FPS Ocean AS - filing for bankruptcy

19.02.2009

February 19th, 2008

The Company's plan to restructure its capital base and attract new financing as previously outlined, has failed. Subsequent efforts to raise interim funding to continue operations in expectation of an employment contract for "DeeP Producer 1" (DP 1) in the near term has also failed. The Board of Directors therefore see no alternative but to place the Company and its subsidiaries FPSO Management AS, DP Producer AS and DP Offshore AS into bankruptcy.

The Board and the Company's new management has since August 2008 worked to:

a) secure the conversion progress and limit the cost overrun on the DP 1 FPSO conversion project in Dubai;
b) intensify the marketing towards potential clients to secure an employment contract for DP 1; and
c) together with Pareto Securities as financial advisor, secure additional financing to complete the DP 1 conversion.

During the early stages of this process and as the global financial crisis unfolded, it became clear that raising the necessary financing would be impossible without a substantial restructuring of the Company's capital base. It was decided in late November 2008, to terminate the DeeP Producer 2 project and commence the liquidation of DP Offshore AS.

The restructuring plan involved the write down of equity and debt, conversion of debt (and certain guarantee obligations) to equity, increasing the 1st priority loan facility and raising of new capital through a share issue. Shareholders, bondholders and the bank conditionally approved the plan in December 2008. In addition, a voluntary payment moratorium until February 15th, 2009 for trade creditors was initiated in late November 2008.

On this basis, encouraged by prospects of a long term employment contract for DP 1 with an oil major and strong investment interest from a recognized FPSO operator, the Company launched a private placement share issue in January 2009. The private placement was extended to allow this investor to carry out a detailed due diligence process and to put an investment proposal before its board. On February 9th, this effort failed as the investor decided not to pursue the proposed investment in FPS Ocean shares.

Following the failed private placement, the Board and management worked to obtain interim financing. Discussions were held with an FPSO operator, included the oil major and certain of the Company's suppliers, but did not result in any meaningful financing commitment by February 16th.

This week, the Board and management brought the yard in Dubai together with the 2nd priority bondholders in a final attempt to find an interim funding solution, but without success.

The Company has had meetings and exchanges of a technical and commercial nature with several oil majors. Although the Board and management believe a contract opportunity exists, the deep global economic downturn and resulting weaker oil prices have delayed client decisions with respect to field development commitments and FPSO awards.

The Board has now concluded that a near term contract with an oil major is unlikely, and recent discussions have not materialised in sufficient interim funding. The Board sees no other means of resolving the Company's immediate funding requirements. The Company and its subsidiaries are unable to meet their payment obligations and the Board has therefore decided to put the Company and its three subsidiaries into bankruptcy.

FPS Ocean AS