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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 20-F


|   |  |                                                                                                   
|-- |  | --------------------------------------------------------------------------------------------------
|o  |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|OR
|  
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934          
|  
|   |  | For the fiscal year ended December 31, 2004                                                       
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934      
|  
|   |  | For the transition period
    from           to                                                   

Commission File Number: 1-14614


Petroleum Geo-Services ASA


(Exact name of registrant as specified in its charter)


Kingdom of Norway


(Jurisdiction of incorporation or organization)


Strandveien 4, N-1366 Lysaker, Norway


(Address of principal executive offices)


Securities registered or to be registered pursuant to
Section 12(b) of the Act:


|                                                                                                       |  |                                          
|------------------------------------------------------------------------------------------------------ |  | -----------------------------------------
|Title of Each Class                                                                                    |  | Name of Each Exchange on Which Registered
|                                                                                                       |  |                                          
|American Depositary Shares, each representing one ordinary share
    of nominal value NOK 30 per share |  | New York Stock Exchange, Inc.            
|Ordinary shares of nominal value NOK 30 per share*                                                     |  | New York Stock Exchange, Inc.            

Securities registered or to be registered pursuant to
Section 12(g) of the Act:


None


Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act:


None




þ o


o þ


þ o




|  |                                                                                                                                                                                          
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The ordinary shares were registered for technical purposes only,
    not involving trading privileges, in accordance with the
    requirements of the Securities and Exchange Commission.









---










PETROLEUM GEO-SERVICES ASA


ANNUAL REPORT ON FORM 20-F FOR THE


YEAR ENDED DECEMBER 31, 2004


TABLE OF CONTENTS


|                                                     |  |                                                                                  |   |      |    |  |  | 
|---------------------------------------------------- |  | -------------------------------------------------------------------------------- | - | ---- | -- |  |  | 
|                                                     |  |                                                                                  |   | Page |   
|                                                     |  |                                                                                  |   |      |   
|Petroleum Geo-Services ASA                           |  |                                                                                  | 3 |     
|Where You Can Find More Information                  |  |                                                                                  | 3 |     
|Forward-Looking Statements                           |  |                                                                                  | 3 |     
|Currency Presentations                               |  |                                                                                  | 4 |     
|PART I                                              
|ITEM 1.                                              |  | Identity of Directors, Senior Management
    and Advisors                        |   |      | 5  | 
|ITEM 2.                                              |  | Offer Statistics and Expected Timetable                                          |   |      | 5  | 
|ITEM 3.                                              |  | Key Information                                                                  |   |      | 5  | 
|ITEM 4.                                              |  | Information on the Company                                                       |   |      | 14 | 
|ITEM 5.                                              |  | Operating and Financial Review and
    Prospects                                 |   |      | 32 | 
|ITEM 6.                                              |  | Directors, Senior Management and
    Employees                                   |   |      | 54 | 
|ITEM 7.                                              |  | Major Shareholders and Related Party
    Transactions                            |   |      | 61 | 
|ITEM 8.                                              |  | Financial Information                                                            |   |      | 62 | 
|ITEM 9.                                              |  | The Offer and Listing                                                            |   |      | 63 | 
|ITEM 10.                                             |  | Additional Information                                                           |   |      | 65 | 
|ITEM 11.                                             |  | Quantitative and Qualitative Disclosures
    About Market Risk                   |   |      | 75 | 
|ITEM 12.                                             |  | Description of Securities Other Than Equity
    Securities                       |   |      | 76 | 
|PART II                                             
|ITEM 13.                                             |  | Defaults, Dividend Arrearages and
    Delinquencies                              |   |      | 76 | 
|ITEM 14.                                             |  | Material Modifications to the Rights of
    Security Holders and Use of Proceeds |   |      | 76 | 
|ITEM 15.                                             |  | Controls and Procedures                                                          |   |      | 76 | 
|ITEM 16A.                                            |  | Audit Committee Financial Expert                                                 |   |      | 78 | 
|ITEM 16B.                                            |  | Code of Ethics                                                                   |   |      | 78 | 
|ITEM 16C.                                            |  | Principal Accountant Fees and Services                                           |   |      | 78 | 
|ITEM 16D.                                            |  | Exemptions from the Listing Standards for
    Audit Committees                   |   |      | 79 | 
|ITEM 16E.                                            |  | Purchases of Equity Securities by the
    Issuer and Affiliated Purchasers       |   |      | 79 | 
|PART III                                            
|ITEM 17.                                             |  | Financial Statements                                                             |   |      | 79 | 
|ITEM 18.                                             |  | Financial Statements                                                             |   |      | 80 | 
|ITEM 19.                                             |  | Exhibits                                                                         |   |      | 80 | 
|Supplemental Indenture - Pertra AS                  
|Supplemental Indenture - P.G.S. Mexicana S.A de C.V.
|Code of Conduct                                     
|Certification of CEO pursuant to Section 302        
|Certification of CFO pursuant to Section 302        
|Certification of CEO and CFO pursuant to Section 906
|Audit Committee Charter                             
|Remuneration Committee Charter                      







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##### Table of Contents






PETROLEUM GEO-SERVICES ASA







WHERE YOU CAN FIND MORE INFORMATION


http://www.sec.gov http://www.pgs.com.





FORWARD-LOOKING STATEMENTS






| |   |                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | market conditions, anticipated demand and prices for our
    services and multi-client data that we license, productive
    capacity in the markets in which we operate, other competitive
    factors, possible expansion, technological developments and
    other trends in the businesses in which we operate;
|
| |  | business strategies, including geographic areas in which we may
    operate from time to time and potential acquisitions and/or
    dispositions;                                                                                                                                                                 
|
| |  | maintaining and obtaining contracts for our floating production,
    storage and offloading vessels, the estimated productive lives
    of the fields served by such vessels and the periods we expect
    such vessels to continue to produce such fields;                                                       
|
| |  | operating regularity and levels of production for our floating
    production, storage and offloading vessels;                                                                                                                                                                                                    
|
| |  | the extent to which our seismic vessels and equipment will be
    utilized, including utilization of such vessels to acquire
    contract or multi-client seismic data;                                                                                                                                           
|
| |  | acquisition of contract and multi-client seismic data,
    governmental licensing activity relating to such acquisition and
    expected future sales of multi-client seismic data;                                                                                                                               
|
| |  | future capital expenditures, investments in our businesses and
    dividends;                                                                                                                                                                                                                                     
|
| |  | investments in, and amortization charges for, our multi-client
    library;                                                                                                                                                                                                                                       
|
| |  | governmental and tax regulations and enforcement;                                                                                                                                                                                                                                                                 
|
| |  | future exposure to currency devaluations or exchange rate
    fluctuations, including in particular fluctuations in the value
    of the U.S. dollar as compared to the Norwegian kroner and
    the British pound; and                                                                                           
|
| |  | interest rates.                                                                                                                                                                                                                                                                                                   

3



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| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | address activities, events or developments that we expect,
    believe, anticipate or estimate will or may occur in the future;                            
|
| |  | are based at least in part on assumptions and analyses that we
    have made and that we believe were reasonable under the
    circumstances when made; and
|
| |  | can be impacted by uncertainties and other factors, many of
    which are beyond our control.                                                              






CURRENCY PRESENTATIONS




4



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PART I







|        |                                                          
|------- | ---------------------------------------------------------
|ITEM 1. | Identity of Directors, Senior Management and
    Advisors








|        |                                        
|------- | ---------------------------------------
|ITEM 2. | Offer Statistics and Expected Timetable








|        |                
|------- | ---------------
|ITEM 3. | Key Information

Selected Financial Data






Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code,






5



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|                                                                                                         |                        |                                                  |            |        |                  |                     |             |                   |   |   |              |           |   |      |             |        |   |   |             |   | 
|-------------------------------------------------------------------------------------------------------- | ---------------------- | ------------------------------------------------ | ---------- | ------ | ---------------- | ------------------- | ----------- | ----------------- | - | - | ------------ | --------- | - | ---- | ----------- | ------ | - | - | ----------- | - | 
|                                                                                                         |                        |                                                  |            |        |                  | Predecessor Company |            
|                                                                                                         |                        |                                                  |            |        |                 
|                                                                                                         |                        | Successor Company                                |            |        |                  |                     |            
|                                                                                                         |                        |                                                  |            |        |                  |                     | Years Ended |                  
|                                                                                                         |                        | Year Ended                                       |            |        | Two Months Ended |                     |             | Ten Months        |   |   | December 31, |          
|                                                                                                         |                        | December 31,                                     |            |        | December 31,     |                     |             | Ended October 31, |   |   |              |          
|                                                                                                         |                        | 2004                                             |            |        | 2003             |                     |             | 2003              |   |   | 2002         |           |   | 2001 |            
|                                                                                                         |                        |                                                  |            |        |                  |                     |             |                   |   |   |              |           |   |      |            
|                                                                                                         |                        | (In thousands of dollars, except for share data) |           
|STATEMENT OF OPERATIONS DATA:                                                                            |                        |                                                  |            |        |                  |                     |             |                   |   |   |              |           |   |      |             |        |   |   |             |  
|Revenues                                                                                                 |                        | $                                                | 1,129,468  |        |                  | $                   | 172,371     |                   |   | $ | 961,864      |           |   | $    | 1,043,231   |        |   | $ | 893,230     |  
|Operating profit (loss)                                                                                  |                        |                                                  | 35,683     |        |                  |                     | 10,702      |                   |   |   | 9,825        |           |   |      | (488,609    | )      |   |   | 46,798      |  
|Reorganization items:                                                                                    |                        |                                                  |            |        |                  |                     |             |                   |   |   |              |           |   |      |             |        |   |   |             |  
|                                                                                                         | Gain on debt discharge |                                                  |            |       |                  |                     |             |                  |   |   |              | 1,253,851 |   |      |             |       |   |   |             |  | 
|                                                                                                         | Fresh-start adoption   |                                                  |            |       |                  |                     |             |                  |   |   |              | (532,268  | ) |      |             |       |   |   |             |  | 
|                                                                                                         | Cost of reorganization |                                                  |            | (3,498 | )                |                     |             | (3,325            | ) |   |              | (52,334   | ) |      |             | (3,616 | ) |   |             |  | 
|Income (loss) from continuing operations before cumulative
    effect of change in accounting principles |                        |                                                  | (137,778   | )      |                  |                     | (9,818      | )                 |   |   | 556,938      |           |   |      | (809,903    | )      |   |   | (140,125    | )
|Net income (loss)                                                                                        |                        |                                                  | (134,730   | )      |                  |                     | (9,953      | )                 |   |   | 557,045      |           |   |      | (1,174,678  | )      |   |   | (172,479    | )
|Basic and diluted income (loss) per share from continuing
    operations                                 |                        | $                                                | (6.89      | )      |                  | $                   | (0.49       | )                 |   | $ | 5.39         |           |   | $    | (7.84       | )      |   | $ | (1.36       | )
|Basic and diluted net income (loss) per share                                                            |                        |                                                  | (6.74      | )      |                  |                     | (0.50       | )                 |   |   | 5.39         |           |   |      | (11.37      | )      |   |   | (1.68       | )
|Basic and diluted weighted average shares outstanding                                                    |                        |                                                  | 20,000,000 |        |                  |                     | 20,000,000  |                   |   |   | 103,345,987  |           |   |      | 103,345,987 |        |   |   | 102,768,283 |  
|CASH FLOW DATA:                                                                                          |                        |                                                  |            |        |                  |                     |             |                   |   |   |              |           |   |      |             |        |   |   |             |  
|Cash flows provided by operating activities                                                              |                        | $                                                | 282,372    |        |                  | $                   | 62,170      |                   |   | $ | 164,948      |           |   | $    | 294,609     |        |   | $ | 110,581     |  
|Cash flows used in investing activities                                                                  |                        |                                                  | (183,446   | )      |                  |                     | (25,089     | )                 |   |   | (69,732      | )         |   |      | (274,497    | )      |   |   | (220,516    | )
|Cash flows provided by (used in) financing activities                                                    |                        |                                                  | (71,283    | )      |                  |                     | (25,807     | )                 |   |   | (92,896      | )         |   |      | (7,636      | )      |   |   | 64,349      |  
|Capital expenditures                                                                                     |                        |                                                  | 148,372    |        |                  |                     | 15,985      |                   |   |   | 42,065       |           |   |      | 56,735      |        |   |   | 147,536     |  
|Investment in multi-client library                                                                       |                        |                                                  | 41,140     |        |                  |                     | 9,461       |                   |   |   | 81,142       |           |   |      | 151,590     |        |   |   | 174,028     |  

6



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|                                                                                        |  |                           |           |  |                     |   |           |      |  |   |           |   |  |   |           | 
|--------------------------------------------------------------------------------------- |  | ------------------------- | --------- |  | ------------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | 
|                                                                                        |  | Successor Company         |           |  | Predecessor Company |  
|                                                                                        |  |                           |           |  |                     |  
|                                                                                        |  | December 31,              |           |  | December 31,        |  
|                                                                                        |  |                           |           |  |                     |  
|                                                                                        |  | 2004                      |           |  | 2003                |   |           | 2002 |  |   | 2001      |  
|                                                                                        |  |                           |           |  |                     |   |           |      |  |   |           |  
|                                                                                        |  | (In thousands of dollars) |          
|BALANCE SHEET DATA:                                                                     |  |                           |           |  |                     |   |           |      |  |   |           |   |  |   |           | 
|Total assets                                                                            |  | $                         | 1,852,153 |  |                     | $ | 1,997,360 |      |  | $ | 2,839,757 |   |  | $ | 3,962,129 | 
|Multi-client library, net                                                               |  |                           | 244,689   |  |                     |   | 408,005   |      |  |   | 583,859   |   |  |   | 799,062   | 
|Total long-term debt and capital lease obligations                                      |  |                           | 1,118,346 |  |                     |   | 1,172,147 |      |  |   | 1,409,134 |   |  |   | 1,964,888 | 
|Guaranteed preferred beneficial interest in PGS junior
    subordinated debt securities |  |                           |          |  |                     |   |          |      |  |   | 142,322   |   |  |   | 141,000   | 
|Common stock                                                                            |  |                           | 85,714    |  |                     |   | 85,714    |      |  |   | 71,089    |   |  |   | 71,089    | 
|Shareholders equity (deficit)                                                          |  |                           | 222,907   |  |                     |   | 353,634   |      |  |   | (192,254  | ) |  |   | 979,896   | 

Risk Factors


You should carefully consider the risks described below. If
any of the following risks actually occur, our business,
financial condition or results of operations could be materially
adversely affected and the trading price of our securities could
decline significantly.




| |                                                         
| | --------------------------------------------------------
| | Risk Factors Relating to Financial Reporting
    Matters



| |                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have continuing issues regarding our internal control over
    financial reporting. Failure to achieve and maintain effective
    internal controls could adversely affect both our ability to
    provide timely and accurate financial statements and the trading
    prices of our securities.









| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Our adoption of fresh start reporting may make
    future financial statements difficult to compare.



7



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| |                                                                    
| | -------------------------------------------------------------------
| | Risk Factors Relating to Our Indebtedness and Other
    Obligations



| |                                                        
| | -------------------------------------------------------
| | We have significant indebtedness and other obligations.





| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we must dedicate a substantial portion of our cash flow from
    operations to debt service and other contractual obligations,
    which reduces the amount we have available for capital
    investment, working capital or other general corporate purposes;
|
| |  | we are more vulnerable to adverse developments in general
    economic and industry conditions;                                                                                                                                                               
|
| |  | we are less flexible in responding to changing market conditions
    or in pursuing favorable business opportunities;                                                                                                                                         
|
| |  | we are limited in our ability to borrow additional
    funds; and                                                                                                                                                                                             
|
| |  | we may be at a competitive disadvantage compared to our
    competitors that have less debt.                                                                                                                                                                  



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Our debt agreements may limit our flexibility in responding
    to changing market conditions or in pursuing business
    opportunities.





| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pay dividends or make other restricted payments;                                                                                                       
|
| |  | incur debt above specified amounts;                                                                                                                    
|
| |  | create or permit to exist liens on our assets;                                                                                                         
|
| |  | consolidate, merge or transfer all or substantially all of our
    assets;                                                                             
|
| |  | sell assets for consideration other than cash or cash
    equivalents or without using the proceeds to reinvest in our
    businesses or to repay debt;
|
| |  | undergo a change of control without having an obligation to
    purchase all of our senior notes; and                                                  
|
| |  | engage in certain sale and leaseback transactions.                                                                                                     



8



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Our ability to obtain additional financing or to refinance
our indebtedness could be restricted.






Risk Factors Relating to Our Business Operations
Generally


We have experienced substantial losses in the past and may
continue to do so in the future.




Our business could be adversely affected if demand for our
services from oil and natural gas companies decreases.




We could incur operating losses if we cannot keep our vessels
and other equipment utilized at high levels.




Our future revenues may fluctuate significantly from period
to period.






| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | fluctuating oil and natural gas prices, which may impact
    customer demand for our services;                                                   
|
| |  | different levels of activity planned by our customers;                                                                                           
|
| |  | the timing of offshore lease sales and the effect of such timing
    on the demand for seismic data and geophysical services;                    
|
| |  | the timing of award and commencement of significant contracts
    for offshore production services and geophysical data
    acquisition services;

9



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| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | weather and other seasonal factors; and                                             
|
| |  | seasonality in the sales of geophysical data from our
    multi-client data library.

Our technology could be rendered obsolete since technological
changes and new products and services are regularly introduced
to our markets and we may not be able to develop and produce
competitive products and services on a cost-effective and timely
basis.




Unpredictable changes in governmental regulations could
increase our operating costs and reduce demand for our
services.






| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | permit or license requirements for geophysical activities and
    for oil and natural gas exploration, development and production
    activities;
|
| |  | exports and imports;                                                                                                                             
|
| |  | taxes;                                                                                                                                           
|
| |  | occupational health and safety; and                                                                                                              
|
| |  | the protection of the environment.                                                                                                               



Because we conduct a substantial amount of international
operations, we have exposure to those risks inherent in doing
business abroad.






| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the disruption of operations from labor and political
    disturbances;                                                                                         
|
| |  | the possibility of unfavorable changes in tax or other laws;                                                                                                    
|
| |  | partial or total expropriation;                                                                                                                                 
|
| |  | restrictions on currency repatriation or the imposition of new
    laws or regulations that preclude or restrict the conversion and
    free flow of currencies;

10



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| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | the imposition of new laws or regulations that have the effect
    of restricting operations or increasing the cost of
    operations; and
|
| |  | the disruption or delay of licensing or leasing activities.                                                                               

We are subject to hazards relating to our geophysical and
production services businesses.




Because we do not have insurance with third party carriers to
cover some operating risks, our results of operations could be
adversely affected if one or more of those risks occurred.




Because we generate revenue and incur expenses in various
currencies, exchange rate fluctuations and devaluations could
have a material impact on our results of operations.




We are subject to intense competition that could limit our
ability to maintain or increase our market share and to maintain
our prices at profitable levels.




11



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Our strategy of pursuing selective growth opportunities may
be unsuccessful if we incorrectly predict operating results for
acquired assets or businesses, are unable to identify and
complete future acquisitions and integrate acquired assets or
businesses or are unable to raise financing for acquisitions on
acceptable terms.








| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the risk of incorrect assumptions regarding the future results
    of acquired operations or assets or investments or any cost
    reductions or other synergies expected to be realized as a
    result of the acquisition or investment;
|
| |  | the risk of failing to integrate successfully and timely the
    operations and/or management of any acquired operations or
    assets;                                                                                                   
|
| |  | the risk of diversion of our managements attention from
    existing operations or other priorities; and                                                                                                                                 
|
| |  | the risk of undisclosed or contingent liabilities associated
    with the acquired operations or assets.                                                                                                                                  



Our results of operations depend in part upon our ability to
establish and protect our proprietary technology.






| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Risk Factors Relating Primarily to Our Geophysical
    Business, Both Marine Geophysical and Onshore

We invest significant amounts of money in acquiring and
processing seismic data for our multi-client data library
without being certain about how much of the data we will be able
to sell or when and at what price we will be able to sell the
data.






| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may not fully recover the costs of the data through future
    sales; and                                                                                                                                
|
| |  | the value of our multi-client data could be adversely affected
    by, among other things, any material adverse change in the
    general prospects for oil and natural gas exploration,
    development and

12



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| |  |                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------
| |  | production activities in the areas where we acquire multi-client
    data and by technological or regulatory changes.





The amounts we amortize from our multi-client data library
each period may fluctuate significantly, and these fluctuations
can have a significant effect on our results of operations.






We perform a substantial portion of our contract seismic work
under turnkey arrangements. If we bid too low on these
contracts, we could incur losses on projects and experience
reduced profitability.






| |                                                               
| | --------------------------------------------------------------
| | Risk Factors Relating Primarily to Our Production
    Business

Our operating results could suffer as a result of risks
arising from our floating production, storage and offloading
contracts.






| |   |                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure to operate at high levels on a sustained basis for
    technical reasons, including operational difficulties that
    require modification of vessels or equipment, or due to strikes,
    employee lockouts or other labor unrest;                                                             
|
| |  | contract termination prior to the scheduled or anticipated
    expiration date for the contracts;                                                                                                                                                                                                       
|
| |  | failure to redeploy vessels following expiration or termination
    of long-term contracts; and                                                                                                                                                                                                         
|
| |  | failure of the underlying reservoir and/or the prevailing market
    prices for oil and natural gas to allow production of the
    expected amounts of oil and natural gas under contracts where
    our compensation depends to a significant degree on the amount
    of oil and natural gas produced.



| |                   
| | ------------------
| | Other Risk Factors

We are a multinational organization faced with increasingly
complex tax issues in many jurisdictions, and we could be
obligated to pay additional taxes in various jurisdictions.




13



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##### Table of Contents





Because we are a foreign company and many of our directors
and executive officers are not residents of the United States,
you may have difficulty suing us and obtaining or enforcing
judgments against us.






| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | suing us or our directors and executive officers in the United
    States;                                                                                                                
|
| |  | obtaining a judgment in the Kingdom of Norway in an original
    action based solely on United States federal securities
    laws; and                                                    
|
| |  | enforcing in the Kingdom of Norway judgments obtained in the
    United States courts that are based upon the civil liability
    provisions of the United States federal securities laws.

We could be adversely affected by violations of applicable
anti-corruption laws.









|        |                           
|------- | --------------------------
|ITEM 4. | Information on the Company

History and Development of the Company




| |             
| | ------------
| | Organization





| |           
| | ----------
| | Who We Are







| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Marine Geophysical,which consists of both streamer and
    seafloor seismic data acquisition, marine multi-client library
    and data processing;

14



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Onshore,which consists of all seismic operations on land
    and in very shallow water and transition zones, including our
    onshore multi-client library;                                                                                                           
|
| |  | Production,which owns and operates four harsh
    environment FPSO units in the North Sea; and                                                                                                                                                                         
|
| |  | Pertra,a small oil and natural gas company that owned
    70% of and was operator for Production License 038
    (PL038) on the Norwegian Continental Shelf
    (NCS) and also owned participating interests in six
    additional NCS licenses without production.







| |                       
| | ----------------------
| | Historical Development





| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | January 1991: Company established with the merger of
    Geoteam a.s. and Nopec a.s.                                                                                                                                                                                                                       
|
| |  | August 1992: Company ordinary shares listed on Oslo Stock
    Exchange                                                                                                                                                                                                                                     
|
| |  | May 1993: Initial public offering and listing in
    U.S. on NASDAQ                                                                                                                                                                                                                                        
|
| |  | 1995-1999: Construction and deployment of six Ramform
    design 3D seismic vessels                                                                                                                                                                                                                        
|
| |  | April 1997: Listing of our ADSs on the New York Stock
    Exchange                                                                                                                                                                                                                                         
|
| |  | May 1998: Acquisition of Golar-Nor (Petrojarl Iand Petrojarl Foinaven)                                                                                                                                                                                                                                     
|
| |  | October 1998: Delivery of Ramform Banff                                                                                                                                                                                                                                                                    
|
| |  | July 1999: Acquisition of FPSO Varg(renamed
    Petrojarl Varg)                                                                                                                                                                                                                                            
|
| |  | March 2001: Sale of data management business and related
    software to Landmark Graphics Corporation, a subsidiary of
    Halliburton, and resumption of oil production by the re-tooled
    Ramform Banff                                                                                               
|
| |  | November 2001: Announcement of business combination
    transaction with Veritas DGC (terminated in July 2002)                                                                                                                                                                                             
|
| |  | August 2002: Acquisition of 70% ownership in, and
    operatorship of, PL 038 on NCS of the North Sea (including Varg
    field)                                                                                                                                                                           
|
| |  | August-November 2002: Replacement of various members of
    senior management, including the Chairman of the Board and Chief
    Executive Officer and the Chief Financial Officer, with a new
    non-executive Chairman of the Board, a new Chief Executive
    Officer and a new Chief Financial Officer
|
| |  | December 2002: Sale of Production Services subsidiary to
    Petrofac Ltd.                                                                                                                                                                                                                                 
|
| |  | February 2003: Sale of Atlantis subsidiary to Sinochem                                                                                                                                                                                                                                                     
|
| |  | February 2003: Delisting of ADSs from the New York Stock
    Exchange and quotations for ADSs available through Pink Sheets                                                                                                                                                                                
|
| |  | July 2003: Filing under Chapter 11 of
    U.S. Bankruptcy Code                                                                                                                                                                                                                                             
|
| |  | November 2003: Emergence from Chapter 11
    proceedings, reorganization plan becomes effective and new Board
    of Directors takes office                                                                                                                                                                

15



---



##### Table of Contents





| |   |                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------
| |  | December 2004: Re-listing of our ADSs on the New York
    Stock Exchange following filing of Form 20-F for 2003
    fiscal year
|
| |  | March 2005: Sale of oil and natural gas subsidiary Pertra
    to Talisman                                                      

2004 Developments






| |   |                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continuing our strong safety performance;                                                                                                                                                                                                                                           
|
| |  | operating at relatively high utilization levels and regularity
    in all business segments, with the exception of the impact of
    (a) a strike on the NCS in the fall 2004 affecting two of our
    FPSOs and (b) damage to a riser relating to operations in the
    Varg field;
|
| |  | continuing our successful development of Pertra;                                                                                                                                                                                                                                    
|
| |  | realizing strong multi-client late sales and improved marine
    seismic contract performance in the second half of 2004;                                                                                                                                                           
|
| |  | improving our financial flexibility through increased cash flow
    from operations;                                                                                                                                                                                                
|
| |  | reducing our net interest bearing debt from $1,077 million
    at year end 2003 to $995 million at year end 2004; and                                                                                                                                                               
|
| |  | completing the re-audit of our 2001 U.S. GAAP financial
    statements, completing and filing our 2003 Annual Report on
    Form 20-F and re-listing our ADSs on the New York Stock
    Exchange.                                                                                   





| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | realized the substantial value enhancement of Pertra by selling
    it in March 2005;                          
|
| |  | improved our financial flexibility with the significant cash
    proceeds realized from the sale of Pertra; and
|
| |  | redeemed in April 2005 $175 million of our 8% Senior
    Notes due 2006.                                       

Sale of Our Oil and Natural Gas Subsidiary Pertra






Petrojarl Varg Petrojarl Varg Petrojarl Varg




16



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##### Table of Contents



Our Business Priorities












Our Geophysical Services




| |         
| | --------
| | Overview





| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Marine Geophysical,which consists of both streamer and
    seafloor seismic data acquisition, marine multi-client library
    and data processing; and      
|
| |  | Onshore,which consists of all seismic operations on land
    and in very shallow water and transition zones, including our
    onshore multi-client library.

sm








| |   |                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continued our strong HSE performance;                                                                                                                                                               
|
| |  | continued our focus on contract seismic, although this part of
    our business was negatively affected by a weak market and by
    external operational disturbances in the first half of the year;
|
| |  | further reduced our investments in multi-client seismic while at
    the same time achieved higher levels of pre-funding;                                                                           

17



---



##### Table of Contents





| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | increased significantly our late-sales of multi-client
    data; and         
|
| |  | increased significantly our contract order backlog in Marine
    Geophysical.



| |                                        
| | ---------------------------------------
| | Our Strategies for Geophysical Services





| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | capitalizing on our strong cost position and operating
    performance;                              
|
| |  | increasing utilization and productivity of, and operating
    margins on, our acquisition capacity by



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | reducing steaming and down-time in Marine Geophysical,                        
|
| |  | entering selected new geographic areas in Onshore, and                        
|
| |  | positioning ourselves to benefit from improved contract market
    conditions;



| |   |                                                         
| | - | --------------------------------------------------------
| |  | regaining growth and profitability in data processing by



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | capturing the full potential of our data processing Mega-Centers,                             
|
| |  | commercializing new technology, and                                                           
|
| |  | increasing our market share, especially in high-end processing,
    including depth migration;



| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | rebuilding a profitable multi-client data acquisition business by



| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | prudently increasing activity from very low 2004 levels,                                       
|
| |  | strengthening our emphasis on the target selection process and
    assessment of prospectivity,
|
| |  | revitalizing our existing library through reprocessing, and                                    
|
| |  | reducing risk through high levels of pre-funding;                                              



| |   |                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | investing selectively in new technology and equipment, including
    new streamers, to increase productivity of our unique Ramform
    seismic vessels and our
    HD3Dsm
    seismic solution; and
|
| |  | identifying and pursuing through selective acquisitions
    attractive growth opportunities.                                                                                                       





| |   |                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our Ramform seismic vessels and deep water seafloor
    FOURcEsm
    acquisition systems;                                                                                                                                  
|
| |  | our high capacity computing facilities, together with the
    development of specialized proprietary software for seismic
    imaging, multi-component processing, signal enhancement and
    visualization technology; and
|
| |  | state-of-the-art technology in our onshore seismic data
    acquisition equipment to enable efficient acquisition of high
    quality seismic data in varied terrain.                                                      





| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | high operational reliability, safety and customer satisfaction;                                                                                                                                                       
|
| |  | our ability to tow more streamers and our superior streamer
    retrievability, control and stability, which yield better cost
    effectiveness on large surveys and in adverse weather
    conditions, respectively;
|
| |  | our high technology Ramform seismic vessels and deep water
    seafloor
    FOURcEsm
    acquisition systems;                                                                                                         
|
| |  | the high channel count for our onshore operations; and                                                                                                                                                                
|
| |  | our highly experienced work force.                                                                                                                                                                                    

18



---



##### Table of Contents





| |                              
| | -----------------------------
| | Geographic Areas of Operation





| |   |                                        
| | - | ---------------------------------------
| |  | North and South America;               
|
| |  | Europe, Africa and the Middle East; and
|
| |  | Asia Pacific.                          





| |   |                                              
| | - | ---------------------------------------------
| |  | North America (U.S. and Canada);             
|
| |  | Latin America (Mexico and South America); and
|
| |  | Eastern Hemisphere.                          





| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | offshore and onshore Canada;                                                           
|
| |  | the Gulf of Mexico;                                                                    
|
| |  | onshore in the U.S. mid continent, Rocky Mountains and
    Alaskan North Slope regions;
|
| |  | offshore and onshore Mexico and other parts of Latin America;                          
|
| |  | offshore Brazil;                                                                       
|
| |  | the North Sea;                                                                         
|
| |  | the Mediterranean and Black Seas;                                                      
|
| |  | offshore West Africa;                                                                  
|
| |  | the Middle East and North Africa;                                                      
|
| |  | the Caspian Sea area;                                                                  
|
| |  | offshore China and Korea;                                                              
|
| |  | offshore India and onshore Bangladesh;                                                 
|
| |  | offshore in the Sakhalin area of Russia; and                                           
|
| |  | offshore Australia, Indonesia and other countries in the Asia
    Pacific region.      



| |                                     
| | ------------------------------------
| | Contract and Multi-Client Operations

Contract Operations.




19



---



##### Table of Contents



Multi-Client Operations.




| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | the existence, quality and age of any seismic data that may
    already exist in the area;                  
|
| |  | the amount of leased acreage in the area;                                                                   
|
| |  | the prospectivity of the area in question for hydrocarbons and
    for future licenses of multi-client data;
|
| |  | the existing infrastructure in the region to transport oil and
    natural gas to market;                   
|
| |  | the historical turnover of the leased acreage;                                                              
|
| |  | the political and economic stability of the countries where the
    data are to be acquired; and            
|
| |  | the level of interest from oil and natural gas companies in the
    area.                                   











| |                
| | ---------------
| | Data Processing



20



---



##### Table of Contents









| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | 2D and 3D data processing of onshore and marine seismic surveys;                                                                            
|
| |  | onboard (vessel) seismic data processing for reduced
    delivery times and enhanced real-time quality control for data
    that we acquire;
|
| |  | multi-component and 4D seismic data processing for reservoir
    characterization and monitoring;                                           
|
| |  | special process design to exploit the dense sampling of our
    HD3Dsm
    data acquisition;                                                
|
| |  | specialized depth imaging of subsurface structures; and                                                                                     
|
| |  | other specialized signal enhancement techniques.                                                                                            



| |                               
| | ------------------------------
| | Our Marine Geophysical Segment

Marine Acquisition.


Streamer Seismic Acquisition. sm


Seafloor Seismic Acquisition.




Vessel Fleet and Crews.


21



---



##### Table of Contents







| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | recording instrumentation;                                                                                                                                                                                   
|
| |  | digital recording streamers;                                                                                                                                                                                 
|
| |  | acoustic positioning systems for source and streamer locations;                                                                                                                                              
|
| |  | multiple navigation systems for vessel positioning; and                                                                                                                                                      
|
| |  | except for vessels that record only, a source control system
    that controls the synchronization of the energy sources and an
    airgun array firing system that activates the acoustic energy
    source.

Ocean Explorer Bergen Surveyor




|                          |  |              |         |       |        |  |       |        |  |           |            |  |          |              |     |          |            |  |     |  |  |  |       |    
|------------------------- |  | ------------ | ------- | ----- | ------ |  | ----- | ------ |  | --------- | ---------- |  | -------- | ------------ | --- | -------- | ---------- |  | --- |  |  |  | ----- | ---
|                          |  |              |         |       |        |  |       |        |  | Maximum   |            |  |         
|                          |  |              |         |       |        |  |       |        |  | Streamers |            |  |         
|                          |  |              |         |       |        |  |       |        |  | Deployed  |            |  |         
|                          |  |              |         | Total |        |  | Total |        |  | Maximum   |            |  | (through |              |     | Owned or |           
|                          |  | Year Rigged/ |         |       | Length |  |       | Beam   |  |           | Streamer   |  |          | December 31, |     |          | Charter    | 
|Vessel Name               |  | Converted    |         |       | (Feet) |  |       | (Feet) |  |           | Capability |  |          | 2004)        |     |          | Expiration | 
|                          |  |              |         |       |        |  |       |        |  |           |            |  |          |              |     |          |            | 
|3D Seismic Vessels:       |  |              |         |       |        |  |       |        |  |           |            |  |          |              |     |          |            |  |     |  |  |  |       |    
|Ramform Explorer          |  |              | 1995    |       |        |  | 270   |        |  |           | 130        |  |          |              | 12  |          |            |  | 8   |  |  |  | Owned |    
|Ramform Challenger        |  |              | 1996    |       |        |  | 284   |        |  |           | 130        |  |          |              | 16  |          |            |  | 12  |  |  |  | Owned | (1)
|Ramform Valiant           |  |              | 1998    |       |        |  | 284   |        |  |           | 130        |  |          |              | 20  |          |            |  | 12  |  |  |  | 2023  | (1)
|Ramform Viking            |  |              | 1998    |       |        |  | 284   |        |  |           | 130        |  |          |              | 20  |          |            |  | 10  |  |  |  | 2023  | (1)
|Ramform Victory           |  |              | 1999    |       |        |  | 284   |        |  |           | 130        |  |          |              | 20  |          |            |  | 16  |  |  |  | 2024  | (1)
|Ramform Vanguard          |  |              | 1999    |       |        |  | 284   |        |  |           | 130        |  |          |              | 20  |          |            |  | 10  |  |  |  | 2024  | (1)
|Atlantic Explorer         |  |              | 1994    |       |        |  | 300   |        |  |           | 58         |  |          |              | 6   |          |            |  | 6   |  |  |  | Owned |    
|American Explorer         |  |              | 1994    |       |        |  | 300   |        |  |           | 72         |  |          |              | 8   |          |            |  | 8   |  |  |  | Owned |    
|Nordic Explorer           |  |              | 1993    |       |        |  | 266   |        |  |           | 54         |  |          |              | 6   |          |            |  | 6   |  |  |  | Owned |    
|Orient Explorer           |  |              | 1995/96 |       |        |  | 246   |        |  |           | 49         |  |          |              | 4   |          |            |  | 4   |  |  |  | 2005  | (2)
|Seafloor Seismic Vessels: |  |              |         |       |        |  |       |        |  |           |            |  |          |              |     |          |            |  |     |  |  |  |       |    
|Falcon Explorer           |  |              | 1997    |       |        |  | 266   |        |  |           | 53         |  |          |              | N/A |          |            |  | N/A |  |  |  | Owned |    
|Bergen Surveyor           |  |              | 1997    |       |        |  | 217   |        |  |           | 48         |  |          |              | N/A |          |            |  | N/A |  |  |  | 2005  | (3)
|Ocean Explorer            |  |              | 1993/95 |       |        |  | 269   |        |  |           | 59         |  |          |              | N/A |          |            |  | N/A |  |  |  | Owned |    
|Support Vessels:          |  |              |         |       |        |  |       |        |  |           |            |  |          |              |     |          |            |  |     |  |  |  |       |    
|Remus                     |  |              | 1998    |       |        |  | 136   |        |  |           | 32         |  |          |              | N/A |          |            |  | N/A |  |  |  | Owned |    
|Romulus                   |  |              | 1997    |       |        |  | 118   |        |  |           | 34         |  |          |              | N/A |          |            |  | N/A |  |  |  | Owned |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have UK lease arrangements for each of the Ramform
    Valiant, the Ramform Viking, the Ramform
    Victory, the Ramform Vanguardand the Ramform
    Challenger. Under the leases, we lease the vessels under
    long-term charters that give us the option to purchase the
    vessels for a de minimis amount at the end of the charter
    periods. The leases are legally defeased because we have made
    payments to banks in consideration for which the banks have
    assumed liability to the lessors equal to basic rentals and
    termination sum obligations. Please read notes 2 and 19 of
    the notes to our consolidated financial statements included in
    Item 18 of this annual report.
|   
|(2) | The charter agreement for Orient Explorer has a one year term
    and will be extended annually for another year until 2011,
    unless we terminate the charter by giving three months
    notice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(3) | The charter for Bergen Surveyorcontinues until
    terminated by us on four months notice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

22



---



##### Table of Contents



Competition in Our Marine Geophysical Segment.






| |                    
| | -------------------
| | Our Onshore Segment





Our Production Segment




| |         
| | --------
| | Overview

Ramform Banff, Petrojarl I, Petrojarl Foinaven Petrojarl Varg






23



---



##### Table of Contents







| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | capable of storing and offloading oil;                                                     
|
| |  | being suitable for a wide range of field sizes and water depths;                           
|
| |  | being reusable on more than one developed reservoir;                                       
|
| |  | generally costing less and being easier to install and remove
    than fixed platforms; and
|
| |  | reducing the time from the discovery of oil and natural gas to
    production.             



| |                  
| | -----------------
| | Our FPSO Strategy





| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | capitalizing on our strong North Sea floating production
    operations;                                                                                                                                        
|
| |  | maximizing the value of our existing contracts through
    maintaining a high level of operational performance, through
    incentive structures and through pursuing opportunities to
    extend the contracts;
|
| |  | seeking and supporting NCS small-field development projects
    suitable for our FPSO fleet; and                                                                                                                
|
| |  | seeking opportunities to expand our vessel fleet and to broaden
    our competence and geographical business scope.                                                                                             





| |                
| | ---------------
| | The FPSO Market



24



---



##### Table of Contents





| |                 
| | ----------------
| | Our FPSO Systems

Ikdam


|                      |  |           |      |             |              |  |             |             |  |          |              |  |  |               |         |  |           |  |         |  |  |  |         | 
|--------------------- |  | --------- | ---- | ----------- | ------------ |  | ----------- | ----------- |  | -------- | ------------ |  |  | ------------- | ------- |  | --------- |  | ------- |  |  |  | ------- | 
|                      |  |           |      |             |              |  |             | Production  |  |          |              |  | 
|                      |  |           |      | Approximate |              |  | Approximate |             |  | Capacity |              |  |  |               | Storage | 
|                      |  | Year      |      |             | Total Length |  |             | Total Width |  |          | (Barrels of  |  |  | Displacement  |         |  | Capacity  | 
|FPSO Vessel Name      |  | Delivered |      |             | (Feet)       |  |             | (Feet)      |  |          | Oil per Day) |  |  | (Metric Tons) |         |  | (Barrels) | 
|                      |  |           |      |             |              |  |             |             |  |          |              |  |  |               |         |  |           | 
|Ramform Banff(1)      |  |           | 1998 |             |              |  | 395         |             |  |          | 175          |  |  |               | 95,000  |  |           |  | 32,100  |  |  |  | 120,000 | 
|Petrojarl I           |  |           | 1986 |             |              |  | 683         |             |  |          | 105          |  |  |               | 47,000  |  |           |  | 51,000  |  |  |  | 180,000 | 
|Petrojarl Foinaven(1) |  |           | 1996 |             |              |  | 827         |             |  |          | 116          |  |  |               | 140,000 |  |           |  | 72,000  |  |  |  | 280,000 | 
|Petrojarl Varg        |  |           | 1999 |             |              |  | 702         |             |  |          | 125          |  |  |               | 57,000  |  |           |  | 100,000 |  |  |  | 420,000 | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have UK lease arrangements for the Petrojarl Foinavenand for the Ramform Banfftopside production
    equipment. Under the leases, we lease the vessel and equipment
    under long-term charters that give us the option to purchase the
    vessel and equipment for a de minimisamount at the end
    of the charter periods. The leases are legally defeased because
    we have made payments to banks in consideration for which the
    banks have assumed liability to the lessors equal to basic
    rentals and termination sum obligations. Please read
    notes 2 and 19 of the notes to our consolidated financial
    statements included in Item 18 of this annual report.



| |              
| | -------------
| | Ramform Banff

Ramform Banff


Ramform Banff Ramform Banff


Ramform Banff. Ramform Banff




| |            
| | -----------
| | Petrojarl I

Petrojarl I Petrojarl I


25



---



##### Table of Contents







| |                   
| | ------------------
| | Petrojarl Foinaven

Petrojarl Foinaven








| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | compensate Britoil up to a maximum of $10 million for some
    breaches of contract; and
|
| |  | pay for pollution damage caused by diesel or lubricants.                                



| |               
| | --------------
| | Petrojarl Varg

Petrojarl Varg




Petrojarl Varg Petrojarl Varg


26



---



##### Table of Contents







| |                                                           
| | ----------------------------------------------------------
| | Employee Lockout and Strike in September/ October
    2004

Petrojarl I Petrojarl I Petrojarl Varg force majeure




| |                                         
| | ----------------------------------------
| | Competition in Our Production Operations





Oil and Natural Gas Production Segment (Pertra)




27



---



##### Table of Contents



Petrojarl Varg


Petrojarl Varg




Petrojarl Varg








|                                                     |             |              |       |       |      |  |       |       |  |  |       |       | 
|---------------------------------------------------- | ----------- | ------------ | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- | 
|                                                     |             | December 31, |      
|                                                     |             |              |      
|                                                     |             | 2004         |       |       | 2003 |  |       | 2002  | 
|                                                     |             |              |       |       |      |  |       |       | 
|Proved Crude Oil Reserves (in thousands of barrels): |             |              |       |       |      |  |       |       |  |  |       |      
|                                                     | Developed   |              |       | 5,477 |      |  |       | 2,114 |  |  |       | 3,272 | 
|                                                     | Undeveloped |              |       |      |      |  |       | 5,704 |  |  |       | 865   | 
|                                                     |             |              |       |       |      |  |       |       | 
|Total                                                |             |              | 5,477 |       |      |  | 7,818 |       |  |  | 4,137 |      
|                                                     |             |              |       |       |      |  |       |       | 





28



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##### Table of Contents



Other Factors Related to Our Business




| |                                     
| | ------------------------------------
| | Our Research and Product Development







| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a complete deep water handling system, installed on our seismic
    sea floor crew and successfully deployed in water depth of more
    than 1,800 meters;                                 
|
| |  | a new generation of solid streamers (in collaboration with
    Teledyne), which streamers were installed on the Atlantic
    Explorer;                                                     
|
| |  | a new methodology for determining how much infill is
    needed during seismic acquisition operations;                                                                                   
|
| |  | the high-end visualization tool holoSeis and the implementation
    of this tool onboard our seismic vessels to improve the quality
    control process of seismic data during acquisition;
|
| |  | a portfolio of pre-stack depth migration software; and                                                                                                                                     
|
| |  | advanced data processing technology, including imaging for true
    3D multiple attenuation.                                                                                               



| |            
| | -----------
| | Seasonality





| |                                   
| | ----------------------------------
| | Operating Conditions and Insurance







29



---



##### Table of Contents







| |                        
| | -----------------------
| | Governmental Regulation









| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | permitting or licensing agreements for oil and natural gas
    exploration, development and production activities;
|
| |  | exports and imports;                                                                                              
|
| |  | currency;                                                                                                         
|
| |  | taxes;                                                                                                            
|
| |  | occupational health and safety; and                                                                               
|
| |  | the protection of the environment.                                                                                







| |                     
| | --------------------
| | Capital Expenditures



30



---



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| |                                                         
| | --------------------------------------------------------
| | Geographic Mix of Operations and Segment
    Information



Organizational Structure




|                                              |  |                |  |           |      | 
|--------------------------------------------- |  | -------------- |  | --------- | ---- | 
|Name                                          |  | Jurisdiction   |  | Ownership |     
|                                              |  |                |  |           |     
|PGS Shipping AS                               |  | Norway         |  |           | 100% | 
|Oslo Seismic Services Ltd.                    |  | Isle of Man    |  |           | 100% | 
|PGS Geophysical AS                            |  | Norway         |  |           | 100% | 
|PGS Production AS                             |  | Norway         |  |           | 100% | 
|PGS Reservoir AS                              |  | Norway         |  |           | 100% | 
|Multiklient Invest AS                         |  | Norway         |  |           | 100% | 
|Petroleum Geo-Services, Inc.                  |  | United States  |  |           | 100% | 
|Petroleum Geo-Services (UK) Ltd.              |  | United Kingdom |  |           | 100% | 
|Seahouse Insurance Ltd.                       |  | Bermuda        |  |           | 100% | 
|PGS Mexicana SA de CV                         |  | Mexico         |  |           | 100% | 
|PGS Rio Bonito SA                             |  | Brazil         |  |           | 99%  | 
|Dalmorneftegeofizika PGS AS                   |  | Norway         |  |           | 49%  | 
|Walther Herwig AS                             |  | Norway         |  |           | 100% | 
|Geo Explorer AS                               |  | Norway         |  |           | 50%  | 
|Shanghai Tensor CNOOC Geophysical Ltd.        |  | United Kingdom |  |           | 50%  | 
|Baro Mekaniske Verksted AS                    |  | Norway         |  |           | 10%  | 
|Calibre Seismic Company                       |  | United States  |  |           | 50%  | 
|PGS Capital, Inc.                             |  | United States  |  |           | 100% | 
|Diamond Geophysical Services Company          |  | United States  |  |           | 100% | 
|PGS Exploration (Nigeria) Ltd.                |  | Nigeria        |  |           | 100% | 
|PGS Data Processing Middle East SAE           |  | Egypt          |  |           | 100% | 
|PGS Data Processing, Inc.                     |  | United States  |  |           | 100% | 
|Petroleum Geo-Services Asia Pacific Pte. Ltd. |  | Singapore      |  |           | 100% | 
|PGS Australia Pty. Ltd.                       |  | Australia      |  |           | 100% | 
|Atlantis (UK) Ltd.                            |  | United Kingdom |  |           | 100% | 
|PGS Egypt for Petroleum Services              |  | Egypt          |  |           | 100% | 
|Hara Skip AS                                  |  | Norway         |  |           | 100% | 
|PGS Exploration, SDN BHD                      |  | Malaysia       |  |           | 100% | 
|PGS Exploration, Inc.                         |  | United States  |  |           | 100% | 
|PGS Exploration Pty. Ltd.                     |  | Australia      |  |           | 100% | 
|PGS Ocean Bottom Seismic, Inc.                |  | United States  |  |           | 100% | 
|PGS Exploration (UK) Ltd.                     |  | United Kingdom |  |           | 100% | 
|PGS Floating Production (UK) Ltd.             |  | United Kingdom |  |           | 100% | 
|PGS Pension Trustee Ltd.                      |  | United Kingdom |  |           | 100% | 
|PGS Reservoir (UK) Ltd.                       |  | United Kingdom |  |           | 100% | 
|Atlantic Explorer Ltd.                        |  | Isle of Man    |  |           | 50%  | 
|Oslo Seismic Services Inc.                    |  | United States  |  |           | 100% | 

31



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|                                            |  |                |  |           |        | 
|------------------------------------------- |  | -------------- |  | --------- | ------ | 
|Name                                        |  | Jurisdiction   |  | Ownership |       
|                                            |  |                |  |           |       
|Oslo Explorer Plc                           |  | Isle of Man    |  |           | 100%   | 
|Oslo Challenger Plc                         |  | Isle of Man    |  |           | 100%   | 
|PGS Shipping (Isle of Man) Ltd.             |  | Isle of Man    |  |           | 100%   | 
|PGS Onshore, Inc.                           |  | United States  |  |           | 100%   | 
|PGS Onshore (Canada), Inc.                  |  | Canada         |  |           | 100%   | 
|PGS Americas, Inc.                          |  | United States  |  |           | 100%   | 
|Seismic Energy Holding, Inc.                |  | United States  |  |           | 100%   | 
|PGS Caspian AS                              |  | Norway         |  |           | 100%   | 
|PGS Multi-Client Seismic Ltd.               |  | Jersey         |  |           | 100%   | 
|PGS Marine Services (Isle of Man) Ltd.      |  | Isle of Man    |  |           | 100%   | 
|Golar-Nor Offshore AS                       |  | Norway         |  |           | 100%   | 
|Golar-Nor Offshore (UK) Ltd.                |  | United Kingdom |  |           | 100%   | 
|K/ S Petrojarl I AS                         |  | Norway         |  |           | 98.5%  | 
|Golar-Nor (UK) Ltd.                         |  | United Kingdom |  |           | 100%   | 
|Deep Gulf LLC                               |  | United States  |  |           | 50.1%  | 
|PGS Nopec (UK) Ltd.                         |  | United Kingdom |  |           | 100%   | 
|PGS Nominees Ltd.                           |  | United Kingdom |  |           | 100%   | 
|Petrojarl 4 DA                              |  | Norway         |  |           | 99.25% | 
|SOH, Inc.                                   |  | United States  |  |           | 100%   | 
|PT PGS Nusantara                            |  | Indonesia      |  |           | 100%   | 
|PGS Processing (Angola) Ltd.                |  | United Kingdom |  |           | 100%   | 
|Seismic Exploration (Canada) Ltd.           |  | United Kingdom |  |           | 100%   | 
|PGS Ikdam Ltd.                              |  | United Kingdom |  |           | 100%   | 
|Sakhalin Petroleum Plc                      |  | Cyprus         |  |           | 100%   | 
|Ikdam Production, SA                        |  | France         |  |           | 40%    | 
|PGS Investigacào Petrolifera Limitada       |  | Brazil         |  |           | 99%    | 
|Sea Lion Exploration Ltd.                   |  | Bahamas        |  |           | 100%   | 
|PGS Administración y Servicios S.A. de C.V. |  | Mexico         |  |           | 100%   | 
|PGS Servicios C.A.                          |  | Venezuela      |  |           | 100%   | 
|PGS Venezuela de C.A.                       |  | Venezuela      |  |           | 100%   | 

Leased Premises









|        |                                             
|------- | --------------------------------------------
|ITEM 5. | Operating and Financial Review and Prospects

You should read the discussion under this caption in
combination with consolidated financial statements and the
related notes in Item 18 of this annual report and
Key Information  Selected Financial Data
in Item 3 of this annual report. This discussion is based
upon, and the consolidated financial statements included in
Item 18 of this annual report have been prepared in
accordance with, United States generally accepted accounting
principles. The following information contains forward-looking
statements. You should refer to the section in this annual
report captioned Forward-Looking Statements for
cautionary statements relating to forward-looking statements.


32



---



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Overview








| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Marine Geophysical,which consists of both streamer and
    seafloor seismic data acquisition, marine multi-client library
    and data processing;                                                                             
|
| |  | Onshore,which consists of all seismic operations on land
    and in very shallow water and transition zones, including our
    onshore multi-client library;                                                                   
|
| |  | Production,which owns and operates four harsh
    environment FPSO units in the North Sea; and                                                                                                                                 
|
| |  | Pertra,a small oil and natural gas company that owned
    70% of and was operator for Production License 038
    (PL038) on the NCS and also owned participating
    interests in additional NCS licenses without production.



Petrojarl Varg




Sale of Our Oil and Natural Gas Subsidiary Pertra






Petrojarl Varg Petrojarl Varg. Petrojarl Varg


33



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##### Table of Contents



2003 Financial Restructuring






| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $746 million of unsecured 10% Senior Notes due 2010;                                                                                                                                                                                                                                        
|
| |  | $250 million of unsecured 8% Senior Notes due 2006;                                                                                                                                                                                                                                         
|
| |  | $4.8 million of an eight-year unsecured senior term loan
    facility;                                                                                                                                                                                                                      
|
| |  | 91% of our new ordinary shares as constituted immediately post
    restructuring, with an immediate reduction of this shareholding
    to 61% in a rights offering of 30% of the new ordinary shares to
    the pre-restructuring shareholders for $85 million, or
    $14.17 per share; and
|
| |  | $40.6 million of cash, of which $17.9 million was
    distributed in December 2003 and the remainder in May 2004.                                                                                                                                                                           





| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our pre-restructuring share capital was cancelled and 20,000,000
    new ordinary shares, par value NOK 30 per share, were
    issued;                                                                                              
|
| |  | the pre-restructuring shareholders received 4%, or 800,000, of
    the new ordinary shares and the right to acquire 30%, or
    6,000,000, of the new ordinary shares for $85 million
    ($14.17 per share) in the rights offering;
|
| |  | pre-restructuring owners of $144 million of trust preferred
    securities received 5%, or 1,000,000, of the new ordinary
    shares; and                                                                                           
|
| |  | the principal amount of our interest-bearing debt and capital
    lease obligations was reduced by approximately
    $1,283 million to approximately $1,210 million
    immediately after the restructuring.                        

2003 Fresh Start Reporting and Changes in Accounting
Policies








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Expenditures incurred in connection with steaming and
    mobilization are expensed as incurred. Onsite project costs such
    as positioning, deploying and retrieving equipment at the
    beginning and end of a project are considered mobilization or
    demobilization costs and are expensed as incurred, unless the
    project relates to the building of the multi-client data
    library, in which case such costs are included in the costs of
    the multi-client survey. Such expenses were previously
    recognized as part of contract costs or multi-client project
    costs as appropriate, and as such would not have been fully
    expensed immediately.
|
| |  | The successful efforts method of accounting for oil and natural
    gas assets was adopted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | We made certain changes to our amortization policy for our
    multi-client library, including an increase in minimum
    amortization by reducing the maximum amortization period from
    eight to five years after completion of a survey.                                                                                                                                                                                                                                                                                                                                                                                                                                     

34



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##### Table of Contents





| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | Depreciable lives of Ramform seismic acquisition vessels and
    FPSOs, other than the Petrojarl I, were reduced from
    30 to 25 years.



Internal Controls over Financial Reporting




Critical Accounting Policies and Estimates








| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | revenue recognition;                                                                        
|
| |  | multi-client data library, including cost capitalization, sales
    and amortization;       
|
| |  | oil and natural gas accounting, including capitalization,
    amortization and impairment;  
|
| |  | long-lived assets, particularly impairment and depreciation,
    depletion and amortization;
|
| |  | deferred tax assets; and                                                                    
|
| |  | fresh start reporting.                                                                      



| |                    
| | -------------------
| | Revenue Recognition







| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Late sales  we grant a license to the customer to a
    specified portion of the library.                                                                                                                               
|
| |  | Volume sales agreements  we grant a license or
    licenses to a specified number of blocks in a defined
    geographical area so that the customer can select and access the
    specific blocks over a period of time.

35



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pre-funding arrangements  we obtain funding from a
    limited number of customers before a seismic acquisition project
    commences. In return for the pre-funding, the customer typically
    gains the ability to direct or influence the project
    specifications, to access data as it is being acquired and to
    pay discounted prices.





| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | from late sales when the customer executes a valid license
    agreement and has been granted access to the library and
    collection is reasonably assured;                                                               
|
| |  | from volume sales agreements ratably based on the total revenue
    and volume of data specified in the agreement as the customer
    executes licenses for specific blocks and has been granted
    access to the data; and
|
| |  | from pre-funding arrangements as the data is acquired, generally
    based on physical progress, on a proportionate performance basis.                                                                                      



| |                          
| | -------------------------
| | Multi-Client Data Library











36



---



##### Table of Contents





| |                               
| | ------------------------------
| | Oil and Natural Gas Accounting











| |                                 
| | --------------------------------
| | Accounting for Long-Lived Assets



37



---



##### Table of Contents







| |                    
| | -------------------
| | Deferred Tax Assets







| |                      
| | ---------------------
| | Fresh Start Reporting





Seasonality




38



---



##### Table of Contents









Results of Operations




| |         
| | --------
| | Overview



Petrojarl Varg Petrojarl Varg Petrojarl Varg




39



---



##### Table of Contents





| |         
| | --------
| | Revenues



|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |           |   |  |   |           |  
|---------------------------- |  | ------------------------- | --------- | ---------- | ------------ | - | ---------- | ----------- |  | ------------- | ------------ | - | ----------- | ------------ | --------- | - |  | - | --------- | -
|                             |  | Successor                 |           |            | Successor    |   |            | Predecessor |  |               |              |   | Predecessor |             
|                             |  | Company                   |           |            | Company      |   |            | Company     |  |               | Combined     |   |             | Company      |          
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|                             |  |                           |           | Two Months |              |   | Ten Months |             |  | Twelve Months |              |   |            
|                             |  | Year Ended                |           |            | Ended        |   |            | Ended       |  |               | Ended        |   |             | Year Ended   |          
|                             |  | December 31,              |           |            | December 31, |   |            | October 31, |  |               | December 31, |   |             | December 31, |          
|                             |  | 2004                      |           |            | 2003         |   |            | 2003        |  |               | 2003         |   |             | 2002         |          
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|                             |  | (In thousands of dollars) |          
|Marine Geophysical           |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |           |   |  |   |           |  
|Contract                     |  | $                         | 297,749   |            |              | $ | 48,273     |             |  | $             | 302,451      |   |             | $            | 350,724   |   |  | $ | 282,234   |  
|Multi-client pre-funding     |  |                           | 30,535    |            |              |   | 6,510      |             |  |               | 43,187       |   |             |              | 49,697    |   |  |   | 100,326   |  
|Multi-client late sales      |  |                           | 203,397   |            |              |   | 36,786     |             |  |               | 123,435      |   |             |              | 160,221   |   |  |   | 178,128   |  
|Other                        |  |                           | 39,124    |            |              |   | 7,813      |             |  |               | 31,040       |   |             |              | 38,853    |   |  |   | 31,952    |  
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|                             |  |                           | 570,805   |            |              |   | 99,382     |             |  |               | 500,113      |   |             |              | 599,495   |   |  |   | 592,640   |  
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|Onshore                      |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |           |   |  |   |           |  
|Contract                     |  |                           | 110,288   |            |              |   | 18,442     |             |  |               | 106,324      |   |             |              | 124,766   |   |  |   | 102,868   |  
|Multi-client pre-funding     |  |                           | 12,761    |            |              |   | 1,807      |             |  |               | 14,636       |   |             |              | 16,443    |   |  |   | 14,104    |  
|Multi-client late sales      |  |                           | 10,112    |            |              |   | 1,210      |             |  |               | 8,005        |   |             |              | 9,215     |   |  |   | 1,726     |  
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|                             |  |                           | 133,161   |            |              |   | 21,459     |             |  |               | 128,965      |   |             |              | 150,424   |   |  |   | 118,698   |  
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|Production                   |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |           |   |  |   |           |  
|Petrojarl I                  |  |                           | 61,303    |            |              |   | 11,086     |             |  |               | 58,529       |   |             |              | 69,615    |   |  |   | 62,631    |  
|Petrojarl Foinaven           |  |                           | 96,595    |            |              |   | 18,726     |             |  |               | 93,373       |   |             |              | 112,099   |   |  |   | 133,364   |  
|Ramform Banff                |  |                           | 51,509    |            |              |   | 6,572      |             |  |               | 38,616       |   |             |              | 45,188    |   |  |   | 37,886    |  
|Petrojarl Varg               |  |                           | 87,133    |            |              |   | 8,604      |             |  |               | 59,191       |   |             |              | 67,795    |   |  |   | 69,455    |  
|Other                        |  |                           | 1,662     |            |              |   | 241        |             |  |               | 349          |   |             |              | 590       |   |  |   | 3,309     |  
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|                             |  |                           | 298,202   |            |              |   | 45,229     |             |  |               | 250,058      |   |             |              | 295,287   |   |  |   | 306,645   |  
|Other/elimination            |  |                           | (56,834   | )          |              |   | (3,243     | )           |  |               | (29,369      | ) |             |              | (32,612   | ) |  |   | (7,449    | )
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|Total revenues (services)    |  |                           | 945,334   |            |              |   | 162,827    |             |  |               | 849,767      |   |             |              | 1,012,594 |   |  |   | 1,010,534 |  
|Revenues (products)  Pertra |  |                           | 184,134   |            |              |   | 9,544      |             |  |               | 112,097      |   |             |              | 121,641   |   |  |   | 32,697    |  
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          
|Total revenues               |  | $                         | 1,129,468 |            |              | $ | 172,371    |             |  | $             | 961,864      |   |             | $            | 1,134,235 |   |  | $ | 1,043,231 |  
|                             |  |                           |           |            |              |   |            |             |  |               |              |   |             |              |          



Marine Geophysical  2004 vs. 2003.


40



---



##### Table of Contents





Marine Geophysical  2003 vs. 2002.


Onshore  2004 vs. 2003.


Onshore  2003 vs. 2002.


Production  2004 vs. 2003. Petrojarl Foinaven Petrojarl I Petrojarl I Ramform Banff Ramform Banff Petrojarl Varg Petrojarl Varg Petrojarl
Varg


Production  2003 vs. 2002. Petrojarl
Foinaven, Petrojarl I Ramform Banff Petrojarl Varg


Elimination of Inter-Segment Amounts. Petrojarl
Varg Petrojarl Varg


41



---



##### Table of Contents



Pertra.




| |              
| | -------------
| | Cost of Sales



|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |         |      |   |   |         |      |  
|------------------------------ | ------------ | ------------------------------------------------- | ------- | ---------- | ------------ | - | ---------- | ----------- | - | ------------- | ------------ | ---- | ----------- | ------------ | ------- | ---- | - | - | ------- | ---- | -
|                               |              | Successor                                         |         |            | Successor    |   |            | Predecessor |   |               |              |      | Predecessor |             
|                               |              | Company                                           |         |            | Company      |   |            | Company     |   |               | Combined     |      |             | Company      |        
|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |        
|                               |              |                                                   |         | Two Months |              |   | Ten Months |             |   | Twelve Months |              |      |            
|                               |              | Year Ended                                        |         |            | Ended        |   |            | Ended       |   |               | Ended        |      |             | Year Ended   |        
|                               |              | December 31,                                      |         |            | December 31, |   |            | October 31, |   |               | December 31, |      |             | December 31, |        
|                               |              | 2004                                              |         |            | 2003         |   |            | 2003        |   |               | 2003         |      |             | 2002         |        
|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |        
|                               |              | (In thousands of dollars, except percentage data) |        
|Marine Geophysical             |              | $                                                 | 342,460 |            |              | $ | 55,903     |             |   | $             | 248,965      |      |             | $            | 304,868 |      |   | $ | 286,324 |     
|                               | % of revenue |                                                   |         | 60.0       | %            |   |            | 56.3        | % |               |              | 49.8 | %           |              |         | 50.9 | % |   |         | 48.3 | %
|Onshore                        |              | $                                                 | 92,290  |            |              | $ | 13,043     |             |   | $             | 76,634       |      |             | $            | 89,677  |      |   | $ | 98,769  |     
|                               | % of revenue |                                                   |         | 69.3       | %            |   |            | 60.8        | % |               |              | 59.4 | %           |              |         | 59.6 | % |   |         | 83.2 | %
|Production                     |              | $                                                 | 167,764 |            |              | $ | 21,208     |             |   | $             | 133,114      |      |             | $            | 154,322 |      |   | $ | 144,261 |     
|                               | % of revenue |                                                   |         | 56.3       | %            |   |            | 46.9        | % |               |              | 53.2 | %           |              |         | 52.3 | % |   |         | 47.0 | %
|Other                          |              | $                                                 | 9,558   |            |              | $ | 900        |             |   | $             | 6,776        |      |             | $            | 7,676   |      |   | $ | 4,286   |     
|Transfer of cost(1)            |              |                                                   | (24,160 | )          |              |   | 3,990      |             |   |               | (11,093      | )    |             |              | (7,103  | )    |   |   | (3,254  | )   
|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |        
|Total cost of sales (services) |              | $                                                 | 587,912 |            |              | $ | 95,044     |             |   | $             | 454,396      |      |             | $            | 549,440 |      |   | $ | 530,386 |     
|                               | % of revenue |                                                   |         | 62.2       | %            |   |            | 58.4        | % |               |              | 53.5 | %           |              |         | 54.3 | % |   |         | 52.5 | %
|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |        
|Cost of sales (products)       |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |         |      |   |   |         |     
|Pertra                         |              | $                                                 | 93,035  |            |              | $ | 7,040      |             |   | $             | 61,910       |      |             | $            | 68,950  |      |   | $ | 27,430  |     
|Elimination(1)                 |              |                                                   | (48,197 | )          |              |   | (5,130     | )           |   |               | (28,528      | )    |             |              | (33,658 | )    |   |   | (16,629 | )   
|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |        
|Total cost of sales (products) |              | $                                                 | 44,838  |            |              | $ | 1,910      |             |   | $             | 33,382       |      |             | $            | 35,292  |      |   | $ | 10,801  |     
|                               | % of revenue |                                                   |         | 24.3       | %            |   |            | 20.0        | % |               |              | 29.8 | %           |              |         | 29.0 | % |   |         | 33.0 | %
|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |        
|Total cost of sales            |              | $                                                 | 632,750 |            |              | $ | 96,954     |             |   | $             | 487,778      |      |             | $            | 584,732 |      |   | $ | 541,187 |     
|                               | % of revenue |                                                   |         | 56.0       | %            |   |            | 56.2        | % |               |              | 50.7 | %           |              |         | 51.6 | % |   |         | 51.9 | %
|                               |              |                                                   |         |            |              |   |            |             |   |               |              |      |             |              |        



|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(1) | Elimination of inter-segment charter hire related to
    Petrojarl Varg and inter-segment transfers of costs.

Cost of sales services  2004 vs. 2003. Petrojarl
Varg Petrojarl Varg


42



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##### Table of Contents



Cost of sales products  2004 vs. 2003.


Eliminations. Petrojarl Varg.


Cost of sales services  2003 vs. 2002.


Cost of sales products  2003 vs. 2002.




| |                  
| | -----------------
| | Exploration Costs







| |                                         
| | ----------------------------------------
| | Depreciation, Depletion and Amortization



43



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|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |   |         |         |  |   |         |         | 
|-------------------- | ----------------- | ------------------------- | - | ---------- | ------------ |  | ---------- | ----------- | ------ | ------------- | ------------ | ------- | ----------- | ------------ | - | ------- | ------- |  | - | ------- | ------- | 
|                     |                   | Successor                 |   |            | Successor    |  |            | Predecessor |        |               |              |         | Predecessor |             
|                     |                   | Company                   |   |            | Company      |  |            | Company     |        |               | Combined     |         |             | Company      |  
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|                     |                   |                           |   | Two Months |              |  | Ten Months |             |        | Twelve Months |              |         |            
|                     |                   | Year Ended                |   |            | Ended        |  |            | Ended       |        |               | Ended        |         |             | Year Ended   |  
|                     |                   | December 31,              |   |            | December 31, |  |            | October 31, |        |               | December 31, |         |             | December 31, |  
|                     |                   | 2004                      |   |            | 2003         |  |            | 2003        |        |               | 2003         |         |             | 2002         |  
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|                     |                   | (In thousands of dollars) |  
|Marine Geophysical:  |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |   |         |         |  |   |        
|                     | Adjusted DD&A     |                           | $ | 55,277     |              |  | $          | 9,565       |        |               | $            | 59,730  |             |              | $ | 69,295  |         |  | $ | 64,616  |        
|                     | MCDL amortization |                           |   | 186,435    |              |  |            | 29,786      |        |               |              | 131,485 |             |              |   | 161,271 |         |  |   | 183,317 |        
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|                     |                   | DD&A                      |   |            | 241,712      |  |            |             | 39,351 |               |              |         | 191,215     |              |   |         | 230,566 |  |   |         | 247,933 | 
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|Onshore:             |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |   |         |         |  |   |        
|                     | Adjusted DD&A     |                           |   | 18,677     |              |  |            | 3,571       |        |               |              | 14,292  |             |              |   | 17,863  |         |  |   | 17,077  |        
|                     | MCDL amortization |                           |   | 21,208     |              |  |            | 2,653       |        |               |              | 15,133  |             |              |   | 17,786  |         |  |   | 11,331  |        
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|                     |                   | DD&A                      |   |            | 39,885       |  |            |             | 6,224  |               |              |         | 29,425      |              |   |         | 35,649  |  |   |         | 28,408  | 
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|Production:          |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |   |         |         |  |   |        
|                     | DD&A              |                           |   | 44,561     |              |  |            | 8,112       |        |               |              | 43,418  |             |              |   | 51,530  |         |  |   | 70,958  |        
|Pertra:              |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |   |         |         |  |   |        
|                     | DD&A              |                           |   | 38,965     |              |  |            | 743         |        |               |              | 30,826  |             |              |   | 31,569  |         |  |   | 12,695  |        
|Corporate and other: |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |   |         |         |  |   |        
|                     | Adjusted DD&A     |                           |   | 2,414      |              |  |            | 361         |        |               |              | 4,911   |             |              |   | 5,272   |         |  |   | 6,203   |        
|                     | MCDL amortization |                           |   | 825        |              |  |            | 908         |        |               |              | 1,781   |             |              |   | 2,689   |         |  |   | 1,306   |        
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|                     |                   | DD&A                      |   |            | 3,239        |  |            |             | 1,269  |               |              |         | 6,692       |              |   |         | 7,961   |  |   |         | 7,509   | 
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|Total:               |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |   |         |         |  |   |        
|                     | Adjusted DD&A     |                           |   | 159,894    |              |  |            | 22,352      |        |               |              | 153,177 |             |              |   | 175,529 |         |  |   | 171,549 |        
|                     | MCDL amortization |                           |   | 208,468    |              |  |            | 33,347      |        |               |              | 148,399 |             |              |   | 181,746 |         |  |   | 195,954 |        
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  
|                     |                   | DD&A                      |   | $          | 368,362      |  |            | $           | 55,699 |               |              | $       | 301,576     |              |   | $       | 357,275 |  |   | $       | 367,503 | 
|                     |                   |                           |   |            |              |  |            |             |        |               |              |         |             |              |  

2004 vs. 2003.




44



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2003 vs. 2002. Ramform Banff






| |                                          
| | -----------------------------------------
| | Selling, General and Administrative Costs







| |                                             
| | --------------------------------------------
| | Impairments and other operating expense, net



Ramform Banff






| |                                           
| | ------------------------------------------
| | Interest expense and other financial items



45



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| |                     
| | --------------------
| | Reorganization items





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | for the first ten months (Predecessor) we recorded a gain on
    debt discharge of $1,253.9 million and costs of
    reorganization of $52.3 million;                                                                                                                                                                                                                                                                     
|
| |  | for the last two months (Successor) we recorded
    $3.3 million in costs of reorganization;                                                                                                                                                                                                                                                                                                                              
|
| |  | for the first ten months (Predecessor) we recorded the net
    effect at November 1, 2003, of adopting fresh start
    reporting of $532.3 million. This amount represents the net
    effect of differences between the fair value of our assets and
    liabilities as measured at November 1, 2003 and the
    carrying value of those assets and liabilities immediately
    before adoption of fresh start reporting.





| |                   
| | ------------------
| | Income tax expense







| |                        
| | -----------------------
| | Discontinued Operations



46



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##### Table of Contents







| |                                              
| | ---------------------------------------------
| | Operating profit (loss) and net income (loss)





Outlook; Factors Affecting Our Future Operating Results






| |   |                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the development of our main market drivers, which includes
    prices and price expectations for oil and natural gas. Such
    prices and price expectations affect the demand for exploration
    and production related seismic services and the economics in
    developing and producing small and medium sized oil and natural
    gas fields;
|
| |  | our ability to optimize performance of our FPSO vessels and
    profitably expand the Production segment, including, among
    others:                                                                                                                                                                                                             



| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | sustaining high regularity and uptime;                                                                                                                              
|
| |  | maximizing volumes and revenues under current contracts,
    including further extension of contract duration where
    appropriate; and                            
|
| |  | capturing new profitable contract opportunities and achieving
    timely redeployment of vessels on terms and at volumes
    reflecting their production capacities;



| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | the business performance of our Onshore and Marine Geophysical
    segments, including, among others:



| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the demand for contract seismic services, coupled with
    (a) our ability to benefit from our strong
    HD3Dsm
    position and high productivity and vessel performance,
    (b) our ability to reduce steaming and other unproductive
    vessel time, and (c) the prices for our services;
|
| |  | demand for multi-client seismic data in various geographic
    regions, including future licensing rounds and demand for data
    offshore Brazil;                                                                                                                                             
|
| |  | our ability to profitably rebuild new multi-client seismic
    survey activity to complement our contract work; and                                                                                                                                                                            
|
| |  | implementation of our streamer replacement program for our
    seismic vessels;                                                                                                                                                                                                                



| |   |                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | foreign currency exchange rate fluctuations between the
    U.S. dollar, our functional currency, and the Norwegian
    kroner or the British pound, which will generally have an impact
    on our operating profit because we have significant operating
    expenses in Norwegian kroner and British pounds;

47



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| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the extent to which we participate in strategic acquisitions or
    dispositions of assets or businesses or in one or more joint
    ventures involving such assets or businesses; and
|
| |  | our ability to continue to develop or acquire competitive
    technological solutions for our different business units.                                                               













| |                   
| | ------------------
| | Marine Geophysical



| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increased contract prices driven by relatively high industry
    capacity utilization;                                                                                                    
|
| |  | Continued focus on contract acquisition, with a moderate
    increase in multi-client activity;                                                                                           
|
| |  | Lower multi-client late sales as compared with 2004 due to
    limited reinvestment over the past three years and expected
    delay of Brazilian 7th Licensing Round sales into 2006; and
|
| |  | Increased costs due to increased fuel prices and a weaker
    U.S. dollar compared to 2004.                                                                                               



| |        
| | -------
| | Onshore



| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continued focus on markets where we can compete most
    effectively; and                                                                                                                  
|
| |  | Full year activity level similar to that in 2004, building on
    expected start-up of a significant transition zone project in
    Nigeria and contract awards for crews in South America.



| |           
| | ----------
| | Production



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continued production by our FPSOs on existing assignments;                                                                                                                                                                         
|
| |  | Total oil production from the four FPSOs in line with 2004
    levels; and                                                                                                                                                         
|
| |  | Increased operating costs due to (a) increased maintenance
    costs on FPSO vessels as the time since deployment of the FPSOs
    on their respective fields is increasing and (b) a weakened
    U.S. dollar as compared to 2004.

48



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##### Table of Contents



Liquidity and Capital Resources




| |                    
| | -------------------
| | Liquidity  General







| |                                         
| | ----------------------------------------
| | Sources of Liquidity  Capital Resources













49



---



##### Table of Contents





|           |                                                |   |       |     | 
|---------- | ---------------------------------------------- | - | ----- | --- | 
|           | 10% Senior Notes, due 2010                     |   | $     | 746 | 
|           | 8% Senior Notes, due 2006                      |   |       | 250 | 
|           | 8.28% First Preferred Mortgage Notes, due 2011 |   |       | 99  | 
|           | Other loans, due 2005  2006                   |   |       | 10  | 
|           |                                                |   |      
|Total debt |                                                | $ | 1,105 |    
|           |                                                |   |      
|           | Capital leases                                 |   |       | 59  | 
|           |                                                |   |      
|Total      |                                                | $ | 1,164 |    
|           |                                                |   |      















| |                                                    
| | ---------------------------------------------------
| | Net Cash Used in Investing and Financing Activities





50



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| |                                     
| | ------------------------------------
| | Capital Requirements and Commitments





| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | capital expenditures on seismic vessels and equipment, including
    data processing equipment and streamers;
|
| |  | capital expenditures on FPSO vessels and equipment;                                                          
|
| |  | investments in our multi-client library; and                                                                 
|
| |  | working capital related to growth, seasonality and specific
    project requirements.                        







|                   |  |        |         | 
|------------------ |  | ------ | ------- | 
|Segment            |  | Amount |        
|                   |  |        |        
|Marine Geophysical |  | $      | 56,946  | 
|Onshore            |  |        | 1,372   | 
|Production         |  |        | 988     | 
|Pertra             |  |        | 84,991  | 
|Other              |  |        | 4,075   | 
|                   |  |        |        
|Total              |  | $      | 148,372 | 
|                   |  |        |        





| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to prudently increase our investment in multi-client library as
    compared to 2004 as we start rebuilding our multi-client
    business;                                                                                             
|
| |  | capital expenditures in Marine Geophysical to be largely in line
    with 2004 as we continue our streamer replacement program and
    otherwise continue to invest in upgrading our seismic vessels
    and data processing equipment;
|
| |  | capital expenditures in Onshore to increase to above
    $10 million as we expect to make investments in specialized
    equipment within certain areas, including transition zone
    recording equipment; and                        
|
| |  | capital expenditures in Production on our existing vessels to
    continue at a low level because our FPSO vessels are not
    expected to have substantial replacement needs through 2005 and
    we expense maintenance expenditures.

51



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| |                                  
| | ---------------------------------
| | Long-Term Contractual Obligations



|                               |  |                          |         |  |      |   |      |             |  |   |             |     |  |            |       |  |  |   |       | 
|------------------------------ |  | ------------------------ | ------- |  | ---- | - | ---- | ----------- |  | - | ----------- | --- |  | ---------- | ----- |  |  | - | ----- | 
|                               |  | Payments Due by Period   |        
|                               |  |                          |        
|Contractual Obligations        |  | Total                    |         |  | 2005 |   |      | 2006 - 2007 |  |   | 2008 - 2009 |     |  | Thereafter |      
|                               |  |                          |         |  |      |   |      |             |  |   |             |     |  |            |      
|                               |  | (In millions of dollars) |        
|Long term debt obligations     |  | $                        | 1,103.0 |  |      | $ | 17.8 |             |  | $ | 276.1       | (1) |  | $          | 29.2  |  |  | $ | 779.8 | 
|Operating lease obligations    |  |                          | 163.6   |  |      |   | 36.4 |             |  |   | 45.4        |     |  |            | 43.9  |  |  |   | 37.8  | 
|Capital lease obligations      |  |                          | 62.1    |  |      |   | 27.4 |             |  |   | 28.1        |     |  |            | 6.6   |  |  |   |      | 
|Other long-term liabilities(2) |  |                          | 158.2   |  |      |   | 16.2 |             |  |   | 33.7        |     |  |            | 76.7  |  |  |   | 31.6  | 
|                               |  |                          |         |  |      |   |      |             |  |   |             |     |  |            |      
|Totals                         |  | $                        | 1,486.9 |  |      | $ | 97.8 |             |  | $ | 383.3       |     |  | $          | 156.4 |  |  | $ | 849.2 | 
|                               |  |                          |         |  |      |   |      |             |  |   |             |     |  |            |      






|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This amount includes the maturity of $250 million of our
    8% Senior Notes due 2006. We redeemed $175 million of
    these notes in April 2005.
|   
|(2) | Excluding other long-term liabilities that are contingent or
    that have uncertain future cash flows.                                          





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|                                              |                                            |                          |       |      |      |   |      |             |  |   |             |      |  |            |      |      |                  |   |      |     |  |   |      |      | 
|--------------------------------------------- | ------------------------------------------ | ------------------------ | ----- | ---- | ---- | - | ---- | ----------- |  | - | ----------- | ---- |  | ---------- | ---- | ---- | ---------------- | - | ---- | --- |  | - | ---- | ---- | 
|                                              |                                            | Payments Due by Period   |       |      |     
|                                              |                                            |                          |       |      |     
|Contractual Obligations                       |                                            | Total                    |       |      | 2005 |   |      | 2006 - 2007 |  |   | 2008 - 2009 |      |  | Thereafter |      |      | Not determinable |  
|                                              |                                            |                          |       |      |      |   |      |             |  |   |             |      |  |            |      |      |                  |  
|                                              |                                            | (In millions of dollars) |       |      |     
|Pension liability(1)                          |                                            | $                        | 52.5  |      |      | $ | 7.9  |             |  | $ | 16.2        |      |  | $          | 17.0 |      |                  | $ | 11.4 |     |  | $ |     |     
|Asset removal obligations(2)                  |                                            |                          | 58.5  |      |      |   | 0.3  |             |  |   |            |      |  |            | 39.9 |      |                  |   | 18.3 |     |  |   |     |     
|Accrued liabilities related to our UK leases: |                                            |                          |       |      |      |   |      |             |  |   |             |      |  |            |      |      |                  |   |      |     |  |   |      |     
|                                              |  related to interest rate differential(3) |                          |       | 47.2 |      |   |      | 8.0         |  |   |             | 17.5 |  |            |      | 19.8 |                  |   |      | 1.9 |  |   |      |     | 
|                                              |  related to tax indemnifications          |                          |       | 32.1 |      |   |      |            |  |   |             |     |  |            |      |     |                  |   |      |    |  |   |      | 32.1 | 
|Tax contingencies                             |                                            |                          | 25.5  |      |      |   |     |             |  |   |            |      |  |            |     |      |                  |   |     |     |  |   | 25.5 |     
|Other                                         |                                            |                          | 3.8   |      |      |   |     |             |  |   |            |      |  |            |     |      |                  |   |     |     |  |   | 3.8  |     
|                                              |                                            |                          |       |      |      |   |      |             |  |   |             |      |  |            |      |      |                  |  
|Totals                                        |                                            | $                        | 219.6 |      |      | $ | 16.2 |             |  | $ | 33.7        |      |  | $          | 76.7 |      |                  | $ | 31.6 |     |  | $ | 61.4 |     
|                                              |                                            |                          |       |      |      |   |      |             |  |   |             |      |  |            |      |      |                  |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pension liability represents the aggregate shortfall of pension
    plan assets compared to projected benefit obligations for our
    plans. We will pay this obligation over time, as adjusted for
    changes in estimates relating to obligations and assets, in
    accordance with the funding requirements of the life insurance
    companies through which we fund our plans. Such requirements are
    subject to change over time, but we expect these payments to be
    made over several years. We have used the premiums expected to
    be paid in future periods as an estimate of future cash outflows
    related to this liability. These premiums would generally relate
    both to payments of the pension obligations as of
    December 31, 2004 and service cost for future years.
|   
|(2) | Asset removal obligations as of December 31, 2004 include
    $39.9 million relating to our Pertra oil and natural gas
    subsidiary that is included in amounts expected to be due for
    payments in the period 2008  2009. We sold Pertra in
    March 2005 to Talisman, and the buyer assumed this
    obligation as part of the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(3) | The estimated net present value of future payments related to
    interest rate differential on our UK leases as of
    December 31, 2004 is $56.9 million based on forward
    interest rate curves, which is $9.7 million higher than the
    amount included in accrued liabilities. Payments through the
    year 2009 reflect estimated total payment based on forward
    interest rate curves as of December 31, 2004. The amount
    presented for periods after 2009 is the residual amount.                                                                                                                                                                                                                                                                                                      



| |          
| | ---------
| | UK Leases

Petrojarl
Foinaven Ramform
Banff.




53



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Petrojarl
Foinaven. Petrojarl Foinaven




Research and Development









|        |                                           
|------- | ------------------------------------------
|ITEM 6. | Directors, Senior Management and Employees

Board of Directors




|                       |  |          |  |          |      |  |            |  |      |           |  |  |     |     
|---------------------- |  | -------- |  | -------- | ---- |  | ---------- |  | ---- | --------- |  |  | --- | ----
|                       |  |          |  | Director |      |  | Term       |  |      | Share     | 
|Name (Age)             |  | Position |  | Since    |      |  | Expires(1) |  |      | Ownership | 
|                       |  |          |  |          |      |  |            |  |      |           | 
|Jens Ulltveit-Moe(62)  |  | Chairman |  |          | 2002 |  |            |  | 2005 |           |  |  | 5.1 | %(2)
|Francis Gugen(56)      |  | Director |  |          | 2003 |  |            |  | 2005 |           |  |  | *   |     
|Keith Henry(60)        |  | Director |  |          | 2003 |  |            |  | 2005 |           |  |  | *   |     
|Harald Norvik(59)      |  | Director |  |          | 2003 |  |            |  | 2005 |           |  |  | *   |     
|Rolf Erik Rolfsen(64)  |  | Director |  |          | 2002 |  |            |  | 2005 |           |  |  | *   |     
|Clare Spottiswoode(52) |  | Director |  |          | 2003 |  |            |  | 2005 |           |  |  | *   |     
|Anthony Tripodo(52)    |  | Director |  |          | 2003 |  |            |  | 2005 |           |  |  | *   |     






|    |                                  
|--- | ---------------------------------
|(1) | In each case, in November 2005.  
|   
|(2) | Controlled through Umoe Invest AS



| |   |                                                             
| | - | ------------------------------------------------------------
| | * | Less than 1% of our outstanding shares as of March 31, 2005.

Mr. Ulltveit-Moe


54



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##### Table of Contents





Mr. Gugen


Mr. Henry


Mr. Norvik


Mr. Rolfsen


Ms. Spottiswoode


Mr. Tripodo




Ms. Johnsen


55



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##### Table of Contents





Mr. Reynolds


Board Committees










| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | financial statement and disclosure matters, including our
    quarterly and annual financial statements and related
    disclosures;                                                                                                                                                                                                                           
|
| |  | reviewing the quarterly and annual financial statements,
    including reviewing major issues regarding accounting principles
    and financial statement presentations, the adequacy of our
    internal controls and discussing significant financial reporting
    issues and judgments made in connection with preparation of the
    financial statements;
|
| |  | provision by the auditor of audit services and permitted
    non-audit services;                                                                                                                                                                                                                                                                               
|
| |  | audits of our financial statements, including reviewing our
    critical accounting policies and practices;                                                                                                                                                                                                                                                    
|
| |  | our relationship with our independent registered public
    accounting firm, including the qualifications, performance and
    independence of the auditors;                                                                                                                                                                                                   
|
| |  | our internal audit function; and                                                                                                                                                                                                                                                                                                                               
|
| |  | responsibilities to comply with various legal and regulatory
    requirements that could affect our financial statements.                                                                                                                                                                                                                                      



56



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Corporate Governance




www.pgs.com




| |                      
| | ---------------------
| | Director Independence





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| |                                     
| | ------------------------------------
| | Meetings of Non-management Directors





| |               
| | --------------
| | Certifications



Supermajority Voting Provision Relating to Our Board






| |   |                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any single sale of assets or series of sales of assets, in any
    calendar year, in excess of $100 million and not otherwise
    requiring approval by two-thirds of the shareholders in a
    general meeting;                                                                          
|
| |  | changes to our key executive management;                                                                                                                                                                                                                                                  
|
| |  | new financings or borrowings over $25 million;                                                                                                                                                                                                                                            
|
| |  | application of major proceeds, which means the
    proceeds from the sale of any of our assets in excess of
    $100 million;                                                                                                                                                           
|
| |  | material acquisitions, which includes any single acquisition of
    assets or series of acquisition of assets, in any calendar year,
    in excess of $100 million and not otherwise requiring
    approval by two-thirds of the shareholders present and voting in
    a general meeting;
|
| |  | proposals to change our Articles of Association; and                                                                                                                                                                                                                                      
|
| |  | proposals for issuance of new equity or equity-like securities.                                                                                                                                                                                                                           



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Executive Officers




|                         |  |                                                   |  |           |      |  |           |  |   | 
|------------------------ |  | ------------------------------------------------- |  | --------- | ---- |  | --------- |  | - | 
|                         |  |                                                   |  | Executive |      |  |          
|                         |  |                                                   |  | Officer   |      |  | Share     | 
|Name (Age)               |  | Position                                          |  | Since     |      |  | Ownership | 
|                         |  |                                                   |  |           |      |  |           | 
|Svein Rennemo(57)        |  | President and Chief Executive Officer             |  |           | 2002 |  |           |  | * | 
|Gottfred Langseth(38)    |  | Senior Vice President and Chief Financial Officer |  |           | 2004 |  |           |  | * | 
|Rune Eng(43)             |  | President  Marine Geophysical                    |  |           | 2004 |  |           |  | * | 
|Eric Wersich(42)         |  | President  Onshore                               |  |           | 2003 |  |           |  | * | 
|Sverre Skogen(48)        |  | President  Production                            |  |           | 2003 |  |           |  | * | 
|Anthony Ross Mackewn(57) |  | Senior Vice President  Geophysical               |  |           | 1999 |  |           |  | * | 






|  |                                                             
|- | ------------------------------------------------------------
|* | Less than 1% of our outstanding shares as of March 31, 2005.

Mr. Rennemo


Mr. Langseth


Mr. Eng


Mr. Wersich


Mr. Skogen


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Mr. Mackewn




Share Ownership of Directors and Executive Officers






Compensation of Directors and Executive Officers






60



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Employees




|                           |       |              |       |       |      |  |       |       |  |  |       |       | 
|-------------------------- | ----- | ------------ | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- | 
|                           |       | December 31, |      
|                           |       |              |      
|                           |       | 2004         |       |       | 2003 |  |       | 2002  | 
|                           |       |              |       |       |      |  |       |       | 
|Marine Geophysical         |       |              | 1,115 |       |      |  | 1,143 |       |  |  | 1,356 |      
|Onshore                    |       |              | 1,011 |       |      |  | 1,479 |       |  |  | 1,828 |      
|Production                 |       |              | 501   |       |      |  | 515   |       |  |  | 520   |      
|Pertra                     |       |              | 16    |       |      |  | 5     |       |  |  | 6     |      
|Global Services/ Corporate |       |              | 256   |       |      |  | 235   |       |  |  | 252   |      
|Discontinued Operations    |       |              |      |       |      |  |      |       |  |  | 41    |      
|                           |       |              |       |       |      |  |       |       | 
|                           | Total |              |       | 2,899 |      |  |       | 3,377 |  |  |       | 4,003 | 
|                           |       |              |       |       |      |  |       |       | 

Petrojarl I Petrojarl Varg







|        |                                                  
|------- | -------------------------------------------------
|ITEM 7. | Major Shareholders and Related Party Transactions









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|        |                      
|------- | ---------------------
|ITEM 8. | Financial Information

Financial Statements




Legal Proceedings




Dividend Restrictions








| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | the annual profit according to the income statement for the last
    financial year;
|
| |  | retained profit from previous years;                                                

62



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| |   |                                               
| | - | ----------------------------------------------
| |  | other unrestricted equity, after deduction of:



| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | accumulated losses;                                                                                                                                                                       
|
| |  | the book value of research and development, goodwill and net
    deferred tax assets recorded on the balance sheet;                                                                       
|
| |  | the aggregate nominal value of treasury shares held by or
    pledged to us;                                                                                                              
|
| |  | the value of such credit or security in favor of our
    shareholders, directors or management that can be granted only
    out of our unrestricted equity; and                           
|
| |  | any part of the annual profit that, according to law or our
    articles of association and the articles of each of our
    Norwegian subsidiaries, must be allocated to restricted funds.





Significant Changes









|        |                      
|------- | ---------------------
|ITEM 9. | The Offer and Listing

Listing Details










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American Depositary Shares




|                           |                  |                                   |       |       |       |   |       |       |       | 
|-------------------------- | ---------------- | --------------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                           |                  | Price per ADS                     |      
|                           |                  |                                   |      
|Calendar Period            |                  | High                              |       |       | Low   |  
|                           |                  |                                   |       |       |       |  
|2000                       |                  | $                                 | 19.56 |       |       | $ | 10.00 |      
|2001                       |                  |                                   | 14.63 |       |       |   | 5.00  |      
|2002                       |                  |                                   | 7.89  |       |       |   | 0.35  |      
|2003 (through February 26) |                  |                                   | 0.48  |       |       |   | 0.31  |      
|2004 (from December 17)    |                  |                                   | 62.06 |       |       |   | 58.00 |      
|2005                       |                  |                                   |       |       |       |   |       |      
|                           | First Quarter    |                                   |       | 74.75 |       |   |       | 59.50 |      
|                           | Last Five Months |                                   |       |       |       |   |       |       |      
|                           |                  | April                             |       |       | 71.09 |   |       |       | 60.50 | 
|                           |                  | March                             |       |       | 74.28 |   |       |       | 63.61 | 
|                           |                  | February                          |       |       | 74.75 |   |       |       | 71.27 | 
|                           |                  | January                           |       |       | 70.10 |   |       |       | 59.50 | 
|                           |                  | December (from December 17, 2004) |       |       | 62.06 |   |       |       | 58.00 | 



|                                            |                                            |                                      |       |       |       |   |       |       |       | 
|------------------------------------------- | ------------------------------------------ | ------------------------------------ | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                                            |                                            | Price per ADS                        |      
|                                            |                                            |                                      |      
|Calendar Period                             |                                            | High                                 |       |       | Low   |  
|                                            |                                            |                                      |       |       |       |  
|2003 (February 26, 2003  November 5, 2003) |                                            | $                                    | 1.49  |       |       | $ | 0.10  |      
|2003 (from November 6, 2003)                |                                            |                                      | 43.00 |       |       |   | 32.80 |      
|2003 (from February 26, 2003)               |                                            |                                      | 43.00 |       |       |   | 0.10  |      
|                                            | First Quarter                              |                                      |       | 0.20  |       |   |       | 0.10  |      
|                                            | Second Quarter                             |                                      |       | 0.66  |       |   |       | 0.15  |      
|                                            | Third Quarter                              |                                      |       | 1.03  |       |   |       | 0.58  |      
|                                            | Fourth Quarter (through November 5, 2003)  |                                      |       | 1.49  |       |   |       | 0.34  |      
|                                            | Fourth Quarter (from November 6, 2003)     |                                      |       | 43.00 |       |   |       | 32.80 |      
|2004                                        |                                            |                                      |       |       |       |   |       |      
|                                            | First Quarter                              |                                      |       | 51.20 |       |   |       | 38.05 |      
|                                            | Second Quarter                             |                                      |       | 48.00 |       |   |       | 33.50 |      
|                                            | Third Quarter                              |                                      |       | 48.50 |       |   |       | 36.75 |      
|                                            | Fourth Quarter (through December 16, 2004) |                                      |       | 62.25 |       |   |       | 37.50 |      
|                                            | Last Two Months of 2004                    |                                      |       |       |       |   |       |       |      
|                                            |                                            | December (through December 16, 2004) |       |       | 62.25 |   |       |       | 55.00 | 
|                                            |                                            | November                             |       |       | 55.61 |   |       |       | 37.50 | 

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Shares




|                                |                                           |                 |       |       |       |     |       |       |       | 
|------------------------------- | ----------------------------------------- | --------------- | ----- | ----- | ----- | --- | ----- | ----- | ----- | 
|                                |                                           | Price per Share |      
|                                |                                           |                 |      
|Calendar Period                 |                                           | High            |       |       | Low   |    
|                                |                                           |                 |       |       |       |    
|2000                            |                                           | NOK             | 174.0 |       |       | NOK | 91.5  |      
|2001                            |                                           |                 | 124.5 |       |       |     | 44.0  |      
|2002                            |                                           |                 | 70.0  |       |       |     | 2.6   |      
|2003 (through November 5, 2003) |                                           |                 | 10.9  |       |       |     | 1.1   |      
|2003 (from November 6, 2003)    |                                           |                 | 315.0 |       |       |     | 213.0 |      
|2003                            |                                           |                 |       |       |       |     |       |      
|                                | First Quarter                             |                 |       | 3.1   |       |     |       | 1.1   |      
|                                | Second Quarter                            |                 |       | 5.1   |       |     |       | 1.1   |      
|                                | Third Quarter                             |                 |       | 7.0   |       |     |       | 4.4   |      
|                                | Fourth Quarter (through November 5, 2003) |                 |       | 10.9  |       |     |       | 6.9   |      
|                                | Fourth Quarter (from November 6, 2003)    |                 |       | 315.0 |       |     |       | 213.0 |      
|2004                            |                                           |                 |       |       |       |     |       |      
|                                | First Quarter                             |                 |       | 365.0 |       |     |       | 262.0 |      
|                                | Second Quarter                            |                 |       | 337.0 |       |     |       | 245.0 |      
|                                | Third Quarter                             |                 |       | 333.0 |       |     |       | 248.5 |      
|                                | Fourth Quarter                            |                 |       | 385.0 |       |     |       | 289.0 |      
|2005                            |                                           |                 |       |       |       |     |       |      
|                                | First Quarter                             |                 |       | 485.0 |       |     |       | 373.0 |      
|                                | Last Six Months                           |                 |       |       |       |     |       |       |      
|                                |                                           | April           |       |       | 451.0 |     |       |       | 380.0 | 
|                                |                                           | March           |       |       | 459.0 |     |       |       | 405.0 | 
|                                |                                           | February        |       |       | 485.0 |     |       |       | 445.0 | 
|                                |                                           | January         |       |       | 446.0 |     |       |       | 373.0 | 
|                                |                                           | December        |       |       | 385.0 |     |       |       | 340.0 | 
|                                |                                           | November        |       |       | 339.0 |     |       |       | 289.0 | 






|         |                       
|-------- | ----------------------
|ITEM 10. | Additional Information

Description of Share Capital






| |                                   
| | ----------------------------------
| | Organization, Register and Purpose



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| |              
| | -------------
| | Voting Rights











| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the beneficial owner provides us, no later than two business
    days prior to the meeting, with its name, address and a
    confirmation from the custodian that the holder is the
    beneficial owner of the shares held in custody; and
|
| |  | our Board of Directors does not disapprove the beneficial
    ownership after receipt of notification as described below under
     VPS and Transfer of Shares.                                                                         









| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | whenever our Board of Directors considers it necessary;                          
|
| |  | at the request of our auditor; or                                                
|
| |  | at the request of shareholders representing at least 5% of our
    share capital.





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| |                                    
| | -----------------------------------
| | Restrictions on Ownership of Shares





| |               
| | --------------
| | Share Register





| |                           
| | --------------------------
| | VPS and Transfer of Shares













| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | the transfer or assignment has been registered or that person
    has reported and shown evidence to us of the share
    acquisition; and
|
| |  | the acquisition is not prevented by law, our articles of
    association or otherwise.                                                   





| |                             
| | ----------------------------
| | ADSs and Transfer and Voting



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| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | requesting to be certificated by having the underlying shares
    transferred to a VPS account in the name of the holder;                                                                                                     
|
| |  | presenting themselves as a shareholder, providing name and
    address, and a confirmation from Citibank N.A. as depositary for
    the ADSs to the effect that they are the beneficial owner of the
    underlying shares; or
|
| |  | authorizing Citibank N.A. to vote the ADSs on their behalf.                                                                                                                                                                   



| |                       
| | ----------------------
| | Disclosure Obligations

1 20 1 10 1 5 1 3 1 2 2 3 9 10




| |                                           
| | ------------------------------------------
| | Additional Issuances and Preemptive Rights





| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an aggregate number of shares not exceeding 50% of the number of
    shares outstanding at the time of the general meeting; and                       
|
| |  | loans convertible into an aggregate number of shares not
    exceeding 50% of the number of shares outstanding at the time of
    the general meeting.











| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | that we could otherwise distribute as dividends; or                                                                                                     
|
| |  | that we may create by transferring funds from our share premium
    reserve discussed below under  Dividends and
    Legal Reserves to share capital.



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| |                             
| | ----------------------------
| | Dividends and Legal Reserves







| |                                    
| | -----------------------------------
| | Examination of PGS and its Accounts





| |                       
| | ----------------------
| | Rights upon Winding-Up





| |                                 
| | --------------------------------
| | Interested Director Transactions





| |                                       
| | --------------------------------------
| | Other Provisions Relating to Directors





| |                          
| | -------------------------
| | Mandatory Bid Requirement





| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | the highest price paid by the offeror for the shares in the
    six-month period prior to the date the 40% threshold was
    exceeded; or
|
| |  | the recorded market price at that date.                                                                                                  



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| |                                                              
| | -------------------------------------------------------------
| | Sale of All or Substantial Part of Our Property or
    Assets





| |                                                         
| | --------------------------------------------------------
| | Compulsory Acquisition (Squeeze Out/ Sell Out
    Right)



Exchange Controls and Other Limitations Affecting Security
Holders






Taxation




| |        
| | -------
| | General



70



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| |                      
| | ---------------------
| | Taxation of Dividends









71



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##### Table of Contents















72



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##### Table of Contents











| |                                  
| | ---------------------------------
| | Taxation of Ordinary Dispositions







73



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##### Table of Contents













| |                        
| | -----------------------
| | U.S. Backup Withholding





| |                    
| | -------------------
| | Gift and Estate Tax





| |                       
| | ----------------------
| | Norwegian Transfer Tax





| |                          
| | -------------------------
| | Norwegian Inheritance Tax



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| |                                          
| | -----------------------------------------
| | Norwegian Property Taxes or Similar Taxes



Documents on Display




Subsidiary Information









|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 11. | Quantitative and Qualitative Disclosures About Market
    Risk



Interest Rate Risk




|      |                       |                               |   |        |      |  |   |         |     |  |      |        |   |      |   |        |            |  |   |        |   |  |   |         |  
|----- | --------------------- | ----------------------------- | - | ------ | ---- |  | - | ------- | --- |  | ---- | ------ | - | ---- | - | ------ | ---------- |  | - | ------ | - |  | - | ------- | -
|      |                       | 2005                          |   |        | 2006 |  |   | 2007    |     |  | 2008 |        |   | 2009 |   |        | Thereafter | 
|      |                       |                               |   |        |      |  |   |         |     |  |      |        |   |      |   |        |            | 
|      |                       | (Dollar amounts in thousands) |  
|Debt: |                       |                               |   |        |      |  |   |         |     |  |      |        |   |      |   |        |            |  |   |        |   |  |   |        
|      | Fixed Rate            |                               | $ | 10,990 |      |  | $ | 261,920 | (1) |  | $    | 12,900 |   |      | $ | 14,040 |            |  | $ | 15,160 |   |  | $ | 779,860 |  
|      | Average Interest Rate |                               |   | 8.28   | %    |  |   | 8.01    | %   |  |      | 8.28   | % |      |   | 8.28   | %          |  |   | 8.28   | % |  |   | 9.93    | %
|      | Variable Rate         |                               | $ | 8,799  |      |  | $ | 1,312   |     |  |      |       |   |      |   |       |            |  |   |       |   |  |   |        |  
|      | Average Interest Rate |                               |   | 4.47   | %    |  |   | 4.22    | %   |  |      |       |   |      |   |       |            |  |   |       |   |  |   |        |  






|    |                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------
|(1) | The amount includes our $250 million 8% Senior Notes
    due 2006. We redeemed $175 million of these notes on
    April 7, 2005.





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Foreign Currency Exchange Rate Risk








Commodity Risk











|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 12. | Description of Securities Other Than Equity
    Securities






PART II







|         |                                                
|-------- | -----------------------------------------------
|ITEM 13. | Defaults, Dividend Arrearages and Delinquencies








|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|ITEM 14. | Material Modifications to the Rights of Security Holders
    and Use of Proceeds








|         |                        
|-------- | -----------------------
|ITEM 15. | Controls and Procedures



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| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | insufficient documentation of policies and procedures, or
    adherence thereto, relating to significant financial statement
    accounts;
|
| |  | inadequate U.S. GAAP expertise within our corporate finance and
    accounting organization;                                              
|
| |  | insufficient quality of support for accounting books and records
    to support our financial statements; and                             
|
| |  | insufficient supervision and review control activities within
    the finance and accounting organization.                                









| |   |                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the U.S. GAAP competency and procedures for timely and
    complete identification of developments and transactions of a
    non-routine nature that require specific accounting
    consideration;
|
| |  | the sufficiency of supervisory review control activities in
    parts of our company;                                                                                                              
|
| |  | the sufficiency of procedures to capture and timely and
    precisely accrue expenses for our Production operations and the
    vessel operations of Marine Geophysical; and                       
|
| |  | the sufficiency of supervisory review and certain other
    procedures related to income tax provision.                                                                                            







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|          |                                 
|--------- | --------------------------------
|ITEM 16A. | Audit Committee Financial Expert








|          |               
|--------- | --------------
|ITEM 16B. | Code of Ethics

www.pgs.com







|          |                                       
|--------- | --------------------------------------
|ITEM 16C. | Principal Accountant Fees and Services





| |   |                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pre-approving all auditing services and permitted non-audit
    services to be provided by our independent registered public
    accounting firm and for observing applicable limitations on
    engaging the independent registered public accounting firm to
    perform the specific non-audit services restricted by law or
    regulations; and
|
| |  | to the extent it deems necessary or appropriate, to retain and
    compensate independent legal, accounting or other advisors.                                                                                                                                                                                                                      

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de minimis




|                         |  |                |       |  |      |   |       |      |  |   |       | 
|------------------------ |  | -------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                         |  | 2004           |       |  | 2003 |   |       | 2002 | 
|                         |  |                |       |  |      |   |       |      | 
|                         |  | (In thousands) |      
|Audit fees(1)            |  | $              | 4,097 |  |      | $ | 5,845 |      |  | $ | 2,609 | 
|Audit-related fees(2)    |  |                | 42    |  |      |   | 114   |      |  |   | 455   | 
|Fees for tax services(3) |  |                | 134   |  |      |   | 182   |      |  |   | 51    | 
|All other fees(4)        |  |                |      |  |      |   | 541   |      |  |   | 540   | 
|                         |  |                |       |  |      |   |       |      | 
|Total                    |  | $              | 4,273 |  |      | $ | 6,682 |      |  | $ | 3,655 | 
|                         |  |                |       |  |      |   |       |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees consisted of fees for audit services, which related
    to the consolidated audit, statutory audits, accounting
    consultations, subsidiary audits and related matters, and fees
    for audit of fresh start reporting. Fees for 2004 are based on
    estimates as of May 3, 2005. Fees for 2003 and 2002 have
    been updated to reflect fees incurred after October 31,
    2004 related to the 2003 and 2002 audits and the 2001 re-audit.
|   
|(2) | Audit-related fees consisted of fees for agreed upon procedures
    and other attestation services.                                                                                                                                                                                                                                                                                                                                                          
|   
|(3) | Fees for tax services consisted of fees for tax services, tax
    filing and compliance and reorganization.                                                                                                                                                                                                                                                                                                                                                  
|   
|(4) | Other fees consisted of fees for assistance in connection with
    restructuring, refinancing and due diligence performed by banks
    in connection with our financial restructuring in 2003.                                                                                                                                                                                                                                                               






|          |                                                               
|--------- | --------------------------------------------------------------
|ITEM 16D. | Exemptions from the Listing Standards for Audit
    Committees








|          |                                                                           
|--------- | --------------------------------------------------------------------------
|ITEM 16E. | Purchases of Equity Securities by the Issuer and
    Affiliated Purchasers






PART III







|         |                     
|-------- | --------------------
|ITEM 17. | Financial Statements



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|         |                     
|-------- | --------------------
|ITEM 18. | Financial Statements

Index to Consolidated Financial Statements


|                                                                                                                                                                                                                                                              |  |      |     | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                                                                                                                              |  | Page |    
|                                                                                                                                                                                                                                                              |  |      |    
|Consolidated Financial Statements of Petroleum Geo-Services
    ASA and Subsidiaries                                                                                                                                                                          |  |      |     | 
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                                                       |  |      | F-2 | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                                                                                                                                                                  |  |      | F-3 | 
|Consolidated Statements of Operations for the year ended
    December 31, 2004, the two months ended December 31,
    2003 (Successor), the ten months ended October 31, 2003
    (Predecessor) and the year ended December 31, 2002                          |  |      | F-4 | 
|Consolidated Statements of Cash Flows for the year ended
    December 31, 2004, the two months ended December 31,
    2003 (Successor), the ten months ended October 31, 2003
    (Predecessor) and the year ended December 31, 2002                          |  |      | F-5 | 
|Consolidated Statements of Changes in Shareholders Equity
    for the year ended December 31, 2004, the two months ended
    December 31, 2003 (Successor), the ten months ended
    October 31, 2003 (Predecessor) and the year ended
    December 31, 2002 |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                    |  |      | F-7 | 








|         |         
|-------- | --------
|ITEM 19. | Exhibits

|        |   |    |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                              
|------- | - | -- |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |    |  |            
|Number  |   |    |  | Description
|        |   |    |  |            
|        | 1 | .1 |  |            |  | Articles of Association, as amended (unofficial English
    translation) (incorporated by reference to Exhibit 1.1 of
    the annual report of Petroleum Geo-Services ASA (the
    Company) on Form 20-F for the year ended
    December 31, 2003 (SEC File No. 1-14614 (the
    2003 Form 20-F))).                                                                                      
|       
|        | 2 | .1 |  |            |  | Deposit Agreement, dated as of May 25, 1993, among the
    Company, Citibank, N.A., as depositary (the
    Depositary), and all holders from time to time of
    American Depositary Receipts issued thereunder (incorporated by
    reference to Exhibit (a)(1) of Post-Effective Amendment
    No. 1 to the Companys Registration Statement on
    Form F-6 (Registration No. 33-61500))
|       
|        | 2 | .2 |  |            |  | First Amendment to Deposit Agreement, dated as of April 24,
    1997, among the Company, the Depositary and all holders from
    time to time of American Depositary Receipts issued thereunder
    (incorporated by reference to Exhibit (a)(2) of the
    Companys Registration Statement on Form F-6
    (Registration No. 333-10856))                                                   
|       
|        | 2 | .3 |  |            |  | Form of American Depositary Receipt (incorporated by reference
    to filing under Rule 424(b)(3) relating to the Companys
    Registration Statements on Form F-6 (Registration Nos.
    33-61500 and 333-10856))                                                                                                                                                                          
|       
|        | 2 | .4 |  |            |  | Indenture dated as of November 5, 2003, among the Company,
    each of the guarantors named therein and Law Debenture Trust
    Company of New York, as trustee (the Trustee)
    (incorporated by reference to Exhibit 2.4 of the 2003
    Form 20-F)                                                                                                                                     
|       
|        | 2 | .5 |  |            |  | First Supplemental Indenture, dated as of November 5, 2003,
    among the Company, each of the guarantors named therein and the
    Trustee (incorporated by reference to Exhibit 2.5 of the
    2003 Form 20-F)                                                                                                                                                                             
|       
|        | 2 | .6 |  |            |  | Second Supplemental Indenture, dated as of June 4, 2004,
    among the Company, each of the guarantors named therein and the
    Trustee (incorporated by reference to Exhibit 2.6 of the
    2003 Form 20-F)                                                                                                                                                                                
|        | 2 | .7 |  |            |  | Supplemental Indenture, dated as of August 31, 2004, among
    Pertra AS, the Company, each of the other guarantors named
    therein and the Trustee                                                                                                                                                                                                                                        

80



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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  |             |  |                                                                                                                                                                                                             
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  |            
|Number  |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  | Description
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  |            
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .8 |  |            |  | Supplemental Indenture, dated as of August 31, 2004, among
    P.G.S. Mexicana S.A. de C.V., the Company, each of the other
    guarantors named therein and the Trustee                                    
|       
|        | The Company and its consolidated subsidiaries are party to
    several debt instruments under which the total amount of
    securities authorized does not exceed 10% of the total assets of
    the Company and its subsidiaries on a consolidated basis.
    Pursuant to paragraph 2(b)(i) of the instructions to the
    exhibits to Form 20-F, the Company agrees to furnish a copy
    of such instruments to the SEC upon request.
|       
|        | 4                                                                                                                                                                                                                                                                                                                                                                                                                                        | .1 |  |            |  | Employment agreement dated November 4, 2002 between the
    Company and Svein Rennemo (the Employment Agreement)
    (incorporated by reference to Exhibit 4.1 of the 2003
    Form 20-F)                 
|       
|        | 4                                                                                                                                                                                                                                                                                                                                                                                                                                        | .2 |  |            |  | Addendum to the Employment Agreement dated June 8, 2004
    between the Company and Svein Rennemo (incorporated by reference
    to Exhibit 4.2 of the 2003 Form 20-F)                                      
|       
|        | 4                                                                                                                                                                                                                                                                                                                                                                                                                                        | .3 |  |            |  | 2004 CEO Bonus Scheme (incorporated by reference to
    Exhibit 4.3 of the 2003 Form 20-F)                                                                                                                  
|       
|        | 8                                                                                                                                                                                                                                                                                                                                                                                                                                        | .1 |  |            |  | Subsidiaries (included in Item 4 of the annual report)                                                                                                                                                      
|       
|        | 11                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Code of Conduct                                                                                                                                                                                             
|       
|        | 12                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 and
    Rule 13a-14(a) of the Securities Exchange Act of 1934                                        
|       
|        | 12                                                                                                                                                                                                                                                                                                                                                                                                                                       | .2 |  |            |  | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 and
    Rule 13a-14(a) of the Securities Exchange Act of 1934                                        
|       
|        | 13                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Certification of the Chief Executive Officer and the Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 and Rule 13a-14(b) of the
    Securities Exchange Act of 1934
|       
|        | 15                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Audit Committee Charter                                                                                                                                                                                     
|       
|        | 15                                                                                                                                                                                                                                                                                                                                                                                                                                       | .2 |  |            |  | Remuneration Committee Charter                                                                                                                                                                              

81



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SIGNATURES






| |                           
| | --------------------------
| | Petroleum Geo-Services ASA



| |     |                      
| | --- | ---------------------
| | BY: | /s/ Gottfred Langseth

| |                        
| | -----------------------
| |                        
| | Gottfred Langseth      
| | Chief Financial Officer



82



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##### Table of Contents






EXHIBIT INDEX


|        |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                              
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  |            
|Number  |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  | Description
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                          |    |  |            
|        | 1                                                                                                                                                                                                                                                                                                                                                                                                                                        | .1 |  |            |  | Articles of Association, as amended (unofficial English
    translation) (incorporated by reference to Exhibit 1.1 of
    the annual report of Petroleum Geo-Services ASA (the
    Company) on Form 20-F for the year ended
    December 31, 2003 (SEC File No. 1-14614 (the
    2003 Form 20-F))).                                                                                      
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .1 |  |            |  | Deposit Agreement, dated as of May 25, 1993, among the
    Company, Citibank, N.A., as depositary (the
    Depositary), and all holders from time to time of
    American Depositary Receipts issued thereunder (incorporated by
    reference to Exhibit (a)(1) of Post-Effective Amendment
    No. 1 to the Companys Registration Statement on
    Form F-6 (Registration No. 33-61500))
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .2 |  |            |  | First Amendment to Deposit Agreement, dated as of April 24,
    1997, among the Company, the Depositary and all holders from
    time to time of American Depositary Receipts issued thereunder
    (incorporated by reference to Exhibit (a)(2) of the
    Companys Registration Statement on Form F-6
    (Registration No. 333-10856))                                                   
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .3 |  |            |  | Form of American Depositary Receipt (incorporated by reference
    to filing under Rule 424(b)(3) relating to the Companys
    Registration Statements on Form F-6 (Registration Nos.
    33-61500 and 333-10856))                                                                                                                                                                          
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .4 |  |            |  | Indenture dated as of November 5, 2003, among the Company,
    each of the guarantors named therein and Law Debenture Trust
    Company of New York, as trustee (the Trustee)
    (incorporated by reference to Exhibit 2.4 of the 2003
    Form 20-F)                                                                                                                                     
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .5 |  |            |  | First Supplemental Indenture, dated as of November 5, 2003,
    among the Company, each of the guarantors named therein and the
    Trustee (incorporated by reference to Exhibit 2.5 of the
    2003 Form 20-F)                                                                                                                                                                             
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .6 |  |            |  | Second Supplemental Indenture, dated as of June 4, 2004,
    among the Company, each of the guarantors named therein and the
    Trustee (incorporated by reference to Exhibit 2.6 of the
    2003 Form 20-F)                                                                                                                                                                                
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .7 |  |            |  | Supplemental Indenture, dated as of August 31, 2004, among
    Pertra AS, the Company, each of the other guarantors named
    therein and the Trustee                                                                                                                                                                                                                                        
|        | 2                                                                                                                                                                                                                                                                                                                                                                                                                                        | .8 |  |            |  | Supplemental Indenture, dated as of August 31, 2004, among
    P.G.S. Mexicana S.A. de C.V., the Company each of the other
    guarantors named therein and the Trustee                                                                                                                                                                                                                      
|        | The Company and its consolidated subsidiaries are party to
    several debt instruments under which the total amount of
    securities authorized does not exceed 10% of the total assets of
    the Company and its subsidiaries on a consolidated basis.
    Pursuant to paragraph 2(b)(i) of the instructions to the
    exhibits to Form 20-F, the Company agrees to furnish a copy
    of such instruments to the SEC upon request.
|        | 4                                                                                                                                                                                                                                                                                                                                                                                                                                        | .1 |  |            |  | Employment agreement dated November 4, 2002 between the
    Company and Svein Rennemo (the Employment Agreement)
    (incorporated by reference to Exhibit 4.1 of the 2003
    Form 20-F)                                                                                                                                                                                                  
|        | 4                                                                                                                                                                                                                                                                                                                                                                                                                                        | .2 |  |            |  | Addendum to the Employment Agreement dated June 8, 2004
    between the Company and Svein Rennemo (incorporated by reference
    to Exhibit 4.2 of the 2003 Form 20-F)                                                                                                                                                                                                                       
|        | 4                                                                                                                                                                                                                                                                                                                                                                                                                                        | .3 |  |            |  | 2004 CEO Bonus Scheme (incorporated by reference to
    Exhibit 4.3 of the 2003 Form 20-F)                                                                                                                                                                                                                                                                                                   
|        | 8                                                                                                                                                                                                                                                                                                                                                                                                                                        | .1 |  |            |  | Subsidiaries (included in Item 4 of the annual report)                                                                                                                                                                                                                                                                                                                                       
|        | 11                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Code of Conduct                                                                                                                                                                                                                                                                                                                                                                              
|        | 12                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 and
    Rule 13a-14(a) of the Securities Exchange Act of 1934                                                                                                                                                                                                                         
|        | 12                                                                                                                                                                                                                                                                                                                                                                                                                                       | .2 |  |            |  | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 and
    Rule 13a-14(a) of the Securities Exchange Act of 1934                                                                                                                                                                                                                         
|        | 13                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Certification of the Chief Executive Officer and the Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 and Rule 13a-14(b) of the
    Securities Exchange Act of 1934                                                                                                                                                                                 
|        | 15                                                                                                                                                                                                                                                                                                                                                                                                                                       | .1 |  |            |  | Audit Committee Charter                                                                                                                                                                                                                                                                                                                                                                      
|        | 15                                                                                                                                                                                                                                                                                                                                                                                                                                       | .2 |  |            |  | Remuneration Committee Charter                                                                                                                                                                                                                                                                                                                                                               

83



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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                                                                                                                                                                 |  |      |     | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                                                                                                                                 |  | Page |    
|                                                                                                                                                                                                                                                                 |  |      |    
|Consolidated Financial Statements of Petroleum Geo-Services
    ASA and Subsidiaries                                                                                                                                                                             |  |      |     | 
|Report of Independent Registered Public
    Accounting Firm                                                                                                                                                                                                      |  |      | F-2 | 
|Consolidated Balance Sheets as of
    December 31, 2004 and 2003 (Successor)                                                                                                                                                                                     |  |      | F-3 | 
|Consolidated Statements of Operations for
    the year ended December 31, 2004 and the two months ended
    December 31, 2003 (Successor), the ten months ended
    October 31, 2003 and the year ended December 31, 2002
    (Predecessor)                      |  |      | F-4 | 
|Consolidated Statements of Cash Flows for
    the year ended December 31, 2004 and the two months ended
    December 31, 2003 (Successor), the ten months ended
    October 31, 2003 and the year ended December 31, 2002
    (Predecessor)                      |  |      | F-5 | 
|Consolidated Statements of Changes in
    Shareholders Equity for the year ended December 31,
    2004 and the two months ended December 31, 2003
    (Successor), the ten months ended October 31, 2003 and the
    year ended December 31, 2002 (Predecessor) |  |      | F-6 | 
|Notes to Consolidated Financial
    Statements                                                                                                                                                                                                                   |  |      | F-7 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of


PETROLEUM GEO-SERVICES ASA:








Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code.


Goodwill and Other Intangible Assets Accounting for the Impairment or Disposal of Long-Lived
Assets Accounting for Asset Retirement
Obligations.


Ernst & Young
AS






F-2



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS


|                                                      |                                                                                                                             |                                            |           |          |           |   |           |         |           | 
|----------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | --------- | -------- | --------- | - | --------- | ------- | --------- | 
|                                                      |                                                                                                                             | December 31,                               |          
|                                                      |                                                                                                                             |                                            |          
|                                                      |                                                                                                                             | 2004                                       |           |          | 2003      |  
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                      |                                                                                                                             | (In thousands of dollars,                  |          
|                                                      |                                                                                                                             | except share data)                         |          
|ASSETS                                               
|Cash and cash equivalents                             |                                                                                                                             | $                                          | 132,942   |          |           | $ | 105,225   |        
|Restricted cash                                       |                                                                                                                             |                                            | 25,477    |          |           |   | 41,123    |        
|Shares available for sale                             |                                                                                                                             |                                            | 9,689     |          |           |   |          |        
|Accounts receivable, net                              |                                                                                                                             |                                            | 161,283   |          |           |   | 127,706   |        
|Unbilled and other receivables                        |                                                                                                                             |                                            | 40,561    |          |           |   | 47,864    |        
|Other current assets                                  |                                                                                                                             |                                            | 60,506    |          |           |   | 62,610    |        
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                      |                                                                                                                             | Total current assets                       |           |          | 430,458   |   |           |         | 384,528   | 
|Multi-client library, net                             |                                                                                                                             |                                            | 244,689   |          |           |   | 408,005   |        
|Property and equipment, net                           |                                                                                                                             |                                            | 1,009,008 |          |           |   | 1,060,183 |        
|Oil and natural gas assets, net                       |                                                                                                                             |                                            | 71,491    |          |           |   | 36,426    |        
|Restricted cash                                       |                                                                                                                             |                                            | 10,014    |          |           |   | 10,014    |        
|Investments in associated companies                   |                                                                                                                             |                                            | 5,720     |          |           |   | 8,070     |        
|Intangible assets, net                                |                                                                                                                             |                                            | 36,114    |          |           |   | 52,609    |        
|Other long-lived assets                               |                                                                                                                             |                                            | 44,659    |          |           |   | 37,525    |        
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                      |                                                                                                                             | Total assets                               |           | $        | 1,852,153 |   |           | $       | 1,997,360 | 
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                     
|LIABILITIES AND SHAREHOLDERS EQUITY                 
|Short-term debt and current portion of long-term debt |                                                                                                                             | $                                          | 19,790    |          |           | $ | 18,512    |        
|Current portion of capital lease obligations          |                                                                                                                             |                                            | 25,583    |          |           |   | 19,963    |        
|Accounts payable                                      |                                                                                                                             |                                            | 81,910    |          |           |   | 56,318    |        
|Accrued expenses                                      |                                                                                                                             |                                            | 115,256   |          |           |   | 147,336   |        
|Deferred tax liabilities                              |                                                                                                                             |                                            | 761       |          |           |   | 2,166     |        
|Income taxes payable                                  |                                                                                                                             |                                            | 11,870    |          |           |   | 17,946    |        
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                      |                                                                                                                             | Total current liabilities                  |           |          | 255,170   |   |           |         | 262,241   | 
|Long-term debt                                        |                                                                                                                             |                                            | 1,085,190 |          |           |   | 1,108,674 |        
|Long-term capital lease obligations                   |                                                                                                                             |                                            | 33,156    |          |           |   | 63,473    |        
|Other long-term liabilities                           |                                                                                                                             |                                            | 219,650   |          |           |   | 197,663   |        
|Deferred tax liabilities                              |                                                                                                                             |                                            | 35,118    |          |           |   | 10,738    |        
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                      |                                                                                                                             | Total liabilities                          |           |          | 1,628,284 |   |           |         | 1,642,789 | 
|                                                      |                                                                                                                             |                                            |           |          |           |  
|Minority interest in consolidated subsidiaries        |                                                                                                                             |                                            | 962       |          |           |   | 937       |        
|Shareholders equity:                                 |                                                                                                                             |                                            |           |          |           |   |           |        
|                                                      | Common stock; 20,000,000 shares authorized, issued and
    outstanding, par value NOK 30, at December 31, 2004
    and 2003 |                                            |           | 85,714   |           |   |           | 85,714  |          
|                                                      | Additional paid-in capital                                                                                                  |                                            |           | 277,427  |           |   |           | 277,427 |          
|                                                      | Accumulated deficit                                                                                                         |                                            |           | (144,683 | )         |   |           | (9,953  | )        
|                                                      | Accumulated other comprehensive income                                                                                      |                                            |           | 4,449    |           |   |           | 446     |          
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                      |                                                                                                                             | Total shareholders equity                 |           |          | 222,907   |   |           |         | 353,634   | 
|                                                      |                                                                                                                             |                                            |           |          |           |  
|                                                      |                                                                                                                             | Total liabilities and shareholders equity |           | $        | 1,852,153 |   |           | $       | 1,997,360 | 
|                                                      |                                                                                                                             |                                            |           |          |           |  



F-3



---



##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |           |         |   |             |            |            |  
|------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------- | ---------- | ------------------- | - | ---------- | ----------- | ------- | - | ------------ | --------- | ------- | - | ----------- | ---------- | ---------- | -
|                                                                         |                                                                                                          | Successor Company                            |            |            | Predecessor Company |  
|                                                                         |                                                                                                          |                                              |            |            |                     |  
|                                                                         |                                                                                                          |                                              |            | Two Months |                     |   | Ten Months |             |         |  
|                                                                         |                                                                                                          | Year Ended                                   |            |            | Ended               |   |            | Ended       |         |   | Year Ended   |          
|                                                                         |                                                                                                          | December 31,                                 |            |            | December 31,        |   |            | October 31, |         |   | December 31, |          
|                                                                         |                                                                                                          | 2004                                         |            |            | 2003                |   |            | 2003        |         |   | 2002         |          
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|                                                                         |                                                                                                          | (In thousands of dollars, except share data) |           
|Revenues services                                                        |                                                                                                          | $                                            | 945,334    |            |                     | $ | 162,827    |             |         | $ | 849,767      |           |         | $ | 1,010,534   |           
|Revenues products                                                        |                                                                                                          |                                              | 184,134    |            |                     |   | 9,544      |             |         |   | 112,097      |           |         |   | 32,697      |           
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|                                                                         |                                                                                                          | Total revenues                               |            |            | 1,129,468           |   |            |             | 172,371 |   |              |           | 961,864 |   |             |            | 1,043,231  |  
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|Cost of sales services                                                   |                                                                                                          |                                              | 587,912    |            |                     |   | 95,044     |             |         |   | 454,396      |           |         |   | 530,386     |           
|Cost of sales products                                                   |                                                                                                          |                                              | 44,838     |            |                     |   | 1,910      |             |         |   | 33,382       |           |         |   | 10,801      |           
|Exploration costs                                                        |                                                                                                          |                                              | 16,326     |            |                     |   |           |             |         |   |             |           |         |   |            |           
|Depreciation and amortization                                            |                                                                                                          |                                              | 368,362    |            |                     |   | 55,699     |             |         |   | 301,576      |           |         |   | 367,503     |           
|Research and development costs                                           |                                                                                                          |                                              | 3,419      |            |                     |   | 598        |             |         |   | 2,024        |           |         |   | 2,766       |           
|Selling, general and administrative costs                                |                                                                                                          |                                              | 64,816     |            |                     |   | 7,366      |             |         |   | 44,326       |           |         |   | 53,426      |           
|Impairment of long-lived assets                                          |                                                                                                          |                                              |           |            |                     |   |           |             |         |   | 95,011       |           |         |   | 558,471     |           
|Other operating expense, net                                             |                                                                                                          |                                              | 8,112      |            |                     |   | 1,052      |             |         |   | 21,324       |           |         |   | 8,487       |           
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|                                                                         |                                                                                                          | Total operating expenses                     |            |            | 1,093,785           |   |            |             | 161,669 |   |              |           | 952,039 |   |             |            | 1,531,840  |  
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|Operating profit (loss)                                                  |                                                                                                          |                                              | 35,683     |            |                     |   | 10,702     |             |         |   | 9,825        |           |         |   | (488,609    | )         
|Other income (expense):                                                  |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |           |         |   |             |           
|                                                                         | Income (loss) from associated companies                                                                  |                                              |            | 668        |                     |   |            | 200         |         |   |              | 774       |         |   |             | (11,501    | )         
|                                                                         | Interest expense                                                                                         |                                              |            | (110,811   | )                   |   |            | (16,870     | )       |   |              | (98,957   | )       |   |             | (153,301   | )         
|                                                                         | Other financial items, net                                                                               |                                              |            | (10,861    | )                   |   |            | (4,264      | )       |   |              | (1,472    | )       |   |             | 33,792     |           
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|                                                                         |                                                                                                          |                                              | (85,321    | )          |                     |   | (10,232    | )           |         |   | (89,830      | )         |         |   | (619,619    | )         
|Reorganization items:                                                    |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |           |         |   |             |           
|                                                                         | Gain on debt discharge                                                                                   |                                              |            |           |                     |   |            |            |         |   |              | 1,253,851 |         |   |             |           |           
|                                                                         | Fresh-start adoption                                                                                     |                                              |            |           |                     |   |            |            |         |   |              | (532,268  | )       |   |             |           |           
|                                                                         | Cost of reorganization                                                                                   |                                              |            | (3,498     | )                   |   |            | (3,325      | )       |   |              | (52,334   | )       |   |             | (3,616     | )         
|Minority expense                                                         |                                                                                                          |                                              | 940        |            |                     |   | 110        |             |         |   | 570          |           |         |   | 778         |           
|Income tax expense (benefit)                                             |                                                                                                          |                                              | 48,019     |            |                     |   | (3,849     | )           |         |   | 21,911       |           |         |   | 185,890     |           
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|                                                                         | Income (loss) from continuing operations before cumulative
    effect of change in accounting principles |                                              |            | (137,778   | )                   |   |            | (9,818      | )       |   |              | 556,938   |         |   |             | (809,903   | )         
|Income (loss) from discontinued operations, net of tax                   |                                                                                                          |                                              | 3,048      |            |                     |   | (135       | )           |         |   | (2,282       | )         |         |   | (201,137    | )         
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|                                                                         | Income (loss) before cumulative effect of change in accounting
    principles                            |                                              |            | (134,730   | )                   |   |            | (9,953      | )       |   |              | 554,656   |         |   |             | (1,011,040 | )         
|Cumulative effect of change in accounting principles, net of tax         |                                                                                                          |                                              |           |            |                     |   |           |             |         |   | 2,389        |           |         |   | (163,638    | )         
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|                                                                         |                                                                                                          | Net income (loss)                            |            | $          | (134,730            | ) |            | $           | (9,953  | ) |              | $         | 557,045 |   |             | $          | (1,174,678 | )
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|Basic and diluted income (loss) per share from continuing
    operations |                                                                                                          | $                                            | (6.89      | )          |                     | $ | (0.49      | )           |         | $ | 5.39         |           |         | $ | (7.84       | )         
|Income (loss) from discontinued operations, net of tax                   |                                                                                                          |                                              | 0.15       |            |                     |   | (0.01      | )           |         |   | (0.02        | )         |         |   | (1.95       | )         
|Cumulative effect of change in accounting principle, net of tax          |                                                                                                          |                                              |           |            |                     |   |           |             |         |   | 0.02         |           |         |   | (1.58       | )         
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|Basic and diluted net income (loss) per share                            |                                                                                                          | $                                            | (6.74      | )          |                     | $ | (0.50      | )           |         | $ | 5.39         |           |         | $ | (11.37      | )         
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          
|Weighted average basic and diluted shares outstanding                    |                                                                                                          |                                              | 20,000,000 |            |                     |   | 20,000,000 |             |         |   | 103,345,987  |           |         |   | 103,345,987 |           
|                                                                         |                                                                                                          |                                              |            |            |                     |   |            |             |         |   |              |          



F-4



---



##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |         |            |         |   |            |         |          |  
|------------------------------------------------------ | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------------------------- | ------------------- | -------- | ---------- | ----------- | ------- | ------- | ------------ | ------- | ---------- | ------- | - | ---------- | ------- | -------- | -
|                                                       |                                                                                              | Successor Company                                                                                      |                                            |                           | Predecessor Company |         
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |         
|                                                       |                                                                                              |                                                                                                        |                                            | Two Months                |                     |          | Ten Months |             |         |        
|                                                       |                                                                                              | Year Ended                                                                                             |                                            |                           | Ended               |          |            | Ended       |         |         | Year Ended   |        
|                                                       |                                                                                              | December 31,                                                                                           |                                            |                           | December 31,        |          |            | October 31, |         |         | December 31, |        
|                                                       |                                                                                              | 2004                                                                                                   |                                            |                           | 2003                |          |            | 2003        |         |         | 2002         |        
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|                                                       |                                                                                              |                                                                                                        |                                            | (In thousands of dollars) |                     |          |           
|Cash flows (used in) provided by operating activities: |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |         |            |         |   |           
|                                                       | Net income (loss)                                                                            |                                                                                                        | $                                          | (134,730                  | )                   |          | $          | (9,953      | )       |         | $            | 557,045 |            |         | $ | (1,174,678 | )      
|                                                       | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |         |            |         |   |            |        
|                                                       |                                                                                              | Depreciation and amortization charged to expense                                                       |                                            |                           | 368,362             |          |            |             | 55,699  |         |              |         | 301,576    |         |   |            | 367,503 |         
|                                                       |                                                                                              | Exploration costs (dry well expensed)                                                                  |                                            |                           | 11,438              |          |            |             |        |         |              |         |           |         |   |            |        |         
|                                                       |                                                                                              | Non-cash impairments, loss (gain) on sale of subsidiaries
    and change in accounting principles, net |                                            |                           |                    |          |            |             | 32      |         |              |         | 92,622     |         |   |            | 935,244 |         
|                                                       |                                                                                              | Non-cash effect of fresh start adoption                                                                |                                            |                           |                    |          |            |             |        |         |              |         | 534,085    |         |   |            |        |         
|                                                       |                                                                                              | Non-cash effect of restructuring                                                                       |                                            |                           |                    |          |            |             |        |         |              |         | (1,253,851 | )       |   |            |        |         
|                                                       |                                                                                              | Non-cash write-off of deferred debt costs and issue discounts                                          |                                            |                           |                    |          |            |             |        |         |              |         | 13,152     |         |   |            |        |         
|                                                       |                                                                                              | Cash effects related to discontinued operations                                                        |                                            |                           |                    |          |            |             | 157     |         |              |         | 3,185      |         |   |            | 5,540   |         
|                                                       |                                                                                              | Provision for deferred income taxes                                                                    |                                            |                           | 27,263              |          |            |             | (5,801  | )       |              |         | (1,918     | )       |   |            | 171,771 |         
|                                                       |                                                                                              | (Increase) decrease in accounts receivable, net                                                        |                                            |                           | (33,577             | )        |            |             | 34,582  |         |              |         | 6,848      |         |   |            | (22,628 | )       
|                                                       |                                                                                              | Increase (decrease) in accounts payable                                                                |                                            |                           | 25,592              |          |            |             | 19,391  |         |              |         | (18,587    | )       |   |            | (10,814 | )       
|                                                       |                                                                                              | Loss on sale of assets                                                                                 |                                            |                           | 4,128               |          |            |             |        |         |              |         | 6,193      |         |   |            | 11,750  |         
|                                                       |                                                                                              | Net (increase) decrease in restricted cash                                                             |                                            |                           | 15,646              |          |            |             | 3,824   |         |              |         | (23,728    | )       |   |            | 1,602   |         
|                                                       |                                                                                              | Other items                                                                                            |                                            |                           | (1,750              | )        |            |             | (35,761 | )       |              |         | (51,674    | )       |   |            | 9,319   |         
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|                                                       |                                                                                              |                                                                                                        | Net cash provided by operating activities  |                           |                     | 282,372  |            |             |         | 62,170  |              |         |            | 164,948 |   |            |         | 294,609  |  
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|Cash flows (used in) provided by investing activities: |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |         |            |         |   |           
|                                                       | Investment in multi-client library                                                           |                                                                                                        |                                            | (41,140                   | )                   |          |            | (9,461      | )       |         |              | (81,142 | )          |         |   | (151,590   | )      
|                                                       | Capital expenditures                                                                         |                                                                                                        |                                            | (148,372                  | )                   |          |            | (15,985     | )       |         |              | (42,065 | )          |         |   | (56,735    | )      
|                                                       | Capital expenditures on discontinued operations                                              |                                                                                                        |                                            |                          |                     |          |            |            |         |         |              | (118    | )          |         |   | (77,364    | )      
|                                                       | Sale of subsidiaries                                                                         |                                                                                                        |                                            | 2,035                     |                     |          |            |            |         |         |              | 50,115  |            |         |   | 20,222     |        
|                                                       | Other items, net                                                                             |                                                                                                        |                                            | 4,031                     |                     |          |            | 357         |         |         |              | 3,478   |            |         |   | (9,030     | )      
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|                                                       |                                                                                              |                                                                                                        | Net cash used in investing activities      |                           |                     | (183,446 | )          |             |         | (25,089 | )            |         |            | (69,732 | ) |            |         | (274,497 | )
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|Cash flows (used in) provided by financing activities: |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |         |            |         |   |           
|                                                       | Repayment of long-term debt                                                                  |                                                                                                        |                                            | (24,167                   | )                   |          |            | (4,850      | )       |         |              | (70,496 | )          |         |   | (340,809   | )      
|                                                       | Principal payments under capital leases                                                      |                                                                                                        |                                            | (22,930                   | )                   |          |            | (3,025      | )       |         |              | (22,352 | )          |         |   | (19,839    | )      
|                                                       | Net increase (decrease) in bank facility and short-term debt                                 |                                                                                                        |                                            | 1,962                     |                     |          |            |            |         |         |              | (48     | )          |         |   | 335,348    |        
|                                                       | Net receipts under tax equalization swap contracts                                           |                                                                                                        |                                            |                          |                     |          |            |            |         |         |              |        |            |         |   | 9,566      |        
|                                                       | Distribution to creditors under the restructuring agreement                                  |                                                                                                        |                                            | (22,660                   | )                   |          |            | (17,932     | )       |         |              |        |            |         |   |           |        
|                                                       | Other items, net                                                                             |                                                                                                        |                                            | (3,488                    | )                   |          |            |            |         |         |              |        |            |         |   | 8,098      |        
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|                                                       |                                                                                              |                                                                                                        | Net cash used in financing activities      |                           |                     | (71,283  | )          |             |         | (25,807 | )            |         |            | (92,896 | ) |            |         | (7,636   | )
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|                                                       | Effect of exchange rate changes on cash                                                      |                                                                                                        |                                            | 74                        |                     |          |            |            |         |         |              | 14      |            |         |   | 537        |        
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|                                                       | Net increase in cash and cash equivalents                                                    |                                                                                                        |                                            | 27,717                    |                     |          |            | 11,274      |         |         |              | 2,334   |            |         |   | 13,013     |        
|                                                       | Cash and cash equivalents at beginning of period                                             |                                                                                                        |                                            | 105,225                   |                     |          |            | 93,951      |         |         |              | 91,617  |            |         |   | 78,604     |        
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        
|                                                       |                                                                                              |                                                                                                        | Cash and cash equivalents at end of period |                           | $                   | 132,942  |            |             | $       | 105,225 |              |         | $          | 93,951  |   |            | $       | 91,617   |  
|                                                       |                                                                                              |                                                                                                        |                                            |                           |                     |          |            |             |         |         |              |        





F-5



---



##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY


|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |        |   |        |        |         |   |        |       |          |         |            |            |  
|---------------------------- | ---------------------------- | ------------------------------------------------ | --------------------------------- | ---------- | ---------- | - | ------- | ----------- |  | --------------------------------------------- | ----------- | ----------- | ---------- | ----------- | ---------- | ------- | ----------- | ---------- | ------------- | --------- | ------ | ----- | ------------- | - | ----- | ------ | ------ | - | ------ | ------ | ------- | - | ------ | ----- | -------- | ------- | ---------- | ---------- | -
|                             |                              |                                                  |                                   |            |            |   |         |             |  | Accumulated Other Comprehensive Income (Loss) |             |             |           
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |           
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             | Accumulated |            |             |           
|                             |                              |                                                  |                                   |            |            |   |         | Foreign     |  |                                               |             |             | Other      |             |            |        
|                             |                              | Common Stock                                     |                                   |            | Additional |   |         |             |  | Currency                                      |             |             | Unrealized |             |            | Pension |             |            | Comprehensive |           |        |      
|                             |                              |                                                  |                                   |            | Paid-In    |   |         | Accumulated |  |                                               | Translation |             |            | Gain (Loss) |            |         | Minimum     |            |               | Income    |        |       | Shareholders |  
|                             |                              | Number                                           |                                   |            | Par Value  |   |         | Capital     |  |                                               | Deficit     |             |            | Adjustments |            |         | Investments |            |               | Liability |        |       | (Loss)        |   |       | Equity |       
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|                             |                              | (In thousands of dollars, except for share data) |                                   |            |           
|Predecessor Company:         |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |        |   |        |        |         |   |        |       |          |        
|Balance at December 31, 2001 |                              |                                                  | 103,345,987                       |            |            | $ | 71,089  |             |  | $                                             | 1,225,115   |             |            | $           | (282,342   | )       |             | $          | (33,620       | )         |        | $     |              |   |       | $      | (346   | ) |        | $      | (33,966 | ) |        | $     | 979,896  |        
|                             | Comprehensive income (loss): |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |        |   |        |        |         |   |        |       |          |         |           
|                             |                              | Net loss                                         |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | (1,174,678  | )          |               |           |       |       |               |   |      |        |        |   |       |        |         |   |       |       |          |         | (1,174,678 | )         
|                             |                              | Other comprehensive income (loss)                |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |            |            |               |           | 7,195  |       |               |   |      |        |        |   | (3,668 | )      |         |   | 3,527  |       |          |         | 3,527      |           
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|                             |                              |                                                  | Total comprehensive income (loss) |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             | (1,174,678 | )             |           |        | 7,195 |               |   |       |       |        |   |        | (3,668 | )       |   |        | 3,527 |          |         |            | (1,171,151 | )
|                             |                              | Dividends to minority interest                   |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | (1,077      | )          |               |           | 78     |       |               |   |      |        |        |   |       |        |         |   | 78     |       |          |         | (999       | )         
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|Balance at December 31, 2002 |                              |                                                  | 103,345,987                       |            |            |   | 71,089  |             |  |                                               | 1,225,115   |             |            |             | (1,458,097 | )       |             |            | (26,347       | )         |        |       |              |   |       |        | (4,014 | ) |        |        | (30,361 | ) |        |       | (192,254 | )      
|                             | Comprehensive income (loss): |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |        |   |        |        |         |   |        |       |          |         |           
|                             |                              | Net income                                       |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | 557,045     |            |               |           |       |       |               |   |      |        |        |   |       |        |         |   |       |       |          |         | 557,045    |           
|                             |                              | Other comprehensive income (loss)                |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |            |            |               |           | 1,580  |       |               |   |      |        |        |   | (3,230 | )      |         |   | (1,650 | )     |          |         | (1,650     | )         
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|                             |                              | Total comprehensive income (loss)                |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | 557,045     |            |               |           | 1,580  |       |               |   |      |        |        |   | (3,230 | )      |         |   | (1,650 | )     |          |         | 555,395    |           
|Reorganization items         |                              |                                                  | (103,345,987                      | )          |            |   | (71,089 | )           |  |                                               | (1,225,115  | )           |            |             | 901,052    |         |             |            | 24,767        |           |        |       |               |   |       |        | 7,244  |   |        |        | 32,011  |   |        |       | (363,141 | )      
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|Balance at October 31, 2003  |                              |                                                  |                                  |            |            | $ |        |             |  | $                                             |            |             |            | $           |           |         |             | $          |              |           |        | $     |              |   |       | $      |       |   |        | $      |        |   |        | $     |         |        
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|Successor Company:           |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |        |   |        |        |         |   |        |       |          |        
|                             | Issuance of common stock     |                                                  |                                   | 20,000,000 |            |   | $       | 85,714      |  |                                               | $           | 277,427     |            |             | $          |        |             |            | $             |          |        |       | $             |  |       |        | $      |  |        |        | $       |  |        |       | $        | 363,141 |           
|                             | Comprehensive income (loss): |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |        |   |        |        |         |   |        |       |          |         |           
|                             |                              | Net loss                                         |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | (9,953      | )          |               |           |       |       |               |   |      |        |        |   |       |        |         |   |       |       |          |         | (9,953     | )         
|                             |                              | Other comprehensive income                       |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |            |            |               |           | 446    |       |               |   |      |        |        |   |       |        |         |   | 446    |       |          |         | 446        |           
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|                             |                              | Total comprehensive income (loss)                |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | (9,953      | )          |               |           | 446    |       |               |   |      |        |        |   |       |        |         |   | 446    |       |          |         | (9,507     | )         
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|Balance at December 31, 2003 |                              |                                                  | 20,000,000                        |            |            |   | 85,714  |             |  |                                               | 277,427     |             |            |             | (9,953     | )       |             |            | 446           |           |        |       |              |   |       |        |       |   |        |        | 446     |   |        |       | 353,634  |        
|                             | Comprehensive income (loss): |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |        |   |        |        |         |   |        |       |          |         |           
|                             |                              | Net loss                                         |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | (134,730    | )          |               |           |       |       |               |   |      |        |        |   |       |        |         |   |       |       |          |         | (134,730   | )         
|                             |                              | Other comprehensive income (loss)                |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |            |            |               |           | (1,667 | )     |               |   | 5,889 |        |        |   | (219   | )      |         |   | 4,003  |       |          |         | 4,003      |           
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|                             |                              | Total comprehensive income (loss)                |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         | (134,730    | )          |               |           | (1,667 | )     |               |   | 5,889 |        |        |   | (219   | )      |         |   | 4,003  |       |          |         | (130,727   | )         
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       
|Balance at December 31, 2004 |                              |                                                  | 20,000,000                        |            |            | $ | 85,714  |             |  | $                                             | 277,427     |             |            | $           | (144,683   | )       |             | $          | (1,221        | )         |        | $     | 5,889         |   |       | $      | (219   | ) |        | $      | 4,449   |   |        | $     | 222,907  |        
|                             |                              |                                                  |                                   |            |            |   |         |             |  |                                               |             |             |            |             |            |         |             |            |               |           |        |       |               |   |       |        |       





F-6



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|         |                                                                    
|-------- | -------------------------------------------------------------------
|NOTE 1  | General Information about the Company and Basis of
    Presentation













Financial Reporting by Entities in Reorganization
under the Bankruptcy Code,


F-7



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|         |                                           
|-------- | ------------------------------------------
|NOTE 2  | Summary of Significant Accounting Policies



| |                       
| | ----------------------
| | Fresh Start Reporting.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The successful efforts method of accounting for oil and natural
    gas exploration and development activities was adopted.                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The Company made certain changes to cost capitalization and
    amortization policies for the multi-client library, including an
    increase in minimum amortization by reducing the maximum
    amortization period from eight to five years after completion of
    a survey. Further, expenditures incurred in connection with yard
    stay and steaming of vessels are expensed as incurred. Such
    expenses were previously recognized as part of multi-client
    project costs.

Petrojarl I, .




| |                  
| | -----------------
| | Use of Estimates.





| |                                      
| | -------------------------------------
| | Consolidation and Equity Investments.







F-8



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Consolidation of Variable
Interest Entities,










| |                         
| | ------------------------
| | Discontinued Operations.





| |                           
| | --------------------------
| | Cash and Cash Equivalents.





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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                              
| | -----------------------------
| | Foreign Currency Translation.









| |                              
| | -----------------------------
| | Operating and Capital Leases.







| |           
| | ----------
| | UK Leases.

Petrojarl
Foinaven Ramform
Banff




F-10



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Cross
Border Tax Benefit Leases,










| |                         
| | ------------------------
| | Receivables Credit Risk.





| |                      
| | ---------------------
| | Multi-Client Library.



F-11



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










F-12



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|              |  |                 |     |  |                     |  |     |                    |  |  |            |  |  |            |      |  |  |  |      | 
|------------- |  | --------------- | --- |  | ------------------- |  | --- | ------------------ |  |  | ---------- |  |  | ---------- | ---- |  |  |  | ---- | 
|              |  | Successor       |     |  | Predecessor Company | 
|              |  | Company         |     |  | % of Total Cost     | 
|              |  | % of Total Cost |     |  |                     | 
|              |  |                 |     |  | Marine              |  |     | Marine             |  |  |           
|              |  | 5-Year          |     |  | 3-Year              |  |     | Components         |  |  | Components |  |  | Land       |     
|Calendar Year |  | Profile         |     |  | Profile             |  |     | (Excluding Brazil) |  |  | (Brazil)   |  |  | Components |     
|              |  |                 |     |  |                     |  |     |                    |  |  |            |  |  |            |     
|Year 1        |  |                 | 80% |  |                     |  | 66% |                    |  |  | 100%       |  |  |            | 100% |  |  |  | 100% | 
|Year 2        |  |                 | 60% |  |                     |  | 33% |                    |  |  | 70%        |  |  |            | 92%  |  |  |  | 60%  | 
|Year 3        |  |                 | 40% |  |                     |  | 0%  |                    |  |  | 55%        |  |  |            | 76%  |  |  |  | 40%  | 
|Year 4        |  |                 | 20% |  |                     |  |     |                    |  |  | 40%        |  |  |            | 50%  |  |  |  | 20%  | 
|Year 5        |  |                 | 0%  |  |                     |  |     |                    |  |  | 30%        |  |  |            | 43%  |  |  |  | 0%   | 
|Year 6        |  |                 |     |  |                     |  |     |                    |  |  | 20%        |  |  |            | 34%  |  |  |  |      | 
|Year 7        |  |                 |     |  |                     |  |     |                    |  |  | 10%        |  |  |            | 20%  |  |  |  |      | 
|Year 8        |  |                 |     |  |                     |  |     |                    |  |  | 0%         |  |  |            | 0%   |  |  |  |      | 





| |                        
| | -----------------------
| | Property and Equipment.





|                                                  |  |           |       |  |             |  |       | 
|------------------------------------------------- |  | --------- | ----- |  | ----------- |  | ----- | 
|                                                  |  | Successor |       |  | Predecessor | 
|                                                  |  | Company   |       |  | Company     | 
|                                                  |  | Years     |       |  | Years       | 
|                                                  |  |           |       |  |             | 
|Seismic vessels                                   |  |           | 20-25 |  |             |  | 20-30 | 
|Seismic and operations computer equipment         |  |           | 3-15  |  |             |  | 3-10  | 
|FPSO vessels and equipment                        |  |           | 25-30 |  |             |  | 20-30 | 
|Buildings and related leasehold improvements      |  |           | 1-30  |  |             |  | 1-30  | 
|Fixture, furniture, fittings and office computers |  |           | 3-5   |  |             |  | 3-5   | 



F-13



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | Oil and Natural Gas Assets.













F-14



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PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |          
| | ---------
| | Goodwill.



Goodwill and Other
Intangible Assets Accounting for the Impairment
or Disposal of Long-Lived Assets








| |                   
| | ------------------
| | Intangible Assets.





| |                         
| | ------------------------
| | Other Long-Lived Assets.



F-15



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                 
| | --------------------------------
| | Impairment of Long-Lived Assets.

Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS 144).




| |                           
| | --------------------------
| | Steaming and Mobilization.





| |                                  
| | ---------------------------------
| | Derivative Financial Instruments.







F-16



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                
| | -------------------------------
| | Share Based Compensation Plans.

Accounting for Stock Issued to
Employees, Accounting for Stock-Based
Compensation Accounting for Stock-Based
Compensation  Transition and Disclosure.




| |                     
| | --------------------
| | Revenue Recognition.

Revenue Arrangement with Multiple
Deliverables


Revenue Services.


1. Geophysical Services (Marine, Onshore and Other).




|    |                                    
|--- | -----------------------------------
|(a) | Sales of Multi-Client Library Data.

Late sales


Volume sales agreements




Pre-funding arrangements




F-17



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                                   
|--- | ----------------------------------
|(b) | Proprietary Sales/ Contract Sales.





|    |                            
|--- | ---------------------------
|(c) | Other Geophysical Services.



2. Production Services.




Revenue Products (Pertra).






Income Statement Characterization of Reimbursements
Received for Out-of-Pocket Expenses
Incurred




| |              
| | -------------
| | Income Taxes.

Accounting for Income Taxes  Special
Areas,




F-18



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                              
| | -----------------------------
| | Asset Retirement Obligations.

Accounting
for Asset Retirement Obligations


Ramform Banff








| |                               
| | ------------------------------
| | Commitments and Contingencies.



F-19



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                       
| | ----------------------
| | Pro forma information.



|                                                            |  |                                                  |          |   |                   |   |            |          |  |   |            |  
|----------------------------------------------------------- |  | ------------------------------------------------ | -------- | - | ----------------- | - | ---------- | -------- |  | - | ---------- | -
|                                                            |  | Loss from                                        |          |   |                   |   |           
|                                                            |  | Continuing                                       |          |   |                   |   |           
|                                                            |  | Operations Before                                |          |   | Loss Before       |   |            |         
|                                                            |  | Cumulative Effect                                |          |   | Cumulative Effect |   |            |         
|                                                            |  | of Change in                                     |          |   | of Change in      |   |            |         
|                                                            |  | Accounting                                       |          |   | Accounting        |   |            |         
|                                                            |  | Principle                                        |          |   | Principle         |   |            | Net loss | 
|                                                            |  |                                                  |          |   |                   |   |            |          | 
|                                                            |  | (In thousands of dollars, except per share data) |         
|Reported income (loss)                                      |  | $                                                | (809,903 | ) |                   | $ | (1,011,040 | )        |  | $ | (1,174,678 | )
|Asset removal obligation pro forma effect                   |  |                                                  | 362      |   |                   |   | 362        |          |  |   | 362        |  
|Reverse cumulative effect of change in accounting principle |  |                                                  |         |   |                   |   |           |          |  |   | 163,638    |  
|                                                            |  |                                                  |          |   |                   |   |            |          | 
|Pro forma income (loss)                                     |  | $                                                | (809,541 | ) |                   | $ | (1,010,678 | )        |  | $ | (1,010,678 | )
|                                                            |  |                                                  |          |   |                   |   |            |          | 
|Pro forma income (loss) per share (basic and diluted)       |  | $                                                | (7.83    | ) |                   | $ | (9.78      | )        |  | $ | (9.78      | )



|         |                                                  
|-------- | -------------------------------------------------
|NOTE 3  | Financial Restructuring and Fresh Start Reporting



| |                             
| | ----------------------------
| | Background of Restructuring.







| |                         
| | ------------------------
| | Financial Restructuring.





| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $746 million of unsecured 10% Senior Notes due 2010;                                                                                                                                                                                                                                                
|
| |  | $250 million of unsecured 8% Senior Notes due 2006;                                                                                                                                                                                                                                                 
|
| |  | $4.8 million of an eight-year unsecured senior term loan
    facility (which the Company fully repaid in May 2004);                                                                                                                                                                                 
|
| |  | 91% of new ordinary shares of PGS as constituted immediately
    post restructuring, with an immediate reduction of this
    shareholding to 61% through a rights offering of 30% of the new
    ordinary shares to the pre-restructuring shareholders for
    $85 million, or $14.17 per share; and

F-20



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | $40.6 million in cash distributed by PGS, of which
    $17.9 million was distributed in December 2003 and
    $22.7 million in May 2004.







| |                      
| | ---------------------
| | Reorganization Value.







| |                       
| | ----------------------
| | Fresh Start Reporting.





F-21



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                               |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       |  |   |         |  |  |  |      |  |  |   |           |  
|------------------------------------------------------------------------------ |  | --------------------------------------------- | --------- | ----------- | ----------- | -------- | ---------- | --------- | ------------ | - | ------- | -------------- | ---- | ---- | ------ | ---- | ---- | - | --------- | -------- |  | - | ------- |  |  | ----- | ----- |  | - |  | ----- | ----- |  | - | ------- |  |  |  | ---- |  |  | - | --------- | -
|                                                                               |  |                                               |           |             |             | Recovery |           
|                                                                               |  |                                               |           |             |             |          |           
|PGS ASA Plan of                                                                |  |                                               |           | Elimination |             |          |            |           | Common Stock |   |         | Total Recovery |     
|Reorganization                                                                 |  | Predecessor                                   |           |             | of Debt and |          |            | Surviving |              |   |         |                | 2010 |      |        | 2006 |      |   | Term Loan |          |  |   |         |  |  |      
|Recovery Analysis                                                              |  | Company                                       |           |             | Equity      |          |            | Debt      |              |   | Cash    |                |      | Note |        |      | Note |   |           | Facility |  |   | %       |  |  | Value |       |  | % |  |       | Value | 
|                                                                               |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       | 
|                                                                               |  | (In thousands of dollars, except percentages) |          
|Other liabilities  not affected                                               |  | $                                             | 338,536   |             |             | $        |           |           |              | $ |        |                |      | $    |       |      |      | $ |          |          |  | $ |        |  |  | $     |      |  |   |  |       |       |  | $ |        |  |  |  |      |  |  | $ |          |  
|Unsecured Debt                                                                 |  |                                               | 2,140,000 |             |             |          | (2,140,000 | )         |              |   |        |                |      |      | 40,592 |      |      |   | 745,949   |          |  |   | 250,000 |  |  |       | 4,810 |  |   |  | 91.0  | %     |  |   | 330,458 |  |  |  | 64%  |  |  |   | 1,371,809 |  
|Trust Preferred Securities (incl. accrued interest)                            |  |                                               | 155,203   |             |             |          | (155,203   | )         |              |   |        |                |      |      |       |      |      |   |          |          |  |   |        |  |  |       |      |  |   |  | 5.0   | %     |  |   | 18,157  |  |  |  | 12%  |  |  |   | 18,157    |  
|Capital lease obligations                                                      |  |                                               | 89,913    |             |             |          |           |           |              |   | 89,913  |                |      |      |       |      |      |   |          |          |  |   |        |  |  |       |      |  |   |  |      |       |  |   |        |  |  |  | 100% |  |  |   | 89,913    |  
|Senior Secured Debt                                                            |  |                                               | 113,970   |             |             |          |           |           |              |   | 113,970 |                |      |      |       |      |      |   |          |          |  |   |        |  |  |       |      |  |   |  |      |       |  |   |        |  |  |  | 100% |  |  |   | 113,970   |  
|Debt of Subsidiaries  not affected                                            |  |                                               | 5,295     |             |             |          |           |           |              |   | 5,295   |                |      |      |       |      |      |   |          |          |  |   |        |  |  |       |      |  |   |  |      |       |  |   |        |  |  |  | 100% |  |  |   | 5,295     |  
|Common Stockholders                                                            |  |                                               | 71,089    |             |             |          | (71,089    | )         |              |   |        |                |      |      |       |      |      |   |          |          |  |   |        |  |  |       |      |  |   |  | 4.0   | %     |  |   | 14,526  |  |  |  | 20%  |  |  |   | 14,526    |  
|Deficit                                                                        |  |                                               | (429,531  | )           |             |          | 429,531    |           |              |   |        |                |      |      |       |      |      |   |          |          |  |   |        |  |  |       |      |  |   |  |      |       |  |   |        |  |  |  |      |  |  |   |          |  
|                                                                               |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       | 
|Total                                                                          |  | $                                             | 2,484,475 |             |             | $        | (1,936,761 | )         |              | $ | 209,178 |                |      | $    | 40,592 |      |      | $ | 745,949   |          |  | $ | 250,000 |  |  | $     | 4,810 |  |   |  | 100.0 | %     |  | $ | 363,141 |  |  |  | 65%  |  |  | $ | 1,613,670 |  
|                                                                               |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       | 
|Adjusted for fair value adjustment of interest rate variation on
    UK leases |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       |  |   |         |  |  |  |      |  |  | $ | 51,642    |  
|Adjusted for cash                                                              |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       |  |   |         |  |  |  |      |  |  |   | (148,912  | )
|                                                                               |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       | 
|Reorganization value                                                           |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       |  |   |         |  |  |  |      |  |  | $ | 1,516,400 |  
|                                                                               |  |                                               |           |             |             |          |            |           |              |   |         |                |      |      |        |      |      |   |           |          |  |   |         |  |  |       |       |  |   |  |       |       | 







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The reorganization value of the Company was allocated to the
    Companys assets in conformity with the procedures
    specified by Statement of Financial Accounting Standards
    No. 141, Business Combinations.The sum
    of the amounts assigned to assets and liabilities was within the
    range of the estimated reorganization value and close to the
    mid-range of the valuation. Therefore, there was no excess or
    deficit value to be allocated to goodwill or long-term assets.
|
| |  | Each liability and contingency existing as of the fresh start
    reporting date, other than deferred taxes, has been stated at
    the present value of the amounts to be paid, determined at
    appropriate then current interest rates.                                                                                                                                                                                                                                                             
|
| |  | Deferred taxes were recorded in conformity with applicable
    income tax accounting standards, principally Statement of
    Financial Accounting Standards No. 109, Accounting
    for Income Taxes. Deferred tax assets and liabilities
    have been recognized for differences between the assigned values
    and                                                                                                                                                                                

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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | the tax basis of the recognized assets and liabilities (see
    Note 20). Valuation allowances have been provided for
    deferred tax assets.                                                                                                                                                        
|
| |  | Changes in existing accounting principles that otherwise would
    have been required in the consolidated financial statements of
    the emerging entity within the twelve months following the
    adoption of fresh start reporting were adopted at the time fresh
    start reporting was adopted.
|
| |  | Resetting the multi-client library, the property and equipment
    and oil and natural gas assets to fair value and eliminating all
    of the accumulated depreciation.                                                                                                                              

F-23



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |          |          |   |           |         |           | 
|----------------------------------------------------- | --------------------------------------------- | ------------------------------------------ | --------- | -------- | ---------------- | - | ---------- | ----------- | ---------- | - | --------- | -------- | -------- | - | --------- | ------- | --------- | 
|                                                      |                                               | October 31,                                |           |          |                 
|                                                      |                                               | 2003                                       |           |          | November 1, 2003 |  
|                                                      |                                               |                                            |           |          |                  |  
|                                                      |                                               | Predecessor                                |           |          | Effects of       |   |            | Fresh Start |            |   | Successor |         
|                                                      |                                               | Company                                    |           |          | Plan             |   |            | Valuation   |            |   | Company   |         
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                      |                                               | (In thousands of dollars)                  |          
|ASSETS                                               
|Cash and cash equivalents                             |                                               | $                                          | 93,951    |          |                  | $ |           |             |            | $ |          |          |          | $ | 93,951    |        
|Restricted cash                                       |                                               |                                            | 44,947    |          |                  |   |           |             |            |   |          |          |          |   | 44,947    |        
|Accountants receivable, net                           |                                               |                                            | 162,288   |          |                  |   |           |             |            |   | 2,000     |          |          |   | 164,288   |        
|Unbilled and other receivables                        |                                               |                                            | 30,771    |          |                  |   |           |             |            |   |          |          |          |   | 30,771    |        
|Other current assets                                  |                                               |                                            | 57,625    |          |                  |   |           |             |            |   | (2,405    | )        |          |   | 55,220    |        
|Assets of discontinued operations                     |                                               |                                            | 2,753     |          |                  |   |           |             |            |   |          |          |          |   | 2,753     |        
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                      |                                               | Total current assets                       |           |          | 392,335          |   |            |             |            |   |           |          | (405     | ) |           |         | 391,930   | 
|Multi-client library, net                             |                                               |                                            | 437,732   |          |                  |   |           |             |            |   | (7,151    | )        |          |   | 430,581   |        
|Property and equipment, net                           |                                               |                                            | 1,577,065 |          |                  |   |           |             |            |   | (507,968  | )        |          |   | 1,069,097 |        
|Oil and natural gas assets, net                       |                                               |                                            | 23,345    |          |                  |   |           |             |            |   | 574       |          |          |   | 23,919    |        
|Restricted cash                                       |                                               |                                            | 10,014    |          |                  |   |           |             |            |   |          |          |          |   | 10,014    |        
|Investments in associated companies                   |                                               |                                            | 9,246     |          |                  |   |           |             |            |   | (205      | )        |          |   | 9,041     |        
|Intangible assets, net                                |                                               |                                            | 3,636     |          |                  |   |           |             |            |   | 52,383    |          |          |   | 56,019    |        
|Other long-lived assets                               |                                               |                                            | 31,102    |          |                  |   |           |             |            |   | 7,601     |          |          |   | 38,703    |        
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                      |                                               | Total assets                               |           | $        | 2,484,475        |   |            | $           |           |   |           | $        | (455,171 | ) |           | $       | 2,029,304 | 
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                     
|LIABILITIES AND SHAREHOLDERS EQUITY                 
|Short-term debt and current portion of long-term debt |                                               | $                                          | 2,294,995 |          |                  | $ | (2,283,395 | )           |            | $ |          |          |          | $ | 11,600    |        
|Current portion of capital lease obligations          |                                               |                                            | 19,561    |          |                  |   |           |             |            |   |          |          |          |   | 19,561    |        
|Debt and other liabilities of discontinued operations |                                               |                                            | 1,252     |          |                  |   |           |             |            |   |          |          |          |   | 1,252     |        
|Accounts payable                                      |                                               |                                            | 36,927    |          |                  |   |           |             |            |   |          |          |          |   | 36,927    |        
|Accrued expenses                                      |                                               |                                            | 152,228   |          |                  |   | 29,139     |             |            |   | (4,818    | )        |          |   | 176,549   |        
|Income taxes payable                                  |                                               |                                            | 22,570    |          |                  |   |           |             |            |   |          |          |          |   | 22,570    |        
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                      |                                               | Total current liabilities                  |           |          | 2,527,533        |   |            |             | (2,254,256 | ) |           |          | (4,818   | ) |           |         | 268,459   | 
|Long-term debt                                        |                                               |                                            | 108,015   |          |                  |   | 1,000,405  |             |            |   |          |          |          |   | 1,108,420 |        
|Capital lease obligations                             |                                               |                                            | 70,352    |          |                  |   |           |             |            |   |          |          |          |   | 70,352    |        
|Other long-term liabilities                           |                                               |                                            | 115,095   |          |                  |   |           |             |            |   | 83,732    |          |          |   | 198,827   |        
|Deferred tax liabilities                              |                                               |                                            | 21,095    |          |                  |   |           |             |            |   | (1,817    | )        |          |   | 19,278    |        
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                      |                                               | Total liabilities                          |           |          | 2,842,090        |   |            |             | (1,253,851 | ) |           |          | 77,097   |   |           |         | 1,665,336 | 
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|Minority interest in consolidated subsidiaries        |                                               |                                            | 827       |          |                  |   |           |             |            |   |          |          |          |   | 827       |        
|Shareholders equity:                                 |                                               |                                            |           |          |                  |   |            |             |            |   |           |          |          |   |           |        
|                                                      | Common stock                                  |                                            |           | 71,089   |                  |   |            | 14,625      |            |   |           |         |          |   |           | 85,714  |          
|                                                      | Additional paid-in capital                    |                                            |           |         |                  |   |            | 809,695     |            |   |           | (532,268 | )        |   |           | 277,427 |          
|                                                      | Retained earnings (deficit)                   |                                            |           | (397,520 | )                |   |            | 397,520     |            |   |           |         |          |   |           |        |          
|                                                      | Accumulated other comprehensive income (loss) |                                            |           | (32,011  | )                |   |            | 32,011      |            |   |           |         |          |   |           |        |          
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                      |                                               | Total shareholders equity (deficit)       |           |          | (358,442         | ) |            |             | 1,253,851  |   |           |          | (532,268 | ) |           |         | 363,141   | 
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         
|                                                      |                                               | Total liabilities and shareholders equity |           | $        | 2,484,475        |   |            | $           |           |   |           | $        | (455,171 | ) |           | $       | 2,029,304 | 
|                                                      |                                               |                                            |           |          |                  |   |            |             |            |   |           |         

F-24



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                                                                     
|-------- | --------------------------------------------------------------------
|NOTE 4  | Impairment of Long-Lived Assets and Other Operating Expense,
    Net



|                                |       |                           |   |            |                     |   |            |             |  |   |              |        |  |   |         |         | 
|------------------------------- | ----- | ------------------------- | - | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ | ------ |  | - | ------- | ------- | 
|                                |       | Successor Company         |   |            | Predecessor Company |  
|                                |       |                           |   |            |                     |  
|                                |       |                           |   | Two Months |                     |   | Ten Months |             |  |  
|                                |       | Year Ended                |   |            | Ended               |   |            | Ended       |  |   | Year Ended   |       
|                                |       | December 31,              |   |            | December 31,        |   |            | October 31, |  |   | December 31, |       
|                                |       | 2004                      |   |            | 2003                |   |            | 2003        |  |   | 2002         |       
|                                |       |                           |   |            |                     |   |            |             |  |   |              |       
|                                |       | (In thousands of dollars) |  
|Multi-client library            |       | $                         |  |            |                     | $ |           |             |  | $ | 90,053       |        |  | $ | 200,393 |        
|Production assets and equipment |       |                           |  |            |                     |   |           |             |  |   | 328          |        |  |   | 331,971 |        
|Seismic assets and equipment    |       |                           |  |            |                     |   |           |             |  |   | 3,539        |        |  |   | 16,706  |        
|Other long-lived assets         |       |                           |  |            |                     |   |           |             |  |   | 1,091        |        |  |   | 9,401   |        
|                                |       |                           |   |            |                     |   |            |             |  |   |              |       
|                                | Total |                           | $ |           |                     |   | $          |            |  |   | $            | 95,011 |  |   | $       | 558,471 | 
|                                |       |                           |   |            |                     |   |            |             |  |   |              |       

Ramform Banff




|                                                                             |       |                           |       |            |                     |   |            |             |  |   |              |        |  |   |        |       | 
|---------------------------------------------------------------------------- | ----- | ------------------------- | ----- | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ | ------ |  | - | ------ | ----- | 
|                                                                             |       | Successor Company         |       |            | Predecessor Company |  
|                                                                             |       |                           |       |            |                     |  
|                                                                             |       |                           |       | Two Months |                     |   | Ten Months |             |  |  
|                                                                             |       | Year Ended                |       |            | Ended               |   |            | Ended       |  |   | Year Ended   |       
|                                                                             |       | December 31,              |       |            | December 31,        |   |            | October 31, |  |   | December 31, |       
|                                                                             |       | 2004                      |       |            | 2003                |   |            | 2003        |  |   | 2002         |       
|                                                                             |       |                           |       |            |                     |   |            |             |  |   |              |       
|                                                                             |       | (In thousands of dollars) |      
|Termination of employees and reorganization                                  |       | $                         | 665   |            |                     | $ | 582        |             |  | $ | 19,235       |        |  | $ | 9,570  |      
|Cost relating to completion of 2002 U.S. GAAP accounts and
    re-audit 2001 |       |                           | 7,447 |            |                     |   | 470        |             |  |   | 2,089        |        |  |   |       |      
|Net gain related to canceled merger with Veritas DGC Inc.                    |       |                           |      |            |                     |   |           |             |  |   |             |        |  |   | (2,864 | )    
|Other                                                                        |       |                           |      |            |                     |   |           |             |  |   |             |        |  |   | 1,781  |      
|                                                                             |       |                           |       |            |                     |   |            |             |  |   |              |       
|                                                                             | Total |                           | $     | 8,112      |                     |   | $          | 1,052       |  |   | $            | 21,324 |  |   | $      | 8,487 | 
|                                                                             |       |                           |       |            |                     |   |            |             |  |   |              |       



|         |                          
|-------- | -------------------------
|NOTE 5  | Shares Available for Sale



F-25



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                         
|-------- | ------------------------
|NOTE 6  | Accounts Receivable, Net



|                                |       |                           |         |         |      |   |         |         | 
|------------------------------- | ----- | ------------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                                |       | December 31,              |        
|                                |       |                           |        
|                                |       | 2004                      |         |         | 2003 |  
|                                |       |                           |         |         |      |  
|                                |       | (In thousands of dollars) |        
|Accounts receivable  trade     |       | $                         | 162,775 |         |      | $ | 130,821 |        
|Allowance for doubtful accounts |       |                           | (1,492  | )       |      |   | (3,115  | )      
|                                |       |                           |         |         |      |  
|                                | Total |                           | $       | 161,283 |      |   | $       | 127,706 | 
|                                |       |                           |         |         |      |  



|                              |                                   |                           |        |            |                     |   |            |             |       |   |              |       |       |   |        |       |       | 
|----------------------------- | --------------------------------- | ------------------------- | ------ | ---------- | ------------------- | - | ---------- | ----------- | ----- | - | ------------ | ----- | ----- | - | ------ | ----- | ----- | 
|                              |                                   | Successor Company         |        |            | Predecessor Company |  
|                              |                                   |                           |        |            |                     |  
|                              |                                   |                           |        | Two Months |                     |   | Ten Months |             |       |  
|                              |                                   | Year Ended                |        |            | Ended               |   |            | Ended       |       |   | Year Ended   |      
|                              |                                   | December 31,              |        |            | December 31,        |   |            | October 31, |       |   | December 31, |      
|                              |                                   | 2004                      |        |            | 2003                |   |            | 2003        |       |   | 2002         |      
|                              |                                   |                           |        |            |                     |   |            |             |       |   |              |      
|                              |                                   | (In thousands of dollars) |       
|Beginning balance             |                                   | $                         | 3,444  |            |                     | $ | 2,913      |             |       | $ | 4,648        |       |       | $ | 2,321  |      
|New and additional allowances |                                   |                           | 1,001  |            |                     |   | 837        |             |       |   | 2,615        |       |       |   | 5,955  |      
|Write-offs and reversals      |                                   |                           | (2,953 | )          |                     |   | (179       | )           |       |   | (4,350       | )     |       |   | (3,616 | )    
|Disposal of subsidiary        |                                   |                           |       |            |                     |   | (127       | )           |       |   |             |       |       |   | (12    | )    
|                              |                                   |                           |        |            |                     |   |            |             |       |   |              |      
|                              |                                   | Ending balance            |        | $          | 1,492               |   |            | $           | 3,444 |   |              | $     | 2,913 |   |        | $     | 4,648 | 
|                              |                                   |                           |        |            |                     |   |            |             |       |   |              |      
|Related to:                   |                                   |                           |        |            |                     |   |            |             |       |   |              |       |       |   |        |      
|                              | Accounts receivable, net          |                           | $      | 1,492      |                     |   | $          | 3,115       |       |   | $            | 2,472 |       |   | $      | 4,608 |      
|                              | Unbilled and other receivables    |                           |        |           |                     |   |            | 329         |       |   |              | 314   |       |   |        |      |      
|                              | Assets of discontinued operations |                           |        |           |                     |   |            |            |       |   |              | 127   |       |   |        | 40    |      
|                              |                                   |                           |        |            |                     |   |            |             |       |   |              |      
|                              |                                   | Total                     |        | $          | 1,492               |   |            | $           | 3,444 |   |              | $     | 2,913 |   |        | $     | 4,648 | 
|                              |                                   |                           |        |            |                     |   |            |             |       |   |              |      



|         |                     
|-------- | --------------------
|NOTE 7  | Other Current Assets



|                                      |       |                           |        |        |      |   |        |        | 
|------------------------------------- | ----- | ------------------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                      |       | December 31,              |       
|                                      |       |                           |       
|                                      |       | 2004                      |        |        | 2003 |  
|                                      |       |                           |        |        |      |  
|                                      |       | (In thousands of dollars) |       
|Prepaid operating expenses            |       | $                         | 13,053 |        |      | $ | 19,186 |       
|Spare parts, consumables and supplies |       |                           | 12,840 |        |      |   | 11,348 |       
|Prepaid taxes                         |       |                           | 15,821 |        |      |   | 11,017 |       
|Produced oil, not lifted              |       |                           | 5,037  |        |      |   | 4,569  |       
|Advances to agents                    |       |                           | 723    |        |      |   | 5,123  |       
|Other                                 |       |                           | 13,032 |        |      |   | 11,367 |       
|                                      |       |                           |        |        |      |  
|                                      | Total |                           | $      | 60,506 |      |   | $      | 62,610 | 
|                                      |       |                           |        |        |      |  

F-26



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                            
|-------- | ---------------------------
|NOTE 8  | Property and Equipment, Net



|                                 |       |                           |           |           |      |   |           |           | 
|-------------------------------- | ----- | ------------------------- | --------- | --------- | ---- | - | --------- | --------- | 
|                                 |       | December 31,              |          
|                                 |       |                           |          
|                                 |       | 2004                      |           |           | 2003 |  
|                                 |       |                           |           |           |      |  
|                                 |       | (In thousands of dollars) |          
|Seismic vessels and equipment    |       | $                         | 435,622   |           |      | $ | 384,294   |          
|Production vessels and equipment |       |                           | 680,737   |           |      |   | 679,748   |          
|Fixtures, furniture and fittings |       |                           | 18,383    |           |      |   | 11,786    |          
|Buildings and other              |       |                           | 4,412     |           |      |   | 3,890     |          
|                                 |       |                           |           |           |      |  
|                                 |       |                           | 1,139,154 |           |      |   | 1,079,718 |          
|Accumulated depreciation         |       |                           | (130,146  | )         |      |   | (19,535   | )        
|                                 |       |                           |           |           |      |  
|                                 | Total |                           | $         | 1,009,008 |      |   | $         | 1,060,183 | 
|                                 |       |                           |           |           |      |  







|                                                                               |  |                           |         |            |                     |   |            |             |  |   |              |  |  |   |         | 
|------------------------------------------------------------------------------ |  | ------------------------- | ------- | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ |  |  | - | ------- | 
|                                                                               |  | Successor Company         |         |            | Predecessor Company |  
|                                                                               |  |                           |         |            |                     |  
|                                                                               |  |                           |         | Two Months |                     |   | Ten Months |             |  |  
|                                                                               |  | Year Ended                |         |            | Ended               |   |            | Ended       |  |   | Year Ended   | 
|                                                                               |  | December 31,              |         |            | December 31,        |   |            | October 31, |  |   | December 31, | 
|                                                                               |  | 2004                      |         |            | 2003                |   |            | 2003        |  |   | 2002         | 
|                                                                               |  |                           |         |            |                     |   |            |             |  |   |              | 
|                                                                               |  | (In thousands of dollars) |        
|Depreciation expense, net of amounts capitalized into
    multi-client library |  | $                         | 106,629 |            |                     | $ | 18,206     |             |  | $ | 121,485      |  |  | $ | 154,204 | 
|Depreciation expense capitalized into multi-client library                     |  |                           | 3,982   |            |                     |   | 1,329      |             |  |   | 11,766       |  |  |   | 31,528  | 



F-27



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                          
|-------- | -------------------------
|NOTE 9  | Multi-Client Library, Net



|                                       |                   |                           |         |         |      |   |         |         | 
|-------------------------------------- | ----------------- | ------------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                                       |                   | December 31,              |        
|                                       |                   |                           |        
|                                       |                   | 2004                      |         |         | 2003 |  
|                                       |                   |                           |         |         |      |  
|                                       |                   | (In thousands of dollars) |        
|Completed surveys:                     |                   |                           |         |         |      |   |         |        
|Completed during 1998, and prior years |                   | $                         | 6,614   |         |      | $ | 37,424  |        
|Completed during 1999                  |                   |                           | 20,158  |         |      |   | 40,402  |        
|Completed during 2000                  |                   |                           | 21,976  |         |      |   | 40,140  |        
|Completed during 2001                  |                   |                           | 106,876 |         |      |   | 139,154 |        
|Completed during 2002                  |                   |                           | 35,393  |         |      |   | 54,520  |        
|Completed during 2003                  |                   |                           | 33,296  |         |      |   | 74,686  |        
|Completed during 2004                  |                   |                           | 11,620  |         |      |   |        |        
|                                       |                   |                           |         |         |      |  
|                                       | Completed surveys |                           |         | 235,933 |      |   |         | 386,326 | 
|Surveys in progress                    |                   |                           | 8,756   |         |      |   | 21,679  |        
|                                       |                   |                           |         |         |      |  
|Multi-client library                   |                   | $                         | 244,689 |         |      | $ | 408,005 |        
|                                       |                   |                           |         |         |      |  



|                                                   |  |                           |         |            |                     |   |            |             |  |   |              |  |  |   |         | 
|-------------------------------------------------- |  | ------------------------- | ------- | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ |  |  | - | ------- | 
|                                                   |  | Successor Company         |         |            | Predecessor Company |  
|                                                   |  |                           |         |            |                     |  
|                                                   |  |                           |         | Two Months |                     |   | Ten Months |             |  |  
|                                                   |  | Year Ended                |         |            | Ended               |   |            | Ended       |  |   | Year Ended   | 
|                                                   |  | December 31,              |         |            | December 31,        |   |            | October 31, |  |   | December 31, | 
|                                                   |  | 2004                      |         |            | 2003                |   |            | 2003        |  |   | 2002         | 
|                                                   |  |                           |         |            |                     |   |            |             |  |   |              | 
|                                                   |  | (In thousands of dollars) |        
|Impairment charges (Note 4)                        |  | $                         |        |            |                     | $ |           |             |  | $ | 90,053       |  |  | $ | 200,393 | 
|Amortization and impairment (from 2004) expense    |  |                           | 208,468 |            |                     |   | 33,347     |             |  |   | 148,399      |  |  |   | 195,954 | 
|Interest capitalized into multi-client library     |  |                           | 1,461   |            |                     |   | 375        |             |  |   | 2,083        |  |  |   | 4,841   | 
|Depreciation capitalized into multi-client library |  | $                         | 3,982   |            |                     | $ | 1,329      |             |  | $ | 11,766       |  |  | $ | 31,528  | 



F-28



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                            |  |               |         | 
|--------------------------- |  | ------------- | ------- | 
|                            |  | Minimum       |        
|                            |  | Future        |        
|                            |  | Amortizations |        
|                            |  |               |        
|                            |  | (In thousands |        
|                            |  | of dollars)   |        
|During 2005                 |  | $             | 53,509  | 
|During 2006                 |  |               | 61,863  | 
|During 2007                 |  |               | 64,254  | 
|During 2008                 |  |               | 51,794  | 
|During 2009                 |  |               | 9,844   | 
|During 2010                 |  |               | 3,425   | 
|                            |  |               |        
|Future minimum amortization |  | $             | 244,689 | 
|                            |  |               |        





|          |                       
|--------- | ----------------------
|NOTE 10  | Intangible Assets, Net



|                                |            |                  |         |        |      |   |        |        | 
|------------------------------- | ---------- | ---------------- | ------- | ------ | ---- | - | ------ | ------ | 
|                                |            | December 31,     |        
|                                |            |                  |        
|                                |            | 2004             |         |        | 2003 |  
|                                |            |                  |         |        |      |  
|                                |            | (In thousands of |        
|                                |            | dollars)         |        
|Existing technology             |            | $                | 30,548  |        |      | $ | 33,011 |       
|Existing contracts              |            |                  | 16,772  |        |      |   | 17,600 |       
|Order backlog                   |            |                  | 5,401   |        |      |   | 5,401  |       
|Patents, royalties and licenses |            |                  | 659     |        |      |   | 85     |       
|                                |            |                  |         |        |      |  
|                                | Total cost |                  |         | 53,380 |      |   |        | 56,097 | 
|Accumulated amortization        |            |                  | (17,266 | )      |      |   | (3,488 | )     
|                                |            |                  |         |        |      |  
|                                | Total      |                  | $       | 36,114 |      |   | $      | 52,609 | 
|                                |            |                  |         |        |      |  





F-29



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|          |                        
|--------- | -----------------------
|NOTE 11  | Other Long-Lived Assets



|                                                |       |                  |        |        |      |   |        |        | 
|----------------------------------------------- | ----- | ---------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                                |       | December 31,     |       
|                                                |       |                  |       
|                                                |       | 2004             |        |        | 2003 |  
|                                                |       |                  |        |        |      |  
|                                                |       | (In thousands of |       
|                                                |       | dollars)         |       
|Governmental grants and contractual receivables |       | $                | 17,204 |        |      | $ | 16,772 |       
|Long-term receivables                           |       |                  | 14,945 |        |      |   | 6,947  |       
|Favorable lease contracts                       |       |                  | 10,444 |        |      |   | 13,806 |       
|Deferred debt issue costs                       |       |                  | 2,066  |        |      |   |       |       
|                                                |       |                  |        |        |      |  
|                                                | Total |                  | $      | 44,659 |      |   | $      | 37,525 | 
|                                                |       |                  |        |        |      |  









|          |                 
|--------- | ----------------
|NOTE 12  | Accrued Expenses



|                                             |       |                           |        |         |      |   |        |         | 
|-------------------------------------------- | ----- | ------------------------- | ------ | ------- | ---- | - | ------ | ------- | 
|                                             |       | December 31,              |       
|                                             |       |                           |       
|                                             |       | 2004                      |        |         | 2003 |  
|                                             |       |                           |        |         |      |  
|                                             |       | (In thousands of dollars) |       
|Accrued employee benefits                    |       | $                         | 37,659 |         |      | $ | 30,199 |        
|Accrued vessel operating expenses            |       |                           | 17,080 |         |      |   | 25,126 |        
|Customer advances and deferred revenue       |       |                           | 12,070 |         |      |   | 12,614 |        
|Accrued commissions                          |       |                           | 9,683  |         |      |   | 5,088  |        
|Accrued interest expenses                    |       |                           | 3,394  |         |      |   | 2,658  |        
|Accrued severance and restructuring expenses |       |                           | 290    |         |      |   | 5,061  |        
|Accrued debt restructuring expenses          |       |                           |       |         |      |   | 25,218 |        
|Other                                        |       |                           | 35,080 |         |      |   | 41,372 |        
|                                             |       |                           |        |         |      |  
|                                             | Total |                           | $      | 115,256 |      |   | $      | 147,336 | 
|                                             |       |                           |        |         |      |  

F-30



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                        |                |                           |        |            |                     |   |            |             |  |   |              |       |  |   |       |       | 
|--------------------------------------- | -------------- | ------------------------- | ------ | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ | ----- |  | - | ----- | ----- | 
|                                        |                | Successor Company         |        |            | Predecessor Company |  
|                                        |                |                           |        |            |                     |  
|                                        |                |                           |        | Two Months |                     |   | Ten Months |             |  |  
|                                        |                | Year Ended                |        |            | Ended               |   |            | Ended       |  |   | Year Ended   |      
|                                        |                | December 31,              |        |            | December 31,        |   |            | October 31, |  |   | December 31, |      
|                                        |                | 2004                      |        |            | 2003                |   |            | 2003        |  |   | 2002         |      
|                                        |                |                           |        |            |                     |   |            |             |  |   |              |      
|                                        |                | (In thousands of dollars) |       
|Beginning balance                       |                | $                         | 5,061  |            |                     | $ | 8,367      |             |  | $ | 1,215        |       |  | $ |      |      
|Additional and adjustment of allowances |                |                           | (632   | )          |                     |   | 1,764      |             |  |   | 18,469       |       |  |   | 1,215 |      
|Severance and restructuring costs paid  |                |                           | (4,139 | )          |                     |   | (5,070     | )           |  |   | (11,317      | )     |  |   |      |      
|                                        |                |                           |        |            |                     |   |            |             |  |   |              |      
|                                        | Ending balance |                           | $      | 290        |                     |   | $          | 5,061       |  |   | $            | 8,367 |  |   | $     | 1,215 | 
|                                        |                |                           |        |            |                     |   |            |             |  |   |              |      



|          |                            
|--------- | ---------------------------
|NOTE 13  | Other Long-Term Liabilities



|                                              |       |                           |        |         |      |   |        |         | 
|--------------------------------------------- | ----- | ------------------------- | ------ | ------- | ---- | - | ------ | ------- | 
|                                              |       | December 31,              |       
|                                              |       |                           |       
|                                              |       | 2004                      |        |         | 2003 |  
|                                              |       |                           |        |         |      |  
|                                              |       | (In thousands of dollars) |       
|Accrued liabilities UK leases (Note 19)       |       | $                         | 79,344 |         |      | $ | 78,120 |        
|Pension liability (Note 21)                   |       |                           | 52,472 |         |      |   | 45,185 |        
|Asset retirement obligations (ARO) (Note 2) |       |                           | 58,518 |         |      |   | 50,016 |        
|Tax contingencies                             |       |                           | 25,522 |         |      |   | 16,124 |        
|Other                                         |       |                           | 3,794  |         |      |   | 8,218  |        
|                                              |       |                           |        |         |      |  
|                                              | Total |                           | $      | 219,650 |      |   | $      | 197,663 | 
|                                              |       |                           |        |         |      |  



|                                           |  |                           |        |             |              |   |            |             |  |   |         |  
|------------------------------------------ |  | ------------------------- | ------ | ----------- | ------------ | - | ---------- | ----------- |  | - | ------- | -
|                                           |  |                           |        | Predecessor |             
|                                           |  | Successor Company         |        |             | Company      |  
|                                           |  |                           |        |             |              |  
|                                           |  |                           |        | Two Months  |              |   | Ten Months |            
|                                           |  | Year Ended                |        |             | Ended        |   |            | Ended       | 
|                                           |  | December 31,              |        |             | December 31, |   |            | October 31, | 
|                                           |  | 2004                      |        |             | 2003         |   |            | 2003        | 
|                                           |  |                           |        |             |              |   |            |             | 
|                                           |  | (In thousands of dollars) |       
|Balance at beginning of period             |  | $                         | 50,016 |             |              | $ | 49,847     |             |  | $ | 59,767  |  
|Accretion expense                          |  |                           | 4,005  |             |              |   | 599        |             |  |   | 3,793   |  
|Liabilities settled in the period          |  |                           |       |             |              |   | (430       | )           |  |   |        |  
|Revision in estimated cash flow/fair value |  |                           | 4,497  |             |              |   |           |             |  |   | (13,713 | )
|                                           |  |                           |        |             |              |   |            |             | 
|Balance at end of period                   |  | $                         | 58,518 |             |              | $ | 50,016     |             |  | $ | 49,847  |  
|                                           |  |                           |        |             |              |   |            |             | 



F-31



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                                                      
|--------- | -----------------------------------------------------
|NOTE 14  | Short-Term Debt and Current Portion of Long-Term Debt



|                                            |       |                  |        |        |      |   |        |        | 
|------------------------------------------- | ----- | ---------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                            |       | December 31,     |       
|                                            |       |                  |       
|                                            |       | 2004             |        |        | 2003 |  
|                                            |       |                  |        |        |      |  
|                                            |       | (In thousands of |       
|                                            |       | dollars)         |       
|Short-term debt                             |       | $                | 1,962  |        |      | $ |       |       
|Current portion of long-term debt (Note 15) |       |                  | 17,828 |        |      |   | 18,512 |       
|                                            |       |                  |        |        |      |  
|                                            | Total |                  | $      | 19,790 |      |   | $      | 18,512 | 
|                                            |       |                  |        |        |      |  



|          |                                           
|--------- | ------------------------------------------
|NOTE 15  | Financial Restructuring and Long-Term Debt



| |                                           
| | ------------------------------------------
| | Financial restructuring completed in 2003:





| |                
| | ---------------
| | Long-Term Debt.



|                     |                                                |                           |         |           |      |  |         |           | 
|-------------------- | ---------------------------------------------- | ------------------------- | ------- | --------- | ---- |  | ------- | --------- | 
|                     |                                                | December 31,              |        
|                     |                                                |                           |        
|                     |                                                | 2004                      |         |           | 2003 | 
|                     |                                                |                           |         |           |      | 
|                     |                                                | (In thousands of dollars) |        
|Unsecured:           |                                                |                           |         |           |      |  |         |          
|                     | 10% Senior Notes, due 2010                     |                           | $       | 745,949   |      |  | $       | 745,950   | 
|                     | 8% Senior Notes, due 2006                      |                           |         | 250,000   |      |  |         | 250,000   | 
|                     | Libor + 1.15% Unsecured senior term loan       |                           |         |          |      |  |         | 4,811     | 
|Secured:             |                                                |                           |         |           |      |  |         |          
|                     | 8.28% First Preferred Mortgage Notes, due 2011 |                           |         | 98,920    |      |  |         | 109,119   | 
|                     | Other loans, due 2005  2006                   |                           |         | 8,149     |      |  |         | 17,306    | 
|                     |                                                |                           |         |           |      | 
|                     | Total debt                                     |                           |         | 1,103,018 |      |  |         | 1,127,186 | 
|Less current portion |                                                |                           | (17,828 | )         |      |  | (18,512 | )        
|                     |                                                |                           |         |           |      | 
|                     | Total long-term debt                           |                           | $       | 1,085,190 |      |  | $       | 1,108,674 | 
|                     |                                                |                           |         |           |      | 

F-32



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                   |       |                  |         |           | 
|------------------ | ----- | ---------------- | ------- | --------- | 
|                   |       | December 31,     |        
|                   |       | 2004             |        
|                   |       |                  |        
|                   |       | (In thousands of |        
|                   |       | dollars)         |        
|Year of repayment: |       |                  |         |          
|2005               |       | $                | 17,828  |          
|2006               |       |                  | 263,231 |          
|2007               |       |                  | 12,900  |          
|2008               |       |                  | 14,040  |          
|2009               |       |                  | 15,160  |          
|Thereafter         |       |                  | 779,859 |          
|                   |       |                  |        
|                   | Total |                  | $       | 1,103,018 | 
|                   |       |                  |        









| |                        
| | -----------------------
| | Bank Credit Facilities.



F-33



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                 
| | ----------------
| | Short-Term Debt.

Falcon Explorer.




| |           
| | ----------
| | Covenants.









| |                
| | ---------------
| | Pledged Assets.

Petrojarl Varg Petrojarl
1 Petrojarl Varg




| |                                 
| | --------------------------------
| | Letter of Credit and Guarantees.





| |                   
| | ------------------
| | Subsequent Events.





F-34



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                 
|--------- | ----------------
|NOTE 16  | Interest Expense



|                                       |                        |                           |          |            |                     |   |            |             |   |   |              |         |   |   |          |          |  
|-------------------------------------- | ---------------------- | ------------------------- | -------- | ---------- | ------------------- | - | ---------- | ----------- | - | - | ------------ | ------- | - | - | -------- | -------- | -
|                                       |                        | Successor Company         |          |            | Predecessor Company |  
|                                       |                        |                           |          |            |                     |  
|                                       |                        |                           |          | Two Months |                     |   | Ten Months |             |   |  
|                                       |                        | Year Ended                |          |            | Ended               |   |            | Ended       |   |   | Year Ended   |        
|                                       |                        | December 31,              |          |            | December 31,        |   |            | October 31, |   |   | December 31, |        
|                                       |                        | 2004                      |          |            | 2003                |   |            | 2003        |   |   | 2002         |        
|                                       |                        |                           |          |            |                     |   |            |             |   |   |              |        
|                                       |                        | (In thousands of dollars) |         
|Interest expense, gross                |                        | $                         | (112,272 | )          |                     | $ | (17,245    | )           |   | $ | (92,504      | )       |   | $ | (143,168 | )       
|Interest on trust preferred securities |                        |                           |         |            |                     |   |           |             |   |   | (8,536       | )       |   |   | (14,974  | )       
|Interest capitalized                   |                        |                           | 1,461    |            |                     |   | 375        |             |   |   | 2,083        |         |   |   | 4,841    |         
|                                       |                        |                           |          |            |                     |   |            |             |   |   |              |        
|                                       | Total interest expense |                           | $        | (110,811   | )                   |   | $          | (16,870     | ) |   | $            | (98,957 | ) |   | $        | (153,301 | )
|                                       |                        |                           |          |            |                     |   |            |             |   |   |              |        



|          |                           
|--------- | --------------------------
|NOTE 17  | Other Financial Items, Net



|                                        |                        |                   |        |                           |                     |   |            |             |   |   |              |        |   |   |         |        | 
|--------------------------------------- | ---------------------- | ----------------- | ------ | ------------------------- | ------------------- | - | ---------- | ----------- | - | - | ------------ | ------ | - | - | ------- | ------ | 
|                                        |                        | Successor Company |        |                           | Predecessor Company |  
|                                        |                        |                   |        |                           |                     |  
|                                        |                        |                   |        | Two Months                |                     |   | Ten Months |             |   |  
|                                        |                        | Year Ended        |        |                           | Ended               |   |            | Ended       |   |   | Year Ended   |       
|                                        |                        | December 31,      |        |                           | December 31,        |   |            | October 31, |   |   | December 31, |       
|                                        |                        | 2004              |        |                           | 2003                |   |            | 2003        |   |   | 2002         |       
|                                        |                        |                   |        |                           |                     |   |            |             |   |   |              |       
|                                        |                        |                   |        | (In thousands of dollars) |                     |   |           
|Interest income                         |                        | $                 | 4,840  |                           |                     | $ | 1,050      |             |   | $ | 4,467        |        |   | $ | 4,214   |       
|Foreign currency loss                   |                        |                   | (8,024 | )                         |                     |   | (5,208     | )           |   |   | (4,286       | )      |   |   | (10,915 | )     
|Sale of shares in Aqua Exploration Ltd. |                        |                   | 1,500  |                           |                     |   |           |             |   |   |             |        |   |   |        |       
|Gain on TES                             |                        |                   |       |                           |                     |   |           |             |   |   |             |        |   |   | 45,264  |       
|Other                                   |                        |                   | (9,177 | )                         |                     |   | (106       | )           |   |   | (1,653       | )      |   |   | (4,771  | )     
|                                        |                        |                   |        |                           |                     |   |            |             |   |   |              |       
|                                        | Financial expense, net |                   | $      | (10,861                   | )                   |   | $          | (4,264      | ) |   | $            | (1,472 | ) |   | $       | 33,792 | 
|                                        |                        |                   |        |                           |                     |   |            |             |   |   |              |       







|          |                      
|--------- | ---------------------
|NOTE 18  | Financial Instruments



| |                                      
| | -------------------------------------
| | Fair Values of Financial Instruments.



|               |  |                           |           |  |                   |   |           |         |  |   |             |  |  |   |           | 
|-------------- |  | ------------------------- | --------- |  | ----------------- | - | --------- | ------- |  | - | ----------- |  |  | - | --------- | 
|               |  | December 31, 2004         |           |  | December 31, 2003 |  
|               |  |                           |           |  |                   |  
|               |  | Carrying                  |           |  |                   |   | Carrying  |         |  |  
|               |  | Amounts                   |           |  | Fair Values       |   |           | Amounts |  |   | Fair Values | 
|               |  |                           |           |  |                   |   |           |         |  |   |             | 
|               |  | (In thousands of dollars) |          
|Long-term debt |  | $                         | 1,103,018 |  |                   | $ | 1,218,386 |         |  | $ | 1,127,186   |  |  | $ | 1,185,313 | 

F-35



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                        
| | -----------------------
| | Interest Rate Exposure.





| |                      
| | ---------------------
| | Commodity Derivative.





NOTE 19  Commitments and Contingencies




| |        
| | -------
| | Leases.



|                                               |                                              |                                                |        |   |         |   |        |         |        | 
|---------------------------------------------- | -------------------------------------------- | ---------------------------------------------- | ------ | - | ------- | - | ------ | ------- | ------ | 
|                                               |                                              | December 31, 2004                              |       
|                                               |                                              |                                                |       
|                                               |                                              | Operating                                      |        |   | Capital |  
|                                               |                                              | Leases                                         |        |   | Leases  |  
|                                               |                                              |                                                |        |   |         |  
|                                               |                                              | (In thousands of dollars)                      |       
|2005                                           |                                              | $                                              | 36,436 |   |         | $ | 27,364 |        
|2006                                           |                                              |                                                | 22,818 |   |         |   | 21,224 |        
|2007                                           |                                              |                                                | 22,612 |   |         |   | 6,904  |        
|2008                                           |                                              |                                                | 22,609 |   |         |   | 6,632  |        
|2009                                           |                                              |                                                | 21,283 |   |         |   |       |        
|Thereafter                                     |                                              |                                                | 37,875 |   |         |   |       |        
|                                               |                                              |                                                |        |   |         |  
|                                               |                                              | Total                                          |        | $ | 163,633 |   |        |         | 62,124 | 
|                                               |                                              |                                                |        |   |         |  
|Imputed interest                               |                                              |                                                |        |   |         |   | (3,385 | )      
|                                               |                                              |                                                |        |   |         |  
|Net present value of capital lease obligations |                                              |                                                |        |   |         |   | 58,739 |        
|                                               | Current portion of capital lease obligations |                                                |        |   |         |   |        | (25,583 | )     
|                                               |                                              |                                                |        |   |         |  
|                                               |                                              | Long-term portion of capital lease obligations |        |   |         |   |        | $       | 33,156 | 
|                                               |                                              |                                                |        |   |         |  

F-36



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                   |       |                   |        |         | 
|---------------------------------- | ----- | ----------------- | ------ | ------- | 
|                                   |       | December 31, 2004 |       
|                                   |       |                   |       
|                                   |       | (In thousands of  |       
|                                   |       | dollars)          |       
|Marine seismic and support vessels |       | $                 | 7,135  |        
|Onshore seismic equipment          |       |                   | 213    |        
|FPSO shuttle and storage tankers   |       |                   | 60,000 |        
|Operations computer equipment      |       |                   | 63     |        
|Buildings                          |       |                   | 95,714 |        
|Fixtures, furniture and fittings   |       |                   | 508    |        
|                                   |       |                   |       
|                                   | Total |                   | $      | 163,633 | 
|                                   |       |                   |       

Ramform Banff






| |       
| | ------
| | Other.





| |           
| | ----------
| | UK Leases.

Ramforms Challenger, Valiant, Viking, Victory Vanguard Petrojarl Foinaven Ramform Banff




F-37



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Petrojarl
Foinaven. Petrojarl Foinaven








F-38



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


NOTE 20  Income Taxes




|                                                         |                              |                                    |   |            |                     |  |            |             |        |   |              |        |        |  |   |         |         | 
|-------------------------------------------------------- | ---------------------------- | ---------------------------------- | - | ---------- | ------------------- |  | ---------- | ----------- | ------ | - | ------------ | ------ | ------ |  | - | ------- | ------- | 
|                                                         |                              | Successor Company                  |   |            | Predecessor Company | 
|                                                         |                              |                                    |   |            |                     | 
|                                                         |                              |                                    |   | Two Months |                     |  | Ten Months |             |        |  
|                                                         |                              | Year Ended                         |   |            | Ended               |  |            | Ended       |        |   | Year Ended   |       
|                                                         |                              | December 31,                       |   |            | December 31,        |  |            | October 31, |        |   | December 31, |       
|                                                         |                              | 2004                               |   |            | 2003                |  |            | 2003        |        |   | 2002         |       
|                                                         |                              |                                    |   |            |                     |  |            |             |        |   |              |       
|                                                         |                              | (In thousands of dollars)          |  
|Current taxes:                                           |                              |                                    |   |            |                     |  |            |             |        |   |              |        |        |  |   |        
|                                                         | Norwegian                    |                                    | $ | (5         | )                   |  | $          | 394         |        |   | $            | 6,639  |        |  | $ |        |        
|                                                         | Foreign                      |                                    |   | 20,761     |                     |  |            | 1,558       |        |   |              | 15,373 |        |  |   | 23,801  |        
|Deferred taxes:                                          |                              |                                    |   |            |                     |  |            |             |        |   |              |        |        |  |   |        
|                                                         | Norwegian                    |                                    |   | 24,534     |                     |  |            | (1,575      | )      |   |              | 2,025  |        |  |   | 158,846 |        
|                                                         | Foreign                      |                                    |   | 2,729      |                     |  |            | (4,226      | )      |   |              | (3,943 | )      |  |   | 3,243   |        
|                                                         |                              |                                    |   |            |                     |  |            |             |        |   |              |       
|                                                         |                              | Total                              |   | $          | 48,019              |  |            | $           | (3,849 | ) |              | $      | 20,094 |  |   | $       | 185,890 | 
|                                                         |                              |                                    |   |            |                     |  |            |             |        |   |              |       
|Classification in Consolidated Statements of Operations: |                              |                                    |   |            |                     |  |            |             |        |   |              |        |        |  |   |        
|                                                         | Income tax expense (benefit) |                                    |   | 48,019     |                     |  |            | (3,849      | )      |   |              | 21,911 |        |  |   | 185,890 |        
|                                                         | Fresh start adoption         |                                    |   |           |                     |  |            |            |        |   |              | (1,817 | )      |  |   |        |        
|                                                         |                              |                                    |   |            |                     |  |            |             |        |   |              |       
|                                                         |                              | Total income tax expense (benefit) |   | $          | 48,019              |  |            | $           | (3,849 | ) |              | $      | 20,094 |  |   | $       | 185,890 | 
|                                                         |                              |                                    |   |            |                     |  |            |             |        |   |              |       









F-39



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                       |                                                                                                         |                           |         |            |                     |   |            |             |  |   |              |         |  |   |         |        | 
|-------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------- | ------- | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ | ------- |  | - | ------- | ------ | 
|                                       |                                                                                                         | Successor Company         |         |            | Predecessor Company |  
|                                       |                                                                                                         |                           |         |            |                     |  
|                                       |                                                                                                         |                           |         | Two Months |                     |   | Ten Months |             |  |  
|                                       |                                                                                                         | Year Ended                |         |            | Ended               |   |            | Ended       |  |   | Year Ended   |        
|                                       |                                                                                                         | December 31,              |         |            | December 31,        |   |            | October 31, |  |   | December 31, |        
|                                       |                                                                                                         | 2004                      |         |            | 2003                |   |            | 2003        |  |   | 2002         |        
|                                       |                                                                                                         |                           |         |            |                     |   |            |             |  |   |              |        
|                                       |                                                                                                         | (In thousands of dollars) |        
|Balance at the beginning of the period |                                                                                                         | $                         | 368,550 |            |                     | $ | 365,439    |             |  | $ | 182,581      |         |  | $ | 121,498 |       
|                                       | Current year additions                                                                                  |                           |         | 41,021     |                     |   |            | 3,111       |  |   |              | 182,858 |  |   |         | 61,083 | 
|                                       | Decrease of valuation allowance related to utilization of
    pre-reorganization deferred tax assets(a) |                           |         | (4,286     | )                   |   |            |            |  |   |              |        |  |   |         |       | 
|                                       |                                                                                                         |                           |         |            |                     |   |            |             |  |   |              |        
|Balance at the end of the period       |                                                                                                         | $                         | 405,285 |            |                     | $ | 368,550    |             |  | $ | 365,439      |         |  | $ | 182,581 |       
|                                       |                                                                                                         |                           |         |            |                     |   |            |             |  |   |              |        



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The decrease of valuation allowance related to the utilization
    of tax benefits from pre-reorganization temporary differences
    and losses carried forward (for which a valuation allowance was
    provided at the date of reorganization) resulted in a
    corresponding decrease of intangible assets (see Notes 10
    and 11). Of the total valuation allowance as of
    December 31, 2004, $358.1 million relates to
    pre-reorganization amounts and will, if the related deferred tax
    assets are subsequently recognized, be allocated to reduce
    intangible assets and certain favorable lease contracts
    (included in other long-lived assets) or directly to contributed
    capital.

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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                  |                                                                         |                           |                                    |            |                     |         |            |             |         |         |              |          |         |         |          |        |          |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------- | ---------------------------------- | ---------- | ------------------- | ------- | ---------- | ----------- | ------- | ------- | ------------ | -------- | ------- | ------- | -------- | ------ | -------- | -------- | -
|                                                                                                                                                  |                                                                         | Successor Company         |                                    |            | Predecessor Company |        
|                                                                                                                                                  |                                                                         |                           |                                    |            |                     |        
|                                                                                                                                                  |                                                                         |                           |                                    | Two Months |                     |         | Ten Months |             |         |        
|                                                                                                                                                  |                                                                         | Year Ended                |                                    |            | Ended               |         |            | Ended       |         |         | Year Ended   |         
|                                                                                                                                                  |                                                                         | December 31,              |                                    |            | December 31,        |         |            | October 31, |         |         | December 31, |         
|                                                                                                                                                  |                                                                         | 2004                      |                                    |            | 2003                |         |            | 2003        |         |         | 2002         |         
|                                                                                                                                                  |                                                                         |                           |                                    |            |                     |         |            |             |         |         |              |         
|                                                                                                                                                  |                                                                         | (In thousands of dollars) |                                   
|Income (loss) from continuing operations before income taxes,
    minority interest and cumulative effect of change in accounting
    principles: |                                                                         |                           |                                    |            |                     |         |            |             |         |         |              |          |         |         |          |       
|                                                                                                                                                  |                                                                         | Norwegian                 |                                    | $          | (125,179            | )       |            | $           | (16,755 | )       |              | $        | 623,654 |         |          | $      | (547,030 | )       
|                                                                                                                                                  |                                                                         | Foreign                   |                                    |            | 35,421              |         |            |             | 3,198   |         |              |          | (46,052 | )       |          |        | (76,205  | )       
|                                                                                                                                                  |                                                                         |                           |                                    |            |                     |         |            |             |         |         |              |         
|                                                                                                                                                  |                                                                         |                           | Total                              |            |                     | (89,758 | )          |             |         | (13,557 | )            |          |         | 577,602 |          |        |          | (623,235 | )
|Norwegian statutory rate                                                                                                                          |                                                                         |                           | 28                                 | %          |                     |         | 28         | %           |         |         | 28           | %        |         |         | 28       | %     
|Expense (benefit) for income taxes at statutory rate                                                                                              |                                                                         |                           | (25,132                            | )          |                     |         | (3,796     | )           |         |         | 161,729      |          |         |         | (174,506 | )     
|Increase (reduction) in income taxes from:                                                                                                        |                                                                         |                           |                                    |            |                     |         |            |             |         |         |              |          |         |         |          |       
|                                                                                                                                                  | Foreign earnings taxed at other than statutory rate                     |                           |                                    | (7,612     | )                   |         |            | (440        | )       |         |              | (2,057   | )       |         |          | (8,023 | )       
|                                                                                                                                                  | Petroleum surtax(a)                                                     |                           |                                    | 12,343     |                     |         |            | (1,619      | )       |         |              | 5,908    |         |         |          | (2,503 | )       
|                                                                                                                                                  | Non-taxable gain on debt discharge                                      |                           |                                    |           |                     |         |            |            |         |         |              | (351,078 | )       |         |          |       |         
|                                                                                                                                                  | Exit Norwegian shipping regime 2002                                     |                           |                                    |           |                     |         |            |            |         |         |              |         |         |         |          | 78,859 |         
|                                                                                                                                                  | Prior year adjustment regarding exit Norwegian shipping regime
    2001 |                           |                                    |           |                     |         |            |            |         |         |              |         |         |         |          | 82,141 |         
|                                                                                                                                                  | Other prior year adjustments                                            |                           |                                    | 3,047      |                     |         |            |            |         |         |              |         |         |         |          |       |         
|                                                                                                                                                  | Goodwill impairment                                                     |                           |                                    |           |                     |         |            |            |         |         |              |         |         |         |          | 48,462 |         
|                                                                                                                                                  | Gain (loss) from local currency other than reporting currency           |                           |                                    | (2,578     | )                   |         |            | (1,495      | )       |         |              | 372      |         |         |          | 91,020 |         
|                                                                                                                                                  | Non-creditable foreign taxes and other permanent items                  |                           |                                    | 26,930     |                     |         |            | 390         |         |         |              | 22,362   |         |         |          | 9,357  |         
|                                                                                                                                                  | Deferred tax asset valuation allowance                                  |                           |                                    | 41,021     |                     |         |            | 3,111       |         |         |              | 182,858  |         |         |          | 61,083 |         
|                                                                                                                                                  |                                                                         |                           |                                    |            |                     |         |            |             |         |         |              |         
|                                                                                                                                                  |                                                                         |                           | Total income tax expense (benefit) |            | $                   | 48,019  |            |             | $       | (3,849  | )            |          | $       | 20,094  |          |        | $        | 185,890  |  
|                                                                                                                                                  |                                                                         |                           |                                    |            |                     |         |            |             |         |         |              |         






|    |                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Pertras income from oil activities on the Norwegian
    Continental Shelf is taxed according to the Norwegian Petroleum
    Tax Law, which includes a surtax of 50% in addition to the
    Norwegian corporate tax of 28%.

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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |   |          |   |         |        |         |        | 
|----------------------------------------------- | -------------------------------------- | ------------------------------------------------------------------- | -------------------------- | - | --------- | - | ------ | ------ | ------ | ------ | --------- | - | -------- | - | ------- | ------ | ------- | ------ | 
|                                                |                                        | December 31,                                                        |                           
|                                                |                                        |                                                                     |                           
|                                                |                                        | 2004                                                                |                            |   | 2003      |  
|                                                |                                        |                                                                     |                            |   |           |  
|                                                |                                        | Asset                                                               |                            |   | Liability |   |        | Asset  |        |        | Liability |  
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|                                                |                                        | (In thousands of dollars)                                           |                           
|Current assets                                  |                                        | $                                                                   | (3,036                     | ) |           | $ | 1,038  |        |        | $      | (11,803   | ) |          | $ | 2,188   |       
|Property, equipment and other long-lived assets |                                        |                                                                     | (23,384                    | ) |           |   | 37,002 |        |        |        | (55,035   | ) |          |   | 120,585 |       
|Tax losses carried forward                      |                                        |                                                                     | (262,458                   | ) |           |   |       |        |        |        | (326,622  | ) |          |   |        |       
|Deferred gain (loss)                            |                                        |                                                                     | (57,721                    | ) |           |   | 32,971 |        |        |        | (63,419   | ) |          |   | 37,583  |       
|Tax credits                                     |                                        |                                                                     | (2,893                     | ) |           |   |       |        |        |        | (3,855    | ) |          |   |        |       
|Expenses deductible when paid                   |                                        |                                                                     | (84,853                    | ) |           |   |       |        |        |        | (31,208   | ) |          |   |        |       
|Other temporary differences                     |                                        |                                                                     | (6,072                     | ) |           |   |       |        |        |        | (37,833   | ) |          |   | 13,773  |       
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|                                                |                                        | Total deferred tax (asset) liability before valuation
    allowance |                            |   | (440,417  | ) |        |        | 71,011 |        |           |   | (529,775 | ) |         |        | 174,129 |       
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|Deferred tax asset valuation allowance          |                                        |                                                                     | 405,285                    |   |           |   |        |        |        |        | 368,550   |   |          |   |         |       
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|                                                |                                        | Deferred tax (asset) liability                                      |                            | $ | (35,132   | ) |        | $      | 71,011 |        |           | $ | (161,225 | ) |         | $      | 174,129 |       
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|                                                | Net deferred tax liability  Norwegian |                                                                     |                            |   |           |   |        | 35,514 |        |        |           |   |          |   |         | 10,980 |        
|                                                | Net deferred tax liability  Foreign   |                                                                     |                            |   |           |   |        | 365    |        |        |           |   |          |   |         | 1,924  |        
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|                                                |                                        |                                                                     | Net deferred tax liability |   |           |   |        |        | $      | 35,879 |           |   |          |   |         |        | $       | 12,904 | 
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|Classification in Consolidated Balance Sheets:  |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |   |          |   |         |       
|                                                | Short-term deferred tax liability      |                                                                     |                            |   |           |   | $      | 761    |        |        |           |   |          |   | $       | 2,166  |        
|                                                | Long-term deferred tax liability       |                                                                     |                            |   |           |   |        | 35,118 |        |        |           |   |          |   |         | 10,738 |        
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  
|                                                |                                        |                                                                     | Net deferred tax liability |   |           |   |        |        | $      | 35,879 |           |   |          |   |         |        | $       | 12,904 | 
|                                                |                                        |                                                                     |                            |   |           |   |        |        |        |        |           |  





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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                    
|--------- | -------------------
|NOTE 21  | Pension Obligations







|                                                        |                                              |                           |         |         |      |   |        |         | 
|------------------------------------------------------- | -------------------------------------------- | ------------------------- | ------- | ------- | ---- | - | ------ | ------- | 
|                                                        |                                              | December 31,              |        
|                                                        |                                              |                           |        
|                                                        |                                              | 2004                      |         |         | 2003 |  
|                                                        |                                              |                           |         |         |      |  
|                                                        |                                              | (In thousands of dollars) |        
|Projected benefit obligations at beginning of period(a) |                                              | $                         | 101,855 |         |      | $ | 90,478 |        
|Service cost                                            |                                              |                           | 10,198  |         |      |   | 1,204  |        
|Interest cost                                           |                                              |                           | 5,145   |         |      |   | 1,207  |        
|Employee contributions                                  |                                              |                           | 968     |         |      |   |       |        
|Payroll tax                                             |                                              |                           | 178     |         |      |   | 1,359  |        
|Actuarial (gain) loss, net                              |                                              |                           | (9,532  | )       |      |   | 3,338  |        
|Benefits paid                                           |                                              |                           | (1,212  | )       |      |   |       |        
|Exchange rate effects                                   |                                              |                           | 10,196  |         |      |   | 4,269  |        
|                                                        |                                              |                           |         |         |      |  
|                                                        | Projected benefit obligations at end of year |                           | $       | 117,796 |      |   | $      | 101,855 | 
|                                                        |                                              |                           |         |         |      |  



|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Projected benefit obligations at beginning of period in the
    column for 2003 refers to fresh start reporting as of
    November 1, 2003.



|                                                    |                                          |                  |        |        |      |   |        |        | 
|--------------------------------------------------- | ---------------------------------------- | ---------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                                    |                                          | December 31,     |       
|                                                    |                                          |                  |       
|                                                    |                                          | 2004             |        |        | 2003 |  
|                                                    |                                          |                  |        |        |      |  
|                                                    |                                          | (In thousands of |       
|                                                    |                                          | dollars)         |       
|Fair value of plan assets at beginning of period(b) |                                          | $                | 53,332 |        |      | $ | 50,134 |       
|Adjustment at beginning of year                     |                                          |                  | (1,214 | )      |      |   |       |       
|Return on plan assets                               |                                          |                  | 4,130  |        |      |   | 819    |       
|Employer contributions                              |                                          |                  | 8,383  |        |      |   | 504    |       
|Employee contributions                              |                                          |                  | 968    |        |      |   |       |       
|Benefits paid                                       |                                          |                  | (1,212 | )      |      |   |       |       
|Exchange rate effects                               |                                          |                  | 7,178  |        |      |   | 1,875  |       
|                                                    |                                          |                  |        |        |      |  
|                                                    | Fair value of plan assets at end of year |                  | $      | 71,565 |      |   | $      | 53,332 | 
|                                                    |                                          |                  |        |        |      |  



|    |                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------
|(b) | Fair value of plan assets at beginning of period in the column
    for 2003 refers to fresh start reporting as of November 1,
    2003.

F-43



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |                                                    |                           |         |         |      |   |         |         |  
|---------------------------------- | -------------------------------------------------- | ------------------------- | ------- | ------- | ---- | - | ------- | ------- | -
|                                   |                                                    | December 31,              |        
|                                   |                                                    |                           |        
|                                   |                                                    | 2004                      |         |         | 2003 |  
|                                   |                                                    |                           |         |         |      |  
|                                   |                                                    | (In thousands of dollars) |        
|Funded status                      |                                                    | $                         | (46,232 | )       |      | $ | (48,523 | )      
|Unrecognized actuarial (gain) loss |                                                    |                           | (6,021  | )       |      |   | 3,338   |        
|Additional minimum liability       |                                                    |                           | (219    | )       |      |   |        |        
|                                   |                                                    |                           |         |         |      |  
|                                   | Net amount recognized as accrued pension liability |                           | $       | (52,472 | )    |   | $       | (45,185 | )
|                                   |                                                    |                           |         |         |      |  





|                              |  |        |     |   |      |  |     |        |  |  |     |   |  |  |     |  
|----------------------------- |  | ------ | --- | - | ---- |  | --- | ------ |  |  | --- | - |  |  | --- | -
|                              |  | 2004   |     |   | 2003 | 
|                              |  |        |     |   |      | 
|                              |  | Norway |     |   | UK   |  |     | Norway |  |  | UK  |  
|                              |  |        |     |   |      |  |     |        |  |  |     |  
|Discount rate                 |  |        | 5.3 | % |      |  | 5.3 | %      |  |  | 6.0 | % |  |  | 5.3 | %
|Return on plan assets         |  |        | 6.3 | % |      |  | 7.5 | %      |  |  | 7.0 | % |  |  | 7.5 | %
|Benefit increase              |  |        | 3.0 | % |      |  | 3.0 | %      |  |  | 3.0 | % |  |  | 4.7 | %
|Annual adjustment to pensions |  |        | 3.0 | % |      |  | 3.0 | %      |  |  | 3.0 | % |  |  | 3.0 | %





|                                      |                           |                           |        |            |                     |   |            |             |  |   |              |       |  |   |        |       | 
|------------------------------------- | ------------------------- | ------------------------- | ------ | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ | ----- |  | - | ------ | ----- | 
|                                      |                           | Successor Company         |        |            | Predecessor Company |  
|                                      |                           |                           |        |            |                     |  
|                                      |                           |                           |        | Two Months |                     |   | Ten Months |             |  |  
|                                      |                           | Year Ended                |        |            | Ended               |   |            | Ended       |  |   | Year Ended   |      
|                                      |                           | December 31,              |        |            | December 31,        |   |            | October 31, |  |   | December 31, |      
|                                      |                           | 2004                      |        |            | 2003                |   |            | 2003        |  |   | 2002         |      
|                                      |                           |                           |        |            |                     |   |            |             |  |   |              |      
|                                      |                           | (In thousands of dollars) |       
|Service cost                          |                           | $                         | 10,198 |            |                     | $ | 1,204      |             |  | $ | 7,145        |       |  | $ | 7,928  |      
|Interest cost                         |                           |                           | 5,145  |            |                     |   | 1,207      |             |  |   | 3,247        |       |  |   | 3,108  |      
|Expected return on plan assets        |                           |                           | (4,130 | )          |                     |   | (819       | )           |  |   | (2,977       | )     |  |   | (3,439 | )    
|Amortization of actuarial loss (gain) |                           |                           | 16     |            |                     |   | (80        | )           |  |   | 403          |       |  |   | 1,908  |      
|Amortization of prior service cost    |                           |                           |       |            |                     |   |           |             |  |   | 3            |       |  |   | 2      |      
|Amortization of transition obligation |                           |                           |       |            |                     |   |           |             |  |   | 17           |       |  |   | 15     |      
|Adjustment to minimum liability       |                           |                           | 198    |            |                     |   |           |             |  |   |             |       |  |   |       |      
|Administration cost                   |                           |                           | 99     |            |                     |   |           |             |  |   |             |       |  |   |       |      
|Payroll tax                           |                           |                           | 949    |            |                     |   | 266        |             |  |   | 397          |       |  |   | 367    |      
|                                      |                           |                           |        |            |                     |   |            |             |  |   |              |      
|                                      | Net periodic pension cost |                           | $      | 12,475     |                     |   | $          | 1,778       |  |   | $            | 8,235 |  |   | $      | 9,889 | 
|                                      |                           |                           |        |            |                     |   |            |             |  |   |              |      

F-44



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                  |         |  |      |   |        | 
|------------------------------ |  | ---------------- | ------- |  | ---- | - | ------ | 
|                               |  | December 31,     |        
|                               |  |                  |        
|                               |  | 2004             |         |  | 2003 |  
|                               |  |                  |         |  |      |  
|                               |  | (In thousands of |        
|                               |  | dollars)         |        
|Projected benefit obligation   |  | $                | 112,727 |  |      | $ | 89,819 | 
|Accumulated benefit obligation |  |                  | 100,167 |  |      |   | 72,151 | 
|Fair value of plan assets      |  |                  | 67,147  |  |      |   | 45,074 | 



|                          |       |                          |        |      |    |          |        |     |   |   |        |     |   |   |        |     |   |   |        |     |  
|------------------------- | ----- | ------------------------ | ------ | ---- | -- | -------- | ------ | --- | - | - | ------ | --- | - | - | ------ | --- | - | - | ------ | --- | -
|                          |       | Norway(1)                |        |      | UK |          |        |     |   |   |        |    
|                          |       |                          |        |      |    |          |        |     |   |   |        |    
|                          |       |                          |        |      |    | )        |        |     |  
|                          |       |                          |        |      |    | Norway(1 |        |     |  
|                          |       | December 31,             |       
|                          |       |                          |       
|                          |       |                          |        | 2003 |   
|                          |       |                          |        |      |   
|                          |       | 2004                     |        |      |    |          | UK     |    
|                          |       |                          |        |      |    |          |        |    
|                          |       | )                        |       
|                          |       | (In thousands of dollars |       
|Fair value of plan assets |       | $                        | 40,111 |      |    | $        | 31,454 |     |   | $ | 15,280 |     |   | $ | 14,907 |     |   | $ | 23,145 |    
|                          |       |                          |        |      |    |          |        |     |   |   |        |     |   |   |       
|Bonds                     |       |                          | 69     | %    |    |          |       |     |   |   | 62     | %   |   |   | 57     | %   |   |   |       |    
|Equity securities         |       |                          | 16     | %    |    |          | 92     | %   |   |   | 13     | %   |   |   | 14     | %   |   |   | 74     | %  
|Real estate               |       |                          | 12     | %    |    |          |       |     |   |   | 12     | %   |   |   | 13     | %   |   |   |       |    
|Other                     |       |                          | 3      | %    |    |          | 8      | %   |   |   | 13     | %   |   |   | 16     | %   |   |   | 26     | %  
|                          |       |                          |        |      |    |          |        |     |   |   |        |     |   |   |       
|                          | Total |                          |        | 100  | %  |          |        | 100 | % |   |        | 100 | % |   |        | 100 | % |   |        | 100 | %
|                          |       |                          |        |      |    |          |        |     |   |   |        |     |   |   |       



|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|(1) | Prior to 2004, the plans in Norway were with two separate
    companies. These companies merged in 2004.





|                  |  |                           |        | 
|----------------- |  | ------------------------- | ------ | 
|                  |  | (In thousands of dollars) |       
|2005              |  | $                         | 1,431  | 
|2006              |  |                           | 1,500  | 
|2007              |  |                           | 1,620  | 
|2008              |  |                           | 1,777  | 
|2009              |  |                           | 1,991  | 
|2010 through 2014 |  |                           | 16,494 | 



F-45



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




NOTE 22  Share Based Compensation Plans






|                                                                 |  |                                                   |          |          |       |  |        |         |          |  |          |   |  |  |        | 
|---------------------------------------------------------------- |  | ------------------------------------------------- | -------- | -------- | ----- |  | ------ | ------- | -------- |  | -------- | - |  |  | ------ | 
|                                                                 |  | December 31,                                      |         
|                                                                 |  |                                                   |         
|                                                                 |  | 2003                                              |          |          | 2002  | 
|                                                                 |  |                                                   |          |          |       | 
|                                                                 |  |                                                   |          | Weighted |       |  |        |         | Weighted | 
|                                                                 |  |                                                   |          | Average  |       |  |        |         | Average  | 
|                                                                 |  |                                                   |          | Exercise |       |  |        |         | Exercise | 
|                                                                 |  | Options                                           |          |          | Price |  |        | Options |          |  | Price    |  
|                                                                 |  |                                                   |          |          |       |  |        |         |          |  |          |  
|                                                                 |  | (In thousands of options, except exercise prices) |         
|Outstanding at beginning of year                                 |  |                                                   | 4,973.5  |          |       |  | NOK135 |         |          |  | 8,635.4  |   |  |  | NOK142 | 
|Granted                                                          |  |                                                   |         |          |       |  |       |         |          |  |         |   |  |  |       | 
|Exercised                                                        |  |                                                   |         |          |       |  |       |         |          |  |         |   |  |  |       | 
|Forfeited/cancelled                                              |  |                                                   | (4,973.5 | )        |       |  | NOK135 |         |          |  | (3,661.9 | ) |  |  | NOK151 | 
|                                                                 |  |                                                   |          |          |       |  |        |         |          |  |          |  
|Outstanding at December 31                                       |  |                                                   |         |          |       |  |       |         |          |  | 4,973.5  |   |  |  | NOK135 | 
|                                                                 |  |                                                   |          |          |       |  |        |         |          |  |          |  
|Weighted average grant fair value of options granted during year |  |                                                   |          |          |       |  |       |         |          |  |          |   |  |  |       | 
|                                                                 |  |                                                   |          |          |       |  |        |         |          |  |          |  

F-46



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                              |                                 |                                                     |          |            |                     |   |            |             |   |   |              |         |  |   |            |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | --------------------------------------------------- | -------- | ---------- | ------------------- | - | ---------- | ----------- | - | - | ------------ | ------- |  | - | ---------- | ---------- | -
|                                                                                                                                              |                                 | Successor Company                                   |          |            | Predecessor Company |  
|                                                                                                                                              |                                 |                                                     |          |            |                     |  
|                                                                                                                                              |                                 |                                                     |          | Two Months |                     |   | Ten Months |             |   |  
|                                                                                                                                              |                                 | Year Ended                                          |          |            | Ended               |   |            | Ended       |   |   | Year Ended   |        
|                                                                                                                                              |                                 | December 31,                                        |          |            | December 31,        |   |            | October 31, |   |   | December 31, |        
|                                                                                                                                              |                                 | 2004                                                |          |            | 2003                |   |            | 2003        |   |   | 2002         |        
|                                                                                                                                              |                                 |                                                     |          |            |                     |   |            |             |   |   |              |        
|                                                                                                                                              |                                 | (In thousands of dollars, except per share amounts) |         
|Net income (loss), as reported                                                                                                                |                                 | $                                                   | (134,730 | )          |                     | $ | (9,953     | )           |   | $ | 557,045      |         |  | $ | (1,174,678 | )         
|Deduct: Total share-based compensation expense determined under
    the fair value based method for all awards, net of related tax
    effect |                                 |                                                     |         |            |                     |   |           |             |   |   | (5,105       | )       |  |   | (9,804     | )         
|                                                                                                                                              |                                 |                                                     |          |            |                     |   |            |             |   |   |              |        
|                                                                                                                                              | Pro forma, net income (loss)    |                                                     | $        | (134,730   | )                   |   | $          | (9,953      | ) |   | $            | 551,940 |  |   | $          | (1,184,482 | )
|                                                                                                                                              |                                 |                                                     |          |            |                     |   |            |             |   |   |              |        
|Net income (loss) per share:                                                                                                                  |                                 |                                                     |          |            |                     |   |            |             |   |   |              |         |  |   |            |           
|                                                                                                                                              | Basic and diluted  as reported |                                                     | $        | (6.74      | )                   |   | $          | (0.50       | ) |   | $            | 5.39    |  |   | $          | (11.37     | )
|                                                                                                                                              | Basic and diluted  pro forma   |                                                     | $        | (6.74      | )                   |   | $          | (0.50       | ) |   | $            | 5.34    |  |   | $          | (11.46     | )



NOTE 23  Acquisitions and Dispositions


Petrojarl Varg








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PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   |            |          |        |   |          |          |          |   |   |          |          |  
|------------------------------------------------------------------------------------------------------------ | ------------------------ | ------------------------- | ---- | ---- | ------------------- | - | ------ | ---------------------------- | - | ---------- | -------- | ------ | - | -------- | -------- | -------- | - | - | -------- | -------- | -
|                                                                                                             |                          | Successor                 |      |      |                    
|                                                                                                             |                          | Company                   |      |      | Predecessor Company |  
|                                                                                                             |                          |                           |      |      |                     |  
|                                                                                                             |                          | Two Months                |      |      | Ten Months          |   |        |                             
|                                                                                                             |                          | Ended                     |      |      | Ended               |   |        |                             
|                                                                                                             |                          | December 31,              |      |      | October 31,         |   |        | Year Ended December 31, 2002 |  
|                                                                                                             |                          | 2003                      |      |      | 2003                |   |        |                              |  
|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   | Production |         
|                                                                                                             |                          | Tigress                   |      |      | Tigress             |   |        | Tigress                      |   |            | Atlantis |        |   | Services |         
|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   |            |          |        |   |          |         
|                                                                                                             |                          | (In thousands of dollars) |     
|Revenue                                                                                                      |                          | $                         | 137  |      |                     | $ | 1,107  |                              |   | $          | 1,684    |        |   | $        | 23,452   |          |   | $ | 181,302  |         
|Operating expenses before depreciation, amortization, impairment
    and other operating income and expenses |                          |                           | (264 | )    |                     |   | (2,433 | )                            |   |            | (2,796   | )      |   |          | (15,836  | )        |   |   | (176,642 | )       
|Depreciation and amortization                                                                                |                          |                           |     |      |                     |   | (707   | )                            |   |            | (913     | )      |   |          |         |          |   |   | (455     | )       
|Impairment of long-term assets                                                                               |                          |                           |     |      |                     |   |       |                              |   |            |         |        |   |          | (169,284 | )        |   |   |         |         
|Other operating income and expenses                                                                          |                          |                           |     |      |                     |   | (512   | )                            |   |            |         |        |   |          |         |          |   |   |         |         
|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   |            |          |        |   |          |         
|                                                                                                             | Total operating expenses |                           |      | (264 | )                   |   |        | (3,652                       | ) |            |          | (3,709 | ) |          |          | (185,120 | ) |   |          | (177,097 | )
|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   |            |          |        |   |          |         
|Operating profit (loss)                                                                                      |                          |                           | (127 | )    |                     |   | (2,545 | )                            |   |            | (2,025   | )      |   |          | (161,668 | )        |   |   | 4,205    |         
|Financial expenses and other financial items, net                                                            |                          |                           | 24   |      |                     |   | (1,237 | )                            |   |            | (1,278   | )      |   |          | 1,545    |          |   |   | (74      | )       
|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   |            |          |        |   |          |         
|Income (loss) before income taxes and change in accounting
    principle                                     |                          | $                         | (103 | )    |                     | $ | (3,782 | )                            |   | $          | (3,303   | )      |   | $        | (160,123 | )        |   | $ | 4,131    |         
|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   |            |          |        |   |          |         
|Capital expenditures of discontinued operations                                                              |                          | $                         |     |      |                     | $ | 118    |                              |   | $          | 135      |        |   | $        | 77,126   |          |   | $ | 103      |         
|                                                                                                             |                          |                           |      |      |                     |   |        |                              |   |            |          |        |   |          |         



|                                                                                                       |                                               |                           |       |            |                     |   |            |             |   |   |              |        |   |   |          |          |  
|------------------------------------------------------------------------------------------------------ | --------------------------------------------- | ------------------------- | ----- | ---------- | ------------------- | - | ---------- | ----------- | - | - | ------------ | ------ | - | - | -------- | -------- | -
|                                                                                                       |                                               | Successor Company         |       |            | Predecessor Company |  
|                                                                                                       |                                               |                           |       |            |                     |  
|                                                                                                       |                                               |                           |       | Two Months |                     |   | Ten Months |             |   |  
|                                                                                                       |                                               | Year Ended                |       |            | Ended               |   |            | Ended       |   |   | Year Ended   |       
|                                                                                                       |                                               | December 31,              |       |            | December 31,        |   |            | October 31, |   |   | December 31, |       
|                                                                                                       |                                               | 2004                      |       |            | 2003                |   |            | 2003        |   |   | 2002         |       
|                                                                                                       |                                               |                           |       |            |                     |   |            |             |   |   |              |       
|                                                                                                       |                                               | (In thousands of dollars) |      
|Income (loss) from discontinued operations before income taxes
    and change in accounting principles |                                               | $                         |      |            |                     | $ | (103       | )           |   | $ | (3,782       | )      |   | $ | (159,295 | )       
|Loss on disposal                                                                                       |                                               |                           |      |            |                     |   | (32        | )           |   |   |             |        |   |   | (31,580  | )       
|Additional proceeds                                                                                    |                                               |                           | 3,048 |            |                     |   |           |             |   |   | 1,500        |        |   |   |         |         
|Income tax benefit (expense)                                                                           |                                               |                           |      |            |                     |   |           |             |   |   |             |        |   |   | (9,588   | )       
|Goodwill impairments SFAS 142, net of tax                                                              |                                               |                           |      |            |                     |   |           |             |   |   |             |        |   |   | (674     | )       
|                                                                                                       |                                               |                           |       |            |                     |   |            |             |   |   |              |       
|                                                                                                       | Loss from discontinued operations, net of tax |                           | $     | 3,048      |                     |   | $          | (135        | ) |   | $            | (2,282 | ) |   | $        | (201,137 | )
|                                                                                                       |                                               |                           |       |            |                     |   |            |             |   |   |              |       



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PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Subsequent Event:






|                                    |                   |                  |        |         |      |   |        |        | 
|----------------------------------- | ----------------- | ---------------- | ------ | ------- | ---- | - | ------ | ------ | 
|                                    |                   | December 31,     |       
|                                    |                   |                  |       
|                                    |                   | 2004             |        |         | 2003 |  
|                                    |                   |                  |        |         |      |  
|                                    |                   | (In thousands of |       
|                                    |                   | dollars)         |       
|Cash and cash equivalents           |                   | $                | 13,423 |         |      | $ | 16,437 |       
|Accounts receivable, net            |                   |                  | 7,406  |         |      |   | (6     | )     
|Other current assets                |                   |                  | 15,916 |         |      |   | 5,242  |       
|Property and equipment, net         |                   |                  | 937    |         |      |   | 44     |       
|Oil and natural gas assets, net     |                   |                  | 70,940 |         |      |   | 33,523 |       
|Other long-lived assets             |                   |                  | 12,024 |         |      |   | 11,828 |       
|                                    |                   |                  |        |         |      |  
|                                    | Total assets      |                  | $      | 120,646 |      |   | $      | 67,068 | 
|                                    |                   |                  |        |         |      |  
|Accounts payable                    |                   | $                | 1,624  |         |      | $ | 3      |       
|Accrued expenses                    |                   |                  | 8,720  |         |      |   | 11,702 |       
|Deferred tax liabilities, current   |                   |                  | 761    |         |      |   | 2,166  |       
|Income taxes payable                |                   |                  |       |         |      |   | 3,587  |       
|Other long-term liabilities         |                   |                  | 39,942 |         |      |   | 32,764 |       
|Deferred tax liabilities, long-term |                   |                  | 34,752 |         |      |   | 8,813  |       
|                                    |                   |                  |        |         |      |  
|                                    | Total liabilities |                  | $      | 85,799  |      |   | $      | 59,035 | 
|                                    |                   |                  |        |         |      |  

NOTE 24  Related Party Transactions




Nordic
Svenita Nordic Yukon


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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Nordic Yukon


NOTE 25  Investments in Associated
Companies




|                                       |                              |                           |   |            |                     |  |            |             |     |  |              |       |     |  |   |        |         |  
|-------------------------------------- | ---------------------------- | ------------------------- | - | ---------- | ------------------- |  | ---------- | ----------- | --- |  | ------------ | ----- | --- |  | - | ------ | ------- | -
|                                       |                              | Successor Company         |   |            | Predecessor Company | 
|                                       |                              |                           |   |            |                     | 
|                                       |                              |                           |   | Two Months |                     |  | Ten Months |             |     | 
|                                       |                              | Year Ended                |   |            | Ended               |  |            | Ended       |     |  | Year Ended   |      
|                                       |                              | December 31,              |   |            | December 31,        |  |            | October 31, |     |  | December 31, |      
|                                       |                              | 2004                      |   |            | 2003                |  |            | 2003        |     |  | 2002         |      
|                                       |                              |                           |   |            |                     |  |            |             |     |  |              |      
|                                       |                              | (In thousands of dollars) |  
|Corporations and limited partnerships: |                              |                           |   |            |                     |  |            |             |     |  |              |       |     |  |   |       
|                                       | Geo Explorer AS              |                           | $ | 26         |                     |  | $          | 119         |     |  | $            | 1,425 |     |  | $ | 142    |        
|                                       | Atlantic Explorer (IoM) Ltd. |                           |   | (80        | )                   |  |            |            |     |  |              |      |     |  |   |       |        
|                                       | FW Oil Exploration LLC       |                           |   |           |                     |  |            |            |     |  |              |      |     |  |   | (5,845 | )      
|                                       | Ikdam Production SA          |                           |   | 722        |                     |  |            | 81          |     |  |              | 162   |     |  |   | (3,561 | )      
|                                       | Triumph Petroleum            |                           |   |           |                     |  |            |            |     |  |              | (813  | )   |  |   | (2,237 | )      
|                                       |                              |                           |   |            |                     |  |            |             |     |  |              |      
|                                       |                              | Total                     |   | $          | 668                 |  |            | $           | 200 |  |              | $     | 774 |  |   | $      | (11,501 | )
|                                       |                              |                           |   |            |                     |  |            |             |     |  |              |      



|                                       |                              |                           |    |       |          |         |   |             |     |  |              |        |           |              |   |    |               |  |    |       |       |  |  |      |   | 
|-------------------------------------- | ---------------------------- | ------------------------- | -- | ----- | -------- | ------- | - | ----------- | --- |  | ------------ | ------ | --------- | ------------ | - | -- | ------------- |  | -- | ----- | ----- |  |  | ---- | - | 
|                                       |                              |                           |    |       |          | Paid-In |   |             |     |  |              |        | Ownership |             
|                                       |                              | Book Value                |    |       | Share of |         |   | Capital/    |     |  | Equity       |        |           | Book Value   |   |    | Percent as of | 
|                                       |                              | December 31,              |    |       | Income   |         |   | (Dividends) |     |  | Transactions |        |           | December 31, |   |    | December 31,  | 
|                                       |                              | 2003                      |    |       | 2004     |         |   | 2004        |     |  | 2004(a)      |        |           | 2004         |   |    | 2004          | 
|                                       |                              |                           |    |       |          |         |   |             |     |  |              |        |           |              |   |    |               | 
|                                       |                              | (In thousands of dollars) |   
|Corporations and limited partnerships: |                              |                           |    |       |          |         |   |             |     |  |              |        |           |              |   |    |               |  |    |       |       |  |  |     
|                                       | Geo Explorer AS              |                           | $  | 3,174 |          |         | $ | 26          |     |  | $            | (3,018 | )         |              | $ |   |               |  | $  | 182   |       |  |  | 50.0 | %
|                                       | Atlantic Explorer (IoM) Ltd. |                           |    | 112   |          |         |   | (80         | )   |  |              |       |           |              |   |   |               |  |    | 32    |       |  |  | 50.0 | %
|                                       | Ikdam Production, SA         |                           |    | 4,690 |          |         |   | 722         |     |  |              |       |           |              |   | (1 | )             |  |    | 5,411 |       |  |  | 40.0 | %
|General partnerships                   |                              |                           | 94 |       |          |         |  |             |     |  |             |        |           |              | 1 |    |               |  | 95 |       |       |  |  |     
|                                       |                              |                           |    |       |          |         |   |             |     |  |              |        |           |              |   |    |               | 
|                                       |                              | Total                     |    | $     | 8,070    |         |   | $           | 668 |  |              | $      | (3,018    | )            |   | $  |              |  |    | $     | 5,720 |  |  |      |   | 
|                                       |                              |                           |    |       |          |         |   |             |     |  |              |        |           |              |   |    |               | 






|    |                                                   
|--- | --------------------------------------------------
|(a) | Includes foreign currency translation differences.

NOTE 26  Segment and Geographic
Information






| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Marine Geophysical, which consists of both streamer and
    seafloor seismic data acquisition, marine multi-client library
    and data processing;      
|
| |  | Onshore, which consists of all seismic operations on land
    and in very shallow water and transition zones, including
    onshore multi-client library;
|
| |  | Production, which owns and operates four harsh
    environment FPSOs in the North Sea; and                                                               

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PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pertra, a small oil and natural gas company that owns 70%
    of and was operator for PL 038 on the Norwegian Continental
    Shelf (NCS) and also owns participating interests in
    six additional NCS licenses without current production.





Petrojarl Varg,




|                                 |  |                           |         |  |         |   |         |            |  |            |           |  |             |               |         |  |       |   |        |       |  |   |         |   |  |   |           | 
|-------------------------------- |  | ------------------------- | ------- |  | ------- | - | ------- | ---------- |  | ---------- | --------- |  | ----------- | ------------- | ------- |  | ----- | - | ------ | ----- |  | - | ------- | - |  | - | --------- | 
|                                 |  |                           |         |  |         |   |         |            |  | Reservoir/ |           |  |             |               |        
|                                 |  |                           |         |  |         |   |         |            |  | Shared     |           |  | Elimination |               |         | 
|                                 |  | Marine                    |         |  |         |   |         |            |  |            | Services/ |  |             | of Affiliated |         |  |      
|                                 |  | Geophysical               |         |  | Onshore |   |         | Production |  |            | Pertra    |  |             | Corporate     |         |  | Sales |   |        | Total | 
|                                 |  |                           |         |  |         |   |         |            |  |            |           |  |             |               |         |  |       |   |        |       | 
|                                 |  | (In thousands of dollars) |        
|Revenue, unaffiliated companies: |  |                           |         |  |         |   |         |            |  |            |           |  |             |               |         |  |       |   |        |       |  |   |         |   |  |   |           | 
|2004 (Successor)                 |  | $                         | 561,898 |  |         | $ | 133,161 |            |  | $          | 237,815   |  |             | $             | 184,134 |  |       | $ | 12,460 |       |  | $ |        |   |  | $ | 1,129,468 | 
|2003 (Successor  two months)    |  |                           | 99,283  |  |         |   | 21,459  |            |  |            | 39,745    |  |             |               | 9,544   |  |       |   | 2,340  |       |  |   |        |   |  |   | 172,371   | 
|2003 (Predecessor  ten months)  |  |                           | 498,719 |  |         |   | 128,965 |            |  |            | 210,437   |  |             |               | 112,097 |  |       |   | 11,646 |       |  |   |        |   |  |   | 961,864   | 
|2002 (Predecessor)               |  |                           | 587,229 |  |         |   | 118,698 |            |  |            | 291,762   |  |             |               | 32,697  |  |       |   | 12,845 |       |  |   |        |   |  |   | 1,043,231 | 
|Revenue, includes affiliates:    |  |                           |         |  |         |   |         |            |  |            |           |  |             |               |         |  |       |   |        |       |  |   |         |   |  |   |           | 
|2004 (Successor)                 |  | $                         | 570,805 |  |         | $ | 133,161 |            |  | $          | 298,202   |  |             | $             | 184,134 |  |       | $ | 20,852 |       |  | $ | (77,686 | ) |  | $ | 1,129,468 | 
|2003 (Successor  two months)    |  |                           | 99,382  |  |         |   | 21,459  |            |  |            | 45,229    |  |             |               | 9,544   |  |       |   | 4,957  |       |  |   | (8,200  | ) |  |   | 172,371   | 
|2003 (Predecessor  ten months)  |  |                           | 500,113 |  |         |   | 128,965 |            |  |            | 250,058   |  |             |               | 112,097 |  |       |   | 16,243 |       |  |   | (45,612 | ) |  |   | 961,864   | 
|2002 (Predecessor)               |  |                           | 592,640 |  |         |   | 118,698 |            |  |            | 306,645   |  |             |               | 32,697  |  |       |   | 16,022 |       |  |   | (23,471 | ) |  |   | 1,043,231 | 
|Depreciation and amortization:   |  |                           |         |  |         |   |         |            |  |            |           |  |             |               |         |  |       |   |        |       |  |   |         |   |  |   |           | 
|2004 (Successor)                 |  | $                         | 241,712 |  |         | $ | 39,885  |            |  | $          | 44,561    |  |             | $             | 38,965  |  |       | $ | 3,239  |       |  | $ |        |   |  | $ | 368,362   | 
|2003 (Successor  two months)    |  |                           | 39,351  |  |         |   | 6,224   |            |  |            | 8,112     |  |             |               | 743     |  |       |   | 1,269  |       |  |   |        |   |  |   | 55,699    | 
|2003 (Predecessor  ten months)  |  |                           | 191,215 |  |         |   | 29,425  |            |  |            | 43,418    |  |             |               | 30,826  |  |       |   | 6,692  |       |  |   |        |   |  |   | 301,576   | 
|2002 (Predecessor)               |  |                           | 247,933 |  |         |   | 28,408  |            |  |            | 70,958    |  |             |               | 12,695  |  |       |   | 7,509  |       |  |   |        |   |  |   | 367,503   | 
|Impairment of long-lived assets: |  |                           |         |  |         |   |         |            |  |            |           |  |             |               |         |  |       |   |        |       |  |   |         |   |  |   |           | 
|2004 (Successor)                 |  | $                         |        |  |         | $ |        |            |  | $          |          |  |             | $             |        |  |       | $ |       |       |  | $ |        |   |  | $ |          | 
|2003 (Successor  two months)    |  |                           |        |  |         |   |        |            |  |            |          |  |             |               |        |  |       |   |       |       |  |   |        |   |  |   |          | 
|2003 (Predecessor  ten months)  |  |                           | 89,598  |  |         |   | 5,085   |            |  |            | 328       |  |             |               |        |  |       |   |       |       |  |   |        |   |  |   | 95,011    | 
|2002 (Predecessor)               |  |                           | 220,594 |  |         |   | 5,906   |            |  |            | 331,971   |  |             |               |        |  |       |   |       |       |  |   |        |   |  |   | 558,471   | 

F-51



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                     |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|-------------------------------------------------------------------- |  | ------------------------- | -------- | - | ------- | - | ------- | ---------- |  | ---------- | --------- | - | ----------- | ------------- | -------- | - | ----- | - | ------- | ----- |  | - | ------ | - |  | - | --------- | -
|                                                                     |  |                           |          |   |         |   |         |            |  | Reservoir/ |           |   |             |               |         
|                                                                     |  |                           |          |   |         |   |         |            |  | Shared     |           |   | Elimination |               |          |  
|                                                                     |  | Marine                    |          |   |         |   |         |            |  |            | Services/ |   |             | of Affiliated |          |   |      
|                                                                     |  | Geophysical               |          |   | Onshore |   |         | Production |  |            | Pertra    |   |             | Corporate     |          |   | Sales |   |         | Total | 
|                                                                     |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       | 
|                                                                     |  | (In thousands of dollars) |         
|Other operating (income) expense, net:                               |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|2004 (Successor)                                                     |  | $                         | (13      | ) |         | $ | 9       |            |  | $          |          |   |             | $             |         |   |       | $ | 8,116   |       |  | $ |       |   |  | $ | 8,112     |  
|2003 (Successor  two months)                                        |  |                           | 1,189    |   |         |   | 38      |            |  |            |          |   |             |               |         |   |       |   | (175    | )     |  |   |       |   |  |   | 1,052     |  
|2003 (Predecessor  ten months)                                      |  |                           | 8,107    |   |         |   | 266     |            |  |            |          |   |             |               |         |   |       |   | 12,951  |       |  |   |       |   |  |   | 21,324    |  
|2002 (Predecessor)                                                   |  |                           | 1,341    |   |         |   | 2,625   |            |  |            |          |   |             |               |         |   |       |   | 4,521   |       |  |   |       |   |  |   | 8,487     |  
|Operating profit (loss):                                             |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|2004 (Successor)                                                     |  | $                         | (34,967  | ) |         | $ | (4,544  | )          |  | $          | 77,769    |   |             | $             | 28,120   |   |       | $ | (29,102 | )     |  | $ | (1,593 | ) |  | $ | 35,683    |  
|2003 (Successor  two months)                                        |  |                           | 583      |   |         |   | 1,740   |            |  |            | 11,878    |   |             |               | (3,198   | ) |       |   | (301    | )     |  |   |       |   |  |   | 10,702    |  
|2003 (Predecessor  ten months)                                      |  |                           | (55,923  | ) |         |   | 14,390  |            |  |            | 66,548    |   |             |               | 17,236   |   |       |   | (32,426 | )     |  |   |       |   |  |   | 9,825     |  
|2002 (Predecessor)                                                   |  |                           | (188,532 | ) |         |   | (21,791 | )          |  |            | (246,601  | ) |             |               | (4,204   | ) |       |   | (22,481 | )     |  |   | (5,000 | ) |  |   | (488,609  | )
|Loss from discontinued operations, net of tax:(a)                    |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|2004 (Successor)                                                     |  | $                         |         |   |         | $ |        |            |  | $          | 3,048     |   |             | $             |         |   |       | $ |        |       |  | $ |       |   |  | $ | 3,048     |  
|2003 (Successor  two months)                                        |  |                           | (135     | ) |         |   |        |            |  |            |          |   |             | $             |         |   |       | $ |        |       |  |   |       |   |  |   | (135      | )
|2003 (Predecessor  ten months)                                      |  |                           | (3,782   | ) |         |   |        |            |  |            | 1,500     |   |             |               |         |   |       |   |        |       |  |   |       |   |  |   | (2,282    | )
|2002 (Predecessor)                                                   |  |                           | (3,977   | ) |         |   |        |            |  |            | (22,660   | ) |             |               | (174,500 | ) |       |   |        |       |  |   |       |   |  |   | (201,137  | )
|Cumulative effect of change in accounting principles, net of
    tax |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|2004 (Successor)                                                     |  | $                         |         |   |         | $ |        |            |  | $          |          |   |             | $             |         |   |       | $ |        |       |  | $ |       |   |  | $ |          |  
|2003 (Successor  two months)                                        |  |                           |         |   |         |   |        |            |  |            |          |   |             |               |         |   |       |   |        |       |  |   |       |   |  |   |          |  
|2003 (Predecessor  ten months)                                      |  |                           | (779     | ) |         |   |        |            |  |            | 3,168     |   |             |               |         |   |       |   |        |       |  |   |       |   |  |   | 2,389     |  
|2002 (Predecessor)                                                   |  |                           |         |   |         |   |        |            |  |            | (161,106  | ) |             |               |         |   |       |   | (2,532  | )     |  |   |       |   |  |   | (163,638  | )
|Investment in associated companies:                                  |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|December 31, 2004 (Successor)                                        |  | $                         | 235      |   |         | $ |        |            |  | $          | 5,411     |   |             | $             |         |   |       | $ | 74      |       |  | $ |       |   |  | $ | 5,720     |  
|December 31, 2003 (Successor)                                        |  |                           | 3,308    |   |         |   |        |            |  |            | 4,687     |   |             |               |         |   |       |   | 75      |       |  |   |       |   |  |   | 8,070     |  
|Assets:                                                              |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|December 31, 2004 (Successor)                                        |  | $                         | 795,102  |   |         | $ | 90,451  |            |  | $          | 710,521   |   |             | $             | 120,646  |   |       | $ | 135,433 |       |  | $ |       |   |  | $ | 1,852,153 |  
|December 31, 2003 (Successor)                                        |  |                           | 959,261  |   |         |   | 117,383 |            |  |            | 790,316   |   |             |               | 67,068   |   |       |   | 63,332  |       |  |   |       |   |  |   | 1,997,360 |  
|Additions to long-lived tangible assets:(b)                          |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|2004 (Successor)                                                     |  | $                         | 87,742   |   |         | $ | 10,817  |            |  | $          | 988       |   |             | $             | 84,991   |   |       | $ | 5,088   |       |  | $ | (114   | ) |  | $ | 189,512   |  
|2003 (Successor  two months)                                        |  |                           | 13,715   |   |         |   | 5,182   |            |  |            | 1,662     |   |             |               | 4,424    |   |       |   | 463     |       |  |   |       |   |  |   | 25,446    |  
|2003 (Predecessor  ten months)                                      |  |                           | 71,299   |   |         |   | 21,965  |            |  |            | (1,147    | ) |             |               | 29,741   |   |       |   | 1,349   |       |  |   |       |   |  |   | 123,207   |  
|2002 (Predecessor)                                                   |  |                           | 167,400  |   |         |   | 24,981  |            |  |            | 3,828     |   |             |               | 10,913   |   |       |   | 1,203   |       |  |   |       |   |  |   | 208,325   |  
|Capital expenditures on discontinued operations:(a)                  |  |                           |          |   |         |   |         |            |  |            |           |   |             |               |          |   |       |   |         |       |  |   |        |   |  |   |           |  
|2004 (Successor)                                                     |  | $                         |         |   |         | $ |        |            |  | $          |          |   |             | $             |         |   |       | $ |        |       |  | $ |       |   |  | $ |          |  
|2003 (Successor  two months)                                        |  |                           |         |   |         |   |        |            |  |            |          |   |             |               |         |   |       |   |        |       |  |   |       |   |  |   |          |  
|2003 (Predecessor  ten months)                                      |  |                           | 118      |   |         |   |        |            |  |            |          |   |             |               |         |   |       |   |        |       |  |   |       |   |  |   | 118       |  
|2002 (Predecessor)                                                   |  |                           | 135      |   |         |   |        |            |  |            | 103       |   |             |               | 77,126   |   |       |   |        |       |  |   |       |   |  |   | 77,364    |  

F-52



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)







|    |                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Loss from discontinued operations, net of tax, and capital
    expenditures on discontinued operations, included in segment
    data for Pertra, relates to Atlantis, which was a part of the
    Companys oil and natural gas operations prior to its
    disposition in early 2003. The discontinued operations for
    Tigress and Production Services are related to Marine
    Geophysical and Production, respectively.



|    |  |                                                                                   
|--- |  | ----------------------------------------------------------------------------------
|(b) |  | Consists of cash investments in multi-client library and capital
    expenditures.





|                                 |  |                           |         |  |    |   |         |        |  |   |              |              |  |             |               |  |       |   |         |       |  |   |        |  |  |   |        |   |  |   |           | 
|-------------------------------- |  | ------------------------- | ------- |  | -- | - | ------- | ------ |  | - | ------------ | ------------ |  | ----------- | ------------- |  | ----- | - | ------- | ----- |  | - | ------ |  |  | - | ------ | - |  | - | --------- | 
|                                 |  |                           |         |  |    |   |         |        |  |   |              |              |  | Elimination |               |  |      
|                                 |  |                           |         |  |    |   |         |        |  |   |              | Middle East/ |  |             | of Affiliated |  |       |  
|                                 |  | Americas                  |         |  | UK |   |         | Norway |  |   | Asia/Pacific |              |  | Africa      |               |  | Other |   |         | Sales |  |   | Total  | 
|                                 |  |                           |         |  |    |   |         |        |  |   |              |              |  |             |               |  |       |   |         |       |  |   |        | 
|                                 |  | (In thousands of dollars) |        
|Revenue, unaffiliated companies: |  |                           |         |  |    |   |         |        |  |   |              |              |  |             |               |  |       |   |         |       |  |   |        |  |  |   |        |   |  |   |           | 
|2004 (Successor)                 |  | $                         | 267,054 |  |    | $ | 191,745 |        |  | $ | 336,949      |              |  | $           | 191,703       |  |       | $ | 112,503 |       |  | $ | 29,514 |  |  | $ |       |   |  | $ | 1,129,468 | 
|2003 (Successor  two months)    |  |                           | 49,164  |  |    |   | 30,743  |        |  |   | 33,087       |              |  |             | 35,175        |  |       |   | 20,784  |       |  |   | 3,418  |  |  |   |       |   |  |   | 172,371   | 
|2003 (Predecessor  ten months)  |  |                           | 270,095 |  |    |   | 181,595 |        |  |   | 235,663      |              |  |             | 82,980        |  |       |   | 124,601 |       |  |   | 66,930 |  |  |   |       |   |  |   | 961,864   | 
|2002 (Predecessor)               |  |                           | 235,010 |  |    |   | 275,706 |        |  |   | 227,104      |              |  |             | 154,821       |  |       |   | 80,393  |       |  |   | 70,197 |  |  |   |       |   |  |   | 1,043,231 | 
|Revenue, includes affiliates:    |  |                           |         |  |    |   |         |        |  |   |              |              |  |             |               |  |       |   |         |       |  |   |        |  |  |   |        |   |  |   |           | 
|2004 (Successor)                 |  | $                         | 267,054 |  |    | $ | 194,712 |        |  | $ | 343,736      |              |  | $           | 191,703       |  |       | $ | 112,503 |       |  | $ | 29,514 |  |  | $ | (9,754 | ) |  | $ | 1,129,468 | 
|2003 (Successor  two months)    |  |                           | 49,164  |  |    |   | 31,067  |        |  |   | 35,429       |              |  |             | 35,175        |  |       |   | 20,784  |       |  |   | 3,418  |  |  |   | (2,666 | ) |  |   | 172,371   | 
|2003 (Predecessor  ten months)  |  |                           | 270,095 |  |    |   | 183,371 |        |  |   | 238,543      |              |  |             | 82,980        |  |       |   | 124,601 |       |  |   | 66,930 |  |  |   | (4,656 | ) |  |   | 961,864   | 
|2002 (Predecessor)               |  |                           | 235,610 |  |    |   | 278,611 |        |  |   | 230,022      |              |  |             | 154,851       |  |       |   | 80,393  |       |  |   | 70,197 |  |  |   | (6,453 | ) |  |   | 1,043,231 | 
|Total assets:                    |  |                           |         |  |    |   |         |        |  |   |              |              |  |             |               |  |       |   |         |       |  |   |        |  |  |   |        |   |  |   |           | 
|December 31, 2004 (Successor)    |  | $                         | 343,484 |  |    | $ | 927,172 |        |  | $ | 469,675      |              |  | $           | 79,873        |  |       | $ | 21,211  |       |  | $ | 10,738 |  |  | $ |       |   |  | $ | 1,852,153 | 
|December 31, 2003 (Successor)    |  |                           | 430,972 |  |    |   | 870,941 |        |  |   | 539,935      |              |  |             | 111,484       |  |       |   | 20,567  |       |  |   | 23,461 |  |  |   |       |   |  |   | 1,997,360 | 
|Capital expenditures (cash):     |  |                           |         |  |    |   |         |        |  |   |              |              |  |             |               |  |       |   |         |       |  |   |        |  |  |   |        |   |  |   |           | 
|2004 (Successor)                 |  | $                         | 7,955   |  |    | $ | 40,812  |        |  | $ | 96,813       |              |  | $           | 1,975         |  |       | $ |        |       |  | $ | 817    |  |  | $ |       |   |  | $ | 148,372   | 
|2003 (Successor  two months)    |  |                           | 5,464   |  |    |   | 1,005   |        |  |   | 9,294        |              |  |             | 222           |  |       |   |        |       |  |   |       |  |  |   |       |   |  |   | 15,985    | 
|2003 (Predecessor  ten months)  |  |                           | 6,261   |  |    |   | 6,155   |        |  |   | 27,952       |              |  |             | 136           |  |       |   |        |       |  |   | 1,561  |  |  |   |       |   |  |   | 42,065    | 
|2002 (Predecessor)               |  |                           | 10,776  |  |    |   | 17,073  |        |  |   | 28,415       |              |  |             | 192           |  |       |   |        |       |  |   | 279    |  |  |   |       |   |  |   | 56,735    | 



F-53



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                    |  |                          |   |  |      |  |   |      |  |  |     |  |  |     |   |  |     |  |   |     |  |  |   |  |  |  |   | 
|----------------------------------------------------------------------------------- |  | ------------------------ | - |  | ---- |  | - | ---- |  |  | --- |  |  | --- | - |  | --- |  | - | --- |  |  | - |  |  |  | - | 
|                                                                                    |  | Years Ended December 31, |  
|                                                                                    |  |                          |  
|                                                                                    |  | 2004                     |   |  | 2003 |  |   | 2002 | 
|                                                                                    |  |                          |   |  |      |  |   |      | 
|                                                                                    |  | 25%                      |   |  | 10%  |  |   | 19%  |  |  | 12% |  |  | 10% |   |  | 15% |  |   | 11% | 
|                                                                                    |  |                          |   |  |      |  |   |      |  |  |     |  |  |     |   |  |     |  |   |     | 
|Segments serving customer (each % in each year represents a
    separate customer): |  |                          |   |  |      |  |   |      |  |  |     |  |  |     |   |  |     |  |   |     |  |  |   |  |  |  |   | 
|Marine Geophysical                                                                  |  |                          | X |  |      |  | X |      |  |  | X   |  |  |     | X |  |     |  | X |     |  |  | X |  |  |  | X | 
|Onshore                                                                             |  |                          |   |  |      |  |   |      |  |  |     |  |  |     |   |  |     |  | X |     |  |  |   |  |  |  |   | 
|Production                                                                          |  |                          | X |  |      |  | X |      |  |  | X   |  |  |     | X |  |     |  |   |     |  |  | X |  |  |  | X | 
|Pertra                                                                              |  |                          | X |  |      |  |   |      |  |  | X   |  |  |     |   |  |     |  |   |     |  |  |   |  |  |  | X | 
|Reservoir/ Shared Services/ Corporate                                               |  |                          | X |  |      |  |   |      |  |  | X   |  |  |     |   |  |     |  |   |     |  |  | X |  |  |  | X | 



NOTE 27  Supplemental Cash Flow
Information




|                                       |  |                           |         |            |                     |   |            |             |  |   |              |  |  |   |         | 
|-------------------------------------- |  | ------------------------- | ------- | ---------- | ------------------- | - | ---------- | ----------- |  | - | ------------ |  |  | - | ------- | 
|                                       |  | Successor Company         |         |            | Predecessor Company |  
|                                       |  |                           |         |            |                     |  
|                                       |  |                           |         | Two Months |                     |   | Ten Months |             |  |  
|                                       |  | Year Ended                |         |            | Ended               |   |            | Ended       |  |   | Year Ended   | 
|                                       |  | December 31,              |         |            | December 31,        |   |            | October 31, |  |   | December 31, | 
|                                       |  | 2004                      |         |            | 2003                |   |            | 2003        |  |   | 2002         | 
|                                       |  |                           |         |            |                     |   |            |             |  |   |              | 
|                                       |  | (In thousands of dollars) |        
|Interest, net of capitalized interest  |  | $                         | 106,731 |            |                     | $ | 19,619     |             |  | $ | 120,162      |  |  | $ | 112,543 | 
|Interest on trust preferred securities |  |                           |        |            |                     |   |           |             |  |   |             |  |  |   | 10,377  | 
|Income taxes                           |  |                           | 29,751  |            |                     |   | 4,951      |             |  |   | 8,145        |  |  |   | 15,938  | 



NOTE 28  Summarized Financial Information for
Subsidiaries with Debt Securities


Ramform Explorer Ramform Challenger


F-54



---



##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                       |                         |                           |   |            |                     |  |            |             |   |  |              |          |   |  |   |          |  
|---------------------- | ----------------------- | ------------------------- | - | ---------- | ------------------- |  | ---------- | ----------- | - |  | ------------ | -------- | - |  | - | -------- | -
|                       |                         | Successor Company         |   |            | Predecessor Company | 
|                       |                         |                           |   |            |                     | 
|                       |                         |                           |   | Two Months |                     |  | Ten Months |             |   | 
|                       |                         | Year Ended                |   |            | Ended               |  |            | Ended       |   |  | Year Ended   |         
|                       |                         | December 31,              |   |            | December 31,        |  |            | October 31, |   |  | December 31, |         
|                       |                         | 2004                      |   |            | 2003                |  |            | 2003        |   |  | 2002         |         
|                       |                         |                           |   |            |                     |  |            |             |   |  |              |         
|                       |                         | (In thousands of dollars) |  
|Income Statement Data: |                         |                           |   |            |                     |  |            |             |   |  |              |          |   |  |   |         
|                       | Revenue                 |                           | $ | 257,609    |                     |  | $          | 17,610      |   |  | $            | 244,605  |   |  | $ | 286,261  |  
|                       | Operating loss          |                           |   | (4,761     | )                   |  |            | (26,009     | ) |  |              | (4,238   | ) |  |   | (52,245  | )
|                       | Net loss                |                           |   | (22,868    | )                   |  |            | (12,671     | ) |  |              | (6,752   | ) |  |   | (47,887  | )
|Balance Sheet Data:    |                         |                           |   |            |                     |  |            |             |   |  |              |          |   |  |   |         
|                       | Current assets          |                           | $ | 116,910    |                     |  | $          | 99,453      |   |  | $            | 141,008  |   |  | $ | 146,061  |  
|                       | Non-current assets      |                           |   | 190,874    |                     |  |            | 148,951     |   |  |              | 123,182  |   |  |   | 157,137  |  
|                       | Current liabilities     |                           |   | 56,573     |                     |  |            | 84,523      |   |  |              | 82,555   |   |  |   | 112,941  |  
|                       | Non-current liabilities |                           |   | 327,199    |                     |  |            | 408,479     |   |  |              | 416,699  |   |  |   | 385,920  |  
|                       | Equity (deficit)        |                           |   | (75,988    | )                   |  |            | (244,598    | ) |  |              | (235,064 | ) |  |   | (195,663 | )

Ramform Explorer Ramform Challenger Explorer Challenger Ramform Explorer Ramform Challenger. Explorer Challenger




|                       |                         |                           |   |            |                     |  |            |             |  |  |              |        |   |          |   |        |            |  |   |          |  |  |            |        |  |  |   |        |  |  |   |        | 
|---------------------- | ----------------------- | ------------------------- | - | ---------- | ------------------- |  | ---------- | ----------- |  |  | ------------ | ------ | - | -------- | - | ------ | ---------- |  | - | -------- |  |  | ---------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                       |                         | Successor Company         |   |            | Predecessor Company | 
|                       |                         |                           |   |            |                     | 
|                       |                         |                           |   | Two Months |                     |  | Ten Months |             |  | 
|                       |                         | Year Ended                |   |            | Ended               |  |            | Ended       |  |  | Year Ended   |       
|                       |                         | December 31,              |   |            | December 31,        |  |            | October 31, |  |  | December 31, |       
|                       |                         | 2004                      |   |            | 2003                |  |            | 2003        |  |  | 2002         |       
|                       |                         |                           |   |            |                     |  |            |             |  |  |              |       
|                       |                         | Explorer                  |   |            | Challenger          |  |            | Explorer    |  |  | Challenger   |        |   | Explorer |   |        | Challenger |  |   | Explorer |  |  | Challenger |       
|                       |                         |                           |   |            |                     |  |            |             |  |  |              |        |   |          |   |        |            |  |   |          |  |  |            |       
|                       |                         | (In thousands of dollars) |  
|Income Statement Data: |                         |                           |   |            |                     |  |            |             |  |  |              |        |   |          |   |        |            |  |   |          |  |  |            |        |  |  |   |        |  |  |   |       
|                       | Revenue                 |                           | $ | 5,251      |                     |  | $          | 5,258       |  |  | $            | 1,078  |   |          | $ | 1,084  |            |  | $ | 6,032    |  |  | $          | 6,003  |  |  | $ | 7,458  |  |  | $ | 7,421  | 
|                       | Operating profit        |                           |   | 5,090      |                     |  |            | 5,098       |  |  |              | (8,462 | ) |          |   | (9,098 | )          |  |   | 5,885    |  |  |            | 5,857  |  |  |   | 7,295  |  |  |   | 7,259  | 
|                       | Net income              |                           |   | 1,042      |                     |  |            | 1,048       |  |  |              | (9,162 | ) |          |   | (9,809 | )          |  |   | 1,738    |  |  |            | 1,708  |  |  |   | 2,094  |  |  |   | 2,058  | 
|Balance Sheet Data:    |                         |                           |   |            |                     |  |            |             |  |  |              |        |   |          |   |        |            |  |   |          |  |  |            |        |  |  |   |        |  |  |   |       
|                       | Current assets          |                           | $ |           |                     |  | $          |            |  |  | $            |       |   |          | $ |       |            |  | $ |         |  |  | $          |       |  |  | $ |       |  |  | $ |       | 
|                       | Non-current assets      |                           |   | 55,493     |                     |  |            | 54,621      |  |  |              | 59,561 |   |          |   | 58,681 |            |  |   | 72,964   |  |  |            | 72,719 |  |  |   | 71,879 |  |  |   | 71,651 | 
|                       | Current liabilities     |                           |   | 6,625      |                     |  |            | 6,624       |  |  |              | 6,252  |   |          |   | 6,252  |            |  |   | 7,616    |  |  |            | 7,616  |  |  |   | 5,864  |  |  |   | 5,864  | 
|                       | Non-current liabilities |                           |   | 44,175     |                     |  |            | 44,177      |  |  |              | 49,658 |   |          |   | 49,657 |            |  |   | 52,324   |  |  |            | 52,336 |  |  |   | 54,729 |  |  |   | 54,729 | 
|                       | Equity                  |                           |   | 4,693      |                     |  |            | 3,820       |  |  |              | 3,651  |   |          |   | 2,772  |            |  |   | 13,024   |  |  |            | 12,767 |  |  |   | 11,286 |  |  |   | 11,058 | 

F-55



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


NOTE 29  Supplemental Information 
Oil and Gas Reserves and Costs (Unaudited)






| |                                                                 
| | ----------------------------------------------------------------
| | Financial Results Related to Oil and Natural Gas
    Activities.





|                                         |                                  |                           |         |             |              |   |            |             |   |   |         |        | 
|---------------------------------------- | -------------------------------- | ------------------------- | ------- | ----------- | ------------ | - | ---------- | ----------- | - | - | ------- | ------ | 
|                                         |                                  |                           |         | Predecessor |             
|                                         |                                  | Successor Company         |         |             | Company      |  
|                                         |                                  |                           |         |             |              |  
|                                         |                                  |                           |         | Two Months  |              |   | Ten Months |            
|                                         |                                  | Year Ended                |         |             | Ended        |   |            | Ended       |  
|                                         |                                  | December 31,              |         |             | December 31, |   |            | October 31, |  
|                                         |                                  | 2004                      |         |             | 2003         |   |            | 2003        |  
|                                         |                                  |                           |         |             |              |   |            |             |  
|                                         |                                  | (In thousands of dollars) |        
|Oil revenues                             |                                  | $                         | 184,134 |             |              | $ | 9,544      |             |   | $ | 112,097 |       
|Production costs                         |                                  |                           | 93,036  |             |              |   | 6,354      |             |   |   | 62,296  |       
|Other operating costs                    |                                  |                           | 3,952   |             |              |   | 599        |             |   |   | 2,126   |       
|Accretion of asset retirement obligation |                                  |                           | 1,664   |             |              |   | 271        |             |   |   | 1,821   |       
|Exploration costs                        |                                  |                           | 20,062  |             |              |   | 4,344      |             |   |   |        |       
|Depletion, depreciation and amortization |                                  |                           | 38,965  |             |              |   | 743        |             |   |   | 30,826  |       
|                                         |                                  |                           |         |             |              |   |            |             |  
|                                         | Results of operations before tax |                           |         | 26,455      |              |   |            | (2,767      | ) |   |         | 15,028 | 
|                                         | Income tax expense (benefit)     |                           |         | 20,635      |              |   |            | (2,159      | ) |   |         | 11,722 | 
|                                         |                                  |                           |         |             |              |   |            |             |  
|                                         | Results of operations            |                           | $       | 5,820       |              |   | $          | (609        | ) |   | $       | 3,306  | 
|                                         |                                  |                           |         |             |              |   |            |             |  



F-56



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                   |                                                      |                  |   |         |        |  |   |        |        | 
|------------------ | ---------------------------------------------------- | ---------------- | - | ------- | ------ |  | - | ------ | ------ | 
|                   |                                                      | December 31,     |  
|                   |                                                      |                  |  
|                   |                                                      | 2004             |   |         | 2003   | 
|                   |                                                      |                  |   |         |        | 
|                   |                                                      | (In thousands of |  
|                   |                                                      | dollars)         |  
|Capitalized Costs: |                                                      |                  |   |         |        |  |   |       
|                   | Proved properties                                    |                  | $ | 106,604 |        |  | $ | 30,262 |       
|                   | Unproved properties                                  |                  |   | 4,000   |        |  |   | 4,000  |       
|                   | Accumulated depreciation, depletion and amortization |                  |   | (39,664 | )      |  |   | (739   | )     
|                   |                                                      |                  |   |         |        | 
|                   |                                                      | Net              |   | $       | 70,940 |  |   | $      | 33,523 | 
|                   |                                                      |                  |   |         |        | 





|                  |                      |                           |        |             |              |   |            |             |  |   |        |        | 
|----------------- | -------------------- | ------------------------- | ------ | ----------- | ------------ | - | ---------- | ----------- |  | - | ------ | ------ | 
|                  |                      |                           |        | Predecessor |             
|                  |                      | Successor Company         |        |             | Company      |  
|                  |                      |                           |        |             |              |  
|                  |                      |                           |        | Two Months  |              |   | Ten Months |            
|                  |                      | Year Ended                |        |             | Ended        |   |            | Ended       | 
|                  |                      | December 31,              |        |             | December 31, |   |            | October 31, | 
|                  |                      | 2004                      |        |             | 2003         |   |            | 2003        | 
|                  |                      |                           |        |             |              |   |            |             | 
|                  |                      | (In thousands of dollars) |       
|Exploration costs |                      | $                         | 20,062 |             |              | $ | 13,262     |             |  | $ | 16,253 |       
|Development costs |                      |                           | 76,342 |             |              |   | 4,375      |             |  |   | 10,318 |       
|                  |                      |                           |        |             |              |   |            |             | 
|                  | Total costs incurred |                           | $      | 96,404      |              |   | $          | 17,637      |  |   | $      | 26,571 | 
|                  |                      |                           |        |             |              |   |            |             | 



| |                                          
| | -----------------------------------------
| | Proved Reserves and Standardized Measure.







F-57



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Estimated Quantities of Reserves (Unaudited).


|                           |                       |                                 |  |       |        |   |  |       |        |  
|-------------------------- | --------------------- | ------------------------------- |  | ----- | ------ | - |  | ----- | ------ | -
|                           |                       | December 31,                    | 
|                           |                       |                                 | 
|                           |                       | 2004                            |  |       | 2003   |  
|                           |                       |                                 |  |       |        |  
|                           |                       | (In thousand                    | 
|                           |                       | barrels)                        | 
|Crude Oil                  |                       |                                 |  |       |        |   |  |      
|Proved Reserves:           |                       |                                 |  |       |        |   |  |      
|                           | Beginning of the year |                                 |  | 7,818 |        |   |  | 4,137 |       
|                           |                       | Extensions and discoveries      |  |       | 2,976  |   |  |       | 4,669  |  
|                           |                       | Revisions of previous estimates |  |       |       |   |  |       | 3,067  |  
|                           |                       | Production                      |  |       | (5,317 | ) |  |       | (4,056 | )
|                           |                       |                                 |  |       |        |  
|                           | End of year           |                                 |  | 5,477 |        |   |  | 7,818 |       
|                           |                       |                                 |  |       |        |  
|Proved Developed Reserves: |                       |                                 |  |       |        |   |  |      
|                           | Beginning of year     |                                 |  | 2,114 |        |   |  | 3,272 |       
|                           |                       |                                 |  |       |        |  
|                           | End of year           |                                 |  | 5,477 |        |   |  | 2,114 |       
|                           |                       |                                 |  |       |        |  

Standardized Measure of Future Net Cash Flows from Proved
Reserves (Unaudited)


|                         |                           |                           |         |        |      |   |         |      |  
|------------------------ | ------------------------- | ------------------------- | ------- | ------ | ---- | - | ------- | ---- | -
|                         |                           | December 31,              |        
|                         |                           |                           |        
|                         |                           | 2004                      |         |        | 2003 |  
|                         |                           |                           |         |        |      |  
|                         |                           | (In thousands of dollars) |        
|Future cash inflows      |                           | $                         | 220,440 |        |      | $ | 234,300 |     
|Future production costs  |                           |                           | 108,253 |        |      |   | 109,010 |     
|Future development costs |                           |                           |        |        |      |   | 12,900  |     
|Future abandonment costs |                           |                           | 47,391  |        |      |   | 37,122  |     
|Future income taxes      |                           |                           | 51,762  |        |      |   | 59,906  |     
|Future net cash flows    |                           |                           | 13,034  |        |      |   | 15,362  |     
|                         |                           |                           |         |        |      |  
|                         | Discount at 10% per annum |                           |         | (2,288 | )    |   |         | (369 | )
|                         |                           |                           |         |        |      |  
|Standardized Measure     |                           | $                         | 15,322  |        |      | $ | 15,731  |     
|                         |                           |                           |         |        |      |  

F-58



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##### Table of Contents



PETROLEUM GEO-SERVICES ASA AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Changes in Standardized Measure (Unaudited)


|                                          |                                                                                                |                  |        |         |      |   |        |         |  
|----------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------- | ------ | ------- | ---- | - | ------ | ------- | -
|                                          |                                                                                                | December 31,     |       
|                                          |                                                                                                |                  |       
|                                          |                                                                                                | 2004             |        |         | 2003 |  
|                                          |                                                                                                |                  |        |         |      |  
|                                          |                                                                                                | (In thousands of |       
|                                          |                                                                                                | dollars)         |       
|Standardized Measure at beginning of year |                                                                                                | $                | 15,731 |         |      | $ | 944    |        
|                                          |                                                                                                |                  |        |         |      |  
|                                          | Revisions of reserves proved in prior years                                                    |                  |        |        |      |   |        | 49,280  |  
|                                          | Changes in prices and production costs                                                         |                  |        | 10,636  |      |   |        | 333     |  
|                                          | Changes in estimates of future development and abandonment costs                               |                  |        | (4,847  | )    |   |        | (10,760 | )
|                                          | Net change in income taxes                                                                     |                  |        | 1,757   |      |   |        | (59,090 | )
|                                          | Accretion of discount                                                                          |                  |        | 1,573   |      |   |        | 94      |  
|                                          | Other, primarily timing of production                                                          |                  |        | 10,454  |      |   |        | 695     |  
|                                          | Extensions, discoveries and other additions, net of future
    production and development cost |                  |        | 58,216  |      |   |        | 75,102  |  
|                                          | Sales of oil and natural gas produced, net of production costs                                 |                  |        | (91,098 | )    |   |        | (48,667 | )
|                                          | Previously estimated development and abandonment costs incurred
    during the period          |                  |        | 12,900  |      |   |        | 7,800   |  
|                                          |                                                                                                |                  |        |         |      |  
|Net changes in Standardized Measure       |                                                                                                |                  | (409   | )       |      |   | 14,787 |        
|                                          |                                                                                                |                  |        |         |      |  
|Standardized Measure at end of year       |                                                                                                | $                | 15,322 |         |      | $ | 15,731 |        
|                                          |                                                                                                |                  |        |         |      |  

F-59



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##### Table of Contents






EXHIBIT INDEX


|                                                                                                                                                                                                                                                                                                                                                                                                                                         |    |    |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | -- |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                  |    |    |  |            
|Number                                                                                                                                                                                                                                                                                                                                                                                                                                   |    |    |  | Description
|                                                                                                                                                                                                                                                                                                                                                                                                                                         |    |    |  |            
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 1  | .1 |  |            |  | Articles of Association, as amended (unofficial English
    translation)(incorporated by reference to Exhibit 1.1 of
    the annual report of Petroleum Geo-Services ASA (the
    Company) on Form 20-F for the year ended
    December 31, 2003 (SEC File No. 1-14614 (the
    2003 Form 20-F))).                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .1 |  |            |  | Deposit Agreement, dated as of May 25, 1993, among the
    Company, Citibank, N.A., as depositary (the
    Depositary), and all holders from time to time of
    American Depositary Receipts issued thereunder (incorporated by
    reference to Exhibit(a)(1) of Post-Effective Amendment
    No. 1 to the Companys Registration Statement on
    Form F-6 (Registration No. 33-61500))
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .2 |  |            |  | First Amendment to Deposit Agreement, dated as of April 24,
    1997, among the Company, the Depositary and all holders from
    time to time of American Depositary Receipts issued thereunder
    (incorporated by reference to Exhibit(a)(2) of the
    Companys Registration Statement on Form F-6
    (Registration No. 333-10856))                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .3 |  |            |  | Form of American Depositary Receipt (incorporated by reference
    to filing under Rule 424(b)(3) relating to the Companys
    Registration Statements on Form F-6 (Registration Nos.
    33-61500 and 333-10856))                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .4 |  |            |  | Indenture dated as of November 5, 2003, among the Company,
    each of the guarantors named therein and Law Debenture Trust
    Company of New York, as trustee (the Trustee)
    (incorporated by reference to Exhibit 2.4 of the 2003
    Form 20-F)                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .5 |  |            |  | First Supplemental Indenture, dated as of November 5, 2003,
    among the Company, each of the guarantors named therein and the
    Trustee (incorporated by reference to Exhibit 2.5 of the
    2003 Form 20-F)                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .6 |  |            |  | Second Supplemental Indenture, dated as of June 4, 2004,
    among the Company, each of the guarantors named therein and the
    Trustee (incorporated by reference to Exhibit 2.6 of the
    2003 Form 20-F)                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .7 |  |            |  | Supplemental Indenture, dated as of August 31, 2004, among
    Pertra AS, the Company, each of the other guarantors named
    therein and the Trustee                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 2  | .8 |  |            |  | Supplemental Indenture, dated as of August 31, 2004, among
    P.G.S. Mexicana S.A. de C.V., the Company, each of the other
    guarantors named therein and the Trustee                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|The Company and its consolidated subsidiaries are party to
    several debt instruments under which the total amount of
    securities authorized does not exceed 10% of the total assets of
    the Company and its subsidiaries on a consolidated basis.
    Pursuant to paragraph 2(b)(i) of the instructions to the
    exhibits to Form 20-F, the Company agrees to furnish a copy
    of such instruments to the SEC upon request.
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 4  | .1 |  |            |  | Employment agreement dated November 4, 2002 between the
    Company and Svein Rennemo (the Employment Agreement)
    (incorporated by reference to Exhibit 4.1 of the 2003
    Form 20-F)                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 4  | .2 |  |            |  | Addendum to the Employment Agreement dated June 8, 2004
    between the Company and Svein Rennemo (incorporated by reference
    to Exhibit 4.2 of the 2003 Form 20-F)                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 4  | .3 |  |            |  | 2004 CEO Bonus Scheme (incorporated by reference to
    Exhibit 4.3 of the 2003 Form 20-F)                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 8  | .1 |  |            |  | Subsidiaries (included in Item 4 of the annual report)                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 11 | .1 |  |            |  | Code of Conduct                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 12 | .1 |  |            |  | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 and
    Rule 13a-14(a) of the Securities Exchange Act of 1934                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 12 | .2 |  |            |  | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 and
    Rule 13a-14(a) of the Securities Exchange Act of 1934                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 13 | .1 |  |            |  | Certification of the Chief Executive Officer and the Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002 and Rule 13a-14(b) of the
    Securities Exchange Act of 1934                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 15 | .1 |  |            |  | Audit Committee Charter                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                         | 15 | .2 |  |            |  | Remuneration Committee Charter