Fairstar releases its 2011 audited financial statements

The report also highlights the company's activities in the international capital markets, where it has successfully signed a new bank facility for the financing of Fjord, Fjell, Forte and Finesse and the timely progress of the construction of the two open stern, semi-submersible vessels that are currently under construction in China, as well as paying down long term debt.

Philip Adkins, the Fairstar chief executive officer, stated: "In 2010's Annual Report we articulated our view of the market for marine heavy transport services. We described a market characterised by an excess of ships, high leverage, scarcity of cargoes and a subsequent collapse in day rates. In 2011 the market continued to deteriorate. Most industry participants continued to engage in savage price cutting to win any available business. Fairstar identified this trend three years ago and we outlined a strategy that would allow our company to escape the commoditisation of our industry and position Fairstar to capture long term, sustainable profitability at levels significantly higher than any of our competitors.

"The "Red Box Strategy" answers the needs of a select group of clients in the energy industry. As energy infrastructure projects began to show a clear trend towards modularisation, Fairstar focused all of our attention and resources on winning a significant share of the marine transportation contracts for the Gorgon LNG Project.

"The initial contracts we were awarded in 2010 were extended in 2011. An additional contract for a third vessel in our fleet, the Fjell was signed. Gorgon now represents a total contract value of USD 120 million with the possibility of increasing to USD 200 million if the Chevron Gorgon JV exercises their options to extend the three contracts for Fjord, Forte and Fjell.

"In 2011 we identified the Ichthys LNG Project as the next likely opportunity for Fairstar to continue to validate our "Red Box Strategy." Throughout 2011 our team in Rotterdam was intensely engaged in the Ichthys LNG tender process. We were rewarded with two contracts to transport modules from Northern Asia to the Ichthys LNG site in Darwin, Australia. These contracts for Forte and Finesse are worth as much as USD80 million to Fairstar and extend the certainty of our future contracts into 2016. This is a unique achievement in the marine heavy transport business.

"The Golden Eagle contract award was also a reflection of our awareness of opportunities in offshore projects that might not require as many voyages as onshore LNG projects, but require a high level of involvement with the EPC companies engaged in the design, fabrication and installation of offshore platforms and topsides. Winning these tenders is dependant on having the in-house knowledge and experience to solve complex technical questions accurately, efficiently and practically.

"In 2011 Fairstar continued to invest in the human resources we need to compete for this business. I am certain this investment is sound and will continue to enhance our ability to create value for our clients. Fairstar is actively engaged in several other major onshore and offshore tenders that started in 2011 and will be awarded in 2012. We are confident our "order book" will continue to grow.

"While building for our future in the "Red Box" during 2011, we still needed to generate revenue, pay down debt and invest in our business. Fairstar moved a lot of jack-up rigs in 2011. In spite of our strategic focus on the major E&P companies and EPCs, Fairstar has established itself as a safe and reliable transporter for the world's leading drilling companies.

"In 2011 we won a number of hard fought contracts, often at day rates higher than those offered by our competitors. We are grateful for the work awarded to us by ENSCO, Hercules Offshore, Northern Offshore and Chevron. We have worked for all of these companies on multiple occasions in the past. Their confidence in Fairstar as a safe and reliable partner played a large part in their decisions to entrust us with their equipment. We have made it clear to our clients in the drilling industry that we will always be willing to serve them if we have a vessel available. While the "Red Box Strategy" may limit these opportunities, we have built valuable relationships we will endeavor to maintain.

"In 2010 our shareholders entrusted us with their capital to build two 50,000 dwt semi-submersible vessels. We made a promise to our shareholders that these two vessels would be delivered on time and on budget. Throughout 2011 we worked tirelessly towards this end. On May 23, 2012, Forte will be delivered to Fairstar, on schedule and on budget. Forte will go "on contract" in July for Gorgon. Finesse will be delivered to Fairstar in November, on schedule and on budget.

"I am pleased to report to shareholders that their trust was not misplaced. We also appreciate the support we have received from our other financial partners. In particular DNB Bank and ING Bank with whom we signed a new loan agreement in 2011 to finance our fleet.

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