Division increased by 60.1 per cent. to US$440.1 million(2003: US$274.9 million) reflecting a full year’s contribution from new business securedduring 2003, in particular the new service operator contracts, growth in the operationsservices business and expansion of the non-UKCS business and revenues arising from RGIT,acquired in February 2004. An increase of approximately 10 per cent. in the average value ofSterling against the US$ during the period also contributed to the revenue increase.

� Revenues arising from the Resources Division increased to US$45.0 million (2003: US$14.4million) reflecting principally a full year’s contribution from the Ohanet development whichcommenced production in late October 2003.

� Inter-divisional revenues eliminated on consolidation for the year were US$7.1 million(2003: US$3.5 million).

Selling, general and administrative expenses

Selling, general and administrative expenses (SG&A) increased to US$58.8 million (2003: US$38.7million), representing 6.2 per cent. of revenues (2003: 6.2 per cent.). The increase in SG&A reflectsan increase in indirect costs in all parts of the business reflecting the continued growth of thebusiness.

Other operating income and expenses

Other operating income, net of other operating expenses, amounted to US$4.7 million (2003:US$1.9 million, net) and included gains made on the sale of certain investments held by theResources Division of US$2.9 million (2003: nil), other income of US$1.1 million, net (2003:US$1.1 million, net) and net foreign exchange gains of US$0.6 million (2003: US$0.8 million).

Operating profit

Operating profit increased by 80.9 per cent. to US$68.3 million (2003: US$37.7 million),representing 7.2 per cent. of revenues (2003: 6.0 per cent.), reflecting the following changes at adivisional level:

� Operating profit arising from the E&C Division increased by 9.8 per cent. to US$33.5 million(2003: US$30.5 million), representing a margin of 7.1 per cent. (2003: 8.9 per cent.),reflecting a combination of profit recognition on new contract awards during the year, thereversal of certain cost provisions relating to projects that completed during the year but didnot contribute significantly to revenues and a provision made in relation to the BTC/SCPproject, which represented a significant proportion of the year’s revenues.

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� Operating profit arising from the OS Division increased by 70.5 per cent. to US$17.3 million(2003: US$10.2 million), representing a margin of 3.9 per cent. (2003: 3.7 per cent.). Theimprovement in operating margin as compared to 2003 was partly attributable to the highermargin contribution from service operator contracts and from RGIT, partly offset by a higherdepreciation and amortisation charge, arising principally from the RGIT acquisition.

� Operating profit arising from the Resources Division increased to US$17.2 million (2003:operating loss US$1.8 million), representing a margin of 38.1 per cent. (2003: negative12.5 per cent.), reflecting principally a full year’s contribution from the investment in theOhanet development (2003: 2 months). 2003 included a write-down in value of the KPCinvestment.

In addition to the above divisional factors, unallocated corporate income increased to US$0.8million (2003: unallocated corporate costs US$0.6 million).

Finance income and charges

Net interest payable by the Group in 2004 was US$5.5 million (2003: nil). The increase in interestcost as compared to 2003 includes the impact of:

� a full year of interest on project finance for the Ohanet investment which was beingcapitalised in the period before project completion;

� interest cost on assumed loans and borrowings following the acquisition of RGIT andincurred in conjunction with the buy back in October 2004 of approximately 25 per cent. ofthe Company’s then issued share capital; and

� an increase in interest rates in the UK and US.

For the period ended 31 December 2004, net interest cover was 12.3 times (2003: net interestpayable nil).

Tax

The income tax charge as a percentage of profit before tax in 2004 was 26.6 per cent. (2003: 6.8 percent.). The effective rate of tax increased in 2004 as compared to 2003 as a result of a greaterproportion of profits being generated in higher income tax jurisdictions and is largely attributableto:

� a full year of income from the Ohanet investment, Algeria, which is taxed at 38 per cent.;

� additional withholding taxes on several projects executed in the year; and

� an increase in the proportion of income from UK operations, where the income tax rate is30 per cent.

Net profits

Net profits attributable to Petrofac shareholders increased by 20.1 per cent. to US$46.1 million(2003: US$38.4 million), representing 4.8 per cent. of revenues (2003: 6.1 per cent.) and reflectingthe changes noted above. At a divisional level:

� Net profits arising from the E&C Division increased by 2.8 per cent. to US$33.1 million(2003: US$32.2 million), representing a margin of 7.0 per cent. (2003: 9.4 per cent.),reflecting the lower operating margin (as described above) and the increased income taxcharge attributable to local taxation payable on certain EPC contracts.

� Net profits arising from the OS Division increased by 41.5 per cent. to US$9.6 million (2003:US$6.8 million), representing a margin of 2.2 per cent. (2003: 2.5 per cent.).Notwithstanding the higher operating margin in 2004 as compared with 2003, the netincome margin in 2004 declined due to higher interest and tax charges.

� Net profits arising from the Resources Division increased to US$7.0 million (2003: US$1.6million), representing a margin of 15.4 per cent. (2003: 10.9 per cent.). The increase on 2003reflects the full year contribution from the Ohanet development, net of tax, partly offset by anincrease in net interest payable on project finance (previously capitalised).

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On a fully diluted basis, adjusting for the impact of the unsecured loan notes, net profits attributableto shareholders increased by 23.3 per cent. to US$48.7 million (2003: US$39.5 million),representing 5.1 per cent. of revenues (2003: 6.3 per cent.).

EBITDA

EBITDA increased to US$96.1 million (2003: US$48.1 million), representing 10.1 per cent. ofrevenues (2003: 7.6 per cent.). The increase in EBITDA margin reflected principally the full year’scontribution from the Resources Division’s investment in the Ohanet development which has asignificantly higher EBITDA margin than the rest of Petrofac’s activities and an increase in the OSDivision’s EBITDA margin, partly offset by a fall in the E&C Division’s EBITDA margin.

Backlog

The combined backlog of the E&C and OS Divisions as at 31 December 2004 was approximatelyUS$1,740 million, representing an increase of 58.6 per cent. on the comparable figure as at31 December 2003.

� The backlog of the E&C Division as at 31 December 2004 was approximately US$739million, representing an increase of 139.9 per cent. on the comparable figure as at31 December 2003.

� The backlog of the OS Division as at 31 December 2004 was approximately US$1,001million, representing an increase of 26.9 per cent. on the comparable figure as at31 December 2003.

7.4 The Petrofac Group, 2003 financial year compared with 2002 financial yearRevenues

Revenues increased by 60.6 per cent. to US$628.7 million (2002: US$391.4 million), reflecting thefollowing changes at a divisional level:

� Revenues arising from the E&C Division decreased by 10.4 per cent. to US$342.9 million(2002: US$382.7 million) reflecting a combination of lower overall revenues from existingcontracts, many of which were at a high level of completion at the beginning of the year,countered by new contract awards during the year, including the BTC/SCP contract.

� Revenues arising from the OS Division increased to US$274.9 million (2002: US$12.7million). PGS PS, which became the core of the OS Division, was acquired by Petrofac on11 December 2002 and, consequently, revenues during 2002 were only for 20 days’ trading.During 2003, the OS Divisions revenues were generated largely by established contracts withadditional revenue arising from transition work undertaken on new service operatorcontracts prior to the contracts reaching full facilities management status.

� Revenues arising from the Resources Division increased to US$14.4 million (2002: US$13.9million) reflecting revenues arising from the initial production from the Ohanet development,which commenced in late October 2003, partly offset by a fall in revenues from facilitiesmanagement contracts that concluded during the year.

� Inter-divisional revenues eliminated on consolidation for the period were US$ 3.5 million(2002: US$17.9 million).

Selling, general and administrative expenses

Selling, general and administrative expenses increased to US$38.7 million (2002: US$23.0 million),representing 6.2 per cent. of revenues (2002: 5.9 per cent.). The increase in SG&A mainly reflects afull year of costs for PGS PS following its acquisition in December 2002 (2002: 20 days).

Other operating income and expenses

Other operating income, net of other operating expenses, amounted to US$1.9 million (2002:US$2.8 million) and included US$1.1 million of other income, net (2002: US$ 1.1 million, net) andnet foreign exchange gains of US$0.8 million (2002: US$1.7 million).

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Operating profit

Operating profit increased by 6.9 per cent. to US$37.7 million (2002: US$35.3 million),representing 6.0 per cent. of revenues (2002: 9.0 per cent.), reflecting the following changes at adivisional level:

� Operating profit arising from the E&C Division decreased by 19.0 per cent. to US$30.5million (2002: US$37.7 million), representing a margin of 8.9 per cent. (2002: 9.8 per cent.),reflecting principally the decline in revenues over 2002 and no profit recognition on the earlystages of the BTC/SCP contract, which represented a significant proportion of revenue for theyear. In addition, depreciation and amortisation increased due principally to property, plantand equipment acquired in support of the BTC/SCP joint venture contract.

� Operating profit arising from the OS Division was US$10.2 million, representing a margin of3.7 per cent. In 2002 operating profit was US$0.6 million, representing a margin of 5.1 percent. (reflecting 20 days of trading after the acquisition of PGS PS).

� Operating loss arising from the Resources Division was US$1.8 million (2002: profit ofUS$2.1 million), reflecting the impact of revenue factors, discussed above, and an impairmentcharge on the Group’s investment in KPC.

In addition to the above divisional factors, unallocated corporate costs reduced to US$0.6 million(2002: US$1.9 million).

Finance income and charges

Net interest payable by the Group in 2003 was nil (2002: US$0.9 million net interest receivable).

For the period ended 31 December 2003, net interest cover was not a meaningful measure on thebasis the Group had net interest income of US$0.03 million for the period (2002: net interestincome of US$0.9 million).

Tax

The income tax charge as a percentage of profit before tax in 2003 was 6.8 per cent. (2002: 6.0 percent.). The rate of tax in both years reflects the fact that a significant proportion of the Group’sactivities were undertaken in countries where income tax was not levied.

Net profits

Net profits attributable to Petrofac shareholders increased by 11.7 per cent. to US$38.4 million(2002: US$34.3 million), representing 6.1 per cent. of revenues (2002: 8.8 per cent.), reflecting thefollowing changes at a divisional level:

� Net profits arising from the E&C Division decreased by 12.4 per cent. to US$32.2 million(2002: US$36.8 million), representing a margin of 9.4 per cent. (2002: 9.6 per cent.).

� Net profits arising from the OS Division were US$6.8 million (2002: US$0.4 million),representing a margin of 2.5 per cent. (2002: 3.5 per cent.), with the 2002 figures reflecting20 days of trading after the acquisition of PGS PS.

� Net profits arising from the Resources Division decreased by 34.1 per cent. to US$1.6 million(2002: US$2.4 million), representing a margin of 10.9 per cent. (2002: 17.2 per cent.),reflecting the impairment of KPC, partly offset by a minority interest credit relating to theimpairment and a small tax credit of US$0.2 million (2002: nil).

On a fully diluted basis, net profits attributable to Petrofac shareholders increased by 13.5 per cent.to US$39.5 million (2002: US$34.8 million), representing 6.3 per cent. of revenues (2002: 8.9 percent.).

EBITDA

EBITDA increased to US$48.1 million (2002: US$39.0 million), representing 7.6 per cent. ofrevenues (2002: 10.0 per cent.) The decline in the EBITDA margin reflected primarily the impact ofa full year’s contribution from the PGS PS business which has lower EBITDA margins (2002:20 days).

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Backlog

The combined revenue backlog of the E&C and OS Divisions as at 31 December 2003 wasapproximately US$1,097 million, representing an increase of 24.0 per cent. on the comparablefigure as at 31 December 2002.

� The backlog of the E&C Division as at 31 December 2003 was approximatelyUS$308 million, representing a decrease of 11.5 per cent. on the comparable figure as at31 December 2002.

� The backlog of the OS Division as at 31 December 2003 was approximately US$789 million,representing an increase of 46.9 per cent. on the comparable figure as at 31 December 2002.

8. Review of the financial results of Engineering & Construction8.1 OverviewThe E&C Division provides services to oil and gas clients to develop, design and construct facilities,including:

� integrated engineering, procurement and construction services, including projectmanagement, engineering, procurement services and the construction management andcommissioning of oil and gas facilities; and

� specialist engineering and consultancy services, including preparation of field developmentplans and associated studies, design development, FEED, demanning and decommissioningstudies, and the provision of risk, safety and environmental consultancy services.

Engineering and consultancy services are usually provided on a cost reimbursable basis, whilemajor EPC contracts are usually undertaken on a lump sum basis.

During the 6 months ended 30 June 2005, the E&C Division achieved total revenues of US$399.0million (57.6 per cent. of Group revenues), operating profit of US$22.9 million (55.7 per cent. ofGroup operating profit) and net profits of US$23.0 million (63.1 per cent. of Group net profits).EBITDA for the period was US$28.1 million (51.6 per cent. of Group EBITDA).

The following table sets out selected financial information of the Engineering & ConstructionDivision of Petrofac. It has been extracted or derived without material adjustment from, and shouldbe read in conjunction with Part X – “Financial Information on Petrofac”.

H1 2005 H1 2004 2004 2003 2002(unaudited)

US$ in thousands (unless stated otherwise)

Total Revenue 398,987 188,259 473,466 342,871 382,684Growth/(decline) on prior period 111.9% 38.1% (10.4%)Operating profit 22,867 15,170 33,524 30,529 37,669Net profits 22,958 15,888 33,100 32,183 36,757EBITDA 28,055 18,808 41,880 34,254 40,217

Operating Margin 5.7% 8.1% 7.1% 8.9% 9.8%Net Margin 5.8% 8.4% 7.0% 9.4% 9.6%EBITDA Margin 7.0% 10.0% 8.8% 10.0% 10.5%

8.2 Engineering & Construction – 6 months ended 30 June 2005 compared with unaudited6 months ended 30 June 2004

Revenues during the period increased by 111.9 per cent. to US$399.0 million (H1 2004: US$188.3million) reflecting continuing progress being made on various Engineering and Procurement (EP)and EPC contracts, including Kashagan, BTC/SCP, QP and Crescent, and the later timing of EPC

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awards secured during the course of 2004. The top five contracts (by revenue) contributed, inaggregate, approximately 90 per cent. (H1 2004: 91 per cent.) of divisional revenue with the toptwo contracts contributing, in aggregate, approximately 67 per cent. (H1 2004: 84 per cent.) ofdivisional revenue.

Operating profit increased by 50.7 per cent. to US$22.9 million (H1 2004: US$15.2 million),representing a margin of 5.7 per cent. (H1 2004: 8.1 per cent.). The reduction in operating marginin H1 2005 as compared to H1 2004 reflected a combination of factors, including:

� contracts generating revenues during H1 2005 having different margin characteristics thanthose generating revenues during H1 2004, specifically, the Kashagan EP contract (awardedin H2 2004), being of lower risk than typical EPC contracts, generating a lower margin andrepresenting a significant proportion of revenues in H1 2005;

� the number and timing of contracts reaching completion during the period, specifically, H12004 saw greater profit recognition on completed contracts than H1 2005 (with neithercontributing significantly to revenues); and

� a further provision on the BTC/SCP contract which generated lower revenues than the priorcomparable period reflecting the contract approaching completion.

Net profits increased by 44.5 per cent. to US$23.0 million (H1 2004: US$15.9 million),representing a margin of 5.8 per cent. (H1 2004: 8.4 per cent.). The decline in net margin over andabove the reduction in operating margin primarily reflects an increased income tax charge, with agreater proportion of business being executed in taxable jurisdictions.

EBITDA increased to US$28.1 million (H1 2004: US$18.8 million), representing a margin of7.0 per cent. (H1 2004: 10.0 per cent.), relating mainly to the fall in operating margin, as discussedabove.

The total backlog for the E&C Division as at 30 June 2005 was approximately US$1,041 million,representing an increase of 40.9 per cent. on the comparable figure as at 31 December 2004. Duringthe 6 month period, new contract awards included a major lump sum EPC contract in Kuwait(KOC) with a value of US$644 million.

8.3 Engineering & Construction – 2004 financial year compared with 2003 financial yearRevenues during the year increased by 38.1 per cent. to US$473.5 million (2003: US$342.9million) reflecting increased revenue generated by the BTC/SCP contract, revenue generated by newcontracts awarded during the year, including QP and Crescent in H1 2004 and Kashagan in H22004, partly offset by lower overall revenues generated by other existing contracts, many of whichwere approaching completion at the beginning of the year. The top five contracts (by revenue)contributed, in aggregate, approximately 86 per cent. (2003: 78 per cent.) of divisional revenuewith the top two contracts contributing, in aggregate, approximately 67 per cent. (2003: 56 percent.) of divisional revenue and no other contract contributing more than 10 per cent.

Operating profit increased by 9.8 per cent. to US$33.5 million (2003: US$30.5 million),representing a margin of 7.1 per cent. (2003: 8.9 per cent.). The reduction in operating margin in FY2004 as compared to FY 2003 reflected a combination of factors including:

� profit recognition on certain of the current contracts and new awards secured during the yearand also on certain contracts that reached completion during the period (which did not makea significant contribution to revenues);

� a significant provision made on the BTC/SCP contract, which generated a significantproportion of revenues during the period;

� no profit recognition on the Kashagan EP contract, reflecting its early stage of completion asat the year end; and

� an increase in depreciation and amortisation for the period relating principally to property,plant and equipment acquired in support of the BTC/SCP contract (2004: US$8.4 million vs2003: US$3.7 million), representing 1.8 per cent. of revenues (2003: 1.1 per cent.).

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Net profits increased by 2.8 per cent. to US$33.1 million (2003: US$32.2 million), representing amargin of 7.0 per cent. (2003: 9.4 per cent.). The decline in net margin over and above the reductionin operating margin primarily reflected an increased income tax charge of US$2.3 million (2003:US$0.5 million, tax credit), attributable to local taxation arising on certain EPC contracts andwithholding taxes on the division’s engineering services activities.

EBITDA increased to US$41.9 million (2003: US$34.3 million), representing a margin of 8.8 percent. (2003: 10.0 per cent.). The decline in EBITDA margin related mainly to the fall in operatingmargin, as discussed above.

The total backlog for the E&C Division as at 31 December 2004 was approximately US$739million, representing an increase of 139.9 per cent. on the comparable figure as at the end of 2003.New lump sum EPC contracts with an aggregate value of approximately US$800 million wereawarded during the year, including Kashagan (value: US$514 million), Qatar Petroleum (value:US$173 million) and Crescent Petroleum (value: US$82 million).

8.4 Engineering & Construction – 2003 financial year compared with 2002 financial yearRevenues during the year decreased by 10.4 per cent. to US$342.9 million (2002: US$382.7million) reflecting a full year’s contribution from the BTC/SCP contract and revenues from newcontract awards during the year, offset by a net decline in the revenues arising from other existingcontracts, many of which were near completion at the beginning of the year. The top five contracts(by revenue) contributed, in aggregate, approximately 78 per cent. of divisional revenue (2002:85 per cent.) with two contracts (2002: four) contributing, in aggregate, approximately 56 percent. of divisional revenue (2002: 81 per cent.) and no other contract contributing more than 10 percent.

Operating profit decreased by 19.0 per cent. to US$30.5 million (2002: US$37.7 million),representing a margin of 8.9 per cent. (2002: 9.8 per cent.), reflecting principally the decline inrevenues over 2002 and no profit recognition on the early stages of the BTC/SCP contract whichrepresented a significant proportion of the revenue for the year. In addition, depreciation andamortisation increased to US$3.7 million (2002: US$2.5 million), representing 1.1 per cent. ofrevenues (2002: 0.7 per cent.), relating principally to property, plant and equipment acquired insupport of the BTC/SCP contract.

Net profits decreased by 12.4 per cent. to US$32.2 million (2002: US$36.8 million), representing amargin of 9.4 per cent. (2002: 9.6 per cent.). The year on year decline in net margin was less than thedecline in operating margin due to an income tax credit of US$0.5 million, comprising a tax chargeon EPC activities offset by a tax credit from the division’s engineering services activities in the UK.

EBITDA decreased to US$34.3 million (2002: US$40.2 million), representing a margin of 10.0 percent. (2002: 10.5 per cent.), reflecting the same factors as affected operating profit, as discussedabove.

The total backlog for the E&C Division as at 31 December 2003 was approximately US$308million, representing a decrease of 11.5 per cent. on the comparable figure as at the end of 2002.New lump sum EPC awards during the year with an aggregate value of approximately US$117million, including an engineering services and procurement contract for Agip (value: US$25million) and the Diffra contract in Sudan (value: US$46 million). In addition, variations to theBTC/SCP contract amounted to US$134 million relating mainly to assigned orders.

9. Review of the financial results of Operations Services9.1 OverviewThe OS Division provides services to oil and gas clients to operate, maintain and modify facilitiesand train personnel, including:

� facilities operations and maintenance services to the oil and gas industry for onshore andoffshore installations, principally in the UKCS but with an increasing presence outside theUKCS, including the provision of operations management, maintenance services andconsultancy, brownfield engineering services and specialist manpower; and

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� specialist training and human resource development for the oil and gas industry, including:safety training; operations and technical training; emergency response and critical incidentmanagement training; and training support and management services.

The Group’s facilities operations and maintenance services are typically provided under long term,cost reimbursable contracts, which include performance related remuneration, while the basis ofremuneration for the Group’s training services varies depending on the scope of the services beingprovided by the Group.

During the 6 months ended 30 June 2005, the OS Division achieved total revenues of US$279.7million (40.4 per cent. of Group revenues), operating profit of US$12.4 million (30.2 per cent. ofGroup operating profit) and net profits of US$7.3 million (20.0 per cent. of Group net profits).EBITDA for the period was US$13.3 million (24.5 per cent. of Group EBITDA).

The following table sets out selected financial information of the Operations Services Division ofPetrofac. It has been extracted or derived without material adjustment from, and should be read inconjunction with Part X – “Financial Information on Petrofac”.

H1 2005 H1 2004 2004 2003 2002(unaudited)US$ in thousands (unless stated otherwise)

Total Revenue 279,668 197,244 440,127 274,881 12,703Growth on prior period 41.8% 60.1% 2,063.9%Operating profit 12,391 8,238 17,347 10,173 642Net profits 7,294 4,275 9,643 6,816 440EBITDA 13,296 9,737 21,135 11,614 710

Operating Margin 4.4% 4.2% 3.9% 3.7% 5.1%Net Margin 2.6% 2.2% 2.2% 2.5% 3.5%EBITDA Margin 4.8% 4.9% 4.8% 4.2% 5.6%

9.2 Operations Services – 6 months ended 30 June 2005 compared with unaudited 6 monthsended 30 June 2004

Revenues for H1 2005 increased by 41.8 per cent. to US$279.7 million (H1 2004:US$197.2 million) with growth experienced across all business areas reflecting, in particular, in theUKCS, the new service operator contract with Lundin and increased revenues from the provision ofspecialist manpower services and brownfield engineering services and, outside the UKCS, the newmaintenance management contract with Kuwait Oil Company (KOC). The top five clients (byrevenue) contributed, in aggregate, 43 per cent. of divisional revenues for the period (H1 2004:51 per cent.), with two clients contributing more than 10 per cent. to the period’s revenue (H12004: two).

Operating profit increased by 50.4 per cent. to US$12.4 million (H1 2004: US$8.2 million),representing a margin of 4.4 per cent. (H1 2004: 4.2 per cent.). The improvement in operatingmargin as compared to H1 2004 reflected a combination of higher pass-through revenues dilutingmargin offset by lower SG&A charges as a percentage of revenues, including a lower depreciationand amortisation charge of US$0.9 million (H1 2004: US$1.5 million) arising from the cessation ofgoodwill amortisation in H1 2005 pursuant to IFRS 3.

Net profits increased by 70.6 per cent. to US$7.3 million (H1 2004: US$4.3 million), representing amargin of 2.6 per cent. (H1 2004: 2.2 per cent.). In addition to the lower depreciation andamortisation charge noted above, the increase in the net margin was attributable to a fall in theeffective tax rate in H1 2005, partially offset by a small increase in net interest payable. Theeffective tax rate fell to 35.7 per cent. in H1 2005 compared with 45.0 per cent. in H1 2004. The taxcharge in H1 2004 was adversely affected by a UK deferred tax charge recognised on unremitteddividends from an overseas subsidiary as well as proportionately higher overseas taxation.

EBITDA increased by 36.6 per cent. to US$13.3 million (H1 2004: US$9.7 million), representing amargin of 4.8 per cent. (H1 2004: 4.9 per cent.). The decline in EBITDA margin as compared to H12004 reflected the factors affecting the operating margin, as discussed above.

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The total backlog for the OS Division as at 30 June 2005 was approximately US$1,453 million,representing an increase of 45.2 per cent. on the comparable figure at 31 December 2004. Duringthe period, the OS Division secured new contracts and contract renewals with an aggregate value ofUS$733 million, with new awards including a service operator contract with Lundin in the UKCS(value: US$250 million), an operations and maintenance contract with Total in the UKCS (value:US$70 million), and a maintenance management contract with KOC (value US$125 million) andcontract renewals including Mobil (value: US$48 million) and Sea Production (in relation to Galleyasset) (value US$26 million).

9.3 Operations Services – 2004 financial year compared with 2003 financial yearRevenues for 2004 increased by 60.1 per cent. to US$440.1 million (2003: US$274.9 million)reflecting, inter alia, a full year’s contribution from new business secured during 2003, in particularthe new service operator contracts, growth in the operations services business, in particular fromthe provision of specialist manpower services, and expansion of the non-UKCS business. RGITMontrose, acquired in February 2004, also made a significant contribution to the growth inrevenues from 2003 to 2004. The increase in US$ reported revenues was also partly attributable toan appreciation of approximately 10 per cent. in the average value of Sterling against the US$during the period. The top five clients (by revenue) contributed, in aggregate, 46 per cent. ofdivisional revenues for the year (2003: 57 per cent.), with only one client contributing more than10 per cent. to the year’s revenue (2003: two).

Operating profit increased by 70.5 per cent. to US$17.3 million (2003: US$10.2 million),representing a margin of 3.9 per cent. (2003: 3.7 per cent.). The improvement in operating marginas compared to 2003 was partly attributable to higher margins arising primarily from the newservice operator contracts and the new training business partly offset by higher SG&A costs,including an increased depreciation and amortisation charge of US$3.8 million, (2003: US$1.4million) relating to the acquisition of RGIT.

Net profits increased by 41.5 per cent. to US$9.6 million (2003: US$6.8 million), representing amargin of 2.2 per cent. (2003: 2.5 per cent.). Notwithstanding the higher operating marginachieved in 2004 compared to 2003, the decline in net margin in 2004 as compared with 2003 wasattributable to higher interest and tax charges. Net interest payable increased to US$1.0 million(2003: nil) as a result of the debt assumed with both the acquisition of RGIT and increased workingcapital associated with the expansion of the non-UKCS business. The effective tax charge for theyear increased to 40.9 per cent. of profit before tax (2003: 32.6 per cent.), reflecting a higherproportion of profits being generated in higher income tax jurisdictions, where withholding taxeswere payable on certain contract revenues and as a result of providing deferred tax on unremitteddividends from an overseas subsidiary.

EBITDA increased by 82.0 per cent. to US$21.1 million (2003: US$11.6 million), representing amargin of 4.8 per cent. (2003: 4.2 per cent.). The increase in EBITDA margin reflected the factorsaffecting the operating margin, as discussed above.

The total backlog for the OS Division as at 31 December 2004 was approximately US$1,001million, representing an increase of 26.9 per cent. on the comparable figure at 31 December 2003.During the period, the OS Division secured new contracts and contract renewals with an aggregatevalue of US$671 million, with new awards including brownfield engineering support for Lundin inthe UKCS (value: US$13 million) and maintenance, management and operations contracts withSPGC in Iran (value not disclosed) and GNPOC in Sudan (value: US$40 million), and renewalsincluding contracts with BHP Billiton (value: US$114 million), BG Armada (value not disclosed)and Sea Production (in relation to the Galley asset) (value not disclosed).

9.4 Operations Services – 2003 financial year compared with 2002 financial yearPGS PS, which became the core of the OS Division, was acquired by Petrofac on 11 December 2002and, as such, contributed only 20 days’ trading to revenues for the 2002 financial year.

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Revenues for 2003 were US$274.9 million (2002: US$12.7 million) generated largely byestablished contracts with additional revenue arising from transitional services provided ahead oftaking on the full facilities management of three new service operator contracts. The top five clients(by revenue) contributed, in aggregate 57 per cent. of total revenues for the year (2002: 65 percent.), with two clients contributing more than 10 per cent. to the year’s revenue (2002: one).

Operating profit was US$10.2 million, representing a margin of 3.7 per cent., after depreciationand amortisation of US$1.4 million.

Net profit was US$6.8 million, representing a margin of 2.5 per cent., and reflected an income taxcharge of US$3.3 million (32.6 per cent. of profit before tax).

EBITDA increased to US$11.6 million, representing a margin of 4.2 per cent.

The total backlog for the OS Division as at 31 December 2003 was approximately US$789 million,representing an increase of 46.9 per cent. on the comparable figure at 31 December 2002. Duringthe period, the OS Division secured new contracts and contract renewals with an aggregate value ofUS$527 million, with new awards including service operator contracts with Tullow Oil & Gas(value not disclosed) and Venture Production (value: US$64 million) in the UKCS, a facilitiesmanagement contract for a crude refinery in Papua New Guinea (value not disclosed), a facilitiesmanagement contract relating to the Baku training centre (value not disclosed) and a renewal of thedivision’s contract with Britannia (value: US$66 million).

10. Review of the financial results of Resources10.1 OverviewIn selected situations, the Resources Division invests alongside its clients and partners in producingand proven or probable but not fully developed oil and gas reserves and energy infrastructure.Investments are assessed on the basis of their projected financial return reflecting the anticipatedrisks of the investment and, independently, the opportunity offered for the Group to provideservices to its clients and partners.

As at 30 June 2005, the Group’s investments had a book equity value of US$96.6 million.

During the 6 months ended 30 June 2005, the Resources Division achieved revenues ofUS$22.6 million (3.3 per cent. of Group revenues), operating profit of US$8.8 million (21.3 percent. of Group operating profit) and net profits of US$12.0 million (33.1 per cent. of Group netprofits). EBITDA for the period was US$15.7 million (28.9 per cent. of Group EBITDA).

The following table sets out selected financial information of the Resources Division of Petrofac. Ithas been extracted or derived without material adjustment from, and should be read in conjunctionwith Part X – “Financial Information on Petrofac”.

H1 2005 H1 2004 2004 2003 2002(unaudited)US$ in thousands (unless stated otherwise)

Total Revenue 22,572 21,569 45,042 14,439 13,914Growth on prior period 4.7% 211.9% 3.8%Operating profit/(loss) 8,769 8,990 17,164 (1,805) 2,082Net profits 12,034 3,552 6,953 1,579 2,396EBITDA 15,730 16,354 32,289 2,572 2,716

Percentage

Operating Margin 38.8% 41.7% 38.1% (12.5%) 15.0%Net Margin 53.3% 16.5% 15.4% 10.9% 17.2%EBITDA Margin 69.7% 75.8% 71.7% 17.8% 19.5%

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H1 2005 H1 2004 2004 2003 2002(unaudited)

US$ in thousands

Investment expenditure 3,794 8,640 10,465 17,741 42,811Book value (period end) 96,621 106,038 99,295 106,277 85,398

10.2 Resources – 6 months ended 30 June 2005 compared with unaudited 6 months ended30 June 2004

Revenues in H1 2005 increased by 4.7 per cent. to US$22.6 million (H1 2004: US$21.6 million)reflecting an increase in the Division’s share of revenue from the KPC joint venture offset by areduction in the revenues arising from the Ohanet investment (H1 2004 having benefited fromrevenue catch-up in accordance with the terms of the RSC arising from lower levels of productionduring start-up in late 2003). The Ohanet investment represented approximately 80 per cent oftotal revenue for the period (H1 2004: 86 per cent.). There were no new investments made in theperiod that contributed to revenue.

Operating profit fell by 2.5 per cent. to US$8.8 million (H1 2004: US$9.0 million), representing amargin of 38.8 per cent. (H1 2004: 41.7 per cent.). The Ohanet investment representedapproximately 95.2 per cent. of total operating profit for the period (H1 2004: 55.0 per cent.). Thedecline in operating margin as compared to H1 2004 mainly reflects lower gains on the disposal ofcertain investments and a decline in depreciation and amortisation as a percentage of revenues.

Net profits in H1 2005 increased by 238.8 per cent. to US$12.0 million (H1 2004: US$3.6 million),representing 53.3 per cent. of revenues (H1 2004: 16.5 per cent.). The increase in net profit isprimarily attributable to a reduction in finance costs (due to the progressive repayment of projectfinance loans relating to the Ohanet investment) and the impact of an income tax credit of US$7.6million arising from tax losses in Petrofac (Malaysia-PM304) Limited (the Division’s investment inCendor). These tax losses, due to uncertainty of utilisation, had not been previously recognised asan asset. Excluding the effects of this tax credit, net profit for H1 2005 represented 19.6 per cent. ofrevenues.

EBITDA was US$15.7 million (H1 2004: US$16.4 million), representing a margin of 69.7 per cent.(H1 2004: 75.8 per cent.). The decline in EBITDA margin as compared to H1 2004 reflected thefactors affecting the operating margin, as discussed above.

Investment expenditure during the period amounted to US$3.8 million towards the Cendor andOhanet investments (H1 2004: US$8.6 million). As at 30 June 2005, the book value of investmentsmade by the Resources division was US$96.6 million (30 June 2004: US$106.0 million).

10.3 Resources – 2004 financial year compared with 2003 financial yearRevenues increased to US$45.0 million (2003: US$14.4 million) reflecting a full year’s contributionfrom the investment in the Ohanet development which commenced production in late October2003, together with additional revenue in the year in accordance with the terms of the RSC, arisingfrom lower production levels during start up in late 2003. The Ohanet investment represented82.8 per cent. of total revenues for the year (2003: 24.1 per cent.).

Operating profit increased to US$17.2 million (2003: operating loss US$1.8 million), representinga margin of 38.1 per cent. (2003: negative 12.5 per cent.) and reflecting a full year’s contributionfrom Ohanet (2003: 2 months). 2003 included a write-down in value of the KPC investment.Depreciation and amortisation of US$15.1 million (2003: US$4.4 million) was charged reflectingprincipally the full year impact of the depreciation charge relating to the Ohanet investment.

Net profits increased to US$7.0 million (2003: US$1.6 million), representing a margin of 15.4 percent. (2003: 10.9 per cent.). The increase in net profit margin in 2004 as compared to 2003 reflectsthe full year contribution from the Ohanet investment, net of tax (2003: 2 months), partly offset byan increase in interest payable. Prior to commencement of production in late October 2003, interestcosts relating to the Ohanet investment were capitalised.

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EBITDA increased to US$32.3 million (2003: US$2.6 million), representing a margin of 71.7 percent. (2003: 17.8 per cent.). The increase in EBITDA margin reflected the factors affecting theoperating margin, as discussed above.

Investment expenditure during 2004 amounted to US$10.5 million (2003: US$17.7 million)towards the Ohanet, Cendor and KPC investments. At the end of 2004, the book value ofinvestments made by the Resources division was US$99.3 million (2003: US$106.3 million).

10.4 Resources – 2003 financial year compared with 2002 financial yearRevenues increased to US$14.4 million (2002: US$13.9 million) comprising revenues arising fromthe initial production from the Ohanet development from late October 2003, partly offset by a fallin revenues from facilities management contracts in Fujairah (UAE) and Bolivia, which during theyear came to an end.

An operating loss of US$1.8 million was incurred in 2003 (2002: operating profit of US$2.1million) primarily attributable to the impairment of KPC, together with the factors affectingrevenues, as discussed above.

Net profits decreased by 34.1 per cent. to US$1.6 million (2002: US$2.4 million), representing amargin of 10.9 per cent. (2002: 17.2 per cent.). A positive net margin position was achieved as aresult of reflecting the minority interest share of losses of US$3.1 million in relation to the KPCinvestment, together with a small tax credit (US$0.2 million) arising from the Division’s UKoperation.

EBITDA decreased marginally to US$2.6 million (2002: US$2.7 million), representing 17.8 percent. of revenues (2002: 19.5 per cent.). The decrease in EBITDA margin reflected the factorsaffecting the operating margin, as discussed above.

Investment expenditure during 2003 amounted to US$17.7 million (2002: US$42.8 million)towards the Ohanet investment. At the end of 2003, the book value of investments made by theResources division was US$106.3 million (2002: US$85.4 million).

11. Discontinued operationsThe origins of Petrofac’s US operations date back to 1981 when they were founded as a US basedEPF business operating as both a domestic and an international EPF contractor, principally focusedon the design and fabrication of modular plant for the upstream oil and gas and downstreamrefining markets.

As the US business pursued growth and expansion of its EPF offering into EPC with thedevelopment of its own construction management capability certain lump sum contracts, inparticular with respect to a major contract to construct FPSO modules for Petrobras, did notperform to expectation and the US operations generated losses.

In early 2003, the Group concluded it should exit the US business, in part reflecting the highlycompetitive domestic market but also the uncertainty of achieving a satisfactory recovery from theongoing underperformance within a reasonable timeframe. In April 2003, Petrofac sold thebusiness for US$25.6 million. As part of that transaction, Petrofac was required to complete thecontracts that remained in progress as at the date of sale. Cost-overruns on the Petrobras projectcontinued to increase, principally due to delays in the project timetable as a consequence ofdifficulties with certain subcontractors and the need to undertake rework. The Petrobras moduleswere shipped in July 2004, at which time Petrofac’s obligations under the underlying contract weresubstantially satisfied. As at 30 June 2004, the physical work under the contracts to be completedby Petrofac was substantially complete, subject to a number of relatively minor commercial issues,principally relating to ongoing legal disputes.

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The following table sets out selected financial information for the discontinued operations ofPetrofac. It has been extracted (with the exception of EBITDA) without material adjustment from,and should be read in conjunction with the Financial Information set out in Part X – “FinancialInformation on Petrofac”.

H1 2005 H1 2004 2004 2003 2002(unaudited)

US$ in thousands

Total Revenue 230 7,178 13,750 89,511 86,149Operating loss (249) (12,958) (13,197) (10,804) (18,457)Net loss (202) (12,942) (13,162) (16,241) (12,268)EBITDA (249) (12,952) (13,184) (6,459) (17,511)

12. Liquidity and cash resources12.1 Statement of cash flowsThe following table sets out the cash flow statements relating to Petrofac. It has been extractedwithout material adjustment from, and should be read in conjunction with, Part X – “FinancialInformation on Petrofac”.

H1 2005 H1 2004 2004 2003 2002(unaudited)

US$ in thousands

Operating activitiesNet profit before income taxesand minority interests:Continuing operations 37,684 29,977 62,736 37,774 36,216Discontinued operation (202) (12,942) (13,162) (11,326) (18,428)

37,482 17,035 49,574 26,448 17,788Adjustments for:Depreciation, amortisationand impairment 13,265 12,696 27,888 11,059 4,329Finance costs, net 3,350 2,460 5,512 495 (949)Minority interests — 46 46 3,164 314Other non cash items, net 2,398 86 (412) (158) 958Gain on disposal ofdiscontinued operation — — — (12,507) —Gain on disposal of investments (1,819) (2,402) (2,932) — —

Operating profit before workingcapital changes 54,676 29,921 79,676 28,501 22,440Trade and other receivables (7,574) (26,635) (99,582) (8,247) (10,017)Work in progress (44,572) 11,308 (6,196) (55,725) (17,616)Due from related parties (10,601) 294 746 (19,596) 2,840Inventories 67 (249) (113) 1,082 62Other current assets 13,765 (9,560) 171 4,002 (20,353)Trade and other payables (15,274) (16,375) (4,581) (5,610) 51,322Billings in excess of cost andestimated earnings (56,233) 12,166 60,773 (21,476) (14,407)Accrued contract expenses andprovisions 91,311 (11,509) 28,489 52,971 4,579Due to related parties 73 (108) 1,345 108 (352)Accrued expenses and otherliabilities 2,835 8,472 17,965 (2,791) 3,645

28,473 (2,275) 78,693 (26,781) 22,143Other non-current items, net (622) 11,901 19,123 13,689 (11,782)

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H1 2005 H1 2004 2004 2003 2002(unaudited)

US$ in thousands

Cash generated from/(used in)operations 27,851 9,626 97,816 (13,092) 10,361Interest paid (5,296) (3,168) (5,695) (1,705) (1,169)Income taxes paid, net (7,548) (6,016) (13,278) (2,590) (777)

Net cash flows from/(used in)operating activities 15,007 442 78,843 (17,387) 8,415

Of which discontinuedoperations (112) (9,589) (8,903) (35,927) (451)

Net cash flows used in investingactivities (6,627) (19,855) (27,243) (11,082) (65,127)

Of which discontinuedoperations 1,895 — 39 21,929 (6,662)

Net cash flows (used in)/fromfinancing activities (16,177) (12,820) (19,153) 14,630 56,667

Of which discontinuedoperations — — — — 5,317

Net (decrease)/increase in cashand cash equivalents (7,797) (32,233) 32,447 (13,839) (45)Cash and cash equivalents at1 January 127,823 95,376 95,376 109,215 109,260

Cash and cash equivalents atperiod end 120,026 63,143 127,823 95,376 109,215

12.1.1 Cash flows – 6 months ended 30 June 2005 compared with unaudited 6 months ended30 June 2004

Operating activities

On continuing operations, net cash flow from operating activities was US$15.1 million (H1 2004:US$10.0 million), representing 27.8 per cent. of EBITDA (H1 2004: 22.2 per cent.). The increase inoperating cash flow, compared with H1 2004, was attributable to the increase in operating profits,partly offset by a higher level of investment in working capital.

Net cash flow used in the Group’s discontinued operation was US$0.1 million (H1 2004:US$9.6 million).

The net cash flow from all operating activities in H1 2005 was US$15.0 million (H1 2004: cash flowUS$0.4 million).

Investing activities

Net cash flows used in the Group’s investing activities were US$6.6 million (H1 2004: US$19.9million), including the following significant items:

� Capital expenditure on property, plant and equipment of US$6.3 million (H1 2004: US$9.1million) in support of each of the Group’s three trading divisions (H1 2004: principally E&Cand Resources).

� Acquisitions during the period accounting for a US$4.1 million cash outflow (H1 2004:US$10.1 million), net of cash balances acquired relating to the acquisition of RubiconResponse (H1 2004: principally RGIT).

� Proceeds from the sale of available-for-sale investments and property, plant and equipmentof US$5.2 million (H1 2004: US$0.4 million), including US$1.9 million relating to property,plant and equipment of the Group’s discontinued operation (H1 2004: nil).

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Financing activities

Total net cash flows used in the Group’s financing activities were US$16.2 million (H1 2004:US$12.8 million), including the following significant items:

� Proceeds from interest bearing loans and borrowings of US$20.3 million (H1 2004: nil),drawn from the Group’s facility provided jointly by The Royal Bank of Scotland and Bank ofScotland. The proceeds were used in the acquisition of Rubicon Response, the exercise of theoption to acquire Petrofac Ohanet (Jersey) Limited and the repayment of loan notesassociated with the acquisition of RGIT, as well as general corporate purposes.

� Loan repayments of US$31.2 million (H1 2004: US$14.7 million), relating to full repaymentof Ohanet non-recourse finance and the repayment of loan notes issued as part of theacquisition of RGIT.

� Dividends paid of US$6.6 million (H1 2004: US$1.3 million).

12.1.2 Cash flows – 2004 financial year compared with 2003 financial yearOperating activities

On continuing operations, net cash flow from operating activities was US$87.7 million (2003:US$18.5 million), representing 91.3 per cent. of EBITDA (2003: 38.6 per cent.) despite the growthin revenues. The increase in operating cash flow, compared with 2003, was attributable to theincrease in operating profits together with a significantly lower level of investment in workingcapital. Working capital in 2003 increased by US$55.3 million largely as a result of the increasedsize of contracts undertaken by the E&C division. Although, the size of the contracts continued torise in 2004, working capital requirements reduced, mainly due to the timing of milestone receiptson lump sum EPC contracts.

Net cash flow used in the Group’s discontinued operation was US$8.9 million (2003:US$35.9 million).

The net cash flow from all operating activities in 2004 was US$78.8 million (2003: cash usedUS$17.4 million).

Investing activities

Net cash flows used in the Group’s investing activities were US$27.2 million (2003: US$11.1million), including the following significant items:

� Capital expenditure on property, plant and equipment of US$17.1 million (2003: US$34.3million). The main elements of the expenditure in 2004 related to property, plant andequipment in support of the BTC/SCP project and the completion of capital works on theGroup’s investment in Ohanet.

� Acquisitions during the year accounting for a US$10.8 million cash outflow (2003: US$0.4million), net of cash balances acquired. Of this amount US$9.1 million related to theacquisition of RGIT and US$1.0 million related to the acquisition of a 50 per cent. interest inKyrgyz Petroleum Company and US$0.7 million related to additional payments associatedwith the acquisition of Chrysalis Learning.

� An investment of US$4.5 million (2003: nil) for a 30 per cent. interest in a PSC in Malaysia(the Cendor investment).

� Proceeds from the sale of available-for-sale investments and property, plant and equipmentwere US$3.1 million (2003: US$1.6 million).

Financing activities

Total net cash flows used in the Group’s financing activities were US$19.2 million (2003 net cashflows from financing activities: US$14.6 million), including the following significant items:

� The repurchase of ordinary shares for a total consideration of US$30.8 million at theCompany’s internal market price (2003: US$8.3 million). The repurchase of shares in 2004represented approximately 25 per cent. of the then issued share capital held by two retiringsenior executives.

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� Proceeds from new bank facilities of US$45.7 million, net of debt acquisition costs, and therefinancing of existing term loans (2003: US$31.4 million). In 2004, the Group arranged aUS$145 million facility, jointly provided by The Royal Bank of Scotland and Bank ofScotland to finance the share purchase referred to above and to refinance certain existing termloans and working capital facilities on more favourable commercial terms.

� Loan repayments of US$35.7 million (2003: US$2.3 million), primarily relating to Ohanetnon-recourse finance and term loans assumed on the acquisition of RGIT.

� Proceeds of US$1.5 million (2003: nil) from the issue of share capital.

� Dividends paid of US$1.3 million (2003: nil).

12.1.3 Cash flows – 2003 financial year compared with 2002 financial yearOperating activities

On continuing operations, net cash flow from operating activities was US$18.5 million (2002:US$8.9 million), representing 38.6 per cent. of EBITDA (2002: 22.7 per cent.). The increase inoperating cash flow, compared with 2002, was attributable mainly to the increased operatingprofits and a reduction in restricted cash balances. Notwithstanding these factors, working capitalin 2003 increased by US$55.3 million (2002: US$0.3 million) largely as a result of the increased sizeof contracts undertaken by the E&C Division.

Net cash flow used in the Group’s discontinued operation was US$35.9 million (2002:US$0.5 million).

The net cash flow used in all operating activities in 2003 was US$17.4 million (2002: cash flow fromoperations US$8.4 million).

Investing activities

Net cash flows used in the Group’s investing activities were US$11.1 million (2002: US$65.1million), including the following significant items:

� Capital expenditure on property, plant and equipment of US$34.3 million (2002: US$52.3million). The main elements of the expenditure in 2003 related to the Group’s investment inOhanet and property, plant and equipment in support of the BTC/SCP contract (2002:principally Ohanet).

� Net cash from the sale of operating assets of the discontinued operation in April 2003 ofUS$20.7 million (2002: nil).

� Proceeds from the sale of property, plant and equipment and available-for-sale assets ofUS$1.6 million (2002: US$2.5 million).

� Acquisitions in the year of US$0.4 million, relating to Chrysalis Learning (2002: US$16.1million: PGS PS).

Financing activities

Total net cash flows from the Group’s financing activities were US$14.6 million (2002: US$56.7million), including the following significant items:

� Proceeds from interest-bearing loans and borrowings, net of debt acquisition costs, ofUS$31.4 million (2002: US$88.5 million). The proceeds primarily related to a US$21.4million term loan, denominated in Sterling, provided by The Royal Bank of Scotland and adrawdown of a project term loan utilised for the Ohanet project, (2002: Ohanet projectfunding and 3i variable rate unsecured loan notes).

� Loan repayments of US$2.3 million (2002: US$15.5 million), primarily relating to deferredconsideration arising from acquisitions made by PGS PS prior to its ownership by Petrofac(2002: repayment of short-term funding for Ohanet).

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� The repurchase of ordinary shares from exiting US shareholders following the sale of PetrofacInc.’s operating assets in April 2003 for a total consideration of US$8.3 million (2002: nil).

� Redemption of the balance of outstanding preference shares issued as part of the Groupreorganisation in 2002 for a total consideration of US$7.3 million (2002: US$0.3 million).

In addition to the above factors, in 2002 US$16.3 million of cash was used in the corporatereorganisation in connection with, inter alia, the purchase of various minority interests (2003: nil).

12.2 Restrictions on cash flow transfers from subsidiariesWith the exception of Petrofac International Ltd (PIL), which undertakes the majority of Petrofac’slump sum EPC contracts and which, under its existing banking covenants, is restricted frommaking upstream cash payments in excess of 70 per cent. of its net income in any one year, none ofthe Company’s subsidiaries is subject to any material restrictions on their ability to transfer funds inthe form of cash dividends, loans or advances to the Company. The restriction on PIL has beentaken into account in the Company’s working capital statement set out in paragraph 16 below.

12.3 Working capital and capital expenditure requirements12.3.1 Working capital requirementsThe majority of the Group’s revenue and working capital requirements are derived from a relativelysmall number of contracts within the E&C and OS Divisions. The working capital requirement ofthe Resources Division is, by comparison, small. The Company’s opinion on the availability ofsufficient working capital is set out in paragraph 16 below.

E&C Division

The E&C Division’s EPC contracts are typically undertaken on a fixed price or lump sum basis,frequently extending beyond a single financial year end and often beyond two years. The timing ofcash flow realised during the course of a lump sum EPC contract does not necessarily closely followthe recognition of profit. This may be due to the receipt of advance payments from the client aheadof contract mobilisation, potentially significant cash outflows arising from procurement of majorequipment and materials and also to the nature and timing of contractually determined milestonepayments. The E&C Division, in respect of lump sum contracts, typically operates with a negativeworking capital requirement, as significant customer prepayments are a feature of these contractactivities.

The E&C Division’s engineering service and consultancy contracts are typically undertaken on areimbursable basis against an agreed schedule of rates, plus, in certain circumstances, incentivepayments arising out of the performance according to specified KPIs. The timing of cash flowrealised by the engineering service and consultancy business is less volatile than lump sum EPCcontracts as a result of a smaller and more diversified contract base. As a result, the working capitalrequirements are more predictable although they do, however, vary across the geographical areasin which the business operates and typically are higher for international contracts.

OS Division

The OS Division’s contracts are typically undertaken on a reimbursable basis against an agreedcontract schedule of rates, plus, in certain circumstances, incentive payments arising out of theperformance according to specified KPIs. The OS Division’s working capital requirements vary byclient and geographical area reflecting varying credit terms, which can range from neutral fundingto, typically, 30 days, dependent on the nature of service provided and the client. Typically,working capital requirements are higher for international contracts as compared with UKCScontracts.

Resources Division

In the Resources Division, each investment has its own individual working capital profile. Theworking capital requirement of the Division’s principal investment, Ohanet, is relatively low withtypically no more than one month’s receivable outstanding at any point in time. The Division’s jointventure interest in KPC also has a low working capital requirement as all sales are conducted on a‘pro forma’ basis, that is, receipt of payment on delivery of product.

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12.3.2 Capital expenditureThe following table shows the capital expenditures (before consolidation and eliminationadjustments) for tangible and intangible fixed assets of the continuing operations within thePetrofac Group on the dates indicated. The information has been extracted without materialadjustment from note 3 to Part X – “Financial Information on Petrofac”.

6 monthsended

30 June2005

Yearended

31 December2004

Yearended

31 December2003

Yearended

31 December2002

US$in millions

E&C 3.0 11.7 16.9 2.8OS 1.5 2.9 0.4 —Resources 3.8 10.5 17.7 42.8

Total 8.3 25.1 35.0 45.6

E&C Division

Typically, the E&C Division has limited capital expenditure requirements. The increases in capitalexpenditure seen in financial years 2003 and 2004 relate principally to the Group’s proportionateshare of the investment made by the joint venture vehicle, Spie Capag – Petrofac InternationalLimited in plant and equipment in connection with the BTC/SCP project.

OS Division

The capital expenditure of the OS Division has typically been limited to the purchase of computerequipment, leasehold improvements and, since the acquisition of RGIT in 2004, additions to plantand equipment within Petrofac’s training facilities.

Resources Division

The Resources Division, by the nature of its activities, has the most significant capital requirementswithin the Group. Since 2002, the Resources Division’s capital expenditure has principallycomprised its investment in the Ohanet project, which began operations in October 2003. In 2004and H1 2005 however, the division has also incurred capital expenditure relating to its oil and gasinterests in Malaysia and the UK.

At 30 June 2005, the Group had capital commitments of US$0.1 million (31 December 2004: nil),all of which related to the Resources Division.

13. Ratio analysisThe following tables set out a summary of interest cover, relating to the continuing operations ofPetrofac, and debt/equity ratios relating to Petrofac. The data used in the ratio calculations has beenextracted without material adjustment from, and should be read in conjunction with, Part X –“Financial Information on Petrofac”.

13.1 Interest cover ratio

6 monthsended

30 June2005

Yearended

31 December2004

Yearended

31 December2003

Yearended

31 December2002

US$ in thousands (unless stated otherwise)

Operating profit from continuing operations(A) 41,081 68,283 37,747 35,296Interest costs/(income), net (B) 3,397 5,547 (27) (920)Interest cover (A/B) 12.1 times 12.3 times Net interest

receivableNet interest

receivable

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In the 2002 and 2003 financial years, the Group had net interest receivable. In the financial year2004, the Group had net interest payable reflecting:

� a full year of interest on project finance for the Ohanet investment which was beingcapitalised in the period before project completion;

� interest cost on assumed loans and borrowings following the acquisition of RGIT andincurred in conjunction with the buy back in October 2004 of approximately 25 per cent. ofthe Company’s then issued share capital; and

� an increase in interest rates in the UK and US.

Notwithstanding this increase in net interest payable, net interest cover was 12.3 times in the year.In H1 2005, the ratio of interest cover has been broadly maintained.

13.2 Debt/equity ratio30 June

2005(adjusted)

30 June2005

31 December2004

31 December2003

31 December2002

US$ in thousands

Interest-bearing loans andborrowings (A) 117,368 155,025 161,478 117,593 87,116Cash and short term deposits (B) 141,427 141,427 143,534 97,502 110,524Net debt/(cash) (C = A � B) (24,059) 13,598 17,944 20,091 (23,408)Total net assets (D) 171,540 133,883 138,558 109,394 96,102Gross gearing ratio (A/D) 68.4% 115.8% 116.5% 107.5% 90.6%Net gearing ratio (C/D) Net cash

position10.2% 13.0% 18.4% Net cash

position

At 30 June 2005, interest-bearing loans and borrowings include US$37.7 million relating to 3i’sholding of A ordinary shares, which as a result of a right to a fixed 5 per cent. dividend, have beenclassified as a current debt instrument. Immediately prior to Admission, the A ordinary shares heldby 3i will be converted to Ordinary Shares and consequently will be reclassified as equity, therebysignificantly reducing the gearing ratio of the Group. The adjusted 30 June 2005 figures abovereflect the effects of this reclassification to equity. Details of the conversion are set out in note 22 and23 to Part X – “Financial Information on Petrofac”.

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14. Capitalisation and indebtedness14.1 Capitalisation and gross indebtednessThe following table sets out the gross indebtedness of the Group as at 15 August 2005 and 30 June2005, the Group committed borrowing facilities available as at 15 August 2005 and thecapitalisation of the Group as at 30 June 2005. Group borrowings and borrowing facilitiesdenominated in currencies other than US$ have been translated at prevailing exchange rates on15 August 2005.

Indebtednessas at

30 June2005

Indebtednessas at

15 August2005

Groupcommittedborrowing

facilitiesavailable

as at15 August

2005US$ in thousands

Current debt instrumentsRevolving credit facility 3,250 3,250 3,270Bank overdrafts – general use 21,401 17,702 33,589Bank overdrafts – project specific — 435 40,891Project term loan 7,000 7,000 7,000Non-current debt instrumentsRevolving credit facilities 13,203 13,241 40,000Term loan 73,569 73,902 73,902

Total current and non-current debt instruments 118,423 115,530 198,652Contingent indebtednessLetters of credit 19,318 13,113 82,423Letters of guarantee (including performance and bidbonds) 334,838 307,388 424,421Forward exchange contracts(1) 104,344 94,450 141,781

Total current and non-current debt instruments andcontingent liabilities 576,923 530,481 847,277

A ordinary shares(2) 37,657 37,657

Total gross indebtedness(3) 614,580 568,138

Capitalisationas at

30 June2005

US$ inthousands

Shareholders equityShare capital 7,184Share premium reserve 29,219Capital redemption reserve 10,881

Total capitalisation(4) 47,284

Notes:(1) Amounts reported represent the net value of forward currency contracts based on notional facility amounts. The gross value of

forward contracts entered into by the Group was US$255.7 million at 15 August 2005 with committed facilities ofUS$607.5 million as at that date.

(2) Immediately prior to Admission, the A ordinary shares will be converted to ordinary shares and consequently will be reclassified asequity, without a cash outflow.

(3) Total gross indebtedness excludes US$1.3 million interest payable at 15 August 2005 on the above borrowings.(4) Shareholders’ equity as stated above excludes retained earnings reserve, foreign currency translation reserve and reserves

attributable to net unrealised gains and losses on available-for-sale financial assets and derivatives which, in aggregate, totalledUS$86.6 million at 30 June 2005.

There has been no material movement in the Company’s capitalisation, as set out in the above table,between 30 June 2005 and 15 August 2005.

105

As at 15 August 2005, the Group had committed borrowing facilities of, in aggregate,US$847.3 million of which US$198.7 million related to current and non-current debt instrumentsand the balance related to facilities available for the provision of letters of credit, letters ofguarantee (including performance and bid bonds) and forward exchange contracts. Suchcontingent liabilities typically arise in connection with the Group’s EPC activities. As at the samedate, the Group’s total gross indebtedness was, in aggregate, US$530.5 million (excludingUS$37.7 million of A ordinary shares which, immediately prior to Admission, will be convertedinto ordinary shares and consequently classified as equity), which comprised US$115.5 millionrelated to current and non-current debt instruments and US$415.0 million related to contingentliabilities.

A further analysis of the Group’s indebtedness as at 15 August 2005 is provided below,distinguishing between guaranteed, secured and unguaranteed/unsecured indebtedness:

Notes

Indebtednessas at

15 August 2005US$ in thosuands

Total current debtGuaranteed (1) 24,702Secured (2) 3,685Unguaranteed/Unsecured 37,657

66,044Total non-current debt (including contingent indebtedness)Guaranteed (1) 108,461Secured (3) 393,633Unguaranteed/Unsecured —

568,138

(1) Guaranteed by the Company, supported by additional guarantees from certain subsidiary companies.

(2) Secured against project receivables. This indebtedness is also guaranteed by the Company.

(3) Secured against project receivables and by cash pledges. Of the total non-current secured indebtedness, US$341.6 million is alsoguaranteed by the Company.

14.2 Net indebtednessThe Group’s current and non-current net financial indebtedness, as at 15 August 2005, was:

US$ in thousands

A Cash 125,239B Cash equivalents 99,725C Trading securities 681

D Liquidity (A�B�C) 225,645

E Current bank debt (21,387)F Current portion of non-current debt (7,000)G Other current financial debt (37,657)

H Current financial debt (E�F�G) (66,044)

I Net current cash/(financial indebtedness) (H�D) 159,601J Non-current debt (87,143)

K Net cash/(financial indebtedness) before contingent indebtedness (I�J) 72,458

L Contingent indebtedness including bonds issued andforward exchange contracts (414,951)

M Non current financial indebtedness (J�L) (502,094)

N Net financial indebtedness (I�M) (342,493)

Group cash and borrowings denominated in currencies other than US$ have been translated atprevailing exchange rates on 15 August 2005.

106

As set out above, as at 15 August 2005, the Group had net cash (before taking into accountcontingent liabilities) of US$72.5 million, comprising cash, cash equivalents and trading securitiesof US$225.6 million, and total current and non-current financial debt of US$153.2 million, ofwhich US$37.7 million related to the A ordinary shares which, upon Admission, will not beclassified as debt. In addition, as at 15 August 2005, the Group had total contingent indebtedness ofUS$415.0 million.

As at 15 August 2005, the Group did not have any indirect indebtedness, whereby the indebtednessof a third party outside the Group may, whether through guarantee obligations or some other formof contractual obligation, become the legal indebtedness of the Group.

14.3 Maturity profile of borrowings and undrawn committed borrowing facilitiesThe following table sets out the maturity profile of the Group’s borrowings and undrawncommitted borrowing facilities as at 15 August 2005.

�1 year 1-5 years �5 years TotalUS$ in thousands

BorrowingsRevolving credit facilities 3,250 9,365 3,876 16,491Bank overdrafts – general usage 17,702 — — 17,702Bank overdrafts – project specific 435 — — 435Term loans — 48,125 25,777 73,902Project term loan 7,000 — — 7,000A ordinary shares 37,657 — — 37,657

66,044 57,490 29,653 153,187

Undrawn committed borrowing facilitiesRevolving credit facilities 20 19,135 7,624 26,779Bank overdrafts – general usage 15,887 — — 15,887Bank overdrafts – project specific 40,456 — — 40,456

56,363 19,135 7,624 83,122

The maturity profile of borrowings includes US$37.7 million of A ordinary shares, which as a result ofrights to a fixed 5 per cent. dividend, are classified as a current debt instrument. Immediately prior toAdmission, the A ordinary shares will be converted to ordinary shares and consequently will bereclassified as equity, without a cash outflow. Excluding the A ordinary shares, the Group has abalanced borrowing profile with 25 per cent. of borrowings maturing within one year, 49 per cent.maturing between one and five years and the remaining 26 per cent. maturing in more than five years.

Of the borrowings maturing within one year, excluding the A ordinary shares, US$21.4 millionrelates to revolving credit facilities and bank overdrafts all of which are subject to annual renewal.

Group borrowings, including working capital requirements, are typically not seasonal but areinfluenced by the needs of individual contracts for the E&C and OS divisions and investmentrequirements for the Resources division.

15. Treasury management15.1 Funding and non-funding requirementsThe Group currently satisfies its funding requirement from the cash generated within its businessand through the use of external debt. The Group’s funded borrowing requirements are principallyfinanced through a facility provided by The Royal Bank of Scotland and Bank of Scotland. Seeparagraph 14.1 of Part IX – “Additional Information” for a summary of the terms of this facility.

The Group’s non-funded requirements, which mainly comprise letters of credit and performanceguarantees, and which are predominantly required for the Group’s international activities aresourced from a number of international and regional banks.

15.2 Cash and cash equivalentsThe Group prepares its financial statements in US$, as a significant proportion of the Group’sassets, liabilities, income and expenses are US$ denominated. Notwithstanding this, the Group

107

manages its cash resources in a number of currencies besides US$. Typically, cash resources are heldin currencies other than US$ when either the functional currency of individual subsidiaries arenon-US$ or when the Group has an anticipated future commitment in a currency other than US$.

The table below sets out the currency composition of cash and cash equivalents held at 15 August2005.

Percentageof total

US$ inthousands

US$ 56.3 126,600Euros 26.7 59,950Sterling 3.8 8,616Kuwaiti Dinars 8.8 19,761Others 4.4 10,037

Total 100.0 224,964

15.3 Management of exchange rate exposureEngineering & ConstructionA significant proportion of the E&C Division’s assets, liabilities, income and expenses are US$denominated. Lump sum EPC contracts are almost always required to be priced in US$. Dependingon the procurement strategy, in particular its scale, timing and vendors’ business currency forpurchasing the equipment and materials, there may be a significant non-US$ exposure and risk tothe budgeted profitability should the non-US$ currency appreciate against the US$ before thepurchasing is complete. Typically, the E&C Division will seek to mitigate this exchange rate riskupon each contract award by purchasing forward an appropriate amount of the non-US$ currency.

The E&C Division’s engineering and consulting business, located in Woking, England, undertakeswork on an international basis, with its income typically denominated in either US$ or Euros. Itscosts are predominantly Sterling based. Typically, the business will seek to mitigate this exchangerate risk and protect its budgeted margin on a contract by contract basis by selling forward anappropriate amount of the appropriate currencies to match its Sterling costs.

Operations ServicesA significant proportion of the OS Division’s assets, liabilities, income and expenses are Sterlingdenominated reflecting the scale of the business undertaken within the UKCS. The OS Division’sinternational activities are typically US$ denominated and the assets, liabilities, income andexpenses relating thereto are also US$ denominated. Only in very limited circumstances is there arequirement to mitigate exchange rate exposure. Where this does arise, the OS Division will seek tomitigate this risk through appropriate provisions within the contract with the client.

Resources

Most of the world’s oil and gas investment projects are denominated in US$. The ResourcesDivision’s activities are therefore predominantly US$ denominated.

Details of the foreign currency hedge instruments used by the Group are set out in note 31 to Part X– “Financial Information on Petrofac”

15.4 Management of interest rate riskInterest rate risk arises from the possibility that changes in interest rates will affect the value of theGroup’s interest-bearing financial liabilities and assets. The Group’s exposure to market risk forchanges in interest rates relates primarily to the Group’s long term variable rate debt obligationsand its cash and bank balances.

In 2004, the Group established a formal policy to manage its interest cost using a mix of fixed andvariable rate debt and specifically to keep between 60 per cent. and 80 per cent. of its borrowings atfixed rates of interest. The Group has used simple hedge instruments to achieve this objective.Details of the instruments used by the Group are set out in note 31 to Part X – “FinancialInformation on Petrofac”.

108

16. Working capitalThe Company is of the opinion that, taking into consideration the bank and other facilitiesavailable to the Group, the working capital available to the Group is sufficient for its presentrequirements, that is, for at least the 12 months from the date of publication of this document.

17. Current trading and prospects17.1 Engineering & ConstructionThe Directors believe revenue backlog and the composition of projects within backlog to be animportant performance indicator for the E&C business. As at 30 June 2005, the revenue backlogfor the E&C Division had increased by 40.9 per cent., to US$1,041 million, compared to31 December 2004, driven by several new contract wins, principally the KOC Upgrade EPCcontract, and resulting in a higher composition of early phase work in H2 2005 versus previousperiods. Since 30 June 2005, Petrofac was awarded a US$246 million EPC contract with theSultanate of Oman in July 2005 to construct a new gas plant in the Kauther field in Oman.Notwithstanding this increase in backlog, the Directors expect a relatively moderate level ofrevenue growth from the E&C Division between the first and second half of the year, as certaincontracts such as the QP and Crescent contracts will be reaching substantial completion during H22005, while various other projects in backlog will still be in early phase. Petrofac does not recogniseprofits on lump sum contracts until it has reached a threshold percentage of completion. Therefore,a higher concentration of early stage projects in the E&C revenue backlog will tend to reduceoperating margins and, as such, the Directors believe that operating margins for H2 2005 may bemoderately lower than for H1 2005. During 2006, as the existing projects in the backlog, includingthe KOC Upgrade EPC contract and the Kauther gas plant EPC contract contract, reach a moreadvanced stage, in the absence of unforeseen circumstances and subject to the scale and timing offurther contract awards, this should have a positive effect on margins as compared to H2 2005.Over the medium term, the Directors expect revenue growth within its E&C Division to beconstrained more by its internal resource capacity than by business opportunities, and anticipatethat revenue growth will moderate.

17.2 Operations ServicesThe Directors believe revenue backlog and the composition of projects within backlog to be animportant performance indicator for the OS business. As at 30 June 2005, the revenue backlog forthe OS Division had increased by 45.2 per cent., to US$1,453 million, compared to 31 December2004, considerably improving the long-term outlook for the division. During H1 2005, the Lundinservice operator, Total operations and maintenance, and KOC maintenance managementcontracts commenced which should all make a full year impact in 2006. However, given that themajority of the OS Division’s contracts are Sterling based (and costed), the recent strengthening ofthe US Dollar against Sterling during H2 2005 may, to the extent that it is sustained, have a negativeimpact on revenue and profit growth for that period as compared to H1 2005. The Directors believethat, because of the nature of the services provided, the UKCS facilities management and serviceoperator contracts of the OS Division can be expected to have a lower variability of operatingmargins than the E&C contracts over the life of a contract.

17.3 ResourcesOver the next 12 months the Ohanet investment is expected to continue to be the largest investmentin Resources’ portfolio. Given the nature of the Ohanet RSC (see the description of the Ohanetproject in Section 4 of Part III – “Information on the Petrofac Group”), the Directors expect thisinvestment to provide relatively stable revenues and cash flows. During the 6 months ended 30 June2005, the Resources Division benefited from an exceptional US$7.6 million tax credit associatedwith its investment in the Cendor asset. The Directors expect Cendor to commence production inlate 2006, which is expected to result in increased revenues and profitability for the division inaccordance with the terms of the PSC.

109

PART VII

Competent person’s report by Ryder Scott

[Please see over]

1100 LOUISIANA SUITE 3800 HOUSTON, TEXAS 77002-5218 TELEPHONE (713) 651-9191 FAX (713) 651-0849

September 21, 2005

Petrofac Limited Whiteley Chambers, Don Street St. Helier, Jersey JE4 9WG United Kingdom

Credit Suisse First Boston (Europe) Limited 1 Cabot Square London E14 4QJ United Kingdom

Lehman Brothers International (Europe) Lehman Brothers Europe Limited 25 Bank Street London E14 5LE United Kingdom

Gentlemen:

At your request, we have prepared an estimate of the future net reserves and income attributable to certain leasehold interests of subsidiaries of Petrofac Limited (Petrofac) as of June 30, 2005. The subject properties are located in Algeria and offshore Malaysia. The income data were estimated utilizing economic parameters supplied by Petrofac. At the request of Petrofac, only its Algerian and Malaysian fields were evaluated in this report, because in its view, at present these are the two upstream assets which are material to Petrofac.

As a result of both economic and political forces, there is significant uncertainty regarding the forecasting of future hydrocarbon prices. The recoverable reserves and the income attributable thereto have a direct relationship to the hydrocarbon prices actually received; therefore, volumes of reserves actually recovered and amounts of income actually received may differ significantly from the estimated quantities presented in this report. The results of this study are summarized below.

PETROFAC ECONOMIC PARAMETERS Estimated Net Reserve and Income Data

Certain Leasehold Interests of Subsidiaries of Petrofac Limited

Algerian and Malaysian Upstream AssetsAs of June 30, 2005

Net Reserves Future Net Income (US$000) Category Oil (MBBL) Undiscounted Disc. @10.0%Proved 7,384.0 $ 213,086 $ 157,121Probable________ 1,696.8 $ 5,436 $ 2,175Proved + Probable 9,080.8 $ 218,522 $ 159,296

Petrofac Limited September 21, 2005 Page 2

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

The values shown in the previous table are inclusive of the financial remuneration received by Petrofac for the Ohanet Field for which no reserve volumes are attributable to Petrofac as per the terms of the RSC. The future undiscounted and discounted future net income at 10 percent for the Ohanet Field comprise approximately 70 percent and 72 percent respectively of the corporate total for the Algerian and Malaysian assets included within this report.

PETROFAC ECONOMIC PARAMETERS Estimated Net Income Data

Certain Petrofac Limited Leasehold Interests in the Risk Service Contract (RSC) Ohanet Field, Algeria As of June 30, 2005

Net Reserves Future Net Income (US$000) Category Oil (MBBL) Undiscounted Disc. @10.0%Proved - $ 153,252 $ 114,885 Probable - - - Proved + Probable - $ 153,252 $ 114,885

Petrofac’s share of the Contractor’s Risk Service Contract (RSC) with Sonatrach in relation to the Ohanet Field provides only for financial remuneration resulting from future field operations, such remuneration being paid in kind, and does not convey actual proportionate ownership of produced hydrocarbon volumes. As part of our due diligence as required for the preparation of this report, we have confirmed that the reserve volumes associated with the financial remuneration to Petrofac for the Ohanet RSC are equal to or in excess of the volumes required for fulfillment of the RSC contractual terms.

PETROFAC ECONOMIC PARAMETERS Estimated Net Reserve and Income Data

Certain Petrofac Leasehold Interests in the Cendor Field, Offshore Malaysia

As of June 30, 2005

Net Reserves Future Net Income (US$000) Category Oil (MBBL) Undiscounted Disc. @10.0%Proved 7,384.0 $ 59,834 $ 42,236Probable 1,696.8 5,436 2,175Proved + Probable 9,080.8 $ 65,270 $ 44,411

Liquid hydrocarbons are expressed in standard 42 gallon barrels. The future net income reflects certain deductions from liquid hydrocarbons revenue. The deductions are comprised of the normal direct costs of operating the wells, costs of personnel, royalty and taxes. The discounted future net income shown above was calculated using a discount rate of 10 percent per annum compounded annually.

Petrofac Limited September 21, 2005 Page 3

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

The following table summarizes the total future net income at various discount rates.

Subsidiaries of Petrofac Limited Total Algerian and Malaysian Upstream Assets Discounted Future Net Income, US$000 As of June 30, 2005

Discount Rate Total Total Total Percent Proved Probable Proved+

Probable 0 $ 213,086.0 $ 5,436.0 $ 218,522.0 8 $ 166,197.0 $ 2,592.0 $ 168,789.0

10 $ 157,121.0 $ 2,175.0 $ 159,296.0 12 $ 148,859.0 $ 1,831.0 $ 150,690.0

Subsidiaries of Petrofac Limited Ohanet Field, Algeria Discounted Future Net Income, US$000 As of June 30, 2005

Discount Rate Total Total Total Percent Proved Probable Proved+

Probable 0 $ 153,252.0 - $ 153,252.0 8 $ 121,136.0 - $ 121,136.0

10 $ 114,885.0 - $ 114,885.0 12 $ 109,185.0 - $ 109,185.0

Subsidiaries of Petrofac Limited Cendor Field, Offshore Malaysia Discounted Future Net Income, US$000 As of June 30, 2005

Discount Rate Total Total Total Percent Proved Probable Proved+

Probable 0 $ 59,834.0 $ 5,436.0 $ 65,270.0 8 $ 45,061.0 $ 2,592.0 $ 47,653.0

10 $ 42,236.0 $ 2,175.0 $ 44,411.0 12 $ 39,674.0 $ 1,831.0 $ 41,505.0

The results shown above are presented for your information and should not be construed as our estimate of fair market value.

Reserves Included in This Report

The petroleum reserves included in this report are classified by degrees of proof as proved or probable. Definitions of proved and probable reserve classifications utilized in this report are in accordance with the reserve definitions presented in Appendix 1 of the Listing Rules of the UK Listing Authority (andalso contained in Part XII “Glossary of Industry Terms”) . Such definitions are not materially different from those customarily utilized in the United States (i.e. the SEC definitions of proved reserves and SPE/WPC definitions for probable reserves). The petroleum reserves are classified as follows:

Petrofac Limited September 21, 2005 Page 4

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Proven Reserves mean, in respect of mineral companies primarily involved in the extraction of oil and gas resources, those reserves which on the available evidence and taking into account technical and economic factors have a better than 90% chance of being produced.

Probable Reserves mean, in respect of mineral companies primarily involved in the extraction of oil and gas resources, those reserves which are not yet proved but which on the available evidence and taking into account technical and economic factors have a better than 50% chance of being produced.

For the purposes of these definitions, present producing methods are limited to primary depletion or secondary recovery by water or gas injection and do not include enhanced petroleum recovery techniques.

The extent to which probable reserves ultimately may be reclassified as proved reserves is dependent upon future drilling, testing and well performance. The degree of risk to be applied in evaluating probable reserves is influenced by economic and technological factors as well as the time element. Probable reserves in this report have not been adjusted in consideration of these additional risks and therefore are not comparable to the proved reserves.

Estimation of reserves is done under conditions of uncertainty. For this report, deterministic estimates of reserves have been prepared. The method of reserve estimation is called deterministic if a single best estimate of reserves is made based on known geological, engineering, and economic data.

Identifying reserves as proved and probable has been the most frequent classification method and gives an indication of the probability of recovery. Because of potential differences in uncertainty, caution should be exercised when aggregating estimates of reserves of different classifications.

Properties Included in the Evaluation

Petrofac owns an interest in two principal upstream assets comprised of the Ohanet Field located in Algeria and the Cendor Field located offshore Malaysia. At the request of Petrofac, only its Algerian and Malaysian fields were evaluated in this report, because in its view, at present these are the two upstream assets which are material to Petrofac.

Ohanet Field, Algeria (or People’s Democratic Republic of Algeria)

The Ohanet Field is located in the lllizi province, Algeria, approximately 1,300 km south east of Algiers and 100 km west of the country’s border with Libya. The field is being developed under a Risk Service Contract (RSC) by a joint venture comprised of:

BHP Billiton (45% and Operator) Japan Ohanet Oil & Gas Co (30%) Woodside Petroleum (15%) Petrofac Resources (10%)

The above companies are known collectively as the Contractor within the RSC agreement with Sonatrach, the national oil company of Algeria. Petrofac acquired its 10% working interest in this project via its Algerian RSC executed with Sonatrach in July, 2000.

Petrofac Limited September 21, 2005 Page 5

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Petrofac’s share of the Contractor’s RSC provides for financial remuneration resulting from future field operations, such remuneration being paid in kind, and does not convey actual ownership of a proportionate share of future produced hydrocarbon liquids. Under the terms of the RSC, Sonatrach retains ownership of all produced hydrocarbons until custody transfer occurs to the Contractors at the Algerian border. At custody transfer, the Contractors receive financial remuneration for operations under the RSC by means of beneficiary sales of the liquid hydrocarbon volumes equivalent to the pre-established remuneration amounts. As a consequence and at the request of Petrofac, this report therefore includes only those future cashflow streams resulting from Petrofac’s net share of the RSC remuneration. As part of our due diligence as required for the preparation of this report, we have confirmed that the reserve volumes associated with the financial remuneration to Petrofac for the Ohanet RSC are equal to or in excess of the volumes required for fulfillment of the RSC contractual terms. Based upon our review of information provided by Petrofac regarding the terms of the RSC, Petrofac's ability to achieve its return as defined in the RSC is not materially impacted by variations in future hydrocarbon prices.

The Ohanet Field was discovered during the late 1950’s to early 1960’s with 4 reservoirs ultimately being discovered. The reservoirs include wet gas reservoirs and a black oil reservoir with a large associated gas cap. The reservoirs have been delineated by more than 65 wells. The four reservoirs comprising the Ohanet Field include the following:

Ohanet Devonian Dimeta West In Adaoui Ohanet Ordovician

The only production prior to October, 2003 consisted of production from the oil rim of the Ohanet Devonian reservoir. Sonotrach entered into the RSC with the Contractor to redevelop the field including the implementation of a gas plant system which allows for the production and sale of plant liquids from each of the four reservoirs. The project’s implementation consists of drilling up to 32 additional production wells, recompletion of 15 existing wells, building new facilities to handle up to 20 million standard cubic metres per day (mmcm/d) or 700 million cubic feet per day (MMCFD) of gas and 56,000 barrels of oil equivalent per day (BOEPD) for export via the existing Sonatrach infrastructure. Sonatrach retains rights to all processed gas volumes and as per the terms of the RSC allocates a portion of the associated production of plant liquids as remuneration for the capital and operating expenditures incurred by the Contractor during project implantation and operation.

The general economic terms for the RSC are as follows:

In addition to repayment of the investment, the RSC provides for an additional remuneration payable to the Contractor which is based upon a defined return, plus re-imbursement of agreed-upon reimbursable operating costs. Remuneration is made in kind as liquids (LPG’s and condensate) delivered by Sonatrach to the Contractor at a loading port. The repayment of the operating cost share, the investment and the remuneration are designed to be repaid (with liquids) over a target period of eight years. If, however, insufficient liquids are produced to allow for the repayment within the 8 year period, an additional three year period is permitted to allow complete repayment. However, if, over the extended 11 year period, the average oil price is below a minimum threshold, an additional year will be granted to allow recovery. Thus, the contract could extend to a total of 12 years under certain scenarios.

Petrofac Limited September 21, 2005 Page 6

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

By Algerian law, the Contractor’s annual revenue is capped to 49% of the total production of the field on a barrel of oil equivalent basis, inclusive of gas production.

The Contractor funds all of the field development costs, currently forecast to be $1,065 million a minority of which is not recoverable.

Development of the project commenced in September, 2000 with first gas and condensate production commencing in October, 2003.

The run in test required delivery and processing of a contractually specified volume to the Sonatrach export pipelines which was successfully achieved by the Contractor in early 2004.

The drive mechanism for each of the four reservoirs is expected to be pressure depletion. Based upon our review, the operator and Petrofac have prepared a detailed and very high quality analysis of these reservoirs in an attempt to optimize the ultimate recoveries from each reservoir. In our professional opinion, the operating consortium exhibits sufficient competency to produce the reserve volumes required for fulfillment of the terms of the RSC.

Maps showing the geographical location of this field are shown in Attachments 1A and 1B.

The contractual concession limit for the RSC license under the terms of the current agreement for Petrofac in the Ohanet RSC is 12 years maximum. It should be noted that the proved and probable reserves included within this evaluation are comprised of only those reserves, which can be produced within the 12-year period as stipulated by the current agreements for each field. Additional reserves may be recovered should the license terms be extended beyond those time limits assumed within this evaluation.

Ohanet Devonian Reservoir

The Ohanet Devonian field was discovered in 1960. Oil production commenced in the early 1960's in the wells drilled in the oil rim plus minor gas production from the wells penetrating the field's significant gas cap. The oil wells were converted to gas producers in order to facilitate implementation of the project.

Ohanet Dimeta West Reservoir

Dimeta West reservoir was discovered in 1970 as a gas condensate reservoir and was delineated by 9 wells. The field had never been produced prior to October, 2003.

In Adaoui Reservoir

The In Adaoui reservoir was discovered in 1961. This reservoir is a small gas condensate reservoir which had never been produced prior to October, 2003.

Ohanet Ordovician Field

The Ohanet Ordovician gas condensate reservoir was discovered in 1961 and subsequently appraised by eight wells. There has been little or no production prior to October, 2003.

Petrofac Limited September 21, 2005 Page 7

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

The reserve verifications prepared as part of our due diligence for the Ohanet Ordovician and Devonian reservoirs were based upon an audit of detailed reservoir simulations and a material balance analysis.

Description of the Ohanet development

The Development comprises all major fluid handling systems, including a two train 710 mmscf/d gas treatment facility (the Central Processing Facility ) fed by 47 production wells of which 32 will be new and 15 are re completions of existing oil wells. The CPF is fed by a gas gathering system comprising more than 150 kilometres of flowlines that connect the 47 wells. A total of 28 wells have been drilled and completed to date. The last four wells have been deferred to allow three to four years or production history to be gathered. Three of the new wells were drilled as horizontal underbalanced wells.

The Ohanet structure is 42 kilometres long and 8 kilometres wide at its greatest extent. Included in the development are four separate hydrocarbon reservoirs, originally discovered in the late 1950s and early 1960s. Since then, they have been appraised and delineated by more than 65 wells. Three of the reservoirs are Devonian, lying at depths of between 7500 and 8880 feet. The fourth is Ordovician at approximately 9020 ft.

Ohanet is the seventh wet gas development in the area south east of the Hassi R’Mel complex in Algeria.

Cendor Field, Offshore Malaysia

The Cendor Field is located in the NE corner of Block PM304 in the South China Sea east of the Malaysian peninsula. The block covers an area of 682 km2 and lies in water depths of up to 70 meters. This field is to be operated by Petrofac. The nearest infrastructures include the Floating Storage and Offloading Facility (FSO) of the Dulang oil field in the north, the Resak gas facilities in the adjacent northwest and the Tapis oil facilities in the east. Both the Resak gas pipeline and the Tapis oil pipeline run across the block to the onshore facilities in Kertih.

A phased approach will be used to develop the Cendor Field. Phase 1 of the development program will be comprised of four producing wells and three injector wells. Production will be from an unmanned platform and these early wells will be utilized to assess reservoir performance for possible subsequent re-development of the field in Phase 2.

The Cendor Field was acquired initially by Amerada Hess in February, 1998 as a 70-30 split with Petronas Carigali under the revenue over cost (R/C) PSC terms. Petrofac acquired its interest from Amerada Hess in May, 2004. The current partners in the Cendor Field include the following:

Company Working Interest, % Petrofac (Operator) 30 Petronas Carigali 30 KUFPEC 25 PIDC 15

The main reservoirs for the Cendor Field are the H15 and H20 reservoirs which are moderately high permeability, oil bearing reservoirs. Should the performance of the H15 and H20 reservoirs justify

Petrofac Limited September 21, 2005 Page 8

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

further development, a second set of wells will be drilled. The production from the second stage would be handled by a dedicated Central Processing Platform (CPP) to be located at Cendor. For purposes of this CPR, only the initial phase of development activity involving the first set of 4 producing wells and 3 injector wells has been utilized. Based upon this phased approach to development, a project producing life of only 12 years has been utilized for this analysis. The field is projected to commence production in 2006.

Maps showing the geographical location of this field are shown in Attachments 2A and 2B. A typical structure map for the field is included as Attachment No. 3.

General reservoir parameters for the Cendor Field are shown in the following table:

H-15 H-20

Porosity, %: min 15.5 16.0Porosity, %: max 31.6 28.7Sw, %: min 32.0 30.5Sw, %: max 53.0 69.5Permeability, md: min 1 1Permeability, md: max 1,255.0 1,180.0 Total Net Pay, ft: min 7.3 3.3Total Net Pay, ft: max 75.8 17.1

Formation Temperature, oF 205 215Depth, ft 4,090 4,285 Formation Pressure, psi 2,220 2,245 Geopressure Gradient, psi/ft 0.540 0.520

CENDOR FIELD-RESERVOIR PARAMETERS

Based upon our review, Petrofac has prepared a detailed and high quality analysis of these reservoirs in an attempt to optimize the ultimate recoveries from each reservoir and exhibits sufficient technical and operational competency to produce the reserves included herein.

Description of H-15 and H-20 Reservoirs and Discussion of Reserves.

The H-15 and H-20 reservoirs are Oligocene aged reservoirs. The early opening of the NW-SE trending Malay Basin was extensional and produced localized grabens. These early grabens were rapidly in-filled. By the Late Oligocene regional tectonic movements resulted in the full expansion of the basin. In the Early Miocene the basin entered a passive sag phase, in which depositional relief decreased, resulting in the first evidence of widespread marine influence in the basin. An important shift in stress patterns during the Mid Miocene caused pre-existing extensional lows to be folded into east-west anticlines of the Sunda Fold Belt, such as the Jambu-Liang structure containing Cendor (and most of the basin’s producing fields).

The reserve estimates included herein for the Cendor Field were based upon volumetric estimates. The drive mechanism is expected to be a fluid expansion drive with supplemental pressure support achieved through water injection.

Future Production Rates-All Fields

Initial production rates are based on the current producing rates for those wells now on production. Test data and other related information was used to estimate the anticipated initial production rates for

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RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

those wells or locations, which are not currently producing. If no production decline trend has been established, future production rates were established by using type curve method based on simulation work and well performance. An estimated rate of decline was then applied to depletion of the reserves. If a decline trend has been established, this trend was used as the basis for estimating future production rates.

The future production rates from wells now on production may be more or less than estimated because of changes in marketing conditions or allowable set by regulatory bodies. Wells or locations, which are not currently producing, may start producing earlier or later than anticipated in our estimates of their future production rates. Projections of future reserves for the Cendor Field are shown in the following table utilizing the projected production start date during the third quarter of 2006.

Projection of Future Reserves Cendor Field, Offshore Malaysia

As of June 30, 2005

YEAR BO/YR BOPD BO/YR BOPD BO/YR BOPD2006 1,577,400 4,322 0 0 1,577,400 4,322 2007 4,163,932 11,408 0 0 4,163,932 11,408 2008 3,779,003 10,353 0 0 3,779,003 10,353 2009 3,284,524 8,999 0 0 3,284,524 8,999 2010 2,921,674 8,005 0 0 2,921,674 8,005 2011 2,598,078 7,118 0 0 2,598,078 7,118 2012 2,405,018 6,589 0 0 2,405,018 6,589 2013 2,329,509 6,382 0 0 2,329,509 6,382 2014 1,554,107 4,258 542,451 1,486 2,096,558 5,744 2015 0 0 1,886,902 5,170 1,886,902 5,170 2016 0 0 1,698,212 4,653 1,698,212 4,653 2017 0 0 1,528,391 4,187 1,528,391 4,187

TOTAL 24,613,245 5,655,957 30,269,201

PROVED UNDEVELOPED PROBABLE UNDEVELOPED PROVED + PROBABLE

A similar table depicting future annual production volumes by reserve category for the Ohanet Field has not been included within this CPR as a result of Petrofac’s decision to include only future revenue streams for this field in their UKLA filing in lieu of net hydrocarbon volumes.

Hydrocarbon Prices

The future hydrocarbon price parameters used in this report reflect Petrofac's estimates of future crude pricing. Petrofac's estimate of future crude pricing utilized Brent Crude as a benchmark and appropriate adjustments for gravity, quality, local conditions and transportation fees to determine effective netback pricing for each property based upon historical differentials between Brent Crude and the realized regional pricing. These estimates of future prices are summarized as follows:

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RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

BRENT CRUDE OHANET NETBACK CENDOR NETBACKYEAR PRICING, $/BBL PRICING, $/BBL OF NGL's PRICING $/BBL OF OIL2005 40.00$ 43.64$ 41.00$2006 37.00$ 40.64$ 37.85$2007 33.00$ 36.64$ 33.65$2008 30.00$ 33.64$ 30.50$

2009 AND AFTER 30.00$ 33.64$ 30.50$

BRENT CRUDE OHANET NETBACK CENDOR NETBACKYEAR PRICING, $/BBL PRICING, $/BBL OF NGL's PRICING $/BBL OF OIL2005 35.00$ 38.64$ 35.75$2006 32.00$ 35.64$ 32.60$2007 28.00$ 31.64$ 28.40$2008 25.00$ 28.64$ 25.25$

2009 AND AFTER 25.00$ 28.64$ 25.25$

BRENT CRUDE OHANET NETBACK CENDOR NETBACKYEAR PRICING, $/BBL PRICING, $/BBL OF NGL's PRICING $/BBL OF OIL2005 45.00$ 48.64$ 46.25$2006 42.00$ 45.64$ 43.10$2007 38.00$ 41.64$ 38.90$2008 35.00$ 38.64$ 35.75$

2009 AND AFTER 35.00$ 38.64$ 35.75$

LOWSIDE CASE ASSUMPTIONS

HIGHSIDE CASE ASSUMPTIONS

AS OF JUNE 30, 2005

ESTIMATE OF FUTURE PRODUCT PRICINGOHANET FIELDS AND CENDOR FIELD

BASE CASE ASSUMPTIONS

Costs

Operating costs utilized within this report were based upon the projected values supplied by Petrofac include only those costs directly applicable to the operation of the fields. Petrofac has prepared their estimates of future operating costs utilizing recent actual operating statements and associated data. When applicable, the operating costs include a portion of general and administrative costs allocated directly to the fields under terms of operating agreements. Our review of the operating statements indicates that the formatting and documentation of these statements are consistent with industry standards. Except for the contractual 1st oil payment to Amerada Hess for the Cendor Field, no deductions were made for indirect costs such as loan repayments, interest expenses, and exploration and development prepayments that are not charged directly to the properties.

Development Costs

Development costs were furnished to us by Petrofac and are based on authorizations for expenditure for the proposed work or actual costs for similar projects. For Ohanet, we have assumed no abandonment costs, as these are not part of the scope of work included in the financial envelope. Such costs, if any are required and expended during the contract, will be provisioned either as cost-recoverable operating costs, or as a legislative requirement thus expanding the financial envelope. However, it should be noted that abandonment provisions have been made as part of the economic requirements of the Cendor PSC and are included in the cost basis thereof. Ryder Scott has not performed a detailed study of the abandonment costs nor the salvage value and makes no warranty for this assumption. As you have requested, current costs were utilized without escalation until depletion of the properties.

Sensitivity Cases

Ryder Scott has examined the sensitivity of the following parameters which could impact the evaluation of these reserves for the Cendor Field:

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RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Minimum Oil Pricing Case – Base case pricing scenario less $5.00 per barrel Maximum Oil Pricing Case – Base case pricing scenario plus $5.00 per barrel

Petrofac has assumed unescalated costs for the base case scenario and for each of these sensitivity cases. The results of these sensitivity cases are as follows:

Cendor Field, Offshore Malaysia Brent Proved Only (1P) Proved + Probable (2P)

Crude Discount Rate Discount Rate $ per Bbl Case 8.0% 10.0% 12.0% 8.0% 10.0% 12.0%

NPV, $000 NPV, $000 NPV, $000 NPV, $000 NPV, $000 NPV, $000

$ 35.00 Lowside $ 34,506 $ 32,310 $ 30,313 $ 36,251 $ 33,802 $ 31,593 $ 40.00 Base $ 45,061 $ 42,236 $ 39,674 $ 47,653 $ 44,411 $ 41,505 $ 45.00 Highside $ 55,285 $ 51,763 $ 48,581 $ 59,473 $ 55,249 $ 51,495

General

This evaluation has been supervised by the undersigned, Mr. Douglas L. McBride, Senior Vice President-International of Ryder Scott Company, LP. Mr. McBride is a Registered Professional Engineer in the State of Texas, a member of the Society of Petroleum Engineers, and a member of the Society of Professional Well Log Analysts. Mr. McBride has 30 years of upstream oil and gas industry experience.

Ryder Scott Company is a professional limited liability partnership incorporated in the State of Texas with head offices located at 1100 Louisiana, Suite 3800, Houston, Texas 77002, USA. With a staff of 130 employees, Ryder Scott also maintains offices in Denver and Calgary as well as affiliated offices in London, Moscow and Beijing. The firm has provided petroleum consulting services throughout the world since 1937. The firm's professional engineers, geologists, geophysicists, petrophysicists, and economists are engaged in the independent appraisal of oil and gas properties, evaluation of hydrocarbon and other mineral prospects, basin evaluations and field studies. Ryder Scott Company generates all revenues based solely upon the professional fees received for services rendered in the evaluation of oil and gas properties. Neither we nor any of our employees have any interest in the subject properties and neither the employment to make this study nor the compensation is contingent on our estimates of reserves and future income for the subject properties.

The estimates of reserves presented herein are based upon a detailed study of the Algerian and Malaysian assets in which Petrofac owns an interest. The existence of the two fields included within this evaluation is substantiated by the details of drilling results, actual historical production data, analysis or other evidence and takes account of all relevant information. A field examination of the properties was not considered necessary for the purposes of this report. No consideration was given in this report to potential environmental liabilities which may exist nor were any costs included for potential liability to restore and clean up damages, if any, caused by past operating practices. Petrofac has informed us that they have furnished us all of the accounts, records, geological and engineering data, and reports and other data required for this investigation. The ownership interests, prices, and other factual data furnished by Petrofac were accepted without independent verification. The economic results indicated within this report have been prepared utilizing the contractual terms of the RSC and PSC as supplied by Petrofac. The contractual terms of these agreements appear to be within industry standards. The estimates presented in this report are based on data available through June, 2005.

Petrofac Limited September 21, 2005 Page 12

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

Petrofac has assured us of their intent and ability to proceed with the development activities included in this report, and that they are not aware of any legal, regulatory or political obstacles that would significantly alter their plans.

Very truly yours, RYDER SCOTT COMPANY, L.P.

Douglas L. McBride, P.E. Senior Vice President-International

Petrofac Limited September 21, 2005 Page 13

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

ATTACHMENT NO. 1A

NIGER

MOROCCO

MAURITANIAALGERIA

Atlantic Ocean

ALGIERS

HASSI R'MEL

HASSI MESSAOUD

LIBYA

TUNISIA

Mediterranean SeaSPAIN

MALI

10°W

10°W

5°W

5°W

0°E

0°E

5°E

5°E

10°E

10°E

20°N

20°N

25°N

25°N

30°N

30°N

35°N

35°N

0 100 200Km

Source: Wood Mackenzie

Petrofac Limited September 21, 2005 Page 14

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

ATTACHMENT NO. 1B

Open

BP

BP

Rosneft

BP

BHP Billiton

BP

Sonatrach

BHPBilliton

SinopecMedex

Sonatrach

Sonatrach

Eni

BP

Sonatrach

Woodside

Eni095

NC169 A

Ouan Essar

240

Ohanet S

234a

233

NC210

242

244b

223aTinrhert

Ain Antar

Timissit

Timedratine N

241

245 South

496

245c

244aTinrhert

Bourarhet Sud 241

239Tinrhert

240a

Tiguentourine

234

NC175A

HASSIOUANABECHEU

IN AMENAS

ACHEB OUEST

OUAN TAREDERT

ALRAR

MEREKSEN

ZARZAITINE NEIN AMENAS N

EDJELEH

WAFA

OHANET

TIDERER

TAMADANET

TIMEDRATINE OUEST

HASSI FARIDA

STAH

GUELTA

IN ADAOUIASKARENE

EDEYEN

ACHEB

ZARZAITINEEOR Project

GARA

DIMETA OUEST

TIGUENTOURINE

LA RECULEE

oil

oil

OH1 30" Ohanet-Haoud El Hamra

oil pipeline

oil

NH 2 30" Ohanet-Haoud El Hamra

condensate pipeline

oil

gas, LPG, condensate(under construction)

oil

oil

oil

oil

Alrar-Hassi R'Mel pipelines:

GR1/GR2 42"/48" gas pipeline

LR1 30" LPG pipeline

oil

Timedratine

Alrar S

N

HIM

Tihalatine C

Ifefane

OuanTaradjeli

Dimeta Nord

In Akamil

OuanSedoukhane

Tahala Nord

AreneTihalatine

Tilmas

Djoua

Guelta Nord

Ouarene

Taouratine402

Tan Baloul

TenereEl Beugra

S

Trig

Ihansatene W

T-North

CouloirNord

OuanSedoukhaneEst

Gara Brune

Irlalene

InAkamilNorth

TMLS

Trig N.

Timissit

Gara S

Alrar C

3A1

W-1

1

N-1

Ouarene S-1

Fersig-1

Garet Tisselit-1

Erg Bourarhet6

G1-26

1

2

1

GZ-101

Tihigaline D-1

1

W-2

N-3

OES-1

Tin Oufar-1

2

1

GourTiedou-1

5

Tihigaline C-1

3

D2-52

HOAS-1

1

E3

A6

Erg Timellouline-101

Gara S-2

2

IFT-1

2

N-1

2

A2

A4

Alrar W-1

125

Ouarene-1

Trig-E-1

E4

Centre-1

In Amenas N-4

A7

1

Taouratine-4

THLS-1

2

BOU-1

D1-52

109

1

In Amenas W-1

1

1

1

N-102

InAmenas E-1

2

Tihalatine

Tinrhert E-1

Tihigaline-2

W-1

2

Tamadanet-1

1

DjebelEl Louh-1

TGE-1

2

Ihansatene-1

Gour Ahmar-1

1

A1-52OEL-1

In Louiam-1

B1,101,102

1

Taouratine-3

1

N-3

NTR-1

E-2

W-1

1

A1

3

3

HFO-1

1

E-101

N-101

2

2

4

D3-52

Alrar North-1

N-1

1

IH-1

4

A-1

2

1

2

TAKS-1

A10

B-1

3

1

El Ksar

A5Stah NW-1

Temaroualine-101

2

Tesselit-101

1

Gour Laoud-1

OES-2

7

3

Oued Ahara-101

Djebel Mzi-1

A2

2

1

Tihigaline C-2

Tesselit-1,101

2

Alrar-101

A-101

2

W-2

E-1

Alrar-1

Taouratine-1

W-1

S-1

T h b t 1

HOS-1

2

7

Ohanet S-1

2

N-2

2

I1-1

1

S-1

2

11

WHA-1

A-102

Ouine Eslak-101

1

Zaouatene-1

1

TGN-1

Dimeta NW-1

TAK-1

1

3

S-1

IhansateneSW-1

A8

1

1

Gara NE-1

4

1

103

AC-1

1

S-2

Remal-1

TMN-1

Tihigaline B-1

1

1

1

A3 A9

4

Ohanet N-1

HFN-1

AL

GE

RIA

LIB

YA

8°E

8°E

8°30'E

8°30'E

9°E

9°E

9°30'E

9°30'E

10°E

10°E

27°3

0'N

28°N

28°N

28°3

0'N

28°3

0'N

29°N

29°N

0 20 4010Km

Source: Wood Mackenzie

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RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

ATTACHMENT NO. 2A

DumaiRef inery & Termi nal

B

SegamatOperationsCentre

A

1

Ku ra u

Pro c es sPla nt

D

A

B

F

B

PortKelang

D

A

A

KL Power Station

C

Riau Andal anpulp and paper mill

Hang Tuah

A

C

A

Su ng e i Pa k nin g

Re fin e ry & T e rm in a l

ConnaughtBridge

E

B

MALAYSIA

South China Sea

Natuna Sea

THAILAND

SINGAPORE

KUALA LUMPUR

INDONESIA

Malaysia-Thailand JDA

Malaysia-Vietnam CAA

100°E

100°E

102°E

102°E

104°E

104°E

106°E

106°E

2°N

2°N

4°N

4°N

6°N

6°N

8°N

8°N

0 100 20050Km

Source: Wood Mackenzie

Petrofac Limited September 21, 2005 Page 16

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

ATTACHMENT NO. 2B

AB

Talism

Petronas Carigali

Petrofac

PetronasCarigali

Petronas Carigali

Open

Talisman

PetronasCarigali

PetronaCarigali

PetronasCarigali

PM314

PM304

PM6

PM306

PM307

PM12

PM30

PM12

PM6

SEMANGKOK

RESAK

IRONGBARAT

Kerteh Oil Terminal

Paka Power Station

32" gas pipeline to Kerteh

TerengganuCrude Oil Terminal(TCOT)

24" oil pipeline

toTCOT

KertehGas Plant

8"Je

rneh

-TC

OT

liqui

dspi

pelin

e

30" gas pipeline

to Kerteh

oil

CPP

28"

Res

ak-K

erte

hga

spi

pelin

e

A, CPP

28"

Jern

eh-K

erte

hga

spi

pelin

e

Jambu-1

5

Jambu-2

Meranti 6F-11.2 1-7

South Angsi-1/ST1/ST2

Desaru-1 Jambu-3

1

1

Oren-1

6

Jambu-4

6

1-1B

2

2

Laba-1

1

1

Liang-1

1

Mutiara

2

2

Telok Kemang-1

3

7

4

1

6F-18.4

Ipoh-14

1-21-5

5

2

1

6

5

B

1

11-6

Liang-2

2

Cengal-1

3,4

B-4

3

2

1

2

Jelutong 5G-23-1

6

1

Ridan

1

41

7-1

5

T

Meranti 6F-11.12

Tunggal-1

3

1-41-3

2

Liang-3

1

3

Tabu-2

Liang-4

Sou

Beranang NW

SemangkokTimur

Chenang

Tembikai

Ketumbar

Cendor

Telok

Serok

Laba Barat

Telo

103°15'E

103°15'E

103°30'E

103°30'E

103°45'E

103°45'E

104°E

104°E

104°15'E

104°15'E

104°30'E

104°30'E

4°30

'N

4°30

'N

4°45

'N

4°45

'N

5°N

5°N

5°15

'N

5°15

'N

5°30

'N

5°30

'N

5°45

'N

5°45

'N

0 20 4010Km

Source: Wood Mackenzie

Petrofac Limited September 21, 2005 Page 17

RYDER SCOTT COMPANY PETROLEUM CONSULTANTS

ATTACHMENT NO. 3

CENDOR TOP H-15 DEPTH MAP (M TVDSS)

110

PART VIII

Details of the Offer

1. Summary of the OfferThe Offer comprises an offer of up to 152,977,031 Ordinary Shares by the Selling Shareholders. Ofthis total, certain Selling Shareholders, being employees and former employees of Petrofac belowBoard and divisional chief executive level and holding 24,623,752 Ordinary Shares eligible for salehave not yet confirmed the number of Ordinary Shares they will sell in the Offer. The Over-allotmentShareholders have granted the Stabilising Manager, on behalf of the Underwriters, theOver-allotment Option, exercisable for a period of up to 30 days after the date of publication of theOffer Price which will require the Over-allotment Shareholders to make available up to an additional15,297,702 Ordinary Shares at the Offer Price to cover over-allotments (if any) made in connectionwith the Offer and to cover short positions resulting from stabilisation transactions. The Offer isbeing made by way of an offer to certain institutional investors in the United Kingdom and to certainqualified institutional investors in the rest of the world. The Offer will be made outside of the UnitedStates in reliance on Regulation S under the US Securities Act of 1933.

As part of the Offer, up to 5,395,041 Ordinary Shares (equivalent to 3.5 per cent. of the OrdinaryShares subject to the Offer, assuming that the Over-allotment Option is not exercised) will beoffered at the Offer Price, with no discount applying, subject to local securities laws, on a basiswhich is preferential only as to allocation (the Priority Offer) to certain individuals specified by theCompany, comprising not more than 35 persons who have personal or business relationships withcertain Directors and Senior Managers (Priority Applicants). Details of the Priority Offer will benotified separately to the Priority Applicants.

Priority Applicants may apply for Ordinary Shares using the instruction form which will be delivered tothem by the Company. Valid applications made under the Priority Offer will be satisfied in full.

The individual Directors purchasing Ordinary Shares in the Offer will also have their applicationssatisfied in full.

Under the Offer, all Ordinary Shares will be sold at the Offer Price, which will be determined byCredit Suisse First Boston and Lehman Brothers following consultation with the Company and isexpected to be announced on 4 October 2005. It is currently expected that the Offer Price will bewithin the Offer Price Range, although it may be set above or below this range. A number of factorswill be considered in determining the Offer Price and the basis of allocation, including the objectiveof establishing an orderly aftermarket in the Ordinary Shares.

Admission is expected to take place and unconditional dealings in the Ordinary Shares are expectedto commence on the London Stock Exchange on 7 October 2005. Prior to that time, it is expectedthat dealings in the Ordinary Shares will commence on a conditional basis (as dealings in unlistedsecurities) on the London Stock Exchange on 4 October 2005. These dates may be changed.

Dealings on the London Stock Exchange before Admission will only be settled if Admission takesplace and will be for settlement three business days after Admission. All dealings before thecommencement of unconditional dealings will be of no effect if Admission does not take place andsuch dealings will be at the sole risk of the parties concerned.

Allocations of Ordinary Shares under the Offer will be determined by Credit Suisse First Bostonand Lehman Brothers, following consultation with the Company, after indications of interest fromprospective investors have been received.

2. Over-allotment and stabilisationIn connection with the Offer, Credit Suisse First Boston as stabilising manager (the “StabilisingManager”), may over-allot or effect other transactions which stabilise or maintain the market priceof the Ordinary Shares or any options, warrants or rights with respect to, or interests in, theOrdinary Shares, in each case at a higher level than might otherwise prevail in the open market.Such transactions may commence on or after the date of publication of the Offer Price and will end

111

no later than 30 days thereafter. Such transactions may be effected on the London Stock Exchange,the over-the-counter market or otherwise. There is no assurance that such transactions will beundertaken and, if commenced, they may be discontinued at any time. Save as required by law, theStabilising Manager does not intend to disclose the extent of any over-allotments and/orstabilisation transactions under the Offer.

In connection with the Offer, the Company has agreed with the Stabilising Manager that OrdinaryShares may be over-allotted for stabilisation purposes. The Over-allotment Shareholders havegranted to the Stabilising Manager the Over-allotment Option, pursuant to which the StabilisingManager may purchase, or procure purchasers for, up to 10 per cent. of the number of Ordinaryshares to be sold under the Offer (assuming no exercise of the Over-allotment Option) for thepurposes of allowing the Stabilising Manager to cover short positions resulting from suchover-allotments. A further 5 per cent. of such Ordinary Shares may be over-allotted but theresulting position of the Stabilising Manager will not be covered by Ordinary Shares from theOver-allotment Shareholders. The Over-allotment Option will be exercisable in whole or in part atany time during the period commencing on the date of publication of the Offer Price and ending 30days thereafter.

3. Underwriting AgreementOn 21 September 2005, the Company, the Directors and certain other Senior Managers and theSelling Shareholders entered into the Underwriting Agreement with the Underwriters and CreditSuisse First Boston as Sponsor.

The Offer is subject to the execution by the Company and the Underwriters of a pricing statementrecording the Offer Price and the satisfaction of certain additional conditions set out in theUnderwriting Agreement, including Admission becoming effective, which is expected to take placeon 7 October 2005.

The Underwriting Agreement is described in paragraph 13 of Part IX – “Additional Information”.

The Underwriting Agreement provides for the Underwriters to be paid commission in respect ofOrdinary Shares sold pursuant to the Offer. Any commissions received by any of the Underwritersmay be retained, and any Ordinary Shares acquired by them may be retained or dealt by them, fortheir own benefit. Investors should be aware that, while the ability of any of the Underwriters toretain Ordinary Shares is not unusual in underwriting agreements, doing so to any significantdegree could, because it limits the number of Ordinary Shares available in the market, affectvolatility in the market price of the Ordinary Shares.

4. Dealing arrangementsThe Offer Price and the final number of Ordinary Shares comprised in the Offer are expected to beannounced on 4 October 2005. It is expected that dealings in the Ordinary Shares (as unlistedsecurities) will commence on a conditional basis on the London Stock Exchange at 8.00 a.m. on4 October 2005. It is expected that Ordinary Shares allocated to investors in the Offer will bedelivered in uncertificated form and settlement will take place through CREST on Admission.Shareholders may elect to receive Ordinary Shares in certificated form. Definitive certificates, whereapplicable, will be despatched by post at the risk of the investor. Investors in the Offer will pay theOffer Price in respect of the Ordinary Shares to be transferred to them in such a manner as shall bedirected to them by the Underwriters.

Admission is expected to take place and unconditional dealings in the Ordinary Shares are expectedto commence on the London Stock Exchange at 8.00 a.m. on 7 October 2005. All dealings betweenthe commencement of conditional dealings and the commencement of unconditional dealings willbe in unlisted securities and on a “when issued” basis. If the Offer does not become unconditional inall respects, all such dealings will be of no effect and any such dealings will be at the sole risk of theparties concerned.

When admitted to trading, the Ordinary Shares will be registered with ISIN GB00B0H2K534 andSEDOL B0H2K53. The Ordinary Shares will be held in registered form and the registrars of theCompany are Capita IRG (Offshore) Limited.

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5. CRESTCREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by acertificate and transferred otherwise than by a written instrument. The New Articles permit theholding of Ordinary Shares under the CREST system. The Directors will apply for the OrdinaryShares to be admitted to CREST with effect from Admission. Accordingly, settlement oftransactions in Ordinary Shares held in uncertificated form following Admission will take placewithin the CREST system.CREST is a voluntary system and holders of Ordinary Shares who wish to receive and retain sharecertificates will be able to do so. Investors applying for Ordinary Shares in the Offer may, however,elect to receive Ordinary Shares in uncertificated form if that investor is a system-member (asdefined in the CREST Regulations) in relation to CREST.

6. Lock-in arrangementsIn addition to the commitment of the Company not to issue or sell Ordinary Shares or relatedsecurities for a period of 180 days after Admission (as summarised in paragraph 13(o) of Part IX –“Additional Information” below), certain of the Selling Shareholders (namely Legis Trust Limited,as trustee of the Lamia Trust, Legis Trust Limited, as trustee of the Nola Trust, Legis Trust Limited,as trustee of the Alima Trust) together with Keith Roberts, Robin Pinchbeck and Louis Owen,(together the ‘Contractual Lock-in Shareholders’) have agreed, in letters of undertaking given infavour of the Company and the Joint Lead Managers, not to offer, sell, contract to sell, pledge,charge, agree to lend, grant options over or otherwise dispose of, directly or indirectly: (i) anyOrdinary Shares or (ii) securities convertible or exchangeable into or exercisable for or representingthe right to receive any Ordinary Shares in the Company; or (iii) warrants or other rights topurchase shares representing the right to receive any such securities; or (iv) any security or financialproduct whose value is determined directly or indirectly solely by reference to the price of theOrdinary Shares of the Company, including equity swaps and forward sales and options or globaldepositary receipts or similar securities representing the right to receive any such securities, whetherin the domestic or international markets, nor to mandate any third party to do so, or announce theintention to do so, (a “Disposal”) without the prior written consent of the Joint Lead Managers fora period ending 365 days after Admission (the “Initial Lock-in Period).The Contractual Lock-in Shareholders have further agreed not to undertake any Disposal withoutthe prior written consent of the Joint Lead Managers for a further period of two years after the endof the Initial Lock-in Period (the “Additional Lock-in Period”); provided that the ContractualLock-in Shareholders may during the Additional Lock-in Period undertake a Disposal or Disposalsof up to 331⁄3 per cent. of their holding of Ordinary Shares on Admission (or, if applicable, suchholding after any sale of Ordinary Shares pursuant to the Over-allotment Option) in aggregate ineach one year period during the Additional Lock-in Period and on a cumulative basis over eachsuccessive year. The above undertakings are subject to certain customary exceptions.The following schedule sets out the provisions governing transfers by each Contractual Lock-inShareholder during the Initial Lock-in Period and the Additional Lock-in Period:Period after Admission Ordinary Shares permitted to be sold or transferred

0 to 12 months (Period 1) No Disposals permitted (save as required under theOver-allotment Option)

12 to 24 months (Period 2) Such number of Ordinary Shares as would not exceed 331⁄3 percent. of the Ordinary Shares held by such Shareholderimmediately following any sale of Ordinary Shares atAdmission (or, if applicable, following any sale of OrdinaryShares pursuant to the Over-allotment Option) (the“Balance”)

24 to 36 months (Period 3) Such number of Ordinary Shares as would not exceed theaggregate of (i) 331⁄3 per cent. of the Balance held by suchShareholder and (ii) any Ordinary Shares the sale or transfer ofwhich was permitted during Period 2, but which were not soldor transferred

36 months onwards Lock-in provisions cease to apply

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The New Articles also contain provisions governing sales or other transfers of Ordinary Sharesafter Admission by current and former employees and Directors (and certain other personsassociated with them).

In summary, Ordinary Shares held immediately before Admission by persons subject to the lock-inarrangements in the New Articles would be able to be sold or transferred in accordance with thefollowing schedule:

Period on or after Admission

Additional proportion of OrdinaryShares permitted to be sold or

transferred

Cumulative proportion ofOrdinary Shares permitted

to be sold or transferred

Admission 40% 40%0-12 months 0% No sales/transfers

permitted12 to 24 months 20% 60%24 to 36 months 20% 80%36 months onward 20% 100%

The Directors may not refuse to register any transfer of any Ordinary Share which has beentransferred in breach of the lock-in provisions in the New Articles. However, the Company willhave recourse to other rights and remedies available to it at law in respect of any breach of thelock-in provisions or other provisions of the New Articles.

A more detailed summary of the relevant New Articles provisions, including, for example,circumstances in which the lock-in provisions may cease to apply, is included in paragraph 4 of PartIX – “Additional Information”. Reference should be made to such summary and to the provisionsof the New Articles themselves, which will be available for inspection as set out in paragraph 21 ofPart IX – “Additional Information”.

7. Provisions governing salesThe distribution of this document and the offer of Ordinary Shares in certain jurisdictions may berestricted by law and therefore persons into whose possession this document comes should informthemselves about and observe any such restrictions, including those in the paragraphs that follow.Any failure to comply with these restrictions may constitute a violation of the securities laws of anysuch jurisdiction.

United Kingdom

Each Underwriter has represented and agreed that (a) it has only communicated or caused to becommunicated and will only communicate or cause to be communicated an invitation orinducement to engage in investment activity (within the meaning of section 21 FSMA) received by itin connection with the issue or sale of the Ordinary Shares in circumstances in which section 21(1)FSMA does not apply; and (b) it has complied and will comply with all applicable provisions of theFSMA with respect to anything done by it in relation to the Ordinary Shares in, from or otherwiseinvolving the United Kingdom.

United States

The Ordinary Shares have not been and will not be registered under the Securities Act and, subjectto certain exceptions, may not be offered or sold within the United States.

The Ordinary Shares are being offered and sold outside of the United States in reliance onRegulation S.

In addition, until 40 days after the commencement of the offering of the Ordinary Shares an offer orsale of Ordinary Shares within the United States by any underwriter (whether or not participatingin the offering) may violate the registration requirements of the Securities Act.

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European Economic Area

No Ordinary Shares have been offered or sold, or will be offered or sold, to the public in anyMember State of the European Economic Area which has implemented Directive 2003/71/EC (the“Prospectus Directive”) prior to the publication of a prospectus in relation to the Ordinary Shareswhich has been approved by the relevant Member State or, where appropriate, approved by thecompetent authority in another Member State and notified to the competent authority in therelevant Member State, all in accordance with the Prospectus Directive except: (a) to legal entitieswhich are authorised or regulated to operate in the financial markets or, if not so authorised orregulated, whose corporate purpose is solely to invest in securities; (b) to any legal entity that hastwo or more of (1) an average of at least 250 employees during the last financial year, (2) a totalbalance sheet of more than (43,000,000 and (3) an annual net turnover of more than (50,000,000as shown in its last annual or consolidated accounts; or (c) in any other circumstances which do notrequire the publication by the Company of a prospectus pursuant to Article 3 of the ProspectusDirective.

Jersey

The registrar of companies in Jersey has given, and has not withdrawn, consent under Article 5 ofthe Companies (General Provisions) (Jersey) Order 2002 to the issue of this Prospectus. As such, thepurchase of Ordinary Shares by residents in Jersey in respect of the Offer is not restricted.Subsequent to Admission, Jersey residents may trade in Ordinary Shares without restriction.

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PART IX

Additional Information

1. Responsibility1.1 The Directors, whose names and functions are set out in Part IV – “Directors and Senior

Managers”, and the Company, whose registered office is set out in paragraph 2 below, acceptresponsibility for the information contained in this document. To the best of the knowledgeand belief of the Directors and the Company (who have taken all reasonable care to ensurethat such is the case) the information contained in this document is in accordance with thefacts and does not omit anything likely to affect the import of such information.

1.2 Ernst & Young LLP accepts responsibility for its report contained in Part X – “FinancialInformation on Petrofac”. To the best of the knowledge and belief of Ernst & Young LLP(who has taken all reasonable care to ensure that such is the case) the information containedin this report is in accordance with the facts and does not omit anything likely to affect theimport of such information.

1.3 Ryder Scott accepts responsibility for its report contained in Part VII – “Competent Person’sReport by Ryder Scott”. To the best of the knowledge and belief of Ryder Scott (who hastaken all reasonable care to ensure that such is the case) the information contained in thisreport is in accordance with the facts and does not omit anything likely to affect the import ofsuch information.

2. The Company2.1 The Company, whose registered office is at Whiteley Chambers, Don Street, St Helier, Jersey

JE4 9WG (tel: �44 1534 504 000), was incorporated and registered in Jersey on 10 January2002 as a limited liability company with registered number 81792 under the Companies(Jersey) Law 1991 (the “Law”).

2.2 Petrofac’s principal places of business are its offices in Sharjah, Aberdeen, Mumbai andWoking. The addresses of these offices are:Al Soor StreetPO Box 23467SharjahUnited ArabEmirates(tel: �971 65740999)

Bridge View1 North EsplanadeWestAberdeenAB11 5QFUnited Kingdom(tel: �44 1224247000)

B WingDelphi BuildingHiranandani BusinessParkPowaiMumbaiRepublic of India(tel: �91 226951821)

Chester House76-86 Chertsey RoadWokingSurreyGU21 5BJUnited Kingdom(tel: �44 1483738500)

2.3 The legal and commercial name of the Company is Petrofac Limited. 2.4 The Ordinary Shares have been created under the Law.

3. Share capital3.1 As at 30 June 2005, being the date of the most recent balance sheet of the Company included

in Part X – “Financial Information on Petrofac”, the authorised and issued and fully paidshare capital of the Company was as follows:

Authorised IssuedNumber Nominal value (at US$1

per share)Number Nominal value (at US$1

per share)

ordinary shares15,000,000 US$15,000,000 7,184,316 US$7,184,316

A ordinary shares3,750,000 US$3,750,000 1,397,557 US$1,397,557

Deferred share1 US$1 1 1

B Preference Shares7,645,801 US$7,645,801 — —

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3.2 Authorised capital

The Company was incorporated on 10 January 2002 with an authorised share capital of10,000 ordinary shares of US$1.00 each.

On 13 January 2002, by a special resolution, the authorised share capital of the Companywas increased to US$26,395,802 divided into 7,645,801 ‘B’ Preference shares of US$1.00each, 3,750,000 ‘A’ ordinary shares of US$1.00 each, one ‘B’ ordinary share of US$1.00 and15,000,000 ordinary shares of US$1.00 each. The authorised share capital of the Companyremained as such up to the date of this document.

Pursuant to a written resolution of the members of the Company dated 15 September 2005conditional upon Admission the authorised share capital of the Company is to be reduced bythe cancellation of the “B” preference shares all of which are unissued and the consolidationof the authorised “A” ordinary shares into the same class as the ordinary shares. Conditionalon Admission, the authorised ordinary shares are to be divided by a factor of 40. Conditionalon Admission, the authorised share capital of the Company will therefore be US$18,750,000divided into 750,000,000 ordinary shares of US$0.025 each. The restructuring of theCompany’s authorised share capital conditional upon Admission was ratified and approvedby the Board on 13 September 2005.

3.3 Issued capital

On incorporation, two ordinary shares of US$1.00 each were issued to Ogier NomineesLimited and Reigo Nominees Limited for US$1.00 each. On 11 January 2002, these twoshares were transferred to Michael Stacey and Petrofac Tyler Inc respectively for US$1.00each. On 24 April 2002, one ‘B’ ordinary share of the Company was issued to 3i for US$1.00.

On 13 June 2002, a total of 9,999,998 ordinary shares of US$1.00 each and 7,645,801 ‘B’preference shares of US$1.00 each were issued to Guernsey International Trustees Limited,J Michael Stacey, Petrofac Tyler Inc, Gary Roth, Double A Limited and Petrofac ESOPTrustees Limited for US$1.00 each. The new total issued capital of the Company wasUS$17,645,802 divided into 10,000,000 ordinary shares of US$1.00 each, 7,645,801 ‘B’preference shares of US$1.00 each and one ‘B’ ordinary share of US$1.00.

On 31 December 2002, 309,596 ‘B’ preference shares were redeemed at US$1.00 per share.

On 1 August 2003, the board of directors of the Company approved the purchase of 698,911ordinary shares by the Company from various shareholders for US$12.29 each. The newtotal issued capital of the Company was US$16,946,891 divided into 9,301,089 ordinaryshares of US$1.00 each, one ‘B’ ordinary share of US$1.00 and 7,645,801 ‘B’ preferenceshares of US$1.00 each.

On 8 August 2003, the board of directors of the Company approved the purchase of 322,594ordinary shares by the Company for US$0.01 each and the redemption and cancellation of allof the remaining issued ‘B’ preference shares of the Company at US$1.00 each. The new totalissued capital of the Company was US$8,978,496 divided into 8,978,495 ordinary shares ofUS$1.00 each and one ‘B’ ordinary share of US$1.00.

On the same date, there was a bonus issue of 33,250 ordinary shares of US$1.00 each of theCompany to Petrofac ESOP Trustees Limited for US$1.00 each. The new total issued capitalof the Company was US$9,011,746 divided into 9,011,745 ordinary shares of US$1.00 eachand one ‘B’ ordinary share of US$1.00.

On 19 November 2003, the board of directors of the Company allotted 54,656 ordinaryshares of US$1.00 each of the Company to Petrofac ESOP Trustees Limited for US$10.69each. The new total issued capital of the Company was US$9,066,402 divided into 9,066,401ordinary shares of US$1.00 each and one ‘B’ ordinary share of US$1.00. This remained theposition as at 31 December 2003.

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On 5 June 2004, the board of directors of the Company issued 115,000 ordinary shares of theCompany for US$13.14 each further to option agreements entered into following theacquisition of RGIT Montrose Holdings Limited. The new total issued capital of theCompany was US$9,181,402 divided into 9,181,401 ordinary shares of US$1.00 each andone ‘B’ ordinary share of US$1.00.

On 19 October 2004, the board of directors of the Company approved the purchase of anaggregate of 2,246,688 ordinary shares of US$1.00 each by the Company for US$13.67.each. The new total issued capital of the Company was US$6,934,714 divided into 6,934,713ordinary shares of US$1.00 each and one ‘B’ ordinary share of US$1.00.

On 9 November 2004, the board of directors of the Company allotted 231,617 ordinaryshares of US$1.00 each of the Company to Petrofac ESOP Trustees Limited for US$13.14each. The new total issued capital of the Company was US$7,166,331 divided into 7,166,330ordinary shares of US$1.00 each and one ‘B’ ordinary share of US$1.00 and remained as suchat 20 June 2005.

On 21 June 2005, the board of directors of the Company allotted 17,986 ordinary shares ofUS$1.00 each of the Company to Petrofac ESOP Trustees Limited for US$16.93 each. Theboard also issued 1,397,557 ‘A’ ordinary shares of US$1.00 each to 3i for US$28.80 eachpaid by way of cancellation of variable rate unsecured loan notes due 2009. The ‘B’ ordinaryshare of US$1.00 was converted to a ‘B’ deferred share of US$1.00. The new total issuedcapital of the Company was US$8,581,874 divided into 7,184,316 ordinary shares ofUS$1.00 each, 1,397,557 A’ ordinary shares of US$1.00 each and one ‘B’ deferred share ofUS$1.00.

Pursuant to a resolution of the board of directors dated 13 September 2005 the Companyapproved the allotment of 29,500 ordinary shares of US$1.00 each for US$1.00 each toPetrofac ESOP Trustees Limited in connection with vested awards under the Petrofac LimitedLong Term Incentive Plan such allotment being approved and ratified by the members of theCompany by written resolution on 15 September 2005. As of 14 September 2005 the totalnew issued share capital was US$8,611,374 divided into 7,213,816 ordinary shares ofUS$1.00 each, 1,397,557 “A” ordinary shares of US$1.00 each and one “B” deferred shareof US$1.00.

Pursuant to the written resolution of the members of the Company dated 15 September 2005and conditional on Admission, the “B” deferred share is to be redeemed at its nominal valueof US$1.00, the issued “A” ordinary shares are to be re-classified as ordinary shares rankingequally in all respects and the ordinary shares are to then be divided by a factor of 40 such thatthe nominal value of such ordinary shares shall be reduced from US$1.00 to US$0.025. Themembers in the written resolution further approved 705,000 ordinary shares of US$0.025each to be allotted to Petrofac ESOP Trustees Limited conditional on Admission. Therefore,conditional on Admission, the total issued shares of the Company will be 345,159,920ordinary shares of US$0.025 each. The board of directors in a meeting on 13 September 2005ratified and approved such alterations to the Company’s issued share capital conditional onAdmission. Pursuant to the same resolution, the Company adopted, conditional uponAdmission, the New Articles and a new memorandum of association both of which form partof the documents on display in connection with the issue of this Prospectus.

Pursuant to the written resolution of the members of the Company dated 15 September 2005,the Company is authorised, pursuant to the New Articles and conditional on Admission, toallot up to 17,220,750 ordinary shares of US$0.025 each without the application of the rightsof pre-emption in the New Articles in any number of tranches, such authority to expire on31 August 2006 unless previously revoked, varied or extended by the Company in generalmeeting, save that the Company may, at any time prior to the expiry of such authority, makean offer or enter into an agreement which would or might require equity securities to beallotted after the expiry of such power and the Directors of the Company may allot equitysecurities in pursuance of such an offer or agreement as if such power had not expired.

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3.4 Save as disclosed in this paragraph 3, during the three years ended 31 December 2002, 2003and 2004 and up to the date of this document, not more than 10 per cent. of the share capitalof Petrofac has been paid for with assets other than cash.

3.5 Mandatory bids

On Admission, the City Code will apply to the Company. While the City Code applies to theCompany, if an acquisition of Ordinary Shares were to increase the aggregate holding of theacquirer and its concert parties to shares carrying 30 per cent. or more of the voting rights inthe Company, the acquirer and, depending on the circumstances, its concert parties, would berequired (except with the consent of the Panel) to make a cash offer for the outstandingOrdinary Shares at a price not less than the highest price paid for Ordinary Shares by theacquirer or its concert parties during the previous 12 months. This requirement would also betriggered by any acquisition of Ordinary Shares by a person holding (together with its concertparties) Ordinary Shares carrying between 30 and 50 per cent. of the voting rights in theCompany if the effect of such acquisition were to increase that person’s percentage of thevoting rights.

3.6 Squeeze-out rules

Under articles 117 and 118 of the Law, an offeror in respect of a takeover offer has the right toacquire shares which he has not or is not contracted to acquire where he has acquired or iscontracted to acquire 90 per cent. in value of the shares to which the offer relates. The offerormay not issue a notice requiring acquisition of minority shareholders unless he has acquiredor contracted to acquire such shares before the end of four months beginning with the date ofthe offer and no notice may be given after the end of the period of two months beginning withthe date on which he has acquired or contracted to acquire 90 per cent. or more of the sharesto which the offer relates. The squeeze out of minority shareholders can be completed at theend of 6 weeks from the date of the notice requiring the squeeze out.

By virtue of article 119 of the Law, minority shareholders in respect of a takeover offer, beforethe end of the period within which the offer can be accepted, can require the offeror topurchase the remaining shares provided the offeror has acquired or has contracted to acquirenot less than nine tenths in value of all the shares in the company.

An offeror shall within one month of the end of the period within which the offer can beaccepted give the remaining shareholders notice of their rights to require repurchase. Theperiod for the exercise of the remaining shareholders’ rights to be bought out cannot endprior to the period of three months after the end of the period during which the offer can beaccepted. These rights do not apply if the offeror has given notice under article 117.

3.7 Public takeover bids occurring in the last and current financial years

There have been no public takeover bids by third parties in respect of the share capital of theCompany in the 2004 financial year and between 1 January 2005 and 19 September 2005being the latest practicable date before the publication of this document.

3.8 Purchases of shares by Directors and Senior Managers

Ordinary Shares have been awarded to certain of the Directors and Senior Managers underthe terms of the Company’s share incentive plans in the year preceding the date of thisdocument at prices determined pursuant to the rules of such plans and (on the assumption theshare split conditional on Admission has not taken place) ranging from nil (for sharesallocated under the LTIP) to US$16.93 per share under the ESS (representing £9.20 per shareat the then prevailing exchange rate of US$1: £0.5436). A private transfer between a Directorand certain Senior Managers took place on 21 June 2005 at a price of US$25.87 per share,(representing £14.18 per share at the then prevailing exchange rate of US$1: £0.5483). Thiscompares to the Offer Price Range of 180 pence to 230 pence per Ordinary Share (whichwould be £72.00 to £92.00 per share on the assumption that no share split had taken place).Details of the interests of the Directors and Senior Managers in Ordinary Shares are set out inPart IV – “Directors and Senior Managers”.

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3.9 Dividends

Set out below are the amounts of the dividends per ordinary share and A ordinary share (onthe assumption that the 40:1 share split conditional upon Admission has not taken place) forthe 2002, 2003 and 2004 financial years and the 6 months ended 30 June 2005:

Dividends per ordinary share 6 monthsended

30 JuneYear ended

31 DecemberYear ended

31 DecemberYear ended

31 December2005 2004 2003 2002

US$

DividendsInterim — — — —Final 0.919 0.145 — —

Total dividend 0.919 0.145(1) — —

(1) Representing (on a comparable basis) a dividend per share of US$0.183 on the assumption that the numbers of ordinaryshares in issue was the same as the number of shares in issue at the time of the final dividend for the 6 months to 30 June 2005.

Dividends per A ordinary share 6 monthsended

30 JuneYear ended

31 DecemberYear ended

31 DecemberYear ended

31 December2005 2004 2003 2002

US$

DividendsInterim — — — —Final — — — —

Total dividend — — — —

On 19 August 2005, the board of the Company declared a dividend of US$1.21 per ordinaryshare and US$0.40 per A ordinary share.

4. Summary of the Memorandum and the New Articles(a) Memorandum of Association

The Company is a public company and a par value company under the relevant provisions ofthe Law. The liability of each member arising from his holding of a share in the Company islimited to the amount (if any) unpaid on it. The Company has unlimited corporate capacityequivalent to general commercial objects (as contained on page 1 of its memorandum ofassociation).

(b) The New Articles, which were conditionally adopted on 15 September 2005, are one of thedocuments referred to in paragraph 21 below as being available for inspection at theaddresses specified. The New Articles become unconditional upon Admission. The NewArticles contain provisions (amongst others) to the following effect:

(i) Rights attaching to shares

(A) Issue of sharesSubject to rights of pre-emption set out below, the Directors may approve theallotment, grant of options over or otherwise dispose of shares to such persons, atsuch times and on such terms as they think fit. The Company may by ordinaryresolution determine that a share be issued with certain rights and restrictions.

The rights of pre-emption are as follows. When proposing to allot shares to aperson, the Company must first offer them to every holder on at least the sameterms. The number of shares offered will be in proportion to the nominal sharevalue held by the relevant holder to the nominal value of the issued share capital.This procedure does not apply to an allotment of shares where such shares are orwill be wholly or partly paid otherwise than in cash nor does it apply to sharesallotted or issued under an employee share scheme.

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The Company may, by special resolution, (i.e. a majority of two-thirds of votingshareholders) give the Directors the power to avoid this procedure.

(B) Voting rightsOrdinary Shares carry one vote each.

(C) Restrictions on votingIn the case of joint holders, the person whose name appears first in the register ofmembers will hold the vote attached to the relevant share.

Unless otherwise decided by the Board, no vote is allowed in respect of a sharewhere a call or other amount due and payable in respect of the share is unpaid.

(D) DividendsThe Company may by ordinary resolution declare dividends in accordance withthe respective rights of the shareholders but no dividend can exceed the amountrecommended by the Directors.

Holders of Ordinary Shares are entitled to dividends pro rata according to thenumber of shares held. This is subject to any priority of payment of dividends asdetermined by the New Articles, the class rights of other classes of shares or byspecial resolution.

Interim dividends may be paid if it appears to the Directors that they are justifiedby the level of the Company’s distributable reserves.

Unless otherwise provided by rights attaching to the shares, all dividends will bedeclared and paid according to the amounts paid up on the shares on which thedividend is paid.

(E) Variation of rightsWhere the capital of the Company is divided into different classes of shares, rightsattached to any class of shares may (unless otherwise provided by the terms ofissue of the shares of that class) be varied or abrogated. This can be done with theconsent in writing of the holders of a majority in nominal value of the issuedshares of the relevant class or by an ordinary resolution passed at a separatemeeting of the holders of the issued shares of that class.

(F) Alteration of capitalThe Company may by special resolution:

– increase its share capital by creating new shares of such amount and in suchcurrency or currencies as it thinks expedient;

– consolidate and divide all or any of its shares (whether issued or not) intoshares of a larger amount than its existing shares;

– convert all or any of its fully paid shares into stock, and re-convert thatstock into fully paid shares of any denomination;

– sub-divide its shares, or any of them, into shares of smaller amount than isfixed by the memorandum save that in a sub-division the proportionbetween the amount paid and the amount, if any, unpaid on each reducedshare will be the same as it was in the case of the share from which thereduced share is divided;

– subject to the New Articles and the Law, convert any of its fully paid shareswhich have a nominal value expressed in one currency into fully paid sharesof a nominal value of another currency and denominate the nominal valueof its issued or unissued shares in units of the currency into which they havebeen converted; and

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– cancel shares which, at the date of the passing of the resolution to cancelthem, have not been taken or agreed to be taken by a person, and diminishthe amount of the Company’s share capital by the amount of the shares socancelled.

(G) Purchase of own shares and reduction of capitalSubject to the confirmation by the court as required by the Law and to the rightsattaching to existing shares, the Company may by special resolution reduce itsshare capital or any capital redemption reserve or any share premium account inany way.

The Company may also purchase, or agree to purchase in the future, any shares ofany class (including redeemable shares) in its own capital in any way provided it isauthorised to do so by special resolution.

(H) Winding-upIf the Company is wound up, the Company may, by a special resolution andsubject to any other sanction required by the Law or a court, divide the whole orany part of the assets of the Company among the holders in specie provided thatno holder will be compelled to accept any assets upon which there is a liability.

(ii) Transfer of shares

The instrument of transfer of a share must be in writing and may be in any usual form orin any other form which the Directors may approve and must be executed by or onbehalf of the transferor and, unless the shares are fully paid, by or on behalf of thetransferee.

Uncertificated shares may be transferred in accordance with the Companies(Uncertificated Securities) (Jersey) Order 1999.

(iii) Directors

(A) Number of DirectorsUnless the Company decides otherwise by ordinary resolution, there is nomaximum but the minimum is two.

(B) Appointment of DirectorsThe Company may appoint Directors by ordinary resolution. The Board mayappoint a Director but such a Director may hold office only until the dissolutionof the next annual general meeting after his appointment unless he is reappointedduring that meeting.

(C) Retirement of Directors by rotationAt each annual general meeting one third of the Directors who are subject toretirement by rotation will retire. If the number of Directors is not divisible bythree, the number nearest to but not less than one-third will retire from office. Ifthere are fewer than three Directors who are subject to retirement by rotation,one will retire from office.

If: (i) any one or more Directors were last appointed or reappointed three years ormore prior to the meeting; (ii) were last appointed or reappointed at the thirdimmediately preceding annual general meeting; or (iii) at the time of the meetingwill have served more than nine years as a non-executive Director of theCompany (excluding as the chairman of the Board), he or they shall retire fromoffice and shall be counted in obtaining the number required to retire at themeeting.

(D) Permitted interests of DirectorsSubject to the Law and provided he has disclosed to the Board the nature andextent of any direct or indirect interest, a Director notwithstanding his office:

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– may enter into or otherwise be interested in a contract, arrangement,transaction or proposal with the Company or any of its subsidiaryundertakings or in which the Company or any of its subsidiaryundertakings is otherwise interested either in connection with his tenure ofan office or place of profit or as seller, buyer or otherwise;

– may hold another office or place of profit with the Company or any of itssubsidiary undertakings (except that of auditor or auditor of a subsidiary ofthe Company or any of its subsidiary undertakings) in conjunction with theoffice of Director and may act by himself or through his firm in aprofessional capacity to the Company or any of its subsidiaryundertakings, and in that case on such terms as to remuneration andotherwise as the Board may decide either in addition to or instead of otherremuneration provided for by the New Articles;

– may be a Director or other officer of, or employed by, or a party to acontract, transaction, arrangement or proposal with or otherwiseinterested in, a Company promoted by the Company or any of itssubsidiary undertakings or in which the Company or any of its subsidiaryundertakings is otherwise interested or as regards which the Company orany of its subsidiary undertakings has a power of appointment; and

– is not liable to account to the Company or any of its subsidiaryundertakings for a profit, remuneration or other benefit realised by suchcontract, arrangement, transaction, proposal, office or employment and nosuch contract, arrangement, transaction or proposal is avoided on thegrounds of any such interest or benefit.

(E) Remuneration of DirectorsUnless otherwise decided by ordinary resolution, the Directors (but not anyalternate Directors) will be paid such amount of aggregate fees as the Boarddecides. These fees will be divided in proportions decided by the Board or equallyand may not exceed £500,000 per annum without the consent of the members ofthe Company by ordinary resolution.

(F) Directors’ interests in sharesDirectors are required to notify the Company on the same day if they acquireOrdinary Shares in the Company or, if they already hold Ordinary Shares, of anychange in their shareholding. When a director is appointed, he must notify theCompany of any Ordinary Shares he holds. All notifications are to be made oneither the day the acquisition or disposal takes place or the date of appointment asapplicable. The Company is to keep a register of the Director’s shareholdings atits registered office which is open to inspection by the members. Directors are,pursuant to these provisions, also required to disclose shares held by (i)Companies in which they hold 33 per cent. or more of the voting rights orotherwise control or direct; (ii) husbands, wives, civil law partners, infant sonsand daughters (including step children); and (iii) trusts in which they, or any ofthese persons, are related. These provisions also apply to shadow directors.

(iv) Directors’ powers

The Board may delegate to a Director holding executive office any of its powers,authorities and discretions for such time and on such terms and conditions as it thinksfit.

(v) Borrowing powers

The Board may exercise all the powers of the Company to borrow money, to mortgageor charge its undertaking, property, assets (present and future) and uncalled capital,and to issue debentures and other securities whether outright or as collateral securityfor any debt, liability or obligation of the Company or of any third party.

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The Board is required to restrict the borrowings of the Company and exercise all votingand other rights or powers of control exercisable by the Company in relation to itssubsidiary undertakings so as to secure that the aggregate principal amountoutstanding at any time in respect of all borrowings by the Group (exclusive of anyintra-group borrowings) after deducting the amount of cash deposited will not,without the previous sanction of an ordinary resolution of the Company exceed anamount equal to the higher of US$500 million or three times the adjusted capital andreserves.

(vi) Meetings of Shareholders

Annual general meetings are to be held once every year. They can be convened by theBoard at such time and place as it thinks fit provided that there must not be a gap ofmore than 15 months between one annual general meeting and the next. Extraordinarygeneral meetings, being meetings other than annual general meetings, may be convenedwhenever the Board thinks fit. Annual general meetings and any extraordinary generalmeeting at which a Special Resolution is to be proposed or at which some otherresolution of which special notice under the Law has been given to the Companyrequire not less than 21 clear days’ notice. All other extraordinary general meetingsrequire not less than 14 clear days’ notice.

The notice must be given to all holders and to all persons recognised by the directors ashaving become entitled to a share following the death, bankruptcy or incapacity of aholder. Shorter notice is possible, in the case of an annual general meeting, by theagreement of all the members entitled to attend and vote at the meeting and, in the caseof an extraordinary general meeting, by a majority of members holding not less than95 per cent of the total voting rights.

The notice must specify that a member entitled to attend and vote may appoint one ormore proxies to attend and, on a poll, vote instead of him and that a proxy need not alsobe a member. Where more than one proxy is validly appointed for the same share foruse at the same meeting, the last valid one is treated as revoking or replacing anyprevious ones. An instrument appointing a proxy is to be in writing in any usual form,or as approved by the Directors, and must be executed by or on behalf of the appointor.The Board of Directors may accept the appointment of a proxy received in an electroniccommunication on such terms and subject to such conditions as it considers fit, subjectto the Law and the Electronic Communications (Jersey) Law 2000.

The quorum of a general meeting is two persons entitled upon the business to betransacted, each being a holder present or by proxy.

In the case of joint holders of a share, a notice will be given to whichever of them isnamed first in the register of shareholders in respect of the joint holding and noticegiven in this way is sufficient notice to all joint holders.

(vii) Untraced shareholders

In respect of untraced shareholders, in the event a shareholder is deemed to beuntraceable, the Company may sell the shares of that shareholder at the best pricereasonably obtainable. This power of sale is subject to certain conditions before it istriggered. Principally, three cash dividends must have become payable in respect of theuntraced shares during a period of not less than 12 years and the holder must not havepresented any cheque, warrant or money order payable by the Company throughoutthe 12 year period. The Company must then advertise its intention to exercise thepower of sale in the relevant press. After publication of the advertisement, the holderhas a further three months to communicate with the Company and therefore effectivelyterminate the power of sale. The Company and any one Director are given anirrevocable power of attorney by the holder to do all such acts and to agree and executeall such agreements, documents and instruments of transfer in order to effect thetransfer of the shares in these circumstances. Any amounts raised by the power of saleare owed to the relevant member although the Company does not act as trustee of thesemonies and they do not carry interest.

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(viii) Distribution of assets on a liquidation

The assets of the Company remaining after payment of its liabilities will, subject to therights of the holders of other class of shares, be applied to the holders of OrdinaryShares equally pro rata to their holdings of Ordinary Shares.

(ix) Indemnity of officers

The Company is permitted by the New Articles to indemnify every officer of theCompany in certain circumstances in respect of officers’ liabilities arising in the courseof their duties.

The Law disallows any agreement by the Company to exempt any person from, orindemnify any person against, any liability which by law would otherwise attach to theperson by reason of the fact that the person is or has been an officer of the Company.

However, the Law allows certain exceptions to this, particularly in respect of anyliability incurred otherwise than to the Company if the person acted in good faith with aview to the best interests of the Company.

(x) Lock-in provisions relating to Ordinary Shares held immediately after Admission bydirectors and employees

(A) For the purposes of the Article:(i) “Initial Holding” means:

(A) Ordinary Shares (or any direct or indirect interest in OrdinaryShares) held by a Restricted Member immediately before Admission;plus

(B) Ordinary Shares (or any direct or indirect interest in OrdinaryShares) Transferred by a Restricted Member to any AssociatedPerson of such Restricted Member and which are held by suchAssociated Person (or another Associated Person of the RestrictedMember) immediately before Admission.

(ii) “Restricted Member” means any current or former director or employee ofthe Company or any of its subsidiaries who, immediately followingAdmission, holds Ordinary Shares (or has any direct or indirect interest inOrdinary Shares) and, in each case, for the purposes of the restrictions onTransfer set out in the Article, shall also include Associated Persons.

(iii) “Associated Person” means:(A) any person with whom a Restricted Member is in partnership, and

any Scottish firm of which he is a member;

(B) any person whom a Restricted Member employs and any person,other than the Company or any of its subsidiaries by whom aRestricted Member is employed;

(C) the beneficiaries of any trust of which a Restricted Member is atrustee, or where the terms of the trust confer a power that may beexercised for the benefit of such Restricted Member other than:

(1) a trust arising under any of the Second Group of Parts of theInsolvency Act 1986 or under the Bankruptcy (Scotland) Act1985, or

(2) a pension scheme or an employees’ share scheme (within themeaning of the Companies Act 1985);

(D) in relation to any trust of which a Restricted Member is a trustee:

(1) any individual who in relation to the trust is a settlor; and

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(2) any body corporate which under section 681 Income andCorporation Taxes Act 1988 is deemed to be connected withthat trust;

(E) any company, other than the Company, of which a RestrictedMember is a director or over which he has control;

(F) any Privileged Relation of a Restricted Member; and

(G) any trustee or trustees of any family trust of which a RestrictedMember and/or any Privileged Relation of such Restricted Member isa beneficiary,

“Privileged Relations” means, in relation to a Restricted Member, anyparent or spouse of that person and that person’s lineal descendants andother members of his or her family and, for these purposes, a step-child oradopted child of a person shall be deemed to be a lineal descendant of suchperson;

(iv) “Transfer” means, in relation to any securities:

(A) directly or indirectly to offer, pledge, sell, contract to sell, sell anyoption or contract to purchase, purchase any option or contract tosell, grant any option, right or warrant to purchase, lend, orotherwise transfer or dispose of, such securities or any othersecurities convertible into or exercisable or exchangeable for suchsecurities; or

(B) to enter into any swap or other arrangement that transfers to another,in whole or in part, any of the economic consequences of ownershipof such securities,

whether any such transaction described in (A) or (B) above is to be settledby delivery of such securities, such other securities, in cash or otherwise.The expression “Transferred” shall be construed accordingly.

(v) “De Minimis Holder” means a Restricted Member whose Initial Holdingcomprises less than 10,000 Ordinary Shares.

(b) Subject to the other provisions of the Articles, following Admission and until the thirdanniversary of Admission, no Restricted Member shall be entitled to Transfer anyOrdinary Shares comprised in such Restricted Member’s Initial Holding except toPrivileged Relations of such Restricted Member or as may otherwise be permittedunder the Article.

(c) As part of any underwritten public offering of Ordinary Shares which culminates inAdmission, a De Minimis Holder may Transfer up to 100 per cent. of the OrdinaryShares comprised in the Initial Holding of such De Minimis Holder and any otherRestricted Member may Transfer up to 40 per cent. of the Ordinary Shares comprisedin such Restricted Member’s Initial Holding.

(d) Subject to (c) above, in the period commencing on Admission and ending on the firstanniversary of Admission, no Ordinary Shares comprised in an Initial Holding may beTransferred.

(e) Following the first anniversary of Admission, a De Minimis Holder may Transfer anyof the Ordinary Shares comprised in such De Minimis Holder’s Initial Holding notTransferred pursuant to paragraph (c) above. In paragraphs (f) and (g) below,references to Restricted Members do not include De Minimis Holders.

(f) In the period commencing on the day following the first anniversary of Admission andending on the second anniversary of Admission, a Restricted Member may Transfer upto 20 per cent. of the Ordinary Shares comprised in such Restricted Member’s InitialHolding plus such number of Ordinary Shares as could have been Transferred pursuantto paragraph (c) above but were not so Transferred.

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(g) In the period commencing on the day following the second anniversary of Admissionand ending on the third anniversary of Admission, a Restricted Member may Transferup to 20 per cent. of the Ordinary Shares comprised in such Restricted Member’s InitialHolding plus such number of Ordinary Shares as could have been Transferred pursuantto paragraph (f) above but were not so Transferred.

(h) The Board may require that the certificates for Ordinary Shares subject to theprovisions of the Article shall bear such legends or shall be held by a trustee or bailee,and, subject to the final sentence of this paragraph (h), may take such other actions withrespect to the relevant Ordinary Shares as the Board may determine appropriate toprotect the interests of the Company. Without limitation to the foregoing and to anyother rights or remedies available at law or otherwise, the Board may, if it has groundsto believe that a Restricted Member has Transferred, or is proposing to Transfer, anyOrdinary Shares in breach of the Article, request any relevant Member, and/or anyother person to whom any such Ordinary Shares have been or may be so Transferred, toprovide such information as the Board considers appropriate to determine whetherthere has been or is likely to be a breach of the Article, and, subject to the final sentenceof this paragraph (h), may take such action as it deems necessary to require any relevantMember or transferee to remedy any breach and/or prevent any further breach of theArticle. Subject to the Article (which sets out the common circumstances in which theBoard may refuse to register a Transfer or decline to recognise an instrument oftransfer) and without prejudice to any rights or remedies available to the Company atlaw or otherwise in respect of any breach of the Article or any other provision of theArticles, the Board may not refuse to register any Transfer of any Ordinary Share whichhas been Transferred in breach of the Article.

(i) The Board (itself or acting through its Remuneration Committee) may waive anyprovision of the Article, in whole or in part, in respect of one or more RestrictedMembers or categories or groups of Restricted Members (including any such personwho may be a director), on such terms and conditions, if any, as the Board and/or theRemuneration Committee shall determine from time to time in its sole discretion.

(j) The restrictions on Transfer in the Article shall cease to apply:

(i) to a Restricted Member if such Restricted Member ceases to be employed by theCompany or any of its subsidiaries by reason of death, disability, redundancy orretirement at or after the age at which he is bound to retire in accordance with theterms of his contract of employment (or earlier by agreement with the Company)or

(ii) in the event of:(A) any scheme of reconstruction under Part XXI of the Law (as amended) in

relation to the Company;

(B) any compromise or arrangement under Part XVIII of the Law (as amended)providing for the acquisition by any person (or a group of persons acting inconcert within the meaning of the City Code on Takeovers and Mergers) ofshares in the Company representing more than 50 per cent. of the totalvoting rights of the Company;

(C) any acceptance of any tender offer or partial offer for Ordinary Sharesmade by the Company in accordance with Chapter 12 of the Listing Rules;or

(D) the winding-up of the Company.

(xi) Notification of interests in shares

Shareholders are under a duty to disclose their interests in shares if they hold more than3 per cent. of any class of issued shares and if their shareholding of such classsubsequently falls below 3 per cent. During the period a shareholder’s holding of shares

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of any particular class remains above 3 per cent., he is under a duty to disclose furtheracquisitions or disposals once such acquisitions or disposals, on an aggregate basis,equate to 1 per cent. or more of the issued shares of that class. A shareholder’s duty todisclose his shareholding in respect of these provisions of the New Articles is, providedthe Company’s issued share capital is divided into different classes, determined on aclass by class basis.

Registered shareholders can also be obliged by the board of directors by virtue of theNew Articles to disclose whether they hold their shares legally and beneficially forthemselves or for some other party. They can also be obliged to disclose the nature ofthe arrangement, if one exists, and the class of persons or parties for whom theyultimately hold the shares (e.g. a family trust, individual or company). In the event thatthe relevant shareholder holds less than 0.25 per cent. of the relevant class of issuedshares, they need make no further disclosure. In the event that they hold 0.25 per cent.or more of the issued shares of the relevant class, then they can be obliged to disclose theidentity of the ultimate party for whom they hold the shares. Failure to comply withthese provisions can result in, at the board of director’s discretion, a suspension ofvoting rights of the relevant member and a withholding (but not forfeiture) of dividendsfor a period of up to one year.

5. Employee Share Schemes5.1 Details of the Employee Share Schemes are included in paragraph 7 of Part III – “Information

on the Petrofac Group” above.

6. Directors and Senior Managers6.1 Details of the names, functions and interests in Ordinary Shares of the Directors and Senior

Managers are set out in Part IV – “Directors and Senior Managers”.

6.2 The Directors and Senior Managers:(a) are or have been directors or partners or senior managers of the following companies

and partnerships (excluding all members of the Group) at any time in the previous fiveyears:

Name Current Directorships Past Directorships (held in the last five years)

DirectorsRodney Chase Nalco Company

Tesco PlcComputer SciencesCorporation

BOC Group PlcBP PlcDiageo Plc

Michael Press ABARTA Inc.SPS International LtdPharmadule EmtungaVarel International(being wound up)T3 Energy Services

ASCO PlcKBC Advanced Technologies PlcOiltools Ltd pte

Kjell Almskog Orkla ASAKverneland Group ASA

Kvaerner ASAKitron ASA

Bernard deCombret

AXA-RETOTSA Total Oil TradingSAVernes Gestion SAWinstar Resources Ltd

CEPSA SAELF Trading SATotalFinaElf GasAurado Energy LtdMaurel et Prom SASOCAP International LtdEurotradia International SA

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Name Current Directorships Past Directorships (held in the last five years)

Ayman Asfari None British Syrian Society Limited

Keith Roberts The Peacock Group Plc Ideashed LimitedHawkpoint Partners Limited

Maroun Semaan Jamaa Trading None

Senior ManagersDivisionalChief Executives

Amjad Bseisu Stratic EnergyCorporation

Serica Energy plcSerica Energy CorporationArco Crude Trading Inc.Arco Petroleum Ventures Inc.

RobinPinchbeck Sondex plc Sondex Group Limited

Motherwell Bridge Holdings Limited(In Receivership)

Other SeniorManagers

Jim Atack Offshore ContractorsAssociationTrentvalley Ltd

None

Steve Bullock None None

Marwan Chedid None None

Rory Edwards Petrocampus LimitedECHO Petroleum Limited

Various asset holding subsidiaries ofAmerada Hess International Limited

Richard Hall Norfolk InformationServices LtdHF Consultants Ltd

UWG LimitedTeam Energy Resources LimitedQuest EnvironmentalHF Consultants Pty Ltd

Leigh Howarth None None

Rob Jewkes Jacani HoldingsProprietary LimitedSmerk Proprietary Limited

Clough Engineering LtdClough LimitedPT Petrosea TBKSaiclo Proprietary LimitedIndustrial Foundation for AccidentPreventionAustralian Institute of Management

Felix Lobo None None

Kevin Martin None None

Richard Milne RHM Holdings LtdRBQ Management Ltd

Hawkpoint Holdings LtdPucka Creative LtdEastgate Group Ltd (and varioussubsidiaries)

DerekMoorfield None None

Vivek Prakash None Dodsal PTE Ltd (and varioussubsidiaries and associated companies)

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Name Current Directorships Past Directorships (held in the last five years)

Sandy Reid None Duncroft Manor ManagementCompany Ltd

MurrayStrachan

Cancer Link Aberdeen &North

Enterprise North East Trust Limited

Rajesh Verma None None

Peter Warner None None

(b) have no convictions relating to fraudulent offences;

(c) (with the exception of Robin Pinchbeck who was (until February 2003) a director ofMotherwell Bridge Holdings Limited, for which a receiver was appointed in September2003 and with an estimated deficiency in unsecured creditors of £44.3 million) havenot been associated with any bankruptcies, receiverships or liquidations while acting intheir capacity as director of a company or other executive function;

(d) have not received any official public incrimination and/or sanctions by statutory orregulatory authorities (including designated professional bodies) and have not beendisqualified by a court from acting as a director of a company or from acting in themanagement or conduct of the affairs of a company; and

(e) (with the exception of Amjad Bseisu, who as a director of Stratic Energy, an oil and gascompany, may have a potential conflict of interest with the Company, in relation towhich the Company takes such steps as appropriate to ensure independent members ofthe senior management team or the Board are involved in any such transaction withStratic Energy), none of the Directors and Senior Managers has potential conflicts ofinterest that could conflict with their duties to the Company.

6.3 The Directors and Senior Managers will be subject to the lock-in arrangements described inparagraph 6 of Part VIII – “Details of the Offer”.

6.4 In 2002, the average number of employees of the Group was 920 and in 2003, the averagenumber of employees of the Group was 3,330. In 2004, the average number of employees ofthe Group was 5,284, including approximately 1,560 temporary employees the majority ofwhich were employed by the BTC/SCP joint venture.

7. Directors’ and Senior Managers’ emoluments7.1 In relation to the 2004 financial year, the remuneration paid (including any contingent or

deferred compensation) and benefits in kind granted to the Directors by any member of theGroup were as follows:

NameSalary/Fee

(US$)Bonus(US$)

Other remuneration/benefits (including

end of servicebenefits in the UAE)

(US$)

Rodney Chase — — —Michael Press 43,125 — —Kjell Almskog — — —Bernard de Combret 49,156 — —Ayman Asfari 363,830 318,469 16,722Keith Roberts 302,315 207,934 1,172Maroun Semaan 210,000 200,000 158,400

7.2 The remuneration and the terms and conditions for the executive Directors is as follows:

(a) Ayman Asfari is employed under a service agreement with Petrofac Services Limiteddated 15 September 2005 pursuant to which he is appointed as Chief Executive Officerof the Petrofac Group and Executive Director of the Company. The notice periodrequired to terminate his service agreement is 12 months’ written notice by

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either party. Petrofac Services Limited is entitled to terminate the employment bypaying in lieu of notice and other benefits, excluding bonus. Ayman Asfari’s basicsalary is £300,000 per annum plus benefits, including a discretionary bonus,participation in the PSP, enhanced sick pay entitlements, private health insurance, lifeassurance and long term disability insurance, plus a payment of £20,000 in lieu of otherbenefits including, but not limited to, pension contributions and a car allowance.

(b) Keith Roberts is employed under a service agreement with Petrofac Services Limiteddated 15 September 2005 pursuant to which he is appointed as Chief Financial Officerof the Petrofac Group and Executive Director of the Company. The notice periodrequired to terminate his service agreement is 12 months’ written notice by either party.Petrofac Services Limited is entitled to terminate the employment by paying in lieu ofnotice and other benefits, excluding bonus. Keith Roberts’ basic salary is £200,000 perannum plus benefits, including a discretionary bonus, participation in the PSP,enhanced sick pay entitlements, private health insurance, life assurance and long termdisability insurance, plus a payment of £15,000 in lieu of other benefits including, butnot limited to, pension contributions and a car allowance.

(c) Maroun Semaan is employed under a service agreement with Petrofac International Ltddated 14 September 2005 pursuant to which he is appointed as Chief Executive Officerof the E&C Division and Executive Director of the Company and is based in Sharjah,UAE. The notice period required to terminate his service agreement is 12 months’written notice by either party. Petrofac International Ltd is entitled to terminate theemployment by paying in lieu of notice and other benefits, excluding bonus. MarounSemaan’s basic salary is US$280,000 per annum plus benefits including a discretionarybonus, participation in the PSP, enhanced sick pay entitlements, private healthinsurance, life assurance, long term disability insurance, a company car, furnishedaccommodation, an education allowance for up to two children up to the age ofnineteen, a travel allowance and an end of service indemnity in accordance with UAElaw.

7.3 The remuneration and terms and conditions for the non-executive Directors is as follows:

(a) Pursuant to a letter of appointment dated 13 September 2005, Rodney Chase wasappointed non-executive director of the Company with effect from 21 June 2005 atwhich time he was also appointed member of the Nominations Committee. RodneyChase is paid a gross fee of £100,000 per annum and is expected to make a timecommitment of three days per month in the performance of his duties. His appointmentcan be terminated by three months’ written notice by either party.

(b) Pursuant to a letter of appointment dated 13 September 2005, Michael Press wasappointed non-executive director of the Company with effect from 13 January 2002 atwhich time he was also appointed Chairman of the Remuneration Committee andmember of both the Nominations and the Audit Committees. Michael Press is paid agross fee of £37,000 per annum plus £5,000 per annum in respect of his chairmanshipof the Remuneration Committee, and is expected to make a time commitment of twodays per month in the performance of his duties. His appointment can be terminated bythree months’ written notice by either party.

(c) Pursuant to a letter of appointment dated 13 September 2005, Kjell Almskog wasappointed non-executive director of the Company with effect from 23 March 2005 atwhich time he was also appointed member of each of the Remuneration, Nominationsand Audit Committees. Kjell Almskog is paid a gross fee of £37,000 per annum and isexpected to make a time commitment of two days per month in the performance of hisduties. His appointment can be terminated by three months’ written notice by eitherparty.

(d) Pursuant to a letter of appointment dated 13 September 2005, Bernard de Combret wasappointed non-executive director of the Company with effect from 1 November 2003at which time he was also appointed Chairman of the Audit Committee and

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member of both the Nominations and the Remuneration Committees. Bernard deCombret is paid a gross fee of £37,000 per annum plus £5,000 per annum in respect ofhis chairmanship of the Audit Committee, and is expected to make a time commitmentof two days per month in the performance of his duties. His appointment can beterminated by three months’ written notice by either party.

7.4 The aggregate remuneration paid to the Senior Managers (including other divisional chiefexecutives) listed in Part IV – “Directors and Senior Managers” above for the 2004 financialyear was US$5.2 million.

7.5 In relation to the 2004 financial year, the total amount set aside by the Group to providepension, retirement or similar benefits to the Directors and the Senior Managers wasUS$0.2 million.

8. Major ShareholdersUnder Jersey law there is no requirement to notify interests in shares. The following people, notbeing Directors or Senior Managers (whose interests in Ordinary Shares are set out in Part IV –“Directors and Senior Managers” above) had, as at 19 September 2005, being the latest practicabledate before the publication of this document, interests in Ordinary Shares or voting rights in theCompany which would be notifiable to the Company under the Company’s New Articles (assummarised in paragraph 4(xi) above):

Name

No. ofOrdinary

Shares held(1)

Percentage ofshare capital(1)

Petrofac ESOP Trustees Limited(2,3) 59,175,960 17.13i 55,902,280 16.2Legis Trust Limited (as trustee for the Alima Trust) 31,329,440 9.1Louis Owen 20,659,080 6.0Michael Stacey 14,857,240 4.3(1) Assuming (a) the re-organisation of the Company’s Share Capital (which is conditional upon Admission) having been completed;

(b) the allotment and issue of all Ordinary Shares due to be allotted and issued under Petrofac’s Long Term Incentive Plan (LTIP),which allotment and issue is conditional upon Admission; and (c) each Selling Shareholder selling his/its full entitlement ofOrdinary Shares including participatory interests in Ordinary Shares under the ESS and the LTIP, permitted for sale.

(2) Petrofac ESOP Trustees Limited holds Ordinary Shares in its capacity as trustee of the Petrofac Limited Executive Share Trustunder the ESS and LTIP.

(3) Of this total, 57,055,960 Ordinary Shares are held under the ESS, and 2,120,000 Ordinary Shares are Ordinary Shares issued andto be issued to satisfy the vesting of awards under the LTIP.

None of the persons listed above has or will have, in relation to their Ordinary Shares, special votingrights.

As at 19 September 2005, being the latest practicable date before the publication of this document,the Company is not (as far as the Directors are aware) controlled by any person and (as far as theDirectors are aware) there are no arrangements, the operation of which may at a subsequent dateresult in a change of control of the Company.

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9. Selling Shareholders9.1 It is expected that Ordinary Shares, up to the stated maximum amounts, will be sold in the

Offer by the following (subject to agreement on the Offer Price and, where applicable,confirmation of selling intentions):

Name

Number ofOrdinary

Sharesheld as at

19 September2005(1)

Percentageof total

OrdinaryShare

capitalheld as at

19 September2005(1)

OrdinaryShares being

sold(1)

Expected no.of Ordinary

Sharesimmediately

following theOffer(1)

Expected %of sharecapital

immediatelyfollowing the

Offer(1)Relationshipwith Petrofac

Martin Beard 1,400,000 0.4 560,000(2) 840,000 0.2 EmployeeMarwan Chedid 3,320,560(3) 1.0 1,328,224(2) 1,992,336 0.6 EmployeeLegis Trust Limited, as trusteeof the Lamia Trust

101,641,480 29.4 25,410,370 76,231,110 22.1 Trust of whichAyman Asfari,Director, and hisclose familyare beneficiaries

Legis Trust Limited, as trusteeof the Nola Trust

49,981,200 14.5 12,495,300 37,485,900 10.9 Trust of whichMaroun Semaan,Director, and hisclose family arebeneficiaries

Legis Trust Limited, as trusteeof the Alima Trust

31,329,440 9.1 7,832,360 23,497,080 6.8 The Bseisu familytrust

Scott Martin 1,374,400 0.4 549,760(2) 824,640 0.2 EmployeeNicola Martin 25,600 0.0 10,240(2) 15,360 0.0 Wife of employee

Scott MartinSamir Musa 692,120 0.2 492,097(2) 200,023 0.1 Former employeeLouis Owen 20,659,080 6.0 8,263,632 12,395,448 3.6 EmployeePetrofac ESOP TrusteesLimited(4)

59,175,960(5) 17.1 23,131,304(2) 36,044,656 10.4 Employee benefitscheme

Michael Stacey 14,857,240 4.3 14,857,240 nil n/a EmployeeMurray Strachan 1,800,000 0.5 720,000(2) 1,080,000 0.3 EmployeeRajesh Verma 3,560,560(6) 1.0 1,424,224(2) 2,136,336 0.6 Employee3i 55,902,280 16.2 55,902,280 nil n/a Private equity

investor(1) Assuming (a) no exercise of the Over-allotment Option; (b) the re-organisation of the Company’s Share Capital (which is

conditional upon Admission) having been completed; (c) the allotment and issue of all Ordinary Shares due to be allotted andissued under Petrofac’s Long Term Incentive Plan (LTIP), which allotment and issue is conditional upon Admission and (d) eachSelling Shareholder selling his/its full entitlement of Ordinary Shares including participatory interests in Ordinary Shares under theESS, and the LTIP permitted for sale.

(2) This assumes the sale of the maximum number of Ordinary Shares eligible for sale by such person, and is subject to confirmation.

(3) Includes 160,000 Ordinary Shares issued or to be issued to satisfy the resting of awards under the LTIP.

(4) Petrofac ESOP Trustees Limited holds Ordinary Shares in its capacity as trustee of the Petrofac Limited Executive Share Trustunder the ESS and LTIP.

(5) Of this total, 36,623,240 Ordinary Shares are held by employees who are not Directors or Senior Managers.

(6) Shareholding of Ordinary Shares held (in whole or in part) through the ESS.

The business address of the Selling Shareholders is Whiteley Chambers, Don Street, St Helier, JerseyJE4 9WG, with the exception of Legis Trust Limited, as trustee for the Lamia Trust, Nola Trust andAlima Trust (whose business address is P.O. Box 579, Elizabeth House, Les Ruettes, Brayes,St Peter Port, Guernsey GY1 6LQ), and 3i (whose business address is 38 Garden Place, AberdeenAB10 1UP).

10. Related Party transactionsSave as disclosed in the financial information set out in Part X – “Financial Information onPetrofac”, there are no related party transactions between the Company and its associatedcompanies or joint venture companies that were entered into during the financial years ending31 December 2002, 2003 or 2004 and during the period between 1 January 2005 to 30 June 2005(the latest practicable date prior to the publication of this document).Save as disclosed in the financial information set out in Part X – “Financial Information onPetrofac”, there are no related party transactions between the Company and its directors that wereentered into during the financial years ending 31 December 2002, 2003 or 2004 and during theperiod between 1 January 2005 to 19 September 2005 (the latest practicable date prior topublication of this document).

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11. TaxationThe comments below are intended only as a general guide to the tax position of Shareholders undercurrent UK and Jersey law and practice and are subject to any changes therein. They do not cover alltax matters that may be important to a particular investor. If you are in any doubt about your taxposition you should consult your own professional adviser.

UK TaxationThe information below, which relates only to UK taxation, is applicable to the Company and topersons who are both domiciled and resident or ordinarily resident in the UK for taxation purposesand who will hold the absolute beneficial title to shares in the Company as an investment. It is basedon current UK revenue law and published HM Revenue and Customs practice, which law orpractice is, in principle, subject to subsequent change possibly with retrospective effect.

11.1 The Company

The Directors intend that the Company will be managed and controlled in such a way that itshould not be resident in the UK for UK tax purposes. Accordingly, and provided that theCompany does not carry on a trade in the UK (whether or not through a branch or agencysituated there) the Company will not be subject to UK income tax or corporation tax otherthan on any UK source income.

11.2 Shareholders

Income

UK resident Shareholders will be liable to income tax on the gross amount of any dividendsreceived. Higher rate individual taxpayers will be liable to income tax at 32.5 per cent. andother individual taxpayers at 10 per cent. Since the Company will not be UK resident therewill be no tax credit in respect of the dividends. UK resident corporate Shareholders will beliable to corporation tax in respect of any dividends received from the Company. Undercurrent Jersey law, when the Company pays dividends to UK resident Shareholders, it isneither entitled nor required to withhold any amount on account of tax.

Capital Gains

Shareholders (other than those holding Ordinary Shares as dealing stock, who are subject toseparate rules) who are resident or ordinarily resident in the UK, or who carry on a trade,profession or vocation in the UK through a branch or agency (or in the case of a company, apermanent establishment) with which their investment in the Company is connected may,depending on their circumstances and subject to any available exemptions or reliefs, be liableto UK tax on capital gains realised on the disposal of their Ordinary Shares. For individualShareholders who are resident or ordinarily resident in the UK and who are employees of theCompany, business asset taper relief may be available to reduce the taxable gains, and forthose Shareholders who are not employees of the Company, non-business asset taper reliefmay be available to reduce the taxable gains. The amount of the taper relief reduction willdepend upon how long, measured in complete years, the Ordinary Shares have been held.Corporate Shareholders who are resident in the UK will benefit from indexation allowancewhich, in general terms, increases the capital gains tax base cost of an asset in accordance withthe rise in the retail prices index. Indexation allowance may operate to reduce a chargeablegain, but not so as to create an allowable loss.

11.3 Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)

As the register of Shareholders will at all times be kept offshore, no UK stamp duty or SDRTwill be payable on a transfer of Ordinary Shares or an agreement to transfer Ordinary Shares.

No UK stamp duty will be payable on the transfer of Ordinary Shares provided that noinstrument of transfer is executed in the UK and any instrument of transfer which is executedoutside the UK does not relate to any property situated, or to any matter or thing done or to bedone, in the UK.

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11.4 Individual Savings Accounts (ISAs) and Personal Equity Plans (PEPs)

Ordinary Shares in the Company will be eligible to be held in the stocks and sharescomponent of an ISA or an existing PEP, as the Ordinary Shares in the Company will be listedon a recognised stock exchange.

11.5 Self Invested Personal Pension schemes (SIPPs)

The Personal Pension Scheme (Restriction on Discretion to Approve) (PermittedInvestments) Regulations 2001 provide that investments which may be held directly orindirectly for the purposes of a SIPP include shares which are listed or dealt in on a recognisedstock exchange. The Ordinary Shares in the Company will therefore qualify as permittedinvestments.

11.6 Other UK tax considerations

Investors should be aware that if more than 50 per cent. of the share capital of the Company isheld by persons who are resident in the UK, the Company will be a “controlled foreigncompany” for the purpose of Chapter IV Part XVII of the Income and Corporation Taxes Act1988 (“ICTA”). If the Company becomes a controlled foreign company, any UK residentcompany which, either alone or together with connected or associated persons, holds 25 percent. or more of the share capital of the Company (or Ordinary Shares which entitle it to25 per cent. or more of the income of the Company) may be assessed to corporation tax inrespect of the profits of the Company which are attributable to such investor’s interest in theCompany.

Individuals ordinarily resident in the UK should note that Chapter III of Part XVII of ICTA,which contains provisions for preventing the avoidance of income tax by transactionsresulting in the transfer of income to persons (including companies) abroad, may render themliable to taxation in respect of any undistributed income and profits of the Company to theextent that such income or profits relate to their respective Shares in the Company. However,this section will not apply where such transactions are entered into for bona fide commercialreasons.

It is possible that the Company would, following the Offer, be a close company if it wereresident in the UK. As a result, certain transactions entered into by the Company or othermembers of the Group may have tax implications for holders of Shares. Shareholders shouldconsult their own professional advisers on the potential impact of the close company rules.

Jersey TaxationThe following summary of the anticipated tax treatment in Jersey in relation to the paymentson the Ordinary Shares is based on the taxation law and practice in force at the date of thisProspectus, and does not constitute legal or tax advice and prospective investors should beaware that the relevant fiscal rules and practice and their interpretation may change. Pleasealso note the specific reference to prospective changes of the Jersey tax system in 11.9 below.Prospective investors should consult their own professional advisers on the implications ofsubscribing for, buying, holding, selling, redeeming or disposing of Ordinary Shares and thereceipt of distributions, whether or not on a winding-up, with respect to the Ordinary Sharesunder the laws of the jurisdictions in which they may be taxed.

Petrofac is an “exempt company” within the meaning of Article 123A of the Income Tax(Jersey) Law, 1961, as amended, for the calendar year ending December 31, 2005. Petrofac isrequired to pay an annual exempt company charge, which is currently £600, in respect ofeach subsequent calendar year during which it wishes to continue to have “exempt company”status. The retention of “exempt company” status is conditional upon the Comptroller ofIncome Tax being satisfied that no Jersey resident has a beneficial interest in Petrofac exceptas permitted by published concessions granted by the Comptroller from time to time. Byconcession, the holding of ordinary shares by a Jersey resident in an exempt company, theshares of which are traded on a recognised stock exchange, is not regarded as a beneficialinterest, provided that the holding is de minimis or clearance has been obtained from theComptroller.

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The Comptroller of Income Tax has indicated that a holding by Jersey residents of less than10 per cent. of the share capital of a company shall be treated as de minimis.

As an “exempt company” Petrofac is not liable for Jersey income tax other than on Jerseysource income, except by concession bank deposit interest on Jersey bank accounts. For solong as Petrofac is an “exempt company”, payments in respect of the Ordinary Shares willnot be subject to any taxation in Jersey, unless the shareholder is resident in Jersey, and nowithholding in respect of taxation will be required on those payments to any holder of theOrdinary Shares as a matter of Jersey law.

11.7 Taxation of Dividends

Dividends are declared in US Dollars and paid gross in Sterling, with an option forShareholders to receive payments in US Dollars. Historically, the Company has declared andpaid its dividends in US Dollars.

11.8 Taxation of Capital Gains and Estate and Gift Tax

Under current Jersey law, there are no death or estate duties, capital gains, gift, wealth,inheritance or capital transfer taxes. No stamp duty is levied in Jersey on the issue or transferof ordinary shares. In the event of the death of an individual sole shareholder, duty at rates ofup to 0.75 per cent. of the value of the Ordinary Shares held may be payable on theregistration of Jersey probate or letters of administration which may be required in order totransfer or otherwise deal with Ordinary Shares held by the deceased individual soleshareholder.

11.9 EU Code of Conduct on Business Taxation

On 3 June 2003, the European Union Council of Economic and Finance Ministers reachedpolitical agreement on the adoption of a Code of Conduct on Business taxation. Jersey is not amember of the European Union, however, in keeping with its policy of constructiveinternational engagement, Jersey intends to propose legislation to replace the exemptcompany regime by the end of 2008 with a general zero rate of corporate tax with effect fromJanuary 2009.

12. Legal and arbitration proceedingsExcept as set out below, no member of the Petrofac Group is engaged in or, as far as Petrofac isaware, has pending or threatened, any governmental, legal or arbitration proceedings, during aperiod covering at least the previous 12 months prior to the date of this document, which may have,or have had in the recent past significant effects on Petrofac and/or the Group’s financial position orprofitability.

12.1 In relation to the BTC/SCP project, Spie Capag – Petrofac International Limited (“SCPI”)submitted various claims during 2004 for cost overruns on the project.

A number of the claims were resolved in principle by a Memorandum of Understanding dated15 September 2004 and contract amendments to reflect this agreement in principle wereconcluded in August 2005. The elements of SCPI’s claims relating to field joint coating,welding and loss of synergies were not covered by this agreement in principle.

SCPI served a notice of dispute on 23 December 2004. Under the terms of the contract a 60day waiting period was provided to allow the parties time to negotiate an amicable solution.No agreement was reached during this period, although the parties have had subsequentdiscussions on these issues. While negotiations on the claims relating to loss of synergies arecontinuing, SCPI has formed the view that it will only progress the claims relating to field jointcoating and welding through formal dispute resolution procedures and it intends to pursue itscontractual remedies in this regard.

At 30 June 2005, Petrofac had provided for US$27.5 million in respect of its share of the lossin relation to this project. The gross amount of SCPI claims under these headings is in excessof $150 million.

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12.2 During 2004, Petrofac Inc. completed work on a crude oil degasification unit located at theUnited States Government’s Department of Energy Strategic Petroleum Reserve site at BigHill, Texas, USA. The scope of work entailed the provision of a turnkey facility and managingthe unit’s civil, mechanical and electrical construction. Petrofac Inc. worked on the projectunder the direction of a project manager appointed on behalf of the US Department ofEnergy.

In May 2004, Petrofac Inc. presented a Request for Equitable Adjustment to the projectmanager for the amount of US$6.9 million. This relates principally to delays caused by theproject manager and instructions to accelerate progress in order to mitigate the impact of thedelays.

The project manager has initiated an audit of the Request for Equitable Adjustment inaccordance with the terms of the contract agreed between the parties. In February and March2005 the auditor made several visits to Petrofac Inc.’s offices and has been provided with allthe information which it requested. The project manager has communicated a plan to initiatesettlement negotiations with Petrofac, Inc. once the audit report has been received and areview completed. It is anticipated that the settlement negotiations will be delayed however,as the project manager’s offices were located in New Orleans, Louisiana and are effectivelyclosed due to the damage caused by Hurricane Katrina.

A lawsuit involving two of Petrofac Inc.’s subcontractors on this project has settled. It isanticipated that the terms of the settlement will be finally agreed by the end of September2005. Petrofac Inc. has made adequate provision in its accounts to fund the settlement.

12.3 During 2004, Petrofac Inc. completed the engineering, procurement and construction of twooil separation/treatment modules and two gas treatment modules for Petrobras NetherlandsBV (PNBV) P-50 floating production storage offloading unit (FPSO) which was designed toproduce oil and gas from the Albacora Leste Field in Brazil’s Campo Basin (P-50).

Petrofac Inc. sub-contracted the transportation of modules on P-50 to Dana Marine Services,Inc. The sub-contractor sub-chartered two barges from Ugland and Cashman EquipmentCompany and one tug from Latham Smith, in order to transport the modules. Two days afterdeparting from New Iberia in July 2004, one of the barges carrying two of the modulescollided with an unmanned platform in the Gulf of Mexico. The modules, the barge and theplatform all suffered damage, the full extent of which is still under investigation.

The owner of the platform, El Paso Production GOM, has commenced proceedings againstthe barge operator Latham Smith, the sub-contractor, Dana Marine Services, Inc. andPetrofac Inc.

Under its agreement with Dana Marine Services, Inc., Petrofac Inc. transferred the risk ofdamage to the barge to Dana Marine Services, Inc. Further, the risk of damage to the moduleshad been transferred to PNBV. Accordingly, Petrofac Inc. believes, (on the basis of advicefrom external counsel appointed as defence lawyers in the litigation), that it should have noliability for this aspect of the claim. In addition, under admiralty law, the responsibility fordamage to the unmanned platform rests with the sub-contractor and again Petrofac Inc.believes that it should have no liability for this aspect of the claim.

Petrofac Inc.’s charterer’s liability insurance policy allows the insurers to step in to managethe claim and the insurers have assumed Petrofac Inc.’s defence and are currently paying thelegal fees and expenses incurred in the course of defending the claim.

Currently the claim is still in the preliminary stage. Petrofac Inc. has also been named in a suitinitiated against Dana Marine by the barge providers in respect of non-payment of amountsalleged to be owed. Both lawsuits involving Dana Marine Services, Inc. are pending in theUnited States District Court located in New Orleans, Louisiana and progress on the lawsuitswill be delayed as a result of the damage caused by Hurricane Katrina.

12.4 Petrofac International Ltd (PIL) is currently pursuing a claim against Al Furat PetroleumCompany (AFPC) for approximately US$5.8 million in relation to an EPC contract for the

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supply and installation of a fifth frame 6 gas turbine driven generator. The claim can bebroken down into five parts, covering costs incurred by PIL through the failure of AFPC toissue a Provisional Acceptance Certificate (PAC) on time, thus resulting in a 33 day delay onthe part of PIL in completing its contractual obligations and triggering a delay penaltypayment clause under the contract, costs incurred associated with an exchange ratefluctuation in connection with an AFPC-nominated supplier contract, extra costs incurred intrying to source other materials and mitigate the effect of a delay under the same suppliercontract, claims for wrongfully withheld payments, and additional associated costs.

Further to a letter dated 27 August 2005, PIL has communicated to AFPC (through legalcounsel) a request that all six claims are acknowledged and that all withheld payments arereleased. AFPC has confirmed to PIL that it is prepared to discuss a settlement. Whilstdiscussions will commence as soon as practicable, the Company cannot currently be certainas to the timing or outcome of the process.

12.5 A former employee of Petrofac Inc. and a shareholder of Petrofac Tyler, Inc. brought a claimfor misrepresentation allegedly made in connection to the sale of assets by Petrofac Tyler, Inc.as part of the Group reorganisation undertaken in 2002. The employee claims fraud,conspiracy to defraud, breach of fiduciary duty, statutory fraud, dissenting shareholder rightsand breach of contract. The claimant may seek compensation in an amount as high asUS$2.52 million.

As a result of mediation in April 2005, the parties agreed to a process to value the shares of theemployee. The employee has only recently executed the document recording the mediationagreement. As a result of this agreement, an independent valuation of Petrofac Tyler, Inc.shares will be completed which ultimately may lead to a full and final negotiated settlement.This valuation process is underway. The presiding judge has indicated that if the valuationprocess does not lead to a settlement by 12 October 2005, the lawsuit may be set for trialshortly thereafter.

12.6 In March 2003, Petrofac Training accidentally discharged kerosene-contaminated waterfrom its Montrose premises into a Scottish Water’s sewerage system. Petrofac Trainingsettled the claim for £500,000, which was covered by its insurance. Following this incidentvarious corrective measures were implemented including the installation by a contractor,Ferrier Pumps, of float switches intended to stop the discharge of water above certain levels.Petrofac Training received another claim for £400,000 as a result of a further incident inApril 2004. An investigation was performed after the second incident by the loss adjusterappointed by the insurer. This revealed that there was an alleged flaw in the installation of thefloat switches by Ferrier Pumps, which resulted in their non-operation to cut off thedischarge. The insurers have initiated a counterclaim against the contractor, Ferrier Pumps.The claim is currently on-going.

12.7 The Procurator Fiscal in Scotland brought two charges under HASAWA on behalf of theH&S Executive against Petrofac Facilities Management (PFM) in respect of a small fire on theNorthern Producer facility. Following an investigation, both of these charges were droppedin May 2005. The charges were, however, subsequently replaced by three fresh charges. PFMintends to plead ‘not guilty’ to the charges on the grounds that the employees had admittedtheir responsibility in not following normal practice and that nothing more could have beendone by PFM. If PFM is found guilty then the maximum penalty which could be awardedagainst it is a combined fine of £30,000. A relevancy minute was prepared on 30 June 2005,lodged with the court and a hearing dealing with the relevency of the charges held on5 September 2005. The case will proceed to be heard at a preliminary hearing (intermediatediet) on 20 December 2005, with a provisional trial date of 16 January 2006.

12.8 Arbitration proceedings have been progressing in India in relation to the sulphur recoveryunit blocks in the Mathura and Gujarat refineries. Petrofac has brought a claim against theclient, Indian Oil Corporation (IOC), for US$7 million (split US$1.3 million to Petrofac andUS$5.7 million to Punj Lloyd as subcontractor) on account of unpaid contractual receivables.IOC has witheld this amount pending resolution of a dispute on the basis of payment of

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customs duties (seller’s invoice or EPC invoice) and whether duty should be treated as areimbursable component under the contract. In addition, Petrofac have also raised claims onaccount of accrued interest and the contractual obligations being extended and prolonged asa result of the arbitration proceedings. The value of this part of the claim is as yetunquantified.

IOC has in turn brought a counter-claim in the amount of US$3,358,000 (10 per cent. of thecontract value) against Petrofac for purported delays and liquidated damages on the Mathurarefinery. Arbitration hearings have been taking place and the last such hearing took place on27 August 2005. A further arbitration hearing is scheduled for October 2005.

12.9 A writ has recently been issued by Atlantic Resourcing Limited (Atlantic) in an attempt torecover (1,235,075.46 owed to Atlantic by Kavala Oil SA (Kavala) pursuant to a contractfor the supply of personnel to work at the King Alexander Drilling Facility, Prinos Field,Offshore Kavala, Greece. Kavala had previously offered to pay off the outstanding amountwith a 25 per cent. discount which Atlantic rejected. Steps are being taken to commenceproceedings in the Greek courts to recover the full outstanding amount. The Companycannot currently be certain as to the timing or outcome of the process.

12.10The Company was notified on 13 September 2005 by lawyers representing Desert Line groupof companies (DLP) (a former agent of Petrofac Inc. in the Sultanate of Oman) of DLP’sallegations that the carrying on by the Group of business in the Sultanate of Oman is in breachof unspecified obligations it is alleged to owe DLP and reserving the right to bring a claimagainst Petrofac (which is, at present, unquantified). Following Petrofac Inc.’s termination ofDLP’s agency agreement in 1992, DLP brought arbitration proceedings against Petrofac Inc.,which ultimately resulted in Petrofac Inc. making a payment of US$500,000 to DLP in 1995.The Directors consider the allegations to be without merit and have responded accordingly.

13. Underwriting arrangementsOn 21 September 2005, the Company, the Selling Shareholders, the Directors, certain other SeniorManagers and the Joint Lead Managers and the Co-Lead Managers (the Joint Lead Managers andthe Co-Lead Managers together the “Underwriters”) entered into the Underwriting Agreement.Pursuant to the Underwriting Agreement and subject to the entry by the Company and theUnderwriters into a Pricing Memorandum recording the Offer Price:

(a) the Company agrees to appoint Credit Suisse First Boston as Sponsor in relation to the Offerand the application for Admission;

(b) the Selling Shareholders agree to sell up to 152,977,031 Ordinary Shares in aggregate in theOffer at the Offer Price;

(c) the Underwriters severally agree, subject to certain conditions (as set out below), to procurepurchasers for (or, failing which, to purchase themselves) the Ordinary Shares pursuant tothe Offer and such an obligation also applies in respect of any Ordinary Shares in respect ofwhich the Over-allotment Option described in paragraph (h) below has been duly exercised;

(d) unless alternative arrangements satisfactory to the Company can be made, the Underwritersagree to increase their respective several commitments under the Underwriting Agreementpro-rata should any Underwriter or Underwriters default on its or their obligation under theUnderwriting Agreement to procure purchasers for, or itself purchase, any of the OrdinaryShares that are the subject of the Offer provided that the number of Ordinary Shares inrespect of which the Underwriter or Underwriters defaults does not exceed an aggregate of10 per cent. of the total number of Ordinary Shares that the Underwriters are obligated topurchase or procure purchasers for;

(e) the Underwriters will deduct from the proceeds of the Offer certain commissions, fees andexpenses to be borne by the Selling Shareholders, including aggregate commissions of3.15 per cent. of the product of the Offer Price and the number of Ordinary Shares to be soldpursuant to the Offer;

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(f) the obligations of the Underwriters to procure purchasers for the Ordinary Shares, failingwhich, themselves to purchase and pay for the Ordinary Shares, are subject to the entry by theCompany and the Underwriters into a Pricing Memorandum recording the Offer Price andthe following additional conditions:

(i) the application for Admission having been approved by 7 October 2005 (or such laterdate as the Joint Lead Managers may agree with the Company);

(ii) delivery of Company Board minutes, legal opinions, the lock-in undertakings given bythe Contractual Lock-in Shareholders (as described in paragraph 6 in Part VIII –“Details of the Offer” above) and comfort letters, a copy of the written acceptance ofappointment of the agents for service of process appointed pursuant to theUnderwriting Agreement and the consent of the Jersey Financial Services Commissionand documents from Ernst & Young as auditors to the Company to the Joint LeadManagers as representatives of the Underwriters;

(iii) the absence of any breach of warranty under, or any other term of, the UnderwritingAgreement;

(iv) no change, and no development or event reasonably likely to involve a prospectivechange, having occurred in the financial condition, prospects, results of operations orproperties of the Group from that set forth in this document which, in the solediscretion of the Joint Lead Managers, is material and adverse to the Group and whichmakes it, in the sole discretion of the Joint Lead Managers (following consultation withthe Company if reasonably practicable), impracticable to market the Ordinary Shareson the terms and in the manner contemplated in this document or which, in the solediscretion of the Joint Lead Managers, (following consultation with the Company ifreasonably practicable) is likely to prejudice materially the success of the Offer ordealings in the Ordinary Shares in the secondary market; and

(v) the Company having applied to CRESTCo for admission of the Ordinary Shares to theCREST system and such application not having been refused;

(g) in addition, the Joint Lead Managers on behalf of the Underwriters have the right toterminate the Underwriting Agreement prior to Admission in the following circumstances:

(i) if there shall have occurred a general moratorium on commercial banking activities inthe United Kingdom or United States or Jersey or the United Arab Emirates by anyUnited Kingdom, New York State or United States Federal or Jersey or United ArabEmirates authorities;

(ii) if any of the conditions precedent of the Underwriting Agreement are not met on time;and

(iii) if certain specified events occur, which make it, in the sole discretion of the Joint LeadManagers, impracticable to market the Ordinary Shares on the terms and in the mannercontemplated in this document or which, in the sole discretion of the Joint LeadManagers (following consultation with the Company if reasonably practicable), arelikely to prejudice materially the success of the Offer or dealings in the Ordinary Sharesin the secondary market;

Such termination provisions are customary for an agreement of this nature;

(h) the Over-allotment Shareholders grant the Stabilising Manager on behalf of the Underwritersan option to purchase or procure purchasers for Ordinary Shares representing up to 10 percent. of the Ordinary Shares in the Offer for the purpose of covering over-allotments whichmay be made in connection with the Offer and short positions resulting from stabilisationtransactions on the date on which the Offer Price is announced or from time to time up to andincluding the thirtieth day following the date of announcement of the Offer Price uponwritten notice from the Joint Lead Managers, on behalf of the Underwriters;

(i) the Selling Shareholders agree to pay any stamp duty or stamp duty reserve tax or other dutyor tax arising on the sale of the Ordinary Shares being sold by them pursuant to the Offer;

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(j) the Company agrees to pay the costs, charges, fees and expenses of the Offer (together withany related value added tax);

(k) the Company, the executive Directors of the Company and certain other executives givecustomary warranties in relation to the business, the accounting records and the legalcompliance of the Group, in relation to the Ordinary Shares and in relation to the contents ofthis document to the Underwriters, the non-executive Directors of the Company givecustomary warranties in relation to the contents of this document and certain matters relatingto themselves to the Underwriters and the Selling Shareholders give customary warranties inrelation to their capacity and their conduct and the contents of this document insofar as itrelates to them to the Underwriters;

(l) the Company and the executive directors and certain other executives and the SellingShareholders (other than 3i) give customary indemnities to the Underwriters in connectionwith any loss the Underwriters may suffer in connection with a breach of the warranties of theCompany or the relevant executive directors, other executives or Selling Shareholders and theCompany gives customary indemnities to the Underwriters in relation to any loss theUnderwriters may suffer in connection with the Offer;

(m) the liability of the Directors, certain executives and the Selling Shareholders under therespective warranties and the indemnity given by them is limited both as to amount and time.The liability of the Company under the warranties and indemnity given by it is unlimited;

(n) the Company undertakes with the Underwriters that, during the period ending 40 days afterthe completion of the Offer, the Company and the Directors will not, and the Company willprocure that none of its subsidiaries or affiliates nor any person acting on its behalf will,without the consent of the Joint Lead Managers (on behalf of the Underwriters), issue anyannouncement concerning, or enter into or procure, and the Company will not permit any ofits subsidiaries or affiliates to enter into, any commitment or agreement which could bematerial in the context of, the offering and distribution of the Ordinary Shares or the businessand affairs of the Group subject to certain limited exceptions;

(o) the Company agrees that neither it nor any of its subsidiaries or affiliates will issue, offer, sell,contract to sell, pledge or otherwise dispose of (or publicly announce any such issuance, offer,sale or disposal) any shares in the Company or securities convertible or exchangeable into orexercisable for any shares in the Company without the prior written consent of the Joint LeadManagers for a period of 180 days after Admission, subject to certain limited exceptions;

(p) the addresses of the Underwriters are set out on page 9 of this document; and

(q) Shuaa Capital is selling agent for the six Middle Eastern countries of the GCC and as such hasnot agreed to underwrite a fixed amount of Ordinary Shares.

14. Material contractsSave as disclosed below, and save for the Underwriting Agreement disclosed in paragraph 13above, there are no contracts (not being contracts entered into in the ordinary course of business)which were either (i) entered into by any member of the Group within the two years immediatelypreceding the date of this document and which are or may be material or (ii) entered into by anymember of the Group and contain any provision under which any member of the Group has anyobligation or entitlement which is material to the Group at the date of this document.

14.1 US$145 million debt facilities agreement dated 15 October 2004 between Petrofac Limitedand its subsidiaries as borrowers and guarantors, The Governor and Company of the Bank ofScotland (BoS) and The Royal Bank of Scotland plc (RBS) as Arrangers and OriginalLenders, RBS as the Working Capital Bank and BoS as the Guarantee Bank, Issuing Bank,Agent and Security Trustee (the “Facilities Agreement”)

14.1.1 Under the terms of the Facilities Agreement, RBS and BoS made available to theborrowers a term loan and guarantee facility, revolving credit facilities, overdraftfacility and a bond and guarantee facility.

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14.1.2 The facilities are secured by cross-guarantees from the Company and other membersof the Group and were previously secured by fixed and floating charges and one sharepledge over the assets and undertaking of certain Group members. BOS, as SecurityTrustee has, on 1 September 2005, signed a deed of release to release all the existingsecurity with the result that the facilities are now fully unsecured as against the assetsof the Company and the other members of the Group.

14.1.3 The term loan element (accounting for up to US$75 million) is repayable quarterlybeginning 31 December 2006 with the final instalment to be made on 30 September2011. It may be prepaid in whole or in part (minimum US$500,000) on not less thanfive business days’ notice. A prepayment fee may be payable in certain circumstances.

The Company is required to promptly notify the Agent in writing upon becomingaware of a change of control in relation to itself, but any such change of control as adirect result of a listing of the Company is not a mandatory prepayment event.Interest on the term loan is calculated as the aggregate of the applicable margin of1.375 per cent. per annum, LIBOR (or in relation to any loan in Euro, EURIBOR)and the bank’s cost of funds.

14.1.4 Up to US$20 million in principal amount of revolving credit facility is provided byBoS and is repayable on 30 September 2006 or such later date as agreed between theparties following annual reviews commencing on 30 September 2006.

Up to a further US$20 million in principal amount of revolving credit facility isprovided by RBS and is repayable on 30 September 2008, on which date all loansre-borrowed will be consolidated into a single loan repayable quarterly commencingon 31 December 2008 and ending on 30 September 2011.

The aggregate amount of the revolving credit facility is US$40 million and interest onthe revolving credit facility is calculated as the aggregate of the applicable margin of1.75 per cent. per annum, LIBOR (or in relation to any loan in Euro, EURIBOR) andthe bank’s cost of funds.

14.1.5 An overdraft of up to US$25 million is committed and is available until30 September 2005, subject to RBS’s right (acting on instruction of the majoritylenders) to terminate the overdraft on the occurrence of a standard event of default.Interest is charged on the net debit balance on the group accounts at the rate of 1.25per cent. per annum above RBS’s fluctuating base rate for sterling, euro or dollars asappropriate. A non-utilisation fee will be charged quarterly in arrears, calculated ona daily basis on the undrawn amount of the overdraft at the rate of 0.5 per cent. perannum. RBS has agreed that the overdraft facility will be extended for another yearuntil 30 September 2006.

14.1.6 A bond and guarantee facility of up to US$5 million is available until 30 September2006, subject to a further renewal or extension upon an annual review by BoS. BoScharges a fee of 1.25 per cent. per annum of the outstanding liabilities (whetheractual or contingent) of BoS from time to time under the guarantees or bonds issuedby BoS on the borrower’s behalf.

14.1.7 An arrangement fee of US$750,000 was paid by the Company to BoS and RBS(distributed equally) on first drawdown of the facilities. A commitment fee computedat the rate of (i) 0.5 per cent. of BoS’s available commitment under the revolvingcredit facility for the period until 30 September 2006 (or such later date as may beagreed between the parties further to annual reviews) and (ii) 0.5 per cent. of RBS’savailable commitment under the revolving credit facility for the period until30 September 2008 is payable to the Agent (for the account of each lender). TheCompany is required to pay (i) to the Agent (for its own account) an agency fee ofUS$10,000 per annum and (ii) to the Agent (for each Lender) a monitoring fee ofUS$50,000 per annum.

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14.2 Agreement for the purchase by Petrofac Limited of the entire issued share capital of RGITMontrose Holdings Limited dated 12 February 200414.2.1 Petrofac Limited acquired RGIT Montrose from a group of sellers, including

individual sellers (management owners Murray Strachan, James Melvin Keenan,Martin Beard, Maurice McBride, William McCall and Scott Martin), together withmembers of their respective families (Carol Fiona Ross, Christopher MurrayStrachan, Lauren Claire Strachan, Nicola Martin, Ross Gunn Martin, Hayley KateMartin, Agnes Hamilton Keenan, Grant Melvin Keenan, Gregor Iain Keenan,Jacqueline Elizabeth Kerry Beard, Douglas Samuel Beard, Francesa Mary Beard) and3i shareholders (3i Group plc, 3i NPM Smaller MBO Plan and 3i Smaller MBOPlan). The consideration was a mixture of cash and loan notes issued by PetrofacLimited, and the total consideration was US$17.2 million. The loan notes were fullyredeemed by 30 June 2005 and there is no outstanding cash consideration to be paid.

14.2.2 Warranties were given severally by the sellers in relation to authority and ownershipof the shares. Customary warranties in relation to the business were given by themanagement owners.

14.2.3 Restrictive covenants lasting for three years were given by certain managementsellers (in relation to non-compete, non-solicitation of clients and non-solicitation ofdirectors, managers, sales persons or previous employees with confidentialinformation). All warrantors agreed not to use the RGIT Montrose name or similarname, not to divulge confidential information, and not to represent an ongoingassociation with RGIT Montrose for any other business conducted.

14.2.4 Under separate option agreements, Murray Strachan, Scott Martin and MartinBeard were granted options over shares in the Company. These options have sincebeen exercised.

14.3 Agreement dated 15 October 2004 for the purchase by the Company of 1,730,211 ordinaryshares of US$1.00 each in the capital of the Company held by Ralph Martin (the “RM SaleShares”)Under the terms of this agreement, the Company purchased the RM Sale Shares from RalphMartin for a purchase price of US$23,651,984. The agreement contained anacknowledgement by Ralph Martin that he was not entitled in the future to any shares in thecapital of the Company by virtue of his ownership of the RM Sale Shares and an agreement byhim to release and forever discharge the Company from any claims for additionaldistributions, dividends or proceeds based on his ownership of the RM Sale Shares.

14.4 Agreement dated 15 October 2004 for the purchase by the Company of 516,477 ordinaryshares of US$1.00 each in the capital of the Company held by Greg Hendrickson (the “GHSale Shares”)Under the terms of this agreement, the Company purchased the GH Sale Shares from GregHendrickson for a purchase price of US$7,060,240.50. The agreement contained anacknowledgement by Greg Hendrickson that he was not entitled in the future to any shares inthe capital of the Company by virtue of his ownership of the GH Sale Shares and anagreement by him to release and forever discharge the Company from any claims foradditional distributions, dividends or proceeds based on his ownership of the GH Sale Shares.

14.5 Supplemental Option Agreement to subscribe for shares in the Company between theCompany, the Shareholders (as defined in the agreement) and 3i dated 20 October 2004.Following the purchase of the RM Sale Shares and the GH Sale Shares (as mentioned above),the option agreement dated 30 April 2002 (whereby 3i was granted an option to acquire13 per cent. of the share capital in the Company, such option also being exercisable by theCompany under certain conditions) was amended, providing 3i with a revised right to acquireshares representing 16.2 per cent. of the share capital in the Company, subject to adjustment.The option was exercisable by 3i at any time until 30 June 2009 and by the Company on thefulfilment of certain conditions. In the six months ended 30 June 2005, such conditionsallowing the Company to call upon 3i to subscribe for 16.2 per cent. of the share capital weresatisfied, and on 21 June 2005 the option was exercised by the Company. For further detail,see the share options section of note 22 to Part X – “Financial Information on Petrofac”.

143

15. Subsidiaries and joint ventures15.1 The Company acts as the holding company of the Group. The Company’s subsidiaries and

joint ventures, excluding dormant companies, are listed below:

Name of companyCountry ofIncorporation Registered Office

Proportion ofnominal valueof issuedsharescontrolled bythe Group(per cent.) Field of Activity

SubsidiariesPetrofac Inc. USA 1101 ESE Loop

323 Tyler, Texas75701USA

100 US EngineeringProcurement andFabricationcontractor(Discontinuedoperation)

PetrofacInternational Ltd

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 EPC contractor

Petrofac ResourcesInternationalLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 Investments in oiland gas assetsworldwide,excluding UK

Petrofac ResourcesLimited

England 205 Holland ParkAvenue, LondonW11 4XB

100 Holding companyfor investments inoil and gas assets inthe UK

Petrofac ESOPTrustees Limited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 Trustee toPetrofac’s executiveshare trust

Petrofac UKHoldings Limited

England Chester House76-86 Chertsey RoadWoking, SurreyGU21 5BJ

100 Holding Company(of all operationalUK companiesexcept PRL andPSL)

Petrofac FacilitiesManagementInternationalLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 Internationaloperations andmaintenancecontractor

Petrofac ServicesLimited

England 205 Holland ParkAvenue, LondonW11 4XB

100 UK ManagementServices Company

Petrofac ServicesInc

USA 1177 Enclave ParkwaySuite 350HoustonTexas77077USA

100 US ManagementService Company

Petrofac TrainingInternationalLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 Provision oftraining services tointernationalmarkets

144

Name of companyCountry ofIncorporation Registered Office

Proportion ofnominal valueof issuedsharescontrolled bythe Group(per cent.) Field of Activity

PetroleumFacilities E & CLimited

Jersey Waverly PlaceUnion StreetSt HelierJerseyJE2 3RF

100 EPC Contractor

AtlanticResourcingLimited

Scotland Bridge View1 North EsplanadeWestAberdeenAB11 5QF

100 UK ManpowerSupply Contractor

MonsoonShipmanagementLimited

Cyprus 3 Chrysathou MylonaStreetLimassolCyprus

100 InternationalManpower SupplyContractor

MonsoonShipmanagementLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 InternationalManpower SupplyContractor

Petrofac AlgeriaURAL

Algeria ERARA CompanyArea No 13 HassiMessaoudWargla StateAlgeria

100 EPC Contractor

PetrofacEngineering IndiaPrivate Limited

India IB/501 and 503DelphiHirananandaniBusiness ParkPowaiMumbai 400 076India

100 EngineeringServices

PetrofacEngineeringLimited

England Chester House76-86 Chertsey RoadWoking, SurreyGU21 5BJ

100 Provision ofengineering andconsultancy services

Petrofac OffshoreManagementLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 SpecialistManpower SupplyContractor

Petrofac FacilitiesManagementGroup Limited

Scotland Bridge View, 1 NorthEsplanade West,AberdeenAberdeenshireAB11 5QF

100 Holding Companyfor all UK PFMcompanies

145

Name of companyCountry ofIncorporation Registered Office

Proportion ofnominal valueof issuedsharescontrolled bythe Group(per cent.) Field of Activity

Petrofac FacilitiesManagementLimited

Scotland Bridge View, 1 NorthEsplanade West,AberdeenAberdeenshireAB11 5QF

100 Operations,Maintenance andEngineeringContractor

PetrofacInternationalNigeria Ltd

Nigeria 4th floor, The Octagon13A A.J. MarinhoDriveVictoria Island AnnexeLagosNigeria

100 EPC Contractor

Petrofac Pars(PJSC)

Iran Units 1&258 East Maryam StreetElahiyeh 19649TehranIran

100 MaintenanceServices

Petrofac Iran(PJSC)

Iran Units 1&258 East Maryam StreetElahiyeh 19649TehranIran

100 EPC Contractor

Petrofac Resources(Ohanet) JerseyLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

100 Holding Company

Petrofac Resources(Ohanet) LLC

DelawareUSA

Suite 6061220 N. Market StreetWilmingtonCounty of New CastleDelawareUSA

100 JV operator of RSCin Algeria (Ohanet)

Plant AssetManagementLimited

Scotland Bridge View, 1 NorthEsplanadeWest AberdeenAberdeenshireAB11 5QF

51 SpecialistMaintenanceContractor

Petrofac NuiginiLimited

Papua NewGuinea

Level 5Defens HausCorner Hunter Streetand Champion ParadePO Box 389Port MoresbyNCB 121Papua New Guinea

100 RefineryManagementContractor

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Name of companyCountry ofIncorporation Registered Office

Proportion ofnominal valueof issuedsharescontrolled bythe Group(per cent.) Field of Activity

PFMAP SendirianBerhad

Malaysia Menara MileniumJalan DamanlelaPusat BandarDamabsaraDamansara Heights50490, Kuala LumparMalaysia

100 Operations andMaintenanceContractor

Petrofac CaspianLimited

Azerbaijan 42 Jabar Jabbarli StreetCaspian BusinessCenterBakuAzerbaijan

100 EPC Contractor

Petrofac (Malaysia– PM304) Limited

England 205 Holland ParkAvenue, LondonW11 4XB

100 JV partner of PSCin Malaysia(Cendor)

Petrofac TrainingGroup Limited

Scotland Scota House, BlacknessAvenue, AltensAberdeen AB12 3PG

100 Holding Company

Petrofac TrainingHoldings Limited

Scotland Johnstone, House52-54 Rose StreetAberdeenAB10 1HA

100 Holding Company(also owns theproperty of theAberdeen andMontrose trainingcentres)

Petrofac TrainingLimited

Scotland The Offshore TrainingCentre, Forties RoadMontrose, AngusDD10 9ET

100 Provision of safetytraining services

RGIT MontroseInc.

USA 1021 Main StreetSuite 1150HoustonTexas77002USA

100 Provision of safetytraining services

RGIT Montrose(Trinidad) Limited

Trinidad 11-13 Victoria AvenuePort of SpainTrinidadWest Indies

100 Provision of safetytraining services

Rubicon ResponseLimited

Scotland 200 Ashgrove RoadWestAberdeenAB16 5NY

100 Provision ofEmergencyResponse and CrisisManagementconsultancy services

147

Name of companyCountry ofIncorporation Registered Office

Proportion ofnominal valueof issuedsharescontrolled bythe Group(per cent.) Field of Activity

Joint ventures

Costain PetrofacLimited

England Costain HouseNicholson WalkMaidenhead, BerkshireSL6 1LN

50 Engineering andConstructionContractor

Kyrgyz PetroleumCompany

KrygzRepublic

Lenin Stret 44Kochkor Ata CityDzhaial-Abad OblastKyrgyz Republic715622

50 Refining andmarketingpetroleum products

MJVI SendirianBerhad

Brunei No 4711Jalan Sungai PandanKuala BelaitBrunei Darussalam

50 Multi – ServicesContractor

Spie Capag –PetrofacInternationalLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

50 EPC Contractor

TTE PetrofacLimited

Jersey Whiteley ChambersDon StreetSt Helier, JerseyJE4 9WG

50 Management andoperation oftechnical trainingcentre

16. Property, plant and equipment16.1 Aside from the property interests listed below, there is no existing or planned material

tangible fixed asset which is material to the business of the Group:

Property name Place Tenure Area (sq.m) UseUnexpired Term ofLease

The Fire SchoolForties RoadMontrose

Montrose,Scotland

Freehold 67,583 FireTrainingSchool

Not applicable

Bridge View, 1North EsplanadeWest, Aberdeen

Aberdeen,Scotland

Leasehold 3,564 Office 19 years and onemonth (expires30 October 2024)

76-78 ChertseyRoad, Woking

Woking,England

Leasehold 2,045 Office 10 years and threemonths (expires24 December 2015)

B Wing, Delphibuilding,HiranandaniBusiness ParkPowai, Mumbai

Mumbai,India

Licence 3,424 Office 4th Floor: Twoyears and twomonths (expires20 November2007)5th Floor: One yearand 7 months(expires 18 April2007)

148

Property name Place Tenure Area (sq.m) UseUnexpired Term ofLease

Block A, Al SoorAl Soor AreaSharjah

Sharjah,UAE

Leasehold 8,068 Office Floors 2-6: One yearand three months(expires31 Deccember2006). Floors 1 and7 and Ground Floorshow room 3: Threemonths (expires31 December 2005)

Block B, Al SoorAl Soor AreaSharjah

Sharjah,UAE

Leasehold 4,408 Office Floors 1-10: Oneyear and 11 months(expires 31 August2007)

Training Centre,Blackness Avenue,Altens, Aberdeen

Aberdeen,Scotland

Leasehold 8,393 Trainingcentre

Lease 1 (part): 74years and 8 months(expires May2080), lease 2(part): 76 years and8 months (expiresMay 2082)

Please see Part II – “Risk factors” and paragraph 5 of Part III – “Information on the PetrofacGroup” for a description of the environmental issues that may affect the Petrofac Group’sutilisation of its tangible fixed assets.

17. Research and developmentThe Group does not undertake significant research and development activities, and has notoperated formal research and development policies for the financial years ended 31 December2002, 2003 and 2004.

18. Intellectual propertyIn providing its services, the Group uses both know-how which it regards as proprietary and certainintellectual property rights and software licensed from third parties. Steps are currently being taken toprotect the Petrofac names used by the Group. The Group uses the RGIT Montrose name under licence.

19. No significant changeThere has been no significant change in the financial or trading position of the Petrofac Group sincethe audited interim financial statements published for the 6 month period ended 30 June 2005.

20. Miscellaneous20.1 The total expenses of the Offer are estimated to amount to US$6.2 million.20.2 Ernst & Young LLP, a member of the Institute of Chartered Accountants in England and

Wales, (together with their predecessor firm, Ernst & Young) of 1 More London Place,London SE1 2AF have audited the financial statements of the Company for the years ended31 December 2002, 2003 and 2004 and for the interim financial period from 1 January to30 June 2005.

20.3 Ernst & Young LLP has given and not withdrawn its written consent to the inclusion of itsreport in Part X – “Financial information on Petrofac” and the references herein to its reportand its name in the form and context in which they appear and has authorised the contents ofits report for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.

20.4 Ryder Scott Company LP of 1100 Louisiana, Suite 3800, Houston, Texas, USA has given andnot withdrawn its written consent to the inclusion of its report in Part VII – “CompetentPerson’s Report by Ryder Scott” and the references herein to its report and its name in theform and context in which they appear and has authorised the contents of its report for thepurposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.

149

20.5 The following natural and legal persons have the following interests (including conflictinginterests) that are material to the Offer:

20.5.1 The Company agreed to grant Keith Roberts options over 75,000 ordinary shares aspart of his appointment as Chief Financial Officer in 2002. At the time of hisappointment, Mr Roberts and 3i agreed in principle that 3i would grant him anoption to acquire from it the number of A ordinary shares, at US$25 per share,required to protect the option which the Company had agreed to grant him fromdilution, in the event that 3i converted their loan notes in the Company into Aordinary shares. Following periodic discussions between Mr Roberts and 3i over theperiod since 2002, a letter agreement was signed on 7 September 2005 pursuant towhich Mr Roberts will receive a cash payment from 3i following Admission of anamount equal to the value, at the Offer Price less US$0.625 per share, of 448,280Ordinary Shares. The letter agreement includes adjustments to reflect thesub-division of the Company’s A ordinary shares and the simplification from anoption to acquire shares to an equivalent cash amount.

20.5.2 Rodney Chase, Chairman, is a senior adviser to, and a member of the EuropeanAdvisory Council of, Lehman Brothers, a Joint Lead Manager of the Offer.

20.5.2 David Bush, former general counsel to the Company, has remained a director of twoUS subsidiaries of the Company, namely Petrofac Inc. and Petrofac Services Inc. inorder to assist in relation to the wind-down of Petrofac Inc.’s business and thetransition of the remaining business from Tyler to Houston. David Bush is a lawyerworking in the firm, Kent, Good, Anderson & Bush P.C. of 1121 ESE Loop 323,Suite 200, Tyler, Texas, USA. The firm receives fees from the Group for the provisionof legal services. In the period 1 January through 30 June 2005, the average feesreceived by the firm from the Group for legal services rendered were US$28,700 permonth.

20.6 The information sourced from BP Statistical Review of World Energy June 2005, theWorldwide Petroleum Industry Report, JS Herold, IEA and OPG has been accuratelyreproduced and, as far as the Directors are aware and have been able to ascertain frominformation published by BP Statistical Review of World Energy June 2005, the WorldwidePetroleum Industry Report, JS Herold, IEA and OPG, no facts have been omitted whichwould render the reproduced information inaccurate or misleading. Where third partyinformation has been used in this document the source of such information has beenidentified.

21. Documents on displayCopies of the following documents will be available for inspection during normal business hours onMonday to Friday each week (public holidays excepted) from the date of publication of thisdocument until Admission at Petrofac’s registered office at Whiteley Chambers, Don Street,St Helier, Jersey JE4 9WG and at the offices of Norton Rose, Kempson House, Camomile Street,London EC3A 7AN:

21.1 this document;

21.2 the memorandum and the New Articles of Petrofac;

21.3 the report of Ryder Scott contained in Part VII – “Competent Person’s Report by RyderScott”;

21.4 the report of Ernst & Young LLP contained in Part X – “Financial Information on Petrofac”;

21.5 the annual report and accounts of Petrofac for the two years ended 31 December 2003 and2004; and

21.6 a full copy of the rules of the ESS, the PSP and the DBSP and the trust deed and rules of the SIP.

Dated: 21 September 2005

150

PART X

Financial Information on Petrofac

Ernst & Young LLP1 More London PlaceLondonSE1 2AF

The DirectorsPetrofac LimitedWhiteley ChambersDon Street, St HelierJersey, Channel IslandsJE4 9WG 21 September 2005

Dear SirsPetrofac LimitedWe report on the financial information for the 6 months ended 30 June 2005 and the years ended31 December 2004, 2003 and 2002 (the “Audited Financial Information”) set out in sections1 to 5 in Part X of the Prospectus. We do not report on the 30 June 2004 unaudited financialinformation. This financial information has been prepared for inclusion in the prospectus dated21 September 2005 of Petrofac Limited on the basis of the accounting policies set out in section 5.This report is required by paragraph 20.1 of Annex I of the Prospectus Regulation and is given forthe purpose of complying with that paragraph and for no other purpose.ResponsibilitiesThe Directors of Petrofac Limited are responsible for preparing the Audited Financial Informationon the basis of preparation set out in note 2 to the Audited Financial Information and in accordancewith International Financial Reporting Standards.It is our responsibility to form an opinion on the Audited Financial Information as to whether theAudited Financial Information gives a true and fair view, for the purposes of the prospectus, and toreport our opinion to you.Basis of opinionWe conducted our work in accordance with the Standards for Investment Reports issued by theAuditing Practices Board in the United Kingdom. Our work included an assessment of evidencerelevant to the amounts and disclosures in the Audited Financial Information. It also included anassessment of significant estimates and judgments made by those responsible for the preparation ofthe financial statements underlying the Audited Financial Information and whether the accountingpolicies are appropriate to the entity’s circumstances, consistently applied and adequatelydisclosed.We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurancethat the Audited Financial Information is free from material misstatement whether caused by fraudor other irregularity or error.OpinionIn our opinion, the Audited Financial Information gives, for the purposes of the prospectus dated21 September 2005, a true and fair view of the state of affairs of Petrofac Limited as at the datesstated and of its profits, cash flows and changes in equity for the periods then ended in accordancewith the basis of preparation set out in note 2 to section 5 and in accordance with InternationalFinancial Reporting Standards.DeclarationFor the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of theprospectus and declare that we have taken all reasonable care to ensure that the informationcontained in this report is, to the best of our knowledge, in accordance with the facts and containsno omission likely to affect its import. This declaration is included in the prospectus in compliancewith item 1.2 of Annex I of the Prospectus Regulation.Yours faithfullyErnst & Young LLP

151

1. Consolidated income statementUnaudited

Notes

6 monthsended

30 June2005

US$’000

6 monthsended

30 June2004

US$’000

Yearended

31 December2004

US$’000

Yearended

31 December2003

US$’000

Yearended

31 December2002

US$’000

Continuing operationsRevenue 692,410 402,968 951,530 628,702 391,398Cost of sales (618,197) (345,099) (829,081) (554,198) (335,907)

Gross profit 74,213 57,869 122,449 74,504 55,491Selling, generaland administrationexpenses 4c (34,073) (29,008) (58,825) (38,705) (23,030)Other income 4a 2,819 4,668 6,246 2,025 3,762Other expenses 4b (1,878) (1,076) (1,587) (77) (927)

Profit from continuingoperations before taxand finance costs 41,081 32,453 68,283 37,747 35,296

Finance costs 5 (4,786) (3,685) (7,544) (1,046) (725)Finance income 5 1,389 1,209 1,997 1,073 1,645

Profit before tax 37,684 29,977 62,736 37,774 36,216Income tax expense 6 (1,292) (8,029) (16,699) (2,579) (2,194)

Profit for the periodfrom continuingoperations 36,392 21,948 46,037 35,195 34,022

Discontinued operationsLoss for the period fromdiscontinued operation 7 (202) (12,942) (13,162) (16,241) (12,268)

Profit for the period 36,190 9,006 32,875 18,954 21,754

Attributable to:Petrofac Limitedshareholders 36,190 9,052 32,921 22,118 22,068Minority interests — (46) (46) (3,164) (314)

36,190 9,006 32,875 18,954 21,754

Earnings per share(US$): 8From continuing anddiscontinued operations:– Basic 5.05 1.00 3.77 2.30 2.21– Diluted 4.35 0.98 3.48 2.11 1.94

From continuingoperations:– Basic 5.08 2.42 5.28 4.00 3.43– Diluted 4.37 2.20 4.77 3.58 3.00

The accompanying notes to the financial information form an integral part of the financialinformation.

152

2. Consolidated balance sheet30 June 31 December 31 December 31 December

2005 2004 2003 2002Notes US$’000 US$’000 US$’000 US$’000

AssetsNon-current assetsProperty, plant and equipment 10 123,806 123,413 119,395 93,268Goodwill 12 49,631 49,653 29,594 31,854Intangible assets 13 372 6,721 — —Available-for-sale financial assets 15 2,273 4,104 2,135 —Other non-current assets 16 4,533 11,205 18,079 38,336Deferred income tax assets 6 6,031 782 975 7,617Investment in associate 17 — — — 1,000

186,646 195,878 170,178 172,075

Current assetsInventories 1,635 1,702 1,589 2,671Work in progress 18 153,609 109,037 102,841 47,116Trade and other receivables 19 209,742 200,042 96,485 88,238Due from related parties 30 31,490 20,889 21,635 2,039Other current assets 20 22,549 54,597 33,087 37,142Cash and short-term deposits 21 141,427 143,534 97,502 110,524

560,452 529,801 353,139 287,730

Non-current assets classified as held for sale 7 1,914 3,678 3,771 7,838

Total assets 749,012 729,357 527,088 467,643

Equity and liabilitiesEquity attributable to Petrofac LimitedshareholdersShare capital 22 7,184 7,166 9,066 10,000Share premium 29,219 28,553 52,592 59,018Capital redemption reserve 10,881 10,881 8,634 310Treasury shares — — (106) (1,018)Net unrealised gains on available-for-salefinancial assets 1,301 2,395 1,127 —Net unrealised (losses)/gains onderivatives (6,008) 22,964 (1,020) 1,132Foreign currency translation (809) 1,688 1,308 581Retained earnings 92,115 64,911 35,552 21,758

133,883 138,558 107,153 91,781Minority interest — — 2,241 4,321

Total equity 133,883 138,558 109,394 96,102

Non-current liabilitiesInterest-bearing loans and borrowings 23 85,717 110,787 85,627 83,221Other non-current liabilities 24 13,315 12,789 4,525 4,952Deferred income tax liabilities 6 2,922 1,535 120 187

101,954 125,111 90,272 88,360

Current liabilitiesTrade and other payables 26 100,080 114,873 110,516 116,021Due to related parties 30 1,526 1,453 108 105Interest-bearing loans and borrowings 23 69,308 50,691 31,966 3,895Income tax payable 3,938 3,172 613 2,597Billings in excess of cost and estimatedearnings 18 15,922 72,155 11,382 32,858Accrued contract expenses andprovisions 27 270,319 179,008 150,519 97,548Accrued expenses and other liabilities 28 52,082 44,336 22,318 22,821Redeemable preference shares 25 — — — 7,336

513,175 465,688 327,422 283,181

Total liabilities 615,129 590,799 417,694 371,541

Total equity and liabilities 749,012 729,357 527,088 467,643

The accompanying notes to the financial information form an integral part of the financialinformation.

153

3. Consolidated cash flow statementUnaudited

Notes

6 monthsended

30 June2005

US$’000

6 monthsended

30 June2004

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Operating activitiesNet profit before incometaxes and minorityinterests:Continuing operations 37,684 29,977 62,736 37,774 36,216Discontinued operation 7 (202) (12,942) (13,162) (11,326) (18,428)

37,482 17,035 49,574 26,448 17,788Adjustments for:Depreciation,amortisation andimpairment 13,265 12,696 27,888 11,059 4,329Finance costs, net 3,350 2,460 5,512 495 (949)Minority interests — 46 46 3,164 314Other non cash items,net 2,398 86 (412) (158) 958Gain on disposal ofdiscontinued operation 7 — — — (12,507) —Gain on disposal ofinvestments (1,819) (2,402) (2,932) — —

Operating profit beforeworking capital changes 54,676 29,921 79,676 28,501 22,440Trade and otherreceivables (7,574) (26,635) (99,582) (8,247) (10,017)Work in progress (44,572) 11,308 (6,196) (55,725) (17,616)Due from related parties (10,601) 294 746 (19,596) 2,840Inventories 67 (249) (113) 1,082 62Other current assets 13,765 (9,560) 171 4,002 (20,353)Trade and otherpayables (15,274) (16,375) (4,581) (5,610) 51,322Billings in excess of costand estimated earnings (56,233) 12,166 60,773 (21,476) (14,407)Accrued contractexpenses and provisions 91,311 (11,509) 28,489 52,971 4,579Due to related parties 73 (108) 1,345 108 (352)Accrued expenses andother liabilities 2,835 8,472 17,965 (2,791) 3,645

28,473 (2,275) 78,693 (26,781) 22,143Other non-current items,net (622) 11,901 19,123 13,689 (11,782)

Cash generatedfrom/(used in)operations 27,851 9,626 97,816 (13,092) 10,361Interest paid (5,296) (3,168) (5,695) (1,705) (1,169)Income taxes paid, net (7,548) (6,016) (13,278) (2,590) (777)

Net cash flowsfrom/(used in) operatingactivities 15,007 442 78,843 (17,387) 8,415

Of which discontinuedoperations (112) (9,589) (8,903) (35,927) (451)

154

3. Consolidated cash flow statement (continued)Unaudited

Notes

6 monthsended

30 June2005

US$’000

6 monthsended

30 June2004

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Investing activitiesPurchase of property,plant and equipment 10 (6,257) (9,132) (17,142) (34,321) (52,324)Acquisition of businessassets 11 — — (695) (373) —Acquisition ofsubsidiary, net of cashacquired 11 (4,073) (9,119) (9,119) — (16,111)Acquisition of interest injoint venture 11 — (1,000) (1,000) — —Purchase of intangibleoil & gas assets (372) (3,744) (4,480) — —Purchase of available –for – sale financial assets (691) — — — —Net cash from disposalof discontinuedoperation — — — 20,692 —Proceeds from disposalof property, plant andequipment 1,955 405 804 1,617 534Proceeds from disposalof available-for-salefinancial assets 3,247 — 2,344 — 1,969Foreign currencytranslation (2,497) 1,539 380 727 581Interest received 2,061 1,196 1,665 576 1,224Investment in associate — — — — (1,000)

Net cash flows used ininvesting activities (6,627) (19,855) (27,243) (11,082) (65,127)

Of which discontinuedoperations 1,895 — 39 21,929 (6,662)

155

3. Consolidated cash flow statement (continued)Unaudited

Notes

6 monthsended

30 June2005

US$’000

6 monthsended

30 June2004

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Financing activitiesProceeds from issue ofshare capital — 1,511 1,511 — —Proceeds frominterest-bearing loansand borrowings 20,347 — 45,722 31,412 88,455Repayment ofinterest-bearing loansand borrowings (31,176) (14,712) (35,684) (2,294) (15,500)Purchase of derivativefinancial instruments — — (62) — (1,000)Redemption ofpreference shares — — — (7,336) (310)Shareholders loan notetransactions, net 2,983 1,714 (1,581) 208 1,428Transactions withemployee share plan, net 655 (18) 3,016 890 (118)Exercise of option toacquire group shares 11 (2,400) — — — —Repurchase of shares 22 — — (30,760) (8,250) —Equity dividends paid (6,586) (1,315) (1,315) — —Net cash used inreorganisation — — — — (16,288)

Net cash flows (usedin)/from financingactivities (16,177) (12,820) (19,153) 14,630 56,667

Of which discontinuedoperations — — — — 5,317

Net (decrease)/increasein cash and cashequivalents (7,797) (32,233) 32,447 (13,839) (45)Cash and cashequivalents at 1 January 127,823 95,376 95,376 109,215 109,260

Cash and cashequivalents at period end 21 120,026 63,143 127,823 95,376 109,215

The accompanying notes to the financial information form an integral part of the financialinformation.

156

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160

5. Notes to the financial information1. Corporate informationPetrofac Limited (the Company) is a limited liability company registered in Jersey and is the holdingcompany for the international group of Petrofac subsidiaries (together “the group”). The group’sprincipal activity is the provision of total facilities solutions to the oil & gas industry.

A full listing of all group companies, including joint venture companies, is contained in note 33.

Prior to January 2002, the group’s operations were owned and/or operated through a combinationof companies organised in the United States and other countries in which a group of commonshareholders owned various share interests. The principal group holding company was PetrofacCorporation Limited (“PCL”).

On 13 January 2002, the group completed a corporate reorganisation through which theCompany acquired full ownership of PCL and of the minority interests in PCL’s subsidiaries thatPCL did not already directly or indirectly own. The Company also purchased certain assets fromthe minority shareholders of Petrofac LLC and the remaining minority interest in Petrofac LLC.The reorganisation resulted in PCL becoming a wholly owned subsidiary of Petrofac Limited andPCL wholly owning each of its direct subsidiaries. Subsequently, PCL was merged into PetrofacLimited. These reorganisation transactions included the issue of ordinary and preference sharesand the payment of cash.

2. Summary of significant accounting policiesBasis of preparationThe financial information has been prepared on a historical cost basis, except for derivativefinancial instruments and available-for-sale financial assets that have been measured at fair value.The carrying values of recognised assets and liabilities that are hedged are adjusted to recordchanges in the fair values attributable to the risks that are being hedged. The functional currency ofthe financial information is United States Dollars (US$), as a significant proportion of the group’sassets, liabilities, income and expenses are US$ denominated. The financial information ispresented in thousands of US$.

Statement of complianceThe financial information of Petrofac Limited and all its subsidiaries has been prepared inaccordance with accounting principles generally accepted in the Island of Jersey, incorporatingInternational Financial Reporting Standards (IFRS) and in compliance with the applicablerequirements of Jersey law.

Basis of consolidationThe financial information comprises the financial statements of Petrofac Limited and itssubsidiaries. The financial statements of subsidiaries are prepared using consistent accountingpolicies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

Subsidiaries are consolidated from the date on which control is transferred to the group and cease tobe consolidated from the date on which control is transferred out of the group. All inter-companybalances and transactions, including unrealised profits arising from intra-group transactions, havebeen eliminated on consolidation. Profit attributable to minority interests is disclosed separately onthe face of the Consolidated Income Statement.

Use of EstimatesThe preparation of consolidated financial statements requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the consolidated financial statements and the reported amountsof revenues and expenses during the year. Actual results could differ from those estimates.

6 months ended 30 June 2004 financial informationThe financial information for the 6 months ended 30 June 2004 has been provided as a comparativeto the financial information for the 6 months to 30 June 2005 and is included in the Consolidated

161

Income Statement, Consolidated Cash Flow Statement, Note 3 Segmental Information and Note 4Revenues and Expenses. This financial information has been prepared using the managementaccounts for the same period, which were prepared in July 2004, and adjusted for events in theperiod to 23 March 2005 (the date the financial statements for the year ended 31 December 2004were signed by the Company’s directors), to reflect the benefit of hindsight on conditions thatexisted at 30 June 2004.

An opinion is not required and has not been formed on the unaudited financial information for the6 months ended 30 June 2004.

Investment in joint venturesThe group’s interests in joint ventures are accounted for by proportionate consolidation, whichinvolves recognising its proportionate share of the joint venture’s assets, liabilities, income andexpenses with similar items in the financial information on a line-by-line basis.

GoodwillAcquisitions of companies are accounted for using the purchase method of accounting. Goodwillrepresents the excess of the cost of acquisition over the fair value of the identifiable assets, liabilitiesand contingent liabilities of the entity at the date of acquisition. Under IFRS 3, which came in to fulleffect on 1 January 2005, goodwill relating to purchase acquisitions is no longer subject toamortisation. The group assesses the carrying value of goodwill annually, or more frequently, ifevents or changes in circumstances indicate that such carrying value may not be recoverable.Impairment losses are recognised immediately in the income statement.

Transactions in foreign currenciesIn the accounts of individual group companies, transactions in foreign currencies are recorded atthe prevailing rate at the date of the transaction. At the period end, monetary assets and liabilitiesdenominated in foreign currencies are retranslated at the rates of exchange prevailing at the balancesheet date. All foreign exchange gains and losses are taken to the income statement.

Foreign group companiesThe balance sheets of overseas subsidiaries and joint ventures are translated using the closing ratemethod, whereby assets and liabilities are translated at the rates of exchange ruling at the balancesheet date. The income statements of overseas subsidiaries and joint ventures are translated ataverage exchange rates for the period. Exchange differences arising on the retranslation of netassets are taken directly to equity.

On the disposal of a foreign entity, accumulated exchange differences are recognised in the incomestatement as a component of the gain or loss on disposal.

Revenue recognitionRevenue is recognised to the extent that it is probable economic benefits will flow to the group andthe revenue can be reliably measured. The following specific recognition criteria also apply:

Engineering and Construction Division

Revenues from engineering, procurement and construction services apply the following criteria:Revenues from fixed-price and modified fixed-price contracts are recognised on thepercentage-of-completion method, based on surveys of work performed. This method is usedbecause management considers it to be the best available measure of progress on these contracts.Revenues from cost-plus-fee contracts are recognised on the basis of costs incurred during theperiod plus the fee earned measured by the cost-to-cost method.

Provision is made for all losses expected to arise on completion of contracts entered into at thebalance sheet date, whether or not work has commenced on these contracts.

Incentive payments are included in revenue when the contract is sufficiently advanced and theamount of the incentive payments can be measured reliably. Claims are only included in revenuewhen negotiations have reached an advanced stage such that it is probable the claim will beaccepted and can be measured reliably.

162

Operations Services Division

Revenues from facilities management and training services within the Operations Services Divisionand engineering services apply the following criteria:

Revenues from reimbursable contracts are recognised in the period in which the services areprovided based on the agreed contract schedule of rates. Revenues from fixed-price contracts arerecognised on the percentage-of-completion method, measured by milestones completed or earnedvalue.

Incentive payments are included in revenue when the contract is sufficiently advanced and theamount of the incentive payments can be measured reliably.

Oil & gas activities

Oil & gas revenues comprise the group’s share of sales from the processing or sale of hydrocarbonson an entitlement basis.

Borrowing costsBorrowing costs directly attributable to the construction of qualifying assets, which are assets thatnecessarily take a substantial period of time to prepare for their intended use, are added to the costof those assets, until such time as the assets are substantially ready for their intended use. All otherborrowing costs are recognised as interest payable in the income statement in the period in whichthey are incurred.

Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulated depreciation and any impairmentin value. The group capitalises directly attributable interest on property, plant and equipment in thecourse of construction.

Property, plant and equipment is depreciated on a straight-line basis over their estimated usefullives as follows:

Oil & gas facilities 10% – 12.5%Plant and equipment 4% – 33%Buildings and leasehold improvements 5% – 33%Office furniture and equipment 25% – 100%Motor vehicles 20% – 33%

No depreciation is charged on land or assets under construction.

The carrying values of property, plant and equipment are reviewed annually for impairment whenevents or changes in circumstances indicate the carrying amount may not be recoverable. If anysuch indication exists and where the carrying value exceeds the estimated recoverable amount, theassets are written down to their recoverable amount. The recoverable amount of property, plantand equipment is the greater of net selling price and value in use.

Oil & gas assetsCapitalised costs

The group follows the full cost method of accounting for oil & gas assets, under which expenditurerelating to the acquisition, appraisal and development of oil & gas interests, including anappropriate share of directly attributable overheads and relevant financing costs, is capitalised incost pools on the basis of income generating units. The cost of borrowing in respect of a fielddevelopment is capitalised until commencement of production from that field.

Expenditure on significant new appraisal and development areas and licences is carried outside thefull cost pools, as intangible oil & gas assets, pending determination of commercial reserves.Intangible oil & gas assets are carried forward until either declared part of a commercialdevelopment or such time as the licence area is abandoned, at which point the relevant total cost istransferred to the relevant tangible cost pool. Where there are no development and producing assetswithin the cost pool, the transferred costs are charged immediately to the income statement.

163

Amortisation of expenditure held in each tangible cost pool is provided using theunit-of-production method based on entitlement to proven and probable reserves, taking accountof estimated future development expenditure relating to those reserves.

Disposal proceeds in respect of oil & gas assets are taken to the relevant cost pool and no gain orloss on disposal is recognised.

Decommissioning

Provision for future decommissioning costs is made in full when the group has an obligation todismantle and remove a facility or an item of plant and to restore the site on which it is located, andwhen a reasonable estimate of that liability can be made. The amount recognised is the presentvalue of the estimated future expenditure. An amount equivalent to the initial provision fordecommissioning costs is capitalised and amortised over the life of the underlying asset on aunit-of-production basis over proven and probable reserves. Any change in the present value of theestimated expenditure is reflected as an adjustment to the provision and the oil & gas asset.

Unwinding of the discount of future decommissioning provisions is included as a separate financialitem in the consolidated income statement under the Finance Cost heading.

Available-for-sale financial assetsInvestments classified as available-for-sale are initially stated at cost, being the fair value ofconsideration given, including acquisition charges associated with the investment.

After initial recognition, available-for-sale financial assets are measured at their fair value usingquoted market rates. Gains and losses are recognised as a separate component of equity until theinvestment is sold or impaired, at which time the cumulative gain or loss previously reported inequity is included in the income statement.

Cash and cash equivalentsCash and cash equivalents consist of cash at hand and bank and short-term deposits with anoriginal maturity of three months or less.

For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents consist ofcash and cash equivalents as defined above, net of outstanding bank overdrafts.

InventoriesInventories, which comprise raw materials and consumables, are valued at the lower of cost and netrealisable value. Net realisable value is the estimated selling price in the ordinary course of business,less estimated costs of completion and the estimated costs necessary to make the sale.

Work in progress and billings in excess of cost and estimated earningsWork in progress is stated at cost and estimated earnings less provision for any anticipated lossesand progress payments received or receivable. Where the payments received or receivable for anycontract exceed the cost and estimated earnings less provision for any anticipated losses, the excessis shown as billings in excess of cost and estimated earnings.

Trade and other receivablesTrade receivables are recognised and carried at original invoice amounts less an allowance for anyamounts estimated to be uncollectible. An estimate for doubtful debts is made when collection ofthe full amount is no longer probable. Bad debts are written off when identified.

A proportion of the group’s trading cycle is on average more than 12 months due to the long termnature of the contracts undertaken. Retentions relating to these long term contracts are presentedas a current asset although they may not be recovered within 12 months of the balance sheet date.

Interest-bearing loans and borrowingsAll interest-bearing loans and borrowings are initially recognised at cost, being the fair value of theconsideration received net of issue costs directly attributable to the borrowing.

164

After initial recognition, interest-bearing loans and borrowings are subsequently measured atamortised cost using the effective interest rate method. Amortised cost is calculated by taking intoaccount any issue costs, and any discount or premium on settlement.

ProvisionsProvisions are recognised when the group has a present legal or constructive obligation as a result ofpast events and, it is probable that an outflow of resources will be required to settle the obligation,and a reliable estimate can be made of the amount of the obligation.

LeasesThe group has entered into various operating leases the payments under which are treated as rentalsand charged to the income statement on a straight-line basis over the lease terms.

Pensions and employees’ end-of-service benefitsThe group has various defined contribution pension schemes in accordance with the localconditions and practices in the countries in which it operates. The amount charged to theConsolidated Income Statement in respect of pension costs and other post-retirement benefits is thecontributions payable in the period. Differences between contributions payable during the periodand contributions actually paid are shown as either accrued liabilities or prepaid assets in theConsolidated Balance Sheet.

Employees’ end-of-service benefits are provided in accordance with the labour laws of the countriesin which the group operates. The period-end provision is calculated based on the length of service ofeach employee.

Share-based payment transactionsEmployees (including directors) of the group receive remuneration in the form of share-basedpayment transactions, whereby employees render services in exchange for shares or rights overshares (‘equity-settled transactions’).

Equity-settled transactions

The cost of equity-settled transactions with employees is measured by reference to the fair value atthe date on which they are granted and is recognised, together with a corresponding increase inequity, over the period in which the relevant employees become fully entitled to the award (‘vestingdate’). The cumulative expense recognised for equity-settled transactions at each reporting dateuntil the vesting date reflects the extent to which the vesting period has expired and the number ofawards that, in the opinion of the directors of the Company at that date, will ultimately vest.

The group has taken advantage of the transitional provisions of IFRS 2 in respect of equity-settledawards and has applied IFRS 2 only to equity-settled awards granted after 7 November 2002 thathad not vested before 1 January 2005.

Income taxesIncome tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profitas reported in the income statement because it excludes items of income or expense that are taxableor deductible in other years and it further excludes items that are never taxable or deductible. Thegroup’s liability for current tax is calculated using tax rates that have been enacted or substantivelyenacted by the balance sheet date.

Deferred income tax is provided using the liability method, on all temporary differences at thebalance sheet date between the carrying amounts of assets and liabilities in the financial statementsand the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilitiesare generally recognised for all taxable temporary differences and deferred tax assets are recognisedto the extent that it is probable that taxable profits will be available against which deductibletemporary differences can be utilised.

165

The carrying amount of deferred income tax assets is reviewed at each balance sheet date andreduced to the extent that it is no longer probable that sufficient taxable profit will be available toallow all or part of the deferred income tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply when theasset is realised or the liability is settled, based on tax rates and tax laws enacted or substantivelyenacted at the balance sheet date.

Employee Share Ownership Plan (ESOP)Through Petrofac ESOP Trustees Limited (Petrofac ESOP), the Company temporarily warehousesordinary shares that are expected, in the foreseeable future, to be offered to new or existingemployees (including directors). Petrofac ESOP acquires shares from the Company at fair value andthe Company extends an interest free loan to Petrofac ESOP to acquire these shares. The effects ofshare issues and buyback transactions arising within Petrofac ESOP are taken directly to equity.

Derivative financial instrumentsThe group uses derivative financial instruments to hedge the risks associated with interest rate andforeign currency fluctuations. Such derivative financial instruments are initially recognised in thebalance sheet at cost and subsequently re-measured at their fair value.

For the purpose of hedge accounting, hedges are classified as either fair value hedges where theyhedge the exposure to changes in the fair value of a recognised asset or liability; or cash flow hedgeswhere they hedge the exposure to the variability in cash flows that is either attributable to aparticular risk associated with a recognised asset or liability or a forecasted transaction.

In relation to fair value hedges which meet the conditions for special hedge accounting, any gain orloss from re-measuring the hedging instrument to fair value is recognised immediately in the incomestatement.

In relation to cash flow hedges which meet the conditions for special hedge accounting, the portionof the gain or loss on the hedging instrument that is determined to be an effective hedge is recogniseddirectly in equity and the ineffective portion is recognised in the income statement.

When the hedged firm commitment results in the recognition of an asset or a liability, then, at thetime the asset or liability is recognised, the associated gains or losses that had previously beenrecognised in equity are included in the initial measurement of the acquisition cost or other carryingamount of the asset or liability. For all other cash flow hedges, gains or losses that are recognised inequity are transferred to the income statement in the same period in which the hedged firmcommitment affects the income statement.

For derivatives that do not qualify for special hedge accounting, any gains or losses arising fromchanges in fair value are taken directly to the income statement.

Earnings per shareThe group calculates both basic and diluted earnings per share. Basic earnings per share iscalculated using the weighted average number of shares outstanding during the period. Dilutedearnings per share is calculated using the weighted average number of shares outstanding duringthe period plus the dilutive effect of share options and warrants outstanding during the period.

3. Segment informationThe group’s continuing operations are organised on a worldwide basis into three primary businesssegments: Engineering & Construction, Operations Services and Resources. The accountingpolicies of the segments are the same as those described in note 2 above. The group accounts forinter-segment sales as if the sales were to third parties, that is, at current market prices. The groupevaluates the performance of its segments and allocates resources to them based on this evaluation.

Business segmentsThe following tables present revenue and profit information and certain assets and liabilitiesinformation relating to the group’s business segments for the 6 months ended 30 June 2005 and

166

30 June 2004, and the 12 months ended 31 December 2004, 2003 and 2002. Included within theconsolidation and eliminations columns are certain balances, which due to their nature, are notallocated to business segments.

6 months ended 30 June 2005Continuing operations

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

Consolidationand

EliminationsUS$’000

TotalUS$’000

DiscontinuedOperation

US$’000Eliminations

US$’000

TotalOperations

US$’000

RevenueExternal sales 390,216 279,622 22,572 — 692,410 115 — 692,525Inter-segment sales 8,771 46 — (8,817) — 115 (115) —

Total revenue 398,987 279,668 22,572 (8,817) 692,410 230 (115) 692,525

ResultsSegment operating results 22,867 12,391 8,769 392 44,419 (249) — 44,170Unallocated corporateincome/(costs) — — — (3,338) (3,338) — — (3,338)

Profit/(loss) from operatingactivities 22,867 12,391 8,769 (2,946) 41,081 (249) — 40,832Finance costs (126) (1,086) (708) (2,866) (4,786) — — (4,786)Finance income 1,637 41 62 (351) 1,389 47 — 1,436

Profit/(loss) beforeincome tax 24,378 11,346 8,123 (6,163) 37,684 (202) — 37,482Income tax(expense)/income (1,420) (4,052) 3,911 269 (1,292) — — (1,292)

Net profit/(loss) for period 22,958 7,294 12,034 (5,894) 36,392 (202) — 36,190

167

6 months ended 30 June 2005 (continued)

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

DiscontinuedOperation

US$’000

Consolidationand

EliminationsUS$’000

ConsolidatedUS$’000

Assets and liabilitiesSegment assets 489,154 182,804 113,673 3,755 (54,125) 735,261Inter-segment assets (52,585) (866) (506) (168) 54,125 —Investments — — 2,273 — — 2,273

436,569 181,938 115,440 3,587 — 737,534Unallocated assets — — — — 5,447 5,447Income tax assets — 755 5,274 — 2 6,031

Total assets 436,569 182,693 120,714 3,587 5,449 749,012

Segment liabilities 368,267 114,898 93,214 25,616 (124,510) 477,485Inter-segmentliabilities (1,490) (19,817) (78,704) (24,499) 124,510 —

366,777 95,081 14,510 1,117 — 477,485Unallocated liabilities — — — — 130,784 130,784Income tax liabilities 2,927 4,364 (628) — 197 6,860

Total liabilities 369,704 99,445 13,882 1,117 130,981 615,129

Other segmentinformationCapital expenditures:Property, plant andequipment 2,993 1,545 1,676 — 43 6,257Intangible oil &gas assets — — 2,118 — — 2,118Goodwill — 3,761 — — — 3,761

Charges:Depreciation 5,188 905 6,961 — (316) 12,738Other amortisation — — — — 527 527

168

Unaudited 6 months ended 30 June 2004

Continuing operations

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

Consolidationand

EliminationsUS$’000

TotalUS$’000

DiscontinuedOperation

US$’000Eliminations

US$’000

TotalOperations

US$’000

RevenueExternal sales 185,335 196,064 21,569 — 402,968 6,394 — 409,362Inter-segment sales 2,924 1,180 — (4,104) — 784 (784) —

Total revenue 188,259 197,244 21,569 (4,104) 402,968 7,178 (784) 409,362

ResultsSegment operating results 15,170 8,238 8,990 (887) 31,511 (12,958) — 18,553Unallocated corporateincome/(costs) — — — 942 942 — — 942

Profit/(loss) from operatingactivities 15,170 8,238 8,990 55 32,453 (12,958) — 19,495Finance costs (29) (519) (1,267) (1,870) (3,685) (3) — (3,688)Finance income 1,270 49 26 (136) 1,209 19 — 1,228

Profit/(loss) beforeincome tax 16,411 7,768 7,749 (1,951) 29,977 (12,942) — 17,035Income tax(expense)/income (523) (3,493) (4,243) 230 (8,029) — — (8,029)Minority interests — — 46 — 46 — — 46

Net profit/(loss) for period 15,888 4,275 3,552 (1,721) 21,994 (12,942) — 9,052

169

Unaudited 6 months ended 30 June 2004 (continued)

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

DiscontinuedOperation

US$’000

Consolidationand

EliminationsUS$’000

ConsolidatedUS$’000

Assets and liabilitiesSegment assets 333,892 141,233 126,477 24,531 (73,692) 552,441Inter-segment assets (68,263) (4,135) (514) (780) 73,692 —Investments — — 3,968 — — 3,968

265,629 137,098 129,931 23,751 — 556,409Unallocated assets — — — — (1,566) (1,566)Income tax assets 573 906 — — (573) 906

Total assets 266,202 138,004 129,931 23,751 (2,139) 555,749

Segment liabilities 234,002 77,166 112,876 45,972 (101,750) 368,266Inter-segmentliabilities (2,839) (11,939) (59,971) (27,001) 101,750 —

231,163 65,227 52,905 18,971 — 368,266Unallocated liabilities — — — — 69,634 69,634Income tax liabilities 899 3,524 — — (372) 4,051

Total liabilities 232,062 68,751 52,905 18,971 69,262 441,951

Other segmentinformationCapital expenditures:Property, plant andequipment 6,567 1,384 2,486 — (1,305) 9,132Intangible oil &gas assets — — 6,154 — — 6,154Goodwill — 18,520 — — — 18,520

Charges:Depreciation 3,638 466 7,206 6 (311) 11,005Goodwillamortisation — 1,033 158 — — 1,191Other amortisation — — — — 500 500

170

Year ended 31 December 2004

Continuing operations

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

Consolidationand

EliminationUS$’000

TotalUS$’000

DiscontinuedOperations

US$’000Eliminations

US$’000

TotalOperations

US$’000

RevenueExternal sales 467,116 439,372 45,042 — 951,530 12,624 — 964,154Inter-segment sales 6,350 755 — (7,105) — 1,126 (1,126) —

Total revenue 473,466 440,127 45,042 (7,105) 951,530 13,750 (1,126) 964,154

ResultsSegment operating results 33,524 17,347 17,164 (550) 67,485 (13,197) — 54,288Unallocated corporateincome/(costs) — — — 798 798 — — 798

Profit/(loss) from operatingactivities 33,524 17,347 17,164 248 68,283 (13,197) — 55,086Finance costs (133) (1,127) (1,968) (4,316) (7,544) (5) — (7,549)Finance income 1,969 104 17 (93) 1,997 40 — 2,037

Profit/(loss) beforeincome tax 35,360 16,324 15,213 (4,161) 62,736 (13,162) — 49,574Income tax(expense)/income (2,260) (6,681) (8,306) 548 (16,699) — — (16,699)Minority interests — — 46 — 46 — — 46

Net profit/(loss) 33,100 9,643 6,953 (3,613) 46,083 (13,162) — 32,921

171

Year ended 31 December 2004 (continued)

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

DiscontinuedOperation

US$’000

Consolidationand

EliminationsUS$’000

ConsolidatedUS$’000

Assets and liabilitiesSegment assets 489,663 164,717 119,173 7,385 (64,235) 716,703Inter-segment assets (63,166) (604) (61) (404) 64,235 —Investments — — 4,104 — — 4,104

426,497 164,113 123,216 6,981 — 720,807Unallocated assets — — — — 7,768 7,768Income tax assets — 780 — — 2 782

Total assets 426,497 164,893 123,216 6,981 7,770 729,357

Segment liabilities 347,316 99,804 100,175 29,044 (108,273) 468,066Inter-segmentliabilities (3,133) (16,751) (61,960) (26,429) 108,273 —

344,183 83,053 38,215 2,615 — 468,066Unallocated liabilities — — — — 118,026 118,026Income tax liabilities 712 3,838 — — 157 4,707

Total liabilities 344,895 86,891 38,215 2,615 118,183 590,799

Other segmentinformationCapital expenditures:Property, plant andequipment 11,673 2,931 3,744 — (1,206) 17,142Intangible oil &gas assets — — 6,721 — — 6,721Goodwill — 19,118 — — — 19,118

Charges:Depreciation 8,356 1,357 14,809 13 (696) 23,839Goodwillamortisation — 2,168 316 — — 2,484Other amortisation — 263 — — 1,209 1,472

172

Year ended 31 December 2003

Continuing operations

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

Consolidationand

EliminationsUS$’000

TotalUS$’000

DiscontinuedOperation

US$’000Eliminations

US$’000

TotalOperations

US$’000

RevenueExternal sales 340,891 273,372 14,439 — 628,702 82,398 — 711,100Inter-segment sales 1,980 1,509 — (3,489) — 7,113 (7,113) —

Total revenue 342,871 274,881 14,439 (3,489) 628,702 89,511 (7,113) 711,100

ResultsSegment operating results 30,529 10,173 (1,805) (599) 38,298 (23,311) — 14,987Unallocated corporateincome/(costs) — — — (551) (551) — — (551)Net gain on disposal ofDiscontinued operations — — — — — 12,507 — 12,507

Profit/(loss) from operatingactivities 30,529 10,173 (1,805) (1,150) 37,747 (10,804) — 26,943Finance costs (104) (164) (8) (770) (1,046) (544) — (1,590)Finance income 1,268 106 27 (328) 1,073 22 — 1,095

Profit/(loss) beforeincome tax 31,693 10,115 (1,786) (2,248) 37,774 (11,326) — 26,448Income tax(expense)/income 490 (3,299) 201 29 (2,579) (4,915) — (7,494)Minority interests — — 3,164 — 3,164 — — 3,164

Net profit/(loss) 32,183 6,816 1,579 (2,219) 38,359 (16,241) — 22,118

173

Year ended 31 December 2003 (continued)

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

DiscontinuedOperation

US$’000

Consolidationand

EliminationsUS$’000

ConsolidatedUS$’000

Assets and liabilitiesSegment assets 340,097 90,554 126,828 32,358 (71,628) 518,209Inter-segment assets (68,326) (364) (771) (2,167) 71,628 —Investments — — 2,135 — — 2,135

271,771 90,190 128,192 30,191 — 520,344Unallocated assets — — — — 5,769 5,769Income tax assets — 975 — — — 975

Total assets 271,771 91,165 128,192 30,191 5,769 527,088

Segment liabilities 240,668 51,957 111,613 40,854 (86,764) 358,328Inter-segmentliabilities (8,377) (3,865) (54,341) (20,181) 86,764 —

232,291 48,092 57,272 20,673 — 358,328Unallocated liabilities — — — — 58,633 58,633Income tax liabilities — 580 — — 153 733

Total liabilities 232,291 48,672 57,272 20,673 58,786 417,694

Other segmentinformationCapital expenditures:Property, plant andequipment 16,893 370 17,741 5 (688) 34,321Goodwill — 373 — — — 373

Charges:Depreciation 3,725 173 2,449 24 (89) 6,282Goodwillamortisation — 1,268 316 3,901 — 5,485Other amortisation — — — — 874 874Impairment losses,net of negativegoodwill — — 1,612 420 — 2,032

174

Year ended 31 December 2002

Continuing operations

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

Consolidationand

EliminationsUS$’000

TotalUS$’000

DiscontinuedOperation

US$’000Eliminations

US$’000

TotalOperations

US$’000

RevenueExternal sales 364,781 12,703 13,914 — 391,398 85,625 — 477,023Inter-segment sales 17,903 — — (17,903) — 524 (524) —

Total revenue 382,684 12,703 13,914 (17,903) 391,398 86,149 (524) 477,023

ResultsSegment operating results 37,669 642 2,082 (3,148) 37,245 (18,457) — 18,788Unallocated corporateincome/(costs) — — — (1,949) (1,949) — — (1,949)

Profit/(loss) from operatingactivities 37,669 642 2,082 (5,097) 35,296 (18,457) — 16,839Finance costs — (12) — (713) (725) — — (725)Finance income 1,214 9 — 422 1,645 29 — 1,674

Profit/(loss) beforeincome tax 38,883 639 2,082 (5,388) 36,216 (18,428) — 17,788Income tax(expense)/income (2,126) (199) — 131 (2,194) 6,160 — 3,966Minority interests — — 314 — 314 — — 314

Net profit/(loss) for period 36,757 440 2,396 (5,257) 34,336 (12,268) — 22,068

175

Year ended 31 December 2002 (continued)

Engineeringand

ConstructionUS$’000

OperationsServices

US$’000ResourcesUS$’000

DiscontinuedOperation

US$’000

Consolidationand

EliminationsUS$’000

ConsolidatedUS$’000

Assets and liabilitiesSegment assets 288,670 70,688 110,261 34,907 (50,221) 454,305Inter-segment assets (49,251) (650) (179) (141) 50,221 —Investments — — 1,000 — — 1,000

239,419 70,038 111,082 34,766 — 455,305Unallocated assets — — — — 4,721 4,721Income tax assets — 1,327 — 6,160 130 7,617

Total assets 239,419 71,365 111,082 40,926 4,851 467,643

Segment liabilities 205,523 45,577 93,427 33,323 (59,958) 317,892Inter-segmentliabilities (3,530) (8,027) (45,590) (2,811) 59,958 —

201,993 37,550 47,837 30,512 — 317,892Unallocated liabilities — — — — 50,865 50,865Income tax liabilities 2,333 425 26 — — 2,784

Total liabilities 204,326 37,975 47,863 30,512 50,865 371,541

Other segmentinformationCapital expenditures:Property, plant andequipment 2,837 14 42,811 6,662 — 52,324Goodwill — 24,807 3,164 4,335 — 32,306

Charges:Depreciation 2,548 — 133 512 — 3,193Goodwillamortisation — 68 316 434 — 818Other amortisation — — — — 497 497Impairment losses,net of negativegoodwill — — 185 — — 185

176

Geographical segmentsThe following tables present revenue, assets and capital expenditure by geographical segments forthe 6 months ended 30 June 2005 and 30 June 2004, and the 12 months ended 31 December 2004,2003 and 2002.

6 months ended 30 June 2005Middle East

& AfricaFormer Soviet

Union/Asia Europe Americas ConsolidatedUS$’000 US$’000 US$’000 US$’000 US$’000

Segment revenue:Continuing operations 170,823 284,806 235,206 1,575 692,410Discontinued operations — — — 115 115

170,823 284,806 235,206 1,690 692,525

Carrying amount ofsegment assets 343,185 203,375 195,376 7,076 749,012

Capital expenditure:Tangible fixed assets 1,968 2,340 1,940 9 6,257Intangible fixed assets — 1,746 372 — 2,118

Unaudited 6 months ended 30 June 2004Middle East

& AfricaFormer Soviet

Union/Asia Europe Americas ConsolidatedUS$’000 US$’000 US$’000 US$’000 US$’000

Segment revenue:Continuing operations 63,041 158,236 178,553 3,138 402,968Discontinued operations — 296 — 6,098 6,394

63,041 158,532 178,553 9,236 409,362

Carrying amount ofsegment assets 219,474 168,888 139,706 27,681 555,749

Capital expenditure:Tangible fixed assets 2,006 5,814 1,312 — 9,132Intangible fixed assets — 6,154 — — 6,154

Year ended 31 December 2004Middle East

& AfricaFormer Soviet

Union/Asia Europe Americas ConsolidatedUS$’000 US$’000 US$’000 US$’000 US$’000

Segment revenue:Continuing operations 281,678 272,384 392,085 5,383 951,530Discontinued operations — — — 12,624 12,624

281,678 272,384 392,085 18,007 964,154

Carrying amount ofsegment assets 382,100 127,561 207,576 12,120 729,357

Capital expenditure:Tangible fixed assets 5,674 8,851 2,537 80 17,142Intangible fixed assets — 6,721 — — 6,721

177

Year ended 31 December 2003Middle East

& AfricaFormer Soviet

Union/Asia Europe Americas ConsolidatedUS$’000 US$’000 US$’000 US$’000 US$’000

Segment revenue:Continuing operations 184,901 198,013 240,607 5,181 628,702Discontinued operations 1,833 6,232 — 74,333 82,398

186,734 204,245 240,607 79,514 711,100

Carrying amount ofsegment assets 246,141 125,138 121,604 34,205 527,088

Capital expenditure:Tangible fixed assets 17,487 16,259 568 7 34,321Intangible fixed assets — — — — —

Year ended 31 December 2002Middle East

& AfricaFormer Soviet

Union/Asia Europe Americas ConsolidatedUS$’000 US$’000 US$’000 US$’000 US$’000

Segment revenue:Continuing operations 260,252 112,135 16,140 2,871 391,398Discontinued operations — — — 85,625 85,625

260,252 112,135 16,140 88,496 477,023

Carrying amount ofsegment assets 179,802 56,406 136,181 95,254 467,643

Capital expenditure:Tangible fixed assets 43,850 76 1,605 6,793 52,324Intangible fixed assets — — — — —

4. Revenues and expenses(a) Other income

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Gain on sale of investments 1,819 2,402 2,932 — —Foreign exchange gains 626 1,411 2,088 811 1,709Other income 374 848 1,206 1,173 2,033Gain on sale of property, plantand equipment — 7 20 41 20

2,819 4,668 6,246 2,025 3,762

178

(b) Other expenses

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Foreign exchange losses 1,752 1,041 1,460 — —Other expenses 126 35 127 — 927Loss on sale of property, plantand equipment — — — 77 —

1,878 1,076 1,587 77 927

(c) Selling, general and administration expenses

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Included in selling, general andadministration expenses:Staff costs 16,636 16,302 27,910 21,344 6,910Depreciation 914 794 1,684 919 1,116Amortisation and impairment 527 1,691 3,956 4,070 1,065Other operating expenses 15,996 10,221 25,275 12,372 13,939

34,073 29,008 58,825 38,705 23,030

Other operating expenses for the period ended 30 June 2005 include US$ 2,332 (all other periods:US$ nil) of accrued legal and professional expenses in relation to the Company’s intended listing onthe London Stock Exchange.

6 monthsended

30 June2005

US$’000

Unaudited6 months

ended30 June

2004US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Continuing OperationsTotal staff costs:Wages and salaries 165,520 135,437 282,596 167,392 40,336Social security costs 12,595 4,401 22,097 14,866 3,249Pension and other postemployment benefit costs 5,001 3,985 8,672 5,311 1,475Expense of share-basedpayments 130 — — — —Other 1,524 1,337 1,319 322 237

184,770 145,160 314,684 187,891 45,297

179

The average number of persons employed by the group during the period in continuing operationsis noted below:

6 monthsended

30 June2005

Number

Unaudited6 months

ended30 June

2004Number

Year ended31 December

2004Number

Year ended31 December

2003Number

Year ended31 December

2002Number

Average number of employees 6,076 4,908 5,284 3,330 920

(d) Equity settled transactionsOn 29 April 2005 the Company introduced a Long Term Incentive Plan (‘LTIP’) for senioremployees (including directors). Under the scheme rules, participatory interests in ordinary sharesare granted to eligible employees. 25 per cent. of the ordinary shares granted vest on award datewith the balance of the shares vesting equally over the following three years, provided the recipientsremain employees of the group.

In the 6 months to 30 June 2005, 23,500 participatory interests in ordinary shares were grantedunder the LTIP scheme rules. The fair value of the interests granted, as determined using a net assetbased formula, was US$398 or $16.93 per share. The group recognised a total expense ofUS$130 during the period in relation to these equity-settled transactions (all other periods: US$nil).

5. Finance costs/(income)6 months

ended30 June

2005US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Interest payable:Long-term borrowings 3,644 6,608 1,126 454Other interest, including short-term loansand overdrafts 1,142 936 (233) 12Redeemable preference shares — — 153 259

Total finance cost 4,786 7,544 1,046 725

Bank interest receivable (1,171) (1,644) (892) (1,524)Other interest receivable (218) (353) (181) (121)

Total finance income (1,389) (1,997) (1,073) (1,645)

Other interest receivable includes shareholder loan interest receivable on loans advanced toemployees for the purchase of ordinary shares in the Company. The offer for purchase of shares isextended through the Petrofac Limited Executive Share Scheme (ESS), which is administered byPetrofac ESOP Trustees Limited (Petrofac ESOP). The rules of the ESS require a down-payment onacquisition of shares with the balance structured as an interest bearing shareholder loan note,payable over three years. Shareholder notes bear interest at rates between 3.4 per cent. and 6.2 percent. dependent on the year of issue.

180

6. Income taxMajor components of income tax expense are as follows:

6 monthsended

30 June2005

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Consolidated Income StatementCurrent income taxCurrent income tax charge 9,495 15,576 2,003 2,859Adjustments in respect of current income taxof previous years (292) 69 160 (614)

Deferred income taxRelating to origination and reversal oftemporary differences (7,911) 1,095 373 (51)Adjustment in respect of deferred income taxof previous year — (41) 43 —

Income tax expense reported in ConsolidatedIncome Statement 1,292 16,699 2,579 2,194

A reconciliation of the income tax expense applicable to profit from continuing operations beforeincome tax at domestic income tax rates to the income tax expense at the group’s effective incometax rate is as follows:

6 monthsended

30 June2005

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Profit from continuing operations beforeincome tax 37,684 62,736 37,774 36,216

Tax at domestic rates 5,660 7,116 1,568 (322)Adjustments in respect of previous years (292) (91) 160 (498)Tax effect of utilisation of tax losses notpreviously recognised (7,620) — — —Tax recognised on unremitted overseasdividends — 618 — —Higher income tax rates of other countries,including withholding taxes 3,229 8,718 658 2,740Expenditure not allowable for income taxpurposes 167 174 113 53Unrecognised tax losses — — — 241Other 148 164 80 (20)

1,292 16,699 2,579 2,194

On 6 May 2005, Petrofac (Malaysia-PM304) Limited received formal approval from theMalaysian licensing authorities for the company’s field development plan in relation to BlockPM-304, Malaysia and, as a consequence, recognised commercial oil and gas reserves. As a result ofthese developments, a tax credit of US$7,620 was recognised in the 6 months ended 30 June 2005relating to losses available within Petrofac (Malaysia-PM 304) Limited. These tax losses areestimates and have not yet been agreed with the tax authorities. These tax losses were previouslyunrecognised due to the uncertainty of utilisation of the losses.

Under Article 123A of the Income Tax (Jersey) law 1961, as amended, the Company is exempt fromJersey income tax on non Jersey source income.

181

Deferred income taxDeferred income tax relates to the following:

Consolidated Balance Sheet30 June 31 December 31 December 31 December

2005 2004 2003 2002US$’000 US$’000 US$’000 US$’000

Deferred income tax liabilitiesUnremitted overseas dividends 382 817 — —Other timing differences 2,540 718 120 187

Gross deferred income tax liabilities 2,922 1,535 120 187

Deferred income tax assetsLosses available for offset against futuretaxable income 5,361 241 281 663Decelerated depreciation for tax purposes 418 423 495 477Other timing differences 252 118 199 317

Deferred income tax assets – continuingoperations 6,031 782 975 1,457

Discontinued operationsLosses available for offset against futuretaxable income — — — 6,160

Gross deferred income tax assets 6,031 782 975 7,617

Consolidated Income Statement6 months

ended Year ended Year ended Year ended30 June 31 December 31 December 31 December

2005 2004 2003 2002US$’000 US$’000 US$’000 US$’000

Deferred income tax liabilitiesUnremitted overseas dividends (389) 775 — —Other timing differences 101 — (78) —

Deferred income tax assetsLosses available for offset against futuretaxable income (7,507) 61 291 (222)Decelerated depreciation for tax purposes (25) 108 75 91Other timing differences (91) 110 128 80

Deferred income tax (credit)/charge (7,911) 1,054 416 (51)

The group has unrecognised tax losses arising in the US and the UK that are available for offsetagainst future taxable profits of the companies in which the losses arose, or in certain circumstancesagainst taxable profits of other group companies as follows:

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Tax losses arising in the US 32,693 32,978 20,816 18,050Tax losses arising in the UK 10,987 36,480 678 922

Deferred tax assets have not been recognised in respect of these losses due to the uncertainty ofutilisation of these tax losses in future years.

182

7. Discontinued operationOn 29 April 2003, the group sold certain assets of Petrofac Inc., a wholly owned subsidiary, forcash consideration of US$25,600 which resulted in a gain on disposal of US$12,507. This gain isnet of the write-off of goodwill of US$3,901.

The assets sold comprised substantially all of the operating assets of Petrofac Inc. although thegroup retained contractual responsibility for the work in hand at the date of the sale.

At 30 June 2005, all projects within the business of Petrofac Inc. were substantially complete.

The results of Petrofac Inc. are presented below:6 months

ended30 June

2005US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Revenue 230 13,750 89,511 86,149Cost of sales (379) (26,039) (106,497) (95,729)

Gross loss (149) (12,289) (16,986) (9,580)Selling, general and administration expenses (214) (1,043) (6,087) (9,021)Other income 114 135 92 144Other expenses — — (330) —Net gain on disposal of discontinued operation — — 12,507 —

Loss from discontinued operation (249) (13,197) (10,804) (18,457)Finance income/(costs), net 47 35 (522) 29

Loss before tax from discontinued operation (202) (13,162) (11,326) (18,428)Income tax (expense)/income — — (4,915) 6,160

Net loss attributable to discontinued operation (202) (13,162) (16,241) (12,268)

The assets and liabilities of the discontinued operation are presented below:30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Property, plant and equipment 28 28 41 149Other non-current assets — — 1,800 3,901Deferred income tax asset — — — 6,160Work in progress 9 347 18,373 6,775Inventories — — — 919Trade and other receivables 1,270 1,315 4,679 14,574Other current assets 138 1,800 2,266 727Cash and short-term deposits 396 217 1,428 24

1,841 3,707 28,587 33,229Non-current assets classified as held for sale:Freehold land & buildings 1,914 3,678 3,771 5,958Other operating assets — — — 1,880

Total assets 3,755 7,385 32,358 41,067

Trade and other payables 24,951 28,109 30,423 23,446Billings in excess of cost and estimated earnings — — 529 3,797Accrued contract expenses and provisions 665 830 9,143 5,743Accrued expenses and other liabilities — 105 759 337

Total liabilities 25,616 29,044 40,854 33,323

Net (liabilities)/assets of discontinuedoperation (21,861) (21,659) (8,496) 7,744

183

The cash flows of Petrofac Inc. have been disclosed on the face of the Consolidated Cash FlowStatement.

6 monthsended

30 June2005

Year ended31 December

2004

Year ended31 December

2003

Year ended31 December

2002

Earnings per share (US$):Basic from discontinued operation (0.03) (1.51) (1.69) (1.23)Diluted from discontinued operation (0.02) (1.29) (1.47) (1.06)

8. Earnings per shareBasic earnings per share amounts are calculated by dividing the net profit for the period attributableto ordinary shareholders by the weighted average number of ordinary shares outstanding duringthe period.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinaryshareholders (after adding interest relating to convertible share warrants) by the weighted averagenumber of ordinary shares outstanding during the period (adjusted for the effects of dilutivewarrants and options on ordinary shares).

The following reflects the income and share data used in calculating basic and diluted earnings pershare:

Continuing and discontinued operations6 months

ended30 June

2005US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Net profit attributable to ordinaryshareholders for basic earnings per share 36,190 32,921 22,118 22,068Income statement charge on variable rateunsecured loan notes (note 23 (x)) 1,317 2,611 1,118 454

Net profit attributable to ordinaryshareholders for diluted earnings per share 37,507 35,532 23,236 22,522

Continuing operationsNet profit attributable to ordinaryshareholders for basic earnings per share 36,392 46,083 38,359 34,336Income statement charge on variable rateunsecured loan notes (note 23 (x)) 1,317 2,611 1,118 454

Net profit attributable to ordinaryshareholders for diluted earnings per share 37,709 48,694 39,477 34,790

6 monthsended

30 June2005

Number’000

Year ended31 December

2004Number’000

Year ended31 December

2003Number’000

Year ended31 December

2002Number’000

Weighted average number of ordinary sharesfor basic earnings per share 7,167 8,732 9,597 10,000Convertible share warrants (note 22) 1,398 1,400 1,366 1,505Ordinary share option 57 75 75 75Unvested portion of LTIP shares 6 — — —

Adjusted weighted average number ofordinary shares for diluted earnings per share 8,628 10,207 11,038 11,580

184

To calculate discontinued earnings per share, the weighted average number of ordinary shares forboth basic and diluted is as set out above. The following reflects the loss figure used as thenumerator:

6 monthsended

30 June2005

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Net loss attributable to ordinaryshareholders from discontinued operationsfor basic earnings per share (202) (13,162) (16,241) (12,268)

Net loss attributable to ordinaryshareholders from discontinued operationsfor diluted earnings per share (202) (13,162) (16,241) (12,268)

9. Dividends paid and proposed6 months

ended30 June

2005US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Declared and paid during the period:Dividends on ordinary shares 91.9 cents(2004: 14.5 cents) 6,586 1,315 — —

On 19 August 2005, a dividend of US$1.21 per ordinary share and US$0.40 per “A” ordinary sharewas approved for payment. Under IAS 32, the Company has classified the “A” ordinary shares as afinancial liability (note 23) rather than as part of equity. As a consequence, the dividend to be paidon these “A” ordinary shares will be recognised in the income statement as an interest expense.

185

10. Property, plant and equipment

Oil & gasassets

US$’000

Oil & gasfacilitiesUS$’000

Land,buildings

andleasehold

improvementsUS$’000

Plant andequipment,

officefurniture

and motorvehicles

US$’000Total

US$’000

CostAt 1 January 2005 — 123,373 20,006 45,790 189,169Additions 704 944 582 4,027 6,257Acquisition of subsidiaries — — — 115 115Transfer from intangible oil &gas assets 8,467 — — — 8,467Disposals — — — (573) (573)Exchange difference — — (859) (1,404) (2,263)

At 30 June 2005 9,171 124,317 19,729 47,955 201,172

DepreciationAt 1 January 2005 — 33,871 4,454 27,431 65,756Charge for the period — 6,411 1,772 4,555 12,738Acquisition of subsidiaries — — — 34 34Disposals — — — (500) (500)Exchange difference — — (94) (568) (662)

At 30 June 2005 — 40,282 6,132 30,952 77,366

Net carrying amount:At 30 June 2005 9,171 84,035 13,597 17,003 123,806

At 31 December 2004 — 89,502 15,552 18,359 123,413

Oil & gasassets

US$’000

Oil & gasfacilitiesUS$’000

Land,buildings

andleasehold

improvementsUS$’000

Plant andequipment,

officefurniture

and motorvehicles

US$’000Total

US$’000

CostAt 1 January 2004 — 121,076 7,122 34,632 162,830Additions — 2,285 3,316 11,541 17,142Acquisition of subsidiaries — — 9,210 2,537 11,747)Disposals — — — (3,443) (3,443)Exchange difference — 12 358 523 893

At 31 December 2004 — 123,373 20,006 45,790 189,169

DepreciationAt 1 January 2004 — 20,136 1,273 22,026 43,435Charge for the period — 13,734 2,924 7,181 23,839Acquisition of subsidiaries — — 168 592 760Disposals — — — (2,725) (2,725)Exchange difference — 1 89 357 447

At 31 December 2004 — 33,871 4,454 27,431 65,756

Net carrying amount:At 31 December 2004 — 89,502 15,552 18,359 123,413

At 31 December 2003 — 100,940 5,849 12,606 119,395

186

Oil & gasassets

US$’000

Oil & gasfacilitiesUS$’000

Land,buildings

andleasehold

improvementsUS$’000

Plant andequipment,

office furnitureand motor

vehiclesUS$’000

Capital workin progress

US$’000Total

US$’000

CostAt 1 January 2003 — 18,423 1,710 20,443 85,155 125,731Additions — 17,029 5,346 11,477 469 34,321Transfers from capitalwork in progress — 85,624 — — (85,624) —Negative goodwillwritten back — — — 3,776 — 3,776Disposals — — (41) (1,473) — (1,514)Exchange difference — — 107 409 — 516

At 31 December 2003 — 121,076 7,122 34,632 — 162,830

DepreciationAt 1 January 2003 — 18,372 566 13,525 — 32,463Impairment provision — — — 5,388 — 5,388Charge for the period — 1,764 708 3,810 — 6,282)Disposals — — (14) (1,000) — (1,014)Exchange difference — — 13 303 — 316

At 31 December 2003 — 20,136 1,273 22,026 — 43,435

Net carrying amount:At 31 December 2003 — 100,940 5,849 12,606 — 119,395

At 31 December 2002 — 51 1,144 6,918 85,155 93,268

6 monthsended

30 June2005

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Total charge for depreciation in theconsolidated income statement:Depreciation included in cost of sales 11,824 22,155 5,363 2,077Depreciation included in selling, general andadministrative expenses 914 1,684 919 1,116

12,738 23,839 6,282 3,193

Capitalised interest:Oil & gas facilities include capitalisedinterest, net of depreciation 3,178 3,421 3,944 1,720

The impairment in plant and equipment in 2003 relates to the group’s refinery in Krygystan.Negative goodwill recognised by the group at the time of acquisition of this asset was written backin 2003 with the asset being carried at fair value.

11. Business combinationsPetrofac Ohanet

On 27 May 2005, and following the group’s voluntary prepayment of non-recourse project financeprovided by GE Structured Finance in relation to the Ohanet project (note 23 (vii)), the groupexercised its option to acquire Petrofac Resources (Ohanet) Jersey Limited (Petrofac Ohanet) forUS$2,400. The option to acquire Petrofac Ohanet was established in May 2002 as part of thegroup’s corporate reorganisation and the investment by 3i Group plc (3i) (note 23 (x)). Prior to

187

exercising the option, the group consolidated the financial results of Petrofac Ohanet in its financialinformation as the group held significant operating and financial control over Petrofac Ohanet. Theconsideration paid to exercise the option has been taken to equity.

Rubicon Response

On 28 January 2005, the group acquired 100 per cent. of the issued and outstanding shares ofRubicon Response Limited (Rubicon Response), a leading provider of emergency responsemanagement consultancy and training services to the upstream oil & gas exploration andproduction markets. Total consideration for the acquisition of the shares, inclusive of transactioncosts, was US$6,326 and the fair value of the net assets acquired was US$2,565. The considerationwas settled in cash.

The fair value of the identifiable net assets and liabilities acquired were as follows:US$’000

Property, plant and equipment 81Trade and other receivables 1,083Cash and short-term deposits 2,253

Total assets 3,417Less:Deferred tax liability (11)Trade and other payables (841)

Total liabilities (852)

Net assets acquired 2,565

From the date of acquisition, Rubicon Response has contributed US$193 to net profit for thegroup. If the combination had taken place at the beginning of the period, net profit for the groupwould have been US$36,216 and revenue from continuing operations would have beenUS$692,593.

Petrofac (Malaysia-PM304) Limited

On 16 June 2004, the group acquired 100 per cent. of the issued and outstanding shares ofAmerada Hess (Malaysia-PM304) Limited. Subsequent to the acquisition, the company name waschanged to Petrofac (Malaysia-PM304) Limited (PM-304). At the date of acquisition, PM-304 helda 40.5 per cent. interest in a Production Sharing Contract (PSC) in Block PM-304, Malaysia. Theconsideration for the acquisition was US$3,418 in cash with further cash consideration ofUS$4,450 due (note 24), contingent on the commercial production of oil from the block.

Under pre-emption rights contained within the PSC, PM-304 entered into a sale and purchaseagreement with a partner in the PSC for the sale of 10.5 per cent. of the PSC on pro rata, the samecommercial terms and conditions associated with the acquisition from Amerada Hess. The totalconsideration payable by the partner for the 10.5 per cent. share of the PSC is US$2,040, of whichUS$1,154 is deferred, contingent on commercial production of oil from the block.

188

The fair value of the identifiable assets and liabilities acquired net of the pre-emption disposal wereas follows:

US$’000

Intangible oil & gas asset 5,828Inventories 369Trade and other receivables 11Cash and short-term deposits 4

Total assets 6,212Less:Trade and other payables (20)Other current liabilities (364)

Total liabilities (384)

Net assets acquired 5,828

Petrofac Training

On 12 February 2004, the group acquired 100 per cent. of the issued and outstanding shares ofRGIT Montrose Holdings Limited, a leading provider of training and consultancy services to theupstream oil & gas exploration and production markets. Following the acquisition, the companychanged its name to Petrofac Training Holdings Limited (Petrofac Training). Total considerationfor the acquisition of the shares, inclusive of transaction costs, was US$17,236. The fair value of theidentifiable net assets and liabilities of Petrofac Training acquired were as follows:

US$’000

Property, plant and equipment 10,987Goodwill 4,707Other non-current assets 386Trade and other receivables 7,259Other current assets 2,508Cash and short-term deposits 609

Total assets 26,456Less:Non-current interest-bearing loan notes (8,678)Deferred tax liability (580)Trade and other payables (8,938)Current interest-bearing loan notes (1,159)Other current liabilities (3,409)

Total liabilities (22,764)

Net assets acquired 3,692

The consideration was settled by a combination of cash and the issue of bank guaranteed loannotes. Interest is payable on the loan notes at UK LIBOR less 1 per cent. (note 23 (i)).

Kyrgyz Petroleum Company

On 29 January 2004, Petrofac Resources International Limited (PRIL), acquired a 50 per cent.interest in Kyrgyz Petroleum Company (KPC) from its subsidiary Kyrgoil Holding Corporation(KHC). PRIL indirectly held a 32.1 per cent. interest in KPC prior to the date of acquisition,through its 64.2 per cent. investment in KHC. The agreed consideration for the acquisition was thecancellation of 50 million shares held in KHC and a cash payment of US$1,000. The fair value ofthe shares at the date of cancellation was US$3,562.

Chrysalis

On 1 April 2003, the group acquired the entire trade and assets and liabilities of Chrysalis LearningLimited (Chrysalis), a UK provider of training services, for consideration of US$29. The netliabilities of Chrysalis acquired on the date of acquisition were US$344. On 26 August 2004, thegroup paid an additional US$695 as earn-out consideration.

189

PGS PS

On 11 December 2002 the group acquired 100 per cent. of the issued and outstanding shares ofPGS Production Group Limited (PGS PS) together with its subsidiaries and joint ventures forconsideration of US$28,143, inclusive of acquisition costs. Following the acquisition, the companychanged its name to Petrofac Facilities Management Group Limited (PFM). The fair value of theidentifiable assets and liabilities of PFM acquired were:

US$’000

Property, plant and equipment 191Deferred income tax asset 1,219Other non-current assets 622Inventories 308Trade and other receivables 37,348Other current assets 17Cash and cash equivalents 8,299

Total assets 48,004Less:Trade and other payables (24,328)Current interest-bearing loan notes (2,586)Accrued expenses and other liabilities (480)Non-current interest-bearing loan notes (2,586)Other non-current liabilities (14,688)

Total liabilities (44,668)

Net assets acquired 3,336

Deferred and contingent consideration payable on the acquisition of PFM at 31 December 2003was US$2,000 (31 December 2002: US$3,731).

12. GoodwillWith effect 1 January 2005, following the prospective adoption of IFRS 3, the group has ceased toamortise goodwill.

A summary of the movements in goodwill from 1 January 2002 is presented below:30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

At 1 January, net of amortisation 49,653 29,594 31,854 —Arising on reorganisation — — — 7,499Acquisitions during the period 3,761 19,118 373 24,807Disposal of subsidiary operating assets (note 7) — — (3,901) —Amortisation charge for the period — (2,484) (1,584) (818)Exchange difference (3,783) 3,425 2,852 366

At period end, net of amortisation 49,631 49,653 29,594 31,854

Prior to 1 January 2005 goodwill was amortised as follows:

� goodwill arising on the acquisition of the minority share interest of Petrofac ResourcesInternational Limited (PRIL) was amortised evenly over the directors’ estimate of its usefuleconomic life of 10 years;

� goodwill arising on the acquisition of Petrofac Facilities Management Group Limited (PFM)was amortised evenly over the directors’ estimate of its useful economic life of 20 years;

� goodwill arising on the acquisition of the trade and assets and liabilities of Chrysalis wasamortised evenly over the directors’ estimate of its useful economic life of 10 years;

� goodwill arising on the acquisition of Petrofac Training was amortised evenly over thedirectors’ estimate of its useful economic life of 20 years.

190

Goodwill acquired through business combinations has been allocated to three individualcash-generating units for impairment testing as follows:

� Facilities Management cash-generating unit (comprising PFM);

� Training cash-generating unit (comprising Chrysalis, Petrofac Training and RubiconResponse); and

� Resources cash-generating unit (comprising PRIL).

The recoverable amount of each cash-generating unit is determined based on a value in usecalculation, using cash flow projections based on financial budgets approved by seniormanagement. The key assumptions of the value in use calculations are those regarding discountrates, growth rates and expected changes to selling prices and direct costs during the period.Management estimates discount rates that reflect current market assessments of the time value ofmoney and the risks specific to each cash-generating unit. The growth rates are based onmanagement estimates having regard to industry growth rates. Changes in selling prices and directcosts are based on past practices and expectations of future changes in the market.

In the 6 months ended 30 June 2005 there have been no events or changes in circumstances toindicate carrying values may be impaired.

The net carrying amount of goodwill relates to the following:30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Resources Division:Resources Unit 2,217 2,217 2,532 2,848

Operations Services Division:Facilities Management Unit 25,659 27,849 26,717 25,105Training Unit 21,755 19,587 345 —

Discontinued Operation — — — 3,901

At period end 49,631 49,653 29,594 31,854

13. Intangible assetsIntangible oil & gas assets

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Cost at 1 January 6,721 — — —Additions 2,118 5,828 — —Development costs capitalised — 893 — —Transferred to tangible oil & gas assets (8,467) — — —

At period end 372 6,721 — —

On 16 June 2004, the group acquired a 40.5 per cent. interest in a Production Sharing Contract(PSC) in Block PM-304, Malaysia. Under pre-emption rights contained within the PSC, a 10.5 percent. interest was subsequently sold to one of the PSC partners, thereby leaving the group with a30 per cent. interest.

On 6 May 2005, Petrofac (Malaysia – PM304) Limited received formal approval from theMalaysian licensing authorities for the company’s field development plan in relation to BlockPM304, Malaysia and, as a consequence, recognised commercial oil & gas reserves. As a result ofthis development, the carrying value of intangible assets associated with Block PM304 wastransferred from intangible oil & gas assets to tangible oil & gas assets.

The intangible oil & gas asset as 30 June 2005 relates to the group’s interest in a UK licence.

191

14. Interest in joint venturesThe group’s share of assets, liabilities, revenues and expenses of joint ventures, which are includedin the financial information, are as follows:

6 monthsended

30 June2005

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Revenue 49,582 229,237 165,097 112,645Cost of sales (58,025) (251,690) (169,769) (102,461)

Gross (loss)/profit (8,443) (22,453) (4,672) 10,184Selling, general and administration expenses (417) (742) (4,931) (2,836)Finance costs, net — 46 551 163

(Loss)/profit before income tax (8,860) (23,149) (9,052) 7,511Income tax (170) (224) (15) (54)

Net (loss)/profit (9,030) (23,373) (9,067) 7,457

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Current assets 77,068 99,154 78,145 26,607Non-current assets 13,272 16,970 17,615 6,025

Total assets 90,340 116,124 95,760 32,632

Current liabilities 96,762 112,776 66,199 23,354Non-current liabilities 152 132 29,782 100

Total liabilities 96,914 112,908 95,981 23,454

Net (liabilities)/assets (6,574) 3,216 (221) 9,178

15. Available-for-sale financial assets30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Shares – listed 1,603 4,104 2,135 —8.5% Gilts (United Kingdom) 670 — — —

2,273 4,104 2,135 —

Listed shares have no fixed maturity date or coupon rate.

The Gilts held by the group have a maturity date of 7 December 2005.

16. Other non-current assets30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Notes receivable from shareholders 1,719 3,342 2,865 3,521Restricted cash 92 91 13,945 34,604Fair value of derivative instruments 194 6,394 3 200Other 2,528 1,378 1,266 11

4,533 11,205 18,079 38,336

192

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Restricted cash balances comprise:Deposits with financial institutions 92 91 13,945 7,840Jointly controlled project account — — — 24,764Escrow account re PFM acquisition — — — 2,000

92 91 13,945 34,604

The deposits with financial institutions secure various guarantees and performance bondsassociated with the group’s trading activities.

The restricted cash balance held in a jointly controlled project account could only be withdrawnwith the approval of the Company and its partner. The US$2,000 held in escrow pursuant to thegroup’s acquisition of Petrofac Facilities Management Group Limited was paid in March 2004 infinal settlement of contingent consideration payable on the acquisition and at 31 December 2003was included in cash and cash equivalents.

17. Investment in associateAt 31 December 2002, the group had a 23.5 per cent. interest in Stratic Energy Corporation(Stratic) as a result of an agreement to sell to Stratic certain rights, interests and assets in respect ofundeveloped oil & gas properties in Algeria and Syria in exchange for shares in the company.

During 2003, the group’s interest in Stratic was diluted by the issue of new shares in the company.At 31 December 2003 the group no longer considered its investment in Stratic to be long term innature and, as a consequence, the investment was classified as available-for-sale.

18. Work in progress and billings in excess of cost and estimated earnings30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Cost and estimated earnings 1,107,712 820,360 645,145 455,063Less: Billings (954,103) (711,323) (542,304) (407,947)

Work in progress 153,609 109,037 102,841 47,116

Billings 148,963 148,334 141,387 247,454Less: Cost and estimated earnings (133,041) (76,179) (130,005) (214,596)

Billings in excess of cost and estimatedearnings 15,922 72,155 11,382 32,858

19. Trade and other receivables30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Contract receivables 206,286 194,919 91,336 84,328Retentions receivable 2,805 2,190 5,149 3,910Other receivables 651 2,933 — —

209,742 200,042 96,485 88,238

193

20. Other current assets30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Restricted cash 7,908 17,587 16,971 19,102Fair value of derivative instruments — 17,371 — 1,932Short-term notes receivable fromshareholders 1,241 2,057 953 505Advances 1,673 3,263 10,995 7,217Prepayments and deposits 7,466 9,866 3,440 3,548Other 4,261 4,453 728 4,838

22,549 54,597 33,087 37,142

Restricted cash is comprised of deposits with financial institutions securing various guarantees andperformance bonds associated with the group’s trading activities.

21. Cash and short-term deposits30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Cash at bank and in hand 54,612 45,169 44,762 110,524Short-term deposits 86,815 98,365 52,740 —

Total cash and short term deposits 141,427 143,534 97,502 110,524

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term depositsare made for varying periods of between one day and one month depending on the immediate cashrequirements of the group, and earn interest at respective short-term deposit rates.

For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents comprise thefollowing:

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Cash at bank and in hand 54,612 45,169 44,762 110,524Short-term deposits 86,815 98,365 52,740 —Bank overdrafts (note 23) (21,401) (15,711) (2,126) (1,309)

120,026 127,823 95,376 109,215

22. Share capitalThe share capital of the Company is as follows:

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Authorised15,000,000 ordinary shares of US$1.00 each 15,000 15,000 15,000 15,000

1 ordinary share of US$1.00 (Class “B”) — — — —

Issued and fully paidOrdinary shares of US$1.00 each 7,184 7,166 9,066 10,0001 ordinary share of US$1.00 each (Class “B”) — — — —

7,184 7,166 9,066 10,000

194

The movement in the number of ordinary shares outstanding is as follows:30 June

2005Number

31 December2004

Number

31 December2003

Number

31 December2002

Number

Ordinary shares:Opening balance of ordinary shares ofUS$1.00 each 7,166,330 9,066,401 10,000,000 —Initial capitalisation — — — 10,000,000Issued during the period 17,986 346,617 54,656 —Repurchased and cancelled during the period — (2,246,688) (988,255) —

Closing balance of ordinary shares 7,184,316 7,166,330 9,066,401 10,000,000

During the 6 months ended 30 June 2005, the Company issued, and Petrofac ESOP acquired,17,986 ordinary shares for consideration of US$305.

On 21 October 2004, the Company repurchased 2,246,688 ordinary shares from two retiringsenior executives for a total consideration of US$30,760. The premium on the share buy-back ofUS$28,513 has been deducted from the share premium account. The shares repurchased weresubsequently cancelled.

During 2004, the Company issued 115,000 ordinary shares to the senior executives of PetrofacTraining for a total consideration of US$1,511 and 231,617 ordinary shares to Petrofac ESOP for aconsideration of US$3,043.

In December 2003, the Company issued, and Petrofac ESOP acquired, 54,656 new ordinary sharesfor consideration of US$584.

Following the sale of Petrofac Inc. in April 2003, the Company repurchased 1,021,505 ordinaryshares for a total consideration of US$8,607. Of these shares repurchased, 988,255 shares weresubsequently cancelled and Petrofac ESOP acquired the remaining 33,250 ordinary shares. Thepremium on the share buy-back of US$7,262 has been taken to the share premium account.

Through Petrofac ESOP, the Company temporarily warehouses ordinary shares that are expectedin the foreseeable future, to be offered to new or existing employees (including directors). Themovements in the warehousing of ordinary shares is noted below:

6 monthsended

30 June2005

Number

Year ended31 December

2004Number

Year ended31 December

2003Number

Year ended31 December

2002Number

New issue of ordinary shares of theCompany acquired by Petrofac ESOP 17,986 231,617 54,656 —

Existing ordinary shares of the Companyacquired by Petrofac ESOP 185,989 176,569 202,454 371,479

Ordinary shares of the Company sold byPetrofac ESOP 203,975 418,100 386,450 229,888

US$’000 US$’000 US$’000 US$’000

Net difference between the acquisition costand sales costs 666 2,784 836 504

195

The net difference between the acquisition (including new shares issued and acquired by PetrofacESOP) and sales cost has been credited to the share premium account of the Company.

30 June2005

Number

31 December2004

Number

31 December2003

Number

31 December2002

Number

ESOP shares held in the Companyat period end — — 9,914 139,254

Share optionsIn 2002 the Company extended an option to a director of the Company to acquire up to 75,000ordinary shares at US$25.00 per share. On 18 May 2005, this option agreement was cancelled.As part of an option agreement entered into on 30 April 2002 (note 23 (x)), 3i was issued one “B”ordinary share. The Company also granted an option to 3i to acquire shares representing 13 percent. of the Company’s share capital, as so enlarged (the Option Shares), subject to adjustment to20 per cent. in the event of the 3i variable rate unsecured loan notes remaining unpaid. On20 October 2004, this option was amended, providing 3i with a revised right to acquire sharesrepresenting 16.2 per cent. of the Company’s share capital, as so enlarged, subject to adjustment to23.2 per cent. in the event of the 3i variable rate unsecured notes remaining unpaid. The option wasexercisable by 3i at any time until 30 June 2009 and by the Company upon the fulfilment of certainconditions. In the 6 months ended 30 June 2005, the conditions allowing the Company to call upon3i to subscribe for the Option Shares were satisfied and on 21 June 2005, the aggregate subscriptionamount was satisfied by the cancellation of the loan notes and the issue of 1,397,557 “A” ordinaryshares to 3i. In addition, and as part of the consideration for the Option Shares, the one ordinaryshare (Class “B”) held by 3i was converted to a deferred ordinary share (Class “B”). This deferredordinary share has no right to receive notice of general meetings of the Company or rights to attendor vote at general meetings. Under IAS 32, the Company has classified the “A” ordinary shares as afinancial liability, as the Articles of Association of the Company provide the shares with priority ofdividends, including the right to an annual 5 per cent. fixed dividend (note 23). The Articles ofAssociation of the Company also provide that certain matters, including the approval of certainordinary share dividends, the conversion of “A” ordinary shares to ordinary shares and theapproval of certain ordinary share transfers, require the approval of the holders of 75 per cent. ormore of the “A” ordinary shares.The Company’s Articles of Association restrict the transferability of ordinary shares in theCompany and contain certain pre-emption rights over the transfer of ordinary shares.

23. Interest-bearing loans and borrowingsThe group had the following interest-bearing loans and borrowings outstanding:

Maturity

30 June2005

US$’000

31 December2004

US$000

31 December2003

US$’000

31 December2002

US$’000CurrentLoan notes (i) 2005 — 7,699 — —Effective interest rate UK LIBOR – 1.00%Loan notes (ii) 2004 — — 2,878 2,586Effective interest rate UK LIBORRevolving credit facility (iii)(a) on demand 3,250 3,250 — —Effective interest rate US LIBOR � 1.50%Revolving credit facility (iii)(b) on demand — — 1,893 —Effective interest rate UK LIBOR �1.50%Bank overdrafts (iv) on demand 21,401 15,711 2,126 1,056Effective interest rate UK LIBOR � 1.25%Term loan (v) 2004 — — 1,069 —Effective interest rate UK LIBOR � 1.50%Other loans:Project term loan (vi) 2006 7,000 — — —Effective interest rate US LIBOR � 2.00%Non-recourse structured finance (vii) 2005 — 24,031 24,000 —Effective interest rate US LIBOR � 3.00%Share of joint venture overdraft on demand — — — 2531,397,557 “A” ordinary shares (xi) — 37,657 — — —Effective interest rate 5%

69,308 50,691 31,966 3,895

196

Maturity

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000Non-currentRevolving credit facility (viii) 2006 6,500 — — —Effective interest rate US/UK LIBOR �1.75%Revolving credit facility (ix) 2008 6,703 — — —Effective interest rate US/UK LIBOR �1.75%Term loan (v) 2006-2011 73,569 68,838 — —Effective interest rate (5.47% to

5.88%)(5.38% to

6.31%)Term loan (v) 2004 — — 20,303 —Effective interest rate UK LIBOR � 1.50%Variable rate unsecured loan notes (x) 2005 — 40,250 40,250 40,250Effective interest rate (7.66%) (6.10%) (6.29%)Other loans:Project term loan (vi) 2006 — 7,000 7,000 —Effective interest rate US LIBOR � 2.00%Non-recourse structured finance (vii) 2005 — — 23,000 45,853Effective interest rate (5.82%) (6.05%)Loan notes (ii) 2004 — — — 2,586Effective interest rate UK LIBOR

86,772 116,088 90,553 88,689Less:Debt acquisition costs, net of accumulatedamortisation (1,055) (3,334) (2,874) (3,036)Warrants, net of accumulated amortisation — (1,967) (2,052) (2,432)

85,717 110,787 85,627 83,221

Details of the group’s interest-bearing loans and borrowings are as follows:(i) Loan notes

The loan notes payable at 31 December 2004 (US$7,699) represent deferred considerationassociated with the acquisition of Petrofac Training (note 11). Interest accrued at the currentprevailing UK LIBOR rate less 1.00%. On 30 June 2005 the loan notes were repaid in full using thegroup’s term loan facility (v).

(ii) Loan notes

These loan notes relate to deferred consideration associated with a subsidiary’s acquisition of theremaining minority share in one of its subsidiaries in May 2002. Interest accrued at the prevailing3 month UK LIBOR rate. The loan notes matured and were repaid in full in two equal tranches inJanuary 2003 and January 2004.

(iii) Revolving credit facilities

a) This revolving credit borrowing relates to US$ denominated borrowings.

b) In conjunction with the establishment of a UK term loan facility in 2003, the group enteredinto a revolving credit facility. This facility was linked to the level of trade receivables withinthe group’s UK business and was denominated in Sterling. Immediately following thecompletion of new bank facilities in October 2004, these borrowings were repaid in full.

(iv) Bank overdrafts

The bank overdrafts are secured by a floating charge over certain of the group’s assets. On1 September 2005, this charge was released by the charging banks.

(v) Term loans

In October 2004, the group secured a new term loan facility with The Royal Bank of Scotland andBank of Scotland (RBOS/BOS). The loan at 30 June 2005 comprises drawings of US$35,310denominated in US$ and US$38,259 denominated in Sterling. The loan is repayable over a periodof five years commencing 31 December 2006 and is secured by a floating charge over certain of thegroup’s assets. On 1 September 2005, this charge was released by the charging banks.

197

The term loan payable at 31 December 2003 (current: US$1,069; non-current US$20,303), whichwas denominated in Sterling, was repaid in full in October 2004 following the establishment of thenew term loan facility with RBOS/BOS.

(vi) Project term loan

This term loan relates to project funding provided for the group’s Ohanet investment in Algeria andis repayable in full in April 2006.

(vii) Non-recourse structured finance

The group’s non-recourse structured finance relates to funding provided by GE Structured Financefor the Ohanet project in Algeria. This project facility was voluntarily pre-repaid in full on 7 April2005.

(viii) Revolving credit facility

This facility, provided by RBOS/BOS, is committed until 30 September 2006 and subject to annualreview thereafter. The facility is secured by a floating charge over certain of the group’s assets. On1 September 2005, this charge was released by the charging banks.

(ix) Revolving credit facility

The drawings against this facility, which is also provided by RBOS/BOS, will be converted to a termloan on 30 September 2008 to be repaid over a period of three years ending 30 September 2011.The facility is secured by a floating charge over certain of the group’s assets. On 1 September 2005,this charge was releaed by the charging banks.

(x) Variable rate unsecured loan notes

In May 2002, the group entered into an investment agreement with 3i pursuant to which 3isubscribed for US$40,250 of variable rate unsecured loan notes. Through the issuance of warrantsassociated with this investment agreement, the group granted an option to 3i to acquire sharesrepresenting 13 per cent. of the Company’s share capital, as so enlarged, subject to adjustment to20 per cent. in the event of the 3i variable rate unsecured loan notes remaining unpaid. On21 October 2004, this option was amended, providing 3i with a revised right to acquire sharesrepresenting 16.2 per cent. of the Company’s share capital as so enlarged, subject to adjustment to23.2 per cent. in the event of the 3i variable rate notes remaining unpaid. The option wasexercisable by 3i at time until 30 June 2009 and by the Company upon the fulfilment of certainconditions. In the 6 months to 30 June 2005 the conditions allowing the Company to call upon 3i toconvert the variable rate unsecured loan notes to equity were satisfied. On 21 June 2005, theaggregate subscription amount was satisfied by the cancellation of the loan notes and the issue of“A” ordinary shares to 3i.

(xi) 1,397,557 ‘‘A’’ ordinary shares

On 21 June 2005, the group issued 1,397,557 “A” ordinary shares to 3i. The “A” ordinary sharesprovide 3i with priority of dividends, including the right to an annual 5 per cent. fixed dividend. Inaddition, the Articles of Association of the Company provide that certain matters require theapproval of the holders of 75 per cent. or more of the “A” ordinary shares.

The “A” ordinary shares will be converted to an equivalent number of ordinary shares immediatelyprior to the Company’s listing on the London Stock Exchange.

The group’s credit facilities and debt agreements contain covenants relating to cash flow cover, costof borrowings cover, dividends and various other financial ratios.

198

24. Other non-current liabilities30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

End-of-service benefits 6,934 5,912 4,399 3,318Deferred consideration on acquisitions 4,450 4,450 — —Fair value of derivative instruments 768 210 23 —Other 1,163 2,217 103 1,634

13,315 12,789 4,525 4,952

25. Redeemable preference sharesUnder the group’s plan of reorganisation, 7,645,801 “B” preference shares of US$1.00 each wereissued to various shareholders during 2002. Each “B” preference share was non-convertible andredeemable for US$1.00 and, until redemption, earned a coupon rate of US LIBOR plus 2 per cent.,payable semi-annually. In the year ended 31 December 2002, 309,596 “B” preference shares wereredeemed. The balance of “B” preference shares (7,336,205) were redeemed in the year ended31 December 2003.

26. Trade and other payables30 June 31 December 31 December 31 December

2005 2004 2003 2002US$’000 US$’000 US$’000 US$’000

Trade payables 81,644 95,776 110,300 116,021Other payables 18,436 19,097 216 —

100,080 114,873 110,516 116,021

27. Accrued contract expenses and provisions30 June 31 December 31 December 31 December

2005 2004 2003 2002US$’000 US$’000 US$’000 US$’000

Accrued contract expenses 265,644 174,731 144,072 91,804Reserve for contract losses 4,675 4,277 6,447 5,744

270,319 179,008 150,519 97,548

Reserves for contract losses are anticipated to reverse within one year and are therefore notdiscounted.

28. Accrued expenses and other liabilities30 June 31 December 31 December 31 December

2005 2004 2003 2002US$’000 US$’000 US$’000 US$’000

Accrued expenses 33,730 31,772 11,640 12,356Other taxes payable 7,881 10,318 6,674 3,573Interest payable 547 1,263 1,049 1,318Deferred consideration on acquisitions — — 2,535 4,691Fair value of derivative instruments 5,373 12 — —Other 4,551 971 420 883

52,082 44,336 22,318 22,821

199

29. Commitments and contingenciesCommitmentsIn the normal course of business the group will obtain surety bonds, letters of credit and guarantees,which are contractually required to secure performance, advance payment or in lieu of retentionsbeing withheld. Some of these facilities are secured by issue of corporate guarantees by theCompany in favour of the issuing banks. The balances on these facilities are noted below togetherwith the details of pledged or restricted cash against these facilities:

30 June 31 December 31 December 31 December2005 2004 2003 2002

US$’000 US$’000 US$’000 US$’000

Letters of credit 19,318 34,081 12,436 7,277Letters of guarantee (includingperformance and bid bonds) 334,838 219,590 117,433 147,819

Pledged or restricted cash balances againstletters of credit and letters of guarantee 8,000 17,678 30,916 26,942

Certain obligations and liabilities of Petrofac Facilities Management Group Limited amounting toUS$2,878 at 31 December 2003 (31 December 2002: US$5,172) were guaranteed by a financialinstitution. This guarantee expired in January 2004.

The group has the following outstanding forward exchange contracts which consist of futureobligations to acquire designated amounts of foreign currency at agreed rates and value dates:

30 June 31 December 31 December 31 December2005 2004 2003 2002

US$’000 US$’000 US$’000 US$’000

Outstanding forward exchange contracts 303,043 185,619 — 17,582

These commitments consist of future obligations to either acquire or sell designated amounts offoreign currency at agreed rates and value dates (note 31).

LeasesThe group has financial commitments in respect of non-cancellable operating leases of office spaceand equipment. These non-cancellable leases have remaining non-cancellable lease terms ofbetween one and ten years and, for certain property leases, are subject to renegotiation at variousintervals as specified in the lease agreements. The future minimum rental commitments under thesenon-cancellable leases are as follows:

30 June 31 December 31 December 31 December2005 2004 2003 2002

US$’000 US$’000 US$’000 US$’000

Within one year 4,901 4,667 2,149 2,091After one year but not more than five years 10,426 13,963 9,340 7,468More than five years 9,013 10,717 9,891 13,851

24,340 29,347 21,380 23,410

Capital commitmentsThe group has the following capital commitments:

30 June 31 December 31 December 31 December2005 2004 2003 2002

US$’000 US$’000 US$’000 US$’000

Capital commitments 129 — 2,458 14,925

30. Related party transactionsThe financial information includes financial information relating to Petrofac Limited and thesubsidiaries listed in note 33. Petrofac Limited is the ultimate parent entity of the group.

200

The following table provides the total amount of transactions which have been entered into withrelated parties:

Salesto related

parties

Purchasesfrom related

parties

Amountsowed by

relatedparties

Amountowed

to relatedparties

US$’000 US$’000 US$’000 US$’000

Joint ventures 30 June 2005 3,520 160 29,731 1,49731 December 2004 11,656 14 20,361 1,42831 December 2003 27,296 — 20,306 —31 December 2002 14,000 — 636 —

Associate companies 30 June 2005 — — — —31 December 2004 — — — —31 December 2003 349 — 290 —31 December 2002 1,000 — — —

Directors’ loans 30 June 2005 — — 1,420 —31 December 2004 — — 528 —31 December 2003 — — 1,039 —31 December 2002 — — 1,403 —

Other directors’ interest 30 June 2005 — 30 339 2931 December 2004 — 252 — 2531 December 2003 — 212 — 10831 December 2002 — 215 — 105

All sales to and purchases from joint ventures and associates are made at normal market prices andthe pricing policies and terms of these transactions are approved by the group’s management.

Directors’ interests in Petrofac Limited Executive Share Scheme (ESS)

Directors’ of the Company held the following participating interests in ordinary shares through thePetrofac Limited ESS:

30 June 31 December 31 December 31 December2005 2004 2003 2002

Number Number Number Number

Directors’ participatory interests in ordinaryshares 247,500 140,000 50,000 25,000

Directors’ loans

Directors’ loans receivable include the following items:30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Interest free US$ loan advanced to a director — — 120 —

Loans advanced to directors for the purchaseof participatory interests in ordinary shares 1,420 528 919 1,403

� The interest free loan advanced to a director of the Company was approved by the Board ofDirectors in a meeting held on 14 January 2003 and was repaid on 26 July 2004.

� The loans advanced to directors of the Company for the purchase of participatory interests inordinary shares in the Company through the Petrofac ESS bear interest at rates between3.4 per cent. and 6.2 per cent., dependent on the year of grant.

201

Directors’ interests in Long Term Incentive Plan (LTIP)

Directors of the Company held the following unvested participatory interests in ordinary sharesunder the terms of the LTIP:

30 June2005

Number

31 December2004

Number

31 December2003

Number

31 December2002

Number

Directors’ unvested participatory interests inordinary shares 7,500 — — —

Directors’ interests in share options

In 2002 the Company granted an option to a director of the Company to acquire up to 75,000ordinary shares at US$25.00 per share. On 18 May 2005, this option agreement was cancelled.

Other Directors’ interests

During the period the following payments were made to a related party for services provided to thegroup by a director of the Company:

6 monthsended

30 June2005

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Purchases from related party 30 252 212 215

Amount owed by the group at period end 29 25 108 105

On 21 June 2005 a director of the Company acquired participatory interests in 20,000 ordinaryshares for a total consideration of US$339. This amount was paid to the Company in full on 6 July2005.

On 21 October 2004, the Company repurchased 1,730,211 ordinary shares from a retiringdirector of the Company for a total consideration of US$23,652.

Petrofac Ohanet

Certain of the Company’s directors held direct or beneficial interests in the holding company ofPetrofac Resources (Ohanet) Jersey Limited (PROJ). On 27 May 2005 the group acquired PROJfrom its parent for cash consideration of US$2,400. The amount received in aggregate by thedirectors, either directly or beneficially, as a result of this transaction was US$1,437. Theacquisition price was determined by a fixed price option that was established in May 2002 as part ofthe group’s corporate reorganisation.

Compensation of directors6 months

ended30 June

2005US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Short-term employee benefits 970 2,993 2,059 2,089Post employment benefits 22 46 31 29Fees paid to non-executive directors 74 92 45 38Share-based payments 55 — — —

Total compensation paid to directors 1,121 3,131 2,135 2,156

202

31. Financial instrumentsRisk management objectives and policiesThe group’s principal financial instruments, other than derivatives, comprise bank loans, loannotes, non-recourse structured finance, cash and short-term deposits. The main purpose of thesefinancial instruments is to finance the group’s operations. The group has various other financialinstruments such as trade receivables and trade payables, which arise directly from its operations.

The group also uses derivative transactions, principally interest rate swaps and caps, and forwardcurrency contracts to manage the interest rate and currency risks arising from the group’soperations and its sources of finance. It is the group’s policy that no trading in financial instrumentsshall be undertaken.

The main risks arising from the group’s financial instruments are interest rate risk, liquidity risk,foreign currency risk and credit risk.

Interest rate riskThe group’s exposure to market risk for changes in interest rates relates primarily to the group’slong-term variable rate debt obligations and its cash and bank balances. In 2004, the groupestablished a formal policy to manage its interest cost using a mix of fixed and variable rate debt andspecifically to keep between 60 per cent. and 80 per cent. of its borrowings at fixed or capped ratesof interest. After taking into account the effect of interest rate swaps and caps, excluding the “A”ordinary shares, overdrafts and short term revolving credit facilities, the percentage of the group’sterm borrowings at a fixed or capped rate of interest is approximately:

6 monthsended

30 June2005

US$’000

Year ended31 December

2004US$’000

Year ended31 December

2003US$’000

Year ended31 December

2002US$’000

Term borrowings at a fixed or capped rateof interest 86% 68% 64% 50%

Foreign currency riskThe group’s business divisions use forward currency contracts to eliminate the currency exposureson transactions significant to their operations. It is the group’s policy not to enter into forwardcontracts until a firm commitment is in place and to negotiate the terms of the hedge derivatives tomatch the terms of the hedged item to maximise hedge effectiveness.

Credit riskThe group trades only with recognised, creditworthy third parties. Receivable balances aremonitored on an ongoing basis with the result that the group’s exposure to bad debts is notconsidered significant.

Liquidity riskThe group’s objective is to maintain a balance between continuity of funding and flexibility throughthe use of overdrafts, bank loans, non-recourse project finance and long term unsecured loan notes.

203

Fair valuesThe fair value of the group’s financial instruments as compared to their carrying amounts includedwithin the group’s Consolidated Balance Sheet are set out below:

Carrying amount30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Financial assets:Cash 141,427 143,534 97,502 110,524Restricted cash 8,000 17,678 30,916 53,706Trade and other receivables 209,742 200,042 96,485 88,238Due from related parties 31,490 20,889 21,635 2,039Available-for-sale financial assets 2,273 4,104 2,135 —Interest rate caps and swaps 194 53 3 200Forward currency contracts — 23,712 — 1,932

Financial liabilities:Interest-bearing loans and borrowings 155,025 161,478 117,593 87,116Trade and other payables 100,080 114,873 110,516 116,021Due to related parties 1,526 1,453 108 105Interest rate swaps 257 210 23 —Forward currency contracts 5,884 12 — —Redeemable preference shares — — — 7,336Deferred consideration 4,450 4,450 2,535 4,691

Fair Value30 June

2005US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Financial assets:Cash 141,427 143,534 97,502 110,524Restricted cash 8,000 17,678 30,916 53,706Trade and other receivables 209,742 200,042 96,485 88,238Due from related parties 31,490 20,889 21,635 2,039Available-for-sale financial assets 2,273 4,104 2,135 —Interest rate caps and swaps 194 53 3 200Forward currency contracts — 23,712 — 1,932

Financial liabilities:Interest-bearing loans and borrowings 155,025 162,404 116,165 87,592Trade and other payables 100,080 114,873 110,516 116,021Due to related parties 1,526 1,453 108 105Interest rate swaps 257 210 23 —Forward currency contracts 5,884 12 — —Redeemable preference shares — — — 7,336Deferred consideration 4,450 4,450 2,535 4,691

Market values have been used to determine the fair values of available-for-sale financial assets. Thefair value of derivative items have been calculated by discounting the expected future cash flows attheir respective interest rates.

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Interest rate riskInterest rate risk arises from the possibility that changes in interest rates will affect the value of thegroup’s interest-bearing financial liabilities and assets. The following table indicates the periodsover which these financial liabilities and assets will re-price or mature:

30 June 2005� 1 year 1-5 years � 5 years TotalUS$’000 US$’000 US$’000 US$’000

Financial liabilitiesFloating ratesRevolving credit facilities 3,250 9,349 3,854 16,453Bank overdrafts 21,401 — — 21,401Term loans — 48,125 25,444 73,569Project term loan 7,000 — — 7,000Fixed rates1,397,557 “A” ordinary shares 37,657 — — 37,657

As at 30 June 69,308 57,474 29,298 156,080

Financial assetsFloating ratesCash and short-term deposits 141,427 — — 141,427Restricted cash balances 7,908 92 — 8,000

As at 30 June 149,335 92 — 149,427

31 December 2004� 1 year 1-5 years � 5 years TotalUS$’000 US$’000 US$’000 US$’000

Financial liabilitiesFloating ratesRevolving credit facilities 3,250 — — 3,250Bank overdrafts 15,711 — — 15,711Loan notes 7,699 — — 7,699Unsecured loan notes — 40,250 — 40,250Non-recourse structured finance 24,031 — — 24,031Term loans — 39,375 29,463 68,838Project term loan — 7,000 — 7,000

As at 31 December 50,691 86,625 29,463 166,779

Financial assetsFloating ratesCash and short-term deposits 143,534 — — 143,534Restricted cash balances 17,587 91 — 17,678

As at 31 December 161,121 91 — 161,212

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31 December 2003� 1 year 1-5 years � 5 years TotalUS$’000 US$’000 US$’000 US$’000

Financial liabilitiesFloating ratesRevolving credit facilities 1,893 — — 1,893Bank overdrafts 2,126 — — 2,126Loan notes 2,878 — — 2,878Unsecured loan notes — 26,833 13,417 40,250Non-recourse structured finance 24,000 23,000 — 47,000Term loans 1,069 17,097 3,206 21,372Project term loan — 7,000 — 7,000

As at 31 December 31,966 73,930 16,623 122,519

Financial assetsFloating ratesCash and short-term deposits 97,502 — — 97,502Restricted cash balances 16,971 13,945 — 30,916

As at 31 December 114,473 13,945 — 128,418

31 December 2002� 1 year 1-5 years � 5 years TotalUS$’000 US$’000 US$’000 US$’000

Financial liabilitiesFloating ratesRedeemable preference shares 7,336 — — 7,336Bank overdrafts 1,309 — — 1,309Loan notes 2,586 2,586 — 5,172Unsecured loan notes — 13,417 26,833 40,250Non-recourse structured finance — 45,853 — 45,853

As at 31 December 11,231 61,856 26,833 99,920

Financial assetsFloating ratesCash and short-term deposits 110,524 — — 110,524Restricted cash balances 19,102 34,604 — 53,706

As at 31 December 129,626 34,604 — 164,230

Financial liabilities in the above table are disclosed gross of debt acquisition costs and warrant debtdiscount as follows:

30 June2005

US$’000

31 December2004

US$’000

31 December2003

US$’000

31 December2002

US$’000

Debt acquisition costs (1,055) (3,334) (2,874) (3,036)Warrant debt discount — (1,967) (2,052) (2,432)

Interest on financial instruments classified as floating rate is repriced at intervals of less than oneyear. The other financial instruments of the group that are not included in the above tables arenon-interest bearing and are therefore not subject to interest rate risk.

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Derivative instruments designated as cash flow hedgesThe group held the following derivative instruments, designated as cash flow hedges in relation tofloating rate interest-bearing loans and borrowings:

30 June 2005 Fair valueasset/(liability)

US$’000 Duration

UK LIBOR interest rate swap (257) 4 years and 9 months, commencing31 December 2004

UK interest rate cap 11 3 years, commencing 31 December 2004US LIBOR interest rate swap 183 3 years commencing 31 December 2004

31 December 2004 Fair valueasset/(liability)

US$’000 Duration

UK LIBOR interest rate swap (70) 4 years and 9 months, commencing31 December 2004

UK interest rate cap 50 3 years, commencing 31 December 2004US LIBOR interest rate swap (140) 3 years, commencing 31 December 2004US interest rate cap 3 3 years and 4 months ending 31 May

2005

31 December 2003 Fair valueasset/(liability)

US$’000 Duration

UK LIBOR interest rate swap (23) 5 years and 9 months,commencing 16 December 2003

US interest rate cap 3 3 years and 4 months, ending 31 May2005

31 December 2002 Fair valueasset/(liability)

US$’000 Duration

US interest rate cap 200 3 years and 4 months, ending 31 May2005

Foreign exchange riskThe functional currency of the group is United States Dollars (US$). The group is exposed to foreigncurrency risk on sales, purchases and borrowings that are entered into in a currency other than US$.The group uses forward foreign exchange contracts to hedge its foreign currency risk, whenconsidered appropriate. The tables below summarise the group’s foreign currency contracts, whichwere designated as cash flow hedges:

30 June 2005Contract

valueUS$’000

Fairvalue

US$000

Netunrealised(loss)/gain

US$’000Maturity

period

Euro currency purchases 254,052 248,289 (5,763) July 2005 –March 2006

Sterling currency purchases 3,790 3,643 (147) July 2005 –November 2006

Other currency purchases 664 616 (48) August 2005

258,506 252,548 (5,958)

Kuwaiti Dinar sales 44,537 44,463 74 August 2005

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31 December 2004Contract

valueUS$’000

Fairvalue

US$000

Netunrealised

gainUS$’000

Maturityperiod

Euro currency purchases 179,125 202,676 23,551 January 2005 –April 2006

Sterling currency purchases 6,494 6,643 149 January 2005 –August 2005

185,619 209,319 23,700

At 31 December 2003 the group had no foreign exchange contracts designated as cash flow hedges.

31 December 2002Contract

valueUS$’000

Fairvalue

US$000

Netunrealised

gainUS$’000

Maturityperiod

Euro currency purchases 17,582 19,514 1,932January 2003 –December 2003

32. Events after the balance sheet dateOrdinary share split

On 13 September 2005, the Company approved a 40:1 share split for all ordinary shares and “A”ordinary shares authorised as at that date, conditional upon listing on the London Stock Exchange.

The following reflects the impact on basic and diluted earnings per share, had the conditional sharesplit been effective throughout the 3 year period ended 31 December 2004 and the six monthsended 30 June 2005:

Earnings per share (US cents):6 months

ended30 June

2005

Year ended31 December

2004

Year ended31 December

2003

Year ended31 December

2002

From continuing and discontinuedoperations:– Basic 12.62 9.43 5.76 5.52– Diluted 10.87 8.70 5.26 4.86From continuing operations:– Basic 12.69 13.19 9.99 8.58– Diluted 10.93 11.93 8.94 7.51

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The following reflects the share data used in calculating the basic and diluted earnings per share,adjusted for the 40:1 share split:

6 monthsended

30 June2005

Year ended31 December

2004

Year ended31 December

2003

Year ended31 December

2002Number ’000 Number ’000 Number ’000 Number ’000

Weighted average number ofordinary shares for basic earningsper share:– Unadjusted (note 8) 7,167 8,732 9,597 10,000– Adjusted for 40:1 share split 286,680 349,280 383,880 400,000Weighted average number ofordinary shares for dilutedearnings per share:– Unadjusted (note 8) 8,628 10,207 11,038 11,580– Adjusted for 40:1 share split 345,120 408,280 441,520 463,200

33. Subsidiaries and joint venturesAt 30 June 2005, the group had investments in the following subsidiaries and incorporated jointventures:

Proportion of nominal value of issued shares controlledby the group

Name of companyCountry of

incorporation30 June

200531 December

200431 December

200331 December

2002Trading subsidiariesPetrofac Inc. USA 100* 100* 100* 100*Petrofac International Ltd Jersey 100* 100* 100* 100*Petrofac Resources Limited England 100* 100* 100* 100*Petrofac Resources International Limited Jersey 100* 100* 100* 100*Petrofac ESOP Trustees Limited Jersey 100* 100* 100* 100*Petrofac UK Holdings Limited England 100* 100* 100* n/aPetrofac Facilities Management InternationalLimited Jersey 100* 100* 100* n/aPetrofac Services Limited England 100* 100* 100* n/aPetrofac Services Inc. USA 100* 100* 100* n/aPetrofac Training International Limited Jersey 100* 100* n/a n/aPetroleum Facilities E & C Limited Jersey 100* 100* n/a n/aAtlantic Resourcing Limited Scotland 100 100 100 100Monsoon Shipmanagement Limited Cyprus 100 100 100 100Petrofac Alger URAL Algeria 100 100 100 100Petrofac Engineering India Private Limited India 100 100 100 100Petrofac Engineering Limited England 100 100 100 100Petrofac Offshore Management Limited Jersey 100 100 100 100Petrofac Facilities Management GroupLimited Scotland 100 100 100 100Petrofac Facilities Management Limited Scotland 100 100 100 100Petrofac International Nigeria Ltd Nigeria 100 100 100 100Petrofac Pars (PJSC) Iran 100 100 100 100Petrofac Iran (PJSC) Iran 100 100 100 100Plant Asset Management Limited Scotland 51 51 51 51Petrofac Nuigini Limited Papua New Guinea 100 100 100 n/aPFMAP Sendirian Berhad Malaysia 100 100 n/a n/aPetrofac Caspian Limited Azerbaijan 100 100 n/a n/aPetrofac (Malaysia-PM304) Limited England 100 100 n/a n/aPetrofac Training Group Limited Scotland 100 100 n/a n/aPetrofac Training Holdings Limited Scotland 100 100 n/a n/aPetrofac Training Limited Scotland 100 100 n/a n/aRGIT Montrose Inc. USA 100 100 n/a n/aRGIT Montrose (Trinidad) Limited Trinidad 100 100 n/a n/aMonsoon Shipmanagement Limited Jersey 100 n/a n/a n/aRubicon Response Limited Scotland 100 n/a n/a n/aPetrofac Resources (Ohanet) Jersey Limited Jersey 100 n/a n/a n/aPetrofac Resources (Ohanet) LLC Delaware, USA 100 n/a n/a n/a

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Proportion of nominal value of issued shares controlledby the group

Name of companyCountry of

incorporation30 June

200531 December

200431 December

200331 December

2002Joint VenturesCostain Petrofac Limited England 50 50 50 n/aKyrgyz Petroleum Company Kyrgyz Republic 50 50 32.1 32.5MJVI Sendirian Berhad Brunei 50 50 50 50Spie Capag – Petrofac International Limited Jersey 50 50 50 50TTE Petrofac Limited Jersey 50 50 50 n/a

Dormant subsidiariesASJV Venezuela SA Venezuela 100 100 100 100Joint Venture International Limited Scotland 100 100 100 100Petrofac Saudi Arabia Limited Saudi Arabia 100 100 100 100Petrofac Sakha Limited England 100* 100* n/a n/aMontrose Park Hotels Limited Scotland 100 100 n/a n/aMontrose Scota Limited Scotland 100 100 n/a n/aPetrofac Resources (Palmyra) Limited Jersey 100 100 n/a n/aRGIT Ethos Health & Safety Limited Scotland 100 100 n/a n/aScota Limited Scotland 100 100 n/a n/a* Directly held by Petrofac Limited

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PART XI

Definitions

“3i” 3i Group plc;

“A ordinary shares” the A ordinary shares of the Company prior to Admission;

“Admission” admission of the Ordinary Shares to (i) the Official List and (ii)trading on the London Stock Exchange’s main market for listedsecurities becoming effective in accordance with, respectively,the Listing Rules and the Admission and Disclosure Standards;

“Admission and DisclosureStandards”

the requirements contained in the publication “Admission andDisclosure Standards” dated July 2005 containing, among otherthings, the admission requirements to be observed by companiesseeking admission to trading on the London Stock Exchange’smain market for listed securities;

“New Articles” the new articles of association of the Company;

“Board” the board of directors of the Company;

“business day” a day (excluding Saturday or Sunday or public holidays inEngland and Wales) on which banks generally are open for thetransaction of normal banking business in the City of London;

“City Code” the UK City Code on Takeovers and Mergers;

“Co-Lead Managers” JPMorgan Cazenove and Shuaa Capital;

“Combined Code” the principles of good governance and the code of best practiceissued by the Financial Reporting Council;

“Company” Petrofac Limited;

“Contractual Lock-inShareholders”

those persons subject to the contractual lock-in arrangementssummarised in paragraph 6 of Part VIII – “Details of the Offer”,namely Legis Trust Limited, as trustee of each of the Lamia Trust,Nola Trust and Alima Trust, and Keith Roberts, RobinPinchbeck and Louis Owen;

“Credit Suisse First Boston”or “CSFB”

Credit Suisse First Boston (Europe) Limited;

“CREST” the system for the paperless settlement of trades in securities andthe holding of uncertificated securities operated by CRESTCo inaccordance with the CREST Regulations;

“CREST Regulations” the Uncertificated Securities Regulations 2001 (as amended);

“CRESTCo” CRESTCo Limited, the operator of CREST;

“Daily Official List” the Stock Exchange Daily Official List published by the LondonStock Exchange;

“DBSP” the Petrofac Deferred Bonus Share Plan, as summarised inparagraph 7 of Part III – “Information on the Petrofac Group”;

“Directors” the directors of the Company;

“Disclosure Rules” the disclosure rules made by the FSA under Part VI FSMA;

“DTI” the UK Department of Trade and Industry;

“Engineering & ConstructionDivision” or “E&C Division”

the engineering and construction division of Petrofac;

“Employee Share Schemes” the employee share schemes of the Company, being the ESS, thePSP, the DBSP and the SIP;

211

“ESS” the Petrofac Executive Share Scheme, as summarised inparagraph 7 of Part III – “Information on the Petrofac Group”;

“Euro” or “(” Euro, the legal currency of those members of the European Unionthat have adopted such currency as their lawful currency inaccordance with the legislation of the European Communityrelating to the Economic and Monetary Union;

“Financial Information” the financial information contained in Part X – “FinancialInformation on Petrofac”;

“FRS” Financial Reporting Standard;

“FSA” the UK Financial Services Authority;

“FSMA” the Financial Services and Markets Act 2000;

“FSU” Former Soviet Union;

“FY” financial year;

“Gross gearing ratio” the ratio of interest-bearing loans and borrowings to total netassets, as set out in paragraph 13.2 of Part VI – “Operating andfinancial review”;

“Group” or “Petrofac” or“Petrofac Group” Petrofac Limited and its subsidiary undertakings;

“H1 2004” the unaudited period from 1 January 2004 to 30 June 2004;

“H1 2005” the period from 1 January 2005 to 30 June 2005;

“HASAWA” the Health and Safety at Work Act 1974, as amended;

“H&S Executive” the Health & Safety Executive in the UK;

“IFRS” International Financial Reporting Standards;

“JPMorgan Cazenove” JPMorgan Cazenove Limited;

“Joint Lead Managers” CSFB and Lehman Brothers;

“Law” The Companies (Jersey) Law 1991, as amended;

“Lehman Brothers” Lehman Brothers Europe Limited and/or Lehman BrothersInternational (Europe) as the case may be;

“LIBOR” London Inter-Bank Offering Rate;

“Listing Rules” the rules and regulations made by the UK Listing Authoritypursuant to Part VI FSMA, as amended from time to time;

“London Stock Exchange” London Stock Exchange plc or any recognised investmentexchange for the purposes of FSMA which may take over thefunction of London Stock Exchange plc;

“LTIP” the Petrofac Limited Long Term Incentive Plan, established on29 April 2005 which will cease to be operated after Admission;

“Memorandum” the memorandum of association of the Company adopted on15 September 2005, conditional upon Admission;

“Net gearing ratio” the ratio of net debt/cash to total net assets, as set out inparagraph 13.2 of Part VI – “Operating and financial review”;

“New Articles” the new articles of association of the Company, adopted on15 September 2005, conditional upon Admission;

“New Employee Share Plans” the PSP, the DBSP and the SIP, established by resolution of theBoard on 13 September 2005, conditional upon Admission;

“Offer” the offer of Ordinary Shares described in this document;

212

“Offer Price” the price at which each Ordinary Share is to be issued or soldunder the Offer;

“Offer Price Range” the indicative range of prices (being in the range of 180 pence perOrdinary Share to 230 pence per Ordinary Share) between whichthe Offer Price is expected to be set, although the Offer Price maybe outside this range, as described in Part VIII – “Details of theOffer”;

“Official List” the Official List of the UK Listing Authority;“Operations Management” the provision of comprehensive services by Petrofac Facilities

Management to facilities where Petrofac has overallmanagement responsibility;

“Operations Services Division”or “OS Division”

the operations services division of Petrofac, incorporatingPetrofac Facilities Management and Petrofac Training;

“Operations Support” the provision of component services by Petrofac FacilitiesManagement to facilities managed by owners;

“Ordinary Shares” ordinary shares with a nominal value of US$0.025 each in theshare capital of the Company;

“ordinary shares” the ordinary shares of the Company prior to Admission;“Over-allotment Option” the option granted in the Underwriting Agreement by the

Over-allotment Shareholders to the Stabilising Manager, onbehalf of the Underwriters, exercisable for a period of 30 daysafter the publication of the Offer Price, which will require certainSelling Shareholders to make available, at the Offer Price, up to15,297,702 additional Ordinary Shares solely for the purposes ofmeeting over-allocations in accordance with the Offer andcovering short positions resulting from stabilisationtransactions;

“Over-allotment Shareholders” the Selling Shareholders granting the Over-allotment Option;“Panel” the UK Panel on Takeovers and Mergers;“Petrofac” Petrofac Limited and its subsidiaries;“Petrofac Facilities

Management”the facilities management business unit of Petrofac, part of theOS Division;

“Petrofac Training” the training business unit of Petrofac, part of the OS Division;“PGS PS” Petrofac Facilities Management Group Limited (formerly PGS

Production Group Limited), trading as PGS Production Servicesat the date of acquisition by Petrofac, and currently part ofPetrofac OS Division;

“Prospectus Rules” the prospectus rules made by the FSA under Part VI FSMA;“PSP” the Petrofac Performance Share Plan, as summarised in

paragraph 7 of Part III – “Information on the Petrofac Group”;“Register of Members” the register kept by the Company which records details of the

members of the Company, as required by article 41 of the Law;“Registrars” Capita IRG (Offshore) Limited;“Regulation S” Regulation S under the Securities Act;“Resources Division” the resources division of Petrofac;“RGIT Montrose” or “RGIT” Petrofac Training Holdings Limited (formerly RGIT Montrose

Holdings Limited) and currently part of Petrofac’s OS Division;“Rubicon Response” Rubicon Response Limited;“Securities Act” the US Securities Act of 1933, as amended;“Selling Shareholders” those shareholders of the Company proposing to sell Ordinary

Shares pursuant to the Underwriting Agreement;

213

“Senior Managers” the senior managers of the Group, other than the Directors,whose names appear in paragraphs 2 and 3 of Part IV –“Directors and Senior Managers”;

“Share Capital” the share capital of the Company;

“Shareholders” holders of Ordinary Shares;

“Shuaa Capital” Shuaa Capital psc;

“SIP” the Petrofac Approved Share Incentive Plan as summarised inparagraph 7 of Part III – “Information on the Petrofac Group”;

“Stabilising Manager” Credit Suisse First Boston;

“£” or “Sterling” UK pounds sterling, the legal currency of the United Kingdom;

“UAE” the United Arab Emirates;

“UK” or “United Kingdom” the United Kingdom of Great Britain and Northern Ireland;

“UK GAAP” the generally accepted accounting principles applicable in theUnited Kingdom at the relevant time;

“UK Listing Authority” the Financial Services Authority acting in its capacity as thecompetent authority for the purposes of Part VI FSMA and in theexercise of its functioning in respect of the admission to theOfficial List otherwise than in accordance with Part VI FSMA;

“Underwriters” the banks and financial institutions that are parties to theUnderwriting Agreement, being the Joint Lead Managers and theCo-Lead Managers, details of which are set out on page 9 of thisdocument;

“Underwriting Agreement” the underwriting agreement relating to the Offer entered intobetween the Company, the Directors, certain Senior Managers,the Selling Shareholders and the Underwriters, details of whichare set out in paragraph 13 of Part IX – “AdditionalInformation”;

“US” or “United States” the United States of America, its territories and possessions, anyState of the United States, and the District of Columbia;

“US$” or “US Dollars” United States dollars, the legal currency of the United States ofAmerica; and

“VAT” the tax imposed by the Value Added Tax Act 1994 and anysecondary legislation thereunder.

214

PART XII

Glossary of industry terms

BOO/BOT/BOOT project investment structures involving (usually) the grant of aconcession under which a facility or project is built, owned andoperated by the project company (BOO) or built, owned andtransferred back at the end of the concession period (BOT) orbuilt, owned, operated and transferred back at the end of theconcession period (BOOT);

brownfield an existing facility, whether onshore or offshore, for example“brownfield modification” is a modification to an existingfacility;

COGENT the sector skills council for chemicals, nuclear, oil and gas,petroleum and polymers (the industry managed trainingregulator in the UK);

COMAH the Control of Major Accident Hazards Act 1999. The COMAHReport holder has overall responsibility for the health and safetyof an onshore installation, eg a gas terminal;

conceptual design an outline of the engineering design philosophy to be followed ona project, which identifies the overall process concepts to beemployed and the reasons why they have been selected;

cost reimbursable refers to a project on which the contractor’s remuneration islinked to its actual costs;

decommissioning the removal process for a plant or piece of equipment from anoperational state;

detailed design complete detailed engineering from the conceptual design and/orFEED study to produce engineering requisitions and drawings insufficient detail to facilitate the selection of all equipment,materials and services sufficient for the purchase, manufactureand construction of the works in the field;

downstream refers to all petroleum activities from the process of refining crudeoil into petroleum products to the distribution, marketing andshipping of the products. Downstream includes engineering,development, operation and maintenance of processing facilities,well services, refining and marketing;

E&P exploration and production companies, oil and gas explorationand production companies not engaged in petroleum refiningand marketing or downstream operations. This is the US term forindependent companies;

EPC engineering, procurement and construction;

EPF engineering, procurement and fabrication;

FDP field development plan;

FEED front-end engineering design, a more detailed appraisal of theengineering design to be used on a project, including a capital costestimate. The FEED study will normally incorporate ananticipated overall project delivery schedule and a criticalappraisal of the key areas of procurement, construction andcommissioning, as well as health, safety and environmentalimpact;

215

GoM Gulf of Mexico;

greenfield a new field development, whether onshore or offshore,particularly where independent of any existing infrastructure;

HSE health, safety and the environment;

IEA International Energy Agency;

independent companies oil and gas exploration and production companies not engagedin petroleum refining and marketing or downstream operations.In the US, these are also called Exploration and Production(E&P) companies;

integrated companies oil and gas companies engaged in a vertically integratedoperation ranging from upstream operations (exploration andproduction) to transportation of oil products to their refining anddistribution. Larger integrated companies are commonlyreferred to as Majors;

international oil companiesor IOCs

integrated companies covering upstream and downstreamactivities, typically operating an internationally diversifiedportfolio of assets and owned by a wide base of investors.Generally, the ownership is not restricted to any particular typeof investor;

KPIs key performance indicators;

life of field the time period (of varying lengths) until production on aparticular oil and gas field ceases. Used when referring to contractterms;

lump sum refers to projects where the contractor receives a fixed price forcompleting the contract;

LPG liquified petroleum gas;

LTI lost time incidents, any work related occurrences, or occurrencesrelated to a company’s wider activities, that resulted in a fatality,permanent disability or the person being incapable of performingany work on one day / shift or more, on any calendar daysubsequent to the day of the occurrence occurring or the illness;

midstream refers to the transportation of oil and gas. The midstream marketencompasses subsea pipelines, onshore pipelines, compression,pumping and metering stations and facilities for receiving,storing and, in some cases, further processing oil and gas fromupstream process facilities;

national oil companiesor NOCs

government controlled companies initially created to exploit andmanage national resources. It is not uncommon that NOCs takethe IOCs role when operating away from its home territory;

NGL natural gas liquids;

OECD the Organisation for Economic Cooperation and Development;

OPG International Association of Oil and Gas Producers;

platform an offshore structure that is permanently fixed to the seabed;

216

procurement the purchasing, expediting and inspection of all materials,equipment and services required for a project that are sourcedoutside the contractor’s organisation;

probable reserves (as defined in Appendix 1 to the Listing Rules)(1) in respect of mineral companies primarily involved in theextraction of oil and gas resources, those reserves which are notyet proven but which on the available evidence and taking intoaccount technical and economic factors, have a better than50 per cent. chance of being produced; and

(2) in respect of mineral companies other than those primarilyinvolved in the extraction of oil and gas resources, thosemeasured and/or indicated mineral resources, which are not yetproven but of which detailed technical and economic studieshave demonstrated that extraction can be justified at the time ofthe determination and under specified economic conditions;

proven reserves (as defined in Appendix 1 to the Listing Rules)

(1) in respect of mineral companies primarily involved in theextraction of oil and gas resources, those reserves which, on theavailable evidence and taking into account technical andeconomic factors, have a better than 90 per cent. chance of beingproduced; and

(2) in respect of mineral companies other than those primarilyinvolved in the extraction of oil and gas resources, thosemeasured mineral resources of which detailed technical andeconomic studies have demonstrated that extraction can bejustified at the time of the determination, and under specifiedeconomic conditions;

PSC production sharing contract, in which the parties to the contractagree to share the produced liquids and gas as well as the costs ofexploration, development and production thereof;

rotating equipment equipment such as turbines, compressors, motors and pumps, thefunction of which is based on rotational motion. This equipmentis particularly susceptible to component wear and, consequently,requires continuing maintenance;

RSC risk service contract, in which the parties agree to repayment oftheir investments and profits thereon according to formulaewhich vary as a function of various parameters such as oil priceand level of production;

UKCS the UK Continental Shelf;

UKOOA the United Kingdom Offshore Operators Association; and

upstream covers the exploration, development of the field and productionof oil and gas. Upstream also includes geology and geophysics,prospect generation and finding of new fields.

Millnet Financial