Final Results - Part 2

Petrofac Limited
10 March 2008



CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2007

                                                                    2007             2006
                                           Notes                 US$'000          US$'000


Revenue                                      4a                2,440,251        1,863,906

Cost of sales                                4b              (2,029,772)      (1,593,588)
                                                           ------------------------------
Gross profit                                                     410,479          270,318

Selling, general and administration          4e                (165,308)        (104,513)
expenses
Other income                                 4c                    3,951            4,870
Other expenses                               4d                    (621)          (1,133)
                                                           ------------------------------
Profit from operations before tax
and finance income/(costs)                                       248,501          169,542

Finance costs                                5                   (8,527)          (7,168)
Finance income                               5                    18,259            9,298
                                                           ------------------------------

Profit before tax                                                258,233          171,672

Income tax expense - UK                                          (7,376)         (13,886)
- Overseas                                                      (62,141)         (37,454)
                                                           ------------------------------
                                             6                  (69,517)         (51,340)
                                                           ------------------------------

Profit for the year                                              188,716          120,332
                                                           ==============================

Attributable to:
Petrofac Limited shareholders                                    188,716          120,332
                                                           ==============================

Earnings per share (US cents)                7

- Basic                                                            54.63            34.98
- Diluted                                                          54.14            34.87



The attached notes 1 to 32 form part of these consolidated financial statements.



CONSOLIDATED BALANCE SHEET
At 31 December 2007

                                                                   2007           2006
                                            Notes               US$'000        US$'000
ASSETS
Non-current assets
Property, plant and equipment                 9                 256,237        143,176
Goodwill                                     11                  71,743         56,732
Intangible assets                            12                   9,010         17,959
Available-for-sale financial assets          14                   1,586          1,726
Derivative financial instruments             15                   1,775          1,925
Other financial assets                       15                      23             22
Deferred income tax assets                   6c                  11,472          2,902
                                                            ---------------------------
                                                                351,846        224,442
                                                            ---------------------------

Current assets
Inventories                                  16                   2,256          1,943
Work in progress                             17                 270,181        367,869
Trade and other receivables                  18                 509,025        330,515
Due from related parties                     30                   3,147          7,725
Derivative financial instruments             15                  27,298          7,483
Other financial assets                       15                   2,702          2,650
Cash and short-term deposits                 19                 581,552        457,848
                                                             -------------------------
                                                              1,396,161      1,176,033
                                                             -------------------------

Asset classified as held for sale                                     -          1,372
                                                             -------------------------

TOTAL ASSETS                                                  1,748,007      1,401,847
                                                             =========================

EQUITY AND LIABILITIES
Equity attributable to Petrofac Limited
shareholders
Share capital                                20                   8,636          8,629
Share premium                                                    68,203         66,210
Capital redemption reserve                                       10,881         10,881
Treasury shares                              21                (29,842)        (8,144)
Other reserves                               23                  50,467         19,611
Retained earnings                                               377,450        227,508
                                                             -------------------------
                                                                485,795        324,695
Minority interests                                                  209            209
                                                             -------------------------

TOTAL EQUITY                                                    486,004        324,904
                                                             -------------------------

Non-current liabilities
Interest-bearing loans and borrowings        24                  81,640         90,705
Provisions                                   25                  19,046         12,498
Other financial liabilities                  26                  13,870          7,373
Deferred income tax liabilities              6c                  34,137         25,754
                                                              ------------------------
                                                                148,693        136,330
                                                              ------------------------

Current liabilities
Trade and other payables                     27                 408,017        346,706
Due to related parties                       30                     744            182
Interest-bearing loans and borrowings        24                  28,455         26,475
Other financial liabilities                  26                     864            172
Income tax payable                                               47,577         10,085
Billings in excess of cost and               17                 208,105        124,990
estimated earnings
Accrued contract expenses                    28                 419,548        432,003
                                                              ------------------------
                                                              1,113,310        940,613
                                                              ------------------------

TOTAL LIABILITIES                                             1,262,003      1,076,943
                                                              ------------------------

TOTAL EQUITY AND LIABILITIES                                  1,748,007      1,401,847
                                                              ========================


The financial statements on pages 24 to 73 were approved by the Board of
Directors on 7 March 2008 and signed on its behalf by Keith Roberts - Chief
Financial Officer___________.

The attached notes 1 to 32 form part of these consolidated financial statements.




CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2007

                                                                 2007            2006
                                          Notes               US$'000         US$'000

OPERATING ACTIVITIES
Profit before tax                                             258,233         171,672
Adjustments for:
Depreciation, amortisation and                                 
impairment                                                     52,758          28,807
Share-based payments                       4f                   5,412           1,281
Difference between other long term
employment benefits
paid and amounts recognised in the                             
income statement                                                5,852           3,082
Net finance (income)                                          (9,732)         (2,130)
Gain on disposal of investments            4c                       -         (1,671)
Gain on disposal of property, plant       
and equipment                             4b,4c               (8,834)        (11,681)
Gain on disposal of held for sale          
assets                                     4c                   (243)               -
Other non-cash items, net                                       1,756           1,203
                                                          ---------------------------

Operating profit before working                               305,202         190,563
capital changes
Trade and other receivables                                 (171,360)         (2,355)
Work in progress                                               97,688       (132,822)
Due from related parties                                        4,578          20,677
Inventories                                                     (313)           (787)
Current financial assets                                        (395)             983
Trade and other payables                                       64,044         129,896
Billings in excess of cost and                                 
estimated earnings                                             83,115          55,214
Accrued contract expenses                                    (12,455)          68,533
Due to related parties                                            562         (1,153)
                                                          ---------------------------

                                                              370,666         328,749
Other non-current items, net                                      133           (139)
                                                          ---------------------------

Cash generated from operations                                370,799         328,610
Interest paid                                                 (7,004)         (7,848)
Income taxes paid, net                                       (32,417)        (19,087)
                                                          ---------------------------

Net cash flows from operating                                 
activities                                                    331,378         301,675
                                                          ---------------------------

INVESTING ACTIVITIES
Purchase of property, plant and                            
equipment                                                  (117,157)         (58,332)
Acquisition of subsidiaries, net of        
cash acquired                              10                (4,902)          (3,865)
Payment of deferred consideration on       
acquisition                                10                   (64)                -
Purchase of intangible oil & gas           
assets                                     12               (48,604)          (6,187)
Purchase of available-for-sale                                    
financial assets                                                   -            (501)
Proceeds from disposal of property,                           
plant and equipment                                           12,166           22,823
Proceeds from disposal of                                          
available-for-sale financial assets                                -            2,250
Net foreign exchange differences                                 829            1,366
Interest received                                             18,562            7,929
                                                         ----------------------------

Net cash flows used in investing                          
activities                                                 (139,170)         (34,517)
                                                         ----------------------------



                                                                 2007          2006
                                            Notes             US$'000       US$'000

FINANCING ACTIVITIES
Proceeds from interest-bearing loans                                
and borrowings                                                      -           766
Repayment of interest-bearing loans and                       
borrowings                                                    (2,767)      (10,361)
Shareholders loan note transactions,                             
net                                                               216           198
Treasury shares purchased                    21              (21,698)       (8,127)
Equity dividends paid                                        (39,479)      (15,069)
                                                          -------------------------

Net cash flows used in financing                             
activities                                                   (63,728)      (32,593)
                                                          -------------------------

NET INCREASE IN CASH AND CASH                                 
EQUIVALENTS                                                   128,480       234,565

Cash and cash equivalents at 1 January                        437,406       202,841
                                                           ------------------------

CASH AND CASH EQUIVALENTS AT 31              
DECEMBER                                     19               565,886       437,406
                                                           ========================


The attached notes 1 to 32 form part of these consolidated financial statements.



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2007


                            Attributable to Shareholders of Petrofac Limited
                    Issued            Capital
                     share   Share redemption Treasury    Other Retained           Minority    Total
                   capital premium    reserve   shares reserves earnings    Total interests   equity
                   US$'000 US$'000    US$'000  US$'000  US$'000  US$'000  US$'000   US$'000  US$'000
                                                          (note
                                                            23)

Balance at 1         
January 2007         8,629  66,210     10,881  (8,144)   19,611  227,508  324,695       209  324,904
                   ---------------------------------------------------------------------------------

Foreign currency         
translation              -       -          -        -     (72)        -     (72)         -     (72)

Net gain on
maturity of cash
flow
hedges recognised
in
income statement         -       -          -        - (22,183)        - (22,183)         - (22,183)

Net changes in
fair value of
derivatives              -       -          -        -   41,734        -   41,734         -   41,734

Realised gains on
the sale of
available-for-sale
financial assets
recognised in            
income statement         -       -          -        -        -        -        -         -        -

Net changes in the
fair value
of
available-for-sale
financial assets         -       -          -        -    (140)        -    (140)         -    (140)
                     -------------------------------------------------------------------------------

Total income and
expenses
for the year
recognised
in equity                -       -          -        -   19,339        -   19,339         -   19,339

Net profit for the       
year                     -       -          -        -        -  188,716  188,716         -  188,716
                      ------------------------------------------------------------------------------

Total income and
expenses
for the year             -       -          -        -   19,339  188,716  208,055         -  208,055

Share-based              
payments charge
(note 22)                -       -          -        -    5,412        -    5,412         -    5,412

Shares issued on         
acquisition (note
20)                      7   1,993          -        -        -        -    2,000         -    2,000

Treasury shares          
(note 21)                -       -          - (21,698)        -        - (21,698)         - (21,698)

Transfer to
reserve for
share-based              
payments (note 22)       -       -          -        -    6,105        -    6,105         -    6,105

Dividends (note 8)       -       -          -        -        - (38,774) (38,774)         - (38,774)
                     -------------------------------------------------------------------------------

Balance at 31        
December 2007        8,636  68,203     10,881 (29,842)   50,467  377,450  485,795       209  486,004
                     ===============================================================================




                            Attributable to Shareholders of Petrofac Limited
                    Issued            Capital
                     share   Share redemption Treasury    Other Retained           Minority    Total
                   capital premium    reserve   shares reserves earnings    Total interests   equity
                   US$'000 US$'000    US$'000  US$'000  US$'000  US$'000  US$'000   US$'000  US$'000
                                                          (note
                                                            23)

Balance at 1        
January 2006         8,629  66,210     10,881     (17) (12,426)  121,850  195,127         -  195,127
                   ----------------------------------------------------------------------------------

Foreign currency         
translation              -       -          -        -    7,449        -    7,449         -    7,449

Net gain on
maturity of cash
flow
hedges recognised
in
income statement         -       -          -        -  (2,378)        -  (2,378)         -  (2,378)

Net changes in
fair value of
derivatives              -       -          -        -   22,931        -   22,931         -   22,931

Realised gains on
the sale of
available-for-sale
financial assets
recognised in           
income statement         -       -          -        -  (1,671)        -  (1,671)         -  (1,671)

Net changes in the
fair value
of
available-for-sale
financial assets         -       -          -        -    1,062        -    1,062         -    1,062
                     --------------------------------------------------------------------------------

Total income and
expenses
for the year
recognised
in equity                -       -          -        -   27,393        -   27,393         -   27,393

Net profit for the       
year                     -       -          -        -        -  120,332  120,332         -  120,332
                     --------------------------------------------------------------------------------

Total income and
expenses
for the year             -       -          -        -   27,393  120,332  147,725         -  147,725

Share-based              
payments charge
(note 22)                -       -          -        -    1,281        -    1,281         -    1,281

Treasury shares          
(note 21)                -       -          -  (8,127)        -        -  (8,127)         -  (8,127)

Transfer to
reserve for
share-based             
payments (note 22)       -       -          -        -    3,363        -    3,363         -    3,363

Dividends (note 8)       -       -          -        -        - (14,674) (14,674)         - (14,674)

Minority interests       
acquired                 -       -          -        -        -        -        -       209      209
                     --------------------------------------------------------------------------------

Balance at 31        
December 2006        8,629  66,210     10,881  (8,144)   19,611  227,508  324,695       209  324,904
                    =================================================================================



The attached notes 1 to 32 form part of these consolidated financial statements.



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2007


1 CORPORATE INFORMATION

The consolidated financial statements of Petrofac Limited (the Company) for the
year ended 31 December 2007 were authorised for issue in accordance with a
resolution of the directors on 7 March 2008.

Petrofac Limited is a limited liability company registered in Jersey under the
Companies (Jersey) Law 1991 and is the holding company for the international
group of Petrofac subsidiaries (together "the group"). The group's principal
activity is the provision of facilities solutions to the oil & gas production
and processing industry.

A full listing of all group companies, including joint venture companies, is
contained in note 32 to these consolidated financial statements.


2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of preparation

The consolidated financial statements have been prepared on a historical cost
basis, except for derivative financial instruments and available-for-sale
financial assets that have been measured at fair value. The presentation
currency of the consolidated financial statements is United States dollars and
all values in the financial statements are rounded to the nearest thousand
(US$'000) except where otherwise stated.


Statement of compliance

The consolidated financial statements of Petrofac Limited and its subsidiaries
have been prepared in accordance with International Financial Reporting
Standards (IFRS) and applicable requirements of Jersey law.


Basis of consolidation

The consolidated financial statements comprise the financial statements of
Petrofac Limited and its subsidiaries. The financial statements of subsidiaries
are prepared for the same reporting year as the Company and where necessary,
adjustments are made to the financial statements of the group's subsidiaries to
bring their accounting policies into line with those of the group.

Subsidiaries are consolidated from the date on which control is transferred to
the group and cease to be consolidated from the date on which control is
transferred out of the group. Control is achieved where the Company has the
power to govern the financial and operating policies of an investee entity so as
to obtain benefits from its activities. All intra-group balances and
transactions, including unrealised profits, have been eliminated on
consolidation.

Minority interests in subsidiaries consolidated by the group are disclosed
separately from the group's equity and income statement. Losses attributable to
minority interests in excess of the minority's interest in the net assets of the
subsidiary are adjusted against the interest of the group unless there is a
binding obligation on the part of the minority to contribute additional
investment in the subsidiary.

Comparative information relating to discontinued operations in the consolidated
income statement and related notes to the financial statements has not been
separately disclosed, as the remaining assets and liabilities associated with
the prior year discontinued operations no longer meet the criteria of IFRS 5
'Non-current Assets Held for Sale and Discontinued Operations' as they are not
being discontinued via a sale transaction, but are being wound down.


New Standards and Interpretations

The group has adopted new and revised Standards and Interpretations issued by
the International Accounting Standards Board (IASB) and the International
Financial Reporting Interpretations Committee (IFRIC) of the IASB that are
relevant to its operations and effective for accounting periods beginning on or
after 1 January 2007. The principal effects of the adoption of these new and
amended standards and interpretations are discussed below:


IAS 1 'Presentation of financial statements'

This amendment requires new disclosure regarding the group's objectives,
policies and processes for managing its capital. These new disclosures are shown
in note 31.


IFRS 7 'Financial instruments: Disclosures'

This standard requires the disclosure of the group's financial instruments and
qualitative and quantitative disclosures around the associated risks arising
from those financial instruments. The new disclosures are included throughout
the financial statements.


IFRIC 8 'Scope of IFRS 2'

This interpretation requires the application of 'IFRS 2 Share-based payment' to
be applied to any arrangements where equity instruments are issued for
consideration which appears to be less than fair value. The group mainly enters
into share- based payment transactions as part of an employee share scheme and
as a result this interpretation has no impact on the financial position of the
group.


IFRIC 9 'Reassessment of Embedded Derivatives'

This interpretation prescribes that the existence of an embedded derivative is
determined at the date an entity first becomes a party to a contract and is
reassessed only when there has been a change to the contract that significantly
modifies the cash flows. The adoption of this interpretation does not have any
significant impact on the financial position of the group.


IFRIC 10 'Interim Financial Reporting and Impairment'

This interpretation lays out guidelines for the treatment of impairment losses
during an interim period, namely that the entity must not reverse an impairment
loss recognised in a previous interim period in respect of goodwill or an
investment in either an equity instrument or a financial asset carried at cost.
The adoption of this interpretation did not affect the group's operating results
or financial position.

Certain new standards, amendments to and interpretations of existing standards
have been published and are mandatory for the group's accounting periods
beginning on or after 1 January 2008 or later periods but which the group has
not early adopted. Those that are applicable to the group are as follows:

i)   IAS 1 'Presentation of Financial Statements (Revised)'effective for
annual periods beginning on or after 1 January 2009 has been revised to enhance
the usefulness of information presented in the financial statements. Management
is considering the approach to meeting this requirement.

ii)  IFRS 2 'Amendments to IFRS 2 - Vesting Conditions and Cancellations'
is required to be applied to periods beginning on or after 1 January 2009. This
amendment clarifies the definition of non-vesting conditions and prescribes
accounting treatment of an award that is cancelled because a non-vesting
condition is not satisfied. This will have no significant impact on the group's
financial statements.

iii) IFRS 3 'Business Combinations (Revised)' and the amended version of
IAS 27 'Consolidated and Separate Financial Statements', effective for annual
periods beginning on or after 1 July 2009, have been enhanced to, amongst other
reasons, specify the accounting treatments for acquisition costs, contingent
consideration, pre-existing relationships and reacquired rights. The revised
standards include detailed guidance in respect of step acquisitions and partial
disposals of subsidiaries and associates as well as in respect of allocation of
income to non-controlling interests. Further, an option has been added to IFRS 3
to permit an entity to recognise 100 per cent of the goodwill of an acquired
entity, not just the acquiring entity's portion of the goodwill. The impact of
this standard on the group is not expected to be significant.

iv)  IFRS 8 'Operating Segments' introduces the management approach to
segment reporting. IFRS 8, which becomes mandatory for the group's 2009
financial information, will require the disclosure of segment information based
on the internal reports regularly reviewed by the group's Chief Operating
Decision Maker in order to assess each segment's performance and allocate
resources to them. Management is analysing the approach to be used in the
segment information under IFRS 8.

v)   IFRIC 14-IAS 19 'The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction' clarifies when refunds or reductions in
future contributions in relation to defined benefit assets should be regarded as
available and provides guidance on the impact of minimum funding requirements
(MFR) on such assets. It also addresses when an MFR might give rise to a
liability. IFRIC 14 will become mandatory for the group's 2008 financial
information, with retrospective application required. This will have no
significant impact on the group's financial statements.

vi)  Revisions to IAS 23 'Borrowing costs' have removed the option of
immediately recognising as an expense borrowing costs that relate to assets that
take a substantial period of time to get ready for use or sale. An entity is,
therefore, required to capitalise borrowing costs as part of the cost of such
assets. The revised standard applies to borrowing costs relating to qualifying
assets for which the commencement date for capitalisation is on or after 1
January 2009. This will have no significant impact on the group.

vii) IFRIC 11, IFRS 2 'Group and Treasury Share Transactions' effective for
annual periods beginning on or after 1 March 2007 provides specific guidance on
applying IFRS 2. It addresses share-based payments involving an entity choosing
or being required to buy its own equity instruments (treasury shares) to settle
a share-based payment obligation and the situation when the parent grants rights
to its equity instruments to employees of its subsidiaries (both of which should
be treated as equity-settled). In addition it addresses the situation when a
subsidiary grants rights to equity instruments of its parent to its employees
(which should be treated as cash settled). The Directors anticipate that the
initial adoption of this standard will have no significant impact on the group.

Other interpretations that have been issued but that are not yet effective but
that are not applicable to the group are IFRIC 12 'Service Concession
Arrangements' and IFRIC 13 'Customer Loyalty Programmes'.

Significant accounting judgements and estimates


Judgements

In the process of applying the group's accounting policies, management has made
the following judgements, apart from those involving estimations, which have the
most significant effect on the amounts recognised in the financial statements:

  • Revenue recognition on fixed price engineering, procurement and
    construction contracts: the group recognises revenue on fixed price
    engineering, procurement and construction contracts using the
    percentage-of-completion method, based on surveys of work performed. The
    group has determined this basis of revenue recognition is the best available
    measure of progress on such contracts.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below:

  • Project cost to complete estimates: at each balance sheet date the group
    is required to estimate costs to complete on fixed price contracts.
    Estimating costs to complete on such contracts requires the group to make
    estimates of future costs to be incurred, based on work to be performed
    beyond the balance sheet date.

  • Impairment of goodwill: the group determines whether goodwill is
    impaired at least on an annual basis. This requires an estimation of the
    value in use of the cash-generating units to which the goodwill is
    allocated. Estimating the value in use requires the group to make an
    estimate of the expected future cash flows from each cash-generating unit
    and also to determine a suitable discount rate in order to calculate the
    present value of those cash flows. The carrying amount of goodwill at 31
    December 2007 was US$71,743,000 (2006: US$56,732,000).

  • Deferred tax assets: the group recognises deferred tax assets on unused
    tax losses where it is probable that future taxable profits will be
    available for utilisation. This requires management to make judgements and
    assumptions regarding the amount of deferred tax that can be recognised as
    well as the likelihood of future taxable profits. The carrying amount of
    recognised tax losses at 31 December 2007 was US$8,512,000 (2006:
    US$1,851,000).

  • Income tax: The company and its subsidiaries are subject to routine tax
    audits and also a process whereby tax computations are discussed and agreed
    with the appropriate authorities. Whilst the ultimate outcome of such tax
    audits and discussions cannot be determined with certainty, management
    estimates the level of provisions required for both current and deferred tax
    on the basis of professional advice and the nature of current discussions
    with the tax authority concerned.

  • Recoverable value of intangible oil & gas assets: the group determines
    at each balance sheet date whether there is any evidence of impairment in
    the carrying value of its intangible oil & gas assets. This requires
    management to estimate the recoverable value of its intangible oil & gas
    assets by reference to quoted market values, similar arms length
    transactions involving these assets etc.


Interests in joint ventures

The group has a number of contractual arrangements with other parties which
represent joint ventures. These take the form of agreements to share control
over other entities ('jointly controlled entities') and commercial
collaborations ('jointly controlled operations'). The group's interests in
jointly controlled entities are accounted for by proportionate consolidation,
which involves recognising its proportionate share of the joint venture's
assets, liabilities, income and expenses with similar items in the consolidated
financial statements on a line-by-line basis. Where the group collaborates with
other entities in jointly controlled operations, the expenses the group incurs
and its share of the revenue earned is recognised in the income statement.
Assets controlled by the group and liabilities incurred by it are recognised in
the balance sheet. Where necessary, adjustments are made to the financial
statements of the group's jointly controlled entities and operations to bring
their accounting policies into line with those of the group.


Foreign currency translation

The Company's functional and presentational currency is United States dollars.
In the accounts of individual group companies, transactions in currencies other
than a company's functional currency are recorded at the prevailing rate of
exchange at the date of the transaction. At the year end, monetary assets and
liabilities denominated in foreign currencies are retranslated at the rates of
exchange prevailing at the balance sheet date. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency
are translated using the rate of exchange as at the dates of the initial
transactions. Non-monetary assets and liabilities measured at fair value in a
foreign currency are translated using the rate of exchange at the date the fair
value was determined. All foreign exchange gains and losses are taken to the
income statement with the exception of exchange differences arising on monetary
assets and liabilities that form part of the group's net investment in
subsidiaries. These are taken directly to equity until the disposal of the net
investment at which time they are recognised in the income statement.

The balance sheets of overseas subsidiaries and joint ventures are translated in
to US dollars using the closing rate method, whereby assets and liabilities are
translated at the rates of exchange prevailing at the balance sheet date. The
income statements of overseas subsidiaries and joint ventures are translated at
average exchange rates for the year. Exchange differences arising on the
retranslation of net assets are taken directly to a separate component of
equity.

On the disposal of a foreign entity, accumulated exchange differences are
recognised in the income statement as a component of the gain or loss on
disposal.


Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation
and any impairment in value. Cost comprises the purchase price or construction
cost and any costs directly attributable to making that asset capable of
operating as intended. The purchase price or construction cost is the aggregate
amount paid and the fair value of any other consideration given to acquire the
asset. Depreciation is provided on a straight-line basis other than on oil & gas
assets at the following rates.

Oil & gas facilities                     10% - 12.5%
Plant and equipment                      4% - 33%
Buildings and leasehold improvements     5% - 33% (or shorter of the lease term)
Office furniture and equipment           25% - 100%
Vehicles                                 20% - 33%


Tangible oil & gas assets are depreciated, on a field-by-field basis, using the
unit-of-production method based on entitlement to proven and probable reserves,
taking account of estimated future development expenditure relating to those
reserves.

Each asset's estimated useful life, residual value and method of depreciation
are reviewed and adjusted if appropriate at each financial year end.

No depreciation is charged on land or assets under construction.

The carrying amount of an item of property, plant and equipment shall be
derecognised on disposal or when no future economic benefits are expected from
its use or disposal. The gain or loss arising from the derecognition of an item
of property, plant and equipment shall be included in profit or loss when the
item is derecognised. Gains shall not be classified as revenue.

Non-current assets

Non-current assets or disposal groups are classified as held for sale when it is
expected that the carrying amount of an asset will be recovered principally
through sale rather than continuing use. Assets are not depreciated when
classified as held for sale.

Borrowing costs

Borrowing costs directly attributable to the construction of qualifying assets,
which are assets that necessarily take a substantial period of time to prepare
for their intended use, are added to the cost of those assets, until such time
as the assets are substantially ready for their intended use. All other
borrowing costs are recognised as interest payable in the income statement in
the period in which they are incurred.

Goodwill

Goodwill acquired in a business combination is initially measured at cost, being
the excess of the cost of the business combination over the net fair value of
the identifiable assets, liabilities and contingent liabilities of the entity at
the date of acquisition. Following initial recognition, goodwill is measured at
cost less any accumulated impairment losses. Goodwill is reviewed for impairment
annually, or more frequently if events or changes in circumstances indicate that
such carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired is allocated to the
cash-generating units that are expected to benefit from the synergies of the
combination. Each unit or units to which goodwill is allocated represents the
lowest level within the group at which the goodwill is monitored for internal
management purposes and is not larger than a segment based on either the group's
primary or the group's secondary reporting format determined in accordance with
IAS14 'Segment Reporting'.

Impairment is determined by assessing the recoverable amount of the
cash-generating units to which the goodwill relates. Where the recoverable
amount of the cash-generating units is less than the carrying amount of the
units and related goodwill, an impairment loss is recognised.

Where goodwill has been allocated to cash-generating units and part of the
operation within those units is disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of
in this circumstance is measured based on the relative values of the operation
disposed of and the portion of the cash-generating units retained.

Intangible assets - non oil & gas assets

Intangible assets acquired in a business combination are initially measured at
cost being their fair values at the date of acquisition and are recognised
separately from goodwill as the asset is separable or arises from a contractual
or other legal right and its fair value can be measured reliably. After initial
recognition, intangible assets are carried at cost less accumulated amortisation
and any accumulated impairment losses. Intangible assets with a finite life are
amortised over their useful economic life using a straight line method unless a
better method reflecting the pattern in which the asset's future economic
benefits are expected to be consumed can be determined. The amortisation charge
in respect of intangible assets is included in the selling, general and
administration expenses line of the income statement. The expected useful lives
of assets are reviewed on an annual basis. Any change in the useful life or
pattern of consumption of the intangible asset is treated as a change in
accounting estimate and is accounted for prospectively by changing the
amortisation period or method. Intangible assets are tested for impairment
whenever there is an indication that the asset may be impaired.


Customer contracts

Customer contracts arising from acquisition are amortised over the remaining
years of the contracts on a straight line basis.

Oil & gas assets

Capitalised costs

The group's activities in relation to oil & gas assets are limited to assets in
the evaluation, development and production phases and the group has adopted IFRS
6 'Exploration for and Evaluation of Mineral Resources' for the purposes of
accounting for oil & gas assets in its financial statements.

Oil & gas evaluation and development expenditure is accounted for using the
successful efforts method of accounting.

Evaluation expenditures

Expenditure directly associated with evaluation (or appraisal) activities is
capitalised as an intangible asset. Such costs include the costs of acquiring an
interest, appraisal well drilling costs, payments to contractors and an
appropriate share of directly attributable overheads incurred during the
evaluation phase. For such appraisal activity, which may require drilling of
further wells, costs continue to be carried as an asset whilst related
hydrocarbons are considered capable of commercial development. Such costs are
subject to technical, commercial and management review to confirm the continued
intent to develop, or otherwise extract value. When this is no longer the case,
the costs are written off in the income statement. When such assets are declared
part of a commercial development, related costs are transferred to tangible oil
& gas assets. All intangible oil & gas assets are assessed for any impairment
prior to transfer and any impairment loss is recognised in the income statement.


Development expenditures

Expenditure relating to development of assets which include the construction,
installation and completion of infrastructure facilities such as platforms,
pipelines and development wells, is capitalised within property, plant and
equipment.

Changes in unit-of-production factors

Changes in factors which affect unit-of-production calculations are dealt with
prospectively, not by immediate adjustment of prior years' amounts.


Decommissioning

Provision for future decommissioning costs is made in full when the group has an
obligation to dismantle and remove a facility or an item of plant and to restore
the site on which it is located, and when a reasonable estimate of that
liability can be made. The amount recognised is the present value of the
estimated future expenditure. An amount equivalent to the initial provision for
decommissioning costs is capitalised and amortised over the life of the
underlying asset on a unit-of-production basis over proven and probable
reserves. Any change in the present value of the estimated expenditure is
reflected as an adjustment to the provision and the oil & gas asset.

The unwinding of the discount applied to future decommissioning provisions is
included under finance costs in the income statement.


Available-for-sale financial assets

Investments classified as available-for-sale are initially stated at fair value,
including acquisition charges associated with the investment.

After initial recognition, available-for-sale financial assets are measured at
their fair value using quoted market rates. Gains and losses are recognised as a
separate component of equity until the investment is sold or impaired, at which
time the cumulative gain or loss previously reported in equity is included in
the income statement.


Impairment of assets (excluding goodwill)

At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to assess whether there is an indication that
those assets may be impaired. If any such indication exists, the group makes an
estimate of the asset's recoverable amount. An asset's recoverable amount is the
higher of an asset's fair value less costs to sell and its value in use. In
assessing value in use, the estimated future cash flows attributable to the
asset are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset.

If the recoverable amount of an asset is estimated to be less than its carrying
amount, the carrying amount of the asset is reduced to its recoverable amount.
An impairment loss is recognised immediately in the income statement, unless the
relevant asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset
is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior
years. A reversal of an impairment loss is recognised immediately in the income
statement, unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment is treated as a revaluation increase.

Inventories

Inventories are valued at the lower of cost and net realisable 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. Cost comprises purchase price, cost of production,
transportation and other directly allocable expenses. Costs of inventories,
other than raw materials, are determined using the first-in-first-out method.
Costs of raw materials are determined using the weighted average method.

Work in progress and billings in excess of cost and estimated earnings

Fixed price lump sum engineering, procurement and construction contracts are
presented in the balance sheet as follows:

For each contract, the accumulated cost incurred, as well as the estimated
earnings recognised at the contract's percentage of completion less provision
for any anticipated losses, after deducting the progress payments received or
receivable to the customers, are shown in current assets in the balance sheet
under the "Work in progress".

Where the payments received or receivable for any contract exceed the cost and
estimated earnings less provision for any anticipated losses, the excess is
shown as "Billings in excess of cost and estimated earnings" within current
liabilities.


Trade and other receivables

Trade receivables are recognised and carried at original invoice amount less an
allowance for any amounts estimated to be uncollectable. An estimate for
doubtful debts is made when there is objective evidence that the collection of
the full amount is no longer probable under the terms of the original invoice.
Impaired debts are derecognised when they are assessed as uncollectable.


Cash and cash equivalents

Cash and cash equivalents consist of cash at bank and in hand and short-term
deposits with an original maturity of three months or less. For the purpose of
the cash flow statement, cash and cash equivalents consists of cash and cash
equivalents as defined above, net of outstanding bank overdrafts.

Interest-bearing loans and borrowings

All interest-bearing loans and borrowings are initially recognised at the fair
value of the consideration received net of issue costs directly attributable to
the borrowing.

After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest rate
method. Amortised cost is calculated by taking into account any issue costs, and
any discount or premium on settlement.

Provisions

Provisions are recognised when the group has a present legal or constructive
obligation as a result of past events, 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. If the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised in the income
statement as a finance cost.

Derecognition of financial assets and liabilities


Financial assets

A financial asset (or, where applicable a part of a financial asset) is
derecognised where:

   • the rights to receive cash flows from the asset have expired;
   • the group retains the right to receive cash flows from the asset, but
     has assumed an obligation to pay them in full without material delay to a
     third party under a 'pass-through' arrangement; or
   • the group has transferred its rights to receive cash flows from the
     asset and either a) has transferred substantially all the risks and rewards
     of the asset, or b) has neither transferred nor retained substantially all
     the risks and rewards of the asset, but has transferred control of the
     asset.

Financial liabilities

A financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires.

If an existing financial liability is replaced by another from the same lender,
on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability
such that the difference in the respective carrying amounts together with any
costs or fees incurred are recognised in the income statement.

Pensions and other long term employment benefits

The group has various defined contribution pension schemes in accordance with
the local conditions and practices in the countries in which it operates. The
amount charged to the income statement in respect of pension costs reflects the
contributions payable in the year. Differences between contributions payable
during the year and contributions actually paid are shown as either accrued
liabilities or prepaid assets in the balance sheet.

The group's other long term employment benefits are provided in accordance with
the labour laws of the countries in which the group operates, further details of
which are given in note 25.

Share-based payment transactions

Employees (including directors) of the group receive remuneration in the form of
share-based payment transactions, whereby employees render services in exchange
for shares or rights over shares ('equity-settled transactions').

Equity-settled transactions


The cost of equity-settled transactions with employees is measured by reference
to the fair value at the date on which they are granted. In valuing
equity-settled transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares of Petrofac Limited
('market conditions'), if applicable.

The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the relevant
employees become fully entitled to the award (the 'vesting period'). The
cumulative expense recognised for equity-settled transactions at each reporting
date until the vesting date reflects the extent to which the vesting period has
expired and the group's best estimate of the number of equity instruments that
will ultimately vest. The income statement charge or credit for a period
represents the movement in cumulative expense recognised as at the beginning and
end of that period.

No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied. Equity awards
cancelled are treated as vesting immediately on the date of cancellation, and
any expense not recognised for the award at that date is recognised in the
income statement.

The group has taken advantage of the transitional provisions of IFRS 2
'Share-based payment' in respect of equity-settled awards and has applied IFRS 2
'Share-based payment' only to equity-settled awards granted after 7 November
2002 that had not vested before 1 January 2005.


Petrofac Employee Benefit Trust

The Petrofac Employee Benefit Trust was established on 7 March 2006 to warehouse
ordinary shares purchased to satisfy various new share scheme awards made to the
employees of the Company, which will be transferred to the members of the scheme
on their respective vesting dates subject to satisfying the performance
conditions of each scheme. The trust has been consolidated in the financial
statements in accordance with SIC 12 'Special Purpose Entities'. The cost of
shares temporarily held by Petrofac Employee Benefit Trust are reflected as
treasury shares and deducted from equity.


Leases

The determination of whether an arrangement is, or contains a lease is based on
the substance of the arrangement at inception date of whether the fulfilment of
the arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys the right to use the asset.

The group has entered into various operating leases the payments for which are
recognised as an expense in the income statement on a straight-line basis over
the lease terms.


Revenue recognition

Revenue is recognised to the extent that it is probable economic benefits will
flow to the group and the revenue can be reliably measured. The following
specific recognition criteria also apply:

Engineering, procurement and construction services (Engineering & Construction)

Revenues from fixed-price lump-sum contracts are recognised on the
percentage-of-completion method, based on surveys of work performed once the
outcome of a contract can be estimated reliably. In the early stages of contract
completion, when the outcome of a contract cannot be estimated reliably,
contract revenues are recognised only to the extent of costs incurred that are
expected to be recoverable.

Revenues from cost-plus-fee contracts are recognised on the basis of costs
incurred during the year 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 the balance sheet date, whether or not work has commenced on
these contracts.

Incentive payments are included in revenue when the contract is sufficiently
advanced that it is probable that the specified performance standards will be
met or exceeded and the amount of the incentive payments can be measured
reliably. Claims are only included in revenue when negotiations have reached an
advanced stage such that it is probable the claim will be accepted and can be
measured reliably.

Facilities management, engineering and training services (Operations Services)

Revenues from reimbursable contracts are recognised in the period in which the
services are provided based on the agreed contract schedule of rates.

Revenues from fixed-price contracts are recognised on the
percentage-of-completion method, measured by milestones completed or earned
value once the outcome of a contract can be estimated reliably. In the early
stages of contract completion, when the outcome of a contract cannot be
estimated reliably, contract revenues are recognised only to the extent of costs
incurred that are expected to be recoverable.

Incentive payments are included in revenue when the contract is sufficiently
advanced that it is probable that the specified performance standards will be
met or exceeded and the amount of the incentive payments can be measured
reliably. Claims are only included in revenue when negotiations have reached an
advanced stage such that it is probable the claim will be accepted and can be
measured reliably.


Oil & gas activities (Energy Developments)

Oil & gas revenues comprise the group's share of sales from the processing or
sale of hydrocarbons on an entitlement basis, when the significant risks and
rewards of ownership have been passed to the buyer.


Income taxes

Income tax expense represents the sum of current income tax and deferred tax.

Current income tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from, or paid to the taxation
authorities. Taxable profit differs from profit as reported in the income
statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The group's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised on all temporary differences at the balance
sheet date between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of
taxable profit, with the following exceptions:

   • where the temporary difference arises from the initial recognition of
     goodwill or of an asset or liability in a transaction that is not a 
     business combination that at the time of the transaction affects neither 
     accounting nor taxable profit or loss;
   • in respect of taxable temporary differences associated with investments
     in subsidiaries, associates and joint ventures, where the timing of 
     reversal of the temporary differences can be controlled and it is probable 
     that the temporary differences will not reverse in the foreseeable future; 
     and
   • deferred income tax assets are recognised only to the extent that it is
     probable that a taxable profit will be available against which the
     deductible temporary differences, carried forward tax credits or tax losses
     can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred
income tax assets to be utilised. Unrecognised deferred income tax assets are
reassessed at each balance sheet date and are recognised to the extent that it
has become probable that future taxable profit will allow the deferred tax asset
to be recovered.

Deferred income tax assets and liabilities are measured on an undiscounted basis
at the tax rates that are expected to apply when the asset is realised or the
liability is settled, based on tax rates and tax laws enacted or substantively
enacted at the balance sheet date.

Current and deferred income tax is charged or credited directly to equity if it
relates to items that are credited or charged to equity. Otherwise, income tax
is recognised in the income statement.

For presentation purposes certain 2006 comparative tax figures have been
restated to conform to the current year's presentation.


Derivative financial instruments and hedging

The group uses derivative financial instruments such as forward currency
contracts, interest rate collars and swaps and oil price collars to hedge its
risks associated with foreign currency, interest rate and oil price
fluctuations. Such derivative financial instruments are initially recognised at
fair value on the date on which a derivative contract is entered into and are
subsequently remeasured at fair value. Derivatives are carried as assets when
the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives that
do not qualify for hedge accounting are taken to the income statement.

The fair value of forward currency contracts is calculated by reference to
current forward exchange rates for contracts with similar maturity profiles. The
fair value of interest rate cap, swap and oil price collar contracts is
determined by reference to market values for similar instruments.


For the purposes of hedge accounting, hedges are classified as:

   •fair value hedges when hedging the exposure to changes in the fair value
    of a recognised asset or liability; or

   •cash flow hedges when hedging exposure to variability in cash flows that
    is either attributable to a particular risk associated with a recognised
    asset or liability or a highly probable forecast transaction.

The group formally designates and documents the relationship between the hedging
instrument and the hedged item at the inception of the transaction, as well as
its risk management objectives and strategy for undertaking various hedge
transactions. The documentation also includes identification of the hedging
instrument, the hedged item or transaction, the nature of risk being hedged and
how the group will assess the hedging instrument's effectiveness in offsetting
the exposure to changes in the hedged item's fair value or cash flows
attributable to the hedged risk. The group also documents its assessment, both
at hedge inception and on an ongoing basis, of whether the derivatives that are
used in the hedging transactions are highly effective in offsetting changes in
fair values or cash flows of the hedged items.

The treatment of gains and losses arising from revaluing derivatives designated
as hedging instruments depends on the nature of the hedging relationship, as
follows:


Fair value hedges

For fair value hedges, the carrying amount of the hedged item is adjusted for
gains and losses attributable to the risk being hedged; the derivative is
remeasured at fair value and gains and losses from both are taken to the income
statement. For hedged items carried at amortised cost, the adjustment is
amortised through the income statement such that it is fully amortised by
maturity.

The group discontinues fair value hedge accounting if the hedging instrument
expires or is sold, terminated or exercised, the hedge no longer meets the
criteria for hedge accounting or the group revokes the designation.


Cash flow hedges

For cash flow hedges, the effective portion of the gain or loss on the hedging
instrument is recognised directly in equity, while the ineffective portion is
recognised in the income statement. Amounts taken to equity are transferred to
the income statement when the hedged transaction affects the income statement.

If the hedging instrument expires or is sold, terminated or exercised without
replacement or rollover, or if its designation as

a hedge is revoked, any cumulative gain or loss existing in equity at that time
remains in equity and is recognised when the forecast transaction is ultimately
recognised in the income statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred to the income statement.


Embedded derivatives

Contracts are assessed for the existence of embedded derivatives at the date
that the group first becomes party to the contract, with reassessment only if
there is a change to the contract that significantly modifies the cash flows.
Embedded derivatives which are not clearly and closely related to the underlying
asset, liability or transaction are separated and accounted for as stand alone
derivatives.


3 SEGMENT INFORMATION

The group's primary operations are organised on a worldwide basis into three
business segments: Engineering & Construction, Operations Services and Energy
Developments. The accounting policies of the segments are the same as those
described in note 2 above. The group accounts for inter-segment sales as if the
sales were to third parties, that is, at current market prices. The group
evaluates the performance of its segments and allocates resources to them based
on this evaluation.

The group's secondary segment reporting format is geographical. Geographical
segments are based on the location of the group's assets. Sales to external
customers disclosed in geographical segments are based on the geographical
location of its customers.

Business segments

The following tables present revenue and profit information and certain asset
and liability information relating to the group's business segments for the
years ended 31 December 2007 and 2006. Included within the corporate,
consolidation and eliminations columns are certain balances, which due to their
nature, are not allocated to segments.


Year ended 31 December 2007

                                  Engineering                                    Consolidation
                                            & Operations       Energy Corporate  adjustments &
                                 Construction   Services Developments  & others   eliminations     Total
                                      US$'000    US$'000      US$'000   US$'000        US$'000   US$'000

Revenue
External sales                      1,409,817    897,602      132,832         -              - 2,440,251

Inter-segment sales                     5,131     13,372            -         -       (18,503)         -
                                  ----------------------------------------------------------------------

Total revenue                       1,414,948    910,974      132,832         -       (18,503) 2,440,251
                                  ======================================================================

Segment  results                      158,197     44,891       51,637     (236)             51   254,540

Unallocated corporate
costs                                       -          -            -   (6,039)              -   (6,039)
                                  ----------------------------------------------------------------------

Profit / (loss) before tax and
finance income / (costs)              158,197     44,891       51,637   (6,275)             51   248,501

Finance costs                           (662)    (4,384)        (205)   (8,572)          5,296   (8,527)

Finance income                         18,013      1,247          331     3,857        (5,189)    18,259
                                  ----------------------------------------------------------------------

Profit / (loss) before
income tax                            175,548     41,754       51,763  (10,990)            158   258,233

Income tax  (expense)/income         (38,454)   (12,857)     (18,375)       169              -  (69,517)
                                  ----------------------------------------------------------------------

Profit / (loss) for the year          137,094     28,897       33,388  (10,821)            158   188,716
                                  ======================================================================


Year ended 31 December 2006

                                                                                  Consolidation
                                 Engineering & Operations       Energy Corporate  adjustments &
                                  Construction   Services Developments  & others   eliminations     Total
                                       US$'000    US$'000      US$'000   US$'000        US$'000   US$'000

Revenue
External sales                       1,079,236    722,850       62,125        33          (338) 1,863,906

Inter-segment sales                      2,043      6,390            -         -        (8,433)         -
                                 -------------------------------------------------------------------------

Total revenue                        1,081,279    729,240       62,125        33        (8,771) 1,863,906
                                 =========================================================================

Segment  results                       117,209     29,100       25,065   (1,577)            707   170,504

Unallocated corporate
costs                                        -          -            -     (962)              -     (962)
                                 ------------------------------------------------------------------------

Profit / (loss) before tax and
finance income / (costs)               117,209     29,100       25,065   (2,539)            707   169,542

Finance costs                            (347)    (2,754)        (470)   (8,042)          4,445   (7,168)

Finance income                          10,040        438          236     3,029        (4,445)     9,298
                                 -------------------------------------------------------------------------

Profit / (loss) before
income tax                             126,902     26,784       24,831   (7,552)            707   171,672

Income tax  (expense)/income          (31,522)    (8,681)     (10,466)     (707)             36  (51,340)
                                 -------------------------------------------------------------------------

Profit / (loss) for the year            95,380     18,103       14,365   (8,259)            743   120,332
                                 =========================================================================



Year ended 31 December 2007
                                                                                                                  
                                                                                 Consolidation    
                                 Engineering & Operations       Energy Corporate adjustments & 
                                  Construction   Services Developments  & others  eliminations     Total
                                       US$'000    US$'000      US$'000   US$'000       US$'000   US$'000
Assets and liabilities
Segment assets                       1,222,444    339,682      244,500         -      (86,438) 1,720,188              

Inter-segment assets                  (82,050)    (4,388)            -         -        86,438         -             

Investments                                  -          -        1,586         -             -     1,586           
                                ---------------------------------------------------------------------------
     
                                     1,140,394    335,294      246,086         -             - 1,721,774        
     
Unallocated assets                           -          -            -    14,761             -    14,761         
     
Income tax assets                        2,895      1,000       13,650       618       (6,691)    11,472         
                                ---------------------------------------------------------------------------

Total assets                         1,143,289    336,294      259,736    15,379       (6,691) 1,748,007            
                                ===========================================================================

Segment liabilities                    861,132    219,248      173,303         -     (178,559) 1,075,124           

Inter-segment liabilities              (9,621)   (43,731)    (125,207)         -       178,559         -              
                                ---------------------------------------------------------------------------
                                       851,511    175,517       48,096         -             - 1,075,124        
    

Unallocated liabilities                      -          -            -   105,165             -   105,165        
    
Income tax liabilities                  53,175     10,147       23,767     1,316       (6,691)    81,714           
                                ---------------------------------------------------------------------------

Total liabilities                      904,686    185,664       71,863   106,481       (6,691) 1,262,003          
                                ===========================================================================

Other segment information
Capital expenditures:
Property, plant
  and equipment                         44,683      6,447       66,484       130         (587)   117,157          
 
Intangible oil & gas assets                  -          -       49,700         -             -    49,700           
     
Other intangible assets                      -      2,369            -         -             -     2,369        
    
Goodwill                                     -     14,233            -         -             -    14,233         
                               ============================================================================
     

Charges:
Depreciation                            15,654      4,567       22,476       449         (845)    42,301       
 
Amortisation                                 -      1,771            -         -             -     1,771           
     
Impairment                                   -          -        8,686         -             -     8,686        
     
Other long term employment benefits      5,075      1,492            7        31             -     6,605       
    
Share-based payments                     2,667      1,382          589       774             -     5,412        
                               ============================================================================
     


Year ended 31 December 2006

                                                                                                                  
                                                                                        
                                                                                       Consolidation
                                 Engineering & Operations        Energy  Corporate &   adjustments &
                                  Construction   Services  Developments       others    eliminations     Total
                                       US$'000    US$'000       US$'000      US$'000         US$'000   US$'000          
Assets and liabilities
Segment assets                       1,017,978    284,308       136,080        2,885        (66,824) 1,374,427          
Inter-segment assets                  (63,221)    (3,418)             -        (185)          66,824         -          
Investments                                  -          -         1,726            -               -     1,726          
                                    ----------------------------------------------------------------------------
                                       954,757    280,890       137,806        2,700               - 1,376,153        
     
Unallocated assets                           -          -             -       22,792               -    22,792         
                                    ----------------------------------------------------------------------------
     
Income tax assets                        3,849        628         3,679          995         (6,249)     2,902        
                                    ----------------------------------------------------------------------------

Total assets                           958,606    281,518       141,485       26,487         (6,249) 1,401,847      
                                    ============================================================================

Segment liabilities                    774,632    185,164       109,182       26,934       (155,622)   940,290        

Inter-segment liabilities             (10,898)   (32,398)      (86,787)     (25,539)         155,622         -          
                                    ----------------------------------------------------------------------------
                                       763,734    152,766        22,395        1,395               -   940,290          
Unallocated liabilities                      -          -             -      100,814               -   100,814        
     
Income tax liabilities                  30,181      8,289         2,118          500         (5,249)    35,839         
                                    ----------------------------------------------------------------------------

Total liabilities                      793,915    161,055        24,513      102,709         (5,249) 1,076,943          
                                    ============================================================================

Other segment information
Capital expenditures:
Property, plant
  and equipment                         35,411      4,702        17,888        1,446               -    59,447          
     
Intangible oil & gas assets                  -          -        12,926            -               -        12      
     
Other intangible assets                      -      1,561             -            -               -     1,561      
     
Goodwill                                     -        668             -            -               -       668      
                                    ============================================================================
     
Charges:
Depreciation                            10,049      3,433        15,042          402           (804)    28,122        
 
Amortisation                                 -        390             -            -               -       390       
     
Impairment losses                            -          -             -          295               -       295      
     
Other long term employment benefits      3,814        430            67          (7)               -     4,304      
     
Share-based payments                       358        287            65          571               -     1,281       
                                     ============================================================================
    


Geographical segments

The following tables present revenue, assets and capital expenditure by
geographical segments for the years ended 31 December 2007 and 2006.

Year ended 31 December 2007
                                        Middle East         CIS /
                                            & Africa Asia Pacific   Europe Americas Consolidated
                                             US$'000      US$'000  US$'000  US$'000      US$'000

Segment revenue                            1,104,569      513,083  815,707    6,892    2,440,251
                                         =======================================================

Carrying amount of segment assets          1,131,287      247,972  360,140    8,608    1,748,007
                                         =======================================================

Capital expenditure:
Property, plant and equipment                 85,169       17,640   14,261       87      117,157
Intangible oil & gas assets                        -       15,927   33,773        -       49,700
Other intangible assets                        2,369            -        -        -        2,369
Goodwill                                      14,233            -        -        -       14,233
                                         =======================================================

Year ended 31 December 2006

                                        Middle East         CIS /
                                            & Africa Asia Pacific   Europe Americas Consolidated
                                             US$'000      US$'000  US$'000  US$'000      US$'000

Segment revenue                              886,359      271,082  700,757    5,708    1,863,906
                                         =======================================================

Carrying amount of segment assets            945,062      147,541  302,749    6,495    1,401,847
                                         =======================================================

Capital expenditure:
Property, plant and equipment                 19,501       27,314   12,514      118       59,447
Intangible oil & gas assets                        -            -   12,926        -       12,926
Other intangible assets                            -        1,561        -        -        1,561
Goodwill                                           -          668        -        -          668
                                         =======================================================



4 REVENUES AND EXPENSES

a. Revenue

                                                                 2007            2006
                                                              US$'000         US$'000

Rendering of services                                       2,346,431       1,840,552
Sale of crude oil                                              85,592          15,656
Sale of processed hydrocarbons                                  8,228           7,698
                                                           --------------------------
                                                            2,440,251       1,863,906
                                                           ==========================

Included in revenues from rendering of services are Operations Services revenues
of a 'pass-through' nature with zero or low margins amounting to US$227,048,000
(2006: US$221,790,000).


b. Cost of sales

Included in cost of sales for the year ended 31 December 2007 is US$8,590,000
(2006: US$11,635,000) gain on disposal of property, plant and equipment used to
undertake various engineering and construction contracts. In addition
depreciation charged on property, plant and equipment of US$37,759,000 during
2007 (2006: US$24,810,000) is included in cost of sales (note 9).


c. Other income


                                                                   2007         2006
                                                                US$'000      US$'000

Gain on sale of investments                                           -        1,671
Foreign exchange gains                                            3,003        2,201
Gain on sale of property, plant and equipment                       244           46
Gain on sale of asset held for sale                                 243            -
Other income                                                        461          952
                                                               ---------------------
                                                                  3,951        4,870
                                                               =====================

d. Other expenses

                                                                   2007         2006
                                                                US$'000      US$'000

Foreign exchange losses                                             441          931
Other expenses                                                      180          202
                                                               ----------------------
                                                                    621        1,133
                                                               ======================

e. Selling, general and administration expenses

                                                                   2007         2006
                                                                US$'000      US$'000

Staff costs                                                      93,915       57,721
Depreciation                                                      4,542        3,312
Amortisation                                                      1,771          390
Impairment (note 12)                                              8,686          295
Other operating expenses                                         56,394       42,795
                                                             -----------------------
                                                                165,308      104,513
                                                             =======================

f. Staff costs

                                                                   2007         2006
                                                                US$'000      US$'000

Total staff costs:
Wages and salaries                                              603,324      443,585
Social security costs                                            29,544       25,127
Defined contribution pension costs                               11,927        9,160
Other long term employee benefit costs (note 25)                  6,605        4,304
Expense of share-based payments (note 22)                         5,412        1,281
                                                              ----------------------
                                                                656,812      483,457
                                                              ======================

Of the US$656,812,000 of staff costs shown above, US$562,897,000 (2006:
US$425,736,000) are included in cost of sales, the remainder in selling, general
and administration expenses.

The average number of persons employed by the group during the year was 9,027
(2006: 7,482).


g. Auditors' remuneration (including out-of-pocket expenses)

                                                                   2007         2006
                                                                US$'000      US$'000

Audit fees                                                        1,142          914
Fees for other services:
Tax services                                                         89           78
Other                                                                95          180
                                                               ---------------------
                                                                  1,326        1,172
                                                               =====================

5 FINANCE COSTS / (INCOME)

                                                                   2007         2006
                                                                US$'000      US$'000

Interest payable:
Long-term borrowings                                              4,921        5,166
Other interest, including short-term loans and overdrafts         2,092        1,595
Unwinding of discount on deferred consideration and               
decommissioning provisions                                        1,514          407
                                                              ----------------------
Total finance cost                                                8,527        7,168
                                                              ======================

Interest receivable:
Bank interest receivable                                       (18,255)      (9,051)
Other interest receivable                                           (4)        (247)
                                                              ----------------------
Total finance income                                           (18,259)      (9,298)
                                                              ======================


Other interest receivable

Other interest receivable includes shareholder loan interest receivable on loans
advanced to employees for the purchase of participatory interests in ordinary
shares of the Company (note 15). The offer to purchase participatory interests
in ordinary shares was extended through the Petrofac Limited Executive Share
Scheme (ESS), which is administered by Petrofac ESOP. The rules of the ESS,
unless varied by the Trustee, require a down-payment on acquisition of
participatory interests with the balance structured as an interest bearing
shareholder loan note, payable over three years. Shareholder loan notes bear
interest at rates between 3.5% and 3.8% (2006: between 3.5% and 3.8%) dependent
on the year of issue.


6 INCOME TAX

a. Tax on ordinary activities


The major components of income tax expense are as follows:
                                                                   2007         2006
                                                                US$'000      US$'000

Current income tax
Current income tax charge                                        69,436       26,552
Adjustments in respect of current income tax of previous years    (228)        (364)

Deferred income tax
Relating to origination and reversal of temporary differences       688       24,923
Adjustments in respect of deferred income tax of previous         
years                                                             (379)          229
                                                               ---------------------
Income tax expense reported in the income statement              69,517       51,340
                                                               =====================


b. Reconciliation of total tax charge

Under Article 123A of the Income Tax (Jersey) law 1961, as amended, the company
has obtained Jersey exempt company status and is therefore exempt from Jersey
income tax on non Jersey source income and bank interest (by concession). An
annual exempt company fee is payable by the Company.

A reconciliation between the income tax expense and the product of accounting
profit multiplied by the Company's domestic tax rate is as follows:

                                                                  2007          2006
                                                               US$'000       US$'000

Accounting profit before tax                                   258,233       171,672
                                                             =======================

At Jersey's domestic income tax rate of 20% (2006: 20%)         51,647        34,334
Profits exempt from Jersey income tax                         (51,647)      (34,334)
Higher income tax rates of other countries, including           
withholding taxes                                               89,884        55,083
Overhead allowances - high rate jurisdiction                  (14,456)       (8,248)
Expenditure not allowable for income tax purposes - high rate    
jurisdiction                                                     3,256         2,586
Adjustments in respect of previous periods                       (615)         (135)
Tax effect of utilisation of tax losses not previously           
recognised                                                       (183)          (83)
Unrecognised tax losses                                             86         1,797
Losses recognised in the period                                (8,455)             -
Tax recognised on un-remitted overseas dividends                     -           340
                                                             -----------------------
At the effective income tax rate of 26.9% (2006: 29.9%)         69,517        51,340
                                                             =======================

The reduction in the effective tax rate for the year ended 31 December 2007
compared to 2006 is principally due to a combination of lower taxed income in
the Engineering & Construction division and the recognition of UK ring fenced
tax losses and net Australian branch losses amounting to US$11,263,000 in the
Energy Developments division..


c. Deferred income tax

Deferred income tax relates to the following:

                                        Consolidated                 Consolidated
                                       Balance Sheet               Income Statement
                                        2007        2006             2007        2006
                                     US$'000     US$'000          US$'000     US$'000

Deferred income tax liabilities
Un-remitted overseas dividends             -           -                -       (366)
Fair value adjustment on               
acquisitions                           1,940       2,393            (453)          39
Accelerated depreciation                 903         401              502       (117)
Other temporary differences           31,294      22,960            8,334      22,960
                                     --------------------
Gross deferred income tax             
liabilities                           34,137      25,754
                                     ====================

Deferred income tax assets
Losses available for offset            8,512       1,851          (6,661)       2,384
Tax assets utilised                        -           -                -          33
                                     --------------------
                                       8,512       1,851
Decelerated depreciation for tax       
purposes                               1,558         407            (655)         401
Share scheme                             716           -            (716)           -
Other temporary differences              686         644             (42)       (182)
                                     --------------------
Gross deferred income tax assets      11,472       2,902 
                                     ====================
                                                                                           
                                                                 ---------------------
Deferred income tax charge                                            309      25,152
                                                                 =====================


d. Unrecognised tax losses

The group has unrecognised tax assets including net operating losses (at 35%) in
the US of US$11,972,000 (2006: US$12,137,000) that are potentially available for
offset against future taxable profits of the companies in which the losses
arose. These losses have an expiration date of 20 years and will expire no
earlier than 2022. A further US$5,100,000 (2006: US$603,000) of project related
tax losses in various jurisdictions are not recognised as they are ring fenced
to specific projects and these losses have no expiration date. A further
US$2,600,000 of project losses are ring fenced to the project and will cease to
be available on completion of the contract or within three years of being
incurred with the earliest expiry date being 2008.





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